Energy crunch-the shock in the pipeline for China’s economy: Widening power shortages in China have halted production at numerous factories including many supplying Apple and Tesla.

Rationing has been implemented during peak hours in many parts of northeastern China since last week, and residents of cities including Changchun said cuts were occurring sooner and lasting for longer, state media reported.

Almost half of China’s regions missed energy consumption targets set by Beijing and are now under pressure to curb power use. Among the most affected are Jiangsu, Zhejiang and Guangdong — a trio of industrial powerhouses that account for nearly a third of China’s economy.

On Monday (Sep 27), State Grid Corp pledged to ensure basic power supply and avoid electricity cuts.

China’s power crunch, caused by tight coal supplies and toughening emissions standards, has hurt production in industries across several regions and is dragging on the country’s economic growth outlook, analysts said.

The impact on homes and non-industrial users comes as night-time temperatures slip to near-freezing in China’s northernmost cities. The National Energy Administration (NEA) has told coal and natural gas firms to ensure sufficient energy supplies to keep homes warm during winter.

Liaoning province said power generation had declined significantly since July, and the supply gap widened to a “severe level” last week. It expanded power cuts from industrial firms to residential areas last week.

The city of Huludao told residents not to use high energy-consuming electronics like water heaters and microwave ovens during peak periods, and a resident of Harbin city in Heilongjiang province told Reuters that many shopping malls were closing earlier than usual at 4pm. The power squeeze is unnerving Chinese stock markets at a time when the world’s second-largest economy is already showing signs of slowing.

PRODUCTION FALLOUT

Tight coal supplies and toughening emission standards have driven the power shortages across China.

China has vowed to cut energy intensity by about 3 per cent in 2021 to meet its climate goals. Provincial authorities have also stepped up the enforcement of emissions curbs in recent months after only 10 of 30 mainland regions managed to achieve their energy goals in the first half of the year.

The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple and Tesla halted production at some plants.

GDP CUTS

The fallout of the power shortage has prompted some analysts to downgrade their 2021 growth outlook.

“The power-supply shock in the world’s second-biggest economy and biggest manufacturer will ripple through and impact global markets,” analysts in a Sep 24 note, warning that global supplies of textiles, toys and machine parts could be affected.

Last week, major coal producers in China met to try and resolve shortages and curb price increases.

PRICE

China’s thermal coal futures have surged in the past month, repeatedly setting records, as concerns over mine safety and pollution constrain domestic output while it continues to ban shipments from top supplier Australia. Meanwhile, natural gas prices from Europe to Asia have surged to seasonal highs as countries try outbid each other for fast-depleting supplies.

One reason behind the curbs on electricity usage is that China wants to reduce emissions in time for the winter Olympics slated for February in Beijing [File: Qilai Shen/Bloomberg] In previous winter power surges in China, many have turned to diesel generators to plug the shortages of power from the electricity grid. This year, the danger is government policies have further limited the energy industry’s potential to increase production to meet the demand increase, said Zeng Hao, chief expert at consultancy Shanxi Jinzheng Energy.

Yunnan Aluminum Co., a $9 billion producer of the metal used in everything from cars to soda cans, has curtailed output due to pressure from Beijing. The shock is also being felt in China’s giant food sector. Soybean crushers, which process the crop into edible oils and animal feed, were ordered to shut this week in the city of Tianjin.

According to Nikkei, suppliers to Apple Inc. and Tesla Inc. halted production at some of their sites in China on Sunday. Foxconn’s facilities in Longhua, Guanlan, Taiyuan and Zhengzhou — the world’s largest iPhone manufacturing complex — remained unaffected by the power-supply restrictions, the report said

A number of smaller companies are also starting to inform the stock exchange they’ve been ordered to curb or halt activity. While they may be overlooked by major foreign investors that don’t cover these firms, the end result could be a shortage of everything from textiles to electronics components that could snarl supply chains and eat into the profits of a host of multinational companies.

