SHANGHAI DAILY

EU fines Qualcomm US$1.23b

Wed, 01/24/2018 - 17:01
EUROPEAN Union antitrust regulators hit US chipmaker Qualcomm with a 997 million euro (US$1.23 billion) fine yesterday for paying Apple to only use Qualcomm chips, rather than those made by rivals such as Intel. The European Commission said its investigation, launched in 2015, covered the period from 2011 to 2016 and took into account Qualcomm’s market dominance in LTE baseband chipsets, which enable rapid mobile broadband connections. “Qualcomm paid billions of US dollars to a key customer, Apple, so that it would not buy from rivals. These payments were not just reductions in price — they were made on the condition that Apple would exclusively use Qualcomm’s baseband chipsets in all its iPhones and iPads,” European Competition Commissioner Margrethe Vestager said in a statement. “This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were,” she said. The fine represented 4.9 percent of Qualcomm’s 2017 turnover, the commission said. Vestager told a news conference there would be no repercussions for Apple in the case. EU antitrust regulators have come under pressure after European judges sent a case against US chipmaker Intel back to an EU court for an appeal. Intel was fined 1 billion euros in 2009 for paying computer makers to buy most of their chips from them. Google has also appealed against a record 2.4 billion euro fine for giving prominent placements in searches to its shopping service and demoting rival offerings. This is the commission’s first decision on market abuse since the Intel ruling last September. Vestager said the ruling had given guidance on how to prove its case. “We have carefully examined the ruling and the evidence in our case to make sure that our decision fully complies with the guidance given by the court,” she said. Apple and Qualcomm are meanwhile locked in a wide-ranging legal battle over Qualcomm’s business practices, which started a year ago, with Apple suing Qualcomm for nearly US$1 billion in patent royalty rebates that the chipmaker allegedly withheld from the phone maker. Other regulators, including the US Federal Trade Commission, are also investigating Qualcomm’s dealings with Apple. The EU decision may make Qualcomm more vulnerable to chipmaker Broadcom Ltd’s US$103 billion hostile bid for it.

GE posts US$10b loss, income fall in Q4

Wed, 01/24/2018 - 17:01
GENERAL Electric Co forecast further weakening of its troubled power business yesterday as it reported a US$10 billion loss and a 5-percent fall in revenue in the fourth quarter, driven by previously-announced charges for insurance losses and taxes. While the results contained no new sizeable charges, they threw into stark relief how far the US industrial conglomerate had veered from its outlook less than a year ago, when former Chief Executive Jeff Immelt predicted that sales would rise as much as 5 percent in 2017 and margins would expand by a full percentage point. In fact, GE said, sales fell 1 percent to US$122.1 billion in 2017 and operating profit margins contracted by 5.7 percentage points to 5.7 percent. The results also indicated that GE’s painful turnaround, which has sent its stock down 43 percent over the last year as investors fled, likely has more months to run. The stock was higher in part on investor relief that the company reaffirmed its 2018 profit forecast, RBC Capital Markets analyst Deane Dray said in a note to clients. “Some short-covering could be triggered just on the news that GE reaffirmed 2018, but the gravity of its operating challenges — especially at Power — are likely to continue to pressure the stock over the near-term,” he wrote. GE kept unchanged its recent forecast for 2018 earnings of between US$1.00 and US$1.07 a share, which contrasts markedly with US$2 a share that Immelt had promised before being replaced as CEO in August. GE’s weakening performance largely reflected deterioration in GE’s power business, where profit plunged 88 percent in the quarter. The division, which makes and services electricity generating equipment, attributed the drop to unspecified charges and other factors. Revenue and orders also fell sharply at the power business.

Outlook for Chinese lenders promising

Wed, 01/24/2018 - 17:01
THE Chinese banking industry expects outlook for profit growth to be decent and net interest margin to improve this year even as the sector continues to deleverage, industry analysts said. A series of tighter rules issued recently by the China Banking Regulatory Commission and other regulators together with implementing the policy on asset management products should lead to “continued unwinding” of financial sector leverage and slower credit growth, a UBS report said yesterday. Wang Tao, UBS’s chief China economist, believes the tighter regulation could help ease investor concerns over the long-term sustainability of China’s banking sector. Wang said in the report that although regulatory tightening will remain a key focus of the banking sector this year, the Swiss bank is positive on China’s banks due to a stable macro environment outlook. Wang said that as shadow banking activities continue to diminish, the Swiss bank sees potential upside to lenders’ loan growth in 2018. UBS expects bank loans to grow around 12.5 percent this year, similar to 2017, even as shadow bank credit slows more sharply. The Switzerland-based bank noted that if the slowing credit poses a significant risk to the economy, bank loans may be allowed to rise more than currently envisaged, which should be potentially positive for banks’ net interest margin and profit growth. Sophie Jiang, a banking analyst at Nomura, said in a recent telephone interview that banks achieved good loan growth in 2017, with joint-stock commercial lenders posting a double-digit increase. Jiang predicted that the banking sector's net interest margin will improve in 2018, with major players likely to see a 6 basis points year-on-year increase and mid-cap commercial lenders neck-on-neck with last year. Wang said UBS preferred China Construction Bank, the Industrial and Commercial Bank of China and Chongqing Rural Commercial Bank because they have strong funding, stable asset quality, manageable exposure to shadow banking, and lower re-capitalization risks.

Toy retailer to shut 180 stores in US

Wed, 01/24/2018 - 17:01
TOYS R Us, squeezed by Amazon.com and huge chains like Walmart, will close 20 percent of its US stores, or 180 locations, within months. Hobbled by US$5 billion in debt, the company that once dominated toy sales in the US filed for bankruptcy protection in September. Chairman and CEO Dave Brandon said in a letter yesterday that tough decisions are required to save Toys R Us. Toys R Us operates about 900 stores in the US. The store closings will begin in February and the majority of the targeted locations will go dark by mid-April. At some other locations, the retailer is combining its Toys R Us and Babies R Us stores. Toys R Us, based in Wayne, New Jersey, has struggled with debt since private equity firms Bain Capital, KKR & Co and Vornado Realty Trust took it private in a US$6.6 billion leveraged buyout in 2005. The plan had been to take the company public again, but weak sales have prevented that from happening. While its numbers have been shrinking, Toys R Us sells about 20 percent of the toys bought in the US, said Stephanie Wissink, an analyst at Jefferies LLC. That pressure will force the company to take a close look at all of its stores, and more will likely be shuttered over the next year or two, Wissink said. Toys R US isn't alone. About three dozen retailers sought bankruptcy protection last year due in large part to a radical shift in consumer behavior, both in where they shop, and what they buy. Some of the retailers that have gone under have been small, but there are also big names on the list, like Payless Shoe Source, Gymboree Corp and True Religion jeans. Toys R Us closed its flagship store in Manhattan's Times Square, a huge tourist destination, about two years ago.

‘Back door’ closing on ersatz stock listings

Wed, 01/24/2018 - 17:01
AFTER Qihoo 360 Technology Co delisted in New York in 2016 and did a 50 billion yuan (US$7.8 billion) asset swap and share deal with Shanghai-listed elevator maker SJEC, it levered itself onto the Shanghai Stock Exchange in what is called a “back door” listing. The biggest reverse takeover in three years on the Shanghai exchange prompted speculation that the market regulator might take a more benign view of such listings, even after the China Securities Regulatory Commission clamped down on the purchase of so-called “shell” companies to gain listings in June 2016. The practice was especially popular with Chinese companies that had listed in the US, only to watch valuations on the domestic market rise above those on overseas markets. Many sought to relist on the mainland. However high expectations ran after software specialist Qihoo listed under the SJEC ticker, no floodgate was opened. It seems that where discretion is exercised, only companies playing a vital role in mainland government policies, such as advanced technology development, stand much of a chance to squeak through. “The Qihoo case was an icebreaker for leading tech firms,” said Song Qinghui, an independent economist. “While we might now expect to see a succession of bellwether firms listing on the A-share market, via either ‘back door’ listings or by IPOs, non-techs firms can expect that door to remain firmly shut. Only those that play a complementary role in mainland development may get approval.” Qihoo 360’s success has been attributed to its leading role in Internet-related national security software — a subject dear to the hearts of China’s leaders. But it’s also obvious that each application will be considered on its own merits and technology in a business name doesn’t necessarily guarantee a free pass. In the past 18 months, a clutch of former US-listed firms, including Chinese property website Fang.com, information technology provider iSoftStone and Shanda Games have all failed in their attempts to relist on the A-share market. According to Wind Information, the realm of “back door” listings last year showed a definite cooling trend after two years of strict oversight. Only six companies applied last year, down from 47 in 2015 and 19 in 2016. The minority Of the 2017 applications, only two passed regulatory scrutiny, one was still in progress at the end of the year, two were terminated voluntarily, and one was rejected outright. A failure rate of 50 percent compares with 34 percent in 2015 and 42 percent in 2016. “We focus on supporting high-quality overseas listed Chinese enterprises of a certain scale and with core technologies that are in line with the strategic development of national industries,” said Gao Li, a spokesman for the regulatory commission. It’s clear that the welcome mat to return to the A-share market is being reserved for only select companies. They need to show that they are contributing in a significant way to industrial transformation and upgrading. Companies whose main objective is to skirt regulations hardly stand a chance. “Stricter regulation makes it more difficult for companies to launch ‘back door’ listings, and the cost of purchasing ‘shell’ companies is rising,” said Shen Jie, a partner of PwC China. The new policy is the strictest yet to look at how material assets of a company are restructured and funds are raised ahead of listing applications. It also prolongs the lock-up period that prevents shareholders from cashing in on high valuation shares when they first hit the market. Five IPO applicants with so-called “variable interest entity” structures, where an investor holds a controlling interest not based on a majority of voting rights, were also rejected by the regulatory commission. Variable interest entities generally involve Chinese firms and foreign venture capital funds that set up offshore vehicles to sign contracts with Chinese firms via one or more foreign investment subsidiaries in China, giving effective control of the companies to offshore entities. “A series of regulatory policies, including new rules of restructuring and re-financing, have cooled the earlier booming market for mergers and acquisitions, and restructuring is no exception,” said an investment banker who advises financial institutions. “As more regulation comes into play, ‘back door’ listings will become increasingly difficult as far as approval is concerned.” The speculation fervor of investors toward new listings related to “back door” listings seems to have cooled. As for Qihoo, SJEC’s elevator and escalator business has been spun off and the shares have had a wild ride this year, often hitting the daily movement limit of 10 percent. The shares rose 10 percent on the first trading day of this year, then dropped 9.45 percent two days later. They last traded at 47.08 yuan, down 6.90 percent since January 2.

SK to adopt real name for crypto trading

Tue, 01/23/2018 - 17:01
SOFTENING its tough stance on crypto trading for now, South Korea said yesterday it would adopt a system requiring that transactions that until now were anonymous be traceable. It also will more closely monitor trading for signs that transactions may be linked to tax evasion or other crimes. The bitcoin markets appeared to take the news in stride. Financial Services Commission Vice Chair Kim Yong-beom said that starting next week, local banks will launch a real-name system for trading of crypto currencies to help curb speculation and criminal activities. That means banks will have to ensure any crypto currency investment comes from a bank account owned by the same individual. The measure will prevent such trading by foreigners living outside South Korea who do not have local bank accounts. It also will ban minors younger than 19 from buying or selling bitcoins and other digital currencies. Once the new system is in place, existing anonymous accounts used for crypto trading will be cancelled, he said. The moves follow warnings by South Korean authorities that they might ban anonymous trading in crypto currencies and crack down on speculative trading. Regulators are seeking to prevent use of crypto currency trading for money laundering, tax evasion and other criminal activities. The new requirements could also lead to a shutdown of some crypto currency exchanges. Banks will be able to refuse to open accounts with crypto currency exchanges that refuse to disclose information about suspicious trading. “We expect that crypto currency exchanges that are in danger of being exploited for money laundering will be thrown out of the market,” Kim said. The government is also asking financial institutions to step up their oversight of the virtual currency sector. Lenders were told to closely monitor crypto trading that exceeds 10 million won (US$9,338) a day or 20 million won per week and also crypto trading accounts owned by corporations or groups and report any suspicious activity to the authorities.

Chinese M&As fall from record in 2016

Tue, 01/23/2018 - 17:01
CHINESE mergers and acquisitions last year dropped from a record in 2016 but PwC says it sees an overall positive trend for M&As in 2018. The value of Chinese M&As fell by 11 percent and the number of deals dropped 14 percent last year from the record highs of 2016. However, the total value of deals at US$671 billion was roughly equal to that set in 2015. This was largely attributable to a reduction of outbound deals from the Chinese mainland, according to PwC’s report released yesterday. But the overall total was supported by a 14 percent increase in the value of domestic strategic deals, which refer to a company being bought to integrate it into an existing business. “While deals are down by both value and volume compared to a bumper 2016, the trend is still strongly upward on a five-year view,” said Weekley Li, transaction services partner of PwC China. “The number of deals was the second highest ever, as all of the main drivers of M&A activity were still in place,” he said. But the number of mega deals valued at over US$1 billion declined from 103 in 2016 to 89 last year due to a reduction in Chinese outbound deals. “The government’s policy guidance on outbound deals has had an undoubted effect,” Li said. “There has been a re-focusing on strategic outbound deals and away from passive or trophy assets. That said, the total value of outbound deals still exceeded that of 2014 and 2015 combined.” Technology, industrial and consumer products continued to be the main sectors targeted in outbound deals, according to PwC. Looking forward, the report expects M&A activity to increase in 2018 to a level close to, or possibly exceeding that in 2016. “With better policy clarity, outbound M&As will resume their growth trend,” Li said.

Banks lift stocks to end at new high

Tue, 01/23/2018 - 17:01
SHANGHAI stocks closed yesterday at a new high since December 30, 2015, as banking shares led gainers after banks posted solid earnings growth and also on the Chinese central bank’s liquidity boost to the banking system. The Shanghai Composite Index jumped 1.29 percent to close at 3,546.50 points. The banking sector rose 3.35 percent and the property sector added 2.22 percent, according to data from Chinese financial data provider Wind Information Co. “Blue chips such as banking and property shares have been favorable among investors since the beginning of this year. Banking shares performed well today, with an increase of more than 5 percent,” said Zhang Qi, an analyst at Haitong Securities. The Industrial and Commercial Bank of China added 4.46 percent to 7.49 yuan, briefly dethroning JPMorgan Chase as the world’s largest bank by market value during the trade. China Construction Bank jumped 8.72 percent to 9.85 yuan. China Merchants Bank Co Ltd said yesterday that its business has steadily improved in 2017. Its operating income rose 5.4 percent year on year to 221.02 billion yuan (US$34.5 billion) in 2017, according to its financial report released yesterday. The bank's total profit gained 14.82 percent from 2016 to 90.66 billion yuan last year. China Merchants Bank Co Ltd added 2.93 percent to 34.05 yuan. Jiangsu Wujiang Rural Commercial Bank Co Ltd surged by the daily limit of 10 percent to 10.21 yuan. Investors were also buoyed after the People’s Bank of China again injected a net liquidity of 170 billion yuan into the financial market via reverse repurchase agreements, according to a statement published on its official website yesterday.

Shares in Leshi to resume trading

Tue, 01/23/2018 - 17:01
LESHI Internet Information& Technology Corp, the listed arm of debt-laden LeEco will resume trading today after a nine-month suspension, the company said in a filing late yesterday. The company is still coordinating measures with debtors and suppliers to “ease liquidity pressure and resume business,” the Shenzhen-listed firm said during a briefing to its investors yesterday. After halting its trade over heavy debt and asset integration in April, Leshi is forecast to reach about 3.9 yuan (61 US cents), only a quarter of the 15.33 yuan before trading halted. Meanwhile, Leshi is considering asking Jia Yueting, founder and still the company’s biggest shareholder, to use the non-listed electric car business to pay back the debt. Jia and his related company still owes 7.5 billion yuan (US$1.15 billion) to the listed firm, Leshi said yesterday. Jia, who is now in the United States, didn’t show up at the meeting. He is regarded as being responsible for the heavy debt after aggressive business expansion into the electric car and smartphone markets. “The company will focus on solving pressure on liquidity and supply-chain issues at this stage so as to resume stable business operation,” said Sun Hongbin, who was elected chairman of Leshi last year. Sun is also the chairman of property developer Sunac China. Sunac invested about 15 billion yuan in Leshi last year. The company’s management is working with Leshi Internet’s second-largest shareholder, Tianjin Jiarui, to provide support for “sustainable business operations in future.” Leshi now focuses on major businesses like smart TVs, Internet video and film production, the company said yesterday. Tianjin Jiarui is a company backed by Sunac China. In the first three quarters, Leshi posted a net loss of 1.6 billion yuan, with expected losses for the whole year. In December, China’s securities regulator ordered Jia to return to China and sort out the mounting debt pile linked to his firms. Jia was still the top shareholder of Leshi with over 26 percent, but his pledged stake may be sold when the share price plunged.

More rental units and affordable housing

Tue, 01/23/2018 - 17:01
SHANGHAI will make more effort in fostering its residential leasing market this year by speeding up real estate development as well as offering support for professional home leasing companies and institutions, Shanghai Mayor Ying Yong said. He was speaking at the first session of the 15th Shanghai People’s Congress yesterday. The city aims to add a total of 290,000 leasing units, including newly built rental apartments, to the local market in 2018 and set up a home leasing service platform, Ying said as he delivered the city government’s work report. Shanghai will also add about 55,000 affordable housing units this year, improve its policies for joint-ownership houses and lower the application threshold for low-rent homes. Ying pledged to stick to current tightening policies to quell speculation, and vowed to accelerate the pace of establishing a housing system that will ensure supply from multiple sources, provide housing support through multiple channels, and encourage both house purchases and rental. “It is great to see that various accommodation demands will be satisfied through various means and with various products as the government has proposed,” said Siu Wing Chu, managing director for central China at Savills. “A key job of the government will be how to work out an appropriate and scientific way to satisfy residents’ housing demands and make better use of existing inventories.”

