1. Comparing urban education competitiveness, Chengdu ranking fourth
The study report on Educational Competitiveness of Chinese Cities released on August 30th by Chinese Academy of Social Sciences shows that among 15 deputy provincial cities in China, Shenzhen ranks first in terms of educational comprehensive competitiveness, and Chengdu ranks fourth.

2. FAW new-energy passenger car to be put into production in 2011
The FAWER Chengdu base, the FAWAY Chengdu base and the FAW southwestern base of new-energy passenger car had officially signed with the Chengdu Economic and Technological Development Zone (CETDZ), learnt the journalist on August 30th from Longquanyi district. The total investment of the 3 automobile and parts production companies is more than 1.1 billion yuan, and according to plan, projects will be completed and put into production in 2011, which by then will greatly enrich the automobile industrial chain of the CETDZ.

3. First foreign-invested wholesale bank, JP Morgan Chase& Co’s Chengdu branch operated
On September 10th, the first wholesale foreign bank JP Morgan Chase& Co.’s Chengdu branch officially began operation, which means that Chengdu’s financial patterns become richer, whereas Chengdu also became JP Morgan Chase& Co.’s fifth chosen cities for conducting business after Beijing, Shanghai, Tianjin and Guangzhou. The opening of the Chengdu branch also signifies that the number of foreign banks operating in Chengdu has risen to 9.

4. CNBM’s “three flowers” blossom in Chengdu in one day
China’s first 0.5mm LCD glass substrate production line laid foundation in Chengdu, the seismic energy-saving house of the new rural construction project started construction in Chengdu, the 2 billion yuan investment in building light building materials industrial base project were formally signed… As the country’s largest comprehensive building materials industry group, the China National Building Material Group Corporation reached a package of cooperation agreements with Chengdu in merely one day of August 30th. The two parts’ collaboration starting from building materials and houses as the base is extending fully towards such new fields as photo electricity and new energy.

5. 390 million yuan investing in Longquanyi district, two projects settled in logistics center
Recently, the Minsheng (Longquan) logistics project and Changjiu Group’s southwestern commercial car transferring base project of total investment of 390 million yuan were settled in Longquan Logistics Center. The Minsheng Longquan logistics project has an investment of 170 million yuan, mainly engaged in building warehouse distribution center, container yard and regional headquarters and so on, and will achieve an annual turnover of 160 million yuan, annual tax revenue 4 million yuan after meeting full capacity; Changjiu Group’s southwestern commercial car transferring base project invested with 220 million yuan, will build high-end vehicle storage, high-end parts warehouse, vehicle parking, automobile preparation base and regional headquarters, and is expected to realize an annual turnover of 250 million yuan, annual tax revenue 8 million yuan. The two projects are planned to start construction in September of this year, and to be completed in 2010.

6. Making of prototype of home-made C919 large passenger aircraft head started in Chengdu
On September 1st, the head works prototype of China C919 large passenger aircraft project started production formally in the AVIC/Chengdu Aircraft Industrial Company, which marks that China’s independent design and manufacture of large passenger aircraft C919 has achieved a breakthrough – Chengdu “leading” large passenger aircraft project set sail.

7. Summer Tour Scoreboard, Chengdu ranks third
According to the “2009 National Summer Tour List” released by the Strip.com on September 2nd, under the leveraging effect of panda cards, tourists coming to Chengdu this summer increased by more than 200% compared with the same period of last year, which made Chengdu just behind Beijing, Xiamen, with the city ascending the second-runner “throne” as the third most popular summer tourist destination in China.

8. At new energy international forum, Shuangliu signed contracts of 5.6 billion yuan
The 2009 China (Chengdu) New Energy International Forum and Solar Energy Exposition were held in Chengdu on September 3rd to 6th. At the Chengdu new-energy industry promotion meeting and signing ceremony held on 5th, Shuangliu County signed 13 contracts with various parties, with total agreed investment of 5.6 billion yuan.

9. Belgium will set up a BCECC representative office in Chengdu
Belgium’s Belgian-Chinese Chamber of Commerce will set up a representative office in Chengdu, and also a dedicated office. It is reported that this is the first representative office to be set up by the BCECC in China. On September 6th, leaders of Sichuan Commerce Department and Sichuan Provincial Import and Export Chamber of Commerce met Dewit, the visiting president of the BCECC, and an economic and trading cooperative agreement was signed between the provincial import and export chamber of commerce and the BCECC.

