China Telecom is planning a big foray into cloud-computing services through a partnership with Tokyo-based Internet Initiative Japan (IIJ), an information-technology services provider that serves more than 600 companies in Japan. IIJ established a local subsidiary in Shanghai called IIJ Global Solutions China. China Telecom will offer its extensive fixed-line network and data centers across the country to the cloud-computing venture, while IIJ will build and operate a cloud-computing platform that will offer software, technology platforms and infrastructure to corporate customers. Market research firm Ovum has forecast that spending by Asia-Pacific enterprises on cloud services over the internet could reach USD12 billion in 2016, compared with an estimated USD2.9 billion last year. Last month in Hong Kong, the fixed-line network unit of Hutchison Telecommunications teamed up with information technology giant Oracle, consulting firm PricewaterhouseCoopers (PwC) and other major carriers in a consortium – the Asia-Pacific Cloud Alliance – that aims to accelerate adoption of cloud computing services by businesses across the region.

U.S.-based PayPal hopes to become the first foreign online payment service provider to win a domestic payment license in China, where the e-commerce market is worth an estimated USD121 billion. Senior Vice President for Asia Rupert Keeley said the company was cautiously optimistic that the People’s Bank of China (PBOC) would give it a license, after applying late last year. China has kept a tight grip on its electronic payment services business, and industry players have often called for it to be relaxed. No overseas companies have so far been awarded a permit to process domestic payments in China. PayPal this month launched a smartphone app and plug-in device to let small business owners take credit and debit card payments through their mobile devices, and hopes to also offer it in China. The company said small business owners often lacked access to credit card payment devices, and risked losing customers. The service known as PayPal Here solved this problem, enabling anyone with an iPhone to receive credit card payments, although the service was expected to expand to include other smartphones as well. Hong Kong, where half of the population has a smartphone, is one of the first markets to get the service. At present, PayPal has offices in six Asian markets, including China, Hong Kong, South Korea and Singapore.

Chinese consumers are more likely than their overseas counterparts to shop online and this trend will push traditional retailers toward a multi-channel business model, according to a survey among over 7,000 consumers globally by PricewaterhouseCoopers (PwC). They are nearly four times as often to make online purchases as those in continental Europe, and twice as often as those in the U.S. and UK. Up to 70% of the 905 Chinese respondents said they shop online at least once a week. Chinese consumers buy 60% to 65% of their clothing, footwear, books, music and films online rather than in physical stores. 70% of them make online purchases across all categories, compared with only 40% of their western counterparts. PwC said retailers will have to further embrace the multi-channel concept and to be successful, they need to fully integrate the physical store, online site, mobile, catalogue and call center to provide a seamless shopping experience. China said it aims to double its e-commerce sales to CNY18 trillion by the end of 2015.

