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Despite problems, Rio Olympics gives China chance to showcase upgraded manufacturing
http://www.ecns.cn/business/2016/08-02/220729.shtml
Aug 2nd 2016, 09:23
Tuesday Aug 02, 2016
The upcoming 2016 Olympic Games, hosted in Rio de Janeiro from Friday to August 21, will be a test for Brazil, which has been suffering from ongoing political turmoil and an economic recession. It will also be a challenge for many Chinese companies that are supplying the event with products such as air conditioners, mascot souvenirs, uniforms and construction equipment. These suppliers have complained about Brazil's slow custom clearance and high duties, but hold onto great hope that the event will showcase the upgraded capabilities of China's transforming manufacturing industry.
With the opening of the 2016 Rio Summer Olympics less than a week away, Brazilian customs authorities are still holding back some official Olympic merchandise provided by Chinese manufacturers.
Beijing-based Honav Culture Development Co (Honav), an exclusively licensed manufacturer for this year's Olympic Games, has delivered 1 million souvenirs based on Vinicius and Tom, the respective mascots of the Rio Olympic Games and the Paralympic Games, and 700,000 Olympic pins, to Brazil's second-most populous municipality.
It is not the first time that the company has confronted slow customs clearance since it started shipping these kinds of products to Rio de Janeiro four years ago, said Wu Hui, Honav's vice general manager.
Wu also complained that Brazil's high customs duties, which are more than double those the UK charged during the 2012 London Olympic Games, noting they are squeezing Honav's profit margins.
Other Olympic merchandise suppliers have also complained about getting their products into Brazil. Gree Electronic Appliances Inc also ran into difficulties as the official supplier for air conditioners to the games.
Wang Weizhen, vice general manager with Gree's Brazilian affiliate, said on Friday that it was hard to say when the installation of air conditioners in the Olympic Village and stadiums would be finished because construction of some of the buildings did not conclude until earlier in week.
However, on Monday, he told the Global Times in a telephone interview that the installations had been completed, though other problems remained.
"Some completed buildings do not have power supplies, making it difficult to adjust the equipment," Wang said.
Unstable Rio
Company executives said the problems appear to be the consequences of the unstable political and business environment in Brazil.
"We do not know how long each custom clearance will take," Wu said, given that customs rules have changed frequently amid the political unrest in Brazil.
Brazil plunged into political turmoil after a vote to impeach President Dilma Rousseff, who had been suspended since May, triggering fierce protests around the country.
What's worse, Brazil is mired in its worst recession since the 1930s.
According to a survey of financial market analysts issued by Brazilian central bank on July 25, the country's economy in 2016 will shrink by 3.27 percent, or 0.02 of a percentage point more than previously forecast.
Meanwhile the unemployment rate in Brazil has shot up to 10.2 percent. Olympic organizers reportedly have had to cut budgets, fueling fears of delays.
Less than a week before the event's opening ceremony, Rio de Janeiro's 10-mile metro Line 4, a key infrastructure project that links the Copacabana area in central Rio de Janeiro with the Olympic Village, opened on Monday. The line was supposed to have opened at the beginning of the year.
Still eager
Despite the above-mentioned challenges and uncertainties, Chinese companies have not been scared away.
Honav worked even harder, setting up an affiliate especially for marketing Olympic souvenirs in Brazil, even though Wu doubted the affiliate would continue to operate in the problematic country after the Olympics.
Gree also establish a special team to ensure a good service for the event.
Other Chinese companies are also involved in the games. Sportswear company 361 Degrees, the event's official uniform supplier, reportedly agreed to provide more than 106,500 uniforms to volunteers, technical staff, torch relay participants and test event personnel.
In the area of transportation, more than half of the subway trains running in Rio's metro system were produced by CRRC Changchun Railway Vehicles Co, according to the company's website.
And Chinese companies such as Sany and Zoomlion provided a variety of heavy construction vehicles to build the main Olympic stadium.
A stage to showcase
"The Olympic Games is the most valuable brand in the world," Wang said.
"It's a great opportunity to build brand awareness. It's not something any company should miss."
Gree, which opened its first plant in Brazil in 2001, pinned its hopes on South America's first Olympic Games to strengthen its foothold on the Brazilian market.
The Olympics can also serve as a platform for companies to showcase their innovative manufacturing abilities and gain more opportunities for future development.
Honav, which was founded as a pin manufacturer in the 1990s, made its name in 2008 by turning waste steel from Beijing National Stadium into Olympic souvenirs like miniature torches and pins. Then they beat about 40 other companies for the pin-licensing rights of the 2012 London Olympic Games, designing 2,012 pins with various themes.
Given its experience, Honav received more licensing rights from the organizing committee of this year's Rio Olympic Games. The rights allowed the company to design, manufacture and market not only pins but also items featuring the event's mascot.
Honav's development reflects the ongoing changes in China's manufacturing, said Wu, who attributed their three-year licensing deal to the company's 300 well-developed manufacturing suppliers around China's Pearl River Delta and Yangtze River Delta regions.
"Chinese manufacturing is shifting from a low-end, labor-intensive sector to a high-end and innovation-centered segment, following the upgrade of the entire supply chain," she said.
"Even though the labor costs are rising, the mature production lines in southern China still give Chinese firms an edge in pricing over their peers."
Both Wu and Wang had faith in the future of the Rio Olympic Games and local authorities.
"They really want to be good hosts for the event," Wu said, noting that government has offered licensees favorable policies such as tax cuts.
The Olympic Games is expected to be something the Brazilian government can bank on to restore the domestic economy.
A report issued by the London government in July 2014 showed that the UK economy got a 14 billion pound ($18.5 billion) shot in the arm following the 2012 London Olympic and Paralympic Games.
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