Jack Ma: Vision and values at Alibaba.com

Jack Ma is one of the first entrepreneurs to
develop e-commerce in China. He and his team
have achieved many ‘firsts’ in the area of Chinese
Internet Trade. He founded the first internet
commercial website in China, and created a B2B
marketplace platform to all small and
medium-sized enterprises in Asia and around the
world. He promoted the “Trust Pass” plan on the
website, which created the world’s first on-line
credit platform for companies.
Under Jack Ma’s leadership, the Alibaba B2B
websites have attracted more than 17 million
registered members in 220 countries globally,
with daily postings exceeding 35 million, making
Alibaba.com the most active Internet market
place and B2B community worldwide.

 Jack Ma vision and values in Alibaba:

The company will remain a ‘start-up’ no matter how long it has been in existence. What ever has 

been stable, I will disrupt that stability. The company needs to continue to innovate and grow. I 

want the employees to believe that we are a small company, no matter how big we get. I believe 

we can create a system and culture to perpetuate this culture of entrepreneurial and start-up spirit. To fuel the entrepreneurial and innovative spirit, along with a service attitude, Jack Ma is 

looking for people with the following characteristics: 

1) People with a dream. “Don’t let your colleagues work for you. They need to 

work for their dreams!” If people don’t believe in the dream and join the company 

purely for money, they won’t stay long .

2) People with shared values. “The value system is very important at Alibaba. We 

are crazy for it! In China, we might be the only crazy company who so strongly 

maintains our value system. People who don’t fit our values cannot survive in 

the company.” (Alibaba’s six core values are customer comes first, teamwork and 

cooperation, embracing change, integrity, passion, and honoring your job). 

3) People with a smile. “When we hire people, we look for people who are naturally 

optimistic and happy. In the start-up process we will meet with difficulties and 

challenges. Optimistic and happy people can better deal with these challenges 

and succeed. It’s hard to make a happy person unhappy, but it’s even harder to 

make an unhappy person happy. I am able to tell whether a person is on our 

staff by their smile.” 

4) People who enjoy work and can turn stress and challenges into 

innovation. ”Employees must be able to handle pressure and challenges, and 

turn them into positive energy for innovation, not negative energy for depression.” 

5) People who work together. “We don’t welcome people who think they are smart because they may think they are above others. This industry is so new that it 

really doesn’t have any real talents. The people who are real talents probably
don’t know they are talents. Everyone has tremendous potential. We all use
other people’s strengths to overcome our weaknesses …. We are all ordinary
people, but our goals are extraordinary.”

. 

China's surging online shopping

China saw surging online shopping in the second quarter of 2013 with transactions totaling   437.13 billion yuan (about 70.8 billion US dollars), showed new data on Sunday.

The figure was a 24.2-percent quarter-to-quarter increase, and a 45.3 percent year-on-yearincrease, according to a research report released by iResearch, China's leading Internet industry   research company.

According to the National Bureau of Statistics, total retail sales of consumer goods amounted to 6.03   trillion yuan nationwide in the period.

This indicates that online shopping now accounts for about 7.3 percent of consumer retail inChina.

In the second quarter, China's E-commerce giants initiated several rounds of collective pricewars to stimulate consumption.

According to the iResearch report, the price war has developed from a means of competition  into a market tool used by E-commerce companies to tap and stimulate customers' purchasing  desire.

Source:China Daily

China's economic reform balance between Government and the market.

Li Wei, head of the Development Research Center at the State Council, thinks the core issue for the economic reforms is to balance the relationship between the government and the market. To achieve this, better allocation of resources in the market is needed.

"China must accelerate the transformation of government functions, improve administrative efficiency and reduce intervention in the market. The government should allow the market to play its role and alleviate itself of tasks which can be better handled by society," he said.

The May 6 State Council executive meeting decided to delegate power to lower levels concerning 62 items that were previously subject to central government approval, a move Li Wei backs. The most urgent task for China's economic reforms is to accelerate the building of a resource-saving and environment-friendly society and speed up pricing schemes for land, water, power, oil and natural gas so that their prices can truly reflect market demand and supply, he said.