Hardware

• Apple cut the price of its iPad 2 by USD100 on March 8, following the announcement of the new iPad. Customers on the Chinese mainland will now be able to buy the 16GB iPad 2 for CNY2,988. iPad 2 sales have risen since the price cut. The new iPad became available in Hong Kong on March 16 but is not yet officially on sale in mainland China. The new iPad in Hong Kong costs HKD3,888 for the 16 GB model, HKD4,888 for the 32 GB and HKD5,488 for the 64 GB version.
• PC sales in the Chinese market will increase 11.3% to 81.9 million units in 2012, almost double the global expansion rate of 4.4%, according to Gartner Inc. The penetration rate of PCs in China is lower than that of the developed countries, which means many domestic consumers will buy their first PCs, industry insiders said. China is expected to contribute 22% of the world sales this year. Hong Kong-listed Lenovo seized a record-high market share of more than 35% in the fourth quarter in China. According to IDC, the mainland’s top five personal computer brands last year were Lenovo, Dell, Acer, Hewlett-Packard and AsusTek Computer.
• Samsung is the No 1 smartphone vendor in China and Apple is only No 5, but worldwide, Apple passed its competitor to become the biggest smartphone vendor in the fourth quarter, according to Gartner. Apple’s partnerships with China Unicom and China Telecom, China’s second and third largest operators, give it access to about 34% of the nation’s 988 million mobile users, while Samsung targeted the whole market, including market leader China Mobile. Apple does not offer an iPhone compatible with China Mobile’s TD-SCDMA network.
• IC companies will expand production capacity and invest heavily to upgrade technology, senior officials from SMIC, ASE and HLMC told a forum during the three-day Semicon China 2012 in Shanghai.
• In the first two months of this year, the production of mobile phones in China rose by 2.7% on an annual basis to 157.6 million units, according to the Ministry of Industry and Information Technology (MIIT). Low-cost Android-run smartphones costing under USD200 were a key growth driver in China, International Data Corp said. IDC added China’s share of the global market this year would be 20.7%, beating the U.S. share of 20.6%.
• Demand for Apple’s new iPad in China is slower than for its first two tablets, with prices already falling within the first week of it being offered by unauthorized sellers. They said they had to cut prices by close to 30% because of sluggish demand. “The market is basically saturated,” said a sales clerk at Buynow, an electronics mall in Beijing. Apple has not yet announced an official launch date for China. Last year, tablet shipments in China ballooned fivefold to 5.83 million, with the iPad grabbing a 70% market share, according to IDC. The new iPad already received the required China Compulsory Certification (3C) to enter the Chinese market.
• Apple CEO Tim Cook visited China and met with Chinese Vice Premier Li Keqiang, China Telecom Chairman Wang Xiaochu and senior executives of China Unicom. He also visited the Joy City Apple Store in Beijing. His predecessor Steve Jobs never visited China. Building stronger relations with the government was another likely reason for Cook’s surprise visit.

Operators

• China added 8.18 million 3G mobile service subscribers in January, bringing its total number of 3G users to 136.6 million, the Ministry of Industry and Information Technology (MIIT) said. The number of fixed-line subscribers fell by 409,000 to 284.7 million, while the number of mobile phone users increased by 10.35 million to 996.6 million. The number of broadband internet users rose by 2.51 million in January to 152.51 million. The main business revenues for China’s telecommunication industry saw a 12.2% annual growth in January to CNY81.63 billion.
• China Mobile Communications Corp plans to become a minority shareholder in China Broadcast Corp (CBC), which provides mobile multimedia broadcasting services, and help the company expand in rural areas. As of December 31, CBC was serving 336 cities, or 800 million people, in China. Subscribers to its free and paid services reached 40 million in 2011. CBC aims to have 100 million subscribers within three years.
• China Mobile said Lu Xiangdong resigned as Executive Director and Vice President amid a financial investigation. Lu, 52, oversaw the operator’s development strategy, planning and procurement.
• China Mobile said its net profit last year rose 5.2% annually to CNY125.8 billion. Revenue rose 8.8% to CNY528 billion. China Mobile’s monthly ARPU for last year was CNY71, down 2.3% from 2010 as most new users live in rural areas. The company said capital expenditure for this year would be CNY131.9 billion, 2.6% more than last year. This does not include the amount that will be spent on the construction of its 3G, or TD-SCDMA, and 4G, or TD-LTE networks, as the money will come from parent firm China Mobile Communications. Chief Executive Li Yue said the company aimed to add 30 million 3G users this year and increase handset subsidies to CNY20 billion, a rise of 17.6% from last year.
• Shanghai Kingtown Hotel is suing China Unicom, accusing it of violating the Chinese Antimonopoly Law by forcing the hotel to pay for a bundled broadband service at a price much higher than the market price. China Unicom is arguing that the contract is binding because it was signed before the law came into effect in 2008.
• By the end of February, China Mobile, the country’s largest carrier, had 56.6 million 3G users, followed by China Unicom (Hong Kong)’s 45.9 million and China Telecom’s 41.2 million, according to figures released by the companies.
• China Mobile Chairman Wang Jianzhou retired on March 22 and was replaced by Vice Chairman Xi Guohua. Wang took the helm of China Mobile in 2004. In that year, the revenue of China Mobile was CNY192.4 billion and its net profit was CNY42 billion. Revenue reached CNY528 billon in 2011, while net profit was CNY125.9 billion. During the same period, China Mobile’s subscriber base grew to about 650 million in 2011 from 204 million in 2004.
• China Unicom (Hong Kong) said its profit margins will be “under pressure” as it faces higher costs to expand coverage this year. The company will boost capital spending 30% to CNY100 billion, Chief Executive Officer Chang Xiaobing said at a press conference in Hong Kong. China Unicom’s net income rose 14% to CNY4.23 billion last year, from a restated CNY3.7 billion a year earlier.

