China Direct

Rolls Royce flying high with China Eastern deal

 

 

CBI member, Rolls-Royce have announced that they have signed a contract with China Eastern to supply engines and services for the airline’s A330 fleet.

The contract, valued at more than $1.4 billion, was one of the largest deals agreed at the China International Expo last week. Rolls-Royce will provide Trent XWB engines and facilitate Rolls-Royce’s long-term ‘TotalCare’ servicing for the airline.

Rolls-Royce Trent 700 engines already power all of China Eastern Airlines’ 59 currently operational Airbus A330 aircraft, and the latest deal is one in a series aimed at expanding and modernising China Eastern’s fleet. In 2016, China Eastern ordered 20 Airbus A350 XWB aircraft that incorporate Rolls-Royce’s Trent XWB engine to expand its widebody fleet and increase capacity across international routes. This was followed by a Letter of Intent in 2017, which set out that Rolls-Royce would also power the A330 fleet and further their relationship through the signing of last week’s contract.

The Trent XWB is the world’s most efficient large civil aero engine with more than 1,700 engines already having been sold to 46 customers. The engine entered commercial service in 2015.

Rolls-Royce sells its engines in China with ‘TotalCare’ servicing for the lifetime of the engine because it is aware of the unique operating environment which China presents. As a result, Rolls-Royce engineers are able to guarantee the engine from damage caused by operating within China’s heavily polluted airspace.

Rolls-Royce is enjoying considerable success in the China market. China became the company’s second biggest market in 2016, way ahead of when the company’s own predictions. China continues to be a key growth market for Rolls-Royce, where they are aiming to double their operating engine count.

Please read more here.

Lego building Chinese market brick by brick

 

New CBI member, Lego has announced that it will launch two exclusive sets to mark Chinese New Year. The move is the latest step made by the Danish toy manufacturer to develop its presence in China. Lego CEO, Niels B. Christiansen made the announcement at last week’s China International Import Expo. in Shanghai. At the launch, Mr. Christiansen was keen to point out to that the sets would be ‘The first time [Lego] have made sets for a specific country or region,’ an approach which demonstrates that Lego is well aware of the unique challenges that companies face when selling into the China market.

Lego has identified the China market as its most important market based on its growth potential. Lego’s presentation at the CIIE focussed on how Lego sought to inspire the minds of the next generation of Chinese children. Mr Christiansen set out Lego’s intentions in China clearly, "If you measure it by turnover, the United States is the biggest toy market in the world, as well as for Lego. But if you look forward, the potential, the opportunity and growth rates in China are amazing. So, if you look at growth potential, China is the most important market.”

The company is already enjoying very positive China sales. Across other markets Lego reported its first sales decline in 13 years. However, in China, Lego is reporting post double-digit growth.

In addition to launching two China-exclusive sets, Lego has also changed how it engages with the market by building up the brand’s profile online.

At the beginning on 2018, Lego partnered with Tencent, China's biggest social network and gaming company, to develop a series of games set in the Lego worlds and increasing the exposure of Lego’s characters in China. The partnership has been very successful, Lego’s online digital media materials have been downloaded 600 million times since the start of this year alone. Lego and Tencent are also partnering to expand the company’s presence in offline gaming over the next couple of months, by launching a video game which will be playable on all major gaming consoles.

Against such success online, the company has also taken steps to develop its offline presence. Lego will double its footprint in China, by opening 140 stores in more than 30 cities by the end of 2019, up from the current 47 stores in 16 cities.

Lego currently enjoys 3% market share in China. However, the company is confident that as the country’s IP environment continues to improve, Lego’s market share will increase as ‘copy-cats’ and products which closely resemble Lego designs disappear from the market. Lego’s CEO addressed this point directly during the product launch at the CIIE, "Creating a business environment with more respect and protection for intellectual property is going to be very important. [Lego] can engage much more, with a higher safety level when intellectual property is better respected [in China].”

The new Lego sets to celebrate Chinese New Year are expected to hit the shops in January of 2019.

