Eileen Gu's  Instablog

www.shcri.com --Since entering the 21^st century, the development speed of Chinese milk industry is astonishing regardless of the number of the cows on hand or the total milk yields. During 2000 to 2007, the national cows on hand had increased by 1.5 folds as well as the 3.3 folds of the milk yields.

In September 2008, there occurred serious poor sales in the domestic dairy products after the outbreak of the melamine event. By November 2008, Chinese domestic milk powder inventories exceeded 300 thousand tons. Subsequently, as partial market confidence was recovered and the peak consumption time coming of the traditional dairy products in Chinese spring festival, the inventories were cut down to 100 thousand tons, however, which was increased fast to 300 thousand tons in short time recently. 

Compared with the same figure of 300 thousand tons in 2008, there is essentially huge difference. After the outbreak of melamine event, Chinese dairy product industry suffered from heavy losses. From November 2008, there was the cow slaughter in large scale, leading to the decline in the raw milk supplies in short time. Under the circumstances of the decline in the raw milk supplies, the above mentioned scaled milk powder inventories show Chinese dairy product industry is in huge difficulty.

As a matter of fact, there are several factors leading to the large scaled milk powder inventory in China.

First, the market demand reduction causes the reduction in the domestic milk powder demands. After the melamine event, Chinese local milk powder industry was seriously stricken. What’s more important, the consumers lost confidence in the domestic dairy products. Due to the consumers’ confident losses, mass dairy products were unsalable, stored and destroyed. Besides, the foreign funded and imported milk powder enterprises extended taking the advantage of the opportunity, leading to the sharp reduction in the domestic milk powder demands.

In 2008, the yields of the dairy products in China were 18.106 million tons, only up by 1.3% compared with 2007, which showed the dropping tendency in the fourth quarter of 2008. If there was not the melamine event, the yields would be about 20 million tons. But from September of 2008, the whole Chinese dairy product market showed the shrinking tendency.

Meanwhile, mass milk powder enterprises overloaded the task of running up the remaining milk sources. Due to the market shrink, the regional governments put the raw milk consumption task on the milk powder enterprises so as to avoid the cow slaughter and milk pour in large scale, because the liquid milk is short in shelf-life and inadequate to accumulate mass raw milk.

Besides, the sharp decline in the imported milk powder price also made the domestic milk industry in worse. For example, the average import price of the milk powder was 3.2 USD per kilogram in January 2009 in Guangdong, the bottom low from January 2008.

Opposite to the over-storage in the north milk producing areas in China, in accordance with the statistics of the customs, Guangdong imported 4,060 tons of milk powder in January 2009, up by 1.7 folds year on year.

On 22^nd April 2009, Chinese government revealed that 3-billion-Yuan investments will be used to support the standard and scaled breeding district constructions of pigs and cows, and expanded the milk powder reserve scales and postponed the discount loan policies for purchasing raw milk to the end of December 2009. It is understood that Chinese government reserve plans will be finished in two cycles. The reserve volumes will be 50 thousand tons in the first cycle through discount loans. Chinese government will procure the milk powder at the price of 29 thousand Yuan (4.23 thousand USD) per ton and give 5.31% discount loans to the enterprises (loans for one year), equivalent to 1,500 Yuan (219 USD) supplements per ton annually for the enterprises. The reserve volumes will be about 100 thousand tons in the second cycle, which is procured by the state directly at the price of 24 thousand Yuan (3.5 thousand USD) per ton.

Source: China Research and Intelligence

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www.shcri.com --The financial crisis, having swept the globe, cuts down the consumption on the luxury. However, there is still business opportunity under the financial crisis, which will make the traditional sales models of the jewelry occur dramatic changes.

Taking the diamond for example, people have regarded the diamond as the luxury in traditional sense. At present, the diamond has been a necessity in Chinese market.

In the developed countries, each couple spends 12 thousand USD on the diamond and only about 30% consumers buy the diamond for wedding.

In China, less than 10% female have one or more diamond jewelry and 80% consumers buy the diamond because of wedding.

The consumption demands driven by the wedding celebration are called the rigid demands. Due to the inherent competition mentality of Chinese consumers, it has become an indispensable step for Chinese couples to buy the diamonds when celebrating the wedding.

The sales channels of the diamond products can be divided into the traditional retail in the stores, TV shopping and network sales. Generally speaking, the costs of the diamond retailers are made up of three parts, namely, delivery costs, store operation costs and market spread costs. The delivery costs vary little. For the traditional store retailers, the store operation costs and market spread costs occupy considerable part and the costs for TV ad sales are even staggering, the huge costs leading to the high prices of the diamond products. However, the E-Commerce does not have the costs for the real stores and even no costs for the inventories, largely cutting down the costs.

When the diamonds become the everyday necessities, the consumers will put more attentions on the price of the diamond products. Undoubtedly, whoever achieves the lowest costs, who will be able to achieve the lowest price, which means that more consumers who will win on the precondition of guaranteeing the quality. Under the present economic circumstances, the consumers will be more sensitive to the price and more rational to the consumption. Therefore, a new commercial model is being born or developed, which is different from the traditional consumption and operation model. The diamond E-Commerce will be pushed onto a new position.

The diamonds at lower price and more in line with the demands will become the mainstream consumption. Therefore, a new commercial model is being born or developed, which is different from the traditional consumption and operation model. The diamond E-Commerce will be pushed onto a new position.

