a guide for retailers on expansion in china
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Retail in China. A guide for retailers on expansion in China. Alvise Donà dalle Rose, Partner Eversheds Bianchini Milan, 8 April 2013. Topics. Macro Dynamic Legal Framework IP Protection Corporate Commercial contracts. Eversheds retail team. - PowerPoint PPT PresentationTRANSCRIPT
A guide for retailers on expansion in China
Alvise Donà dalle Rose, Partner Eversheds BianchiniMilan, 8 April 2013
Retail in China
• Macro Dynamic• Legal Framework• IP Protection• Corporate• Commercial contracts
Topics
Eversheds retail team
• One of the largest full service law firms across Asia, Europe, the Middle East and Africa
• Offer sector specific advice on the options for expansion• Extensive experience in advising regulatory environment,
advertising and promotions, branding and competition
Ranked in the top tier of retail practices and recommended for client service by Chambers and Partners every year from 2006-2012
Commercial ContractsCommercial Contracts
China offices key Areas of Practice
Litigation and Dispute Management
Litigation and Dispute Management
M&AM&ACompliance and
RegulatoryCompliance and
Regulatory
General CorporateGeneral
CorporateIPIP
Debt and equity capital markets
Debt and equity capital markets
Private Equity and Restructuring
Private Equity and Restructuring
TechnologyTechnology
EmploymentEmploymentBanking and FinanceBanking and Finance
Our clientele includes major MNCs, state-owned and private PRC companies, international banks and financial institutions, professional services companies, government and regulatory bodies. We service a wide range of sectors as detailed below
InsolvencyInsolvency
China offices key Industry Sectors
TransportTransport
Defence and Security
Defence and Security
AerospaceAerospaceEnergyEnergy
Industrial EngineeringIndustrial
Engineering
Financial InstitutionsFinancial
Institutions
RetailRetail
Food and DrinkFood and Drink
EducationEducation
TMTTMTHealthcareHealthcare
With one of the largest employment teams in the
UK, we manage over 5.500 employment cases
per year
With one of the largest employment teams in the
UK, we manage over 5.500 employment cases
per year
One of two law firms to pass the 100 mark in number of rankings
in the independent legal directory Chambers, leading the
way with 128 firm rankings
One of two law firms to pass the 100 mark in number of rankings
in the independent legal directory Chambers, leading the
way with 128 firm rankings
Polls show that Eversheds is the leading non-US law
firm working with US clients
Polls show that Eversheds is the leading non-US law
firm working with US clients
Eversheds – The Facts44 offices across 26 jurisdictions within Europe, the Middle
East, Asia and Africa
44 offices across 26 jurisdictions within Europe, the Middle
East, Asia and Africa
Service Ethos:Excellence in service delivery is
our first commitment; a service which is tailored and
guarantees to exceed your expectations
Service Ethos:Excellence in service delivery is
our first commitment; a service which is tailored and
guarantees to exceed your expectations
Preferred law firms across 150 countries including
Africa, India, Latin America, Russia, USA
Preferred law firms across 150 countries including
Africa, India, Latin America, Russia, USA
Providing control over
costs
Providing control over
costs
Relationship lawyers –
pioneers of partnering in
the legal market
Relationship lawyers –
pioneers of partnering in
the legal market
Advocates of transparency,
value based billing and
closer working relationships – aiming to reflect value of work done;
not the cost of providing it
Advocates of transparency,
value based billing and
closer working relationships – aiming to reflect value of work done;
not the cost of providing it
Highly rated for corporate finance work
Highly rated for corporate finance work
Over 4,000 people, including more than
500 partners and 1900 legal advisers
Over 4,000 people, including more than
500 partners and 1900 legal advisers
The most top tier rankings of any
firm in the independent legal
directory Chambers UK
2012
The most top tier rankings of any
firm in the independent legal
directory Chambers UK
2012
Practising proactive legal and risk management:
prevention not cure
Practising proactive legal and risk management:
prevention not cure
Global reach
Global reach Asia
Macro dynamics
Setting the scene
Alvise Donà dalle Rose, China deskEversheds Bianchini
China in one wordUrbanisation
China’s urban billion
• China has more than 1,3 billion residents more than 500 million of which live in towns. McKinsey predicts near 400 million new urban residents by 2030
• The most important China towns are usually divided in four Tiers
Tier 1: Beijing, Shanghai, Guangzhou, Shenzhen Tier 2: Chongqing, Xi’an, Changsha and other 40
towns Tier 3: Changzhou, Xining, Nanyang, Xuzhou
and other 130/135 towns Tier 4: around 90 towns
People/place
Shanghai
Shanghai too
FYP 2011-2015
• China's 12th Five-Year Plan (FYP, 2011-15), is expected to continue funnelling major investments into Tier 2 cities
• The plan focuses on seven strategic emerging industries: biotechnology, high-end equipment manufacturing, new energy, new-energy vehicles, new materials, and next-generation information technology
• According to PRC state media reports, the government is considering a $738 billion 10-year energy plan that will develop clean energy sources
Planned economy
• 12th Five Year Plan– Investment Catalogue
• Economic targets– GDP growth 7% annually on average– 45m+ jobs created in urban areas– Urban registered unemployment no
higher than 5%– Prices to be kept generally stable
12th five year plan• Innovation
• Environment and clean energy
• Agriculture
• Livelihood
• Social management– Improved public service for both urban and rural residents– Better social management system for greater social harmony
Innovation: e-tailing
• 700 million Chinese registered with Alibaba.com*• Since 2003 e-tailing industry posted more than
100% compound annual growth**• In 2012 e-tailing produced sales of little less than
200 billion $ with a broadband penetration of 30%.
