Shanghai Daily Business
Updated: 43 sec ago
ONE of Britain’s biggest contractors collapsed yesterday, putting thousands of jobs at risk, after creditors and the government refused to bail out a company struggling under the weight of over 1.5 billion pounds (US$2.1 billion) of debt.
Carillion said it had no choice but to go into compulsory liquidation after weekend talks with creditors failed to get the short-term financing it needed to continue operating. The construction and services company is working on major public works projects, such as the HS2 rail line in northern England, while also maintaining prisons, cleaning hospitals and providing school lunches.
“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years,” Chairman Philip Green said.
The company employs 43,000 people worldwide who now face the risk of redundancy. Almost half of them are in the UK, though Carillion has a presence also in Canada and the Middle East. Carillion has been struggling to reorganize for the past six months amid debts of about 900 million pounds and a pension deficit of 590 million pounds. Carillion’s share price has plunged 70 percent in the last six months.
Britain’s government refused to rescue Carillion, saying it could not be expected to bail out a private company. In the meantime, it said it would provide the necessary funding to maintain public services.
“It is of course disappointing that Carillion has become insolvent, but our primary responsibility has always been (to) keep our essential public services running safely,” said David Lidington, head of the Cabinet Office.
But questions remain about why the government continued to award contracts to the firm — even after it was having troubles. The opposition Labour Party said the government must move quickly to protect public services and ensure employees, supply chain companies, taxpayers and pension fund members are protected.
“Given 2 billion pounds worth of government contracts were awarded in the time three profit warnings were given by Carillion, a serious investigation needs to be launched into the government’s handling of this matter,” said Labour lawmaker Jon Trickett.
As critics debated the wisdom of contracting out civic services to private entities, Lidington rejected the notion that there would be a fire sale of assets. He said government departments had drawn contingency plans to be activated in the event of a collapse.
In cases of joint partners on a contract, the other partners will take up the slack.
“As we go forward, some services will be taken in house, some services will go out to alternative contractors in a managed, orderly fashion,” he told the BBC.
Prime Minister Theresa May’s spokesman, James Slack, denied that the government had been taken by surprise by the firm’s collapse. He said some of Carillion’s 450 public sector contracts might have to be taken over by the government, but there would not be a huge cost to taxpayers.
David Birne, insolvency partner at chartered accountants H.W. Fisher & Co, said in a statement that it is extremely unusual for a company of Carillion’s size to opt for liquidation rather than administration.
“It suggests there is little, if anything, of value within the company to be saved. Almost every big insolvency in recent years has been a move towards administration rather than liquidation,” he said. “For Carillion’s 43,000 global staff, liquidation means the immediate risk of redundancy.”
NEW home sales rebounded moderately in Shanghai last week, with suburban areas remaining the major driving force due to ample supply, market data showed yesterday.
The area of new homes sold, excluding government-subsidized affordable housing, rose 18 percent to 82,000 square meters during the seven-day period ending on Sunday, Shanghai Centaline Property Consultants Co said in a report.
Outlying Qingpu District reclaimed its No. 1 position with sales of 24,000 square meters, a week-on-week surge of 71.4 percent. Jiading followed with 15,000 square meters sold, while Nanhui in the Pudong New Area sold over 10,000 square meters of new homes.
The average cost of new homes rose 3.4 percent from the previous week to 49,123 yuan (US$7,633) per square meter, according to Centaline data.
“Notably, three out of the 10 most sought-after projects cost less than 30,000 yuan per square meter, a comparatively high proportion if we looked at the past few weeks,” said Lu Wenxi, senior manager of research at Shanghai Centaline. “That also seemed consistent with new supply.”
Citywide, a project in Qingpu sold 13,911 square meters, or 148 units, of new homes for an average price of 39,131 yuan per square meter, making it the most popular development last week. A project in Jiading’s Nanxiang, which cost about 46,300 yuan per square meter on average, trailed closely after selling 10,199 square meters, or 112 units, during the seven-day period.
Meanwhile, about 86,000 square meters of new houses spanning six projects, all of which cost no more than 50,000 yuan per square meter, were released to the local market last week, a surge of 174 percent from a week earlier, Centaline data showed.
“In the second half of this month, at least five projects are set to launch a total of some 2,000 units on the local market which will push overall new home supply in January to exceed 3,000 units, probably the highest monthly figure since August last year,” said Zhang Yue, chief analyst with Shanghai Homelink Real Estate Agency Co.
“Moreover, since over 80 percent of this new supply will be units no larger than 120 square meters, we expect to see continually improving sentiment among home seekers through the end of this month.”
CHINA’S centrally administered state-owned enterprises yesterday reported double-digit growth in business revenues and profits last year.
The SOEs supervised by the State-owned Assets Supervision and Administration Commission made a total of 1.4 trillion yuan (US$218 billion) in profits, up 15.2 percent.
The total revenue of the centrally administered SOEs rose 13.3 percent to 26.4 trillion yuan in 2017.
China now has 98 centrally administered SOEs, down from 117 five years ago, as the central government has been restructuring central SOEs to improve their efficiency and competitiveness.
A series of reforms have changed their shareholding structure, spinning off non-core assets and encouraging innovation.
