mardi 16 décembre 2014

Matthieu David Experton, president of Daxue Research, about the Snack industry in China

-How is the snack industry in China in terms of value, volume/scale, growth rate? 
According to, the sales of snack industry in China are more than ¥200 billion in 2011 and it is growing with 15% growth rate. It is forecasted increasing to ¥480 billion in 2018.In the recent 5 years, the average growth rate of importing snack markets is remains15%, and the main consumer group is from age 18-25 female consumers.

-Is there any visible trend? What are the reasons behind that? What drive the growth?
Based on the research from Standard Chartered 2014, the growth rate of sweets and chocolates declined to 10% in the first 10 years in China. The same situation happen to the instant noodles, despite the growth rate of instant noodles was nearly 20% in 2014. In terms of fruit juice and soft drinks, the growth rate is decrease almost half when comparing with last three years. However, the growth rate of bottled water remains increasing with 16% every year.The main reason for that is mainly because of the slow economic growth in China. In addition, Chinese consumers have stronger health consciousness than before.
A research carried by Chinese Snack Association aims to the age range below 40, found out that there are 88.5% interviewees said snacks are nonnutritive, especially those snacks with Saturated fats and sweets. Therefore, the development of snack industry in the future should made of low-energy, low-fat, low-sugar materials, to provide consumers more healthy and nutrition foods.

-What kinds of snacks are more popular and who would buy more snacks?
The research from Chinese Snack Association also shows 41.6%, 40.4% and 26.7% interviewees choose chocolates, sweets and potato chips as their favorite snacks respectively.
The young people from 22-35 are the main consumer group for snacks, especially the females. The teenager and children are also the main consumers for snacks.

-Will imported products/multinational brands more popular in China?
According to the development trend of Chinese Snacks Industry in 2013, the multinational brands take the complete advantage in China snack industry. The top 10 snack brands are: Want-want, Kraft Foods, LIWAYWAY, DANONE, Wm Wrigley Jr Company, Dove, ORION, Xufuji and Jiashili. Among these brands, Wang-want and Xufuji are the Taiwanese company, which accounted 20% market share. Kraft Foods, LIWAYWAY, DANONE, Wm Wrigley Jr Company, Dove, ORION are occupy 50% in Chinese market. Xufuji and Jiashili are domestic brands, only accounted for 20%.
However, some domestic brands have the potential to increase their market share in the future. For example, Le Conte, Dali and Qinqin. As these brands know the needs of Chinese consumers better than foreign brands, for example, the Chinese snacks manufactures produce some snacks that foreign brands do not produce, like pot roast foods.

- What's the position of China in Asia in this industry?
Investigation conducted by Nielsen shows the sales of frozen snacks take up the one third of total snacks sales on Asia-Pacific area, which are $13.7 billion. The most popular snacks in Asia-Pacific area is chocolate(69%), cookies/biscuits(55%), nuts/seeds(49%), yogurts,(48%) chips/crisps(43%), gum(38%).
In 2013, the growth rate of exports and imports of Chinese snacks increased about 8%, Brazil,ASEAN (Association of Southeast Asian Nations) and America are the three biggest foods trade partner.


mardi 9 décembre 2014

The effect of appreciation of RMB on investment in China

The effect of appreciation of RMB on investment in China

The appreciation of RMB has great effect on Chinese export and import, investment policy, debt issues and the inflation problem.
China is an exporting superpower. Chinese people rely on sells of export a lot. The kinds of products we export can be simply divided into 2 parts: primary products and processed products.

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The primary products, like paper, woods, ferrous metals (metals with iron), will be exported less. This is negative for the economy of the country in a short time. However, in the long terms, this is beneficial to the country because the limited resources can be saved which can help adjust the industrial structure. After all, China is not a country with rich resources. We have large amounts of people to consume them. What’s more, we may save the money for environmental problems of making primary products.
The processed products, like technological products, cars, machines, foods, toys, are highly influenced by the changes of currency prices. If the price of RMB rises, the products exported will become more expensive. The consumers in other countries will be more eager to purchase the cheaper products (maybe the products of their own country or other countries). This is hard for the country whose export occupies 30%-40% GDP. That is to say, output is quite important for the country.
These years, Chinese input has increased. We can also divide the input products into 2 parts as above.
About the primary products, we mainly talk about the energy products. The percentage of coal consumption is about 65% to 70%. Most of the coal is produced locally. That mains we basically use the energy produces by ourselves. On the other hand, the percentage of oil is about 20% to 25% according to the report of Chinese government. Most of them rely on the input. This is also not a small figure in that the energy we consume is quite huge. If the price of RMB becomes lower, the price of oil is relatively lower. We can use less money to buy more oil. In this sight, the appreciation of RMB is beneficial.
Here come the processed products. The kinds of processed products are the same as the export products. If the appreciation happens, the price of the import will become quite cheap. Chinese people will start buying more foreign products and give up their local products. This will be a great loss for the country because the market of China is very large. If you lose the market, you lose everything. The economy of the country will meet its period of stagnations.
The appreciation issue will also influence the investment policy.
The first is about the negative influences. As the prices of RMB rises, the currency will not be so attractive to foreign investors. The reason is the cost of investment is quite high. That may be good for the local company for they will face fewer competitors. They can have more freedom to control Chinese market. However, that is negative for the corporation of local companies and foreign companies. The technological research abilities of China are far from super big countries like the US and Japan. We really need to learn more from these countries. If they do not invest and supply technological support, we will lose the competitive ability in the world.
The second is about the positive influences. We have mentioned that we will lose some investment from other countries, but our investment to other countries will increase. We can find the evidence from some figures. Since the exchange reform in 2005, the appreciation of the RMB at a stage of excess domestic liquidity and the international context of economic imbalances, the government encourages the development of foreign direct investment. With close to 10% economic growth in 10 years, China’s foreign direct investment has a rapid growth. The reason of it is quite clear. The cost of external investment is quite low. The asset and resources of foreign countries become more attractive to Chinese investors. They are relatively cheap. Another reason is the lower financing cost. The lower the cost, the higher the return on invested capital.
The RMB currency changes will also arouse foreign debt problems. As we all know, China is a country with huge amounts of foreign debts. The latest number is USD863.167 billion, which exclude the debt of Hong Kong, Macau and Taiwan. So if the price of RMB becomes higher, the foreign countries need to pay less for their debt. If America borrows USD10 from China, it needs to pay back RMB60. If the RMB price appreciates, it only needs to pay back less than RMB60. That means we lose part of the money. So if the number is USD863.167 billion. A little change leads to a great loss.
Finally, the inflation problem is quite easy to understand. The rise of the currency makes the inflation mute. We can use less money to buy more products. On this aspect, it’s positive for the country.
All in all, the appreciation of RMB has good parts and bad parts. It’s good for the primary products import and export, the external investment and inflation. And it’s bad for the processed products import and export, the internal investment and foreign debt. We really need to find which currency policy will get more benefits and carry out it.

