The three complainants said the surcharge, equivalent to the tariff on imports of complete cars, exceeded China’s permitted tariff ceiling for car parts and broke WTO rules. The duty on complete cars is typically 25 per cent, compared with about 10 per cent for car parts. Beijing claimed the surcharge was necessary to prevent circumvention of the car duty by importing large chunks of vehicles for local assembly.

China will appeal this decision and delay the ruling which would cause them to change the tariff in question or face trade sanctions.

Additional interesting statistics:

- China’s $19bn (€12bn, £9.5bn) vehicle market is the world’s third largest after the US and Japan

- China’s exports of vehicles and parts jumped 45 per cent last year to $41bn

- China’s imports of vehicles and parts rose 25 per cent in 2007 to $26bn

- China’s export sales of car parts reached $2bn in 2007

I should add that this is China’s first official legal defeat involving the WTO since they joined in 2001.

The Beijing Administration for Industry & Commerce (BAIC) may cancel e-commerce regulations initially scheduled for an August 1 release, reports Weaseek.com quoting an unnamed insider. According to the report, Internet inspector Lv Bowang along with 90% of Internet users have voiced opposition to the regulations that require online sellers to pay a RMB 500 licensing fee for their online stores. Previous reports said e-commerce operators allowing unlicensed sellers to operate on their platform could be fined from RMB 20,000 to RMB 500,000 under the new rule.

If this rumor is true then I foresee nothing but continued growth for the many assets owned and operated by our friends at Alibaba Group.

Alibaba Group, which initially developed Taobao.com with Softbank, owns 100% of the business and it seems they are upping the anty with the recent announcement of a US$300 million investment over the next 5 years in hopes of making Taobao.com one of the largest retailers (online or offline) in the world. Chairman Jack Ma (Ma Yun) is so bullish on Taobao.com that he believes it will eventually be bigger than Wal-Mart!

In the next few years, China’s Internet users will reach 500-600 million, and by then about 100-200 million people will be shopping on Taobao every day. Show me a company with such scale?

Many, including me, believe that Taobao.com will be the next big IPO and you’ll have to get in line for this one given the success of the Alibaba.com (1688) listing late last year (the stock has taken a beating since then, I should point out).

How will this money be spent? There are many ways but this is how TradeMediaBlog sees Taobao.com’s evolution over the next few years – or at least what Alibaba Group may wish to consider.

1. Alipay integration with Alibaba.cn – Alipay is 100% owned by Alibaba Group and is far and away the most dominant online payment gateway in China with nearly 58% marketshare. Alibaba.cn is China’s largest domestic B2B trade site that could facilitate trade transactions within China using Alipay’s escrow payment model.

2. Taobao.com integration with Alibaba.cn – Taobao.com sellers need to find product and what better place than through Alibaba.cn and what better way to facilitate payment than through Alipay.

3. Taobao.com introduced in English and given away FREE worldwide – If eBay thinks they had it tough in China after investing US$180 million cash only to lose out to Taobao.com in the end just wait til they start penetrating the U.S. market! Meg Whitman left at a good time because Jack Ma could come with deep pockets, aggressive marketing and an army of Mainland Chinese programmers behind him. I do believe the many disgruntled eBay sellers would flock to this FREE platform and be happy about it!

4. Alipay integration with Alibaba.com – Alipay begins experimenting with overseas payments. Of course there are many issues and hurdles but it is possible given both the buyer and seller agree to use Alipay’s escrow service and partner banks.

5. Taobao.com integration with Alibaba.com – Taobao.com not only begins carving out marketshare from eBay on their home turf but also beats them at a business that they have always struggled to understand – sourcing. Like Taobao.com’s integration with Alibaba.cn, this last link in the chain creates a global sourcing opportunity for Taobao.com’s sellers and will definitely be another draw for online sellers around the world.

Integration is easier said than done; however, we strongly believe that it is not a question of how but when.

Pacific Epoch has shared the latest China Internet Network Information Center (CNNIC) online shopping statistics for 1H-08 and Alibaba Group’s Taobao.com continues to leave all other competitors in the dust. Check out these statistics:

- Online shopping transactions in China reached RMB16.2 billion (US$2.3 billion) in 19 developed cities including Beijing, Shanghai, Guangzhou and Shenzhen during the period.

- Over half of the total, RMB8.4 billion, came from male consumers while RMB3.1 billion was attributed to students.

- The top five e-commerce sites based on online shopping penetration rates were Alibaba Group’s consumer-to-consumer (C2C) site Taobao.com (81.5%), Dangdang.com (16.6%), Amazon’s China subsidiary Joyo (13.6%), Tom Online and eBay’s (Nasdaq: EBAY) Eachnet (8.4%), and Tencent’s (0700.HK) C2C site Paipai.com (7.2%).

- According to the report, 91% of online shoppers who have heard of Taobao have made purchases on the site, while 61.4% percent of those familiar with Joyo had shopped there.