According to Xiao Yaqing, head of SASAC, China had basically completed corporate governance reform of central SOEs by the end of 2017.
AVERAGE salaries for professionals in Shanghai are set to rise between 5 and 8 percent this year as the digital transformation deepens amid China’s stable economic growth, recruitment agency Morgan McKinley said in a report yesterday.
Salaries will rise 5-8 percent on average for regular performers who stay with their current employer, while the increase could reach between 10 and 20 percent for those who take on new opportunities elsewhere, the report said.
The increase is expected to be bigger than that of 2017 as the firm has observed new opportunities and more competition for talent.
The report said China has been able to defy the expectations of a marked slowdown this year due to improved global demand for its goods, infrastructure spending, and improved profit by Chinese companies.
“Many companies now understand that retaining talent is more important than attracting new talent, and we expect 2018 to be a much more rewarding year,” said Rio Goh, managing director of Morgan McKinley China.
SOME airlines affiliated with China’s HNA Group are delaying aircraft lease payments to lessors, and Export-Import Bank of China, which is a long-term financier of the group, has formed a team to handle the conglomerate’s liquidity issues, several banking and leasing sources said.
Executives from leasing units of Chinese lenders including Bank of China, China Minsheng Banking Corp and Bank of Communications have held talks with some HNA-linked airlines to recover payments, the sources said.
“Some payments have been delayed by over two months,” said one senior Beijing-based executive at a Chinese lessor. He said HNA airlines had informed the lessor that payments would be made soon as they expected banks to support HNA in coming months.
HNA, an aviation-to-financial service conglomerate, said in a statement: “HNA and its subsidiaries are maintaining stable operations, and are in the process of gradually paying each lessor’s fees as planned.”
HNA’s US$50 billion worth of deal-making over the past two years, which included investments in Deutsche Bank and the Hilton hotels group, has sparked intense scrutiny of its opaque ownership and use of leverage.
In June, the Chinese government told major banks to review their credit exposure to HNA and a handful of other non-state companies, putting pressure on its finances.
Some of the sources from lessors and banks said HNA’s flagship Hainan Airlines and smaller ones including Lucky Air and Capital Airlines had missed payments, while Tianjin Airlines was seeking to extend the term for payments due this year.
The sources declined to be named because of the sensitivity of the matter.
Lucky Air and Capital Airlines declined to comment. Tianjin Airlines, Bank of Communications Financial Leasing, Minsheng Financial Leasing and EXIM did not respond to requests for comment.
Hainan Airlines suspended trading last Wednesday pending an announcement. The reason for the share suspension is unclear.
Tianjin Airlines has asked a Chinese lessor to delay June rental payments for three aircraft, said one source with direct knowledge.
Another source said one HNA-affiliated airline has told Bank of Communications Financial Leasing that it will not be paying rental payments due in January. He did not name the airline.
In the last few weeks, executives from some international lessors have flown to China to meet executives at HNA-affiliated airlines and thrash out a repayment plan, the sources said.
“This is a widespread issue among many lessors but they understand that a lot depends on whether banks reopen their funding for HNA and lessors are betting on that,” said one financier at a European bank.
In November, Airfinance Journal reported the delays in lease rental payments and the problems have intensified since then, the sources said.
However, Robert Martin, chief executive of BOC Aviation Ltd, said his company, the leasing unit of Bank of China, did not have problems on lease payments by HNA-linked airlines.
“BOC Aviation has very strong focus on receivables management, and we ended 2017 with a collection rate of 99.9 percent. This included airline subsidiaries of the HNA Group,” Martin said in an e-mail.
Faced with a slew of repayment obligations and concerns about rising financing costs, HNA had its creditworthiness downgraded in November by S&P Global Ratings, as a result of its “aggressive financial policy.”
Underlining the growing concern by lenders over the group’s repayment obligations, Beijing-based EXIM set up a team this month to handle HNA’s debt, which the conglomerate is struggling to repay, banking sources said.
HNA has promised to pay all outstanding delayed payments by the end of January, said a source with direct knowledge.
EXIM’s HNA team was set up after meetings at the conglomerate’s headquarters in south China’s Hainan Province late last year, when HNA asked for new loans to cover existing debt, the source said.
HNA has also been attempting to reorganize its debt commitments from other lenders, the banking sources said.
Many aircraft leases in China are full-recourse leases, said David Yu, a professor and aircraft leasing specialist at New York University Shanghai. This means lessors are on the hook for the money banks have lent them to acquire the planes, putting them at risk of default, he said.
AIRBUS said yesterday that it might have to end production of the double-decker A380 superjumbo jet, having booked no new orders for the plane in two years.
The European aerospace group had been banking on another big order from main client Emirates in November, but the Dubai-based airline decided instead to buy 40 of Boeing’s Dreamliners.
Airbus’s decision in 2007 to pursue the A380, capable of packing in 853 seats, was diametrically opposed to Boeing’s bet on the Dreamliner, marketed as a more efficient plane that could be used for both medium and long-distance flights.
But the economics of the A380 have proved daunting, with airlines having to fly every flight at full capacity in order to make a profit.