City aims at 6.5% GDP growth, pledges more reform, innovation

Tue, 01/23/2018 - 17:01
SHANGHAI aims to expand its GDP by around 6.5 percent this year with priorities to deepen market reforms and enhance innovation, the city’s mayor said at the first session of the 15th Shanghai People’s Congress, which opened yesterday. The year 2018 marks the 40th anniversary of China’s reform and opening-up, and is also a critical year for building a moderately prosperous society in all aspects, Mayor Ying Yong said as he delivered the city government’s work report. “It is imperative for us to pursue excellence in development, adopt a need-based, problem-solving-oriented and results-driven approach, strengthen the role of innovation, focus on rule making, expand services and improve people’s quality of life.” In terms of economic targets, Ying said Shanghai will make further improvements in the quality and efficiency of development. The target for this year is slightly lower than the 6.9 percent growth recorded last year that lifted the city’s GDP above the 3 trillion yuan (US$469 billion) mark for the first time. He said the general public budget revenue is targeted to increase 7 percent, compared with last year’s 9.1 percent. Research and development expenditure is expected to be kept at around 3.8 percent of the local GDP, and the government also plans to spend 3 percent of GDP in environmental protection. The focus of this year’s work includes deepening reform and opening-up across the board, pressing ahead with the initiative of Shanghai as a science and technology innovation center, and furthering supply-side structural reform while upgrading the real economy, Ying said. He pledged to turn the free trade zone into a “stress test area” for the open economy, and will explore the establishment of a free trade port on the strengths of the existing Yangshan Deep-Water Port and Pudong International Airport. Both opening-up and innovation policies will be integrated in new FTZ policies. As part of efforts to promote opening-up, more concrete measures will be implemented to encourage regional headquarters of multinational corporations to move more of their global-scale operations such as trade, R&D and settlement to Shanghai. The city government aims to make the China International Import Expo, which is to be inaugurated in November, a world-class exhibition. To promote innovation in greater concentration and visibility, Ying said efforts will be focused on development of the Zhangjiang Comprehensive National Science Center, enhancing support for the commercialization of scientific and technological achievements, and promoting the use of artificial intelligence in urban management. Unemployment rate will be kept below 4.3 percent and Shanghai residents’ per capita disposable income will grow at the same pace as GDP, he added.

11 nations, minus US, to sign new TPP

Tue, 01/23/2018 - 17:01
ELEVEN countries aiming to forge a new Asia-Pacific trade pact after the United States pulled out of an earlier version will hold a signing ceremony in Chile in March, Japan’s economy minister said yesterday in a big win for Tokyo. Officials from the 11 countries had been meeting in Tokyo to try to resolve rifts including Canada’s insistence on protection of its cultural industries such as movies, TV and music. An agreement is a huge plus for Japanese Prime Minister Shinzo Abe’s government, which has been lobbying hard to save the pact, originally called the Trans-Pacific Partnership. President Donald Trump pulled the United States out of the original 12-nation trade agreement last year. Abe has painted the deal as a spur to growth and reform in Japan and a symbol of commitment to free and multilateral trade at a time when Trump is stressing “America First” policies. Economy Minister Toshimitsu Motegi said that the new agreement, known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or TPP-11, would be an “engine to overcome protectionism” emerging in parts of the world. He also said Japan would explain the importance of the deal to Washington in hopes of persuading it to join. Ministers from the 11 countries including Japan, Australia and Canada had agreed in November on core elements to move ahead without the US, but demands by countries including Canada for steps to ensure the deal protects jobs have been a barrier to finalizing the deal. Australian Prime Minister Malcolm Turnbull also said last week that the new deal would leave a door open for eventual US participation.

Fox-Sky deal ‘not in the public interest’

Tue, 01/23/2018 - 17:01
Britain’s competition regulator provisionally ruled yesterday that a planned takeover of pan-European satellite TV giant Sky by Rupert Murdoch’s 21st Century Fox entertainment group was “not in the public interest.”The government had referred the matter to the Competition and Markets Authority for an in-depth probe last September owing to concerns about media plurality and broadcasting standards.21st Century Fox bid 11.4 billion pounds (US$15.1 billion) two years ago for the 61-percent of Sky it does not already own.“The CMA has provisionally found that Fox taking full control of Sky is not in the public interest due to media plurality concerns, but not because of a lack of a genuine commitment to meeting broadcasting standards in the UK,” the regulator said in a statement.“The media plurality concerns identified mean that, overall, the CMA provisionally concludes that the proposed transaction is not in the public interest.”However, in a separate document detailing potential remedies, the CMA indicated that its plurality concerns would “fall away” on completion of Disney’s takeover of 21st Century Fox.In a twist to the Sky saga, Disney announced in December a US$52.4-billion deal to buy 21st Century Fox.The Fox/Sky takeover has meanwhile been approved by regulators in Austria, Germany, Ireland and Italy as well as the European Union.But it has not yet been given the nod in Britain, where concerns linger over the strengthening influence of Australian-born US tycoon Murdoch.The CMA added yesterday that the deal would hand Murdoch “too much control” over UK news — and therefore too much power in swaying public opinion.“It would lead to the Murdoch Family Trust (MFT), which controls Fox and News Corporation (News Corp), increasing its control over Sky, so that it would have too much control over news providers in the UK across all media platforms (television, radio, online and newspapers), and therefore too much influence over public opinion and the political agenda.”

Job cuts, product revamp planned

Tue, 01/23/2018 - 17:01
FRANCE’S Carrefour group said yesterday it is overhauling its business in a transformation plan involving thousands of job cuts and a product revamp. Carrefour, which was the world’s second-biggest retailer at the start of the century after US giant Wal-Mart, has since slipped to ninth position, according to the Deloitte consultancy, having been overtaken by Amazon and Costco. “Carrefour has not sufficiently developed with its customers,” CEO Alexandre Bompard told a news conference. Some 2,400 jobs will be cut in Carrefour’s French operations via voluntary redundancies, the group said. Many of the cuts will be made at Carrefour’s 12 French headquarters, which total 10,500 employees and are, according to Bompard, staffed “out of proportion” compared to its competitors. The job cuts move immediately drew a warning from the French government. Finance Minister Bruno Le Maire said in Brussels that “the government will be very vigilant concerning support for each staff member in the plan announced by Carrefour.” Unions quickly lodged their protest, and Force Ouvriere, the union at Carrefour, issued a strike call for February 8. The retailer’s product mix is to be redirected toward more organic produce, with a target of increasing sales in that segment almost four-fold by 2022, it said. “We must revamp our model, by simplifying our organization, opening ourselves up to partnerships, improving our operational efficiency, investing in our growth formats, building an efficient omnichannel model and developing our fresh and organic products offer, notably under the Carrefour brand,” Bompard said in a statement. The group said it will also accelerate its online development, aiming for a 20-percent market share in French online food sales, and open at least 2,000 new neighborhood outlets in its French home market in coming years. Carrefour is hoping for 2 billion euros (US$2.45 billion) of annual savings from 2020 onwards thanks to the restructuring as it streamlines logistics and overheads. Bompard said the group would sell 500 million euros worth of non-strategic assets over the next three years. None of the group’s hypermarkets in its traditional outlet network would be shut down, he said, but some would be leased out. Analysts at Aurel BGC welcomed the plan, saying it was aimed at relaunching the retailer which is “worn out from years of strong competition and the rise of digital.”

Carrefour, Tencent seal alliance

Tue, 01/23/2018 - 17:01
CARREFOUR and Tencent announced an alliance in China yesterday, joining a rush of companies trying to link the strengths of online and offline retailing. The companies said they want to combine Carrefour’s global retail experience and the technology strengths of Tencent, which operates the popular WeChat social media platform and other services. They said they would cooperate on smart retail, mobile payment and data analysis to boost Carrefour China’s customer traffic. They join a flurry of ventures by retailers including Amazon.com and China’s Alibaba and JD.com aimed at combining the strengths of online and offline retailing. “Carrefour will improve its online visibility, increase the traffic of its offline and online retail activities and benefit from Tencent’s advanced digital and technological expertise to develop new smart retail initiatives,” the companies said in a statement. E-commerce is growing with explosive speed in China, putting traditional retailers on the defensive. Online sales accounted for about 20 percent of Chinese retail spending last year but grew 32.2 percent compared with 2016 while overall retail rose 10.2 percent. Tencent and Yonghui are considering a “potential investment” in Carrefour’s China unit, the companies said.

Pharma, tech giants team up to build digital ecosystem

Tue, 01/23/2018 - 17:01
SHANGHAI fund company employee Cathy Wang said she and several friends searched the net for a private clinic in Hong Kong to make reservations to get Gardasil 9 shots against a common virus that can cause cervical cancer. Gardasil 9, put out by MSD, isn’t yet available on the mainland, but the Gardasil 4 vaccine is. Sammi Zheng, a Beijing office worker in her early 30s, learned about the latter vaccine from online postings and chose to get an inoculation at a local community health clinic. “I decided to get the inoculation after reading about the disease and the vaccine, but I wanted to save myself the trouble of traveling to Hong Kong,” she said. The modern generation of young people, who rely on digital devices for so many aspects of their daily lives, is plumbing the Internet for medical information amid widespread concern about health. A survey of 1,400 patients last year by Kantar Health and the online medical community DXY.cn found respondents were spending about a quarter of their online time searching for information on disease and healthcare on medical sites, WeChat postings and pharmaceutical platforms. But is the information always accurate and reliable? Pharmaceutical companies and Internet service providers are seeking to ensure that the information they provide is accurate. They have also developed systems to track drugs sold online to make sure they are genuine. Since last year, MSD China has distributed its Gardasil 4 human papillomavirus vaccine, also known as HPV, through mainland distributor Chongqing Zhifei Biological Products Co. Earlier this month, it entered into a partnership with AliHealth to target women between the ages of 20 and 45 to provide them information on cervical cancer and the HPV vaccine. “Amid a rising online population in China, we want to use the most efficient channel to help consumers get a better understanding of disease and health risks,” MSD China President Joseph Romanelli said in an interview with Shanghai Daily earlier this month. “We hope to work closer with partners adept in digital technologies to help build an ecosystem that will ultimately help both physicians and patients.” Digital transformation in the pharmaceutical industry has come at a slower pace than development in industries such as finance, he added. Easy reach Other multinational drug companies are tapping into the convenience of smartphone applications and the user bases of Internet providers such as Alibaba. Bayer is using digital channels to promote its self-care concepts and perhaps sales of its products. The Germany-based company wants to combine its resources with platforms such as Alibaba’s Tmall Global flagship store to integrate with Alibaba’s cross-border e-commerce ecosystem and merchandising capabilities. China Biological Tech Co Vice President Wu Yonglin said his company is teaming up with Alibaba’s AliHealth to explore new models to make healthcare information more accessible to consumers under the “Health China 2030” plan. Online appointments for inoculations of selected adult vaccines are already available for residents in more than 1,000 community health centers in 100 cities in China, using the resources of a link with AliHealth. “It’s a big trend for pharma companies to adopt digital ways of dispersing information on health and disease management,” said Yang Hongfei, co-founder of Hangzhou Firestone Technology Co, which provides healthcare and pharmaceutical industry data to governments and businesses. Digital channels also offer new ways for patients to manage their chronic disease when they are not seeing doctors or going to hospitals. The collection of user behavioral data remains a sticky issue, Yang said. It’s still too early to determine how the data may improve operational efficiency. Ensuring that consumers get objective, fair healthcare information is a core issue for involved players, he added. Wang Wenjing, deputy secretary-general of the China International Exchange and Promotion Association for Medical and Healthcare, said disease management and public health awareness would be greatly improved if Internet companies and the pharma industry collaborate. Lin Jixiang, president of the Beicai Community Health Service Center in Pudong, said that such relationships help community hospital doctors ensure that patients take appropriate dosages of medicine and that the public receives proper advice on lifestyle and diet factors that may have an impact on health. Jin Xiaodong, head of Sanofi China’s cardiovascular business unit, said using the AliHealth platform enables his company to implement initiatives that affect patients and physicians in efficient, more accessible ways. Tailor-made An AliHealth official told Shanghai Daily that patient education and healthcare information has been built upon the company’s medicine-tracking technology. Digital channels also allow services more tailor-made to patient needs. Digital health management is still in its formative stages at AliHealth, amid hopes that more players will be drawn into the mix. As another Internet giant, Tencent is pursuing digital healthcare initiatives mostly aimed at medical institutions and healthcare service providers. Its artificial intelligence program is helping nearly 100 hospitals in medical imaging and screening for certain types of early-stage cancer. In late December, Tencent launched its own medical-information platform, called Tencent Yidian, through its popular social networking application WeChat. The initiative provides authoritative health-related information to users. Zhang Meng, Tencent vice president and head of the medical-information center, told a media interview in late December that the company is not initially seeking profit from the platform. The emphasis is first and foremost high-quality content, he said. China’s largest search engine Baidu has curbed lucrative healthcare adverts and paid search results following regulatory orders after a scandal in mid 2016 and the compnay also shut down its mobile healthcare business Baidu Doctor to merge with its artificial intelligecne operations in early 2017. It has also shifted its focus toward leveraging artificial intellingence to help with doctors’ recommendations and treatment options.

IMF revises up world economic growth outlook

Mon, 01/22/2018 - 17:01
THE International Monetary Fund yesterday revised up its forecast for world economic growth in 2018 and 2019 saying that sweeping US tax cuts were expected to boost investment in the world's largest economy and help its main trading partners. In an update of its World Economic Outlook, the IMF however warned that US growth would likely start weakening after 2022 as temporary spending incentives brought about by the tax cuts start to expire. The tax cuts would likely widen the US current account deficit, strengthen the US dollar and affect international investment flows, IMF chief economist Maurice Obstfeld said. President Donald Trump signed the Republicans' massive US$1.5 trillion tax overhaul into law in December, cementing the biggest legislative victory of his first year. The tax package, the largest such overhaul since the 1980s, slashed the corporate rate from 35 percent to 21 percent and temporarily cut the tax burden for most individuals as well. The US economy has been showing steady but underwhelming annual growth since the last recession in 2007-2009. The IMF revised up its forecast for global growth to 3.9 percent for 2018 and 2019, a 0.2 percentage point change from its last update in October. It also said that economic activity in Europe and Asia was surprisingly stronger than expected last year, and global growth in 2017 was now estimated to have reached 3.7 percent, 0.1 percentage point higher than the it projected in October. “The US tax policy changes are expected to stimulate activity, with the short-term impact in the United States mostly driven by the investment response to the corporate income tax cuts,” the IMF said in the update, which was released on the sidelines of the World Economic Forum in Davos, Switzerland. “The effect on the US growth is estimated to be positive through 2020, culminating to 1.2 percent through that year,” it said, cautioning that after 2022 the tax cuts were expected to lower growth for a few years. The IMF said the US economy was now expected to expand by 2.7 percent in 2018, higher than the 2.3 percent it forecast in October. US growth was set to slow to 2.5 percent in 2019, it said. The IMF also revised up its growth forecasts for the euro area, especially for Germany, Italy and the Netherlands “reflecting the stronger momentum in domestic demand and higher external demand.” However, it cut its forecast for Spain's growth for 2018 by 0.1 percentage point, saying political uncertainty was expected to impact business confidence and demand. The IMF revised up its growth forecast for Japan to 1.2 percent this year and 0.9 percent in 2019. It kept its projection for Britain’s growth at 1.5 percent this year. The IMF kept its forecast for growth in emerging markets and developing countries for this year and next. China’s economy was set to expand 6.6. percent this year and slow to 6.4 percent in 2019. The IMF said growth in the Middle East, North Africa, Afghanistan and Pakistan was also expected to pick up in 2018 and 2019 but remain subdued at 3.6 percent this year.

Aston Martin recalls cars for faulty parts

Mon, 01/22/2018 - 17:01
Aston Martin has become the latest carmaker to be caught up in a major recall of faulty Daimler steering-column components that can cause unintended airbag deployments.The British sports car maker is recalling all 3,873 DB11 coupes built since late 2015, when production of the flagship model began, sources with knowledge of the matter said.Aston Martin spokesman Kevin Watters confirmed the recall when contacted by Reuters and said repairs would be carried out to “address an issue with the DB11 steering column upper.”Daimler last year recalled more than 1 million Mercedes-Benz cars fitted with steering-column parts also supplied to Aston and Nissan. The Japanese carmaker’s Infiniti brand recalled 17,500 affected vehicles.The issue is unrelated to a global recall of faulty Takata airbag inflators that have been blamed for 20 deaths.Inadequate grounding in the Daimler units leaves their circuitry vulnerable to electrostatic charges that can trigger unintended airbag deployments, according to earlier warnings.Mercedes reported “a handful of instances where drivers suffered minor abrasions or bruises” as a result of the problem. No Aston Martin customers have reported any such incidents to date, the company said, adding the necessary repair work would be carried out free of charge in less than two hours.

UBS posts US$2.3b loss for Q4

Mon, 01/22/2018 - 17:01
SWISS bank UBS has reported a 2.22 billion franc (US$2.3 billion) loss for the fourth quarter due to a large writedown caused by the newly enacted US tax reform. UBS said yesterday it wrote down nearly 2.87 billion francs in deferred tax assets due to the reform. It said it would have had a 641 million franc profit without the charge. However, the bank said the overall picture last year was “excellent.” CEO Sergio Emotti said: “We delivered stronger financial results and met our net cost reduction target.” UBS said in March it will start a three-year share buyback program worth up to 2 billion francs — up to 550 million francs of that this year.

AIG to buy Validus for US$5.6b

Mon, 01/22/2018 - 17:01
LEADING global insurer AIG announced a US$5.6 billion deal yesterday to purchase Validus Holdings, expanding its portfolio of insurance services. American International Group Inc will acquire all outstanding common shares of Validus, a leading provider of reinsurance, primary insurance, and asset management services, the companies said. Validus shareholders will receive US$68 per share. "Validus is an excellent strategic fit for AIG, bringing new businesses and capabilities to our General Insurance operation," AIG chief Brian Duperreault said. "With our global scale and the strength of our balance sheet, I am confident that Validus will thrive within AIG and strengthen our ability to deliver profitable growth for our shareholders as we strategically position AIG for the future." AIA said the deal is expected to close in mid-2018. During the 2008 global financial crisis, AIG was rescued in a government bailout of US$182 billion amid its close links with other key financial institutions. The sum was later repaid by AIA.