Learn more:

https://www.chinadaily.com.cn/a/202109/27/WS61517c3ea310cdd39bc6bdaf.html

The post The next shock in the pipeline for China’s economy: energy crunch spreads first appeared on SAHARA.

Shipping costs have risen sharply and fierce competition for ocean freight capacity is the new normal. With new capacity only slowly coming on stream, freight rates are expected to continue to reach new highs this year and will remain above their pre-pandemic levels in the longer term.

Since 2020, shipping cost have been growing strongly. For 2021 prices for several trade lanes have triple compared to last year, and charter prices for container vessels have been rises. There is little sign of relief in the short term, and rates are therefore likely to continue spiking in the second half of this year, as rising global demand will continue to be met with limited increases in shipping capacity and the disruptive effects of local lockdown. Even when new capacity arrives, container liners may be more active in managing it, keeping freight rates at a higher level than before the pandemic.

Problems that had built up from the beginning of the pandemic have included imbalances in the production and demand for goods, with countries locking down and opening up at different times, as well as shipping companies cutting the capacity on major routes and shortages of empty containers. As the recovery has progressed, global demand has recovered strongly, especially in the sectors which are most closely linked to international trade in goods. Competition for ocean freight capacity has intensified as economies open up further and inventories are rebuilt across the several links of supply chains.

A lack of alternatives to ocean freight means it’s hard to avoid surging transport costs at the moment. For higher value products, alternative modes of transportation would normally be an option, such as the shipment of electronic devices by air or via train, not least through the ‘Silk Road’. But capacity is currently limited, and tariffs have spiked as well. Shippers of lower value products such as household items, toys, promotional articles or t-shirts have seen freight costs increase from around 5% of their sourcing costs to more than 20%. The difficulty of absorbing increases on this scale in margins means that consumers may start to feel the impacts through price increases, or changes in product availability.

Some countries are already exporting more goods than they did before the pandemic, while in others, including the US, exports continue to lag behind the overall recovery in output. Trade in goods will rise further while not only the major trading countries, but also their trade partners, continue recovering. With the competition for ocean freight capacity set to remain, the unbalanced recovery will continue to exacerbate some of the problems for world trade, including displaced empty containers. It all adds up to more pressure on freight rates in the near term.

Globally, capacity on major shipping routes has recovered to levels before the major lockdowns in 2020, although blank sailings (cancelled port calls) continued to cut 10% of scheduled capacity through the first quarter. There are signs of improvement this quarter, which on current plans will average at 4%. But cancellations have partly been a response to delays, so while the system remains congested, shipping capacity may continue to be taken out of the system at short notice.

As the link between cancelled sailings and delays suggests, congestion is part of the problem. Shipping performance in 2021 has carried on where 2020 left off, in terms of lower rates of vessels keeping to schedule, and average delays for late vessels rising. There are some signs that average performance will start to improve as the share of vessels reaching their destinations on time stopped sliding in April, and average delays improved. But overall performance remains the lowest it has been in ten years of records.

https://www.seatrade-maritime.com/ports-logistics/osra-2021-would-increase-cargo-delays-terminals-shipping-associations

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For many companies, the Chinese market may be quite difficult to approach. Many companies fail in their project to do business in China. We provide you with the common mistakes.

Not protecting your IP

Having a company in China, doesn’t mean your IP, including brand copyrights, are protected. A somewhat common pitfall in starting a company in China is finding out someone watching from afar has registered parts of your trademark rights such as your brand logo, name or slogan under the radar. If the owner of your trademark wants to, they can prevent you from selling, importing or exporting products or services branded with the trademarked materials in question.

While this scenario isn’t a widespread phenomena, it does happen under certain circumstances where ties to the trademark materials aren’t obvious (such as for a new or obscure brand).