Wang Dongjin, former Vice Minister of the National Development and Reform Commission, said whether the government can properly recognize and balance its relationship with the market will decide the success of the new round of economic reforms.

Wang said the number of items subject to government approval is reducing, but the government still frequently participates in microeconomic activities, which will only exacerbate unrestrained administrative power, the waste of resources, environmental pollution, redundant construction and a surplus of production capacity, and also cause corruption. The root cause for such a situation is that there is no effective restraint mechanism on government interventions and the power to allocate resources.

According to Wang, current economic reforms should focus on "reforming" the government: It should return the power once monopolized by the government during the planned economy to the market, companies and society. Reforms should reduce the government's hand in microeconomic activities. In the meantime, the government should stick to strengthening education, health care, employment, social security and public services.

Source:  Beijing Review

Western program new engine for growth: Premier Li

China is betting on its western development program to lead a new round of economic growth as the government is mulling "differentiated" policies for the region that will feature huge spending on infrastructure, Premier Li Keqiang said on Monday.
"We will roll out more preferential policies tailored for the western region concerning infrastructure projects, to accelerate the construction and upgrading of rail and road networks," he said.
 Healthy economic development in the western region holds the key to the country's overall economic health.
Due to rising labor costs and a saturated market, the coastal areas are losing growth momentum. And experts believe the western region, which boasts a huge market and big pool of labor, is bound to become the country's new growth engine.

Some western cities have grown faster than their rich counterparts in the east.

In the first half of this year, three western cities Guiyang in Guizhou province, Xining in Qinghai province and Kunming in Yunnan province topped the national list in terms of year-on-year growth.

Source: China Daily

BOJ Governor Bond Buying is no risk for financial stability of Japan

In an article published today in the Wall Street Journal:

"Bank of Japan Governor Haruhiko Kuroda presented evidence Saturday that the central bank’s bond-buying effort is starting to produce results.

Increases in Japanese stock prices, long-term interest rates that have remained quite stable and low, improved employment conditions, and signs that business investment is picking up were among the signs Mr. Kuroda cited.

He also said that investors’ inflation expectations appear to be picking up.

Mr. Kuroda made the comments at the annual global banking summit in Jackson Hole, Wyo., hosted by the Federal Reserve Bank of Kansas City.

During the question and answer session, Mr. Kuroda defended the BOJ’s policy prescriptions as “completely justified” and said there was no evidence it was raising risks to the stability of the financial system. Japan’s financial system is “quite sound,” he said.

Japan’s problem has been continuous deflation, and the bond-buying program is designed to fix that, he said".

Alibaba's latest move Yu'ebao, its online-finance platform.

Yu'ebao, launched in mid-June is Alibaba's wildly popular online-finance platform that works through Alipay, Alibaba's third-party-payment arm, to deposit idle Alipay funds into a comparatively high-yielding money market fund.

Given Yu'ebao's current annual interest rate of 4.5 percent, its lack of a minimum deposit requirement, and the ability to transfer and withdraw funds easily without paying a commission,it  has made them China's biggest online investment service.

 The online platform that works through Alibaba's online finance arm Alipay (a Chinese version of Paypal) and partners with Tianjin-based Tianhong Asset Management Co. Ltd., had attracted 1 million users. A month after it was unveiled, in mid-July, it had 4 million users and more than 10 billion yuan ($1.6 billion) in deposits.

Yu'ebao's popularity has skyrocketed in large part, because of consumer confidence in its parent company, Alibaba, and its link to the company's online payment platform, Alipay, which claims close to 600 million active worldwide users (800 million registered accounts according to the company's website).
In announcing Alibaba's intention for Yu'ebao and Alibaba's foray into financial services to Chinese media, the company's founder and chairman, Jack Ma, said, "China's financial industry, especially the banking industry, only serves 20 percent of clients, and I see there are 80 percent of the clients (who) are not covered. Financial services should be about serving the layman, rather than playing inside your own circles and making money for yourself."
Hangzhou-based Alibaba, which runs Taobao, Tmall, and a host of other e-commerce sites, accounted for 70 percent of package deliveries in China last year, with sales reaching $163 billion, or 2 percent of China's GDP, according to statements released by Yahoo. The American tech giant currently owns a 24-percent stake in Alibaba.
In preparations for a possible public listing in the months to come, some financial analysts have estimated Alibaba's worth at more than $100 billion, rivaling Facebook's $104 billion valuation last year before its $16 billion IPO—the largest ever for a tech company, and the third largest of all time.
Analysts are able to justify the sky-high valuation because of the explosive growth in China's online retail sector. McKinsey's estimates the Chinese online retail economy, with Alibaba's operations as a core engine, will reach $420 billion to $650 billion by 2020, eclipsing the United States to become the world's largest market. China is currently the second largest market in the world, with online retail sales reaching $210 billion in 2012, and an annual growth rate of 120 percent since 2003.