A few related articles that you may find of interest:

New York Times - Oh Jerry, It’s No Longer Your Baby

TechCrunch - NYTimes Article Reverberates Through Yahoo; Who’s Their Next CEO?

Washington Post - Icahn: Yahoo’s Google Deal ‘Might Have Merit’, ‘May Be Better Than Microsoft’

It will be a most interesting year ahead as we continue to watch Google unfold its master plan and Microsoft do its best to defend.

Yahoo said Microsoft “unequivocally” rejected the notion of buying the entire company in a meeting held Sunday.

Now what?

Well, the company’s annual meeting is August 1st where they will face the wrath of activist investor Carl Icahn who wants Jerry Yang’s head and the entire Yahoo! Board replaced. NOTE: Link is to a nice TechCrunch posting reminding us that Jerry Yang’s salary is only US$1/year.

Shares fell 10% on this news to US$23.52/share.

Yahoo! is now looking for help from arch rival Google who will now serve Adwords on the Yahoo! site. This may help Yahoo! in the short-term but also signs over the rights to global search domination to Google once and for all. Yahoo! says this deal could generate up to US$450 million in revenues for the first year and up to US$800 million per year moving forward. However, lots of antitrust hurdles to overcome before this deal gets signed.

Our good friends at Alibaba Group can relax this weekend but I am sure they will sleep with one eye open just in case Ballmer has a last card to play.

Simply, trade media is the underlying media supporting global trade. From bricks-and-mortar publishing and online sourcing communities to large export-oriented trade events as well as the many third-party services supporting an international trade transaction - all of these businesses are involved in trade media.

To understand the opportunity is to understand the industry we serve.

Global merchandise exports has grown from US$9.9 trillion in 2005 to over US$11.7 trillion in 2006. This is only exports, folks!

Further, the importance of this industry is staggering when viewing global trade as a percentage of GDP, which was only 10% in 1970 (only 38 years ago!). According to the WTO, global trade represented 47% of world GDP in 2006. This is an overwhelming and growing dependence on the trade industry to keep the planet’s economies afloat!

Therefore, the more efficiencies we can drive through global trade and its corresponding media the more likely we are to help local, regional and global economies grow.

Any questions?

For many trade media companies, this is also proving to be an incredibly tough sales period. While speaking with one of TradeMediaBlog’s partners, they admitted that they were experiencing a most difficult sales period as many manufacturers who are advertisers/exhibitors are simply going out of business due to:

1. China labor law increasing human resource costs
2. Materials costs increasing
3. Buyers choosing product from other more affordable countries

Our good friend Paul Woodward at BSG Asia provided additional insight:

- There’s talk of 10,000 factories closing in the Pearl River Delta and (I assume) moving inland. Most are going into other parts of China, not (as some suggest) Vietnam, Cambodia, etc. in any significant numbers.
- I think that trade media companies with China-wide reach will not suffer too much. However, those with limited reach could be in trouble.
- Foreign visitor numbers to Hong Kong and China trade shows so far this year have been flat; however, there is a noticeable decrease in U.S. attendees to these events.
- Another concern for trade show organizers is new Chinese visa regulations which could make it very difficult for visitors to come to Mainland fairs.

John Guise of the One-Eyed Panda provides a very good list of these visa regulations which I have pasted below for convenience. As you can see, China’s government is not doing anyone any favors with this long list of new rules which will inevitably hurt many industries, including import-export and tourism.

- There are no changes to the Z (work) visa procedure. These visas are converted into work and residency permits inside China upon entrance into the country.

- Currently people need to apply in their home countries for Chinese visas and cannot apply in Hong Kong (other third countries are currently okay at the moment including Macao). Only those with either HK work permits or HK ID can apply for visas in Hong Kong.

- Visa processing takes longer so you need to be prepared and apply in advance.

- For L (tourist) visas, you are required to have a copy of a hotel reservation a photocopy of a round-trip plan ticket.

- For F (business) visas, you are required to apply at the consulate/embassy in your country of residence. The consulates/embassies are only issuing 30-day single or double-entry visas.

- The following are the required documents: original letter from the Chinese government ministry; Chinese hotel reservation; photocopy of return plane tickets.

- F visas can be extended inside China only. If extended in Beijing they can only be extended to July 1st 2008. If extended in Shanghai, they can be extended for the standard 30 to 60 days and count as single entry (and supposedly beyond July 1st). Extensions take five working days and must be applied for in person.

- For the letter from the Chinese government ministry (usually the local foreign affairs office), this must be applied for by a locally registered company such as a WOFE or domestic Chinese company in the city where the person applying for the F visa intends to visit. IE if the person intends to visit Shanghai, the letter must be applied for by a company in Shanghai.

- Representative offices must apply through an agent such as FESCO to get the letter from the relevant ministry.

- Those people who are in China for longer than 90 days continually or more than 180 days in a calendar year should apply to be on a Z visa, which would be changed to a residency permit inside China.