Not using your official company chop

After some time filling out paperwork for bank accounts and whatnot, you’ll notice something different about paperwork in the west and China and that is that your signature means very little in China. In fact, without your company’s official chop, any company paperwork is practically meaningless. 

Your company official chop is the ultimate validation on business and official contracts and overrides personal signatures. You need a WFOE in China to have an official company chop.

Deleting WeChat/WhatsApp Conversations

We can’t stress this enough, but unbeknown to many foreigners and some locals alike, WeChat conversations are legally binding in China. Whether the conflict in question is a business deal, rent agreement, or any form of business agreement between two or more residents in China, the relevant WeChat conversation is accepted in court as evidence.

Relying on Relation

Relation “Guanxi” is a Chinese social concept that roughly translates to “you help me, I help you” type of mentality, except it is a deeply rooted concept in China.

By no means is having relation bad in China, it’s great, but relying heavily on Guangxi is one of the worst mistakes to make when doing business in China. It’s important to remember that people from all over the world go back on their word and exaggerate. Because of the “Guanxi” culture in China, it may be tempting to forgo official contracts and jump into lucrative deals without any protection. Guangxi is so ingrained in some businessmen that they’ll throw money left and right without written contracts, these people don’t stay in business for long.

Not keeping track of your corporate transactions

This one is applicable for businesses throughout the world, however it is especially punishing for foreign companies in China. Any irregularity or run in with the law, even for minor nuisances oftentimes lead to company bookkeeping audits where the scrutiny can be meticulous.

This is not a problem if your transactions and bookkeeping are in order, but can turn into a nightmare with improper tax and accounting.

Underestimating the specificities of the local market & culture

Never underestimate the differences of the Chinese market and culture. This could be fatal to your company. Therefore, make sure to conduct in-depth market research prior to the launch of your activities in China. This will help you to adapt your product, strategy and sales pitch to local tastes. McDonald’s for example slightly changed its menu in China, adding shrimp burgers to satisfy local demand. You should also get to know and use local platforms such as WeChat and Baidu where all the business takes place. This is the best way to get to your local target customers.

However, be careful not to lose your company’s identity in the adaptation process. You should still present a strong brand and identity, as branding is a crucial element for business success in China.

Also, be aware of language barriers and cultural differences. Many companies fail to succeed in China due to a lack of knowledge of Chinese business etiquette and traditions.

Hiring the wrong people & other HR mistakes

Without the right staff, your business is not likely to sustain for long. So, take special care when hiring. First of all, your people should match with your company’s values, vision and motivations. That is the best way to take your company forward.

Then, your hiring strategy should also take into consideration potential staff retaining issues. Indeed, there is a common misperception that China with a population of 1.3 billion provides access to a limitless pool of workers. Currently, staff turnover rates are high in China. It is challenging to find and retain trustworthy employees and quality managers.

Expatriates or local contracts? The benefits of employing expatriates are greater operational control and transparency. However, expatriate packages are often very costly in terms of salary, relocation costs, insurance charges, etc. More and more companies are offering local contracts to their foreign employees and more and more foreigners are working this way.

In case you face difficulties with your hiring process, the best thing to do is to contact recruiting agencies who are specialized in the Chinese market.

The post The worst mistakes to avoid when doing business in China first appeared on SAHARA.

With the development of market economy, the phenomenon of commodity trading has become very common, and the sales contract has become the most common civil contract. After signing a sales contract, either the seller or the buyer usually do not want to have a sales contract dispute, because the dispute means the loss of time, energy, money and feelings. However, the situation in real life is complicated, so it is difficult to avoid the disputes of sales contract.

So, when faced with sales contract disputes, how should we deal with? The following is to provide you with several methods to solve the sales contract disputes:

Consultation

In case of any dispute arising from the execution of this contract, the two parties shall, in accordance with the relevant laws and provisions of the contract, conduct friendly consultations on the principles of equality, mutual benefit, honesty and good faith. 