Source: Beijing Review

Marc Faber thoughts about the Indian Economy

 "I am not very optimistic about India on the macroeconomic front, and it

has to do with the government policies. The economic policies of the

government are by and large a disaster; the government could have done

more. The government in India, through its incredible bureaucracy, has

retarded economic growth in the last 20-30 years by at least 3% per

annum in real terms. It’s a miracle that the Indian economy has

performed well, considering the quality of its government".

China's regulators trimming overcapacity in Industries

Trimming Overcapacity.

BBMG Corp. is a large cement producer listed on China's stock market. Two of its subsidiaries are being eliminated because the Ministry of Industry and Information Technology (MIIT) has deemed their capacity excessive.
According to its 2013 semi-annual report, BBMG now has a cement production capacity of 45 million tons, while each of the two subsidies to be shut down only has 100,000 tons of production capacity.
 The eliminated capacity only accounts for a small proportion of the corporation's total capacity, therefore the performance of the corporation will not be affected,the company said on a statement.

Industries such as cement, steel, electrolytic aluminum, ferroalloy, copper smelting, chemical fiber and papermaking are among those required to cut surplus capacity. Altogether 527 enterprises in the cement industry are on the list. Alcohol, gourmet powder, citric acid and lead-acid battery were previously not key sectors of excess capacity but have now been included on the list.

China has been shutting down companies in overcapacity for a decade. When the plan began in 2003, only three industries were targeted steel, cement and electrolytic aluminum. Today the list is five times longer.

Although the Chinese Government has made several attempts to tackle the problem of overcapacity in the past, it had little success, said Wang. This time might be some different because the new term of government is keen on advancing economic reforms and tolerating slower economic growth

Wang a  researcher with CITIC Securities Co. Ltd. said "Among all the problems the Chinese economy is facing, overcapacity is at the top," "In some industries the problem has been quite serious, causing low prices and reducing the profits of enterprises,"

Take the cement industry for example. It has been a key sector in the government's past efforts to eliminate overcapacity. But production has not slowed. In 2009 capacity stood at 800 million tons, but at the end of 2012 the figure rose to 2.9 billion tons, with 75 percent actually being used. Owing to the overcapacity and intensified competition among companies in excess capacity, the 25 listed cement companies, including BBMG, are suffering profit declines. Some of them even partially suspended production because of huge losses.

Is China having Capital Outflows?

According to the Wall Street Journal, "The flow of funds out of Asia  anticipating higher U.S. interest rates has not yet hammered China as badly as some of its neighbors. That’s largely because China imposes broad controls on capital, limiting foreign investments in stocks, bonds and property as well as the money Chinese investors can send overseas".But those controls are not watertight, and recent data suggests that capital is leaving the country. In July, China’s banking system had a second straight month of foreign-exchange outflows, with net foreign currency sales totaling 24.5 billion yuan ($4 billion). That means banks were net sellers of dollars, an indication of money leaving the country.

"The expectation of higher rates in the U.S makes it less attractive to hold funds in foreign currencies, including the yuan, changing the dynamics of currency hedging for companies and investors. If China’s exporters decide to keep their earnings in dollars rather than convert them into yuan, that reduces banks’ foreign-exchange purchases".
  "China’s currency, which trades within a narrow band set by the central bank, has yet to be shaken by these outflows. The country runs a trade surplus, which means it is not reliant on foreign funding to pay for its imports. That puts it in a stronger position than India or Indonesia, whose currencies have been pushed significantly lower in recent weeks.