“We are still talking to Emirates, but honestly, they are probably the only one to have the ability right now on the market place to take a minimum of six per year on a period of eight to 10 years,” said John Leahy, Airbus’s sales director.
“Quite honestly, if we can’t work out a deal with Emirates there is no choice but to shut down the program,” he said.
The A380 has a list price of US$437 million, and as of December Airbus had booked 317 orders for the plane.
But the last order, for three jets by Japan’s ANA, goes back to January 2016 — and that was the first after nearly three years since a huge order for 50 A380s by Emirates in 2013.
So far, the A380 has cost Airbus 18-20 billion euros (US$22-25 billion), and the company says it needs to build at least six a year for the program to remain viable.
“We will deliver 12 aircraft as planned in 2018,” Chief Operating Officer Fabrice Bregier said, down from 27 in 2015.
“The challenge will be to maintain at least this level in the years to come” before customers start placing replacement orders for the A380s they currently have in service, and “potential new markets” start opening up, he said.
He said the fact the program could exist with just six planes built each year was a testament to its efficiency, adding that the “magnificent plane” was widely acclaimed by passengers.
In many ways, the A380 program is a race against time: Airbus is hoping China will lead a revival in orders once demand for long-haul planes picks up. The country is expected to become the world’s biggest air travel market in 2022, surpassing the United States, according to the International Air Transport Association.
Looking ahead, Bregier said the company’s overall deliveries could rise to 800 this year given the increased pace of production of the A320neo — Airbus’s response to the Dreamliner challenge.
Deliveries have been slowed by problems with the plane’s engines made by US firm Pratt & Whitney and by CFM, the joint venture of General Electric and Safran, but Bregier said these were being worked out.
Overall, Airbus said it booked a total of 1,109 aircraft orders and a record 718 deliveries in 2017, outpacing Boeing’s 912 orders but falling short of its rival’s 763 deliveries.
TENCENT and Denmark’s Lego Group yesterday announced a strategic partnership that aims to create an online digital ecosystem for children in China.
The collaboration includes developing a Lego video zone for children on the Tencent video platform as well as developing and operating Lego-branded video games.
“At present, about a third of current Internet users around the world are youngsters under 18, and in China minors account for 22.5 percent of all Internet users,” said Sun Zhonghuai, vice president of Tencent and chief executive officer of Tencent Penguin Pictures.
“The Internet is having an increasingly great influence on the growth of the young generation, which makes it important to set up a healthy online digital ecosystem for children,” he added.
The two companies also plan to launch Lego Boost, an online coding platform.
They will improve online safety by creating Lego Life, a social network for kids to share their Lego creations in a protected environment.
A Sino-British joint venture will soon begin outbound tourism business for Chinese tourists in the Shanghai free trade zone.
Registered in the FTZ in 2015 by Thomas Cook Group and Shanghai’s Fosun International, Fosun Tourism and Culture Group is one of the beneficiaries of fine-tuning to some laws and regulations in China’s FTZs to further opening-up and reform.
Eleven regulations including those on ship registration, urban rail transit and foreign investment are to be temporarily adjusted, according to a State Council decision.
One regulation specifically deals with foreign investment in tourism. Joint ventures registered in the zones are now allowed directly into outbound tourism for Chinese residents. Previous regulations meant joint ventures had to work with local travel agencies on outbound tourism, but could apply for their own license after two years.
Xu Bingbin, vice president of the group, said his firm offers several products for Chinese tourists, and since the change to regulations, revenue is expected to increase tenfold this year.
“The alteration of these laws and regulations will further the opening up of China’s free trade zones,” said Ren Yibiao, general manager of the National Base for International Culture Trade (Shanghai). The changes are also good for FTZ businesses involved in shipping, agriculture, aerospace and urban rail transit.
As of October 2017, nearly 18,000 firms were registered in the Shanghai FTZ, double the number in the four previous bonded zones when they merged in September 2013. In the first three quarters of 2017, foreign trade in the zone rose 16.2 percent year on year to US$150 billion.
The FTZ was launched to trial streamlined business registration. Companies can register and be operational in the zone in three working days, down sharply from the previous 40.
In 2014, three more FTZs opened in Tianjin, and Guangdong and Fujian provinces. A third batch of seven more opened in August 2016.
