MARKET WATCH

MARKET WATCH

TO THE POINT: Export deals experience year-on-year increases at the Canton Fair, though uncertainties still linger. Soaring coal prices put cost pressures on thermal power generators. Fierce competition rocks the foundation of China Mobile’s market dom inance. Chinese automaker BYD goes on a bumpy ride as its sales go through a free-fall. The Export-Import Bank of China ties up w ith the Inter-American Development Bank to finance trade between China and Latin America and the Caribbean region.

By HU YUE

Expo rt Ou tlook

Are Chinese exporters faring well? The latest session of the China Import and Export Fair, known as the Canton Fair, a bellwether for the trade climate, could offer some clues.

The fi rst phase of the Canton Fair’s fall session w itnessed export deals worth $21.15 billion, up 12.3 percent from the fair’s last session in April, said Canton Fair Deputy General Secretary Liu Jianjun. The number of foreign buyers totaled 98,000, down 5.5 percent.

Despite show ing signs of recovery, the hard-hit export sector has yet to fully regain its lost ground due to costs inflation, a stronger yuan, and simmering protectionism, said Liu.

The Guangdong Fenglu A lum inum Co.Ltd., for example, has suffered painful losses from restrictions imposed by the developed countries, Chen Nuansen, a marketing manager of the Chinese company, told theNanfang Daily.

The U.S. Government is likely to slap 137-percent anti-subsidy duties on Chinese alum inum profi les, dealing a heavy blow to the exporters, he said.

“While our orders from the traditional Western markets dry up, the emerging markets in the M iddle East and Southeast Asia are bursting w ith vitality,” said Wu Jianfeng,export manager of Guangzhou Hongyu Group.

In addition, it is easier to gain a foothold in the emerging markets where distribution channels are not deeply entrenched and local competition is not insuperable, he said.

Therm al Power Pinch

China’s thermal power generators are facing chilly headw inds as coal prices skyrocket.

The steam coal price at Qinhuangdao Port, an industry benchmark in the country,climbed around 7 percent in October, as a nationw ide w inter freeze pushed up demand.

There’s no sign in sight that the price surge w ill slow in the fourth quarter, said Song Zhichen, an energy researcher at the CIC Industry Research Center. This means the thermal power generators w ill have to bear a heavier burden of costs, and even the risk of losses, he said.

The pressure has already been felt.Huadian Power International Co. Ltd. said it incurred a heavy loss of 384 million yuan($57.3 m illion) in the third quarter due to higher costs. The company is a listed arm of China Huadian Group, one of the country’s five largest electricity providers.

By contrast, coal miners are faring well.The Shandong Province-based Yanzhou Coal M ining Co. Ltd., for example, reported net profit of 3.68 billion yuan ($549.3 million) for the third quarter, soaring 227 percent year on year. Its coal prices averaged at 682.2 yuan ($101.8) per ton in the third quarter, up 25.3 percent from one year earlier.

In an attempt to soothe the profi t woes,the National Development and Reform Comm ission in September proposed to raise on-grid tariffs in seven provinces by 15-25 yuan ($2.2-3.7) per megawatt-hour.

“Last year, the generators offset much of the pressure by turning to cheaper imports,”said Song. “But that is no longer an option for this year since international prices are also hovering at a high level.”

China’s coal imports more than tripled from the previous year to reach 130 million tons in 2009, making it a net importer for the fi rst time.

China Mobile Slow dow n

China Mobile, the world’s largest telecom operator by subscribers, is losing steam as a maturing market and intensifying competition eat into its profi ts.

The company raked in a net profit of 29.6 billion yuan ($4.4 billion) from July to September, representing a modest grow th of 3.5 percent year on year, down from 6.8 percent in the second quarter.

Revenues grew 7.8 percent to 352.6 billion yuan ($52.6 billion) in the first nine months as the company added 41.47 million new customers, bringing the total customer base to 569 million.

“We are experiencing a slow down in grow th because of the w idening penetration of mobile services and an increasingly competitive market,” said a China Mobile statement. “In addition, most of our new users live in the countryside, where customer spending is typically lower.”

The average revenue per user—a key barometer for long-term grow th prospects—slipped to 72 yuan ($10.6) in the fi rst three quarters from 75 yuan ($11) a year earlier.

In an attem pt to keep its dom inant position, the com pany plans to increase spending on handset subsidies this year to 15.5 billion yuan ($2.3 billion) from 11.7 billion yuan ($1.7 billion) in 2009. This has helped consolidate the customer foundation,but has also underm ined profit margins,said Jin Tang, an analyst at the Shanghaiheadquartered Shenyin & Wanguo Securities Co. Ltd.

BYD Strugg les

While China’s auto market booms, BYD Automobile Co. Ltd. is barely trudging along.

The Shenzhen-based company generated a net profi t of 11.34 m illion yuan ($1.7 million) in the third quarter, less than 1 percent of a year ago.

A former manufacturer of rechargeable lithium and nickel batteries, BYD has been a pioneer in exploring new energy vehicles. It was even considered a rising star when U.S.investor Warren Buffet in September 2008 paid $230 million for a nearly 10-percent stake in the company.

Chen Huanyu, an analyst at the Guotai& Jun’an Securities Co. Ltd., attributed the downturn to a drop in auto sales. BYD sold 33,085 vehicles in September, down 24.9 percent year on year. Total sales for this year are estimated at 600,000 units, down from the original forecast of 800,000 units.

Part of the reason was many dealers of the company bowed out of its sales network or joined rival manufacturers, said a report by theBeijing Youth Daily.

Weighing down the performance was also the relatively high comparison base last year w hen the market thrived, said Yin Guohui, an analyst at the BOCOM International Holdings Co. Ltd.

The gloom may ease later this year, but a substantial turnaround is unlikely, said Yin.

Latin Am erican Trade

The Export-Import Bank of China(China Eximbank) and the Inter-American Development Bank (IDB) have comm itted to financing up to $200 m illion worth of trade activity between China and Latin America and the Caribbean (LAC) region over the next two years.

The partnership w ill be a groundbreaking initiative to support increased trade activity since trade is a fundamental econom ic driver of both LAC and China’s economies, said Luis Alberto Moreno, President of IDB.

China-LAC trade grew at an average annual rate of 31 percent from 2000 to 2008.Even during the global econom ic meltdown,the bilateral trade maintained its dynam ism,and amounted to $121.5 billion in 2009, 12 times that of 2000.

In January 2009, China became a member of the IDB, the world’s largest regional development bank and the main source of multilateral finance for the LAC region.

HR Sem inar

The Career International Inc. held a seminar on October 26 in Beijing with a number of experts and researchers offering fresh insight into the latest trends in career development and human resource management.Career International is a leading recruitment solution provider based in Beijing.

“Human resource management has evolved far beyond employee performance evaluation and training,” said Lu Lingm in,former PR manager at the Baidu Inc., at the sem inar. “The focus is now strategy design for corporate development and coordination between various parts of the organization.”

An Ran, a senior manager of Career International, said multinationals are increasingly outsourcing their recruitment process so they could focus on their core businesses.