  China also suffers if its more vulnerable neighbors in Asia hit a speed bump, as that hurts an increasingly important market. China exported $135 billion to Southeast Asia in the first seven months of the year, compared with $200 billion to the U.S. and $188 billion to the European Union".

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US New single-family houses sales fell -13.4% in July

NEW RESIDENTIAL SALES IN JULY 2013
Sales of new single-family houses in July 2013 were at a seasonally adjusted annual rate of 394,000, according to
estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 13.4 percent (±14.5%)* below the revised June rate of 455,000, but is 6.8 percent (±18.6%)* above the July 2012
estimate of 369,000.
The median sales price of new houses sold in July 2013 was $257,200; the average sales price was $322,700. The
seasonally adjusted estimate of new houses for sale at the end of July was 171,000. This represents a supply of 5.2 months at the current sales rate.

Source: US Census Bureau

FDI increased in China last month

Investment inflows into China quickened in July, the government said on Friday, suggesting foreign firms' confidence in the world's No.2 economy is holding up despite slowing growth.

China drew $71.4 billion in foreign direct investment (FDI)in the first seven months of 2013, up 7.1 percent from the same period of 2012, the Commerce Ministry said.

In July alone, China attracted $9.4 billion in FDI, up 24.1 percent from a year ago, quickening from the 20.1 percent pace in June, the fastest in more than two years, although the amount was lower than June's $14.4 billion.

The ministry said FDI inflows into the manufacturing sector in the first seven months fell 2.4 pct from a year earlier, while investment in the service sector rose 15.8 pct.

China aims to lure more FDI in advanced manufacturing to help move its industry make more sophisticated, high-value products.

Source:  Reuters

Japan aiming to help increase bluefin tuna

Japan aims to take the lead in working out an international plan to help bluefin tuna stocks in the Pacific Ocean recover and implement it in 2015, a senior Fisheries Agency official said Thursday.

Masanori Miyahara, deputy director-general of the agency, announced the policy at a meeting of some 340 representatives of the fisheries industry, calling on them to help regulate bluefin tuna stocks in the Pacific.

The plan is aimed at increasing spawning bluefin tuna stocks, which fell to a record low in 2010. It is expected to set a target year and call for regulating annual catch quotas.

TPP countries goal to conclude talks by year end

Twelve countries negotiating Trans-Pacific Partnership free trade rules, including Japan, reconfirmed at a ministerial meeting Thursday the goal of concluding their talks by the end of this year.

Japan will participate in discussions in a proactive and constructive manner to conclude the TPP talks by the year-end, Akira Amari, Japanese minister in charge of TPP negotiations, said in the first round of the two-day meeting.

Still, Japan, which joined the negotiations in July, is aiming to maintain its tariffs on five key items including rice and sugar, with Amari pointing out during the day's session that every country has a certain set of important items.

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Pilot free trade zone in Shanghai approved by China's State Council

China's State Council has approved the establishment of a pilot free trade zone in Shanghai, according to a Ministry of Commerce statement on Thursday.

Covering 28.78 square kilometers, the new zone will be built on the basis of existing bonded zones -- Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.

Experiences gained from the pilot zone are expected to be copied in other parts of the country, according to the statement.

The zone will help foster China's global competitiveness and serve as a new platform for the nation's cooperation with other countries, and contribute to efforts in building "an upgraded version of China's economy," said the statement.

China will adopt a "negative list" approach in the foreign investment management in the zone, and innovate the country's opening-up mode, said the statement.

Ratings Agencies could downgrade U.S. Banks

According to the Wall Street Journal:
Moody’s Investors Service put ratings of big U.S. bank holding companies on watch for possible downgrade, citing a possible removal of extraordinary government support now that the industry is moving closer to formalizing plans for liquidating banks in crisis.

These biggest U.S. banks’ ratings have gotten a slight boost since the financial crisis erupted five years ago because of the extraordinary support the government extended to aid the financial system. More recently, regulators and lawmakers have worked with banks to come up with plans for their orderly liquidation in the event of another crisis.

Now that those plans are getting more firm, the government may withdraw its support and the holding company ratings could drop as a result, the ratings agencies said in separate announcements this week.