Please read more here.

ABB announces $150 million investment in Shanghai robotics factory

 

CBI member, ABB has announced plans to invest $150 million in an advanced robotics factory in Shanghai where robots will make other robots. The new plant is expected to begin operations by the end of 2020 and will incorporate an onsite R&D centre to pursue innovations in artificial intelligence and automating production lines.

ABB Chairman, Peter Voser said that, ‘the decision to invest in the robotics factory was influenced by growing automation needs across industries. […] what will be driving the industries of the future is going to be automation, [and a shift] towards autonomous manufacturing. For that you need robots, but it’s not just the robot itself as a product – you need also end-to-end solutions for manufacturing.’

Shanghai was chosen as the location of ABB’s new factory, over other leading robotics centres such as those in Japan, because ABB believe that China will become the world’s largest market for robotic manufacturing. Whilst Tokyo may have the jump on domestic robotics and robotics which can assist in the healthcare industry, for example, it is in China where ABB expects manufacturing robotics to take off since the China manufacturing sector ‘has a great need to automate.’

ABB are making this investment in alignment with Beijing’s push for ‘Made in China 2025,’ the Chinese Government’s ambitious industrial policy that aims to develop local industry to a point where it is at least on-par with Western rivals. In line with this industrial plan, last summer the Chinese government called on domestic firms to manufacture and incorporate more robots in their production lines. President Xi has called on companies in manufacturing to bring about a ‘robot revolution,’ and seeks to autotomise close to 80% of industrial manufacturing jobs.

Having already localised much of its production to China, ABB is well placed to get behind such an initiative. According to Voser, ‘[ABB] manufactures and sells locally. The company produces up to 90% of the products it sells in China within its borders.’

Manufacturing in China has been developing at a rapid pace. At the Tianjin meeting of the World Economic Forum in September, two other factories in China - and belonging to CBI members (Bosch & Siemens) - were identified as ‘the most advanced in the world’ because of their efforts to integrate AI systems and autotomise production. Out of 9 factories identified by WEF as technologically world leading, 3 are in China – a statistic which support’s ABB’s prediction that China will be at the fore-front of autonomous manufacturing.

China’s manufacturing sector has a real need to shift to autonomous manufacturing. Following decades of economic growth, wages are rising and jobs in the factory are starting to appear far less attractive. The impact rising wages has had on profits and bottom lines has pushed many companies to leave China, and re-position their manufacturing hubs where labour is cheaper, such as in Southeast Asia. However, an AI-manufacturing industrial revolution could tilt the scales back in China’s favour.

Please read more here.

Burberry shifts B Series China fashion brands online... and sells out in record time

A new collection by British high-end fashion brand and CBI member, Burberry, that was only available to buy through Chinese social media apps, has sold out in one month.

Named the ‘B Series’, Burberry’s new line aims to better cater towards the Chinese fashion market by following a new and unique production cycle, which matches the monthly launch schedule of the Asian fashion world rather than the West’s seasonal timeframe. On top of this, the ‘B Series’ also features a new way of reaching out to customers and selling into the China market. Burberry’s latest collection takes advantage of China’s booming e-commerce industry and is only available through social media shopping platforms.  

Burberry’s shift in how it sells into the China market brought results – the collection sold out in four hours.

The fashion house has made clear that it is in the midst of a transition and repositioning phase that places a greater emphasis on the China and wider Asian markets.

Over the last couple of months, Burberry have announced a series of partnerships with social media apps that are particularly popular with Chinese consumers - such as WeChat and Weibo - in an attempt to develop to build customer loyalty through increased engagement on social media.

Burberry has also taken steps to change its concept and design process to better cater to the China and Asian markets by bringing in Riccardo Tisci from Givenchy – where he is credited as having successfully led the French fashion house’s transition from European to Asian fusion.

