Sportswear brands in China feeling the heat; the days when Chinese sportswear brands could compete against international peers through price advantages have gone. Overseas sportswear brands like Nike drawing up ambitious plans to enter smaller markets

Sportswear brands in China feeling the heat

Overseas sportswear brands like Nike drawing up ambitious plans to enter smaller markets. -China Daily/ANN
Wang Zhuoqiong and Tang Zhihao

Sun, Mar 10, 2013
China Daily/Asia News Network

Nike’s advertisement is seen at a chain store in Yichang, Hubei province, Oct 27, 2012. The US sportswear maker plans to open 40 to 50 factory outlets to clear its high inventory in China.

BEIJING – US sportswear maker Nike Inc’s plans to open 40 to 50 factory outlets to clear its high inventory in China is a sign that the days when Chinese sportswear brands could compete against international peers through price advantages have gone.

At a Nike factory outlet store in downtown Beijing, a men’s sports sweater is selling for 199 yuan (S$40), down 300 yuan from its original price. A pair of sports shoes cost around 300 yuan, a price range found more often among domestic brands. Read more of this post

China’s coffee industry is in a key stage of development after trying to crack the global industry chain for the past two decades

Yunnan coffee industry in key stage of development

Staff Reporter

2013-03-11

China’s coffee industry is in a key stage of development after trying to crack the global industry chain for the past two decades, reports the Guangzhou-based 21st Century Business Herald. One of the landmark developments in China’s coffee industry took place in the southwestern province of Yunnan, which produces 98% of all coffee beans in the country, when coffee chain Starbucks opened its third international Farmer Support Center in the area, the magazine said. Starbucks has also set up a joint venture with a local company to establish bean processing facilities in Yunnan. However, local industry leader Dehong Hogood Coffee Co has been undergoing turmoil as a result of a dispute between the company’s founder and private equity investors. Though it was resolved at the end of 2012, the dispute caused serious damage to the company’s operations. Dehong Hogood’s rapid expansion by boosting the scale of the coffee farms it owns, and efforts to develop its own brand by building the country’s largest instant coffee production line, resulted in a tight funding situation that forced it to bring in outside investors.

Local growers shifting from tea to coffee after the Pu-erh tea price bubble burst in 2008, had also expanded the scale of coffee farms from around 64,000 acres to 165,000 acres, the magazine said. The expansion dragged down local coffee prices last year, which more than halved from peak prices. According to the magazine, because of the focus on instant coffee products, Yunnan has not grown high-quality coffee varieties on a large scale, even though the plateau environment in the subtropical region is ideal for such planting. In addition, tea is still the dominant drink in China, despite the country’s growing consumption of coffee, which has resulted in a large number of local coffee outlets being sold mainly to overseas buyers. Read more of this post

Pacific Asset Management MD Shawn Mesaros: Why stimulus won’t make gardeners work faster

Why stimulus won’t make gardeners work faster

Created: 2013-3-11 0:45:08

Author:Shawn Mesaros, managing director, Pacific Asset Management.

WE would like to consider what US$6 trillion in stimulus has gotten the USA over the past five years.

Same static joblessness of around 14 percent unemployment and a higher stock market despite a record (48 million) Americans on food stamps.

How can this be?

Service sector economies simply do not respond well to stimulus.

Consider the wisdom of lending money to a runner, expecting him to run faster as a result of being more in debt?

Consider the wisdom of lending money to a shoe shine boy expecting him to personally shine more pairs of shoes?

Consider the wisdom of lending money to a group of gardeners expecting them to clip rose bushes faster as a result of their being further indebted?

Rubbish? Absolutely rubbish.  Read more of this post

Preparing for Day When Rates Rise; “We don’t subscribe to the view that once the fire starts, we’ll be able to outrun everybody through the door,”

March 10, 2013, 5:25 p.m. ET

Preparing for Day When Rates Rise

By MATT WIRZ

“Don’t fight the Fed” has been a market mantra for the past four years. But some bond investors are starting to lace on their gloves.

Figuring that the Federal Reserve won’t be able to keep a lid on interest rates forever, large money managers such as BlackRock Inc., BLK -0.08% TCW Group Inc. and Pacific Investment Management Co. are getting ready for the day when rates take their first turn higher.

It isn’t coming anytime soon, these investors say. But when it does, they worry, the ascent will be swift and steep.

Rather than trying to guess exactly when that moment will happen, they are pre-emptively making investments that will pay off when it does. The moves include buying debt with floating interest rates that rise as overall rates climb, as well as interest-rate swaps and inflation-protected bonds that will also increase in value.

Other investors are hedging against potential bond losses by making bearish bets on U.S. Treasury bonds through derivatives that gain when rates rise. As rates rise, prices of bonds fall. Because rates are so low now, many investors are worried that even a small rise could be particularly painful for anyone holding Treasurys.