10. Ministry of Culture formally approved intangible heritage festival to permanently reside in Chengdu
The Ministry of Culture had returned a formal letter of approval, agreeing to hold with Sichuan Provincial People’s Government in Chengdu an edition every two year of the China Chengdu International intangible cultural heritage festival during the period of the national “cultural heritage day”, learnt the journalist on September 6th from the municipal bureau of culture.

11. Three important domestic design companies to enter Redstar 35
On September 9th, ARTOP Industrial Design Co., Ltd., a domestic well-known industrial design company, was formally settled in the Redstar 35 Chengdu Cultural Creative Industrial Parks, and together with the previously stationed Newplan and the upcoming LKK Design, the three most famous industrial design companies in China all have a presence in the Redstar 35 – Chengdu Cultural Creative Industrial Park, which will shoulder the flag of industrial design locally even in west regions.

12. Investing 30 billion yuan, West China Clothing Capital landed in Pengzhou
On September 10th, the fifth congress of Sichuan Household Textile Industrial Association was held in Pengzhou. It is reported that the major developer Huamao Construction Company collaborating with Chengdu Industry Investment Group, will gradually invest 30 billion yuan and devotedly build in Pengzhou the “West China Clothing Capital”. Its prophase project – the first phase construction of Huamao•Chengdu Household Textile Industrial Park has already completed, and 18 leading household textile companies will soon enter.

13. Chongzhou Chuanhui investing 100 million yuan to build a plastic pipe production park
On August 29th, Chongzhou Chuanhui Plastic, one of Sichuan’s leading plastic companies, invested 100 million yuan in Chongzhou’s industrial park, to add a 100-mou plastic pipe production park.

14. Chengdu entered China’s top ten e-commerce innovation and entrepreneurship cities
The 1997 – 2009: Survey Report on China’s E-commerce in Twelve Years released by the China B2B Research Center recently in Hangzhou has selected the “top ten e-commerce innovation and entrepreneurship cities/regions in China”; Chengdu was among the list, becoming the only selection from West China, learnt the journalist on September 13th.

15. Dujiangyan signed in Shanghai, obtaining investment of 3.06 billion yuan for post-disaster reconstruction
On September 14th, the Dujiangyan post-disaster reconstruction introduction and project promotion meeting were held in Shanghai, at which signed were a total of 53 post-disaster reconstruction projects, the investment amounting to 3.06 billion yuan, involving 4 primary industry projects, 10 secondary industry projects, 17 tourist cooperation projects, 12 commercial projects and 10 science and technology projects.

1. GDP increased by 14.3 % in first half year
In the first half of this year, Chengdu’s GDP has increased by 14.3%, far higher than the national GDP growth of 7.1%, while the second quarter’s growth rate is 2% higher than that of the first quarter; over half of the task has been realized in 50% of the time. Chengdu’s economy shows a tendency of stopping slide and rising up, the impact of financial crisis on which is gradually reducing.

2. High-tech Zone selected among Chinese top-ten high tech zones with most investment potential
Aiming to build a world first-rate industrial pack, the Chengdu High-tech Zone entered the list of the top ten high-tech zone with most investment potential in China. On July 19th, the “Future of a development zone and a city – the summit forum on and the metal presentation of China’s high-tech zones with most investment potential” was held in Beijing, the Chengdu High-tech zone among 10 national high-tech industrial development zones were selected as the “top-ten high tech zones of most investment potential of China”.

3. Venture capital magnate joining hands with Chengdu, to set up sub-funds of 500 million yuan
After having jointly set up a sub-fund of 500 million US dollars with the Korea Development Bank and the Korea KTB, on July 15th, the Chengdu government guided fund “Yinke Venture Capital” made another big endeavor: the company signed with the domestic VC magnate DT Capital Partners, to jointly establish a CV fund of 500 million yuan, which is the first time for the government-guided fund to introduce a pure RMB fund to support the local industries.

It is predicted that by the end of the year, Chengdu will in total own 5 CV sub-funds, and Yinke also plans to introduce 3 American and Chinese investment organizations to set up sub-funds in Chengdu.

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Friend Pierig Vezin of WethicA (one of my recommended vendors) has put out one of his more compelling newsletters to date where he offers readers Untouched Pictures of Factory Conditions around Asia.