Radio, film & TV

• Cao Shuming, Director of the China Academy of Telecommunication Research, said a national broadcasting network company would be launched by the State Administration of Radio, Film and Television (SARFT) by June. The authority will consolidate about 1,000 radio and television networks at various administrative levels into a single, national network.
• At its current growth rate, China is expected to become the world’s second-largest movie market in a few years, with box office takings projected to top USD5 billion by 2015. In North America, revenue has fallen for two years straight, and ended 2011 with USD10.2 billion in ticket sales.
• Tencent Holdings officially entered the internet television industry by launching an exclusive partnership with China Network Television (CNTV), the online branch of  China Central Television (CCTV). Tencent said it would initially put QQ, the most popular instant-messaging service in China, on TV. The domestic internet TV industry is expected to grow to USD1.38 billion by 2016 from USD50 million in 2010, according to Digital TV Research.

Telecom MFg. Co.

• Hon Hai Precision Industry Co, the world’s largest contract manufacturer of electronics, posted record quarterly profit as sales of Apple’s iPhones and iPads climbed and costs for relocating factories dropped. Fourth-quarter net income climbed 64% to NTD35 billion from NTD21.4 billion a year earlier.
• Nokia launched its new Lumia 800C phone for China Telecom’s CDMA2000 network. Although still the leader in the domestic market, Nokia has seen its share fall to 15%  by the end of last year, compared with above 20% at the start of last year and over 30% at its peak in previous years. The phone runs on the Windows mobile operating system. Nokia Siemens will trim 350 jobs in China as part of its plan to slash 17,000 jobs globally, the joint venture said. The reduction will account for 3.5% of employee numbers at Nokia Siemens China, which now has 10,000 employees.

Web

• Apple has made Baidu the favored search service for local users of its personal computers. Apple’s recently announced OS X Mountain Lion will deliver features specifically designed to support Chinese users, including the option to select Baidu search. Baidu had a 78.3% share of China’s desktop internet-search market in the fourth quarter of last year. IDC ranked Apple as the No 11 personal computer brand in China last year, but pointed out that sales of iMacs and MacBooks almost doubled to 1 million units from about 600,000 in 2010.
• E-commerce became the biggest hot spot of consumers’ complaints last year. The Shanghai Commission of Consumers’ Rights and Interests Protection said it received more than 11,350 cases on e-commerce, up 161% on 2010. Consumers encountered a wide range of problems, including fake promotion, low product quality, slow delivery and bad service, said the Commission, which cited a lack of specific laws to regulate e-commerce.
• LeTV.com, a major online video provider, said it had ended its cooperation with a unit of Baidu, the search engine, which it said had infringed the copyrights of its licensed content. Gao Fei, Senior Vice President of LeTV, said that Baidu Player enabled users to search and watch pirated videos from various websites. “Pirated content would be a big problem for LeTV, which generates revenues by sub-licensing copyrights to other online video websites,” said Shi Jialong, Hong Kong-based Analyst with CLSA Asia- Pacific Markets.
• Micro-blog users who had not submitted real names and ID card numbers could still put up posts on Beijing-based services such as sina.com, sohu.com and 163.com, as well as Shenzhen-based tencent.com, after the registration deadline. China has more than 300 million micro-blog users, more than half of its 517 million internet users, although many people have more than one account. Analysts said authorities wanted to use the real-name registration system to better monitor and control public opinion. About a quarter of micro-bloggers on 163.com had registered, it was reported.
• China’s copyright authorities are investigating claims that Apple is offering some Chinese writers’ works at its App Store without authorization. The Chinese Writers Alliance has filed a lawsuit in Beijing demanding CNY50 million in compensation. The lawsuit was filed on behalf of 22 writers, involving 95 books. Legal experts in Beijing said Apple lacked supervision on what is sold or freely provided at the App Store. Last year, Baidu deleted 2.8 million unauthorized works of literature following protests.
• Online payment firm Alipay said it will invest CNY500 million over three years to boost a cash-on-delivery service to e-commerce merchants and courier firms. It plans to introduce 10,000 cash-on-delivery (COD) terminals in the first half of this year in all first-tier cities. The firm eyes 60,000 COD terminals in three years. Online vendors will get paid 24 hours after delivery, down from three to four days now. Alipay said less than 20% of China’s top-100 online business-to-consumer merchants were able to accept credit or debit card payments upon delivery.
• NetEase.com extended its licensing pact with Blizzard Entertainment, the creator and publisher of the popular World of Warcraft franchise. Their new three-year deal sets the stage for the domestic release of the fourth expansion pack of World of Warcraft called Mists of Pandaria. In 2011, NetEase’s total turnover increased 32% to CNY7.5 billion from the previous year. Revenue from its online games business rose 35% to CNY6.6 billion from 2010. Blizzard has been working with NetEase since 2009, when the firm replaced The9 as the licensed operator of World of Warcraft in China.
• Vipshop Holdings, a Guangzhou-based online retailer, raised USD71.5 million, 39% less than targeted, in the first initial public offering (IPO) in the United States by a Chinese company since August. Vipshop runs an online discount store in China for branded goods through vipshop.com. Venture-capital investors DCM and Sequoia Capital China have stakes in Vipshop Holdings of 19.2% and 19.3% respectively.