“We don’t subscribe to the view that once the fire starts, we’ll be able to outrun everybody through the door,” said Stephen Kane, managing director for U.S. fixed income at TCW in Los Angeles. “Rates could be up 50 basis points before your traders can get all the sell orders through.” Read more of this post

China: Beyond The Miracle

China: Beyond The Miracle

03/10/2013 20:04 -0400

by Larry Kantor, Head of Research, Barclays,

China has become a key locomotive for global growth, in many ways taking over the role traditionally played by the United States in business cycles. It is now the world’s second largest economy, and has grown much faster than any other major economy over the past couple of decades.China’s role as a key driver of global growth brings with it increased scrutiny by investors and economists: a significant slowdown in China – never mind a collapse – would have significant implications for economies and financial markets around the world. This was most recently seen in 2012, when slower economic growth – fostered in large part by policy tightening to alleviate inflation pressures and structural imbalances – generated fears of a “hard landing” that served as a headwind to financial market performance for much of last year.

The extremely rapid growth in China – as welcome as it has been during an otherwise disappointing recovery from the Great Recession – represents the first stage of development in the evolution of the economy from closed to open, from fully controlled to market, and from agrarian to industrial. This initial stage is already giving way to a new phase of slower, more sustainable growth, with different drivers. It is critical for the global economy and financial markets that China’s transition is managed in a way that allows the necessary adjustments to happen gradually and without de-stabilizing effects.

The Beyond the Miracle series – written by Barclays Yiping Huang, Jian Chang and Steven Lingxiu Yang and launched in September 2011 – carefully analyzes the transition that China is undergoing from various perspectives, and also discusses the economic and financial market implications. It argues that China will successfully make the transition from ‘economic miracle’ to normal development in the next decade (Chapter 1). But there is an important caveat: China must embark on a multi-pronged set of reforms if the country is to move to a slower, more sustainable growth rate that deemphasizes trade, construction and investment and instead places a greater weight on consumer spending as a source of growth.

Each chapter provides an in-depth analysis of the task at hand – from financial reform (Chapter 2), to housing reform (Chapter 3), to the pivotal role of consumption in rebalancing China’s economy (Chapter 4). For China to avoid becoming a source of inflation in the future, its monetary policy-making, too, will need to be reformed (Chapter 5). China’s ageing population will also mean an end to its surplus of cheap labor, heralding a new era of rapidly rising wages (Chapter 6). In turn, this could put additional pressure on the country’s fiscal outlook, as it seeks to meet growing pension liabilities (Chapter 8).

These challenges notwithstanding, the Beyond the Miracle series is optimistic on the outlook for China. It argues that the Chinese economy is in the middle of a major and broad-based structural transformation that will lead the country to a more sustainable growth potential of 6-8%, from a double-digit pace previously. As China continues to grow and upgrade, its outward direct investment should rise quickly (Chapter 7). And by narrowing the technological gap with the advanced economies, China should be able to avoid the “middle income trap” and graduate to the global high-income group within the next decade (Chapter 9).

China’s Beyond the Miracle series is ambitious, both in scope and depth. Given the critical role now played by China in the world economy and financial markets, I highly recommend it as essential reading for investors, as well as anyone interested in current and future economic and market trends. Everything you wanted (and need) to know about China but were afraid to ask…

How John Lewis found fashion and became never knowingly underdressed; Clothing boss Peter Ruis tells how the stores known for good sense and slippers became the fashionistas’ darling

How John Lewis found fashion and became never knowingly underdressed

Clothing boss Peter Ruis tells how the stores known for good sense and slippers became the fashionistas’ darling

Sarah Butler

The Observer, Sunday 10 March 2013

Peter Ruis in the John Lewis chain’s Peter Jones store, Sloane Square. Photograph: David Levene

Fashionistas queuing round the block, a sell-out designer collection and breathless reviews by the style press. Can this really be John Lewis? As 84,700 partners working at the department stores celebrate their 17% bonus this weekend, they can rest assured they are back in fashion in a big way. A 9% rise in clothing sales helped drive a bumper year for John Lewis as it increased its market share, mainly at Marks & Spencer’s expense. The chain accounted for 2.1% of the UK clothing market in 2012, according to retail analysts Verdict, 10% up on a year before.

Once associated with sensible knitwear and cosy slippers, the 40-store chain has polished up its fashion credentials through designer collaborations, classy own-label products and the addition of upmarket brands that had previously steered clear of the store.

As a result, fashion sales topped £1.1bn last year – up from about £700m in 2005. That’s still only about a quarter of what Marks & Spencer sells, but it indicates the kind of growth that rivals can only dream of in the economic downturn.

Under the guidance of buying and brand director Peter Ruis, who took charge of fashion in 2007, John Lewis has created a buzz by recognising that shoppers of all ages now want to look trendy – and that older customers no longer want gold buttons and elasticated waistbands. Read more of this post

Retiring workers are being “ripped off” by financial companies making huge profit margins on annuities, campaigners have warned

Pensioners being ‘ripped off’ by profit margins on annuities

Retiring workers are being “ripped off” by financial companies making huge profit margins on annuities, campaigners have warned.