China has had over 300 million netizens, tens of millions of whom usually buy the commodities on the internet. In 2008, the amounts of the business-to-consumer online shopping had been beyond 1.7 billion USD.

In recent years, with the continuous development of the E-Commerce, some network diamond sellers appeared in succession, such as www.9diamond.com, www.popdiamond.com, www.kela.cn, www.zbird.com and 51diamond.com etc, all of which began their sales models by copying Blue Nile at the beginning and later shifting to the individual specific operation strategies. Taking kela.cn for example, it adopts the model of the online and offline combination, 9diamond.com concentrates in the network+trial centers +real stores model. zbird.com, however, adopts the route of the network +trial centers model. popdiamond.com develops the online cooperation with Industrial and Commercial Bank of China and China Merchants Bank, releasing the payment by installments. zb166.com forms the products and the exhibition hall into a system depending on the manufacturer advantages.

Strictly speaking, the present online diamond brands do not belong to the absolute diamond E-Commerce, which still have offline trial stores and real stores, which is closely related to the consumption habits and the market mature degree.

It is estimated that the scale of Chinese jewelry industry was about 17 billion USD, which continues to rise. It is evitable for mass domestic and foreign investors to make money in Chinese jewelry E-Commerce industry.

Source: China Research and Intelligence

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www.shcri.com --Due to the increasing investments in Chinese infrastructure construction and the cost reduction in Chinese construction machinery, Chinese construction machinery industry began to boom in the first quarter of 2009.

In the first quarter of 2009, the newly added fixed asset investments in China reached to 91.8 billion USD, up by more than 50% year on year, propelling the development of the industries related to the infrastructure construction. Among the various infrastructure constructions, the transportation construction became the biggest bright spot. According to the incomplete statistics, the investment scale in the newly started railways, highways and ports would exceed 40 billion USD in the first quarter of 2009, which was closely related to the earth and stone machinery, lifting machinery, piling machinery and concrete mixer machinery.

Only in February 2009, China had finished 2.93 billion USD investments in the railway construction in a single month, up by over 200% year on year. The investments in the highways were finished 4.6 billion USD in February, sharp up by 70% YOY.

Under the influences of international financial crisis, the growth speed of Chinese economy begins to slow down. However, there are still huge demands and potential demands for the construction machinery in Chinese domestic market. In the 4-trillion-Yuan investment plan issued by Chinese government, 75% projects have more or less relationships with the construction machinery. It is roughly estimated that the investment plan will drive 20-biilion-USD domestic construction machinery market.

On the night of 26th April 2009, SANY Heavy Industry Co., Ltd issued the first quarter financial statement, which said that the company realized the operation revenues of 2.847 billion Yuan in the first quarter of 2009, up by 6.9% year on year; the net profits subject to the parent company were 236 million Yuan, down by 21.8% year on year. The basic earnings per share were 0.1589 Yuan.

On 29th April 2009, Xuzhou Construction Machinery Group issued the first quarter financial statement of 2009. In the reporting period, the operation revenues totaled 735 million Yuan, down by 15.87% year on year. The net losses were about 8.6 million Yuan, decreased by 36% compared with 13.42 million Yuan losses in 2008, equivalent to a net loss of 0.016 Yuan per share.

On 29th April 2009, Changsha Zoomlion Heavy Industry Science & Technology Development Co., Ltd also announced their financial statement in the first quarter of 2009; the company realized the operation revenues of 3.517 billion Yuan, up by 38.65% year on year and the net profits of 301 million Yuan. With the influences of the operation cost increases and so on, the net profits of the company were cut down by 17.72% year on year and the earnings per share were 0.1977 Yuan, down by 58.87%.

On 29th April 2009, Guangxi Liugong Machinery Co., Ltd made their financial statement publicity. In the reporting period, the company realized the total operation revenues of 2.209 billion Yuan, reduced by 10.16% YOY, 151 million Yuan of net profits, up by 8.57% YOY. Marked improvement had been achieved compared with the net losses of 49 million Yuan in the fourth quarter of 2008, realizing 0.32Yuan earnings per share.

Most construction machinery products produced in China belong to the medium and low quality, but certain advantageous in the cost performance. Under the circumstances of the depressed global construction machinery market, there are comparatively more choice opportunities for Chinese products.

From January to February 2009, the import and export amounts in Chinese construction machinery industry were 1.88 billion USD, 26 percent less than the previous year, in which the import amounts were 660 million Yuan, down by 21.5% over the previous year; the export amounts were 1.21 billion USD, reduced by 29.2% compared with last year, 550 million USD trade surplus.

From January to February 2009, China accumulatively imported 380 million USD of the complete construction machinery, down by 19% compared with 2008, accounting for 57% of the total import amounts; 290 million USD were spent on the component imports, decreased by 23% over the previous year, accounting for 43% of the total import amounts. The crawler digger imports cost 120 million USD, reduced by 41% compared with 2008, accounting for 32% of the complete machinery imports.

In the field of exports, China totally exported 770 million USD of the construction machinery, down by 32.5% compared with 2008, accounting for 645 of the total export amounts; the export amounts of the components were dropped by 22.8% to about 440 million USD over the previous year, accounting for 36% of the total export amounts.

However, Chinese construction machinery manufacturers over relied on the export market, especially the developing countries. The profits are comparatively low. It is quite difficult for Chinese construction machinery products to enter the foreign high-quality market because of the existence of the component supply, product reliability and service problems.

Source: China Research and Intelligence

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