On the one hand, resolving disputes through consultation can help resolve disputes in a timely manner and avoid protracted problems. On the other hand, it is also conducive to maintaining the bilateral trading relationship, so that disputes can be properly handled. For example, when the debtor is temporarily unable to repay the debt, the dispute can be resolved by means of “repayment in installments or repayment in goods” through negotiation between the two sides.

It should be noted that the settlement of disputes through consultation should be based on mutual understanding, mutual accommodation and consultation on an equal footing, and the settlement method should be the result of consensus reached by both parties through consultation. Its advantage is to avoid damaging the cooperative relationship between the parties and save time and effort for the parties to resolve the contract dispute.

Mediation

There are many kinds of mediation in China. According to different subjects, it can be divided into people’s mediation, court mediation, administrative mediation, arbitration mediation and so on. 

In order to ensure that the disputes between the two parties can be objectively and fairly resolved, the parties may seek the help of mediation organizations. 

Mediation organizations, as neutral third parties, can intervene in the dispute to help exchange views, put forward solutions, and facilitate the parties to reach a mediation agreement in accordance with the principle of voluntary and legal. 

The mediation agreement shall have legal effect and both parties shall conscientiously perform it. Resolving disputes through mediation is simple and easy, and can save the parties a lot of time, energy and money.

Arbitration

According to Chinese law, there are two types of arbitration: labor arbitration and commercial arbitration. Commercial arbitration means that the parties agree in the contract to submit the dispute to arbitration, and the arbitration commission, as a third party, will intervene in the dispute between the parties and make a ruling on the merits of the dispute according to law and based on facts.

If the parties adopt arbitration to resolve the contract dispute, they must agree in the sales contract in advance to choose arbitration as the dispute resolution method, and need to specify the arbitration committee with jurisdiction. In addition, the advantages of arbitration in resolving disputes lie in the fact that the ruling has the final effect and the time efficiency is faster than that of litigation.

Litigation

When a contract dispute occurs, the parties fail to negotiate and there is no agreement on arbitration as a dispute settlement method, the parties will usually entrust lawyers to collect evidence materials, bring a lawsuit to the court, and protect their rights through litigation. 

In recent years, with the enhancement of people’s legal awareness, more and more citizens and enterprises actively protect their legitimate rights and interests through litigation, litigation has also become an important line of defense to maintain social fairness and justice. 

In China, the judicial organ with jurisdiction is the people’s court. The people’s court independently exercises the judicial power according to law. Its advantage is that it can guarantee the objectivity, impartiality and authority of the trial of cases.

Legal Note:

The legal relationship between the parties in the sales contract dispute seems simple, but in practice it often becomes difficult and complicated due to the lack and insufficiency of evidence. 

Therefore, in the sales contract relationship, the parties should enhance their legal awareness, pay attention to signing the written sales contract, keep relevant documents, chat records, email messages, mobile phone messages and other evidence, ensure the authenticity and integrity of the evidence, in order to provide evidence for future disputes to protect their rights in accordance with the law.

The above is about the sale contract dispute settlement method basic introduction. We hope you can safeguard your legitimate rights and interests through legal means when you encounter disputes over sales contracts in the future.

The post How to Deal With the Disputes Arising from the Sales Contract? first appeared on SAHARA.

According to one of China’s top health authorities, despite its vaccination program, China is still unable to open its borders.

Opening the borders, according to Feng Zijian, the deputy director general of China’s Center for Disease Control and Prevention, would still pose the risk of a catastrophic COVID-19 outbreak even if 60-80 percent of people were fully vaccinated. Because there is no way to confirm if Chinese COVID-19 vaccines can prevent more transmission as well as serious illness in China’s predominantly COVID-free population.

As many countries in the world have shown, messenger RNA (mRNA) vaccines, like those developed by BioNTech SE, Pfizer Inc., and Moderna Inc., seem can prevent the onward transmission.

Li Yunchun, CEO of Chinese pharmaceutical firm Walvax Biotechnology Co., said that the firm is working on its own mRNA vaccine.

