Economy & Trade
China to Become the World’s Second Largest Insurance Market
China is expected to become the world’s second largest insurance market this year, overtaking Japan, owing to the rapid increase of the middle class. The China Insurance Regulatory Commission has reported that China’s premium income reached RMB 1.9 trillion in the first half, up 37.3 percent on the previous year. This growth rate has accelerated fast, compared to 17.5 percent in the first half of 2014 and 20 percent in the first half of 2015. There are now 330 million policy holders in China, triple that of stock investors, and with a lack of insurance companies and products, China’s insurance market has a lot of potential.
By Dezan Shira & Associates
Editor: Dominik Grossalber
The Dongguan of old, focused on the manufacturing of cheap, low-tech products, is currently transforming into a new, modern hub for the production of higher value goods. As this is happening, many established light manufacturing companies, sometimes present in the city for over 20 years, are moving away. This is part of a China-wide trend as the country seeks to move up the manufacturing value chain.
In 2015, Dongguan’s high tech manufacturing industry grew by 10.2 percent and automobile manufacturing grew by 8.5 percent, reflecting the growth of value-added manufacturing in the city. Meanwhile, textiles decreased by 4.3 percent and household electrical appliance manufacturing grew by just 2.4 percent, as lower value-added industries witnessed comparatively sluggish performance.
The Dongguan government has promised to support the shift to manufacturing higher value-added products and has targeted several strategic industries as a part of this effort, including high-end electronics, biotechnology, new-generation internet, and 3D printing. Additionally, Dongguan is seeking to become China’s center of robotics and automated manufacturing technology, positioning itself as a crucial spot of the changing landscape of Chinese manufacturing. While Dongguan’s new economic strategy is taking form, it is also interesting to look at why low-tech manufacturing is leaving in the first place and where it is going.
Chinese Infant Formula Market: Study Calls Foreign Brands ‘Less Suitable’ for Chinese Babies
A recent study conducted by the state run China Central Television has called on parents to buy domestically produced infant formula over foreign brands, due to levels of certain nutrients which do not meet the specific needs of Chinese babies. The study found that eight out of 19 popular foreign infant formulas from seven different countries contained varying amounts of nutrients were inconstant with that of Chinese nutritional standards, and that if an infant were to consume such formulas over a long length of time, could develop certain health problems. Findings concluded that these problems were based on differing nutritional standards of different nations, and urged parents to consider domestic brands. The study comes after an increasing amount of parents buying infant formula overseas via online retail sites, while domestic dairy farms are suffering significant losses.
Our Latest Round-Up of Business News Affecting China-Based Businesses Investing in Asia
In this edition of China Outbound, we start with the challenging corporate establishment procedure in ASEAN nations, with a focus on the South China Sea arbitration and its implications on ASEAN investors. From there, we move to an introduction to Vietnamese product labeling requirements, as well as the country’s new decree for investment violations. Lastly, we look into India’s business environment, highlighting its new insolvency and bankruptcy bill, and the revised reinsurance rules, which was re-drafted for the third time and is expected to create new hurdle for foreign reinsurers in India.
China Exports and Imports Fall in June Signalling Further Slowing Demand
China’s exports made a further decline last month, partially due to diminished demand overseas, falling by 4.8 percent from the same period last year, after falling by 4.1 percent in May. Imports were also down by 8.4 percent, after falling by 0.4 percent in May, according to the General Administration of Customs. Trade surplus reduced to US$48.1 billion in June from May’s US$50 billion. Demand from abroad is expected to remain weak, especially after the UK’s departure from the European Union. However, things may look more hopeful in the second half because of a weaker yuan and increasing demand from emerging markets.
China Expected to Become World’s Main Cruise Liner Market
China is already the second largest cruise liner market for Royal Caribbean International, and the company’s chief executive, Michael Bayley, has predicted that China will soon overtake the U.S. to become the world’s largest. In a bid to preempt this growing demand, Royal Caribbean International’s newest ship, Ovation of the Seas, has been stationed in China’s northern port city Tianjin. Weighing in at 168,666 tons and measuring 348 meters long, the new liner can accommodate up to 4,900 passengers and 1,500 crew, offering cruises to South Korea and Japan from RMB 700-1,300 per night. According to the cruise economy research institute of the Shanghai International Shipping Institute, China is expected to deliver 4.5 million passengers by 2020.
By Cameron Turnbull
Advances in mobile technology and mobile app development have given rise to a new business model that has already had a profound effect on the transportation, e-commerce, and lodging industries. The sharing economy refers to third party online service providers that help businesses and individuals turn excess supply into revenue by linking them to consumers via various online platforms. With high levels of mobile use and a rapidly expanding consumer class, China has been quick to adapt to the sharing economy, presenting tremendous opportunities for those who embrace new technology and business models. Continue reading…
China to Allow Foreign Firms to Issue Shares as Part of Drive to Open up Capital Markets
In a bid to open up China’s capital market and encourage the reform of the RMB convertibility, the People’s Bank of China is considering allowing foreign-invested companies to issue shares on the mainland at an unspecified time in the future. Beijing will head the scheme with reforms allowing individuals to directly invest in capital markets. The scheme will allow qualified foreign firms to issue depositary receipts, a mechanism implemented to issue shares on the local stock exchange, similar to American depositary receipts, which have been used by Chinese firms to do the same thing in the U.S.