- F and L visas for senior managers can be changed to work and residence permits from inside China. Also all companies with capital over US$3 million can change F and L visas to work and residency permits for all employees. Representative offices also can’t apply directly for Z visas. They must apply for L or F visas and convert them to work and residency permits inside China.

- These regulations will most likely last after the Olympics. The government is really cracking down on F visa holders who are actually residents inside China as they are really residents here, and should therefore be on residency and work permits and be paying taxes.

- Revenue was $40.6 million, up 16% from $34.9 million.
- Online revenue was $21.9 million, up 27% from $17.3 million.
- Exhibitions revenue was $6.0 million, up 24% from $4.8 million.
- Print revenue was $11.6 million, down 1% from $11.8 million.
- Revenue from mainland China was $24.1 million, up 30% from $18.4 million.

The 27% increase in online sales can be contributed to positive traction of the company’s new pricing strategy which we reported on in January.

Further evidence of this can be seen in Global Sources’ total deferred income which was US$96.1 million, up 26% Y-O-Y. This is significant as their online/print business model requires customers (mainly suppliers buying marketing packages) to pay upfront for a 12 month service.

It is also worth noting that activity on the site increased significantly as their buyer members sent 32.6 million RFIs (Requests For Information from buyers to suppliers listed on GlobalSources.com) for the 12 months ended March 31, up more than 137%.

Why is this a big deal?

First, Global Sources only increased their buyer members by 16% in the last year. Second and as shown in the Alexa chart below, the site has not seen significant traffic growth in the last 6 months. Therefore, credit must be given to Brent Barnes, GM of Content, and his very capable Team for increasing usage of existing services which is an incredible challenge especially when this particular function (sending an RFI) has been available to users since the site launched in 1995.

They also surprisingly increased guidance for Q2.

I say surprisingly as TradeMediaBlog has spoken to our trade show organizer partners in China/Hong Kong and they are seeing a noticeable slowdown in exhibitor sales due to the fact that many manufacturers/exporters have gone out of business. The global economic slowdown as well as changes in China’s labor laws (enacted in January this year) have made running a business in the country impractical for certain industries.

Global Sources stock fell on the news but is up from its 12 month low of US$10.70.

MFG.com is a B2B online trade marketplace focused on manufacturing. The site supports over 300 manufacturing processes from machining and molding to extrusions and metal stamping.

Driving efficiencies by disintermediating traditional trading houses, manufacturer’s representatives and brokers.

Revenues are generated from fees paid by suppliers (between US$5,000-US$10,000/year) for access to RFQs posted by buyers who need custom manufactured parts/products. Buyers use the site FREE.

While this subscription model is not unique the underlying services are.

For buyers, they no longer suffer from searching through pages and pages of product images and supplier profiles as MFG.com’s platform offers Intelligent Matching. This service automatically matches supplier’s with the parameters from the buyer’s RFQ.

If the Discovery Phase (buyers searching for suppliers) represents over 50% of the total Sourcing Cycle, which on average is between 3-4 months, then it is safe to say that MFG.com is saving buyers an unbelievable amount of time/money by shrinking this phase from months to minutes.

Buyers are also encouraged to provide Supplier Ratings which helps further qualify suppliers and their performance/production capabilities.

For intellectual property concerns when posting drawings with RFQs, MFG.com has developed electronic NDA’s that can be ’signed’ online before any supplier is given access to proprietary information. There is also a corresponding online ’shred’ function which deletes all potentially sensitive data.

For suppliers, they are paying a most affordable annual fee for access to over US$250 million worth of open RFQs (check MFG.com homepage for daily statistics).

Suppliers may also post Buyer Ratings in order to share their business experience with other potential clients.

MFG.com also offers suppliers Market Intelligence by providing buyer demand data for certain manufacturing processes as well as geographic origin of RFQs posted.

They also claim to have a patent pending application that predicts product prices based upon historic quotations submitted through the platform.

Other reasons I like MFG.com:

- Started in 2000 by a passionate and driven entreprenuer, Mitch Free, who was a machinist before bringing his deep knowledge of this industry to the web.

- Acquired largest competitor, SourcingParts.com, in 2006.

- $22.8 million in sales in 2007; projecting $35 million in 2008.

- Established and growing operations in Europe, China and India.

- Clients include Black & Decker, Harley Davidson and new age car manufacturer, Tesla Motors.

- Closed third round of funding in January 2008 with a US$26 million investment from Fidelity Ventures (investors in Alibaba Group) and the Samwer Brothers (investors in Facebook).

- Chosen by Business 2.0 as one of ‘15 companies that will change the world.’ Watch the video.

Buyers - If your business relies upon OEM/ODM parts/products, I suggest you sign up, post an RFQ and let us know the results.

Suppliers - If you support any of the manufacturing categories listed here, then MFG.com’s low cost entry prices make it an easy decision for you to gain access to the US$250 million in RFQs online today.

Trade Media Competitors - Take a close look at MFG.com as they are a bringing tangible improvements to online sourcing and we at TradeMediaBlog believe they have a very bright future ahead.