The Detroit Auto Show opened yesterday, with pickup trucks and SUVs expected to take center stage in a sign of their growing might in the US car market.General Motors got things off to an early start on Saturday night, unveiling its revamped 2019 Chevrolet Silverado pickups, billed as the “next generation of strong.”A short video with twangy music and upbeat testimonials from Silverado owners was followed by the introduction of four of the eight Silverado models at different price points and with slightly different styling.The Silverado was the second best-selling US vehicle in 2017 after the Ford F-series and ahead of the Ram 1500, in third position. All three are pickups.“Everything’s just bigger here, so I think that’s what makes us just love our trucks,” said Chris Luce, 24, a Silverado owner from Brighton, Michigan who attended the launch.Ford is unveiling the North American version of the 2019 Ford Ranger. It goes on sale next spring, eight years after Ford pulled it off the market in the US and Canada.Back then, the cheap but dependable Ranger was the best-selling truck of its size. But gas prices were high, demand was dwindling and the struggling company wanted to devote more resources to hybrids and to improving fuel economy in its full-size F-150 pickup. The company shuttered the 86-year-old Minnesota factory where the Ranger was made.“It was politically correct to cast aside pickups at the time,” says Dave Sullivan, manager of product analysis for the market research firm AutoPacific. A rival small pickup, the Dodge Dakota, was pulled off the market the same year.Other carmakers seen unveiling pickups, SUVs and large “crossover” vehicles include Fiat Chrysler, Nissan and Toyota’s Lexus.The show is set to be light on electric cars and to be dominated by spiffed up versions of the bread-and-butter vehicles that dominate the US market.US car sales fell modestly last year for the first time since the financial crisis but came in at a still-solid 17.2 million, well above the 16 million that many analysts consider good.While the show is primarily an opportunity to ogle what’s coming next from Motor City, politics is certain to enter the discussion as well.US carmakers are eyeing talks to revamp the North America Free Trade Agreement following President Donald Trump’s vows to cut a better deal for US firms and workers.The just-enacted US tax cut bill, which will lift corporate profits and includes measures to spur capital spending, will also be in focus.
A Chinese industry association has cautioned against risks from the so-called “initial miner offerings,” saying they are disguised digital coin fundraising that has been completely halted in the country.Investors should be alert to hidden risks of the IMOs, the National Internet Finance Association of China said in a statement on Friday.Originating in China, the IMOs allow companies to sell mining hardware to generate a particular cryptocurrency or token that can be rewarded to contributors. The model became popular after financial regulators, including the central bank, banned initial coin offerings in September.The IMOs are “essentially a financing activity and a form of disguised ICO,” NIFA said.NIFA urged investors not to invest blindly and encouraged individuals to report to regulators or the police on such illegal activities.
CHINA will step up oversight in the banking sector this year to reduce financial risks, the banking regulator said, stressing that long-term efforts would be needed to control banking sector chaos.
The China Banking Regulatory Commission said late on Saturday in a statement that its priorities included enhancing supervision over shadow banking and interbank activities.
“Banking shareholder management, corporate governance and risk control mechanisms are still relatively weak, and root causes creating market chaos have not fundamentally changed,” the CBRC said.
“Bringing the banking sector under control will be long-term, arduous, and complex,” it said.
The CBRC said stricter punishment will be imposed for violating corporate governance, property loans, and disposal of non-performing assets, and that it would strengthen risk control in interbank activities, financial products and off-balance sheet business.
China has repeatedly vowed to clean up disorder in its banking system.
In recent months, regulators have introduced a series of new measures aimed at controlling risk and leverage in the financial system, with everything from lending practices to shadow banking under the microscope.
In January, the CBRC published regulations that cap the number of commercial banks that single investors can have major holdings in.
SHANGHAI International Port yesterday reported rapid growth in net profit last year as trade pushed up shipping demand.
In an unaudited report filed with the Shanghai Stock Exchange, the company said the net profit attributable to shareholders rose 66.1 percent to 11.5 billion yuan (US$1.8 billion).
The world’s busiest container port attributed the growth mainly to rising cargo and container throughput.
Cargo throughput rose 9.1 percent to 560 million tons, and the company handled 40.2 million standard containers, or twenty-foot equivalent units, up 8.4 percent from 2016.
Business revenue rose 19 percent year on year to 37.3 billion yuan, while the total assets surged 21.5 percent to 142 billion yuan, the company said.
“In 2017, world economic growth and China’s foreign trade growth laid the foundation for international container transport demand and pushed up the port’s throughput growth,” the company said.
Liu Xin, an individual investor, has been twice lucky in putting money into wealth management products recommended by his banker. Both times, he was duly paid interest and principal at the promised rate, in the time specified.But will he be so lucky going forward as Chinese regulators begin tightening the screws on asset management?“The wealth management product I invested in was very popular,” he said. It had a minimum investment requirement of 1 million yuan (US$153,250) and promised an annualized return of 6 percent for a product maturing in 90 days. That compares with a benchmark one-year deposit interest rate that has been cut by the central bank down to as low as 1.5 percent. The investment products were recommended to Liu by his client manager at Ping An Bank, a mid-cap joint-stake commercial lender.