Archive for July, 2007

Of the roughly 100 different manufacturers currently building cars in China, an estimate is that between three and five will be peddling their low-cost wares in the U.S. within five years.

The estimate was made by Bill Pollack who has a vested interest in this. He is CEO of China America Cooperative Automotive (Chamco), which plans to import Chinese vehicles to North America.

Speaking at a recent New York City press lunch, he showed photographs of the company’s first two models, an SUV and a four-door pickup. Pricing will be about 20% less than competing models already on sale here. To succeed the quality must be at least as high, possibly higher, then competing vehicles.

Chamco faces myriad hurdles to accomplishing these goals, such as ensuring the vehicles meet U.S. emissions and safety requirements, establishing dealer networks, and competing with well-established car brands.

Chamco also wants to build a factory in Mexico. This plant would supply Mexico and South America.

Then if Chamco should face cost-prohibitive tariffs on its Chinese imports — and that is a possibility to be considered — U.S.-market models could be sourced from Mexico. Prior to the factory being completed the company is looking to bring in 50,000 units duty free to Mexico to start sales.

Already on sale in some 50 countries around the world — none of which have the safety and emissions standards, to say nothing of customer quality expectations — of the United States or Europe, Chamco has some changes to make before it becomes a major force in the United States.

The article ended on a very true note: ‘Can he do it? We’ll see. But one thing is certain, even if he can’t, somebody will.’
Source: Consumer Reports

German logistics service provider Dachser has established its second wholly foreign-owned enterprise, the Dachser Shenzhen Company.

Dachser opened its first warehouse in the Shanghai-Baoshan district at the end of June.

The 3,000 sq m logistics facility has space for up to 3,300 pallets. The company has branches around the world and seems to have the idea of the complexity of modern logistics worked out. It uses a computer system called Order Monitor keeps track of the complex logistics around the globe.

Order Monitor lets all parties involved follow the entire order process, including the physical transport of goods, via a single system. It starts the moment goods are ordered from the supplier so that users can track an order through the various stages of processing.
Source: CargoNews Asia

Outsourcing has created complex supply chains spanning the globe making it more difficult for logistics operators. This was a constant theme with logistics company executives attending the recent Council of Supply Chain Management Professionals (CSCMP) conference in Tianjin.

John Mentzer, professor of Logistics and Supply Chain Management at the University of Tennessee, said, ‘In today’s world it is common for commodities to be designed in Singapore, made in China, shipped to Hamburg or Los Angeles, and distributed to Europe or North America. Often, garments made in China have to reflect the latest varieties, even for Turkey and India as well, in a matter of days.’

He gave an example of sorting out the complexity from a study carried out by a company. The company found that 90% of its sales were accounted for by 11 retailers while the remaining 10% was accounted for by some 10,000 retailers. (This sounds like a version of the Pareto principle.)

Jeff Zhou, solutions director for Greater China of E2OPEN said, ‘The supply chain needs more coordination among suppliers, just like the close relationship of production and marketing within a supplier.’

Lisa Harrington, principal of US-based Harrington Associates, pointed out that many supply chain companies do not pay enough attention to their network efficiency globally.

Suppliers should consider whether the freighter will take off as planned, and have a full understanding of customer needs instead of taking a random approach. She said, ‘Sometimes time is more important than costs while other times it’s the opposite.’

The executives were unanimous on the use of technology, which can help locate the best supply point of the chain. They were of the opinion that the whole chain should have its own frame and raise the visibility of information to be shared as soon as possible by all partners, including second and third-level businesses in the chain.
Source: Cargonews Asia

According to the South China Morning Post China Southern Locomotive & Rolling Stock Industry plans to raise at least $2.5 billion from an initial public offering early next year.

A source was quoted as saying, ‘The firm had hoped to sell shares by end of the year but the plan has been delayed due to a complicated restructuring process.’

According to the report, the company plans to list in both Hong Kong and mainland markets.
Source: Hemscott

The Ministry of Railways reports that the summer holidays have begun the peak season for railroad transport. Wang Yongping, spokesman with the ministry, said since July 1, daily passenger transport volume has averaged 4.01 million and remained at a high level, with a record of 4.33 million on July 14.

