China's mobile game market is expected to grow an average of 11.8 percent in the next five years if the user base stays stable with a massive shift toward smartphones and tablets, an industry report says on Friday.
Last year, mobile game players accounted for over 50 percent of China's mobile Internet users, PricewaterhouseCoopers said in its Mobile Game Industry Insight 2014.
"The development of mobile devices and network environment provides much faster mobile access and huge potential for the mobile game market," said Vincent Cheuk, PwC China TMT partner.
The number of products and downloads of sports and strategy types of games across China's mobile game platforms is significantly greater than that of martial-arts role playing and social games, the report shows.
Meanwhile, mobile game players' payment habits have changed as domestic game players become more willing to pay for in-game tools or functions and "free game + in-game purchases" model will continue to be the most profitable business model for mobile games in the future.
An yhd.com banner displays at an exhibition on June 28, 2014 in Nanjing, Jiangsu province.
Analysts: Pharmaceutical retailers may face technology-driven shakeup
Yhd.com, a Shanghai-based online supermarket controlled by Wal-Mart Stores Inc, has been given permission by China's Food and Drug Administration to sell over-the-counter medicines online, a first in the nation.
The FDA in late July included Yhd.com in an online medicine retail pilot project. With the license, all the third-party pharmaceutical retailers that have set up online shops on the company's website are allowed to sell medicines directly to consumers.
Previously, they could sell only certain categories of health and beauty products such as medical devices and cosmetics.
At present, however, only OTC drugs can be sold online. Prescription drugs, which account for the majority of China's massive pharmaceutical market, are not included in the project.
Many of the big names in China's e-commerce industry, such as JD.com Inc, are going through the application process, hoping to tap into the online medicine industry. But analysts warned that there are many hurdles, particularly at the policy level, that stand in the way of profit.
According to a press release from Yhd.com on Wednesday, more than 10 pharmaceutical retailers have already set up online stores on its platform, which has more than 60 million registered users. Yhd.com said that it expects to add another 50 pharmaceutical retailers by the end of year.
It has set an ambitious goal of having 200,000 OTC medicines by the end of the year, said the company.
Vice-President Liu Tong said that getting permission to sell OTC drugs online will expand the company's business portfolio and help it provide better one-stop shopping for customers.
Most important, with the help of the Internet, customers anywhere can easily buy safe drugs at reasonable prices, said Liu.
"By setting up stores on Yhd.com, pharmaceutical chain stores can effectively reduce their operating costs, therefore eventually lowering the prices of medicines," said Liu.
The Internet has revolutionized many traditional sectors, such as retail, videos and finance, and created high-growth sectors.
China's e-commerce market is already the world's largest. And traditional brick-and-mortar stores must change or be left with a decreasing retail market, experts say.
Will the Internet work the same magic with the pharmaceutical industry? Probably not, at least in the short term, said analysts.
Lu Zhenwang, an independent Internet expert and chief executive officer of the Shanghai-based Wanqing Consultancy, said that the nation's pharmaceutical market is valued at more than 1 trillion yuan ($162.5 billion) annually, but OTC drugs only account for 20 percent of the total.
"The prices of OTC medicines are usually not very high. If you include the delivery cost, the medicines you buy online may even be more expensive than those you buy at local pharmacies," Lu said, adding that the market also excludes those with acute conditions who cannot wait for delivery.
Qiao Yu, an analyst with IT consultancy Analysys International, said those with chronic diseases are often elderly people who are not tech-savvy enough to place orders online in any case. And some people may also shy away from buying drugs online because they worry that insurance will not cover the bill.
Despite these challenges, many e-commerce companies and pharmaceutical retailers still see online medicine as a strategic sector. "With the continuation of medical reform, there's hope that the government will allow the sale of prescription drugs online, which will quickly make the market more dynamic," Qiao said.
THE Chinese online job-market business backed by Seek and gaming billionaire James Packer is working on rolling out educational services in the world鈥檚 fastest-growing economy over the next 12 months, fresh from its 颅successful listing on the New York Stock Exchange.
In China, both a labour shortage and unemployment have emerged as problems in recent years. The number of university students scheduled to graduate in June 2014 is 7.27 million, increasing by 280,000 from 2013. Following 2013, at the time considered the most difficult year for jobseekers in history, 2014 is expected to be even harsher.
Problems in the labour market in China, a key region for Japanese companies advancing overseas, are also attracting attention in Japan. This paper provides a few perspectives on the Chinese labour market, which combines a labour shortage with challenges for jobseekers.
