Banking of China: A long path for internationalization

The scale of China commercial & industrial bank is bigger than Citibank, however, the profitablity is only 25% of Citibank, and the price per chip is less than USD1.00 in the second quarter of 2008. Putting the state-own bank to publicly-listed in the overseas board is one of the solution for the revolution of banking in China. Where needs to use the power from the international invester to advance the bank system & make the operation especially the accounting to have the higher transparency.

The old problem from the China banking is that they mainly focus at collecting the deposite from the China local market & load to the state-own enteprise, if there is any problem from the enterprise, they ask the help from the government. There wer alomost no retial banking or any good finance products for the consumer market. And there are involved many politics from the government. So, even the bad debt is higher than the international level, no body would care it, since the government would finally take care for it.

In the year 2007 after China industrial & commercial bank publicly-listed in Amercia & Hong Kong, there were really brought the change. For example, much more finance products for the consumer, more load to the healthy private enteprise, more direct investment from the bank, the bank officier would try to sell more finance products when there is any person open the bank account and even actively participant into the bidding of the infrastucture project with the developers. Of course, there is still a long long path to move for meeting the standard as Citibank, the important is that it takes the success first step of moving aboard for the revolution of the banking from China.

If China commercial & industrial bank revolution can success, there are much more banks will also go publicly-listed in the overseas board, such as argiculture bank, where owns the similiar scale as China commercial & industrial bank. And there are also many small & medium size banks too from China who have excellent personnel network in China where are always capable of getting the China local big infrastucture project that even the multi-national company cannot do.

What are Chinese enterprise going to learn in the coming 10 years

In the past 10 years, most of the production are moved to held in China, and such trend will be maintained for at least 10 years more.

In the past 10 years, Chinese enterprise mainly focused at learning the production skill & knowledge from the foreign enterprise. And it's awed in China that the new comprtitive core is no longer in production, but the patten, technlogy innovation, product design, branding & distributing channels. If the Chinese enteprise cannot learn them in the cmoing 10 years, the economic role of China in the world will be in a peripherial place.

In the coming 10 years, it will see more lab build up in China, start to see in some of the factory where the engineers are more than workers, and more commercial manger put the effort in value-adding their products & seeking more channels to sell their products.

For example Samsung, it was an factory once employed many workers & focused at production before the Asian finance crisis in 1997. In only 10 years later, most of their un-core business are either sold or closed. And they are focusing in R & D, distributing channels, branding build up. It make the enteprise from the value of USD2.2 billion to be the enteprise near 40 billion which is even bigger than Sony.

Branding strategy in China

In Hong Kong, a Sony LCD TV can sell around 40% higher than a China brand LCD TV. In Amercia or Europe, it's also can sell around 40% higher, because of the branding value. However, it cannot sell at such difference of the price in China, the Sony LCD TV may only possible to sell around 10% higher. It's due to the taste of the China conusmer is different than Hong Kong, Europe & Amercia.

In China, the young generation have high confident on the domestic made product. It's not just due to the nationalism teaching from the school, higher sense of the belonging to the own country, it's also due to the China made product quality imporved a lot. And the overall society is highly encouraging the loyalty of using the China local products.

Almost all multi-national companies come to China would set up with their own Chinese enterprise name & Chinese brand name. And it also inject many traditional Chinese factors in their product design, packing & website. And they also use the China local movie stars or famous person such as Yao Ming for their TV advertising. It's for the purpose of taking care the emtional needs from the Chinese people.

In China, there are none of any brand can have the high loyalty customer (unlike Apple, they have many high loyalty customer), the consumer from China like to use the different products & brands alternatively. We can see from Wal-mart of Carrefore where they offer the boarder products & more brands than Amercian & French mall.

China government has cancelled many favor policies for the foreign enterprise, but even more enterprise come

The year 2008 marks milestone of the China economic policy change. It's no longer easy to get the visa to stay in China. Before 2008, there were easy to have the visa of staying in China for 6 months or even 12 months. And now, it's only allow 1 month & single entry instead of multi entry.

Besides, the government also cancel the tax favor of 2 years free tax & 3 years half tax. That policy allow the foreign enterprise to have tax free in China in the first 2 years & pay only 50% of the normal tax for the another 3 years. The other favors like land, energy, tax refund for export, cheap labor cost are gradually increasing.

Because many new investors feedback that they are no longer wanting the cheap production cost from China, since other countries can even do cheaper. The new demanding from the enterprise are a expanding local market, supply of talents, excellent infrastructure, legal environment, free flow of the capital from the finance market etc. Especially the multinational enterprise, they demand China to supply them more option to increase their international competitiveness.

For example Amazon, their new demand from India is no longer the cheap price English speaking customer service people, it's the internet infrastructure can be matched with China.
The development of the China local market has started to accelerate.

After Chinese dollar increase the value for more than 2 years

On 21-7-2005, China government start to increased the currency rate of RMB against US dollar. The government implement that policy extremely careful. Since the economic structure of China is highly relied on the export and the export power are mainly from the cheap production cost & low RMB currency rate. Many people afraid that the increasing of the currency would harm to the local manufacturer, since they are mainly the assembler earning small profit only.

More than 2 years have gone, the foreign enterprise even accelerate their speed of investing in China, many hot money still flow into China, which was even make the capital market of China to be "too hot".

In my secondary industry, part of the enterprise were really collapsed due to the currency or remove the Vietnam especially in delta pearl where the cost of the land also increase a lot. So, in that past 2 years, the currency help the industrial province of China to filter the quality or high value add enterprise to survive in China. The removed factories are usually the shoes assembler, wood made furniture assembler, garment assembler etc.

And it also contribute to the service industry of China where can charge the price higher such as touring, hotel, logistic, property, finance service etc.

Warning signal to the China economic growth

In the economic structure of America, Europe or Japan, the origin of the economic is mainly from the expenses of the consumer, where can occupy up to 70% - 80%, for the rest are mainly origin from the government's fixed asset investment such as infrastructure.

In China, world number 4 largest economic scale, the expenses of the consumer contribute to less than 50% of the economic growth. And the government investment in the fixed asset occupy near 45%. As compare with American less than 20%, we can see that the economic growth is still highly relied from the government instead of the free market.

The new economic priority from the government is the creating of the "local demanding", where encourages the enterprises to develop the new product for fulfilling the local market. Since most of the products are from clone the overseas design where are not exactly the demand from the local consumer.

Shocking of the China wholesales & retail industry

China started to open the wholesales & retail market after joined the WTO on 2001. Some of the international shopping mall came to China to start their investments such as Wal-mart, Carrefore etc. In the beginning, they invest only in the level 1 or level 2 cities. From 2008, Wal-mart announced that they will expand the scale in China by setting up more than 100 malls in China within few years. And it's a starting of igniting the wholesales war in China.

The shopping mall is only one of the wholesales models open in China. The other models such as commission distributor, chain store, franchise & even online shop are also open already. And the problem is that else of the home appliance chain store, there are not existed any famous local enterprise brand for other wholesales models. Especially the online store, most of the local online shop are still alerted the importance of it nor knowing the core skills of bringing the traffic to the online shop.

In the coming years, the entrance level of the wholesales market will be lower, there are much more middle scale international wholesales enterprise will enter China too. The local wholesales enterprises will face more hard competition. There is found a phenomenon that the local wholesales mall are changing to focus the level 3 cities or agriculture market due to the strong impacting from the foreign wholesales mall.