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China Sourcing Blog
The China Sourcing Blog
An information platform for the procurement and trade industries in China

China’s Transformation: Implications for Global Supply Chains (Sep 27)
While costs have become a focal point for companies seeking to grow their margins, China’s competitive position as a low-cost sourcing destination is being questioned. This article takes a closer look at the new competitive forces shaping China and other low cost countries’ competitiveness and the implications for global supply chain executives.

The world that witnessed a decade of impressive growth is now a distant memory. The global financial crisis intervened and put a halt to it. Demand in developed markets plummeted before levelling out and the knock-on effects have been felt around the world. China, along with a few other countries, temporarily bucked the trend but most are seeing relatively slower growth and it seems as if this pace is set to remain in place for the foreseeable future.

Unfortunately, not only are growth prospects bleak, but for numerous countries and sectors, costs are rising faster than revenues. This is not only the case for some developed economies, such as ...

The China Analyst - September 2013 (Sep 22)
As China’s top leaders prepare to discuss major policies on the country’s reform agenda during the upcoming plenary session of the 18th Central Committee in November, China watchers are cautiously optimistic that President Xi Jinping and his leadership team will push through long anticipated reforms needed to ensure China continues on its long-term growth trajectory.

One of the dynamic issues to watch against this backdrop will be the success (or failure) of Chinese firms in being able to crack into developed markets. The fruits of globalisation will no longer accrue solely to rich-world businesses as increasingly competitive emerging-market products and services win over consumers in the West.

In the coming years, Chinese car manufacturers will continue their efforts to break into European markets, Chinese real estate firms will be looking to diversify their asset portfolios into more stable but still revenue-generating economies, and Chinese construction and IT firms...

China’s Rising Wages and its Impact on Cost Competitiveness (Sep 19)
Recent developments in the Chinese economy have drawn renewed media attention to rising labour costs in China. More than 50 years ago, economist Arthur Lewis pointed out that with the expansion of the modern sector of a low-income country, the unlimited labour supply (from the rural sector’s labour surplus) would disappear and, as a result, the country will enter into a phase of faster real wage increases. Many countries, including South Korea and Japan, have experienced such a change. What about China—is it already at the Lewis turning point? If so, does this signal the end of cheap labour in China?

Has China reached the point of no return? (aka the Lewis turning point)

Those that argue that China has already reached the Lewis turning point cite the fact that starting from2006, wages for Chinese migrant workers have skyrocketed. Based on data from the China Household Income Project, in 2006 and 2007, migrant wages increased by 11.5% and 11.2% in nominal terms, and 10% and 6.4% in rea...

The Beijing Axis joins forces with IMPERIAL Logistics (Sep 10)
IMPERIAL_Logistics logo.pngThe Beijing Axis has boosted its procurement and international supply chain offering by entering into a joint venture with global logistics and supply chain leader, IMPERIAL Logistics. The partnership will ensure that both companies and their clients are well-placed to reap the benefits of the thriving trade and development between the two fastest growing continents in the world – Asia and Africa.

The joint venture brings together The Beijing Axis’ strength in analytics, strategy formulation and implementation, transaction support, and outsourced procurement and managed services, with IMPERIAL Logistics’ extensive resource base of transportation, warehousing and distribution operations in Africa and Europe, as well as best-of-breed integrative process and technology solutions. The combined team will have the ability to build a seamless distribution channel from China – and other Asian, low-cost manufacturing countries – to Africa, as well as from Africa to Asia. “Partner...

China Sourcing Strategy: The Purchase Positioning Matrix (Aug 9)
Global purchasing managers sourcing from China face a myriad of options on setting up their Chinese procurement operations. Whether it be a direct structure such as a rep office, offshore structure, joint-venture, and WOFE; or to completely outsource operations to a trading company or third-party service providers, each option has its own pros and cons. Understanding the Purchase Positioning Matrix can help companies determine the most suitable procurement structure to set up in China.

The Purchase Positioning Matrix: A Tale of Two Axes 

Based on ‘The Portfolio Instrument’ developed by Dirk-Jan F. Kamann (which is itself based on Kraljic’s 1983 purchasing model), the Purchase Positioning Matrix is a framework for buyers to develop their supplier relations strategy by examining their sourcing needs in terms of sourcing value and sourcing complexity. The Matrix can be represented by the following illustration:
Purchase Positioning Matrix.jpgThe matrix has two axes, an x-axis that measures the complexity ...