Burberry point to the gothic touches and minimalism in their new ‘B Series’ collection as evidence that the brand has successfully transitioned towards an aesthetic preferred in Asia. Furthermore, the new collection places more emphasis on items which are ‘ready to wear’ rather than high fashion pieces. This is because of the fact that in the China market branded sweatshirts and T-shirts appear to be held in much higher regard than in Europe, where the same products are considered to be comfort wear and not fashion statements.

The next ‘B Series’ collection will be launched on November 17^th.

Burberry executives are confident that the line will enjoy repeat success because the new sales concept of selling through social media platforms has prompted much higher levels of engagement online and attracted twice the number of new and younger customers to the brand compared to statistics from February.

Burberry also said that comparable store sales in the Asia-Pacific were outpacing figures from Europe, as spending rose in Mainland China and Chinese travellers shifted their spending from European to Asian tourist destinations, particularly Hong Kong.

Burberry has plans to expand its physical presence in China also, and has an upcoming store opening in Xi’an.

Please read more here .

HSBC launches new Navigator: Made for China report at CIIE

 

HSBC took to the stage at the China International Import Expo. to launch its latest report on Chinese consumer tastes. Titled Navigator: Made for China, the report seeks to provide manufacturers with an understanding of changing Chinese consumer tastes and where there may be opportunities within the China market.

The report contains good news for British manufacturers. After several days of campaigning behind the slogan ‘Britain is GREAT,’ and pitching to potential Chinese clients that British products can be easily distinguished in China because of their quality, British manufacturers should be encouraged to read that HSBC affirms that international businesses selling into the China are successfully distinguishing themselves through the unique quality of their products.

Building on this idea that manufacturers must focus their attention on quality, the report also pays attention to the changing demographics of the China market and sign-posts how this shift is affecting the practicalities of selling into China. The report encourages manufacturers to focus on younger consumers who are after high-quality products that integrate advanced technological components.

According to HSBC’s Head of Commercial Banking, Asia Pacific ‘[manufacturers] all recognise the rapidly growing importance of the Chinese consumer and [the fact] that it’s really the young, affluent Chinese that are driving this consumerism.’

HSBC is confident that more and more manufacturers will find success selling into China, and at the launch of the report, Helen Wong, Chief Executive, Greater China said: ‘[the report is] talking about the middle class. At the moment it is around 400 million and could grow to 850 million by 2030.’ However, the report clearly points out that it is important that foreign firms focus on the needs of this growing demographic and avoid being blinded by its size. Ms. Wong continues to make the point that ‘foreign firms [must] understand the aspirations of younger Chinese consumers who are selective about brands, increasingly health conscious, and concerned about the environment.’ With that in mind, the report highlights opportunities for high-end manufacturers of consumer electronics and intelligent equipment.

Finally, the report stresses the need for international manufactures to work harder to understand local business culture so that they can form effective partnerships enabling them access to China through distribution agreements with local companies and establishing a presence on China’s e-commerce sites.

Please read the full report here.

Please read more about HSBC’s ‘Made for China’ initiative at the CIIE here.

Atkins builds bridges - and urban solutions - in China

 

CBI member, Atkins has been commissioned by China Nuclear Engineering Construction Corporation to provide integrated urban development solutions to the China National Electric Engineering Business Park in Shanghai.

The park is located in the Hongqiao central business district and is part of a wider scheme aimed at increasing Shanghai’s capabilities in enhanced disruptive innovation and engineering a shift towards a greener economy centred around renewables and future technologies.

The contract serves as evidence that Atkins is managing to expand its offerings in Shanghai, and that the company has successfully built itself up as a respected and trusted partner in the city.

Mark Harrison, Atkins’ director for China Property, said ‘[Atkins] is pleased that as the market becomes increasingly demanding, our role as a consultant is evolving from designer to trusted advisor who understands and meets the business needs of our clients. This is underpinned by [Atkins’] integrated urban development capabilities, from positioning through to urban and master planning and ultimately architecture and landscape design, which allow us to provide a vision which is unique, comprehensive and implementable.’

