Advertising Spend Reaches Record High In Hong Kong In 2013

Advertising spending in Hong Kong rose 9 percent to reach a record high of HK$43.1 billion in 2013, driven by the strong recovery in ad campaigns in the second half of the year. Data from media monitoring firm admanGo revealed banking and investment services was the top industry in terms of ad spending, while Procter & Gamble was the territory’s largest advertiser. In February 2013, the Hong Kong Advertising Association predicted a modest annual growth for the market, citing persistent factors affecting the economy, such as Samsung Electronics’ reduction of its advertising budget. Ad spending by cosmetics and skincare companies grew 10 percent to HK$3.6 billion, while the pharmaceuticals and healthcare industry’s ad spending rose 12 percent to HK$3.3 billion.

"Hong Kong advertising spending hits record on second-half rebound", South China Morning Post , January 28, 2014

Doing Business In China Gets Harder, Becomes Less Attractive For Foreign Companies

Foreign companies are finding it harder and less attractive to do business in China as economic growth slows down and costs rise. China’s government is expanding its restrictive economic policies to include more industries in addition to banking, brokerage, and Internet. As competition heats up further, with local brands developing high-quality and innovative products, some foreign companies, such as Revlon, Best Buy, and Media Markt, have left the country. Others reduced their exposure and operations, such as L’Oreal’s decision to stop selling its Garnier brand of cosmetics and retailer Tesco’s joint venture with a state-owned enterprise. Some companies that chose to stay are facing difficulties, such as IBM, which reported a 23 percent drop in China revenue in the last quarter of 2013; and French drinks company Remy Cointreau, which said sales of its Remy Martin cognac dropped by 30 percent in the first three quarters of 2013.

"China loses its allure", The Economist, January 25, 2014

Wal-Mart Plans Upgrades For Vendor Compliance In China

Wal-Mart Stores Inc. said it plans to upgrade its vendor compliance process in China, after it was accused by state-owned China Central Television of violating the country’s vendor permit policies to jack up its profits. As part of its compliance efforts, Wal-Mart will expand its inspection of vendors’ fulfillment documents for products sold at its stores and will collect more documents to verify product labels, test results, and product claims. Wal-Mart defended its compliance practices, saying accelerated product approvals are only for current suppliers. The company has encountered various obstacles in China, an important growth market for the U.S. retailer.

"Wal-Mart Boosting Compliance in China", Wall Street Journal, January 28, 2014

Fox DNA On Donkey Meat Prompts Wal-Mart To Adopt DNA Tests For Meat Sold In China

Wal-Mart Stores Inc. announced plans to perform DNA tests on meat it sells in China after identifying fox DNA in samples of donkey meat products from a local supplier. Wal-Mart recalled products from supplier Dezhou Fujude Food Company Ltd., while local authorities detained Dezhou Fujude officials after test results had shown the presence of fox DNA in samples. Offering compensation to affected customers, Wal-Mart also said it is considering legal action. In 2013, Wal-Mart said it plans to invest 100 million yuan in the next three years to improve food safety in China by launching a mobile food-inspection program and expanding supplier training.

"Wal-Mart Adds DNA Tests in China After Donkey-Meat Recall", Bloomberg , January 04, 2014

China’s Commitment To GM Crops Is Challenged On Food Safety And Patriotic Grounds

Growing public sentiment in China opposing genetically modified crops – often seen not only as a scary food safety issue but as a strategy by the U.S. to weaken China and control the world’s food supply – has created a predicament for China’s government. The Chinese food ministry -- and its agri-science community -- has long been committed to the use of genetically modified crops, and to the development of its own GM varieties. To that end, it has spent a lot of research money on GM technology, hoping to ensure self-sufficiency in food by increasing crop yields on limited farmland. More than 70 percent of China’s cotton is genetically modified. The imported (often from the U.S.) soybeans it overwhelmingly uses are GM. Five years ago the government approved safety certificates for GM varieties of rice and maize, but further approvals for commercial growing are delayed and certificates could expire – thanks to anti-GM pressure.

"Genetically modified crops: Food fight", The Economist, December 14, 2013

China Tightens Rules For Country's Online Market

China plans to implement stricter rules governing the country’s fast-growing ecommerce market. Driven by the millions of Chinese consumers who are discovering the online market for the first time, China’s ecommerce sector grew from $3 billion in 2009 to $64 billion in 2012, according to a report by the “South China Morning Post” newspaper. With the country set to become the world’s second-largest online retail market, with the business-to-consumer submarket forecast to expand by an average of 34 percent each year, the government was compelled to flex its regulatory muscles. Several laws covering the market will take effect on March 15, 2014.

"China E-Commerce: Regulations For Protecting Consumers And Fighting Counterfeit To Take Effect In March", International Business Times, January 27, 2014

Alibaba Poses Most Serious Threat Yet To Amazon's Business Model

China’s online retailer Alibaba poses the most serious challenge yet to Amazon.com and its business model, which is based on the so-called three pillars —operating with low margins, helping customers find deals easily, and creating a lineup of customer-oriented services. Alibaba threatens Amazon with its no margins business; it earns money not from sales but from advertising and premium services. Unlike Amazon, Alibaba keeps its customers and operations away from online search engines. Also, Alibaba creates revenue no matter what kind of customers is accessing its online store. There are two ways that Amazon can respond to Alibaba’s disrupting effect: first, the online retailer can ignore the challenge and instead continue focusing on its most profitable customers and, second, it can create an independent business unit that would adopt Alibaba’s revenue model.

"Alibaba: The First Real Test for Amazon’s Business Model", Harvard Business Review, January 21, 2014

L'Oreal Stops Selling Garnier Cosmetics In China

L’Oreal SA stopped selling its Garnier brand of cosmetics in China and will instead focus on its other brands. Citing the slowing market in China as the reason behind its move, L’Oreal said it will continue pushing its L’Oreal Paris and Maybelline New York brands in the country. A week before L’Oreal’s announcement, its American rival Revlon Inc. said it plans to withdraw completely from the China market. Currently valued at $25.9 billion, China’s cosmetics market is the world’s third largest and is forecast to grow 63 percent in the five-year period ending 2015 by market research firm Euromonitor. While it remains L’Oreal’s third largest market where it holds a 17 percent share, China’s cosmetics market is “slowing, although still dynamic,” the company said.

"L'Oreal ends Garnier sales in China amid slowdown", Reuters, January 08, 2014