We are posting real untouched photos of factory working conditions from about one year ago. We have decided this summer to show you an important part of the job we do during audits by telling you why these pictures have been taken. Actually, an audit is much more investigative than ticking boxes off a questionnaire. One has to walk in with an open mind ready to question everything in these situations and not only ask a list of pre-defined questions.

The pictures pretty much speak for themselves.

To see more pictures here, and to learn more about the conditions and socio-economic conditions that exist in these factories I highly suggest watching the movies China Blue and A Decent Factory.

1. Investment of 100 million US dollars, Alibaba to build western base in Chengdu
On June 29th, the signing ceremony of the western base project of Alibaba Group was held in Chengdu High-tech Zone. It is learnt that Alibaba Group is to invest 100 million US dollars in Chengdu to build the “Alibaba Western Base”, whose business range will cover all related businesses conducted by the Group’s subsidiaries, with such functions as research, calling, background operation and maintenance, management and settlement, disaster recovery and training, etc. The settlement of the Chengdu Operation Service Center subordinated to the Alibaba Group was also signed at the occasion.

2. Total investment of 800 million yuan, China Plastic City Chengdu project settled in Xindu
The management committee of China Plastic City based in Yuyao city of Zhejiang province recently signed an agreement with Xindu district, to formally settle the China Plastic City Chengdu project in the district. According to the introduction, the project has a total investment of 800 million yuan, and after the first-phase put in operation, the annual tax revenue can reach 100 million yuan averagely, capable of providing over 3,000 job positions.

3. Important projects of 10.1 billion of Jinniu district signed collectively
Recently, Jinniu district held an signing ceremony for important projects, during which 4 companies including RedStar Furniture and Zhongtie Wuju signed with Jnniu district a “big bill” worth 10.1 billion yuan, in which the RedStar-Shanghai Mall project of investment of 3 billion yuan will start construction on August 8th, which also contains the first five-star hotel in the northern part of Chengdu.
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A few weeks back, I was forwarded a link to a new site that I thought readers would find interesting and useful.

China Industrial Zone

A digital catalog of China’s various zones, what I like about the site it how easy it is to use, the fact that their list is fairly comprehensive, and that it is all in one place…. all important when I am looking for a quick tool to point me in the right direction.

One of the most interesting business dynamics that has come out of the recent crisis has been the psychological impact on China’s business.  Early on, there was a clear recognition that firms here were going to feel the fallout, and the first visible steps came when the government took action via VAT rebate increases for the textile industry, relaxing the RMB, and pumping liquidity into the system.

All steps that we would come to expect of China’s policy makers during a downturn looking to protect their economy, but in the business world, things were very different…that while the government was doing all it could to promote trade, those on main street were doing all they could to mitigate the risks.

As the recent China Stake’s article US Importers on China’s Blacklist highlights:

“We dare not accept orders from the US due to high risk. After we deliver the goods, they don’t pay us, or even vanish completely. This has happened many times. In the past we would get money two or three months after we delivered our goods. But now we won’t see it even two or three years after the delivery,” says Xu Min, a salesman for Shanghai Sanmao Import & Export Co.(Sanmao) attending the 19th East China Import and Export Fair.

Why this article is interesting to me is that while I knew suppliers were tightening up their payment terms (asking for more cash / guarantee upfront), I had not heard of manufacturers who were actively saying no to business due to the perceive risk in the market.

It is a situation that under normal circumstances could be avoided through guaranteed letters of credit, but as I have mentioned before, even those are now at times hard to come by as many Chinese banks have developed their own internal blacklists against other “unstable” banks.

Where this could get interesting is that as firms are forced to buy in cash it is going to be far more important that buying firms have strong QC in place.  that, unlike when a L/C was involved, inspections will need to occur onshore, and that should any disputes occur it could potentially become a real cash flow nightmare for the buying firm who no longer has a measure of safety through the use of financial instruments.

Could this force more closures in China and abroad?

Are there any buyers out there who have experienced this and have worked through it?

While putting the wood furniture posts together, I came across this chart on the Construction materials market that I thought would be interesting.

I apologize as it is a few years old now, but 2006 and 2007 were a continuation of the moves from 2003 to 2005. high growth, lots of exports.

The people we are working with/ speaking to are seeing a falloff in the 50% range from 2005 levels.

Three big announcements and 2 juicy rumors today highlight the fact that the scale of the global downturn is growing. Fast.