“We have known each other for a long time and I trust her implicitly,” Liu said of the manager. “So I didn’t ask for too much detail on the investment.”Chinese regulators are moving to tighten regulation and monitoring of asset management products to address problems that have arisen in the sector in the past few years.In November, the People’s Bank of China drafted a “consultation paper” prohibiting managers in the 60 trillion yuan asset management market from promising investors a guaranteed rate of return. It stipulates that financial institutions must instead offer yields based on the net asset value of the products they are selling. Asset management products have become very popular among the upper-middle and wealthy classes in China as a way to park money at returns much higher than those of money market funds or bank savings accounts. The runaway growth followed the first wealth management product initiated by China Everbright Bank in 2004.During the past two years, city commercial banks have led the way in terms of the number of wealth products issued with guaranteed returns and the rate of yields. “We Chinese tend to look for investments with high returns and little risk,” said Xu Zewei, founder and chief executive of 91 Technology Group, a Beijing-based finance service provider. Or put another way:“We tend to be too greedy on yields and too fearful about risks,” said Lin Wei, a financial professional and an experienced investor. “That is our nature, and it is hard to change that.” He cited the example of one trust company that introduced an investment product in 2007 promising an annualized return of up to 20 percent, double the average for the industry. “The return rate was so incredibly high that I worried about the potential risks,” he said, after resisting the temptation to buy the product.Fortunately for asset managers, most investors aren’t as wary as Lin. The market has grown explosively since 2012, with security houses, funds and insurance companies jostling for business with banks. As the size of the sector expands, so too the risks, said Zhao Qing, a senior researcher at the Suning Financial Research Institute.Parts of asset management fall into the “shadow banking” sector, which has been largely unregulated. At the end of the first half of 2017, nearly half of the 60 trillion yuan of asset management products were issued and distributed by banks, among which about three-quarters are off bank balance sheets and will be subject to the new regulations, according to a Nomura note. Fleeing clients?Previously, banks attracted customers, especially retail individual clients, with verbal assurances that both principal and interest would be guaranteed, even though that pledge never appeared in writing. “To put it simply, commercial lenders depended on the government’s credit to make money,” Li Jinjin, a senior researcher at Bank of Communications, told Shanghai Daily.The strategy worked because customers basically trusted banks. Among those retail clients was a large group of older, wealthy women known as dama, who blindly followed bankers’ advice.“When buying wealth products, they do not bother looking at the fine print,” said investment professional Lin. The new rules have set a grace period until the first half of next year and will require investment contracts based on net asset value once they are implemented. Li said a study he conducted found that of 17 listed commercial lenders, fewer than 10 percent of their wealth management products were based on the net asset value. When the new rules come into effect, investors rather than banks will be responsible for any losses of wealth management products they buy.“Investors will have to become more risk conscious,” said professional investor Lin. “Money doesn’t grow on trees.”Suning’s Zhao said the new rules will have a big influence on how people invest. Some investors may return to lower-risk products like bank deposits or money market funds. “My first response will be running away from banks and looking for alternative ways for investing,” said individual investor Liu, who disdains the idea of assuming personal responsibility for his investments. “Institutional integrity needs to be improved in China because there have been too many instances of malpractice.”The most recent example occurred in mid-December, when Shandong Longlive Biotechnology Co defaulted on 140 million yuan in loans tied to an asset management product sold by Datong Securities Co.The new rules also require banks to set up asset management subsidiaries to manage their products in the future. That may help ease the end of implicit guarantees, according to Sophie Jiang, a banking analyst at Nomura. However, banks ultimately will figure out new ways to keep investors buying asset management products, Bank of Communications’ Li predicted.“After all, we need clients to survive,” he said. “We have cried wolf for a long while, but now it seems that banks will have to make adjustments.”
Technology has wrought so many stunning achievements turning science fiction into reality that we can only wonder with anticipated awe what could possibly be next.The World Economic Forum has drawn up a list of what we can expect to see by 2025. It includes unlimited and free online storage, robotic pharmacists and investment advisors, 3D-printed body organs and cars, and smart connections everywhere.Though some of these sectors still lag far behind predictions now, they have the potential to reshape our lives. Artificial intelligence, smart connections, blockchain, 3D printing and 5G telecommunications will drive business, transform industries and reshape our homes, schools and workplaces. In a sense, it’s the best of times and the worst of times.As we succumb to an addiction to all things digital, we face the prospect of forfeiting our privacy, face-to-face relationships and a sense of society around us.Or as Charlie Brooker, writer of the TV drama “Black Mirror,” wrote in The Guardian last month: “We routinely do things that just five years ago would scarcely have made sense to us. We tweet along to reality shows; we share videos of strangers dropping cats in bins; we dance in front of Xboxes that can see us, judge us and find us sorely lacking.