One-line news

• China will “standardize” regulations on telecommunications services and also plans to open the industry wider to private investment, the National Development and Reform Commission (NDRC) said in its report to the National People’s Congress (NPC). The announcement follows widespread public complaints about the high cost and low speed of broadband services. The NDRC also welcomes private investors to invest more in the telecom industry when it is opened wider.
• Pacnet, the operator of Asia’s largest privately owned submarine cable network, plans to accelerate development of new data centers across the region after launching a USD44 million facility in Hong Kong’s Tseung Kwan O. Chief Executive Bill Barney said this new infrastructure, called CloudSpace2, was “the most advanced data center to open in Hong Kong in the last 10 years”. Daniel Lai, Hong Kong’s new government Chief Information Officer, said Pacnet’s new facility helped “reaffirm Hong Kong’s status as the prime location for data centers in the Asia-Pacific region”.
• Taiwan’s Foxconn Technology will become the largest shareholder in Sharp to help the Japanese company restore profitability to its TV manufacturing and liquid crystal display (LCD) businesses. Sharp has lost ground in recent years to more nimble South Korean companies like Samsung and LG. Foxconn is primarily a contract manufacturer, with premier clients that include Apple, for which it makes iPads and iPhones.

Many Belgian companies pursuing business opportunities in China use Hong Kong as their gateway to the Mainland. Financing and tax considerations are probably the two most important drivers that are considered when opting for this setup. This seminar will provide  testimonials of professionals on the ground from KBC Bank and Deloitte discussing the current practices being applied, risks commonly encountered as well as misconceptions frequently noticed.

This seminar will take place on Monday 23 April 2012 at 14h00 at Het Pand, Onderbergen 1, 9000 Gent.

Programme
13h30     Registration
14h00     Welcome by Mrs Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce
14h05     Introduction by Deloitte & KBC
“Deloitte in Asia” by Mr Coen Ysebaert, Partner, Deloitte Belgium Chinese Services Group Leader
 “KBC in Asia” by Mr Jason Lee, CEO, KBC China
14h30     Mainland China
“Critical Success Factors & Banking Perspective” by Mr Koenraad Van de Borne, Head of European Network Desk, KBC China

“Financial and Business Risks in China – What is happening on the ground?” by Mr Gerd De Vuyst, Director Audit and Enterprise Risk Services, Deloitte China
15h30     Coffee Break
15h40     Hong Kong

“Hong Kong as your gateway to China” & “A technical primer on the internationalization of the RMB” by Mr Jo Vander Stuyft, First Vice President European Desk – Corporate Banking, KBC Hong Kong

“Relevance of Hong Kong for Asia bound investments from a tax perspective” by Mr Wouter Claes, Managing Director Belgium Tax Services, Deloitte Hong Kong
17h00     Networking reception
Participation fee for FCCC Members: €65, non-members: €95.