Plan for e-charging hubs

Mon, 01/22/2018 - 17:01
Two companies plan a network of fast-charging stations for battery-powered cars in Europe that they say will help drivers of electric vehicles travel in and among the region’s main cities.Allego and Fortum Charge & Drive said yesterday they initially envision 27 e-charging hubs in 20 countries that accommodate different charging methods and speeds at the same location. Allego CEO Anja van Niersen said the hubs would serve diverse kinds of transport including commercial vehicles, buses, taxis and private vehicles, helping reduce greenhouse gases and optimizing the use of the electricity grid.The hubs, or charging plazas, would offer the fast stations that will be needed for future car models and will enable charging in minutes instead of hours, as is currently the case with slow home chargers.Rollout is set to start after financial details are completed in mid-2018.The project comes amid several separate efforts by governments, auto firms, service station operators and utilities to build charging networks to support battery-powered cars.

E-Mart closes shop in China

Mon, 01/22/2018 - 17:01
A pedestrian walks past a closed E-Mart outlet in Shanghai in this file photo. The South Korean supermarket chain will close its last Chinese outlet in Wuxi, Jiangsu Province next Wednesday, according to a company announcement. Run by Shinsegae Group, E-Mart has been in China for 20 years. It used to have nearly 30 outlets in the country. As of the end of 2016, E-Mart suffered accumulated losses of 900 million yuan (US$141 million) in the Chinese market.

Chinese FDI into Europe and North America drops

Mon, 01/22/2018 - 17:01
CHINESE investment in Europe and North America retreated in 2017 in tandem with China’s posting its first fall in foreign direct investment globally since 2006 as stricter rules were imposed. Chinese FDI into North America fell sharply by 35 percent to US$30 billion last year as the government unveiled policies restricting outbound investment, said a report of global law firm Baker McKenzie’s and consulting company Rhodium Group. Although FDI into Europe soared 76 percent to US$81 billion, the growth was solely due to the delayed completion of ChemChina’s record US$43 billion takeover of Swiss agribusiness company Syngenta. If this mega deal had not been completed in 2017, Chinese investment in Europe would have tumbled 22 percent to US$38 billion. But the figures backed up official Chinese data showing that the country’s global FDI flows had fallen by over a third in 2017 — the first drop since 2006. “The main reason for the fall was guidelines introduced by the Chinese government imposing additional restrictions on outbound investment to address balance of payment concerns and mitigate perceived risks for China's financial system arising from rapid overseas investment,” Baker McKenzie said. Additionally, Chinese FDI faced growing regulatory scrutiny in many host countries. The Committee on Foreign Investment in the US was especially strict in its monitoring that at least seven major deals were impacted greatly, according to the report. Also Chinese capital controls introduced in late 2016 greatly slashed the average size of deals announced in 2017 across all industries and investor types. The deals fell from US$626 million in North America in 2016 to US$282 million last year, and in Europe they declined from US$346 million in 2016 to US$162 million. “The momentum of deals involving Chinese investors dropped sharply from Q3 2016 to the first half of 2017,” said Mike DeFranco, global head of M&A at Baker McKenzie. “Now that it is clear how the rules have changed for Chinese investors at home and abroad, activity is picking up, and 2017 was still the second-best year on record in North America and technically the best in Europe, despite all the challenges for dealmakers,” he said. Chinese investors, however, cancelled or withdrew 19 announced deals worth over US$12 billion in North America and Europe in 2017, compared with 30 deals cancelled in 2016.

Sales of new homes fall by double digits

Mon, 01/22/2018 - 17:01
NEW home sales fell by double digits in Shanghai last week despite a surge in supply, latest market data showed. The area of new homes sold, excluding government-subsidized affordable housing, dropped 16.8 percent to 68,000 square meters during the seven-day period ending on Sunday, staying below the 100,000-square-meter threshold for the third straight week, Shanghai Centaline Property Consultants Co said in a report released yesterday. The city’s outlying Qingpu District kept its No.1 position for the second week, though transactions plunged 42 percent to around 14,000 square meters. It was followed by Minhang and Jiading districts, where new home sales both failed to reach 10,000 square meters. “What seemed to be a surprise was that new home supply hit a 28-month high last week but the beginning of the year is usually a low season for the property market,” said Lu Wenxi, senior manager of research at Shanghai Centaline. “As the majority of new homes released into the market asked for no more than 50,000 yuan per square meter, we could probably expect a major rebound before the lunar new year holiday, which will fall around mid February.” A total of 231,000 square meters of new homes spanning six projects were released in the city last week, a week-over-week jump of 168.8 percent, Centaline data showed. A housing development in remote Nanqiao, Fengxian District, launched in one batch some 86,000 square meters, or 836 units, of new homes. The average cost of new homes was nearly flat at 49,190 yuan (US$7,671) per square meter, according to Centaline data. A project in Qingpu was still the city’s most sought-after for the second week after selling 7,302 square meters, or 76 units, for an average of 38,824 yuan per square meter.

Shares end up on data and fund injection

Mon, 01/22/2018 - 17:01
SHANGHAI shares closed yesterday at their highest since December 31, 2015, as investors were buoyed by positive economic data and the Chinese central bank’s efforts to boost liquidity in the financial market. The Shanghai Composite Index added 0.39 percent to close at 3,501.36 points. Investors were cheered after the National Development and Reform Commission said yesterday that China’s economy grew by a higher-than-expected 6.9 percent to 82.71 trillion yuan (US$12.85 trillion) in 2017. “China’s economy has been steadily improving last year. The country has achieved good progress in terms of supply-side structural reform, with quality and efficiency of economic development continuing to improve,” said Yan Pengcheng, an NDRC spokesperson during a conference in Beijing yesterday. The economy’s 6.9 percent growth in 2017 is above the government’s official target of 6.5 percent, and also above the GDP growth of 6.7 percent in 2016. China International Capital Corporation said in a report the key stock index rose due to stable economic data and improved liquidity conditions. CICC pointed out the A-share market is set to continue trending up, citing a good economic environment and increasing profits in most sectors. Sentiment also rose after the People’s Bank of China injected a net liquidity of 110 billion yuan (US$17.18 billion) into the financial market via reverse repurchase agreements, said a statement published on its official website yesterday.

Smart car tech to be developed

Mon, 01/22/2018 - 17:01
China plans to push forward the development of smart cars and achieve the industrialization of key technology in the field, an official with the country’s top economic planner said yesterday.China will unveil a three-year action plan to propose solutions for the industrialization of smart car technology such as chips and automatic driving systems, Yan Pengcheng, spokesperson for the National Development and Reform Commission, told a press conference.“Smart cars have become a strategic direction for the future development of the auto industry,” said Yan.The NDRC will also work to establish a national innovation and development platform for smart cars by unifying different links in the industry, Yan said.China aims to make smart car production account for half of the country’s total new vehicles by 2020, according to a draft plan released by the NDRC earlier this month.

Innovation hub aimed at NEVs

Mon, 01/22/2018 - 17:01
China will build a technological innovation center for new energy vehicles in Beijing, according to the Ministry of Science and Technology.The center will boost the supply of key NEV technologies to meet growing demand, said the ministry in a response to a request made by the Beijing government to establish the center.Leading resources in the industry, and higher learning and research institutions are encouraged to participate in the building of the center.The center should make its goals dynamic according to new developments in global technology as well as the NEV industry, said the ministry.China leads in the development of NEVs. Last year, 777,000 NEVs were sold in the Chinese market, more than any other country, said the China Association of Automobile Manufacturers. The government sees NEV output and sales of 2 million annually by 2020.

Saudis urge crude oil cooperation

Sun, 01/21/2018 - 17:01
Saudi Energy Minister Khaled al-Faleh talks to journalists during the 7th Meeting of the Joint Ministerial Monitoring Committee in Muscat yesterday. Faleh called for extending cooperation between OPEC and non-OPEC oil producers beyond 2018 after a deal to shore up crude prices. The call, the first explicit invitation by Riyadh for long-term cooperation between oil producers, came with oil prices topping US$70 a barrel thanks to the deal, after they dove below US$30 a barrel in early 2016.

Slower but sustainable growth for Chinese economy in 2018

Sun, 01/21/2018 - 17:01
CHINA’S economic performance beat market expectations in 2017, but will the bullish momentum continue into the new year? A moderation in GDP growth is the popular view among global investors given a high comparison base, while a more balanced and sustainable economy is expected to take shape faster. China’s economy totaled 82.7 trillion yuan (US$13 trillion) in 2017, expanding 6.9 percent as it picked up pace for the first time in seven years. Stronger-than-expected growth data may indicate a further tightening of macro-prudential policy, but that does not change Japanese securities trader Nomura’s economic view for China this year. It has raised its 2018 GDP growth forecast by 0.1 percentage point to 6.5 percent, with a gradual growth slowdown in coming quarters. Global investment banks JP Morgan and UBS expect China’s economy to expand about 6.7 percent and 6.4 percent this year respectively. The property sector remains one of the major uncertainties facing China’s economic growth in 2018. No collapse or major loosening of property market management is in sight this year, but government policies including supporting rental housing and a faster-than-expected legislative progress for property tax might complicate market sentiment, according to Zhu Haibin, JP Morgan chief China economist. UBS China economist Wang Tao estimated that property sales might lose momentum in 2018, while property investment and construction growth stay robust or soften only modestly until late this year. Meanwhile, as the government’s ongoing environmental protection and clean-up efforts kick into full swing through the peak heating season, industrial production and related investment activities should soften more visibly this quarter, Wang pointed out. Externally, the normalization of monetary policies in developed economies might weigh upon the exchange rate and capital flow balance while more protectionist practices from the United States might dampen China’s exports. China’s cross-border capital flows hit a turning point in 2017 as foreign currency reserves stabilized after two years of decline. Zhu estimated that the basic equilibrium of capital flow will continue in 2018 with a stronger yuan, steady economy and improved market sentiment due to financial risk control efforts and other reforms. Better manufacturing investment and robust external demand due to the recovering global economy may help to partly offset some upstream sector weakness, according to UBS. Iris Pang, economist at ING, believes 2018 will be another good year for China, supported by consumption of goods and services and infrastructure investments. ING expects manufacturing of high-tech products and parts to grow by more than 50 percent this year, cushioning the loss of production from overcapacity cuts in non-ferrous metals, shipbuilding and building materials. Data from December and fourth quarter point to resilient growth momentum, which Nomura believes was driven by a robust expansion of the services sector, as it continued to benefit from China’s economic rebalancing toward consumption and the Internet-led “new economy.”

Germany recalls 127,000 Audi models

Sun, 01/21/2018 - 17:01
GERMANY’S KBA automotive watchdog has detected illicit emission-control software in Audi’s latest Euro-6 diesel models and has ordered a recall of 127,000 vehicles, Bild am Sonntag reported. Audi, a unit of Volkswagen, said in a statement that the models had been included in a voluntary recall of 850,000 diesel vehicles with V6 and V8 TDI engines announced in July. “The engine control software for the vehicles in question will be completely revised, tested and submitted to the KBA for approval,” Audi said in its statement. It did not confirm more details of KBA’s request. Bild am Sonntag said KBA had told Audi to respond by February 2 on how it plans to update vehicle software controlling emissions, making sure the cars are unable to illegally manipulate emission controls. Audi said it has been examining its diesel-fueled cars for potential irregularities for months in close cooperation with KBA. “As part of this systematic and detailed assessment, the KBA has now also issued a notice regarding Audi models with V6 TDI engines,” the carmaker added. In November, Audi announced a recall of 5,000 cars in Europe for a software fix after discovering they emitted too much nitrogen oxide, the polluting gas that parent Volkswagen concealed from US regulators in its devastating 2015 “dieselgate” scandal. Volkswagen was found in 2015 to have illegally manipulated engine software so that vehicles would meet nitrogen oxide emissions standards in laboratory testing but not in real-world conditions, where they could emit up to 40 times the permitted levels. Several Audi models were affected and Audi has been accused in media reports of having devised the so-called defeat devices years earlier.

SPDB branch in Chengdu fined US$72m

Sun, 01/21/2018 - 17:01
CHINA’S top banking regulator has fined a Chengdu branch of Shanghai Pudong Development Bank 462 million yuan (US$72.19 million) for offering huge credit to bogus firms, as part of the country’s latest crackdown on financial irregularities. The head of the Chengdu branch will be banned from working in the banking sector for life, according to the China Banking Regulatory Commission. The Chengdu branch was found to have offered credit worth 77.5 billion yuan to 1,493 bogus firms via illegal means in a bid to cover bad loans. The organized malpractice reveals poor internal regulations, low compliance and over-the-top focus on business expansion, according to the CBRC. Local banking regulatory officials and the Shanghai bank senior management were also punished for their negligence of duty. Last month, China Guangfa Bank was fined 722 million yuan for offering illegal guarantees for defaulted corporate bonds. Risk control will be enhanced in interbank activities, financial products and off-balance sheet business, while violations in corporate governance, property loans, disposal of non-performing assets, and other key areas will also face stricter punishment, the CBRC said last week.

Young buyers propel luxury sales in 2017

Sun, 01/21/2018 - 17:01
CHINA’S luxury product sales rebounded in 2017 after three years of moderation as more young consumers spent on global brand cosmetics and jewelry. Sales of luxury goods in China hit 142 billion yuan (US$22.2 billion) last year, up about 20 percent year on year, the biggest growth since 2011, said a report by Bain and Co. Bain attributed the rebound to the Chinese government encouragement for domestic consumption, lower import tariffs and moves by global luxury brands to adjust prices. A survey of 1,170 respondents showed that those aged between 20 and 34 were the major contributors to the warming market due to their tech savviness and deeper understanding of the luxury market with a preference for street casual and fashionable design. Online shopping for luxury products grew robustly last year despite a limited share in overall sales. More luxury brands launched official online shopping sites and spent more on digital marketing. Bain sees China’s luxury products sales to keep a strong pace this year.

Consumers do care if a car is black or white

Sun, 01/21/2018 - 17:01
FANCY gadgetry and sleek styling, color matters when Chinese consumers go to buy a car. Gong Xiaoyu, who works in an educational institute, recently bought a pearl white car. She said she loves the sparkling effect that distinguishes her car from standard white. Indeed, when we look at a car, the first thing we usually notice is its color, and automakers are well aware of that fact. Pearl white is becoming more popular in China, even though the exterior paint and coating process cost more than standard white vehicles. The color is often used in mid- to high-end models. The Tesla Model X, for example, has a pearl white option and General Motor’s Cadillac has a color option called crystal white. According to a report released by US-based Axalta Coating Systems, 62 percent of new cars sold in China in 2017 are in white color. The color has been the favorite for more than 10 years. Within the white segment, 15 percent of car buyers voted for pearl white in 2017. This all means that for every 10 cars sold in China, six are white color. After white, Chinese car buyers prefer black, brown and silver. Yellow, red, blue, grey and green are down the list of favorites. But there is white. Whoever thought such a neutral color could have so many variations? And why do Chinese like white so much in the first place? For one thing, white is a highly reflective color, making cars more visible at night. It also makes a smaller car look larger and tends to keep cars look cleaner for longer periods of time. Using white paint may enable manufacturers to downsize a car’s air conditioner system and raise fuel efficiency. Gong said a friend of hers suggested she buy a white car. Black, she was told, gets dirty more quickly and shows water spots and dust more readily. Her friend has two cars, one is black and one white, so Gong figured she knew what she was talking about. Consumers may take a short time to choose a car color, but for manufacturers, color decisions require long discussions and testing. “The development cycle is three years ahead of the target launch in a model year,” said Annie You, an Axalta color designer in China. “In 2018, we are working on colors for vehicles that will hit the streets in 2021.” You said automotive coating suppliers have to keep in close touch with car designers, who have to decide if the latest colors are compatible with their visions of what kinds of cars consumers want. “The development cycle for exterior colors is longer than for interior colors,” You said. “Both need to complement one another as well.” For Chinese consumers, brown is a popular color for interior seats. German carmaker Mercedes-Benz has a customized brown color for seats of its E-class models in China. Colors for the young Younger Chinese consumers pay more attention to vehicle appearance than their parents. Their tastes in color have become increasingly important because the youth market is a big money-spinner for automakers. While 1980s generation tends to be focused on success in their chosen career paths more than the colors of their cars, the post-90s group are much more picky and uncompromising, according to German automotive coating supplier BASF. “Chinese young people prefer car colors that show off their individual tastes and style,” the company said. “They are also more focused on design and quality. That is reflected in the popularity of pearl white and sophisticated greyish browns.” Axalta’s You said the young generation is perfectly willing to change car brands if carmakers fail to offer colors it likes. “Automakers need to have a deep understanding of young Chinese consumers,” she said. “Carmakers need to be aware that young people are impatient. In a fast-changing society, color preferences change fast as well. In some global markets, car buyers may wait three to five years to get the car they want. But for Chinese consumers, if the color isn’t right, they won’t wait. They want it now.” But as anyone in the fashion industry will attest, the hot color of one season or two can quickly become passé. Car colors go through the same cycle of changing tastes. Industry insiders say blue is a promising color of the future in China. And not just the standard dark navy blue of the past. They want new trendy, chromatic hues like Tiffany blue, sapphire blue, cesium blue and royal blue. “After a new model in blue is launched, it shows good sales performance in a month or two,” said Zhang Xiaofeng, an independent market observer. “It means that rich, vibrant blues have caught on with a certain group of consumers.” China’s biggest carmaker, Shanghai Automotive Industry Co, applied BASF’s starlight sapphire blue coating on its Roewe Vision-E concept car that debuted at the Shanghai Auto Show last year. BASF said the hue is a new interpretation of the classic klein blue color, with an additional purple effect. The unique blue is meant to highlight the futuristic and high-tech features of the electric coupe sport-utility vehicle. UK premium carmaker Jaguar Land Rover launched its XEL model in cesium blue, whose color is designed and supplied by Axalta, targeting Chinese consumers born in the 1990s or later. The color is meant to convey style and dynamism, and is designed to resonate with Chinese consumers. People who used to view Jaguar Land Rover as a traditional British-style company with conventional colors have now been put on notice that things are changing.

