MAERSK OP­TI­MISTIC ON CHINA BUSI­NESS

Cambodian Business Review - - CHINA -

Dan­ish ship­ping and oil gi­ant Maersk Group is op­ti­mistic about busi­ness prospects in China de­spite the global trade down­turn and ques­tion marks over the im­pact of the re­cent weak­en­ing of the yuan, a com­pany ex­ec­u­tive said.

The group's rev­enue in China has roughly dou­bled since 2009, which is the big­gest ori­gin mar­ket for its con­tainer ship­ping busi­ness, said Tim Smith, chair­man of Maersk China and chief rep­re­sen­ta­tive of Maersk Group North Asia, at a press brief­ing.

Busi­ness in the coun­try is con­tin­u­ing to flour­ish, and Maersk sees op­por­tu­ni­ties as the econ­omy moves to­ward con­sump­tion and ser­vice-led growth, as well as in the Belt and Road re­gional trade and in­fra­struc­ture net­work pro­posed by China, Smith told re­porters.

"China is big, and im­por­tant, and that will con­tinue to be the case in fu­ture," he said.

He also called the de­val­u­a­tion of the yuan an "over­all a good thing."

"We don't know the trend yet but it will boost China's ex­ports, and that's help­ful to our busi­ness gen­er­ally," he said.

China's ex­ports in July slumped 8.9 per­cent year on year, com­pared with a 2.1-per­cent in­crease in June. Im­ports slipped 8.6 per­cent.

Smith de­scribed July as "not a typ­i­cal month" due to the in­flu­ence of com­mod­ity price fluc­tu­a­tions, and said he ex­pected im­prove­ment in China's ex­ports in the com­ing quar­ter helped by the yuan's de­pre­ci­a­tion.

Mean­while, a weaker yuan will make im­ported goods more ex­pen­sive and af­fect im­ports slightly, Smith ex­plained.

How­ever, he be­lieves China's im­ports will con­tinue to grow as the econ­omy ma­tures to be­come more re­liant on con­sump­tion, which will drive up im­ports.

Maersk Line, the group's big­gest busi­ness unit and the world's largest con­tainer ship­ping com­pany, re­ported lower quar­terly prof­its as ship­ping over­ca­pac­ity dented freight rates, es­pe­cially in Asia-Europe trade.

Maersk Line's un­der­ly­ing prof­its de­clined 8.1 per­cent year on year to 499 mil­lion U.S. dol­lars in Q2. But it out­per­formed the mar­ket by re­duc­ing costs and im­prov­ing bunker ef­fi­ciency, with re­turn on in­vested cap­i­tal reach­ing 10.1 per­cent.

The Maersk Group ob­tained 1.1 bil­lion U.S. dol­lars of un­der­ly­ing prof­its in Q2, down 8.3 per­cent from a year ear­lier, ac­cord­ing to fi­nan­cial re­sults re­leased Thurs­day.

Smith said the over­all seaborne trade vol­ume be­tween Asia and Europe fell by an es­ti­mated 3 per­cent year on year in the first half, but ship­ping ca­pac­ity rose a lot more than that.

Due to over­ca­pac­ity, spot rates for Chi­nese out­bound goods have halved since early 2012, but Maersk still con­sid­ers China its key mar­ket, he said.

The group spends around 2 bil­lion U.S. dol­lars each year buy­ing equip­ment, ships and other fa­cil­i­ties in China, and is look­ing for op­por­tu­ni­ties to part­ner with Chi­nese com­pa­nies to par­tic­i­pate in the Belt and Road Ini­tia­tive.

Smith said the ini­tia­tive was a "very smart strat­egy" by China, as it will ben­e­fit Chi­nese com­pa­nies in con­struc­tion and for­eign trade sec­tors, and Maersk also sees a lot of in­ter­est­ing op­por­tu­ni­ties ahead.

The group could work with Chi­nese firms to carry cargo ex­ported from China, or in build­ing ter­mi­nals in Africa, for ex­am­ple, he said.

That was one of the rea­sons the group moved its China chair back to the main­land from Hong Kong last month, be­cause it wants to in­vest more re­sources in the ini­tia­tive to en­gage in it, Smith noted.

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