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mardi 2 décembre 2014

Chinese system of conformity assessment

Chinese system of conformity assessment

The Chinese system of conformity assessment has played an essential role in the history of Chinese law. When the conformity assessment carried out, the consumers were more confident in the products they produced, thereby protecting the health of consumers and encouraging them to buy more without hesitation.
The beginning of the conformity assessment can date back to 2006. In order to reduce technical barrier to trade and facilitate bilateral trade, the government established the China National Accreditation Service for Conformity Assessment which is more helpful to the trade especially the founding of well-functioning quality infrastructure (QI).
Chinese system of conformity assessment

With the release of quality infrastructure, the relevant department can assess the products in a standard way, which decreases the complaint from the consumers. While standard implementation is not simple like what the government think. The first problem is the unified setting and compliance. Every industry has its own benchmark and they cannot imitate from each other according to the similar principle, therefore problems fall into the relevant department. Forexample, fish and cargo belong to diverse type of product. If the department examinee them in a similar way, the fish or cargo may have problems in the future in spite of the absurd standard.  What requires the government to do is that formulate system from person to person to make the system more perfect than before, which makes people believe the system.
The second problem is the implementation of the system. Since ancient times, promulgation of the system is not excellent itself, but the problem of Law enforcement agencies such as corruption, favoritism. In this way, the absolute execution is quite important, so the government may formulate relevant regulations to restrict the officials. If they cannot perform in terms of regulation, they will be severely punished. Such methods can constrain the officials better and reduce the risk of weak implementation. Since then, the credibility of QI has been guaranteed and people do not care about the standard because only the unfair system is likely to make people worried about it.
While the excessive reliance on regulation will have a negative on officials and pose a threat to the future development, so it is not a long-term policy. The main cause is that the stiff regulation is more likely to reduce the initiative of the officials, for they are afraid of making mistakes with stiff punishments. Hence for them, slacking is a choice for amounts of them that is counterproductive for the authority. In this way, the appropriate measure is adequate punishment and better system which gives partial freedom to the relevant department. In the future they are more possible to have an efficient execution for the sake of guaranteeing the system.
The third problem is the market surveillance. When the relevant department passes the products to the markets in terms of standard, related merchant dispose of the products at will and append additives after the process of inspection. Apart from the subsequent behavior, some amounts of businessmen dare to try illegal behavior escape from inspection that not only brings a huge trouble to the consumers but also themselves. 
The point is best illustrated with the example of Shanghai Husi Food Company. The company is the one who produce the food with raw expired materials delivering to the foreign fast food restaurants such as McDonald's KFC, etc., When the government reached the factory to examine the materials, the merchants have prepared in advance such as hiding the expired food in the refrigerator or adding the qualified sample label. Therefore whether the authority checked several times, they would never find the illegal food. Examples of such incidents are not only once, but only the Husi Company was exposed to the public owing to its huge range of harm violations.

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For the sake of guaranteeing the system in order, the relevant department should not remind the company of checking the products in advance, or they will never know about what they are like actually in the factory. The relevant departments need to comply with this standard to perform the implementation of this system, not individual problems individually. What’s more, officials cannot examine only once, they are able to have a spot check irregularly, which can test the real strength of the enterprise and the safety of the food. From then on, the factory is careful of producing food because the health of people is the vital element for everyone.
The Chinese system of conformity assessment is not among core subject areas in law but deserve a place in the system, for it is beneficial to people. During the last decades, global economic integration has become the focus of public concern. The system will be a good way to reduce technical barrier to trade and facilitate bilateral trade, If the government can overcome the problems like implement and market surveillance.