Goal: ‘zero emissions, crashes, congestion’

Sun, 01/21/2018 - 17:01
The automobile is fast becoming an Internet, mobile phone and general factotum on wheels, thanks to new technologies that connect car interiors with mobile platforms.It’s all called “connectivity,” and it promises smart, safe driving experiences for car owners. Systems can now connect cars to the city’s smart transit system so that drivers can tap into driving conditions and traffic alerts. Connected cars access the Internet, send and receive signals, and “sense” the physical environment around them.“If we compare today with the first time I came to Shanghai in 1995, we can see connectivity is becoming a more popular feature,” Matt Tsien, president of General Motors China, told Shanghai Daily in an interview.Tsien said General Motors attaches great importance to vehicle connectivity, noting that the carmaker was a pioneer in the field by bringing its OnStar service to China in 2008. OnStar offers on-board communications and vehicle security features now used by more than a million Chinese. It provides connections to a call center where a driver can turn for assistance. It offers cloud-based services and a mobile app that monitors fuel consumption and driving behavior. All Cadillac, Buick and Chevrolet models will be equipped with connectivity features by 2020, the company said. General Motors is not alone in focusing on a new generation of smart cars. Many automakers have announced plans to provide vehicle connectivity technology to the world’s largest auto market. Ford and Volkswagen have both said all their new vehicles sold in China will be “connected” by the end of 2019.According to China’s industrial roadmap for 2025, 80 percent of locally produced vehicles will be equipped with telematics and 30 percent of the vehicles will apply V2X, or “vehicle of everything” technology. That means cars will have the capability to talk with one another, with outside infrastructure and with the Internet.Shanghai is a leader in the development of intelligent, connected vehicles in China. Last November, the city government promulgated what it called the “Shanghai Declaration,” which calls for more international cooperation and efforts in the development of smart cars. The city is seeking to build a transport system with zero emissions, zero crashes and zero congestion.Shanghai has advantages in the development. Its testing base, called the National Intelligent Connected Vehicle Shanghai Pilot Zone, is a 100 square-kilometer site in the Jiading District that is the first of its kind in China.Rong Wenwei, general manager of Shanghai International Automobile City, said the city plans to accelerate research, development and application of intelligent and connected vehicles.Mega-cities like Shanghai must now cope with increased traffic congestions, vehicle emissions and more road accidents. A smarter, cleaner and safer transportation system is obviously needed. Automakers play a role in these plans of the future. Most of them are actively shifting from mere manufacturers to mobility services providers to help solve problems caused by urban development.General Motors said connected vehicles could help the city to achieve the goal of zero congestion. Vehicle-to-infrastructure technology, for example, can provide information on traffic accidents or backed up traffic and suggest alternative routes to drivers. Last November, GM demonstrated its vehicle-to-infrastructure capability on public roads in Shanghai. The test vehicles received real-time data from traffic lights on signal timing to enable a smoother flow of traffic. “Shanghai is in a great position to become a leader linking connectivity technology with traffic management, which will greatly aid the flow of vehicles in dense urban settings,” said Tsien. Chinese consumers seem to like the new trend.A survey of 8,500 consumers from 13 countries published by Kantar TNS, showed that 65 percent of Chinese consumers are willing to accept connectivity features inside vehicles. That was higher than 40 percent in Europe and 32 percent in North America.A report from PwC showed that 40 percent of Chinese car buyers are willing to switch car brands to obtain connected technology. Chinese consumers rank safety-related features such as collision prevention, danger warnings and emergency calling highest on the list of what they want from a connected car, the report said.Zhang Haoran, who works at a Shanghai-based consulting firm, is an OnStar user. “This service really solves many of my driving problems,” Zhang said. “I use the navigation function most often. I just press a button in the car, connect to the call center and customer service sends navigation information back to me. I don’t need to check the route on my mobile phone. I can also discuss vehicle issues and basic maintenance with the OnStar advisor.”Analysts said full connectivity is some time off. Installation costs are high and there is still insufficient funding for further research and development.“The sector needs cooperation and the joint efforts of the government, automakers, Internet providers and insurance companies,” said David Zhang, an independent automotive consultant.“General Motor’s OnStar and SAIC Motor’s Inkanet have been the leaders in terms of connectivity in China,” he added. “These two companies have sufficient funding to develop new features, but not all providers do.”

GM vows to tap new technologies

Sun, 01/21/2018 - 17:01
Matt Tsien, president of General Motors China, has been with the US-based carmaker for 37 years. He has held the post since January 2014.Based in Shanghai, he oversees the operations of GM’s 10 joint ventures in China.Tsien has a master’s degree in electrical engineering from Stanford University and a master’s in management from the Massachusetts Institute of Technology. He began his professional career as an electrical engineer at Delco Electronics in 1976.In September 2017, he received the Magnolia Gold Award from the Shanghai municipal government for his contributions to the economic and social development of the city.Tsien sat down recently with Shanghai Daily and talked about his views on Shanghai auto industry to discuss industry trends in China.Q: What’s your overview on the development of Shanghai’s automotive industry?A: Over the past few years, Shanghai has become a pilot city for new-energy vehicle promotion and development of intelligent and connected vehicles, as well as home to a number of automotive startups. Shanghai’s automotive industry, like the city itself, embodies what I believe locals call the “inclusive Shanghai spirit.” Fair competition backed by supportive government policies will bring the best out of every player. We plan to remain a leader in driving the automotive industry in Shanghai and China forward.Q: So, what are GM’s plans for this year?A: China has been GM’s biggest retail market for six consecutive years, and it will play an important role in the company’s global move toward a future of zero emissions, zero crashes and zero congestion. We will continue to work with our partners to introduce the best electrification solutions and advanced technologies to benefit our customers in China. This year, we will have more new products coming to market. We are also really looking forward to the opening of our Pan Asia Technical Automotive Center, a new facility in Shanghai that will further enhance our local research and development capability. We are also building a Cadillac “experience center” that will open later this year in Shanghai. Q: China is actively promoting the development of new-energy vehicles. Will you unveil more green cars in China in the next two years, and will they target specific consumer groups? A: China will continue to play an important role in GM’s global move toward an all-electric future. We are on track to expand our new-energy vehicle product portfolio with more electric vehicles and plug-in hybrids, which will include up to 10 models by 2020. When we look at new-energy vehicle strategy, we are really looking across the entire range of vehicles, from entry-level to luxury brand. Our new energy vehicles will be produced in China through our local joint ventures.Q: Does GM have any plans to test intelligent and connected vehicles in the National Intelligent Connected Vehicle Shanghai Pilot Zone?A: We really enjoy a good relationship with the Jiading pilot zone. We think there will be continuing opportunities to work with Jiading, either on V2X technology and maybe in the future, even on autonomous driving features. We think it’s a good place to some testing and demonstration.

Detroit auto show offers nostalgia, glamor

Sun, 01/21/2018 - 17:01
THE car industry tied its latest offerings to American nostalgia and Hollywood glamor at the ongoing Detroit auto show, which will end this Sunday. But on the sidelines, there were lingering questions about policy and politics.  Arnold Schwarzenegger emerged from a Mercedes-Benz G-Class SUV. The granddaughter of screen legend Steve McQueen arrived in the latest version of the Ford Mustang he immortalized on film.  In a keynote address, US Transportation Secretary Elaine Chao touted just-enacted US tax cuts, which reduced the US corporate tax rate from 35 to 21 percent, saying the move will attract more US investment. There were also cautious statements about ongoing renegotiations of the North American Free Trade Agreement, on which the North American car industry heavily relies.   But the auto show is about the cars, and automakers did their best to stay focused on their products.  With Americans’ appetite for trucks and SUVs expected to remain robust in 2018, brands highlighted a number of new offerings in that category.  Mercedes-Benz debuted a redesigned G-Class SUV, significantly updating the interior with new technologies. The vehicles were made to climb steep ramps as flames shot up from the ground and confetti cannons blasted. As one finally stopped, Schwarzenegger emerged from a passenger seat.  Star-studded show “I have driven G-Wagens now for 25 years,” glowed the actor of Austrian heritage.  “I think this car became so historic,” he said, “because of its look.” Ford unveiled its own nostalgic offering, showing off a new mid-sized Ranger pickup, redesigned and reintroduced to the North American market.  It also offered a new sports trim of its Edge SUV, as well a third iteration of a “Bullitt” special edition of its Mustang sports car.  Actor McQueen drove a 1968 Mustang in the thriller film “Bullitt,” creating an indelible link between the car and American pop culture. His granddaughter Molly McQueen emerged from the latest special edition, comparing it favorably with the original.  “It is fun. It’s fast and effortlessly cool,” she said.  In a break from most of the big launches, Volkswagen highlighted a sedan, releasing its updated version of the Jetta, the German automaker’s top-selling vehicle in the US. The base price of US$18,545 won especially loud applause at a glitzy launch, and was a counterpoint to the pricey SUVs and trucks that can easily cost twice that amount and more. “As a full-line automaker... you need to have a competitive, strong sedan,” VW North American chief executive Hinrich Woebcken told reporters after the launch. Tariffs matter On the sidelines of the flashy announcements, industry insiders were taking a wait-and-see attitude toward talks to revamp the North American Free Trade Agreement, which has generated fears of huge tariffs on Mexican-made imports to the US. Negotiations have been ongoing for months at the insistence of US President Donald Trump, who has threatened to abandon the agreement if a beneficial deal is not struck. “There’s good conversation going on to modernize NAFTA,” said Mary Barra, CEO of General Motors. “We’re going to continue to interact constructively to make sure people understand the very complex nature of our business.”  Ray Tanguay, automotive advisor to the Canadian government, highlighted his country’s close ties to the Michigan car industry, and cautioned that losing NAFTA could cost American car buyers higher prices.  “The integration is so much that if you try to break that, you’re going to hurt the consumer,” he said.  Analysts were less certain about potential impacts.  ‘Post-peak’ period “There continues to be the debate — ‘Is the president using hyperbole to get something less severe because he’s a skilled negotiator, or does he seriously think that we need to be exiting NAFTA,’” said Cox Automotive economist Jonathan Smoke. Meanwhile, the effects of the recently enacted US$1.5 trillion in tax cuts were expected to be varied by region and income level. Among the clearest winners will be luxury vehicles because of the tax bill’s bounty to those with incomes over US$150,000 a year, said Smoke. Highlighting the tax changes, which reduced corporate rates, Chao pointed to Fiat Chrysler’s decision to move production of its Ram trucks from Mexico to an assembly plant near Detroit. The car maker said it would invest US$1 billion and add 2,500 jobs. “This is just one example of the positive impact that the tax cuts and jobs act will have on workers, job creators, employers and our country,” Chao said. But analysts said many households still don’t have a clear sense of how much they will benefit from the complex changes to tax laws. “There’s some people that are probably putting off purchases because they don’t really know... what our paychecks are going to look like,” said industry analyst Rebecca Lindland of Kelley Blue Book. 

6.9% GDP increase beats forecasts

Thu, 01/18/2018 - 17:01
CHINA'S economy expanded by a more-than-expected 6.9 percent last year, amid the deepening of supply-side reforms, the National Bureau of Statistics said yesterday. The annual growth of GDP was above the government's official target of 6.5 percent and marked a recovery from a 26-year low of 6.7 percent in 2016. GDP growth in the fourth quarter was 6.8 percent, the same as the third quarter but slower than the 6.9 percent growth in the first two quarters. The services sector led growth with an increase of 8 percent, outpacing the industrial sector's 6.1 percent and the agricultural industries' 3.9 percent. Services continued to make up 51.6 percent of the countryÕs 82.71 trillion yuan (US$12.85 trillion) GDP. Industrial value-added output expanded 6.6 percent year on year in 2017, up from 2016Õs 6 percent led by high technology and equipment manufacturers. ÒThe domestic economy was steady, positive, and above expectations,Ó the statistics bureau said. ÒEconomic dynamism, momentum, and potential have been released and the stability, coordination and sustainability have significantly enhanced.Ó Ning Jizhe, the bureauÕs head, said in a briefing that structural reforms achieved important progress last year with capacity reduction in high energy consumption industries, lower debt burden of industrial companies, and greater investment in agriculture and environment protection. Momentum gathered in the Ònew economyÓ Ñ referring to new skills, new products, new industries, and new business models. Ning highlighted that 13 million new jobs were created last year, and the foreign exchange reserves rose to US$3.14 trillion. YesterdayÕs figures showed retail sales up 10.2 percent year on year, slightly lower than the 10.4 percent increase in 2016. ÔNew momentumÕ Fixed-asset investment rose 7.2 percent year-on-year, down 0.9 percentage points from 2016. Specially, private investment reached 38.15 trillion yuan, up 6 percent year on year, 2.8 percentage points faster than the previous year, accounting for 60.4 percent of the total investment. Online sales of physical goods rose 32.2 percent to 7.18 trillion yuan, amounting to 15 percent of total retail sales, 2.6 percentage points higher than 2016. Cheng Shi, chief economist of ICBC International, attributed the faster-than-expected economic growth last year to emergence of new momentum instead of government stimulus in investment. ÒThe year 2017 concluded in a steady way after surprising recovery in the first half,Ó said Cheng. ÒBenefits of supply-side have been released, and macro-economic policies in the new age are expected to support and accelerate the shift from traditional industries to new momentum, creating new room for high quality development in China.Ó The institute said ChinaÕs GDP growth could still reach 6.9 percent this year as a long-term recovery trend is consolidated. Earlier data showed ChinaÕs consumer inflation was 1.6 percent last year, cooler than the 2 percent for 2016, while the factory-gate prices rose for the first time in six years. Foreign trade recorded its first expansion in three years under strong domestic and external demand. Standard Chartered Bank forecast ChinaÕs GDP will be ÒmoderateÓ this year, up to 6.5 percent, with greater emphasis on reforms in pursuit of higher quality of development. ÒWhile the government has continuously emphasized stability in the process of moving forward, we sense a tilt in the balance toward faster reforms and increased risk-taking in 2018, which marks the 40th anniversary of the launch of ChinaÕs reform and opening up,Ó the bank said in a note. The bank said potential risks to the economy include smaller property investment, lower growth and higher inflation, as well as escalating trade friction with the United States.

Shanghai shares hit 2-year high, HK at new record

Thu, 01/18/2018 - 17:01
SHANGHAI shares rose to a two-year high yesterday when Hong Kong stocks climbed to a fresh record as investors tracked another milestone on Wall Street, but Asia-wide markets struggled to keep up the recent momentum. But while the afternoon saw a slight wobble across the region and some analysts warned of a possible correction, traders remain bullish on equities thanks to a healthy global economic outlook, optimism over the impact of Donald trump’s tax cuts and strong corporate earnings. The Shanghai Composite Index gained 0.87 percent to 3,474.75 points, the highest close since the end of 2015. After the market closed, data showed the Chinese economy grew a forecast-beating 6.9 percent in 2017, the first annual improvement since 2010. The GDP reading follows strong trade data last week, which showed the humming global economy had propelled China’s export machine. “This momentum, especially the part fueled by external demand, may carry on well into 2018,” said Wei Yao, chief China economist at Societe Generale. Hong Kong’s Hang Seng Index ended 0.4 percent higher at 32,121.94, holding above the 32,000 mark it broke in the morning for the first time in its history. The market has fallen only once in the past 17 trading days. Seoul was slightly higher, while Bangkok and Jakarta also rose. However, Tokyo dipped 0.4 after a late sell-off on profit-taking but still sits at 26-year highs, while Sydney was marginally lower and Singapore shed 0.5 percent. Wellington and Manila were also down. A survey by Bank of America found fund managers were upbeat about the outlook and see equities continuing to rise into next year. And Lucy MacDonald, chief investment officer for global equities at Allianz Global Investors, told Bloomberg Television: “It’s time for relative caution but we’re still overall pro-equity.” However, she added: “Nominal returns in markets are liable to be lower than they’ve been in the recent past.” There was also a word of caution from Joachim Fels at Pacific Investment Management, who said: “The fact that the fear is gone is the main reason why we should be worried.” Traders started on the front foot after Apple said it will pay almost US$40 billion in taxes to repatriate US$350 billion following Trump’s tax cuts, adding that it will also boost jobs, hike wages and spend more on innovation. “This is exactly the encouragement that Trump’s tax policy constructed for. The move by Apple will influence and at the same time impose pressure on other multinationals to follow suit,” said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers. The pound held gains against the US dollar after climbing on Wednesday on comments from European Commission chief Jean-Claude Juncker that he would welcome any British attempt to rejoin the EU after it leaves. The remarks raised hopes Britain could exit on more favorable terms than have been expected and follow speculation about a possible second referendum. “Some smooth-talking from Jean-Claude Juncker helped propel the pound ... as he appeared to not only suggest that the UK could come back after they leave but equally in the change of tone reflects that a ‘soft’ Brexit is now becoming a high probability,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader. Bitcoin rose above 10 percent to US$11,000, according to Bloomberg data, a day after falling through the US$10,000 mark for the first time since mid-December.

China cuts US debt holdings

Thu, 01/18/2018 - 17:01
China cuts its holdings of US Treasury securities in November, after adding US$8.4 billion in October.China’s holdings of US Treasuries dropped by US$12.6 billion to nearly US$1.18 trillion in November. China remained the largest holder of US Treasuries.Japan, the second-largest holder of US Treasuries, also cut its holdings by US$9.9 billion to US$1.08 trillion in the month. Japan has cut its Treasuries holdings for four straight months.By the end of November, overall foreign holdings of US Treasury securities slightly fell to US$6.34 trillion from October’s revised US$6.35 trillion.The State Administration of Foreign Exchange, China’s top forex regulator, recently dismissed a foreign media report that China was considering slowing down or even halting its purchase of US securities.China’s forex reserves have been invested in a diverse and decentralized manner to keep assets safe and ensure they grow in value steadily, the SAFE said in a statement. Like other investment moves, the purchase of US Treasuries is market-based behavior and is subject to professional management based on market conditions and investment targets, said the statement. China’s forex reserves rose for 11 months to US$3.14 trillion at the end of December, as the economy got on a firmer footing and the government stepped up regulation of illegal capital transfers and overseas investment.