High unemployment amid a labour shortage
Although a nationwide labour survey did not include unemployment rates, we will look at the Chinese labour market using statistics from job placement services. According to the latest statistics on job offers and applications, as of the January-March quarter of 2014, there were 1.293 million young jobseekers who graduated in the last year or earlier but had yet to find a job through employment agencies in 102 major cities.
As the population of these major cities accounts for approximately 46.7 per cent of the total population of large and mid-size Chinese cities, we can estimate that the number of young jobseekers who have graduated, but have yet to find a job, totals more than two million.
Using data from the survey, I also tried to estimate the unemployment rate in those 102 major cities. I employed data on the working population in major cities and the number of job seekers who have not found employment (newly graduated unemployed persons and rural immigrant job seekers) based on the international standard set by the International Labour Organisation (see Figure 1).
Figure 1. Unemployment rate in major Chinese cities
Source: Calculated by the author from statistics on job placement services in China.
The unemployment rate, including rural migrants in major cities in the first quarter of 2014, is 8.7 per cent; excluding them is 6.9 per cent. Unemployment rates before the first quarter of 2014 are also close to these numbers, suggesting that the high unemployment rate has continued.
The unemployment rate is high not because unemployed people lack the ability to work. Looking at the age distribution of all job seekers in these 102 major cities (of whom 96.0 per cent are unemployed), workers aged 45 or younger account for 89.9 per cent of the unemployed, indicating a large population of young workers. In addition, 54.7 per cent of job seekers have specialist or vocational qualifications. Regarding the type of job, 44.1 per cent of job seekers look for technical jobs, while 25.8 per cent seek marketing, sales, or service jobs. Abundant, high-quality labour in the Chinese labour market still exists.
Job offers still buoyant
The high unemployment rate cannot be blamed for the sluggish job offers. Despite the slower economic growth, job offers from companies are still buoyant. As indicated in Figure 2, the job-offers-to-seekers ratio in the first quarter of 2014 was 1.1, showing that there are still more job offers than job seekers.
Figure 2. Job-offers-to-seekers ratio in China
Source: Statistics on job placement services in China (http://www.chinajob.gov.cn/) and CEIC Database
With regard to the buoyant job offers, I demonstrated in my recent book that labour productivity is the most persuasive of the factors that have an impact on the job-offers-to-seekers ratio in China.
As shown in search theory, the larger the income earned from a job, the larger will be the rate of return gained from job creation for companies, which will result in more job offers. Given that productivity in developing countries will improve through not only technological innovations on their own but also through their efforts to catch up with developed nations, a higher rate of increase in productivity can be expected. For that reason, even if the economy slows down somewhat, buoyant job offers are likely to continue because of the support for higher productivity.
Reasons why a labour shortage coexists with high unemployment
So why do labour shortage and high unemployment co-exist in China? I analysed this in my book. I explored the matching efficiency in the labour market by estimating the matching function between job offers and job seekers in urban labour markets in China based on search and matching theory.
Figure 3 shows the values of matching efficiency on the vertical axis. From the figure, we see that matching efficiency in China declined sharply from the late 1990s to the 2000s.
Figure 3. Matching efficiency in the Chinese labour market
Source: Liu (2013 a, b)
* A conceivable cause of the sharp decline is the increase of the inflow and outflow of workers into and out of companies, reflecting the establishment of new companies and the disappearance and downsizing of old state-owned enterprises following economic and corporate reforms, which led to friction in the labour market. This decline was also attributable to imperfect information between job offers and jobseekers.
* I also found that a rise in productivity has a significant negative impact on matching efficiency and showed that a mismatch has arisen between unemployed persons and companies seeking highly-skilled workers.
* Lastly, although it was not dealt with by quantitative analysis in the book, a skill mismatch and a geographic mismatch have some bearing on this phenomenon.
For example, the job-offers-to-seekers ratio for security maintenance staff is surprisingly high in Nanjing at 4.0, while it is only 0.2 in Shanghai.
One way to improve matching efficiency is through employment agencies, as I find that the matching efficiency is very high in areas where there are many employment agencies. As employment agencies are organisations that provide information mainly on job offers and job seekers, they are useful for increasing matching efficiency by correcting imperfect information. Although it is, of course, difficult to increase substantially the number of employment agencies in a short period of time, it would be beneficial for companies to put more efforts into recruiting activities in order to bring many job seekers and secure the labour force.
