Europe is getting tough with China over trade.
The European Union said Wednesday that it had enough evidence to begin an investigation into Chinese telecoms network suppliers over unfair subsidies and dumping products below market prices.
The EU's top trade official said he hoped China would be willing to negotiate to prevent the formal opening of a case, which could lead to punitive import duties being imposed.
"This decision will not be activated for the time being to allow for negotiations towards an amicable solution with the Chinese authorities," EU trade commissioner Karel de Gucht said in a statement.
China exports telecoms network equipment worth about one billion euros each year to the EU. De Gucht did not mention any companies by name, but big Chinese players in the European market include Huawei and ZTE (ZTCOF).
Huawei said in a statement that it was "disappointed" by the EU warning.
"Huawei always plays fair and we win business and trust from our customers through our innovative technology and quality service, rather than via pricing or subsidies," the company said.
EU action against unfair trade practices usually begins with an official complaint by companies active in the industry. But in this case, the European Commission is opting to pursue action without waiting for a complaint from firms such as Ericsson (ERIC)or Alcatel Lucent (ALALF).
"This possibility is particularly important as it offers a shield when the risk of retaliation against European companies asking for trade defense instruments is high," the commission said in a statement.
Ericsson, the world's largest maker of mobile networks, said it did not support the EU action.
"Ericsson is a strong supporter of free trade and we don't believe in this type of unilateral measure," said Ulf Pehrsson, the Stockholm-based company's head of government and industry relations. "Our policy is for open, free and unrestricted trade and global supply chains, benefiting users and societies."
Related: Huawei won't hang up on U.S. smartphone market
Much is at stake if trade relations deteriorate between the world's second-biggest economy and Europe, which is looking to exports to help end a prolonged recession.
China is the EU's second biggest trading partner behind the United States, and the EU is China's biggest market. Trade in goods and services between the two totaled nearly 480 billion euros last year.
The biggest outstanding trade dispute concerns Chinese exports of solar panels, cells and wafers worth 21 billion euros per year. The EU launched an anti-dumping case last September after more than 20 local producers filed a formal complaint.
Related: Major Chinese solar company goes bankrupt
The European Commission will impose provisional duties on those imports at an average rate of 47% as early as next month, according to recent reports. A commission spokesman could not be reached for comment.
The U.S. Commerce Department imposed tariffs on Chinese-made solar panels last year after it found manufacturers were dumping their products on the American market.
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24 May 2013
EU braces for China telecoms trade fight
24 May 2013
China factory activity contracts in May
Fears of a slowdown in global growth were reinforced Thursday as a preliminary report on China's manufacturing in May showed activity contracted for the first time in seven months.0 Comments
Global bank HSBC said its "flash" index of purchasing managers' sentiment fell to 49.6 from a final reading of 50.4 in April. It's the first time the index has fallen below 50 since October 2012. Any reading above 50 signals expansion in the manufacturing sector.
The strength of manufacturing in China is considered a barometer of the global economy because of the nation's role as a powerhouse exporter. Because it makes up a large part of China's economy, manufacturing plays an important role in shaping domestic policy.
"The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds," noted HSBC economist Hongbin Qu.
"A sequential slowdown is likely in the middle of the second quarter, casting downside risk to China's fragile growth recovery."
China recorded its weakest growth in 13 years in 2012, but the world's second biggest economy rebounded in the fourth quarter to post growth of 7.9%, easing concerns about a hard landing.
Growth slowed again in the first quarter to 7.7%, a weaker performance than economists were expecting but still ahead of the government's annual target of 7.5%.
May's weaker-than-expected PMI survey followed a fall in the reading for last month and could increase pressure on the Chinese government to cut taxes and increase spending to stimulate the economy.
But with no sign of a cooling in the property market, and mounting concerns about soaring debt levels, monetary policy is likely to remain unchanged.
"We believe the government will not loosen monetary policy to stimulate the economy in the second quarter because the labor market is still tight and although headline activity indicators are weaker, they are not collapsing," noted Nomura economist Zhiwei Zhang.
HSBC's final reading of May purchasing managers' sentiment is due on May 1, as is the Chinese government's reading.
24 May 2013
Our 'Re-globalizing' World: What It Means for Supply Chains in China
During the long lead-up to the 2012 US election, both candidates took their shots at China and claimed intentions to "bring manufacturing back home."0 Comments
We began hearing more about near-shoring, right-shoring and on-shoring in the business pages and from corporate leaders. Subsequent conversations and actions have proven that there is indeed such a movement afoot, but the big picture on manufacturing and supply chains is much more complicated.
Take Lenovo, the giant Chinese PC maker that bought IBM's computer unit. Lenovo recently announced the creation of hundreds of new jobs in North Carolina to produce its new high-end business computers.
James Fallows, the Atlantic's China expert, regularly addresses the phenomenon of high-tech and high value-add manufacturing moving back to the US. In one article, Fallows wrote about Liam Casey, (who he has dubbed "Mr. China"). Casey, who has built a huge electronics manufacturing empire in Southern China, expounded on why, when and how he and others will bring a portion of their tech manufacturing back to California.
Then, almost as if on cue, Apple announced its intentions to start limited production of iMacs in Silicon Valley. Adding to this is the growing chorus of voices proclaiming everywhere from Mexico, to Brazil, to Indonesia, to Ghana as the "next China."
So what does this all mean? After 25 years of almost automatic off-shoring to China, are global supply chains being completely transformed?
The fact is that smart companies will consider a new mix of manufacturing, sales, marketing and logistics in a re-balanced and re-globalized world. And In this world, China still has a huge role to play.
Globalization Waves & Change Drivers
What all of these conversations about manufacturing and supply chains have in common is that they are part of a process called "re-globalization."
Here's some perspective. In the first wave of globalization (during the last 30 years), we generally experienced a two-track series of innovations and changes.
Track #1: This was marked by improved supply chain and logistics strategies, along with the simultaneous (and not coincidental) rise of China as a manufacturing power. In tandem, the big box store phenomenon led companies in Western and developed countries to make products in China (and other parts of Asia) and sell them in the West.
Track #2: Technology allowed companies and individuals to work in a shrunken world in which almost anything was possible across borders. Consider customers in London buying directly from the J. Crew website, or Indian doctors reviewing X-rays overnight and having results back to US doctors in the morning.
In a re-globalizing world with continuous innovation and technology advancements, supply chain becomes even more critical to survival. The six supply chain mega-processes of PLAN, BUY, MAKE, MOVE, STORE and SELL are undergoing major changes due to:
•The rise of the Chinese consumer behemoth;
•The transfer of wealth from West to East;
•The changing nature of how, where, when, and what Western consumers buy;
•The rising cost of energy and fuel;
•A need to balance serving your home, near and far markets with your products and services; and
•Technologies that shrink the world further.
Companies need to balance the costs of R&D and development (PLAN), manufacturing (BUY/MAKE), shipping and logistics (MOVE), inventory (STORE), and customer satisfaction (SELL).
Make no mistake – China is still very important as a continuing destination for profitable manufacturing and supply chain opportunities. Over the next decade, supply chain in Asia will remain a major part of the discussion, and a key piece of any strategy, for companies of almost any size, geographic location and product category.
But we no longer live in a world in which companies can simply make something in Asia, ship it to the US, and distribute to retailers without considering the realities of re-globalization and the factors that are driving change.
James A. Tompkins
CEO & President, Tompkins International
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