Stable home markets in 15 major cities indicate policy effectiveness

Thu, 01/18/2018 - 17:01
Housing markets in China’s 15 major cities were generally stable for another month in December as differentiated rein-in policies to curb speculation continued to take effect, data released yesterday by the National Bureau of Statistics showed.Four of the 15 cities, including first-tier ones and key second-tier cities, saw decline in new home prices from November. Prices in three cities were flat from a month earlier, and the remaining eight posted month-on-month growth, according to the bureau, which monitors property prices in 70 Chinese cities.In the four first-tier cities, new home prices in Shanghai added 0.3 percent from November, the only gainer among the four. Prices in Beijing were flat while those in Guangzhou and Shenzhen fell 0.2 percent and 0.3 percent, respectively.On an annual basis, prices in nine cities retreated between 0.2 percent and 3 percent while those in the remaining six cities rose by between 0.1 percent and 5.5 percent from a year earlier, according to the bureau.“Price fluctuations on a monthly basis in the 15 major cities were all within a moderate range, indicating a largely stable housing market,” said Liu Jianwei, a senior statistician at the bureau.“On an annual basis, the majority of these cities recorded lower prices.”Nationwide, new and pre-owned home prices in the four first-tier cities fell year on year for 15 consecutive months in December.Meanwhile, lower-tier cities were showing some signs of picking up, the bureau’s data suggested.New home prices in second and third-tier cities rose 0.6 percent and 0.5 percent month on month, respectively, both 0.1 percentage points faster than that in November.In the pre-owned housing market, prices in second and third-tier cities both climbed 0.3 percent, the same pace from a month earlier.In a separate statement yesterday, the bureau released annual property sales and investment data for 2017.Sales of new homes, excluding government-subsidized affordable housing, rose 11.3 percent last year to 11.02 trillion yuan (US$1.7 trillion), up from the 9.9 percent growth in the first 11 months of 2017.By area, new homes sold last year climbed 5.3 percent from 2016 to 1.45 billion square meters, slowing from a 5.4 percent gain in the first 11 months.By investment, about 7.5 trillion yuan were invested in residential development nationwide last year, an annual increase of 9.4 percent, 0.3 percentage points slower than that in the first 11 months.

Emirates throws A380 a lifeline

Thu, 01/18/2018 - 17:01
An Airbus A380 of Emirates Airlines lands at Dubai’s International Airport. Emirates yesterday said it has struck a US$16 billion deal to buy 36 A380 aircraft just days after Airbus said it would have to halt production without new orders. Emirates placed firm orders for 20 of the aircraft with options for a further 16. Deliveries are scheduled to start in 2020. Emirates is already the world’s biggest customer for A380 with 101 in its fleet and 41 more firm orders previously placed.

HNA chairman confident group will turn corner

Thu, 01/18/2018 - 17:01
HNA Group Chairman Chen Feng has expressed confidence that China’s aviation-to-financial service conglomerate will manage its cash crunch, and continue to receive support from banks and other financial institutions this year. The liquidity problem exists “because we made a big number of mergers,” even as the external environment became more challenging and China’s economy “transitioned from rapid to moderate growth,” impacting the group’s access to new financing, Chen said. “Rate hikes by the Federal Reserve and deleveraging in China caused a liquidity shortage at the end of the year for many Chinese enterprises,” Chen said. “We’re confident we’ll move past these difficulties and maintain sustained, healthy and stable development.” It was a rare acknowledgment by a top company official that HNA is facing financing problems. In recent weeks, local banks have privately and publicly voiced concern after HNA failed to repay some obligations, including aircraft lease payments, and as surging debt drove up the cost of the group’s short-term fundraising to new highs. Significant moves are expected. HNA’s flagship Hainan Airlines Holding Co, Bohai Capital Holding Co, the parent of aircraft leasing firm Avolon, and Tianjin Tianhai Investment, which controls California-based Ingram Micro, all have suspended trading pending major announcements. Ingram Micro, which HNA bought for roughly US$6 billion, is part of the US$50 billion worth of transactions the conglomerate announced over the last two years. They also included big stakes in Hilton Hotels Worldwide Holdings and Deutsche Bank. HNA’s Chief Executive Adam Tan said in November that the company was selling some real estate and other assets to improve liquidity and comply with national policy. Chen, speaking at his office in Haikou, Hainan Province, where HNA has its headquarters, said he wasn’t involved in decision making for any transactions and declined to comment on fundraising plans. After years of “extraordinary development,” Chen said HNA was now focused more on integrating operations, creating synergies between resources at home and overseas, and improving group management. “Our business has become so big that we need to improve efficiency,” said Chen. “The long-term goal remains unchanged, which is to become a world-class enterprise,” he said. “2018 is our year of effectiveness.” HNA’s leverage has alarmed some analysts and its “aggressive financing policy” caused S&P Global Ratings in November to downgrade its assessment of the company’s creditworthiness. HNA in recent weeks also has raised additional financing by selling expensive short-term debt and pledging more of its shares for loans. Group borrowing, including bank loans and bonds, surged by more than a third over the first 11 months of last year to 637.5 billion yuan (US$99.3 billion), according to a China bond market filing. Group assets reached 1.2 trillion yuan at the end of June, according to a separate bond market filing. In December, HNA said it received pledges of support for 2018 from eight big domestic policy and commercial banks, including China Development Bank, the Export and Import Bank of China, and the Industrial and Commercial Bank of China. The company also said it still had 310 billion yuan in unused credit facilities from financial institutions. Chen said financial institutions continued to support HNA because of the quality of its assets and projects. “We provide local employment, tax revenue and development,” he said. HNA’s financing troubles have been exacerbated by regulatory investigations in multiple countries after the group announced changes to its shareholding structure in July. While securing clearances from German, Irish and UK authorities, the group also has experienced setbacks in Switzerland and New Zealand. Australia and New Zealand Banking Group this month dropped plans to sell its UDC finance unit to HNA after the New Zealand regulator blocked HNA’s application, citing uncertainty about the group’s ownership and controlling interests. China’s going abroad, change in its foreign exchange policy and the doubts of foreign governments presented challenges, Chen said. “Some people are uncomfortable.” He said HNA still faces a problem of experience, which has been tested by a complex global environment. “Our young leadership team, including myself, hasn’t managed a global enterprise,” Chen said.

PPDai to invest in research institute

Thu, 01/18/2018 - 17:01
PPDai, China’s first online P2P (peer-to-peer) lending platform listed in the US market, said yesterday that it will invest 1 billion yuan (US$156 million) within three years to set up a new research institute.The money invested in the new PPDai Smart Finance Institute will be used to fund artificial intelligence, blockchain, finance cloud and Big Data sectors, said Zhang Jun, co-founder and chief executive of Shanghai-based PPDai.“It’s the first company to invest more than the ‘1 billion yuan’ line in the P2P industry to develop intelligent and secure online finance services in China,” Zhang said.PPDai, which launched an initial public offering in New York in November, has also formed a consultant team consisting of executives and researchers from FICO and CalTech. It is also cooperating on AI with research institutes under the Ministry of Industry and Information Technology, Zhejiang University and the National University of Singapore.

Sony bullish over business in China

Thu, 01/18/2018 - 17:01
SONY Corp expects its business in China to grow strongly this year amid a market of 230 million middle-class consumers who are upgrading their consumption patterns, the company’s China president said yesterday in Shanghai. In the first half of Sony’s fiscal year ended on September 30, the Japanese company’s revenue jumped 40 percent year on year in China on brisk sales of new-technology TVs, professional cameras, sensors used in smartphones and game devices and services. Sony still managed to expand even as the entire domestic TV and smartphone markets faced sluggish growth close to saturation points, industry insiders said. “It’s one of the best fiscal years for Sony China recently thanks to our products and strategies,” Takahashi Hiroshi, Sony China’s president, said in Chinese. Sony China will continue to focus on middle or high-end users as China has “enough market space” with 230 million middle-class consumers and a “big trend” for consumption upgrade, said Hiroshi.

Cross-border capital flow seen balanced

Thu, 01/18/2018 - 17:01
CHINA saw more balanced cross-border capital flow in 2017 as willingness to purchase the greenback waned thanks to rising confidence in the yuan and the domestic economy. Chinese banks’ net forex settlement deficit fell significantly last year, according to the State Administration of Foreign Exchange. Commercial banks bought US$1.64 trillion worth of foreign currencies, up 14 percent year on year, while selling US$1.76 trillion, down 1 percent compared with 2016. This resulted in a net forex settlement deficit of US$111.6 billion, down by a whopping 67 percent year on year. SAFE pointed out that the forex market has seen more balanced demand and supply, with the fourth quarter of last year reporting a settlement surplus of US$1.2 billion. An index weighing bank clients’ willingness to purchase forex fell 9 percent year on year, while individual cross-border remittances and deposits also shrank significantly compared with 2016. “The year 2017 marked the threshold when China’s cross-border capital flow transited from net outflow to general balance,” said SAFE spokeswoman Wang Chunying. China’s forex reserves ended the downward trajectory of the previous two years to gain US$129.4 billion in 2017, while its current account surplus remained in a reasonable range and the financial account saw net capital inflow in the first three quarters of last year. Wang attributed the more balanced forex supply and demand to steady domestic economic expansion, acceleration of the financial sector’s opening as well as a recovering global economy. Cross-border capital flow will continue to remain generally stable as China’s emphasis on high-quality growth will boost market confidence and more opening-up efforts will lure more capital, said Wang.

6.9 percent GDP rise beats forecasts

Thu, 01/18/2018 - 17:01
CHINA’S economy expanded by a more-than-expected 6.9 percent last year, amid the deepening of supply-side reforms, the National Bureau of Statistics said yesterday. The annual growth of GDP was above the government’s official target of 6.5 percent and marked a recovery from a 26-year low of 6.7 percent in 2016. GDP growth in the fourth quarter was 6.8 percent, the same as the third quarter but slower than the 6.9 percent growth in the first two quarters. The services sector led growth with an increase of 8 percent, outpacing the industrial sector’s 6.1 percent and the agricultural industries’ 3.9 percent. Services continued to make up 51.6 percent of the country’s 82.71 trillion yuan (US$12.85 trillion) GDP. Industrial value-added output expanded 6.6 percent year on year in 2017, up from 2016’s 6 percent led by high technology and equipment manufacturers. “The domestic economy was steady, positive, and above expectations,” the statistics bureau said. “Economic dynamism, momentum, and potential have been released and the stability, coordination and sustainability have significantly enhanced.” Ning Jizhe, the bureau’s head, said in a briefing that structural reforms achieved important progress last year with capacity reduction in high energy consumption industries, lower debt burden of industrial companies, and greater investment in agriculture and environment protection. Momentum gathered in the “new economy” — referring to new skills, new products, new industries, and new business models. Ning highlighted that 13 million new jobs were created last year, and the foreign exchange reserves rose to US$3.14 trillion. Yesterday’s figures showed retail sales up 10.2 percent year on year, slightly lower than the 10.4 percent increase in 2016. ‘New momentum’ Fixed-asset investment rose 7.2 percent year-on-year, down 0.9 percentage points from 2016. Specially, private investment reached 38.15 trillion yuan, up 6 percent year on year, 2.8 percentage points faster than the previous year, accounting for 60.4 percent of the total investment. Online sales of physical goods rose 32.2 percent to 7.18 trillion yuan, amounting to 15 percent of total retail sales, 2.6 percentage points higher than 2016. Cheng Shi, chief economist of ICBC International, attributed the faster-than-expected economic growth last year to emergence of new momentum instead of government stimulus in investment. “The year 2017 concluded in a steady way after surprising recovery in the first half,” said Cheng. “Benefits of supply-side have been released, and macro-economic policies in the new age are expected to support and accelerate the shift from traditional industries to new momentum, creating new room for high quality development in China.” The institute said China’s GDP growth could still reach 6.9 percent this year as a long-term recovery trend is consolidated. Earlier data showed China’s consumer inflation was 1.6 percent last year, cooler than the 2 percent for 2016, while the factory-gate prices rose for the first time in six years. Foreign trade recorded its first expansion in three years under strong domestic and external demand. Standard Chartered Bank forecast China’s GDP will be “moderate” this year, up to 6.5 percent, with greater emphasis on reforms in pursuit of higher quality of development. “While the government has continuously emphasized stability in the process of moving forward, we sense a tilt in the balance toward faster reforms and increased risk-taking in 2018, which marks the 40th anniversary of the launch of China’s reform and opening up,” the bank said in a note. The bank said potential risks to the economy include smaller property investment, lower growth and higher inflation, as well as escalating trade friction with the United States.

More money in people’s pockets

Thu, 01/18/2018 - 17:01
CHINA’S per capita disposable income stood at 25,974 yuan (US$4,033) in 2017, up 7.3 percent year-on-year in real terms, official data showed yesterday. The increase was 1 percentage point faster than the 6.3 percent rise registered in 2016. Separately, urban and rural per capita disposable income reached 36,396 yuan and 13,432 yuan, respectively, in 2017, up 6.5 percent and 7.3 percent in real terms after deducting price factors, according to the National Bureau of Statistics. In 2017, China had 286.52 million rural migrant workers, up 1.7 percent from 2016. Their average monthly income was 3,485 yuan, up 6.4 percent year on year. By 2020, China aims to double the per capita income of its urban and rural residents from 2010 levels, to build a moderately prosperous society.

Economy set for ‘stable growth’ this year

Thu, 01/18/2018 - 17:01
CHINA’S economy is likely to experience stable growth this year, although continuing deleveraging efforts, regulatory tightening and subsequent liquidity concerns are the key challenges, says investment management services firm Fidelity International. The stock market recorded one of its longest rising runs as it entered 2018, leading investors to the question whether the momentum can be sustained or whether a decline is due. “The A-share market (shares listed on the Chinese mainland) hit the bottom in 2016 and since then it has experienced a continuous rebound. I believe the trend is likely to last in 2018, as valuation is still attractive in global content,” said Lynda Zhou, Fidelity’s equity portfolio manager. She said that China’s ongoing supply-side reform will benefit cyclical sectors such as coal, steel and cement by fostering a more robust market with a better supply-demand balance. In terms of sectors, a number of domestic brands in the automobile and home appliance industries have grabbed market share from foreign players in recent years. “Domestic automobile brands captured 40 percent of market share in China in 2017, compared to the 20 percent back in 2003,” Zhou said. Also, high-end manufacturing is a market set to expand, as China is leading the way in surveillance and communication technology industries. “China is on track to further accelerate innovation over the long term. All of these driving forces will propel the economic growth in 2018 and beyond,” Zhou said. Corporate earnings are expected to remain strong this year despite an expected slowdown compared with 2017. The overall valuation for A-shares is still below the global average, which is a chance for investors, while some overpriced stocks with high growth can expect a correction that will lead to additional market volatility. As for the bond market, Freddy Wong, Fidelity’s fixed income portfolio manager, believes the authorities will step up further on regulatory tightening. He added that inflation and the expected looming interest rate rise by the central bank can bring additional risks that might also drive the yield curve upward. “Banking, property, consumer and infrastructure will be the major sectors dominating China’s bond market,” Wong said.

Smartphones get all-clear for take-off in China

Wed, 01/17/2018 - 17:01
CHINA Eastern and Hainan airlines will allow passengers to use their smartphones on planes from today — but not to make actual phone calls. The two airlines announced the move yesterday after the industry regulator issued a guideline to lift the ban on mobile phones. Spring Airlines, a Shanghai-based carrier like China Eastern, said it will allow passengers to use phones in the air from “early this year.” From today, passengers on China Eastern flights are able to use their smartphones as well as laptops, iPads, e-books and other small-size portable electronic devices throughout the whole flight, the carrier said. Previously, the use of phones was banned on flights by Chinese carriers. However, intercoms, remote-control toys and other devices with remote-control or radio transmitting equipment remain out of bounds on aircraft. Flouting the rules can mean a fine of up to 50,000 yuan (US$7,610). According to the new rule on the use of portable electronic devices released yesterday, smartphones must be shifted to flight mode and the communication function must be turned off, China Eastern said. That means passengers will merely be able to take pictures or use in-flight Wi-Fi services on their devices rather than make phone calls in the air. Phones with no flight mode facility still have to be turned off throughout the flight, according to the airline. Demands from passengers Furthermore, earphones or chargers must be detached during taxiing, take-off, descending and landing. Spring has launched an evaluation and will apply to the Civil Aviation Administration of China soon, said the budget carrier’s spokesman Zhang Wu’an. He noted “passengers must obey the order of the crew to turn off the devices once any inference was noticed.” There have been increasing demands from passengers to be allowed to keep their smartphones switched on throughout their flights, the CAAC said in the guideline released on Tuesday. “The administration has made technical tests to conclude that the condition has been mature to lift the ban on portable devices in the air,” the CAAC said in the evaluation guideline. It allows domestic airlines to evaluate the impact of portable electronic devices on flights and come up with their own management policies. Airlines will have to first carry out an evaluation, submit an application and get agreement from the administration before allowing passengers to use phones on flights, a CAAC official said. The carriers must issue specific rules on the category of devices to be allowed and when they must be switched off. For instance, smartphones and other portable electronic devices must be turned off when the airplanes are flying in low visibility weather conditions or if any interference is being caused, according to the guideline. ‘Cabin will be far noisier’ “I don’t think it is necessary to use mobile phones on planes, and I am more concerned about flying safety,” said Georges Billard, a French freshman from Bordeaux at Shanghai’s Fudan University. “The regulator should focus more on the security angle, rather than to allow the usage of phones,” he added. “I prefer to be free from the endless WeChat messages and e-mails on phones and take some rest in the air,” said Zhao Yun, a civil servant working for a government body. “I’m afraid the cabin will become far noisier when passengers can make video communications or play games on their phones.” According to an online survey about the usage of smartphones on airplanes, more than half of the respondents said they “don’t want the ban to be lifted” or that they “don’t care.” Nearly 80 percent of the respondents said they feared smartphones could affect flying safety. Many foreign carriers have allowed the use of smartphones during flights in the wake of the popularity of in-flight Wi-Fi services. At present, in-flight Wi-Fi services are available on a majority of airlines in the United States, Europe, Singapore and China’s special administrative region of Hong Kong. More than 78 percent of overseas flights feature Wi-Fi functions. That compares with only about 2 percent of airlines in China, the world’s second-largest air-travel market. The new regulation will boost the development of in-flight Wi-Fi services among Chinese airlines, Spring’s Zhang said. He added that Spring Airlines has equipped two aircraft with Wi-Fi facilities and will launch an Internet service soon. China Eastern has opened Wi-Fi services on 74 of its aircraft. All its long-distance international routes have been equipped with Wi-Fi services, according to the airline.

Petrochemical sector gushes in profit

Wed, 01/17/2018 - 17:01
PetroChina’s logo is seen at its petrol station in Beijing. Profit of China’s petrochemical industry in 2017 grew at the fastest pace in six years, the China Petroleum and Chemical Industry Federation said yesterday. The sector’s 2017 profit is estimated to exceed 850 billion yuan (US$132 billion), an increase of 30 percent. Revenue from core operations totaled 14.5 trillion yuan last year, up 12.5 percent. The petrochemical industry has been hindered by overcapacity along with security and environmental constraints. A State Council guideline issued in August 2016 said China must increase the competitiveness of the industry.