The China Analyst - October 2012 (Oct 30)
China's hand-picked next generation of leaders will be tasked with solving deep-rooted problems formed during China's 30 years of socio-economic development. A growing (and increasingly visible) disconnect between top wage earners and the working class, frustrated factory owners, and a rapidly-ageing population are just some of the key issues facing modern China. Beijing needs to rebalance its economy away from excessive reliance on investment towards a more domestic consumption driven growth model. Beijing will only be able to accomplish this feat through targeted market-oriented reforms such as deepening reforms in the land, labour and financial markets. In the meantime, the vested interests of China's powerful SOEs, who have long enjoyed preferential government policies in an effort to breed global champions, will remain a major hurdle in pushing long-awaited reforms. China is still on track to become the world's largest economy sometime during the new leadership's 10-year ten...

The China Compass - August 2012 (Jul 31)
The China Compass - August 2012, published by The Beijing Axis, combines basic country data of China, as well as other major world economies, with more detailed analysis of a wide range of macroeconomic and social data; presents a comprehensive picture of the ever-changing and evolving Chinese landscape; contains up-to-date statistics, topical themes and insights; and is presented in a reader-friendly format as a useful desk reference for executives with a China agenda.
The China Compass - August 2012_Cover.jpg
Click here to download the August 2012 edition

Since our last edition, the developed world has been unable to escape from a self-induced sovereign debt crisis, which has fuelled speculation as to whether China's economy is headed for a 'soft' or 'hard' landing. While China's GDP growth has subsequently slowed to 9.2% in 2011 and 7.8% year-on-year in the first half of 2012, fears of 'hard' landing seem overblown. Even growth of 7.6% in the second quarter fits with our core view that China's annual growth rate for ...

Juxtaposition: China in the Fortune 500 vs. the Beijing Subway System (Apr 24)
Here's a little mental leap. In the last few years Beijing's subway has expanded substantially, especially after a building blitz before the 2008 Olympics. At the time, Chinese companies have entered the Fortune 500 in increasing numbers. What if you would literally put these two completely disparate phenomena together?

The result is this infographic. It illustrates the progression of Chinese companies in the Fortune 500 from 1994 (when the first Chinese company joined the list) with a visual reference to the expansion of the Beijing subway system from 1971. All but two of Beijing’s current 15 lines were opened in the last decade; in the same period, 47 of the current total of 58 mainland Chinese companies joined the Fortune 500. The circles around each company portrays visually the expansion in revenue of the companies at time of joining the Fortune 500 vs. currently. Note the subway map is not exhaustive of Beijing’s current subway system of 15 lines.

Click for a closer view....

The China Analyst - April 2012 (Apr 4)
The China Analyst - April 2012.jpgThis is the new edition of The China Analyst - April 2012. In this edition we ask you to prepare for a more competitive China. We ask you to change your perspective on China. 

How competitive is China really? It has changed a lot in the last three decades, yet now it is aiming to transition to innovation-driven competitiveness. If you apply a little imagination and envision where current trends are heading, you might be induced to change your opinion on China. This process has started happening in a number of industries, such as heavy and construction equipment, where Chinese companies have begun to shake up the competitive landscape, especially in emerging economies. Yet in various other industries as well a number of Chinese companies are approaching the 'technological frontier.' It is a process that is occurring in gradual steps, as Chinese companies adapt, improve and innovate, but it is a process that all companies in the world should be aware of and prepare for. 

In other ...

China's Shipbuilding Industry: Tough at the Top (Feb 16)
The shipbuilding industry has been the scene for a major uptick in Chinese export market share in the period 2007-10. 

Ship Exports.png
The OECD countries that China captured market share from were in this case Japan and South Korea. These two, in their turn, were responsible for capturing the market from Europe as early as the 1970s, but it was only in 2010 that South Korea was surpassed by China as the world's leading shipbuilder. The chart above illustrates how rapidly this occurred in the period 2007-10. 

According to the global shipping services provider Clarksons, in 2011 China accounted for around 41% of the global shipbuilding share in dead weight tonnes, while South Korea had 33%, Japan 20%, and Europe only 2%. China's ascent in the industry was complicated, however, by the global financial crisis. With sluggish demand for new ships and rising costs for labour and steel, the volume of new orders in 2011 fell 52%, according to the China Association of the National Shipbuilding Industry (CANSI)...
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