As of June 9, China had administered almost 800 million vaccination doses. However, how many of these are first and second dosages is unknown.

As the COVID-19 pandemic worsened overseas in the early part of 2020, China closed its borders to almost all foreigners at midnight on March 28, 2020. Anyone entering the Chinese mainland from overseas must still undergo strict measures of centralized quarantine and testing. Most places in the mainland require 21 days of centralized quarantine.

Clearly, there is still a long way to go on the road back to normality.

READ MORE: Announcement of the People’s Republic of China and National Immigration Regarding the Temporary Suspension of Holding and Permits on China

The post Official Response: Why China Still Can Not Open The Borders first appeared on SAHARA.

A written contract ensures that all of the terms of your agreement are documented,  different from an oral contract, refers to a contract in the form of written words. In practice, a written contract is usually expressed in the form of a contract, a letter and a data message.

Compared with oral contract, the advantages of written contract are as follows:

1. The agreed content is clear, the relationship between rights and obligations is clear, and it is easy to perform and supervise
2. In case of a dispute, a written contract is easier to verify and settle.

A written contract is usually not required to adhere to a certain fixed format, but the basic content should include:

1. The names of the parties
2. Rights, obligations and responsibilities of the parties
3. Term of validity, date and place of execution
4. Signature or seal of the parties concerned

Written contracts can be divided into ordinary written contracts and special written contracts.

Ordinary written contract refers to a contract that is concluded after negotiation between the parties and can be established without performing other procedures.

The special written contract refers to the contract which needs to be notarized, certified by a third party or approved and registered by the relevant authorities according to the provisions of law or the agreement of the parties.

Problems to be noted when signing a written contract:

1. The signing of a written contract shall be made through friendly negotiation on the basis of equality and free will between the two parties.
2. The content and form of the written contract must conform to the laws and regulations, and shall not violate the compulsory provisions of the law or public order and good customs.
3. The terms and conditions of the contract should be consistent and free from inconsistencies. For example, the name, specification, price, quantity and other information of the goods in the sales contract should be consistent.
4. All terms of the contract must be fully negotiated by the parties and should not violate the principle of fairness and good faith.
5. The terms and conditions of the contract should be complete and circumscribed to prevent mislisting or omission of major items.
6. The wording of the contract should be accurate, clear and precise, and avoid ambiguity. Try to avoid vague words such as “probably” and “might”

The importance of a written contract

1. Signing a written contract is conducive to reducing the risk of breach of contract, thus promoting the development of social economy. Oral contract is difficult to truthfully record the agreement of the parties, while written contract can record the agreement of the parties in the form of words, which can prompt the contracting parties to strictly perform the contract, and promote the rapid development of social economy.
2. The conclusion of a written contract is a condition of its effectiveness under certain circumstances. Usually, the form of contract is not limited to writing. However, in some cases, the signing of a written contract may be a condition for the contract to become effective. For example, according to the Civil Code of China, if a law or administrative regulation stipulates that a contract must be in writing, or if the parties agree that the contract must be in writing, then the contract shall be in writing.
3. The signing of a written contract is conducive to the protection of rights of the parties. A legally formed written contract is protected by law and allows the other party to seek legal remedies in the event of default by one party. (Legal remedies include but are not limited to litigation)
4. The signing of a written contract is the basis for the parties to perform the contract. The stipulation on the rights and obligations of both parties in a written contract is the basic basis for the parties to perform the contract, and plays a positive role in promoting the performance of the contract. The signing of the written contract can effectively restrain the breach of contract and protect the legitimate rights and interests of the parties to the greatest extent.

Warm Tip:

In practice, in view of the complexity of civil and commercial activities, it often takes a long time to observe and verify whether the transaction object is honest, and the legal risk is large. Therefore, the signing of written contracts has become an important way to guarantee the security of market transactions and maintain the stability of economic order.

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