From July 12 to 16, the daily passenger transport volume exceeded 4 million for five consecutive days, four of which saw a daily volume of more than 4.2 million.

As an indicator of the peak season, standing-room-only tickets have begun to be sold for some bullet train especially those serving shorter-distance journeys including the Beijing-Tianjin and Beijing-Shijiazhuang lines.

According to a report by the Beijing Morning Post some bullet trains provide stools for passengers holding standing-room-only tickets, which cost the same as those for second-class seats.
Source: China View

The reclamation at Tianjin’s Dongjiang port is for a land belt 10km long and 3km wide forthe construction of berths.

According to Yu Rumin, general manager of the Tianjin Port Group’s Customs and quarantine facilities the first batch of six container berths with a draught of 18m will be completed at Dongjiang, will be completed by the end of 2007. As will the first phase of the logistic processing zone, covering four sq km.

The six berths, run by a joint venture of Tianjin Port and PSA of Singapore and costing 871.5 million, will have a capacity of four million TEUs a year.

The current bonded port and zone will become the Dongjiang Free Port and the Tianjin Free Trade Zone, according to a blueprint drawn up by the Tianjin municipal authority. Together with Tianjin Port, the area will be the core of the Binhai New Area, identical to the Pudong New Area in Shanghai.

Yu Rumin said, ‘The Dongjiang Free Port will be a pioneer project for China in supply chain management.’

The bonded zone’s director, Feng Zhijiang, said the zone would consolidate its role as an international supply chain centre and serve Northeast Asia. A trade and financial centre will be built at the zone to facilitate exports and imports for central and western China. The zone will also comprise an aviation industrial park, an airport bonded zone, and a free-trade logistics park.
Source: Cargonews Asia

A new research report prepared by the International Institute for Trade and Development (ITD) gives a new overseas perspective on trade with China. It states that penetrating the mainland China market requires a thorough understanding of each province’s different stage of development and culture.

China’s liberalization under the World Trade Organization framework has changed the spending patterns of its consumers, but most of them remain cautious and focused on savings. This according to Aksornsri Phanishsarn, a lecturer at Thammasat University’s Faculty of Economics and the author of China: One Country, Many Provinces and Different Regulations.

The report says that although China ranks fourth in the world in terms of gross domestic product, its per-capita income has remained low because of poor income distribution. It states, ‘Some 70% of China’s population is in the rural areas, and about 200-300 million well-heeled and middle-income people live in key cities in the country’s east coast.’

The research, which focuses on 18 out of the 31 provinces in mainland China, said 70% of Thailand’s trade with China in 2005 was in just three provinces: Guangdong, Jiangsu and Shanghai.

The main mode of transport to China was ship, thanks to China’s modern deep sea ports. Exporters can also utilize the Mekong River for shipments to China’s inner provinces.

China’s National People’s Congress in 2006 approved the 11th national economic and social development plan for the five-year period between 2006 to 2010.

The plan spells out the development framework as follows:

Beijing: to achieve 6% economic growth per year.
Shanghai: to achieve 9% growth; and develop as the world’s financial, trade and shipping hub.
Tianjin: to achieve 12% growth; and develop seaports as a hub of the northern region.
Chongchin: to boost growth to 10%; and become an economic centre of the upper Yangtze River region.
Guangdong: to slow economic growth to 9% from 13%; and focus on innovation, fundamental reforms and energy conservation.
Fujian: to be the economic center of the Taiwan Strait’s western region; promote relations with Hong Kong, Macao and Taiwan; and achieve 9% economic growth.
Liaoning: to upgrade its industrial sector; and achieve 11% economic growth.

The report says that Thailand’s trade activities with mainland China are impeded by poor transport networks among provinces, non-tariff barriers and protectionism.

The report said, ‘In the past, many Thai firms failed to operate in the Chinese market because of the lack of personal connections with the government and civil servants.’

A full copy of the research report can be downloaded from ITD.
Source: Bangkok Post

First come complaints that there is an excess of capacity in the air cargo business.