The contract covers, urban and architectural master planning, concept design, schematic design and design development phases, as well as coordinating the relevant consultants to ensure implementation and design excellence throughout the project. Once, completed the 14-hectare development will become the headquarters of CNECC and create a large-scale fully integrated mixed-use urban complex with offices, hotels, residential and commercial facilities.

Construction of the CNECC began in December 2017 and is expected to be completed by 2020.

 

Atkins celebrates the opening of Hong Kong – Zhuhai – Macau bridge

The opening of the Hong Kong – Zhuhai – Macau Bridge last month made headlines across the world, as President Xi formally opened the bridge signalling the start of a plan to integrate the economies of the Bay Area.

Atkins’ Divisional Director for Highway & Transport Infrastructure in Asia, Douglas Simmons was on hand to report on Atkins’ engagement with the project.

Atkins is undertaking multiple contracts with third-party contractors for the Hong Kong-Zhuhai-Macau Bridge and related projects:

• Atkins was appointed by Gammon Construction Limited as design checker for the design and construction of the Tuen Men – Chek Lap Kok Link Southern Connection Viaduct Section
• Atkins was appointed as independent checking engineer for the design and construction of the Tuen Men – Chek Lap Northern Connection Sub-Sea tunnel section
• Appointed by China State Construction Engineering as the designer for the design and construction of the Hong Kong Link Road section between Scenic Hill on the Airport Island and the proposed Hong Kong boundary cross facilities So far only the Hong Kong Link Road has been completed, work on the bridge and surrounding area including the Tuen Men – Chek Lap Kok Link is expected to be completed in 2020.
• Please read more here (Hongqiao Development)
• Please read more here (Hong Kong Bridge) 
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DHL increasing China Greater Bay area investment

 

German logistics giant and CBI member, DHL announced last week that it plans to increase its investment in China.

According to DHL Express China CEO, Wu Dongming the firm hopes to benefit from the recent opening of the Hong Kong – Zhuhai – Macao Bridge and associated government-sponsored initiatives related to the Belt & Road Initiative, which has a start point in the Greater Bay Area. More specifically, the added investment will focus on expanding service facilities in Hong Kong and Guangzhou, enabling DHL to increase the capacity of their freight flight services from South China to Germany.

In addition to announcing plans to increase investment in the Zhuhai / Greater Bay area, DHL launched a new freight flight service from Guangdong to Leipzig last Friday.

Demand from Chinese manufacturers has risen to such an extent that despite the company operating flights from Shenzhen to Leipzig six times a week, the company needed to introduce a new route to boost capacity. The new Guangdong to Leipzig route will help DHL cater to the demand from Chinese manufacturers for delivery services in Zhuhai, Zhongshan, Jiangmen and Foshan in Guangdong province. The added investment will extend DHL’s lead in the China market, where the company is already the air freight market leader.

The company announced in a press release that these steps were merely the first in a plan to further DHL’s ‘Guangzhou Gateway’ and benefit from the accelerated economic integration and development taking place in the Greater Bay area.

DHL China employs over 7,000 people and offers China-connectivity to over 401 cities worldwide and domestic transportation to 128 cities within China.

Please read more here.

Akzo Nobel expanding China business

CBI member, Akzo Nobel has made public its intention to expand its presence in Mainland China through acquisitions off the back of rising sales.

Sales in China - which is the company’s largest single market - rose to $1.7 billion in 2017. This growth has been attributed to a rise in demand from Chinese millennials for paints and home decoration products. According to Akzo Nobel’s China President, Lin Liangqi, the company is performing well because ‘sales of new homes have slowed in China [making it] the right time for [Akzo Nobel] to adjust their strategies in the big market.’

Millennials refer to those aged 24 to 38 years old and make up a market of 400 million consumers. As the cost of real-estate has risen over the last year, so has the demand for re-painting. As a result, the average household in China has begun to fall more in line with those in Western markets, choosing to repaint their homes every 3 years, compared to at least every 8 years in China.

