February 2006 China News

SINGAPORE (Reuters) - McDonald's Corp., the world's largest fast-food company, has added rice burgers -- fried beef slices served between two pressed rice cakes -- to its menu in Singapore in a bid to appeal to local palates.

The fast-food giant, known for all-American food such as fries, beef burgers and milkshakes, said it was encouraged by a positive response to its new rice burgers in Taiwan.

It sold 5 million rice burgers in the first six months since adding them to the menu in February last year. McDonald's sells 40 million burgers a year worldwide.

"We believe that rice burgers will be a substantial product in the Singapore market because rice is a general staple here and for the rest of Asia," Shirley Foenander, vice president of marketing and communications for McDonald's Restaurants, said in a press statement.

Singapore's population of 4.4 million people is predominantly ethnic Chinese, Malay and Indian. Rice is a staple food for the three ethnic groups.

Rice burgers were popularized by Japanese fast-food chain MOS Burger -- part of the MOS Food Service Inc group -- which says on its Web site it launched its first rice burgers in 1987. The group has nearly 1,500 outlets in Japan, 107 in Taiwan and 17 in Singapore.

McDonald's has more than 30,000 restaurants in more than 119 countries, including 124 in Singapore and 346 in Taiwan.

Intense competition between fast-food outlets worldwide has prompted McDonald's to shift away from a standardized menu and turn instead to more localized menus.

In China, McDonald's fastest-growing market outside the United States, it tested rice triangle wraps in some outlets.

In India, where the majority Hindus regard the cow as a sacred animal and many Hindus avoid meat, the fast-food giant has a vegetarian menu and replaced beef with mutton in its burgers.

DETROIT (Reuters) - With all the hype surrounding the first Chinese auto maker to exhibit at North America's biggest auto show, you would expect the head of Geely Automobile Holdings Ltd. to be brimming with pride and promises of prosperity.

"Competition is fierce in the United States," said the chairman and founder of the small Chinese car maker, which plans to import its first cars to the U.S. market as early as 2008.

"There are challenges in every direction, and the biggest one is from ourselves," he told Reuters at the North American International Auto Show in Detroit. Geely displayed one of its cars at the show Tuesday.

U.S. safety and emissions standards are far more stringent than in his native China, where Geely sells most of its 100,000-plus vehicles annually. And Geely -- initially a tiny manufacturer of refrigerators and bicycles that only decided to build cars 10 years ago -- will be competing against established players with decades of experience.

Geely will also have to build up from scratch a network of dealers willing to run the risk of selling a no-name brand to savvy American consumers, while establishing a broad enough after-sales servicing force to put consumers' minds at ease.

"We will have to gauge the market's reaction and our initial performance before setting any targets," the soft-spoken son of a Chinese peasant farmer said.

Initially, Geely plans to find a niche to serve low and middle-income earners, offering cars for under $10,000. A version of the five-passenger car it plans to improve to meet U.S. needs and regulations was on display at Geely's booth at the show.

"After that, things will depend on how well we lay the groundwork. But we intend to build a stable base in the lower end of the market," Li said.

Despite Li's reservations, his U.S. competitors are watching him and other Chinese automakers' efforts to enter the U.S. market.

"Long term you'd be crazy not to be looking at what China could do given what others have done," said General Motors Corp. CEO Rick Wagoner talking to reporters at the show Tuesday. But GM, which is making its own major push in the Chinese market, is not concerned about the immediate threat from Geely or other Chinese automakers he said.

"Short term it's not an issue," said Wagoner. "The product won't be competitive."

Just as China is important to GM, Li said that succeeding in the U.S. car market was vital for achieving Geely's broader goal of grabbing 2 percent of the global car market by 2015.

Geely will follow on the heels of Chery Automobile, which plans to become the first Chinese car maker to enter the U.S. market in late 2007 through entrepreneur Malcolm Bricklin, best known for bringing the Subaru and Yugo to the United States.

Within a few years, Bricklin's Visionary Vehicles hopes to sell 1 million Chery cars, which will list for around $20,000 each, and build the next million in the United States to avoid a political backlash.

While complaints from U.S. manufacturers and politicians about China's fixed currency make trade friction a real threat, Li said it was too early for Geely to think about producing cars in the United States.

"We are just a baby," he said. "We're not going to talk about giving birth to another baby now."

Wal-Mart's challenge in China

NEW YORK (CNNMoney.com) - Wal-Mart may rule the retail roost at home, but establishing that same kind of dominance in China won't be easy.

Several European supermarket operators as well as a handful of Chinese supermarket chains are all expanding there at a fast clip, jostling for early dominance in this fast-growing market.

Some industry watchers say Wal-Mart could find itself overshadowed in China as companies like Tesco, Carrefour and Metro push even harder to increase their market share.

Wal-Mart currently operates 56 stores in China, including its supercenters that sell groceries and its Sam's Club warehouse stores.

By comparison, French retailer Carrefour already has more than 240 supermarkets and discount stores in the country.

UK's No.1 supermarket chain Tesco operates about 50 Chinese "hypermarkets" -- which are large size supercenters typically between 120,000 to 140,00 square feet -- in partnership with China's Hymall grocery store chain. Tesco said it plans to open 15 new stores in 2006.

And Germany's largest retailer Metro has 30 discount, cash-only stores in China. Metro spokesman Albrecht Von Truchsess said the company is targeting 6 to 8 news stores a year over the next three to four years.