“It’s hard to think of a single human function that technology hasn’t somehow altered, apart perhaps from burping. That’s pretty much all we have left. Just yesterday, I read a news story about a new video game installed above urinals to stop patrons getting bored. Read that back to yourself and ask if you live in a sane society.” So what can we expect looking ahead?Artificial IntelligenceWhat’s now: Artificial intelligence was without a doubt the hottest buzzword last year, infiltrating everything from voice and facial recognition to autonomous driving, investment analysis, security surveillance and even remarkable Go matches between humans and machines where we mortals came out on the losing end.China is pushing full steam ahead in the development of artificial intelligence to develop a core market valued at more than 150 billion yuan (US$22.7 billion) by 2020, according to the State Council, China’s cabinet. Artificial intelligence, or AI as it is popularly known, has become a national strategy.What’s next:AI will soon breach the borders separating industries like information technology, finance, automotive and healthcare. It may be too early to worry about how that may threaten jobs, where robotic creatures replace humans, but we can expect smarter and more efficient hospitals, with faster X-ray diagnoses.The global market for robots and drones will grow to US$3.9 billion this year, covering sectors such as logistics, materials selection and handling, navigation and delivery services, according to researcher IHS Markit.Smart Connections What’s now:Voice controlled speakers connecting online shopping websites, game consoles that track eye movements, home appliances with real-time monitoring and automated food defrosting, wearable devices for fitness and even implantable smartphone chips are already in trial use.Connections between devices and humans are becoming ever closer, thanks to the development of powerful chips and sensors, the Internet of Things and artificial intelligence features both in cloud servers and in-processor devices.A US-based company has actually offered free chip implantation to volunteer employees. The chips, implanted in hands, allow people to do all kinds of things just by waving their hands. About 50 out of the 80 employees at the company have opted for the implants.What’s next: The global installed base of Internet of Things devices will rise to 73 billion units in 2025, according to industry predictions. Voice commands will dominate half of all online searches in the next two years, and devices will link people to the era of 5G networks due to debut around 2020.We can expect people to be more connected with technologies like 5G, Internet of Things and virtual reality, using various gadgets, glasses or clothing. Our bodies or other gadgets may someday replace smartphones to help us connect to the world.Cryptocurrency & BlockchainWhat’s now:Bitcoin’s 1,400 percent surge in value last year far outstripped the returns of other investment products. Surprisingly perhaps, it wasn’t the most profitable of cryptocurrencies. Ripple and ethereum took that honor.The frenzy over cryptocurrencies has triggered considerable debate about whether they are just a huge bubble about to burst. Many people are calling for stricter government controls, especially in China. Blockchain, the key technology behind bitcoin, is now creeping into the operating technologies of industries like banking, logistics, retailing and law.What’s next:Blockchain-based services are expected to transform the financial services realm. They may also be used to assess the impact of advertising, fight fraud, pay for music and picture royalties, and streamline supply chains. The technology itself portends a future of decentralized transactions that are efficient, trackable and intelligent.Technology CynicismBrooker’s science fiction TV series “Black Mirror,” airing on Netflix, examines our society in terms of the unexpected consequences of new technologies. It’s been called “the Twilight Zone of the modern age.”“If technology is a drug — and it does feel like a drug — then what, precisely, are the side effects?” Brooker asks. “The ‘black mirror’ of the title is the one you’ll find on every wall, on every desk, in the palm of every hand: the cold, shiny screen of a TV, a monitor, a smartphone.”A recent scandal involving e-commerce giant Alibaba looked as if life were imitating art. Alibaba’s payment arm Alipay had to issue an official apology earlier this month after users accused the company of illegally collecting and sharing their personal data.It came after users discovered, when acquiring their annual digital financial report via Alipay’s app, that a data-sharing agreement was imposed on them. According to the agreement, Alipay would be authorized to collect and store user data, including personal and financial information, and share it with third parties.Baidu, China’s answer to Google, had to shutter some of its medical businesses last year after disclosures that it was promoting unauthorized medical advertising to patients, resulting in several deaths. Small wonder that digital trust remains a hot issue in China. More than 51 percent of people are concerned about personal data privacy as they subscribe to intelligent services designed to understand and anticipate their needs, according to an Accenture report released last month.Tipping points expected to occur by 2025World Economic Forum asked over 800 experts of information, communication and technology about what we can expect about our lives by 2025. % percentage of the respondents who think it is possible10% of people wearing clothes connected to the Internet 91.2%90% of people having unlimited and free (advertising-supported) storage 91.0%1 trillion sensors connected to the Internet 89.2%The first robotic pharmacist in the US 86.5%10% of reading glasses connected to the Internet 85.5%80% of people with a digital presence on the Internet 84.4%The first 3D-printed car in production 84.1%The first government to replace its census with big-data sources 82.9%The first implantable mobile phone available commercially 81.7%5% of consumer products printed in 3D 81.1%90% of the population using smartphones 80.7%90% of the population with regular access to the Internet 78.8%Driverless cars equaling 10% of all cars on US roads 78.2%The first transplant of a 3D-printed liver 76.4%30% of corporate audits performed by AI 75.45%Tax collected for the first time by a government via a blockchain 73.1%Over 50% of Internet traffic to homes for appliances and devices 69.9%Globally more trips/journeys via car sharing than in private cars 67.2%The first city with more than 50,000 people and no traffic lights 63.7%10% of global gross domestic product stored on blockchain technology 57.9%The first AI machine on a corporate board of directors 45.2%