Moody’s said Thursday that a possible offset to the removal of government support is the reduction in the severity of losses for holding company creditors in the event of an orderly liquidation versus a bankruptcy.

The agency joins Standard & Poor’s Corp., which said earlier this week it was also reviewing the holding company ratings of Goldman Sachs, J.P. Morgan, Morgan Stanley and Wells Fargo,JP Morgan Chase,Bank of New York Mellon,State Street and Bank of America.

Euro zone indicators show broad base expansion in August

In an article published today in the Wall Street Journal says "Markit's euro-zone purchasing managers indexes show broad-based expansion in August, including in the so-called periphery countries, such as Spain and Italy. European stocks and corporate bonds should continue to win favor despite headwinds from U.S. monetary policy and emerging-market turbulence"
.The flash estimate of the August euro-zone composite PMI rose to 51.7 from 50.5 in July, Markit said, moving further above the 50 mark that separates contraction from expansion and rising for the fifth consecutive month. Growth was once again led by Germany, where new export orders jumped, pushing the composite PMI to 53.4.

France disappointed. Its PMI dipped to 47.9, but forward-looking indicators appear encouraging: Manufacturing new orders rose and expectations in services remained positive. In any case, the French PMI has consistently understated the

strenghth of the economy.

   The really encouraging news was that the rest of the euro zone saw output rise for the first time since May 2011, across both manufacturing and services. Both domestic and export sales improved, Markit said, indicating both that economies have become more competitive and are benefiting from reduced fiscal strains.

Slower Growth of China and its impact on property markets in top and small cities.

"A flurry of housing investment over the past several years, fuelled in part by herd-like speculative buying, resulted in some developers building more housing than could be sold once the market began to slow.

Now, the concern is that the market could be cooling too quickly, and risk stalling one of the few engines in the economy that are still firing.

While new home prices in Beijing rose 14.1 percent in July from a year earlier and Shanghai prices were up 13.7 percent, smaller cities are lagging the major centers. The National Bureau of Statistics data showed average new home prices in China's top 70 cities up 7.5 percent on the year.

Housing, moreover, props up at least 40 other sectors, from cement to steel to furniture and home appliances. Local governments also depend heavily on revenues from land sales to developers to help service a debt pile worth trillions of yuan.

Still, some developers are scaling back.

Last month, Yu Liang, chief executive of China Vanke , the biggest listed developer by sales, said the company was pulling back from Yixing city in prosperous Zhejiang province.

And Yi Xiaodi, the president of Sunshine 100, a mid-sized residential developer based in Beijing, has put off plans to expand in Zhuzhou, a city with 3.9 million residents in Hunan.

"We changed our mind because of oversupply risk," Yi said. "We will avoid investing in cities where industrial competitiveness is fading and the market is plagued with over-supply. That will be very dangerous." 

China's leadership, acutely aware of housing's importance to the economy, appears to have set aside concerns that a property boom was pricing millions of families out of the market.

That is how industry executives and analysts took a July 30 pledge to maintain "steady and healthy development of the property sector" by the Politburo, the top decision-making body.

But leaving the market alone may not be enough. With stock markets volatile and caps on bank deposits, property remains the only game in town for millions of Chinese savers.

Total property investment accounted for 14.8 percent of gross domestic product in the first half of 2013, up from 13.5 percent a year earlier. Residential property accounts for 70 percent of that total.

Most economists believe incomes will keep growing enough to sustain relatively healthy demand for at least a year, and the government does plan to encourage urbanization.

"We expect a stable property sector policy in the coming year and see a modest property recovery to continue," said UBS chief China economist Tao Wang.

Industry executives say there is now a tide of new investment coming to top cities and provincial capitals, because demand remains strong. Over time, economists say, that could ease housing price inflation in China's biggest cities.