Saturation hits mobile phone sales

Wed, 01/17/2018 - 17:01
CHINA’S mobile phone sales fell 27.1 percent last year as the market became saturated after several years of rapid growth. In 2017, China’s mobile phone sales totaled 491 million units, down 27.1 percent from a year earlier. The number of newly released models also fell 12.3 percent from a year ago to 1,054, according to the China Academy of Information and Communications Technology, a research arm of the Ministry of Industry and Information Technology. In December alone, China’s mobile phone sales tumbled 32.5 percent year on year, signaling a more sluggish market, said CAICT. On Tuesday, ZTE, China’s biggest listed telecom equipment maker, became the first major Chinese smartphone vendor to release a foldable dual-screen smartphone, Axon M, which will be available from Saturday at a starting price of 3,888 yuan (US$600). It’s time to bring consumers “tech-savvy” products to create a new market space when the whole market is close to saturation, said Cheng Lixin, chief executive of ZTE’s mobile devices. Smaller Chinese smartphone vendors, including 360 and Meizu, have also unveiled high-end and innovative products and planned to expand overseas to seek opportunities amid the “tough” domestic market environment. Xiaomi, which is reported to launch an initial public offering this year, aims to double overseas revenue in 2018 by expanding in India and Europe. It’s also “seriously preparing” to enter the US market, Xiaomi Chairman Lei Jun said last month.

Foreign banks see assets gain 13% in 2017

Wed, 01/17/2018 - 17:01
THE assets of foreign banks in Shanghai saw year-on-year growth of 13 percent in 2017, while their bad-loan ratio stood below the industry’s average, the banking regulator said yesterday. Overseas banks in Shanghai recorded 1.56 trillion yuan (US$243 billion) in assets at the end of 2017, accounting for 10.6 percent of the city’s entire banking sector, according to the Shanghai Office of the China Banking Regulatory Commission. The non-performing loan ratio of foreign banks in Shanghai stood at 0.34 percent at the end of last year, below the industry’s average of 0.57 percent and down 0.17 percentage points from the first half of 2017. Overseas banks and their Chinese counterparts jointly launched 13 projects worth 89.5 billion yuan last year to deepen their cooperation. The city’s foreign banks have also seen 671.7 billion yuan in outstanding loans to Chinese clients involved in the Belt and Road initiative. Meanwhile, they backed the development of local science and technology firms. Data from the regulator showed these banks had served 440 such firms by the end of the third quarter of 2017, up 43.8 percent from the start of the year. The outstanding loans to these clients topped 14 billion yuan at the end of September, up 53.9 percent from the start of 2017. Shanghai was home to 230 foreign banking institutions from 29 countries and regions at the end of last year, the regulator said.

Volkswagen sells record 10.7m vehicles

Wed, 01/17/2018 - 17:01
Volkswagen said yesterday that it sold a record number of vehicles in 2017, putting it on track to hold on to the title of world’s largest carmaker two years after its “dieselgate” emission scandal.Some 10.7 million vehicles from VW or its subsidiaries ranging from Porsche and Audi to Skoda and Seat rolled out of dealerships last year — an increase of 4.3 percent over the previous year, the carmaker said.“We are grateful to our customers for the trust these figures reflect,” Chief Executive Matthias Mueller said.VW’s sales look likely to outstrip Japanese rival Toyota’s, which is expected to stand at around 10.35 million units.Nevertheless, the Wolfsburg-based group is still facing a growing challenge from the Renault-Nissan-Mitsubishi alliance, which also laid claim to the top spot yesterday.Its chief Carlos Ghosn told the French national assembly that, excluding trucks, Renault-Nissan-Mitsubishi sold 10.6 million vehicles worldwide last year.“The alliance is the world’s biggest carmaker, that’s just been confirmed,” Ghosn said, arguing that the VW figure included 200,000 heavy trucks, which shouldn’t be included in the total.VW’s strong performance underlines its recovery from the blow it was dealt two years ago, when it admitted in September 2015 to cheating regulators’ emissions tests on millions of diesel cars worldwide.It has since begun to rebuild its reputation in some of the world’s most important markets, with Chinese sales adding 5.1 percent to 4.2 million vehicles last year and US sales rising 5.8 percent to 625,000 vehicles.Growth was more spectacular in South America, at 23.7 percent, but sales only reached 522,000 units in absolute terms.Meanwhile, sales in Central and Eastern Europe including Russia increased by 13.2 percent to 745,000 vehicles.But growth in Western Europe was more sluggish, with shipments up 1.4 percent at 3.6 million units.Looking to the group’s different brands, generalist VW booked an increase of 4.2 percent to 6.2 million units, while Skoda added 6.6 percent to 1.2 million and Seat 14.6 percent to 468,000 units.Luxury Porsche shipped 246,000 cars, up 3.6 percent year on year, while Audi fell behind high-end rivals BMW and Mercedes-Benz, with 0.6 percent growth to 1.9 million vehicles sold.Truckmaking units MAN and Scania both grew 11.6 percent.

Luxury market to continue growth

Wed, 01/17/2018 - 17:01
CHINA’S luxury market is expected to grow by low double digits in 2018 after posting the highest expansion in the past five years in 2017, with market momentum still vibrant. Bain & Co said in its 2017 China Luxury Report yesterday that new consumers — those aged between 20 and 34 — were major contributors to the luxury market’s growth last year. Chinese spending in the domestic luxury market grew 20 percent to 142 billion yuan (US$22 billion) last year, outpacing purchases overseas. Luxury spending from China contributed to 32 percent of the global luxury market over the past year, with renewed consumer confidence and narrowing price gaps for luxury goods between overseas and domestic markets contributing to the spending boom. Compared with mature consumers, millennials start purchasing luxury goods at an earlier age and buy more frequently. They purchased an average of eight times last year, compared with five times for other buyers. Cosmetics, women’s wear and jewelry were the top categories, and sales of them surged over 20 percent annually, surpassing the growth of other categories. “In response to the booming appetite of millennials, we’re seeing luxury brands repositioning themselves to better reach this influential demographic group, particularly through digital media that we know plays an influential role in shaping younger consumers’ opinions about luxury and fashion,” said Bruno Lannes, partner at Bain’s China office and author of the report. Although they saw a high growth rate, online channels only contributed to 9 percent of overall sales. That’s expected to continue to pick up in the future, with more brands planning to open their proprietary websites. The report said creating “newness” and offering innovative ideas will be important if brands hope to capture the new generation of consumers. Brands should also consider partnering with fashion icons and keep a “trendy” image, the report said, to cater to the individualism of millennials.

Wall Street on a roll since Trump elected president

Wed, 01/17/2018 - 17:01
THE bronze sculpture of a bull that stands near the New York Stock Exchange serves as a symbol of Wall Street’s power perhaps this year more than ever. Since US President Donald Trump took office a year ago, the principal US stock indexes have gained by leaps and bounds, hitting a record string of records. “I have not seen such enthusiasm on Wall Street since Ronald Reagan,” said Peter Cardillo of First Standard Financial, who has seen nine US presidents come and go since 1971, when he started working at the heart of global finance. In 2017, the S&P 500 soared 19.4 percent while the blue-chip Dow Jones Industrial Average gained 25 percent and the tech-heavy Nasdaq added 28.3 percent — the strongest performances since 2013. Only two other presidents, Democrats Barack Obama and Franklin Roosevelt, saw higher gains in the broad-based S&P 500 during their first years in office. Analysts say euphoria over the tax overhaul that slashed corporate rates, which Trump signed last month, fed Wall Street’s buying frenzy, along with rising prosperity and job creation after a decade of slow economic recovery. “We got a very generous tax cut and of course it favors corporate America and so basically that means that we’re going to see capital investments rise at a hefty pace, and that could create more jobs,” Cardillo said. After the tax package was enacted in December, some companies wasted no time in announcing pay raises and rosy earnings — including automaker Fiat Chrysler, commercial banking giant Wells Fargo and global retailer Wal-Mart. But many companies have said the windfall will go to increased payments to shareholders and share buybacks rather than more investments and job creation. In addition to the Christmas present of tax cuts, Trump’s pro-business attitude has comforted investors. ‘Not related to Trump’ “Around him, the people in charge of the American economy come directly from Wall Street and Goldman Sachs,” said Gregori Volokhine, president of Meeschaert Financial Services. That includes senior White House economic advisor Gary Cohn and Treasury Secretary Steven Mnuchin, among others. “It’s a team of insiders. Donald Trump lets things happen and what happens is market friendly.” Those welcome signals from the White House come against the backdrop of steady economic expansion, with the US economy growing every year since 2010, fueling the good mood on Wall Street. Trump and his team are seen as having given the economy a “boost,” Cardillo said, noting that “the US economy and job creation were already robust before him.” But the healthy US outlook is also part of a bigger, global picture. The International Monetary Fund estimates the world economy will grow by 3.7 percent this year after expanding by 3.6 percent in 2017, further lifting demand for US exports. And as Volokhine noted, “last year, the most successful financial markets in the world were Argentina, Nigeria and Turkey. “It was obviously not related to Donald Trump.” Underscoring the impact of global conditions on the US economy, he noted that the 55 percent of American companies on the S&P 500 that are export-dependent have become even more competitive due to the weakening of the US dollar, which fell nearly 10 percent last year. Meanwhile, individual investors, who are cautiously dipping their toes back into American stock markets after suffering so heavily in the financial meltdown of 2008, seem largely unconcerned by Trump’s penchant for controversy. “Everything he does is not perfect but Donald Trump does what he promised,” said Steven Kinney, who has been investing on Wall Street for four years.

Shanghai stocks hit new high as HK breaks record

Wed, 01/17/2018 - 17:01
HONG Kong stocks hit an all-time high yesterday, breaking a record that had been in place for more than 10 years, while the Shanghai Composite Index ended higher for a second day, refreshing a two-month high and extending the strong performance since late December. But most other major Asia markets fell into the red with energy firms hit by a dive in oil prices. The US dollar rebounded from morning losses to extend Tuesday’s recovery though Bitcoin was well down following what one analyst called a “cryptocalypse” that saw digital currencies take a hammering. Hong Kong’s Hang Seng Index spent most of the day in negative territory after ending at a record-high close on Tuesday. But late buying saw shares stage a recovery to finish up 0.3 percent at 31,983.41 — overtaking its previous high seen on October 30, 2007. The HSI surged by a third in 2017 and has continued its stellar run at the start of the new year, with a record 14-day winning streak only ending on Monday. Analysts now expect the index to press on with its advance to as high as 34,000 by the end of the year. The Shanghai Composite hit the highest level since the end of 2015 during the morning session, but later edged down to 3,444.67, the highest close since November 13, 2017, and up 0.24 percent from Tuesday. The strong rally from December 28 has sent the index higher by 5.2 percent. Large caps listed in Shanghai led the gains as 36 of the 50 largest listed companies by market value rose. However, most other markets in the region tracked losses on Wall Street, where investors returned from a long holiday weekend to political horse-trading as Washington lawmakers struggle to avert a crippling government shutdown. While a deal to fund programs is expected to be met by tomorrow’s deadline, the uncertainty provided an opportunity to cash in after all three main indexes hit peaks last week. The retreat also comes after a blistering start to the year for equity traders, and Hartmut Issel, head of Asia-Pacific equity and credit at UBS AG Wealth Management in Singapore, told Bloomberg Television that “it’s more of a healthy correction” in stocks. “The last two and a half weeks have been very strong and in some cases we were really wondering if you extrapolate this another three or four weeks we would have exhausted the potential we saw for the entire year.” Tokyo shed 0.4 percent on a stronger yen, while Sydney fell 0.5 percent, Singapore slipped 0.4 percent and Seoul fell 0.3 percent. However, there were gains in Manila and Wellington. Among the big losers were energy firms after both main oil contracts sank more than 1 percent as expectations of falling US stockpiles were overshadowed by worries that Russia is considering ending its role in an output freeze with OPEC. PetroChina, CNOOC and Sinopec in Hong Kong all lost more than 1 percent while Japan’s Inpex was 1.2 percent lower. Rio Tinto tumbled more than 3 percent in Sydney, where Woodside Petroleum lost 0.5 percent. On forex markets the dollar pressed on with a small recovery against its major peers after falling to a three-year low against the euro. But analysts say a move globally toward tighter monetary policy could keep pressure on the greenback. “Expectations are increasing that other ... central banks are readying to enter a path of interest rate normalization, with the European Central Bank and Bank of Japan joining (the Federal Reserve) spearheading the shifting central bank narrative for 2018,” said Stephen Innes, head of Asia-Pacific trading at OANDA. ‘Cryptocalypse’ However, Bitcoin was down almost 8 percent at US$10,900, according to Bloomberg data, having slumped around 15 percent on Tuesday as the volatile cryptocurrency market continues to suffer broad losses. The selling spread to other alternative digital units, with Ethereum, Ripple and Litecoin all losing about a quarter of their value on Tuesday. Bitcoin is down from record highs approaching US$20,000 in the week before Christmas, having rocketed 25-fold over the year, hit by concerns about a bubble and worries about crackdowns on trading it. “It’s been a Cryptocalypse overnight with Bitcoin and other virtual currencies coming under heavy selling pressure,” said Greg McKenna, chief market strategist at AxiTrader. But Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers, sounded a slightly positive note, saying: “Not all hope is lost. The cryptocurrency market is privy to these wild swings and seasoned veterans in this space have seen this happen many times previously. “Not saying that it couldn’t be different this time but every major correction has been followed up by a rally more powerful than the last.”

In pursuit of blue sky, carbon trading looms

Wed, 01/17/2018 - 17:01
China, the world’s largest emitter of greenhouse gases, wants to shed that unwelcome status by becoming the world’s largest market in carbon trading.The process began with pilot projects in 2013, leading up to a trading start in 2020. The initial trading will be limited to the power industry.Under the program, power companies will be given carbon quotas, or credits. Those who emit below their quotas can sell unused credits to companies that pollute beyond quotas.The 1,700 power plants included in the first round of trading emit an aggregate 26,000 tons of carbon dioxide a year, the equivalent of burning 10,000 tons of coal, said Li Gao, director of climate change at the National Development and Reform Commission.In the future, the trading system will be expanded to include steel, chemicals, building materials, papermaking and nonferrous metals.Coal power plants were the first to be targeted because they account for a third of all carbon emissions. Coal burning has been fingered as a prime culprit in blanketing northern cities in smog every year. The number of coal plants in China fell to 7,000 by the end of 2017 from 10,800 in 2015 amid industrial restructuring that closed the most inefficient plants. Still, new coal plants are being built because “the business is still profitable because of relatively low coal prices,” said James Zhou, an employee at a state-owned power plant.But day by day, plants like that will “face higher costs, especially after carbon trading starts,” said Li Chen, operational director of Shanghai Carbon Favor New Energy Technology Development Co. “They have to pay more every year because carbon trading won’t end.”Li Chen specializes in carbon management. He welcomes the advent of carbon trading. “It has finally come!” he said. “The government has shown its serious ambition to create the world’s largest carbon trading market.”Pilot projects in the carbon-trading scheme began in 2013 and concluded at the end of last year. Nearly 3,000 companies and public institutions in China traded 197 tons of carbon valued at 4.5 billion yuan (US$700 million) through last September 30. The Shanghai municipal government, which was part of the pilot program, expanded the number of companies included in the project to 279 last year from 197 in 2013. It is now urging all listed companies to include carbon emission data in their annual reports.Though actual carbon trading is still two years away, its specter looms large. Many companies are beginning to realize they will have no choice but to adapt.Li Chen recalls the time five years ago when a materials company asked his firm to calculate its carbon emissions to see how it compared with other industries on environmental protection. But the interest was short-lived.“They quit us soon after,” he said. “At that time, the calculation was meaningless to most clients as the trading hadn’t started. They would say to us, ‘Even if I can prove the new product saves more carbon, so what? I can barely make profit from it.’”But Li Chen said more companies are coming to his offices nowadays seeking information on carbon trading as the start year approaches. He said his firm did a carbon assessment for a Zhejiang-based nonferrous metals company, which resulted in the installation of solar panels and turned losses into profits. “Companies are realizing that that they will have to pay for their carbon footprint in the future,” he said. “And we are not talking about a one-year cost. It will have to be part of their long-term business strategies.”Carbon trading is expected to give a big boost to renewable energy industries and create new jobs.Xu Liang, who earned a master’s degree in environmental governance in Germany eight years ago, said he switched to the recycling industry from carbon emissions management in China because he didn’t see much progress in that industry at the time.“But now,” he said, “I would urge people to study environmental engineering because the time is ripe for change.” Good as it all sounds, reducing carbon emissions has not proven easy worldwide.Carbon prices in the European Union’s cap-and-trade system dropped to about five euros (US$5.29) at the beginning of 2017 after years of trading stagnation. Experts said the price of carbon dioxide should be about US$30 a ton, and they blamed an excessive issuance of credits for damping the market. In China’s carbon-trading pilot cities, the price of carbon has ranged from 60 yuan a ton in Beijing to 5 yuan in Chongqing.Jiang Zhaoli, deputy director of the climate change division at the National Development and Reform Commission, said the ideal carbon price in the future should be between 200 and 300 yuan a ton.“Below that,” he said, “companies won’t feel the pressure and will have little motivation for trading. China must develop standards for issuing quotas.”Li Chen said the mechanics of the carbon trading market changes are complex and more refinement is needed to ensure smooth implementation. But he remains optimistic.“This step toward blue skies,” he said, will “spur market players to speed up preparations for the coming changes.”

Germany adds yuan to reserves

Tue, 01/16/2018 - 17:01
GERMANY’S central bank has said it will include the Chinese yuan in its reserves, giving another boost to China’s drive to internationalize the currency. The Bundesbank said its board had decided in July to invest in the yuan to take account of its growing importance globally, though it did not say when it would begin to include it or how much it would purchase. “The decision to accept the yuan is part of a long-term diversification strategy and reflects the growing role of the Chinese currency in the world financial system,” Bundesbank board member Joachim Wuermeling said. The German central bank regularly reviews the composition of its currency reserves “by weighing risks and benefits,” Wuermeling said. “In addition to dollars and yen, (the bank) has invested in Australian dollars since 2013 and seeks to invest in other currencies.” The move comes after the European Central Bank in June converted 500 million euros’ worth of its US dollar reserves into yuan. China was Germany’s top trade partner in 2016, ranking first in the European country’s imports and fourth as an export destination. The Bundesbank’s currency reserves totaled some 170 billion euros (US$210 billion) in November. The yuan has increased its global clout in recent years, and in September 2016 it joined the US dollar, pound, yen and euro in the IMF’s elite “special drawing rights” reserve currency basket.