Wal-Mart has not disclosed its China expansion plans for 2006.

However, company spokeswoman Beth Keck dismissed the notion that Wal-wasn't growing fast enough. "We did start out slow, but this is a big market with strong growth opportunity for us. We think we have excellent formats that will work very well there."

China's a retail gold mine

Based on 2005 estimates, consulting firm Retail Forward ranks China as the seventh largest retail market in the world, behind the United States, Japan, the United Kingdom, Germany, France and Italy.

Given the market's rapid growth, China could surpass both Italy and France to claim the No. 5 slot within the next four years.

Frank Badillo, senior economist and director of Retail Forward's global research program, points out that China's market for retail goods has been growing at an annual rate of 7 percent for the past five years. That compares with a 5 percent annual growth rate for the U.S. retail market.

Wal-Mart already operates more than 3,700 stores in the United States, 2,400 stores in 15 international markets and employs a whopping 1.6 million "associates" worldwide.

But its gigantic U.S. footprint has repeatedly sparked Wall Street concerns that its home base is perilously close to saturation -- this despite the fact that it continues to open new stores in the U.S. and it's still pulling in double-digit annual revenue growth.

"In the short run, Wal-Mart still has more room to expand in the U.S.," Badillo conceded. "But after about five years, that pace will slow and it will have to focus on the global opportunities."

Competition heating up

It's hard to ignore a market of 1.2 billion consumers and a growing middle-class with higher disposable incomes.

Global consulting firm Bain & Co. estimates that the number of China's middle-class households will nearly triple by 2010, and their spending will surpass $500 billion.

In an interview with the Observer this week, Tesco's CEO Terry Leahy said the retailer was moving full steam ahead to bulk up its business in China.

Said Badillo, "Tesco's entry is particularly ominous for Wal-Mart. Even though the company is not as big as Wal-Mart or Carrefour, it's proven it can successfully expand internationally, particularly in Eastern Europe, and in Korea where Wal-Mart's struggled."

What can Wal-Mart do?

Badillo suggests Wal-Mart should mirror Carrefour's strategy of mixing up its store formats to quickly penetrate both large and small markets in China, rather than focusing on opening more big-box supercenters that are primarily skewed toward larger cities.

Moreover, Wal-Mart can emulate Metro's strategy by joining forces with local developers as a means to bypass local bureaucratic traps and procure prime locations.

Chinese companies are flexing their muscle, too

According to Bain, Chinese retailers dominate more than 90 percent of local retailing in the country, and maintain a substantial cost advantage over their International rivals.

Observers say Wal-Mart, Carrefour and others simply don't have the scale -- yet -- in China to compete on price versus home-grown supermarket chains like WuMart or the Lianhua Supermarket Co.

Also vying for retail dollars are China's ubiquitous street markets, or "wet markets" that sell everything from fresh fish and live chickens to mammals and reptiles for consumption.

Ira Kalish, director of global economic research with Deloitte Research, said Wal-Mart can't discount the threat from these types of local vendors either.

"Chinese consumers are very sensitive to quality and freshness of food," Kalish said. "These vendors also have extremely low overhead, so their prices are also very, very low.

Wal-Mart, which sells food, meat and dairy products in its supercenters in China, may not be able to match the street market sellers on freshness and price, but it can compete on quality, hygiene and the convenience of a one-stop shop, he said.

The dragon versus the tiger

The Chinese market presents unique cultural, infrastructure and bureaucratic hurdles not just for Wal-Mart but for all foreign retailers, said Jay McIntosh, director of retail and consumer products with Ernst & Young.

Kalish agreed. "Companies there have to deal with corruption and piracy issues. It's also hard to attract and retain skilled managers. Chinese workers are not terribly loyal. So international companies are spending lots of money training workers only to lose them."

Instead, McIntosh said he's more excited about China's next door neighbor India.

"No doubt China is very important to American companies looking to expand globally, but India may be a better [opportunity] once the government relaxes its regulations," he said.

Current Indian regulatory policies bar international retailers from directly entering the Indian market, but they can operate in the country via a joint-venture with local partners. Wal-Mart executives have repeatedly indicated the company's interest in setting up shop on the subcontinent provided the regulatory hurdles are removed.

"Our research shows that the Indian population tends to spend more and save less versus Chinese consumers who save up to 40 percent of their income," McIntosh said.

"Also, a typical retail store in India is tiny, mostly mom and pop and specialty store," he added. "This gives foreign retailers the opportunity to go in and compete in any number of ways. They can set up the one-stop shopping destinations like supercenters, or smaller discount store formats like Wal-Mart's neighborhood markets."

Carrefour could not be reached for comment.

Source

Stores with temperatures set too high during winter or office complexes with their lights on during the day will be fined, the China Daily said, citing Zhang Mao, vice-mayor of Beijing.

Zhang said the first 20 officers will be employed over the next few months and new laws drawn up to help them in their work.

"We have been advocating energy saving for years but it has remained only a slogan because of a lack of a supervising system," Zhang was quoted by the newspaper as saying.

China has struggled to reduce its energy consumption after a summer in which many cities faced blackouts as residents tried to escape soaring temperatures by cranking up the air conditioning.

Beijing asked large buildings and government offices to keep air conditioning temperatures above 26 degrees Celsius (78.8 Fahrenheit) and allowed officials to dress down to save on electricity.