Akzo Nobel is having particular success in China with its two brands, Dulux and Nippon Paint. Both owned by Akzo Nobel, they are the two best-selling foreign paint brands in China.

According to the China National Coatings Industry Association, China’s home repainting market could see annual sales of more than $14.5 billion in the next couple of years. With a wider range of colours and reputation for ecologically friendly products, Dulux (owned by Akzo Nobel) is well positioned to profit against domestic competition and brands which carry poor reputations following a series of scandals involving paints containing carcinogens and giving off poisonous fumes.

Akzo Nobel’s sales in China accounted for 12.3% of the company’s global sales. The company operates 15 factories in the Mainland and employs roughly 6,000 workers.

Please read more here.

Aston Martin driving China growth with Shanghai design studio

 

CBI member, Aston Martin has announced that it will expand its presence in China with the opening of a new design studio in Shanghai. The studio will be the sportscar manufacturer’s first design studio to be located outside of the UK.

The studio is being set up in collaboration with Tongji University in Shanghai, which is one of the leading universities for the study of design and innovation. According to Aston Martin’s Executive Vice-President, Marek Reichman the partnership’s first project will be ‘collaboration on future interior designs for Aston Martin sportscars and the company’s first SUV.’

Mr. Reichman continues to explain that Shanghai was chosen as the location for Aston Martin’s first overseas design studio because, ‘the Chinese market is incredibly important to the future success of Aston Martin. Collaborating with industry leaders and talent at Tongji University will allow us to have a deeper understanding of the trends in China, ensuring we are focussed on the needs of our Chinese customers.’

Chinese customers account for 90% of the international sportscar market, and as a result Aston Martin has big ambitions for its activities in China. In January the company announced it had a £620 million trade and investment plan designed to boost its presence in China, a plan which is being introduced off the back of an 89% increase in sales in 2017.

In addition to opening the new design studio, Aston Martin is also in the process of doubling its number of dealerships in the country aiming to reach 20 dealerships within the next year or so.

Aston Martin currently has 4 models on the market in China: the Rapide S, Vantage , Vanquish S, as well as James Bond’s preferred mode of transport, the DB11.

City of London launches RMB Business Quarterly

A report launched last month by CBI member the City of London Corporation and People’s Bank of China reveals that Chinese currency transactions in London have increased significantly year-on-year.  

The London RMB Business Quarterly report shows that daily RMB foreign exchange market transactions averaged roughly £70 billion in the second quarter of this year, up nearly 14 per cent on the previous quarter and over 30 per cent on 2017.

The news comes as the City Corporation relaunches its influential Renminbi business initiative, a campaign which ran from 2012 to 2015 that helped London become the leading offshore RMB trading hub outside of Asia.

The joint publication, which is backed by HM Treasury, is part of the City of London Corporation’s Asia Next Decade campaign, which has identified there is increasing demand in the capital for more information on London’s RMB landscape.

The aim of the reports, which will be published every quarter, is to help cement London’s position as an RMB hub, by encouraging the issuance of more RMB denominated products and transactions in the City.

 Below are some key facts from the report: 

• The UK is a leading offshore RMB hub: The UK remains the country with the largest share of RMB payments outside of greater China. By the end of June, the total actual cross-border RMB settlement between China and the UK amounted to RMB176.2billion, an increase of 143% YoY.
• Global market developments are supporting the internationalisation of the RMB: The bond connect is only one year old, and has made a significant impact in helping overseas investors to access the CIBM. Future developments will allow UK and global institutional investors to achieve improved returns and diversification benefits. The inclusion of A-shares in MSCI EM has clear implications for the UK as a global asset management and capital markets centre.  
• China is continuing to open up the financial sector: The PBoC announced in April the implementation of a range of measures to further open the financial sector. In August, activity from the CSRC indicated that the Shanghai London Stock Connect would be launched soon.

 For further facts and information please read The City of London Report as enclosed below:

Download London RMB Business Quarterly－Issue 1