Shenzhen to abolish border around SEZ

Tue, 01/16/2018 - 17:01
SHENZHEN will remove the barrier that was set up more than three decades ago to mark the boundary of the Shenzhen Special Economic Zone. The State Council has approved the removal of the barbed wire fence that runs more than 80 kilometers around the core of Shenzhen, in a move to foster the city’s integration. In a guideline, the State Council urged the city government and the provincial government of Guangdong to take the opportunity to optimize the city’s layout and land use, improve its public transport and better protect the environment. Analysts say the decision to scrap the boundary indicates further integration of Shenzhen and sends a positive message on regional development. In 1980, Chinese authorities carved out a 327-square-kilometer special economic zone from Shenzhen and implemented preferential economic policies there in a bid to attract foreign investment and boost exports. Two years later, a boundary line and several checkpoints were set up around the zone. Residents outside the zone had to apply for a special permit to enter the area. However, the role of the boundary line faded over time as two sides of the border became more integrated. In 2010, the central government expanded the special economic zone to the whole city, making the line existing in name only.

Political pressure hits AT&T-Huawei deal

Tue, 01/16/2018 - 17:01
US lawmakers are urging AT&T, the No. 2 wireless carrier, to cut commercial ties to Chinese phone maker Huawei and oppose plans by telecom operator China Mobile to enter the US market over so-called national security concerns, two congressional aides said. China calls for a fair operating environment for its companies. Earlier this month, AT&T was forced to scrap a plan to offer its customers Huawei handsets after some members of Congress lobbied against the idea with federal regulators, sources said. The lawmakers are also advising US firms that if they have ties to Huawei or China Mobile, it could hamper their ability to do business with the US government, one aide said, requesting anonymity. One of the commercial ties senators and House members want AT&T to cut is its collaboration with Huawei over standards for the high-speed next-generation 5G network, the aides said. Another is the use of Huawei handsets by AT&T’s discount subsidiary Cricket, the aides said. Chinese foreign ministry spokesman Lu Kang said yesterday that he did not know anything about the details of the commercial cooperation cases, but added China hopes other countries would provide a fair operating environment for Chinese companies. “We hope that China and the United States can work hard together to maintain the healthy and stable development of trade and business ties. This accords with the joint interests of both,” Lu said in Beijing. Huawei said earlier this week that it sells its equipment through more than 45 of the world’s top 50 carriers and puts the privacy and security of its customers as its top priority. In 2012, Huawei and ZTE, a Chinese telecom equipment maker, were the subject of a US investigation into whether their equipment provided an opportunity for foreign espionage and threatened critical US infrastructure — a link that Huawei has consistently denied. US lawmakers do not want China Mobile, the world’s biggest mobile phone operator, to be given a license to do business in the US, the congressional aides said. China Mobile applied for the license in 2011, and the application is pending before the Federal Communications Commission. Huawei and Chinese telecom firms have long struggled to gain a toehold in the US market, partly because of US government pressure on potential US partners. Two Republican lawmakers, Michael Conaway and Liz Cheney, unveiled a bill this week that bars the US government from using or contracting with Huawei or ZTE.

ODI falls but rational sentiment wins

Tue, 01/16/2018 - 17:01
CHINA’S non-financial outbound direct investment dropped nearly 30 percent in 2017 from a year ago but the decline signaled a more rational investment sentiment, the Ministry of Commerce said yesterday, adding that economic cooperation with Belt and Road countries deepened. Chinese mainland investors injected US$120 billion in 6,236 non-financial enterprises in 174 countries and regions last year, the ministry said. That compared with a record US$170 billion investment in 2016, when the authorities warned of “irrational tendency” and started to impose stricter rules on overseas investment. The State Council, China’s Cabinet, in August clarified that overseas investment in real estate, hotels, cinemas and entertainment would be limited, while that in sectors such as gambling would be banned. Investment in countries involved in the Belt and Road initiative totaled US$14.4 billion in 2017, the ministry said. Belt and Road deals accounted for 12 percent of total investments in 2017, up 3.5 percentage points from a year earlier. The ministry said investment mainly flowed to leasing, commercial services, retail, manufacturing and information technology sectors. The ministry did not report new investment in property, sports or entertainment. Chinese companies sealed 341 merger and acquisition deals valued at US$96.2 billion across 49 countries and regions last year. The commerce ministry also said foreign direct investment in China totaled 877.56 billion yuan (US$136.3 billion) last year, up 7.9 percent year on year. The business environment for foreign companies has improved last year after measures, including wider access, financial support, greater protection of foreign companies’ rights, and better government services, were implemented, the ministry said.   FDI in the high-tech and service sectors grew strongly and the increase was rapid in China’s western regions, the ministry added. It said FDI in China is expected to be stable this year.

HKEx ponders rule change

Tue, 01/16/2018 - 17:01
Two bull statues are situated outside the Hong Kong stock exchange building in the city. Hong Kong Exchanges & Clearing Chief Executive Charles Li said yesterday that HKEx is preparing for a market consultation, expected to start after the Spring Festival, on a rule change, which will allow biotechnology companies without revenue and other new-economy companies with dual-class shares to list in Hong Kong in the second half of this year. After the consultation is completed, HKEx plans to announce the new rules in early June and start to accept applications for listing from new-economy companies by the end of the month, Li said.

Realty, brewer shares boost key index

Tue, 01/16/2018 - 17:01
REAL estate companies and brewers boosted Shanghai shares yesterday as investors were buoyed by new property policies and investments in brewers. The Shanghai Composite Index gained 0.77 percent to 3,436.59 points, the highest since November 13. Real estate developers Greenland Holdings Corp and Shanghai Ya Tong Co both jumped by the daily limit of 10 percent to 10.13 yuan (US$1.57) and 10.92 yuan respectively. Real estate companies benefited from news that China would allow non-real estate enterprises and villages to build houses on the land they own to boost housing supply. Shen Meng, director of domestic investment bank Chanson & Co, said the policy would continue to bolster the shares of real estate firms in the coming months on expectations that the industry would be energized in the long term. There was also investor interest in brewers after conglomerate Fosun became the second-largest stakeholder of Tsingtao Brewery Co by buying its Hong Kong-listed shares. Investor sentiment was further fueled on news that Shanghai Chongyang Investment Co bought shares of Beijing Yanjing Brewery Co. Shares of Chongqing Brewery Co surged 7.08 percent. Shen expected brewers to be one of the most stable sectors in the Chinese mainland food and beverage market amid capital inflows.

GAC to scrap name sounding like Trump for US market

Tue, 01/16/2018 - 17:01
Chinese automaker GAC Motor will scrap the brand name it uses in China when it enters the US market next year because it could be confused with US President Donald Trump’s surname.For the past eight years, GAC has sold cars and SUVs under the brand Trumpchi in its home market, but is now researching new names before the company’s expected US debut in the fourth quarter of 2019.“We want to provide the best service for American customers, so we want to not be closely linked with politics,” Wang Qiujing, president of GAC Engineering Institute China, said through an interpreter in an interview at the Detroit auto show. “This is the reason we want to rename the brand.”GAC, which stands for Guangzhou Automobile Group Co, picked the Chinese name Trumpchi in 2010, well before Trump was elected. The similarity to Trump is just a coincidence, Wang added. GAC will continue to use Trumpchi in China, where the word means legend and good fortune.GAC’s first vehicle in the United States will be the GS8, a loaded-out full-size SUV that will cost US$35,000. Two more vehicles are being researched for US sales, but have not been selected yet.The company showed seven different models on a video and unveiled two more at the Detroit show. One is a gull-wing compact electric SUV called the Enverge, which is still in the concept phase. The automaker says it will go nearly 600 kilometers on a single charge. Also unveiled was the GA4 midsize sedan that will go on sale in China later this month.The GS8 would be comparable to a big luxury SUV, many of which go for above US$60,000. Wang said he didn’t know what the brand’s lowest-price vehicle would be in the US.GAC sold just over 500,000 automobiles in China last year, up 37 percent from 2016.The company says it is negotiating with partner Fiat Chrysler about possible distribution of vehicles. Wang said GAC is the top-ranked domestic brand for initial quality in China in JD Power and Associates surveys, and it ranks fourth or fifth when joint ventures with foreign automakers are included. He says the company’s vehicle quality will be ready for US buyers, and it will work with US partners to meet stricter US safety standards.Chinese automakers are advanced and have expertise in mass production but the American market may not be ready yet to accept GAC, said Jake Fisher, Consumer Reports’ director of auto testing.“There will be Chinese automakers at the top of the market and at the bottom of the market, and it will be very interesting to see how they are received,” he said.GAC already has a research center in Silicon Valley and is working on another one in Detroit, as well as a Los Angeles design center. Initially it will import vehicles from China but depending on sales, plans to build a factory in the US.

Yunnan Capital secures funds to repay trust loans

Tue, 01/16/2018 - 17:01
A state-owned investment company in Yunnan that defaulted last month on two trust loans has secured financing to repay those loans and is set to get 2 billion yuan (US$311 million) in additional equity capital from the provincial government.Yunnan State-Owned Capital Operation Co, fully owned by the provincial government’s state asset regulator, obtained the cash to repay the loans through one-month loans from three institutions, Liu Gang, the company’s chairman, said in a telephone interview.Liu declined to name the institutions providing the funds.On December 15, Yunnan Capital missed payments of more than 900 million yuan, representing principal and interest, that it had borrowed through two trust products issued by Zhongrong International Trust, two sources said on Monday.In an e-mailed statement yesterday, Zhongrong International said it had received full repayment for the two loans, including principal and interest. The Harbin-based trust company did not provide further details.The missed payments were the first known default of off-balance sheet, or shadow, loans borrowed by local governments, they said.The case is closely being watched by investors and lenders concerned that China may be entering “a year of defaults” for off-balance sheet local government borrowing, one of the sources said.The Yunnan provincial government also is set to inject 2 billion yuan in the state-owned investment company, according to Liu of Yunnan Capital.Those missed payments came amid growing fears that financing vehicles used by local governments throughout China, often for projects that ran up large amounts of debt, may start to default this year.Liu said Yunnan Capital was a platform to manage provincial state assets and carry out reforms at provincial government-owned companies. He said the anticipated capital injection had nothing to do with the loan repayments.But, according to an internal memo from the trust company and two sources with knowledge of the matter, the capital injection promised by the provincial government was to be used to help with the loan repayments.The government capital injection to help the company repay loans, if it moves forward, could also indicate potential violations of the central government’s ban that prevents local governments from providing implicit guarantees for local government financing vehicle debt, they added.Yunnan Capital’s Liu confirmed the government’s capital injection plan but denied any relationship between it and the loan repayments. He said he did not consider his company to be a local government financing vehicle.“Last week, Yunnan held four local governments accountable and punished a bunch of people for providing illegal guarantees — an activity that is not in line with the spirit of the central government,” he said.He said the 2 billion yuan capital injection from the government was aimed at boosting the company’s capital strength and was pending budget approval by the provincial National People’s Congress which will convene later this month.Ivan Chung, head of credit research and analysis for China at Moody’s Investors Service, said he expects the number of defaults by local government financing vehicles to increase in 2018 and 2019.Thousands of financing vehicles have been created by local governments in recent years to fund large state-driven projects and hit economic growth targets.They have taken on trillions of yuan in debt from banks, the bond market and shadow lenders such as trust firms, helping local governments bypass the central government’s limits on borrowing. Much of the debts come with implicit local government backing.China has increasingly cracked down on such debt-raising activities, stressing that it will not bail out local governments that run into financial difficulties.One central bank researcher said recently that some cities should be allowed to go bankrupt like Detroit.Since late 2014, the central government has tried to address the situation of surging local government debt by revising the Budget Law, launching a municipal bond market, and stripping local government guarantees from debts held by local government vehicles.At its annual economic conference in December, China’s top leadership decided to take concrete measures to strengthen the regulation of local government debt in 2018.

Reforms over who can build homes

Tue, 01/16/2018 - 17:01
CHINA will work on plans to allow non-real estate companies to build residential properties on land parcels to which they have acquired rights of use. The government will also no longer be the sole provider of residential plots, Minister of Land and Resources Jiang Daming told a national land resources work conference held on Monday. Trials on building rental housing on rural land, currently being conducted in more than a dozen Chinese cities, will be deepened as the country steps up efforts to put in place a housing system that ensures supply from multiple sources, provides housing support through multiple channels and encourages both house purchases and rental, Jiang said. China has already launched pilot programs in 13 major cities, including the gateway cities of Shanghai, Beijing and Guangzhou as well as lower-tier cities such as Shenyang, Nanjing, Chengdu and Foshan. The aim is to allow collective rural economic organizations to build and rent housing on rural land themselves or through joint ventures, the Ministry of Housing and Urban-Rural Development said in a statement posted on its website in late August. “Different types of land suppliers will likely prompt different types of entities in land development and property operation, as well as different forms of cooperation,” said Zhang Yue, chief analyst with Shanghai Homelink Real Estate Agency Co. “This will help relieve housing supply shortage and leave an impact, particularly on the rental market.” Under the country’s current land administration system, real estate developers can only acquire land plots designated for housing development from the government. Rural land parcels of collective ownership are not allowed to be sold in the public market until they are expropriated by the government and turned into state-owned plots. Yan Yuejin, research director at E-House China R&D Institute, said the statement by the minister suggests that the central government is actively seeking new sources to increase land supply for rental housing that has become a new focus in the country’s building of a new housing system. “The country is exploring new channels to raise land supply for rental units by giving the go-ahead to non-state owned land plots to enter the market,” Yan said. “This will help accelerate the pace of land supply in large cities, particularly in their suburban areas.” In Shanghai, where the local government has earlier announced a target to add 700,000 leasing units during the five-year period through 2020, building rental housing on rural land must be a key channel to ensure future supply, according to Zhang. “It seems almost impossible to achieve the 700,000-unit target if land plots designated for residential leasing purpose are the only source,” Zhang added. From last July to December, the city added or plan to add a total of around 41,000 rental units to supply, including 30,000 apartments to be built on 29 land parcels designated solely for residential leasing purposes, Xu Yisong, director of the Shanghai Planning, Land and Resources Administration, told a municipal press conference this month.

Regulators cast shadow over dubious loans

Tue, 01/16/2018 - 17:01
CHINA’S economy has steadily become more debt-ridden. Governments, households, companies and institutions borrow money to make more money, but concern is mounting that it all may be at a tipping point. The ratio of debt to gross domestic product has grown since the 2008 global financial crisis, prompting a shift in official policy to “bubble deflating,” according to Zhou Hao, a senior economist for emerging markets at Commerzbank. The resulting brakes on debt accumulation have weighed heavily on the banking industry, which relies on lending for profits. Where does that leave banks going into a new year? Financial risk control is certain to remain a priority in 2018. It was listed among the “three tough battles” by the top decision-makers at the Central Economic Work Conference. Regulators have proposed a slew of new regulations to fend off risk. In November, the People’s Bank of China drafted new rules for the asset management industry, aiming to reduce financial leveraging and arbitrage. They prohibit managers in the 60 trillion yuan (US$ 9.3 trillion) asset management market from promising investors a guaranteed rate of return and stipulate that financial institutions must offer yields based on the net asset value of the products they are selling. Against that backdrop, commercial banks have to make changes, said Wei Jiyao, an analyst at financial planning research firm PY Standard. Parts of the asset management sector fall into the country’s “shadow banking” system, which has been largely unregulated. Banks and regulators are now discussing the proposed new rules, and there may be some compromises, according to May Yan, head of China Financials at UBS investment research. “After all, a sharp contraction in the shadow banking system might have a big impact on the economy,” she said. “The government needs to strike a balance.” A reallocation of assets may benefit the insurance sector. Kelvin Chu, director of Asian insurance and diversified financials at UBS, predicts that insurers will have “more space” to compete with banks in the realm of long-term asset management products. The government’s determination to rein in runaway lending practices is beginning to bite. The China Banking Regulatory Commission said in a statement last weekend that long-term efforts are needed to tackle “disorder and chaos” in the industry. Oversight of the shadow banking system and interbank activities sits at the top on its agenda. In January, the watchdog published new measures to increase scrutiny over the shareholdings of commercial banks to rein in abuses related to major shareholders. That was followed by a notice banning banks and other institutions from extending loans via entrusted loan accounts, a popular form of shadow banking. Reducing debt will continue this year, but the pace may slow in the interest of keeping the market liquid, said Raymond Yeung, chief economist of China at Australia & New Zealand Bank. Banks should stick to their core businesses and not get involved in the chaos that has marked sections of asset management, he added. Robin Xing, Morgan Stanley’s chief China economist, predicted that the central bank will raise interest rates on loans and deposits in the third quarter. “The move would at least help divert people from investing in wealth management products and attract money back onto bank balance sheets,” he added. Banks need to strengthen their capital bases via equity and bond issues to meet new regulatory requirements, said Commerzbank’s Zhou. It’s a big challenge for banks to improve their liquidity management, according to Qu Tianshi, a markets economist at Australia & New Zealand Bank (China). Previously, banks used to extend loans without enough consideration toward liabilities, he noted. Now they had better think twice about how to allocate assets. He added that banks should return to their core function as “capital intermediaries.” Looking ahead, Gao Ting, chief China strategist at UBS Securities, predicts that big state-owned lenders will outperform their mid-cap and smaller peers in terms of profitability. “Liquidity tends to be tight in the market, which will push up interbank rates and thus the funding costs of smaller lenders,” he added. Those lenders should concentrate on business aimed at smaller companies and on retail banking, industry observers said. All the banks seem intent on increasing investment in information technologies, according to a recent survey by the China Banking Association and PricewaterhouseCoopers, an accounting and auditing firm. China Industrial Bank, a mid-sized joint-stock lender, recently teamed up with Microsoft China to create smart banking capabilities.

UK contractor Carillion collapses, putting thousands of jobs at risk

Mon, 01/15/2018 - 17:01
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.”

Suburbs drive rally in new home sales

Mon, 01/15/2018 - 17:01
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.”

Central SOEs post rosy picture

Mon, 01/15/2018 - 17:01
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.

Bigger pay raise in forecast

Mon, 01/15/2018 - 17:01
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.