Experts warn that the industry is concealing large profits. Photo: PA

By Richard Evans, and James Kirkup

9:47PM GMT 08 Mar 2013

A Telegraph investigation has raised concerns about the profits that insurance companies and other firms are making on annuities. Only one annuities provider, Standard Life, has disclosed its margins on annuities, revealing that it pockets almost 20p of every pound a customer pays for an annuity. Other firms refuse to reveal their margins, and experts warn that the industry is concealing large profits. Ros Altmann, a pensions campaigner, said: “These huge margins are outrageous.” Annuities rates have tumbled in recent years as the Bank of England’s quantitative easing programme pushes down returns on the government bonds that are the basis of annuity income. Financial experts say that people can significantly boost their retirement income by shopping around. Steve Webb, the pensions minister, said: “Annuities are increasingly important. More openness on rates should help consumers get a better deal.” Standard Life pays an income of £4,990 on a £100,000 annuity for a 65-year-old. The market leader, Aviva, pays £5,600.

A ‘Politically Explosive’ Secret: Italians Are More Than Twice As Wealthy As Germans

A ‘Politically Explosive’ Secret: Italians Are More Than Twice As Wealthy As Germans

Wolf Richter, Testosterone Pit | Mar. 9, 2013, 7:17 AM | 6,192 | 29

In December 2006, the ECB established the HFSC network of survey specialists, statisticians, and economists from its own ranks, national central banks of the Eurozone, and statistical institutes. The acronym stood for Household Finance and Consumption Survey.

It would collect “micro-level structural information” on household wealth. A massive bureaucratic undertaking. Surveys went out in 2010. Results are now ready. No one in Europe had ever done a survey on that scale before.

And no one might ever do it again. Because, in the era of bailouts and wealth-transfers, the results are so explosive that the Bundesbank is keeping its report secret—and word has leaked out why.

The surveys were conducted on a national basis, with each central bank publishing its own report. They would then be combined and summarized by the ECB into a cohesive picture of how wealthy—or how poor—people in various parts of the Eurozone were. A number of countries already published their reports, including Italy and Austria.

What the Austrian National Bank found was not pretty (20-page PDF). The considerable wealth in Austria was very unevenly distributed. The wealthiest 5% owned nearly half of the country’s wealth. Their median wealth was €1.7 million in diversified assets. The lower 50% owned only 4% of the country’s wealth. Of them, 83% rented their homes. Their median wealth was a measly €11,000 consisting usually of a car and a savings account. That’shalf of the people! And 10% had a net wealth of less than €1,000.

This unequal distribution of wealth created a huge gap between median income (half the people earned more, the other half less) of €76,000 and average income of €265,000 (pushed up by a small number of extremely wealthy households). And that’s why some countries don’t even publish average income values. Too much truth would hurt.

Germany’s data is likely to be similar—but the Bundesbank is treating its report like a secret. Because the results are, let’s say, awkward for two reasons.

The highly unequal distribution of wealth is one of them. The German government already went through wild gyrations late last year, and now again, over its Poverty Report that exposed some inconvenient facts that were then edited out—something that was leaked immediately, and it caused a ruckus [read…. Censored: Poverty Report in Germany].

Italy is the other issue. But it may be too hot for the Bundesbank to touch. Italy’s report (142-page PDF) finds that median household net wealth has increased 56% since 1991. And from 2008 to 2010, it increased by about 5% annually, despite the crisis!

But the wealth of German households stagnated during much of that time while they paid taxes out of their noses. And now they might learn that Italy’s median household wealth is €163,875—while Germany’s is closer to Austria’s, around €76,000. Less than half!

“Politically explosive,” sources at the Bundesbank whispered to the FAZ. Read more of this post

Chinese consumers account for 50% of all LV sales

Chinese consumers account for 50% of all LV sales

Staff Reporter

2013-03-10

More than half of all Louis Vuitton purchases in the world are made by Chinese people, according to the Hurun Report, a magazine best known for its rankings of wealthy individuals in China. According to Rupert Hoogewerf, founder of the Hurun Report and chairman of the Hurun Research Institute, the 33 billionaires on their new Hurun Luxury Tycoon Rich List owe much of their success to Chinese shoppers and their notorious overseas shopping sprees. “The Chinese luxury consumer is today the most important customer group in the world for luxury brands, especially now that the Chinese luxury consumer has started to travel around the world,” Hoogewerf said. Read more of this post

State-owned firms ignore Beijing order to exit property sector

State-owned firms ignore Beijing order to exit property sector

Staff Reporter

2013-03-10

A 2010 order issued by the Chinese government requiring state-owned companies to exit the property sector if it is not their core business has failed to prevent such companies from winning bids for prime-location land across the country, reports the Guangdong-based Southern Weekly newspaper.

According to recent reports, less than a quarter of the 78 state-owned enterprises asked to terminate their property business operations more three years ago have complied. Read more of this post