 Source: Reuters

China´s international reserves and Chimerica

The twenty-first-century economy has thus far been shaped by capital flows from China to the United States – a pattern that has suppressed global interest rates, helped to reflate the developed world’s leverage bubble, and, through its impact on the currency market, fueled China’s meteoric rise. But these were no ordinary capital flows.
They came primarily from the People’s Bank of China (PBOC), as it amassed US$3.5 trillion in foreign reserves largely US Treasury securities. 
  Much has been said about the fact that a single institution wields so much influence over global macroeconomic trends has caused considerable anxiety, with doomsayers predicting that doubts about US debt sustainability will force China to sell off its holdings of US debt. This would drive up interest rates in the US and, ultimately, could trigger the dollar’s collapse.
But selling off US Treasury securities, it was argued, was not in China’s interest, given that it would drive up the renminbi’s exchange rate against the dollar, diminishing the domestic value of China’s reserves and undermining the export sector’s competitiveness.
To describe the symbiotic relationship between China’s export-led GDP growth and America’s excessive consumption, the economic historians Niall Ferguson and Moritz Schularick coined the term chimerica
In 2009, these distortions led Ferguson and Schularick to forecastChmericas  collapse  a prediction that seems to be coming true. With the reserves’ long-term effects on China’s internal economic dynamics finally taking hold, selling off foreign-exchange reserves is now in China’s interest.

Jim Rogers Thoughts on Central Banks monetary policies

"I am worried about the global economy because this is all artificial money. Things are looking better because the world is printing money. All the major central banks including the US, Japan, UK are printing money. This is all artificial, and this is going to end badly, when it does. Nobody so far had success by printing money."

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July power sales post 1st rise in 7 months

Electricity sales by the nation's 10 major power suppliers rose 2.5 percent from a year before to 70.12 billion kilowatt-hours in July, the first increase in seven months, the Federation of Electric Power Companies of Japan said Monday.

The increase reflected greater household use of air conditioners amid a heat wave, as well as the first rise in electricity sales to large-lot industrial users since May 2012.Sales to large-lot users rose 0.7 percent to 23.93 billion kilowatt-hours due to brisk demand from main sectors such as machinery, steel, and paper and pulp on the back of the yen's weakness.

Source: NewsOnJapan

HSBC Flash China Manufacturing Purchasing Managers' Index rose in August to 50.1

The HSBC Flash China Manufacturing Purchasing Managers' Index rose in August to 50.1, its highest in four months, as new orders rebounded. That was an encouraging turnaround from July's 47.7 reading, the weakest in 11 months. Any number over 50 means activity is expanding; below 50 represents a contraction.

Economists cheered the survey result as evidence that government efforts to arrest a rapid slowdown were starting to work, while cautioning that a strong rebound still appeared unlikely.

Beijing has launched a series of targeted measures recently to support the economy, including scrapping taxes for small firms, offering more help for ailing exporters and accelerating investment in urban infrastructure and railways.
A sub-index measuring new orders rose to a four-month high of 50.5 in August from 46.6 in July. The employment sub-index of the flash PMI also picked up, but still hovered below the 50 watershed line. But a sub-index on new export orders edged lower -- a reminder that global demand for Asia's exports remains sluggish.

Source: Reuters

End of easy money makes high growth rates of Asian Economies increasingly vulnerable Part I

Asia's economic miracle looks increasingly vulnerable to the end of a decidedly earthly phenomenon - five years of ultra-cheap financing sparked by the U.S. monetary policy dubbed "quantitative easing".
But the sell-off gripping emerging foreign exchange and equity markets this week has exposed an Asia that, despite amassing huge currency reserves and devising policies to insulate it from the kind of fund flight that triggered the Asian financial crisis in 1997 and 1998, has once again become susceptible to the rapid reversal of capital inflows.

Economists, bankers and investors say they caught a glimpse of Asia's possible future in June, when regional markets convulsed at a suggestion by Federal Reserve chairman Ben Bernanke that the central bank of the world's largest economy might start scaling back quantitative easing, or QE.

Those concerns have returned with a vengeance this week to batter markets in India and Indonesia.

Having failed to dismantle politically and socially knotty obstacles to growth, Asia has instead relied on low interest rates and massive borrowing to keep its economies expanding, particularly since the 2008/09 global financial crisis that prompted the Fed to start aggressively buying bonds.

But whether it's immigration and labour laws in Japan, the dominance of state enterprises in China or hurdles to foreign investment in India, each nation faces its own third rail of reform - one that stands to revive productivity and boost potential growth if resolved.

Source:  Reuters