HNA faces woes as airlines delay leasing payments

Mon, 01/15/2018 - 17:01
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 may end A380 output as no new orders in 2 years

Mon, 01/15/2018 - 17:01
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, Lego eye kids’ social network

Mon, 01/15/2018 - 17:01
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.

China FTZs ease rules for foreign firms

Sun, 01/14/2018 - 17:01
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.

Pickups and SUVs set to grow in US car market

Sun, 01/14/2018 - 17:01
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.

Warning about risks from IMOs

Sun, 01/14/2018 - 17:01
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 to enhance scrutiny on banks

Sun, 01/14/2018 - 17:01
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 port sees profit rise

Sun, 01/14/2018 - 17:01
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.

Bidding farewell to the heyday of whopping returns, rampant risks

Sun, 01/14/2018 - 17:01
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.”

Hang on for the digital ride of our lives

Sun, 01/14/2018 - 17:01
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%

Whither the yuan? Subdued but solid

Sun, 01/14/2018 - 17:01
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.”

Great expectations in uncertain times

Sun, 01/14/2018 - 17:01
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 up strongly

Thu, 01/11/2018 - 17:01
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.

Sony’s ‘aibo’ robot boasts AI, Internet

Thu, 01/11/2018 - 17:01
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 plans to lift stores to 40

Thu, 01/11/2018 - 17:01
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.

Forex scare report may be ‘fake news’

Thu, 01/11/2018 - 17:01
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.

Shanghai’s sales of pre-occupied homes fall 57%

Thu, 01/11/2018 - 17:01
SALES of pre-occupied homes more than halved in Shanghai last year while prices fluctuated moderately as local authorities strictly enforced tightening policies to quell speculation, hitting buyers’ sentiment. The Shanghai Existing House Index Office said in a report today that stability would be the key word for 2018 as the rein-in policies are expected to be maintained. Around the city, about 147,700 pre-owned houses changed hands in 2017, a plunge of 56.6 percent from 2016, the office said. In December, around 12,100 units of pre-owned homes were sold, up 5.2 percent from November and a year-on-year drop of 8.5 percent. The index, which tracks month-over-month price changes in 130 areas, dipped 0.17 percent from November to 3,991 last month. That marked a year-over-year drop of 0.13 percent, according to the office. “The monthly price index remained generally flat last year with only moderate fluctuations being recorded over the past 12 months,” the office said. “Looking forward, stability would be the key word for 2018 as no major relaxations on rein-in policies should be anticipated soon while the central government is stepping up its efforts to work on a long-term mechanism that aims to guarantee healthy development of the country’s real estate market.” Meanwhile, pre-owned homes costing between 3 million yuan (US$459,467) and 5 million yuan took up 23.2 percent of the total sold in 2017. Those costing between 5 million yuan and 10 million yuan accounted for 10.1 percent while pre-occupied homes priced at over 10 million yuan grabbed nearly 3 percent, the office’s data showed. Around 124,529 pre-owned homes were available for sale around the city by the end of December, a month-over-month fall of 6.1 percent and a year-over-year drop of 27.3 percent. By proximity to the city center, some 25,748 units were located within the Inner Ring Road, a fall of 7.5 percent. That compared to 63,400 units between the Inner and Outer Ring roads, down 6.2 percent, and 35,381 units beyond the Outer Ring Road, down 5.1 percent from the same time a year earlier. “Continuously tight policies coupled with gradually changing expectations amid the government’s reiterated vows to increase rental supply have kept more home seekers on the sideline,” said Lu Wenxi, senior manager of research at Shanghai Centaline Property Consultants Co. “As a result, more individual owners are starting to offer larger discounts to lure buyers if sluggish momentum continues to linger over the local market.” Currently, buyers of pre-occupied homes could get a 3-to-5 percent discount for medium to low-end houses while a price cut of between 5 and 10 percent is often available for more expensive housing, according to Lu.

Nvidia updates software, says chips not hit by flaws

Thu, 01/11/2018 - 17:01
NVIDIA Corp is updating the software for its graphics processors in response to the Spectre security threat, but its chief executive said on Wednesday its chips were not subject to the same risks as those from Intel and other companies. “Our GPUs are immune,” Nvidia CEO Jensen Huang said, referring to graphics processing units, the chipmaker’s key product. “They are not affected by these security issues.” Huang’s comments illustrate how technology sellers from cloud-based data center providers to anti-virus companies are scrambling to guard against flaws disclosed last week in chips made by Intel and others. Security researchers revealed vulnerabilities, dubbed Meltdown and Spectre, that could let hackers steal passwords or encryption keys from central processing units made by Intel and rivals. CPUs are used on personal computers, smartphones, servers and other devices. The security patches unveiled by Nvidia relate to software drivers that let its chips work with operating systems like Windows. While Nvidia said its GPUs are not flawed, it was updating its drivers because they interact with potentially vulnerable CPUs. It said it had no reason to believe the drivers were troubled by the second flaw, dubbed Meltdown. Intel published data that showed the recent security updates did not have significant performance impact. The data included three generations of processor platforms running Microsoft Corp’s Windows 10 and Windows 7 operating systems, Intel Vice President Navin Shenoy said. While the full extent of devices affected by the flaws is not yet fully known, Cisco Systems has said it has identified 18 vulnerable products and is looking for problems in nearly 30 other products.

China sees slowest rise in auto sales since 2012

Thu, 01/11/2018 - 17:01
China’s auto sales rose 3 percent to 28.88 million vehicles in 2017 from a year ago, the slowest market expansion since 2012, according to data from the China Association of Automobile Manufacturers yesterday.The data revealed the 3 percent growth is lower than an estimated 5 percent growth at the beginning of last year. In 2011, the market grew only 2.5 percent after government ended tax cuts on fuel efficient cars and economic growth slowed. From 2012 to 2016, the growth rate was more than 4 percent annually. China’s auto market surged 13.7 percent in 2016 — a contrast with the weak sales in 2017.“China’s auto market saw minimal growth last year. In 2018, the growth rate of the industry is expected to slow further,” said David Zhang, an independent automotive consultant.CAAM said the auto industry “faced certain pressure in 2017” because of the rise in the purchase tax. The tax for vehicles with engines below 1.6 liters has been raised from 5 percent to 7.5 percent at the beginning of last year, which caused the market sentiment to weaken and resulted in fewer consumers buying small-engine cars.According to data from CAAM, sales of vehicles with engines below 1.6 liters fell over 1 percent to 17.19 million units in 2017 from a year ago.Passenger car sales took up 85 percent of total vehicle sales, with 24.72 million sold in 2017, up 1.4 percent from 2016. Commercial vehicles took up the remaining 15 percent, with 4.16 million units sold last year.

China chips to be used in place of Intel’s

Thu, 01/11/2018 - 17:01
CHINA-DEVELOPED computer chips will be widely adopted in government bureaus and core industries like banks and energy firms, Shanghai-based chip designer Zhaoxin said yesterday. It’s the latest effort by China to improve cyber and technology security nationwide by developing own chips with a high level of security and software amid the furor surrounding security flaws found recently in Intel chips. The chips are developed by Shanghai Zhaoxin Semiconductor Co, and backed by a government fund as well as industry partners including Lenovo Group Ltd. In 2018, Zhaoxin aims to ship about 100,000 to 200,000 computer chips, up from almost 30,000 chips in 2017, said Ye Jun, chairman and chief executive of Zhaoxin. The chip flaws, which affect billions of devices including phones, computers and tablet computers, are due to a fundamental hardware defect that can’t be fixed short of a recall.

Huawei wins patent suit

Thu, 01/11/2018 - 17:01
HUAWEI won a patent infringement lawsuit against South Korea smartphone rival Samsung yesterday, according to information released by a Chinese court. The court ruled in the Chinese company’s favor over two patents involving fourth generation phone technology, according to a notice released through the court’s WeChat account and video of the trial. The judge ordered Samsung Electronics to immediately stop selling or making products using the technology and to pay a small court fee. The ruling did not cite specific phone models. The decision by the Shenzhen Intermediate Court is the latest in a series of deepening patent disputes between the Asian smartphone makers, which have filed lawsuits against each other in the United States and China in recent years. The court said it ruled in Huawei’s favor after finding that Samsung “maliciously delayed negotiations” that began in July 2011 and was “obviously at fault.” Samsung said in a statement that it would “thoroughly review the court’s decision and determine appropriate responses.”

SK eyes ban on cryptocurrency trading

Thu, 01/11/2018 - 17:01
SOUTH Korea’s government said yesterday it plans to ban cryptocurrency trading, sending bitcoin prices plummeting and throwing the virtual coin market into turmoil as the nation’s police and tax authorities raided local exchanges on alleged tax evasion. The clampdown in South Korea, a crucial source of global demand for cryptocurrency, came as policymakers around the world struggled to regulate an asset whose value has skyrocketed over the last year. Justice Minister Park Sang-ki said the government was preparing a bill to ban trading of the virtual currency on domestic exchanges. “There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Park told a news conference, according to the ministry’s press office. After the market’s sharp reaction to the announcement, the Presidential Office hours later said a ban on the country’s virtual coin exchanges had not yet been finalized while it was one of the measures being considered. A press official at the ministry said the proposed ban on cryptocurrency trading was announced after “enough discussion” with other government agencies, including the finance ministry and financial regulators. Once a bill is drafted, legislation for an outright ban of virtual coin trading will require a majority vote of the 297 members of the National Assembly, a process that could take months or even years. The government’s tough stance triggered a selloff of the cryptocurrency on both local and offshore exchanges. Once enforced, South Korea’s ban “will make trading difficult here, but not impossible,” said Mun Chong-hyun, chief analyst at EST Security. “Keen traders, especially hackers, will find it tough to cash out their gains from virtual coin investments in Korea but they can go overseas,” Mun said.

Shanghai shares rise for 10th day

Thu, 01/11/2018 - 17:01
CHINA’S benchmark Shanghai Composite Index rose for a 10th straight trading day yesterday to the highest level since November 22, 2017. Although the index mostly fluctuated under the previous closing, it still closed 0.1 percent higher at 3,425.34 points, extending consecutive rises since December 27. Looking back, the most recent 10-trading-day winning streak on the index was recorded in March 2015, when the country’s stock market was in a strong bullish cycle. The Shenzhen Component Index closed 0.24 percent higher at 11,464.2 points. It has been on a constant rising trend in the past 10 trading days, except for a dip of 0.09 percent on Wednesday. Combined turnover on the two bourses stood at 477 billion yuan (US$73 billion), down from around 516 billion yuan on Wednesday. Analysts call the strong performance at the beginning of the year a “spring rally.” “Spring rallies are mainly driven by sparse data available on Q1 economic fundamentals, usually lower interest rates and relatively high risk preference at the start of the year,” Haitong Securities said. Haitong said the weak performance in November and December 2017 was mainly due to “capital disturbance,” and the recent rally came with a higher liquidity level in the market. Spring rallies often start between late January and early February and last five to nine weeks, Huachuang Securities said, citing data since 2010. In 2017, the spring rally was between January 17 and March 24, which saw the Shanghai index up 5.35 percent, Huachuang said. After rising for 10 straight days, the index has risen 4.57 percent.

HK stocks extend record run

Thu, 01/11/2018 - 17:01
HONG Kong stocks extended their record run into a 13th day yesterday, helped by inflows of cash from mainland traders, while Shanghai clocked up a 10th day of gains. The Hang Seng Index rose 0.15 percent, or 46.67 points, to close at 31,120.39. Global markets have been on a tear at the start of 2018, with Wall Street chalking up records, and others hitting multi-year highs on the back of a healthy economic outlook and optimism for corporate profits. But while most traders from New York to most of Asia have taken a step back, Hong Kong and Shanghai have pressed on, with the HSI now setting its sights on an all-time high of 31,958.41 hit in October 2007.

Driverless monorail launched

Wed, 01/10/2018 - 17:01
A man takes photo of an unmanned monorail launched yesterday in Yinchuan in Ningxia Hui Autonomous Region. Named SkyRail, the unmanned monorail is jointly produced by Chinese IT equipment and smartphone manufacturer Huawei and electric carmaker BYD. — Xinhua

Business as usual for China’s big developers

Wed, 01/10/2018 - 17:01
China’s large developers are tightening their hold on the country’s real estate market, capturing an ever-larger share even as sales growth is expected to slow and worries about debt persist.According to US investment bank Citi, the top 10 Chinese developers are forecast to achieve close to 35 percent market share this year, up from around 27 percent now. They held just 14.2 percent of the market in 2012.The number of developers posting above 50 billion yuan (US$7.7 billion) in sales rose to 40 in 2017 from 25 in 2016, with sales growing from 53 percent to 84 percent, real estate firm CREIS said. The number of smaller developers, with sales between 10 billion and 50 billion yuan, fell to 104 from 106.Although the total number of home transactions is expected to drop about 5 percent, securities firms and rating agency analysts said Hong Kong-listed developers could see 30 percent sales growth on average this year, down from an average of 40 percent growth in 2017.But the growth will not be without risk. Ramped-up land purchases mean the developers will add debt, throwing uncertainty into the stated plans of some to deleverage.China Evergrande and Sunac China had the highest gearing ratios at more than 200 percent in the first half of last year. Both said in October they intended to reduce their debt ratio, but neither halted their buying sprees.If there is a market correction, developers’ liquidity will be tested. But Standard & Poor’s director Christopher Yip said even in that scenario, he didn’t see a large impact.“We don’t think there’ll be a big probability for rated developers to be unable to repay their debt other than very weak ones with poor liquidity and refinancing prospects; others should have secured the financing before they buy land,” Yip said.Several major developers told Reuters that they were confident in double-digit sales growth this year. The companies could not be identified as the information is not yet public.“Last year we sold so many flats, we’ll need to replenish; our land acquisition budget has to be larger than last year because our size is also larger,” said a senior executive of a Shanghai-based developer, who declined to be identified as he was not authorized to speak to the media.A softening but still resilient property market, underpinned by steady prices, would be welcome news for both China’s policymakers and developers. Beijing is eager to keep the market stable as the government tackles an alarming build-up in debt.Many investors are overlooking debt risks and focusing more on revenue, as evidenced by surging share prices.China property stocks were among the best performers in Hong Kong in 2017, propelled by robust sales, with Evergrande up 480 percent, Sunac jumping 460 percent, and Country Garden climbing 270 percent. Nine other developers saw shares surge more than two-fold.Some analysts questioned whether the expansion rate of China’s largest developers could be sustained.“China’s property shares rallied in 2017 thanks to top-line growth, but this momentum will slow in 2018. The growth story this year will be weaker,” said CLSA analyst Nicole Wong. “Last year, many sales were from smaller cities, but as liquidity tightens, sales to these cities will be more difficult.”

Great Wall’s sales reversed in 2017 on SUV rivalry

Wed, 01/10/2018 - 17:01
Chinese automaker Great Wall reported a slight sales decline in 2017 of below market expectations, due to weak performance in the sedan segment and fiercer competition.The company announced that it sold 1.07 million vehicles last year, down 0.4 percent year on year, according to a statement published by the company on Tuesday night.In January last year, Great Wall set its sales target for 2017 at 1.25 million vehicles. Based on the data released, Great Wall only met 85 percent of that target.“The lackluster sales performance last year is due to fierce competition in the sport-utility vehicle segment,” Zhang Xiaofeng, an independent market observer said. “Great Wall faced more and more competition in the market because other domestic automakers also launched their SUV models in 2017 and consumers have more choice.” Great Wall’s decline in sales last year was partly caused by a drop in sedan sales. According to the data provided by the company, sales of Great Wall’s sedans tumbled 60.97 percent annually to 12,033 in 2017.Its overall sales fell in 2017 due to weak sales in December when the firm sold just 125,585 vehicles, down 16.58 percent year on year.Great Wall is known as a competitive SUV producer, but the company’s SUV sales growth was just 0.03 percent last year, compared with its SUV sales in 2016.Pick-up trucks are the only segment which saw stable increase last year for the company, with sales rising 13.47 percent to 119,846 vehicles.Great Wall set its sales target for 2018 at 1.16 million vehicles, up 8 percent from its total sales in 2017.

Memoranda inked to back home rentals

Wed, 01/10/2018 - 17:01
The Shanghai government has signed memoranda with China Development Bank and China Construction Bank separately in a bid to ensure healthy development of the local home rental market.Shanghai Jianxin Housing Service Co Ltd, a company which offers financial services for home rental seekers, was set up on Tuesday during a ceremony attended by Shanghai Mayor Ying Yong, Wang Zuji, president of CCB, and Zheng Zhijie, president of CDB.According to the memoranda, the three parties will strengthen cooperation in various areas such as credit for key projects, comprehensive financial services, and financial innovation, to foster a healthy development environment for the local rental market.The Shanghai branch of CDB and CCB inked house renting deals with local state-owned enterprises such as Shanghai Municipal Investment (Group) Corporation, Shanghai Metro, and Bright Food (Group) Co Ltd to further support their participation in promoting the market.The move is an active response to the central government’s assertion that “housing is for living in, not for speculation.”

Grade A office market vibrant in 2017

Wed, 01/10/2018 - 17:01
SHANGHAI’S Grade A office market performed vibrantly in 2017 despite vacancies rising slightly amid record supply, major international real estate services providers said.More than 2.2 million square meters of new Grade A offices — 1.6 million square meters in the decentralized market and the rest in the CBD — were released to the local market, a record for Shanghai and a significant surge from 1.02 million square meters in 2016, JLL said in a report released yesterday.“Co-working operators, financial services providers particularly domestic firms, retail as well as TMT (technology, media and telecom) companies were major demand drivers in the city’s Grade A office market over the past year,” said Eddie Ng, managing director for JLL’s East China operation. The average vacancy climbed 2 percentage points year on year to 10.2 percent in the CBD at the end of 2017 while that in the decentralized market gained 8.8 percentage points to 26.8 percent during the same period, according to JLL data.Meanwhile, landlords in core CBD areas have been facing high pressure in rents from their counterparts in decentralized areas.“As new supply of Grade A offices is expected to remain high in 2018, some office owners in core CBD areas have adjusted their rental expectations to retain or attract tenants which, therefore, led to a moderate year-over-year decrease in the core CBD area,” said Timothy Chen, director of research for Colliers International’s East China operation.Core CBD Grade A office rents were 10.19 yuan (US$1.56) per square meter per day at the end of the fourth quarter, down 2.4 percent from the end of 2016, Colliers data showed.

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