The yuan had a stellar 2017, with expectations that this year may be solid if a bit quieter for the currency.The yuan capped its first annual gain in four years with a rally against the US dollar in the past two weeks, touching 6.48 yuan to the dollar last week, its strongest value since May 2016.Apparently confident that depreciation pressure is licked, at least for the time being, the People’s Bank of China eased its controls over the mechanism that sets the midpoint value of the currency. In response, the yuan slid just a tad.For the whole of 2017, the yuan gained 6.7 percent against the greenback on the spot market, its strongest appreciation in nine years.The yuan’s performance defied widespread predictions that it would depreciate last year and put to rest the debate about whether the central bank would allow the yuan to fall below 7 to the dollar.While a weaker US dollar was cited as the main driver of the stronger yuan, steady domestic economic growth in China, trade surpluses, limits on capital outflows and the introduction of a “counter-cyclical factor” in deciding the daily yuan fixing rate helped support the currency.Central bank direct intervention in the foreign-exchange market through money injections — a factor once heavily used to influence the direction of the yuan — was downplayed during the currency’s recent appreciation.“The authorities have been relatively ‘hands off’ but still appear cautious about capital outflows,” HSBC said in a report. “The yuan is not at the start of a new one-way appreciation trend, but it may overshoot its fair value in the near term.”China’s foreign-exchange reserves rose in December for the 11th consecutive month to US$3.14 trillion, prompting economists and central bank officials to note that smaller injections of US dollars were needed to support the yuan.When the yuan is measured against a basket of currencies of major trade partners, the CFETS index reveals a quieter picture for the currency. The index was up a mere 0.02 percent in 2017. HSBC said the yuan is showing signs of becoming more of a “normal currency.”“In our view, the People’s Bank of China is keen on implementing a ‘clean floating’ — minimal foreign-exchange intervention while retaining controls over some capital flows,” HSBC said.Zhou Hao, senior emerging market economist at Germany’s Commerzbank, wrote on his public WeChat account that the central bank is not the main driver behind the recent yuan rally. Rather, he said, appreciation was driven by market players trying to profit from higher interest rates in China amid a weaker US dollar.But, he added, history has taught us that the central bank will step in if yuan appreciation starts to threaten financial stability.New measuresIn the first two weeks of the new year, a series of measures implemented by the central bank did reveal some mixed views about foreign exchange market intervention.On the one hand, the central bank announced measures to encourage more cross-border use of the yuan in trade and foreign direct investment by both companies and individuals. It also reiterated guarantees that foreign investors will be able to repatriate legal investment returns offshore.On the other hand, central bankers tightened controls over how much money Chinese residents may withdraw overseas on their bankcards.The upper annual withdrawal limit of 100,000 yuan per bank account was changed to 100,000 yuan per person. That ends the practice of people using multiple cards to withdraw sums beyond the limit.Early last week, a Bloomberg report said the central bank had ordered a halt to the application of the mysterious “counter-cyclical factor” that kicked off the yuan’s appreciation last May.After that, the yuan’s daily fixing rate, around which the yuan is allowed to trade within a 2 percent range, fell to 6.51 and the market followed.Though it’s difficult and probably risky to make predictions about any financial markets, economists are still trying to read the tea leaves on where the currency may be headed in 2018.Opinions are divided, but there is broad consensus that the yuan will remain mostly stable against a basket of currencies.“For this year, I would say 6.80,” Zhou with the Commerzbank said of the currency’s average value this year. “But market views are more divergent, especially after the yuan hit the 6.50 mark. It is not a bad thing.”Wang Tao, chief China economist of UBS, said she thinks the yuan will weaken mildly to 6.70 per US dollar by the end of the year, amid stable economic growth and government efforts to mitigate risks in the financial sector.The outlook for exports remains rosy as the global economy continues its recovery, she said, and domestic interest rates are likely to follow the US trend — mildly upward. Controlling significant capital outflows will remain on the agenda, Wang added.“These conditions suggest that the yuan will be relatively stable this year,” she said. “But worries about depreciation may flash again if the US dollar strengthens more than we expect.”Unknown factors such renewed trade wars, geopolitical conflicts and the unpredictability of US President Donald Trump could shake the foundation of current expectations, Wang added.The Netherlands-based ING Bank, which took second place in a recent Bloomberg ranking of institutional accuracy in forecasting the dollar-yuan exchange rate, is predicting the yuan will stand at 6.30 by the end of this year.“I expect a milder appreciation pace of 3 percent in 2018, compared with 6.6 percent in 2017,” said Iris Peng, ING’s China economist. “The yuan needs not appreciate as quickly because capital outflows have slowed due to policies that keep an eye on outbound direct investments, personal remittances and overseas cash withdrawals.”Peng said stemming capital outflows is still an important factor in avoiding risks to the system. “US dollar weakness is likely to persist because the market has priced in better data for the US,” Peng said. “The foreign-exchange market needs unexpectedly good or unexpectedly bad data to move the greenback.”
This year, China marks the 40th anniversary of economic reforms that opened the country to foreign investment. Dramatic progress has been made, but the State Council, China’s cabinet, says more needs to be done to create a stellar business environment that is open and fair.In one of its first statements of the year, the council called for nationwide use of short lists that tell investors where they can’t operate, replacing the long lists of all the sectors open to them. It also promised to step up efforts to cut red tape, slash business fees and reduce taxes. China was ranked 78th in ease of doing business, according to a 2017 report by the World Bank, up from 96 in 2013.Yin Xingmin, an economics professor at Fudan University, said he is very upbeat about China’s economy after he interviewed more than 300 entrepreneurs in Shenzhen, the city where economic reforms started 40 years ago.“We are witnessing technological progress that can transform the world much in the way that the invention of steam power and electricity did,” Yin said.Indeed, China is a recognized leader in adapting new technologies, including artificial intelligence and cloud computer. It has been a pioneer in bike-sharing, development of a cashless society and clean-energy vehicles.Some people predict that change will come but more slowly than in the past.“China, as well as the world, has entered a phase of nursing growth instead of over-stimulating it,” said Huang Jun, chief Chinese analyst at Forex.com.The country has been proceeding cautiously with deeper reforms to address what are seen as economic imbalances amid a growing public demand for a better lifestyle.What lies ahead? This issue of Benchmark will focus on what we might expect in this new year.