Big Announcements:
1) Intel shuts Shanghai factory and lays off 2,000 to move inland
2) Electrolux closes refrigerator factory in Changsha as part of a wider move to move from low end products to high end
3) McDonald’s cuts prices on 4 meals by 30% to 16.5RMB to, in the words of Jeff Schwartz, McDonald’s China chief executive:

do our part by helping stimulate domestic demand in the restaurant sector

Big Rumors (both unconfirmed)
1) Yum brands will follow McDonald’s lead and cut prices tomorrow
2) KPMG will ask China staff to take one month non-paid leave

Clearly the impacts of the global downturn are beginning to have an impact, and my feeling is that we are only beginning to see the iceberg expose itself. There is now a lot of chatter about how China’s auto part manufacturers are growing very concerned and there could potentially be some big loses.

1. First Chengdu Forum on Acceptance of Global Industrial Shift held in Chengdu
On September 25th, the first Chengdu Forum on Acceptance of Global Industrial Shift sponsored by Chengdu Municipal People’s Government was held in the city, where gathered over 300 guests including representatives from multinational companies, persons in charge of key industrial parks in China, and experts and scholars, who discussed and exchanged their points of view on such topics as the overall tendency and characteristics of the current global industrial shift, the role China is playing within the shifting process, the policies and countermeasures of the city of Chengdu in reception of the industrial transferring, as well as the post-disaster reconstruction and economic development.

Starting from this year, once every year, the forum, through close cooperation with Shanghai Transnational Purchasing Center Co. Ltd, will become the sub meeting place of “China (Shanghai) International Transnational Purchasing Assembly”, by which to bring in effective resources from the world and promote the industrial shift development in Chengdu.

2. Sixth Chengdu International Computer Festival held in Chengdu
West China’s biggest IT pageant drawing extensive attention – the Sixth Chengdu International Computer Festival was held in Chengdu on September 26th. The festival has attracted approximately 2,000 enterprises to participate, including over 30 famous companies from home and aboard including Intel, AMD, IMB and Samsung. The statistics show that 850,000 visitors have came to experience the IT pageant during the festival, and the sales of IT products registered a new record in its history, with revenue totaling 280 million yuan.
At the opening ceremony, China Electronic Chamber of Commerce formally granted Wuhou district, Chengdu, the title of “Core Business District of Electronic Information Industry of West China”, becoming the first “national” electronic information business district in West China.

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The scenario is always the same.

An executive team is in China assessing the opportunities for China based manufacturing.  they want to meet potential partners, understand the environment, see what the conditions on the ground are, etc.

They have heard from others, and seen in the media (blogs inlcuded), that China can save them money… and for them All Roads Lead to China

But, there are times when as a consultant in China you have to say NO.  That the worst possible move they could make would be to outsource their product to China (or anywhere for that matter) as either the volumes are not there, or the price points are not feasible, or they simply have one of those products that has no hands on it at all and the risk that would be injected into the system vs. the gains are to great.

The Businessweek story Dangerous Fakes presents a very timely article on how outsourcing critical parts to military equipment can have long term consequences that were not thought of.

Personally, I am floored at times by how far people will go to save a buck.

Computer chips for the latest fighters and routers used in military networks are exactly the items that countries should not be outsourcing to anyone, let alone bringing in distributors who:

Hakimuddin says she knows little about the parts she has bought and sold. She started her business by signing up on the Internet for a government supplier code. After the Defense Dept. approved her application, with no inspection, she began scanning online military procurement requests. She plugged part codes into Google  and found Web sites offering low prices.

Then she ordered parts and had them shipped directly to military depots. “I wouldn’t know what [the parts] were before I’d order them,” she says, standing near her front door. “I didn’t even know what the parts were for.”

Amazing.  After the last 8 years of listening to my own president speak about how security is the country’s number 1 issue, it all comes down to this one person who by her own admission doesn’t know the first thing about the product she is buying or the suppliers she is finding.

What was the process here?  Didn’t anyone think that these components may be of a higher level of protocol to find domestic manufacturers or at the very least find a factory direct source?

Case closed: these items should have never been outsourced.

Perhaps an extreme case, what I hope this example highlights is that (1) companies/ countries should not outsource items that are critical to their ongoing concern, (2) that if they do, they should make sure the right people are in place to manage the process, (3) that there needs to be a process