May 6 - The provincial government of Guangdong province has unveiled plans of providing 1.2 million jobs for 2008. The plans will also provide wider coverage for migrant workers like social insurance, endowment, medical, unemployment, injury at work, and maternity insurance to name a few.

Fifty percent of the target 1.2 million jobs are expected to be newly-generated, a 28 percent increase from last year’s figure.

Lin Jingqing, director of the labor relations division of the provincial labor and social security department, told China Daily: “More people will be included in our social security system this year, embodying the Labor Contract Law implemented by the central government at the start of the year.”

For 2007, Guangdong’s 10.55 million resident workers and 13.5 million migrant workers were provided with work and medical insurance - one-third of China’s total. This year, migrant workers with work insurance should increase by 13.3 million while those with medical insurance will jump by 13.6 million. (more…)

Shanghai left standing as London takes the lead

Mar. 21 - Targeting China’s producers and traders, the London Metals Exchange (LME), the world’s largest trading house of non-ferrous metals, has announced it will go live next month to sell futures contracts in steel

The announcement has confounded plans by the Shanghai futures exchange to sell the same product. The LME says that steel futures are necessary to increase price transparency, control risk exposure and help traders manage cash flows, while at the same time offering traders the ability to profit from differences in the commodity between London and Shanghai, should Shanghai still go ahead with its own steel futures. Locking in future prices will also allow Chinese and other producers to turn steel inventories into cash.

The new trading floor comes at a time when steel prices are being driven upwards by rising costs and huge demand, mainly from China’s construction industry. The global price of steel billet, low grade steel used to make bar for reinforcing concrete structures, has tripled in four years and is now trading at US$840 per ton, up from US$630 in December 2007. (more…)

By Andy Scott 

SHANGHAI, Nov. 15 - The new catalogue for foreign investment, released on November 7, aims to address some of what Beijing perceives as structural problems in China’s economic development. Chief among these is limiting the inflow of foreign direct investment into industries that do little to tackle some of Beijing’s major problem areas – real estate, mining and non-renewable mineral resources, and conventional manufacturing.

Real estate
Foreign investment in the real estate industry has been declared dead. From China Law Blog to Stan Abrams of China Hearsay, everyone is agreeing that the new restrictions will not only significantly limit FDI in the sector, but kill it. As Steve Dickinson writes, “the effect of these provisions, when combined with the prior regulations, is to effectively eliminate most areas of foreign investment in real estate.”

That sentiment however is not universal and many analysts and investors remain puzzled over the likely impact of the new catalogue.

“I do not see any impact on the physical market or on our funds investing in China,” Richard van den Berg, managing director of ING Real Estate Investment Management told the South China Morning Post. (more…)

By Andy Scott

SHANGHAI, Sept. 11 - China’s new policy restricting processing trade, which took effect nationwide August 23, will most heavily impact Guangdong province. The booming Chinese economy, which has grown at over 10 percent for the last 15 years, has been largely driven by processing trade factories located in South China and the Yangtze River Delta region, importing tax-deductible raw materials to manufacture finished products for export. Of the over 90,000 processing trade firms operating on the mainland, nearly 70,000 are located in Guangdong province according to the National Bureau of Statistics.

However, in its continued efforts to develop the central and western regions which have not profited from China’s economic surge, Beijing has stipulated that the new regulations will not affect enterprises operating in those regions.

With that in mind, we decided to take a look at central China, an area that includes the six provinces of Anhui, Henan, Hubei, Hunan, Jiangxi and Shanxi. It includes 30 airports, 12 inland ports, 460,000 kilometers of highway and approximately 15,000 kilometers of railway. Would it be better for processing trade manufacturers to move their operations inland, or look for other possibilities to dealing with Notice 44? (more…)

Textile manufacturers in and around Hangzhou, long one of the region’s pillar industries, are beginning to move their operations inland as China reduces the VAT burden in the central provinces.

Beginning July 1, 2007, the Ministry of Finance and the State Administration of Taxation reduced the VAT burden in eight sectors within 26 specified industrial cities in the six central provinces of Anhui, Henan, Hubei, Hunan, Jiangxi, and Shanxi.

The new system, which applies to both domestic and foreign invested enterprises in the central provinces, benefits general taxpayers engaged in the equipment manufacturing, petrochemical, metallurgy, automobile manufacturing, agricultural product processing, mining, electrical power, and high/new technology sectors within the 26 specific industrial cities.

The input tax can be deducted upon activities listed below:

• purchase of fixed assets (including fixed assets obtained as donation and capital injection)
• goods purchased or services obtained for self-produced fixed assets
• fixed assets obtained by financial lease and the lessor paid VAT as per the relevant tax regulation (Guoshuihan [2000]514)
• transport costs paid for fixed assets (more…)

The eminently readable James Fallows has an excellent piece on manufacturing in China in the upcoming issue of The Atlantic. When not judging beer in Shanghai, Fallows apparently spends a lot of time eating breakfast at the Four Points hotel in Shenzhen. In The Atlantic July/August cover story, he takes a look inside China’s manufacturing world and comes out with some interesting insights. A couple of choice excerpts:

Many people I have spoken with say that the climb will be slow for Chinese industries, because they have so far to go in bringing their design, management, and branding efforts up to world standards. “Think about it—global companies are full of CEOs and executives from India, but very few Chinese,” Dominic Barton, the chairman of Mc­Kinsey’s Asia Pacific practice, told me. The main reason, he said, is China’s limited pool of executives with adequate foreign-language skills and experience working abroad. (more…)

Several international companies have recently set up shop in Chongqing as more and more foreign investors look to China’s western second tier cities. With the rising costs of land, labor, energy and other inputs to manufacturing making the coastal regions less attractive to companies looking for places to park their factories, the inland second and third tier cities have become an attractive alternative, whether for export production or, increasingly, to sell domestic B2B or B2C consumers.

Rieter Holding AG, a Swiss based industrial automotive supplier, has set up a new facility in western China called Rieter Automotive Chongqing Sound-Proof Parts. The new manufacturing facility in Chongqing represents a further step in China for Rieter.  According to the announcement, the 9,000 square meter plant is located close to OEM facilities, including Ford, Volvo and Mazda, and will be fully operational by mid-year with an initial workforce of around 70.  The facility will produce thermal management packages and acoustic parts. (more…)