HONEYWELL’S revenue in China grew by double digits last year as the US-based multinational rode on the nation’s environmental protection and industrial upgrading efforts.
China contributed above 20 percent to its global sales growth over past years, said Lydia Lu, vice president of communications for Asia High Growth Regions, who didn’t reveal specific figures.
Its main business sectors of aerospace, smart buildings and household applications, specialty materials and safety “all posted double digit growth” in China last year, said William Yu, vice president for Honeywell’s performance materials and technologies for Asia Pacific.
Yu cited the revenue growth to “the nation’s environmental protection and industrial upgrading efforts.”
He said that Honeywell’s local research group is working on a thermal oxidizer which can control air pollution in chemical and pharmacy plants. The product is set to be released this year, according to Yu.
AS Japan readies to celebrate the year of the dog, electronics giant Sony yesterday unleashed its new robot canine companion, packed with artificial intelligence and Internet connectivity.
The sleek ivory-white puppy-sized “aibo” robot shook its head and wagged its tail as if waking from a nap when it was taken out of a cocoon-shaped case at a “birthday ceremony” held in Tokyo.
Seven-year-old Naohiro Sugimoto from Tokyo was among the first to get his hands on the shiny new toy, which he described as “heavy but cute.”
“The dog we had previously died... We bought this robot dog as we wanted a (new) family,” he said.
The 30-centimeter long hound-like machine comes complete with flapping ears and its eyes, made of a cutting-edge light-emitting display, can show various emotions.
Aibo is also fitted with an array of sensors, cameras and microphones and boasts Internet connectivity.
The owner can play with the pet remotely via smartphone and even teach it tricks from the office for the faithful hound to perform when its “master” gets home.
It builds up a “character” by interacting with people and while not always submissive, it is friendly toward those who are kind to it.
What the machine “learns” is stored in the cloud so its “character” can be preserved even in the event of hardware damage. Photos it takes can also be shared.
But the aibo costs nearly US$3,000 for a three-year package, including software services such as data storage.
SAM’S Club, the membership-only warehouse retailer under Walmart, plans to have 40 outlets on the Chinese mainland from 19 now as the company expressed high confidence in the consumption power of its target shoppers, Andrew Miles, its president, said in Shanghai yesterday.
The company intends to open new outlets in Suzhou, Shenyang, Chengdu, Nantong and Beijing this year to complement current stores in 16 cities. There is only one Sam’s Club in Shanghai, but Miles said the company is negotiating with partners in six locations, indicating there will be more stores in the city as well.
“Continuous investment is the best way to prove our confidence in the Chinese market,” Miles said.
Sam’s Club currently has 1.8 million members on the Chinese mainland.
CHINA is diversifying its foreign exchange reserves in order to safeguard their value, the country’s currency regulator said yesterday, while dismissing a media report the government is halting or reducing its purchases of United States debt.
Bloomberg News reported on Wednesday that Chinese officials reviewing the country’s vast foreign exchange holdings had recommended slowing or halting purchases of US Treasury bonds amid a less attractive market for them and rising US-China trade tensions.
That spooked investors worried that sharp swings in China’s massive holdings of US Treasuries would trigger a sell-off in bond and equity markets globally.
The report sent US Treasury yields to 10-month highs and the US dollar lower.
“The news could quote the wrong source of information, or may be fake news,” the State Administration of Foreign Exchange said on its website.
The US 10-year Treasury yield edged down to 2.5366 percent from Wednesday’s close of 2.549 percent, while the dollar gained 0.3 percent to 111.72 yen after the regulator’s comment.
China has been diversifying its foreign exchange reserves investments to help to “safeguard the overall safety of foreign exchange assets and preserve and increase their value,” the SAFE said.
The foreign exchange reserves investment in US Treasury bonds is a market activity, with investment professionally managed according to market conditions and investment needs, it added.
The regulator added that foreign exchange reserves management agencies are responsible investors in international financial markets.
Economists say they expect China to continue to adjust its holdings of US government debt, considered to be the most liquid dollar assets, but few believe dumping US Treasuries is among policy choices to be considered by top leaders.
“Given our big Treasury holdings, sometimes we sell some and sometimes we buy some, changes will not be very big and there won’t be big impact on markets,” said Xu Hongcai, deputy chief economist at the China Center for International Economic Exchanges, a government think tank.
“We should have full confidence in the US Treasury debt market, its depth and capacity are very big,” he said.
China’s foreign exchange reserves, the world’s largest, rose US$129.4 billion in 2017 to US$3.14 trillion, as tight regulations and a strong yuan continued to discourage capital outflows, data from China’s central bank showed.
That marked a turnaround after China spent nearly US$320 billion in 2016 to defend the yuan, which fell 6.5 percent against the surging dollar. The yuan gained around 6.8 percent versus the dollar last year.
China’s holding of US government debt — the world’s largest — climbed US$131 billion in the first 10 months of 2017 to US$1.19 trillion, data from the US Treasury Department showed.
The debt holdings accounted for 38 percent of China’s total reserves, up from 35 percent at the end of 2016.