Now comes the complaint that China is hogging all of the space.

In fact, it is possible for both complaints to exist side by side. The use of air cargo is not a smoothed out graph with easy predictions. There is a long gap between a need arising for cargo space and an aircraft becoming available to cater for it.

So, yes, there is a looming problem of excess air capacity. And, yes, there are temporary shortages. Almost simultaneously.

At a recent conference in Atlanta air cargo shippers complained, at some length, that there is no shortage of problems US companies face in out-sourcing manufacturing to Asia. For air cargo shippers, available lift out of Asia at peak season — perhaps the phrase ‘peak season’ is key here — was high on the complaint list.

Timex makes the majority of its watches in the Philippines — 17 million. The company ships 97,000 watches a week to the US, either to Wal-Mart distribution centers or to the Timex facility in Little Rock, Arkansas.

Michael DeVault, Timex vice-president of distribution and logistics, said it was difficult to find lift out of Asia as China swallowed all available air cargo capacity. He said, ‘Our business is driven by retail cycles, so most of our shipping is done in the third and fourth quarter. That means we clash with all the peak season shipments absorbing capacity leaving China.’

Golden Gate Logistics senior vice-president Ed Feitzinger had similar complaints. He said, ‘Just look at Shanghai. Hewlett Packard started making all its laptops in Shanghai and now flies one-and-a-half 747 freighters out of Pudong every day.

‘Dell set up a factory in Shanghai. So did Seagate Technology [a major US maker of hard drives] and in a short time air freight tightened up and started to cost a lot more. And that situation remains.’

What, perhaps, they want is a very large amount of capacity for the American Christmas and Thanksgiving trade. Unfortunately, demand and supply in almost any business are rarely smoothly matched. The suggestion that Christmas and Thanksgiving, like Golden Weeks, should be abolished, is not met with enthusiasm.
Source: Cargonews Asia

A new route between north China’s port city of Tianjin and the US east coast has been launched by the grandly named Grand Alliance, one of the world’s shipping giants.

The Grand Alliance — Hapag-Lloyd Container Line (HLCL), Nippon Yusen Kaisha (NYK), Orient Overseas Container Line (OOCL) and Malaysia International Shipping (MISC) — will operate eight container vessels on the new line.

The new service will cover the ports of Dalian, Qingdao, Ningbo and Shanghai in China, Pusan in the Republic of Korea and New York.

The Grand Alliance has previously launched two other ocean routes between Tianjin and the US west coast, and between Tianjin and Europe. Yu Rumin, president of the Tianjin Port Group said this new venture is the first shipping route connecting the US east coast with the port of Tianjin.

China plans to make Tianjin Port in north China an international shipping center.

The world’s top 20 shipping lines have all opened services at Tianjin Port, which has now more than 100 container shipping lines and trade links with more than 400 ports in some 180 countries and regions.

Tianjin Port handled nearly 3.36 million TEUs of containers in the first six months, up 21% year-on-year.
Source: China.org.cn

In Australia it is called a ute, short for utility, and every farmer, or would-be farmer, has one. Often gussied up to the nines with all sorts of embellishments. It is not the sort of machine you associate with China. And yet it is big time.

The China Association of Automobile Manufacturers has announced that China’s major pickup truck producers sold 84,755 units in the first half of this year, with domestically-owned brands accounting for nearly 80% of the total sales.

Great Wall, Zhongxing and Zhengzhou-Nissan were the top three sellers.

Between January and June, 25,016 Great Wall pickup trucks were sold, or 29.5% of the total sales. They were followed by Zhongxing pickup trucks with sales of 14,287, or 16.9% and then by Zhongzhou-Nissan pickup trucks with sales of 13,033, 15.4%.

China’s total vehicle sales amounted to 4.37 million in the six-month period, a growth of 23.3% on the same period of last year. Last year China became the world’s second largest market for new vehicles after the United States, with annual sales at 7.22 million.

There is something very tempting about the idea of hooning around the Australian outback in a Great Wall ute. And have no doubt that some day, soon, that will not only be possible, it will be commonplace.
Source: China.org.cn