Thursday, July 31, 2014

Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN




About 2point6billion.com

2point6billion.com discusses business and investment news rising from the geopolitical relations of China and India, and the interactions these two countries have with the rest of emerging Asia.



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Three Pillars to Getting Quality Goods from China

by Etienne Charlier

I am not the first one to mention that pre-shipment inspections are important to securing quality from China. As they say:

You get what you Inspect, not what you Expect!

But pre-shipment inspections are not enough. The inspector you send to your supplier will stop defective products from being shipped to you, and this is good. But after all, not receiving defective goods is not the same as receiving what you order, according to specification and on the time agreed upon. Continue Reading


China-ASEAN Wage Comparisons and the 70 Percent Production Capacity Benchmark

Op-Ed Commentary: Chris Devonshire-Ellis

As wage increases in China continue to rise – along with the comparatively high national welfare costs – increasing comment is being made as to the legitimacy of the “China Plus One” scenario. Coined some years ago, this theory – in reality, more of a shrewd observation – suggests that future manufacturing capacity will be placed both in China and externally in another location by the same manufacturer.

In fact, this has been going on for years, most notably between China and Vietnam. The recent anti-Chinese riots there have even prompted Hong Kong Shippers’ Council chairman Willy Lin Sun-mo to state that Hong Kong manufacturers based in the Pearl River Delta are running out of alternative, low-cost factory locations with ample labour following recent instability in their two preferred destinations, Vietnam and Thailand. I wrote about the Vietnam and Thai issues – along with a risk analysis for doing business in the rest of Asia – and China, earlier this week here, in this article “Anti-China Vietnam Riots a Passing Phase,” and Willy Lin’s comments can also be construed as a mild political point to Beijing that placing oil rigs in disputed waters hurts Hong Kong manufacturers. Continue Reading


Will the Rains Come? Reflections on an India at the Point of Economic Renewal

Op-Ed Commentary: Chet Scheltema, Manager, Dezan Shira & Associates

Monsoon rains sweep across India during the summer after several months of hot, dry weather, turning parched earth into lush and tropical landscape. Besides bringing eagerly awaited relief from the heat, these rains play an important role in sustaining the vibrancy of the Indian sub-continent’s life. Most of its vast population remains rural and highly dependent upon the land’s yield for sustenance. And the wealth of its large urban population depends entirely on the steady surge of India’s river waters flowing from the Himalayan heights. Lacking monsoonal renewal, India’s agriculture production may fail and its water resources dwindle – all with potentially dire consequences. So while traveling in Delhi and Mumbai these past weeks, it was little surprise to hear Indian’s ask this time of year, “will the rains come?” Continue Reading


Increasing Labor Productivity will be key to China Success

By Renaud Anjoran

The conference organized last week by the European Chamber of Commerce in China was extremely interesting.

I took notes during the other speakers’ presentations, and a theme came back again and again: if China doesn’t increase its labor productivity, times are going to get tough:

  • Tough for China because its potential growth will be seriously capped.
  • And tough for the importers, because costs will have to rise a lot.

The necessity of productivity gains for China’s GDP growth

Ben Simpfendorfer, a strategic consultant with an economic background, set the stage:

  • The working population is contracting and this trend will continue;
  • The debt/GDP ratio has been growing but will have to stabilize sometime in the future, so capital investments will need to decrease.

These two trends mean that the only way for China to keep growing at a rapid rate will be through productivity gains.

How to gain productivity? By making farms, companies, and administrations more efficient. And a big part of this effort will have to take place in factories.

The search of manufacturing efficiencies by importers

I asked the panel of experts for their forecast regarding the rate of price increases over the next 5-10 years. Their responses were pessimistic.

They all agreed that prices of Chinese products would increase faster in the next 5 years than they have over the past 5 years!

The main reasons they invoked were as follow:

  • Supply and demand will dictate higher prices, since there will be less labor supply for the manufacturing sector… and more demand, coming in good part from the domestic market;
  • The central government plans for higher wages and a move to more advanced industries.

Will it be very brutal? Probably not. One speaker suggested it might follow a ”stop & go” pace. His meaning is, Beijing will devalue the currency a little if they see they overshot what foreign companies are willing to pay.

So, what are importers trying to do?

The low-hanging fruits have been reaped. Now, improvements to the bottom line will have to come from reduced waste (in other words, higher efficiency all along the supply chain).

That’s why more and more companies are launching lean programs to reduce costs. And why others are getting their feet wet in other Asian countries.

Renaud Anjoran has been managing his quality assurance agency (Sofeast Ltd) since 2006. In addition, a passion for improving the way people work has pushed him to launch a consultancy to improve factories and a web application to manage the purchasing process. He writes advice for importers on qualityinspection.org.

This article was originally published by Global Sources, March 13, 2014. Global Sources is a leading business-to-business media company that facilitates trade between buyers worldwide and suppliers in China & Asia, via online portals, magazines, research reports and trade fairs.


Ten of Asia’s Most Dynamic Export Processing Zones That You’ve Never Heard Of

Export capacity building up throughout South-East Asia

Op-Ed Commentary: Chris Devonshire-Ellis

As global manufacturing starts to spread its tentacles across Asia, Export Processing Zones – once the sole preserve of China – are springing up all over. Conceived as ideal for emerging markets as they help develop worker skill sets and begin the development of supply chain infrastructure, they are also popular with foreign investors as they negate the need to import directly into the host country (avoiding import duties) and assist with being able to deliver a cost-effective product by offering VAT rebates on any locally sourced components. Continue Reading


Foreign Investors Prepare for Post-Election Revival in India

DELHI – While India’s economy typically slumps in the lead-up to national elections, international companies have begun vocalizing their intention to step up investment after a new government is constituted in May.

At a private meeting yesterday with Reserve Bank of India (RBI) Governor Dr. Raghuram Rahan, top executives from global financial services companies and institutional investors expressed optimism the RBI would enact the reforms necessary to restore investor confidence and stimulate long-term economic growth post-elections. Continue Reading


Vietnam Rolls Out New Online Visa Processing System

HANOI – March 14th saw the rollout of Vietnam’s new online visa processing system. As a result of the new system, foreigners will now be able to register and fill out visa application forms online. The official website can be found here.

Previously, foreigners looking to apply for a Vietnamese visa had to physically visit the relevant representative government agency in their area in order to get the required forms. Continue Reading





Dezan Shira & Associates provide a range of services for companies looking to undertake foreign direct investment into Asia, These include corporate establishment, accounting, tax, payroll, audit and due diligence. To learn more about the firm, please contact one of our specialists at china@dezshira.com, download our corporate brochure or visit at us www.dezshira.com


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