• On 11 November 2012 through Taobao and T-mall (B2B) 3 billion $ of products were sold
(double of 2001 offline sales of Black Friday)*• In 2020 online sales could reach 700 billion $* Corriere.it 30 November 2012 **MKI March 2013
Tier 2 towns: a huge market
• Chongqing:10 million residents (southern China)• Xi’an: more than 9 million residents only in the
old town (at least 18 million within the city belt)• Changsha:7 million residents – head of Hunan
province• In Tier 1 towns prevails the “brick and mortar”
business• In Tier 2 towns prevails the e-commerce. Huge e-
marketplaces allow small enterprises and individuals to sell products online without paying intermediation fees and distribution costs.
Development of ancillary services
• The e-tailing marked dimension entails the growth of ancillary services like:- Warehousing and delivery- Payment services- Online advertising and search engines- Software to manage the business (ERP) - Consulting services
• The full value chain generated 13 million $ revenues in 2011*
* MKI March 2013
Environment and clean energy
Pollution smog in Shenyang, (province of Liaoning) (Reuters)
TreatmentsWastewater treatment
•Analysts expect that the country's total wastewater output will reach 79 billion tons by 2015 because of rapid urbanization and industrialization
•The PRC government plans to build new facilities and upgrade existing ones, resulting in a large demand for technology and components.
Solid-waste treatment
•China is the world's largest producer of municipal solid waste (MSW).
•To reduce the amount of MSW, the PRC government is making investments to improve its solid-waste treatment capabilities.
•A very high per cent of China's landfills do not meet international standards because of capacity constraints and unsanitary conditions.
China State Council Guidelines Feb 2013
• Change to the economic development strategy
• Sustainable “scientific development”
• Driving the economy by domestic demand
•Moving to higher value-added and high-tech products
• Higher wages
•New cities to be built as population shift from rural to urban
• Spending more for social services for the people
China State Council Guidelines Feb 2013
Aims •increase resident’s income
•narrow income distribution disparity
•regulate the distribution order
Targets
•state firms and government employees and officials
•tax and financial sector
•rural poor and social safety net
(continue)
China State Council Guidelines Feb 2013
Wall Street Journal (February 5, 2013)Sweeping policy guidelines to narrow the growing gap between rich and poor…and pay for ambitious welfare programs
The Guardian (February, 6, 2013)“China unveils major tax reforms to make rich pay more”
But even before the changes were apparent
Wall Street Journal (January 17, 2013)“A long-term trend of rising wages and other costs has made china less attractive, specially for basic manufacturing…total foreign direct investment flowing into China fell 3.7% in 2012”
(continue)
Costs are soaring
• Coastal provinces– Labour– Land prices– Regulations– Taxes
The end of cheap China (The Economist, 10 March 2012)
What will replace cheap China?
5% annual rise in currency and shipping costs
+30% annual rise in wages
=Cheaper to make in US than China (incl. shipping) by 2015
Proverbs
• 同床异梦 Same bed, different dreams• 创业难 守业更难 To open a shop is difficult,
to keep it open is the art of survival• 木秀於林 风必摧之 It is the beautiful bird that
invariably gets caged• 不知则问 其惑一时 不知不问 惑其一生 He who
asks a question is a fool for five minutes; he who does not ask a question remains a fool forever
Questions & Answers
Thank you !
www.eversheds.it
Eversheds Bianchini
Eversheds Bianchini contact detailsFor further information please contact:
Alvise Donà dalle RosePartner, China Desk+39 02 89287 733+39 335 [email protected]