Although the coexistence of unemployment and labour shortage is seemingly contradictory, it is observed in labour markets not only in China but also in many other countries. Even though it is impossible to eliminate imperfect information in the actual economy, there is room for improvement. If the matching efficiency in the labour market increases, it seems possible to lower both the labour shortage and the unemployment.
This article was originally published at VoxEU.org. Reproduced with permission.
A Bank of China branch in Yichang, Hubei province. China's top five banks will raise 128 billion yuan ($20.8 billion) over a two-week period.
China's top five banks will raise 128 billion yuan ($20.8 billion) in a two-week bond offering spree following a yearlong hiatus, as regulators signal a willingness for lenders to aggressively tap fixed-income markets.
The country's banking regulator began phasing in new higher capital adequacy requirements last year, in line with global rules known as Basel III, and aggressive implementation of the third Basel accord is a key element of China's plan to fortify banks against risks from a slowing economy.
China Construction Bank Corp and Agricultural Bank of China Ltd, the country's second and third-largest banks, respectively, have announced plans to raise 50 billion yuan worth of Basel III-compliant Tier 2 capital via domestic bond issues on Friday.
Bank of Communications Co Ltd, the country's fifth-biggest lender, plans to raise 28 billion yuan on Monday.
The issues follow two large offerings last week, the first from the country's top five banks since early 2013 and China's transition to Basel III.
Industrial and Commercial Bank of China Ltd and Bank of China, the country's largest and fourth-largest lenders, together offered 50 billion yuan of bonds last week.
The flurry of offerings shows Chinese regulators have signed off on the giant deals despite their potential drain on market liquidity, and are comfortable with the new Basel III-compliant bond structure, sources told IFR Asia, a Thomson Reuters publication.
China's economy showed further signs of softening in July despite a burst of government stimulus measures, and banks have tightened lending to risky areas such as the property sector.
The government embarked on a massive credit-fueled economic stimulus program from 2008 to 2010 to pull the economy through the global financial crisis. Many analysts expect a large portion of bank loans extended during that time to turn sour.
The fundraising spree still leaves China's top lenders lagging regional counterparts.
Asian banks (excluding Japan and Australia) have raised more than $32 billion in Basel III compliant securities to date, which includes $26 billion issued in 2014, in local and international markets, according to Moody's data.
Steven Chan, a banking analyst at Maybank Kim Eng, a Singapore-based research firm said the amount being raised was small viewed against the assets of China's top lenders. "It's very small compared with the trillions of assets," he said.
China's big State-owned banks have announced plans to raise $43.5 billion in on- and offshore Tier 2 capital by the end of 2015.
Agricultural Bank of China plans to sell 50 billion yuan of Tier 2 securities, Bank of Communications is in for 40 billion yuan and China Construction Bank for 60 billion yuan. ICBC is eyeing a total of 60 billion yuan, while Bank of China will make a play for the same.
All that makes for a total of 270 billion yuan in Basel III compliant bonds that will hit the market - more than from any other single country.
Lenders are issuing to replace old-style Tier 2 bonds that are about to mature and hold yields down, Chan said.
"If you don't repay bondholders, the yield will increase automatically, so the best way is to issue bonds at a similar or lower rate to repay the earlier one."
A total of 93 billion yuan of subordinated bonds from China's commercial banks will mature next year, according to China Central Depository & Clearing, a State-owned clearinghouse for onshore bonds.
Beijing home sales fell at a slightly slower pace in the Jan.-July period as price declines drove potential home buyers to snap up bargains last month.
Real estate developers in the city sold 5.05 million square meters of housing during the first seven months of this year, down 30.3 percent year on year, the municipal bureau of statistics said in a statement Thursday. The decline for the first half of the year was 35.2 percent.
Housing starts edged 3.8 percent lower to 8.04 million square meters against the backdrop of a gloomy property market.
Sales of commercial buildings, which include residential and commercial property, fell 31.5 percent, compared with 34.8 percent for the first half. The sales reached 6.77 million square meters, it said.
China's property market remains weak prompting dozens of cities nationwide to lift three-year-old purchase limits in a bid to revive sales and boost the economy.
Nationwide, property sales witnessed a steeper decline in the Jan.-July period. Sales in terms of floor area dropped 7.6 percent year on year, 1.6 percentage points higher than the decline seen in the first half.
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