European businesses are trying to make common cause with Chinese private firms in an effort to push Beijing to reform state-owned enterprises (SOEs). Foreign companies and the Chinese private sector have long shared concerns about preferential treatment and regulatory red tape, but deteriorating economic conditions and the slow pace of reform from Beijing have pushed the two closer together. European business sources speaking on condition of anonymity said some businessmen and women had been trying to find new ways of working together with Chinese private firms to push for reform.

But taking joint action with foreign firms can be politically sensitive for private firms in China, and the Europeans were focusing more on their common frustrations to strengthen the case for reform, which they regarded as crucial in ensuring a fair operating environment. Other sources familiar with the matter said European businesses were expected to focus on “competitive neutrality” to coax Beijing into reforming its state sector. The concept of competitive neutrality was first devised by Australia in the 1980s, and was picked up by the OECD in 2011 as a way of promoting a “level playing field” for all kinds of enterprises, and discourage state protections, like preferential subsidies or other limits on investment, in strategic enterprises.

Some in China have signaled that this may be the way for reform to proceed. In October last year, People’s Bank of China Governor Yi Gang said that China was considering applying the principle to its state sector, and the term also featured in Premier Li Keqiang’s work report delivered at National People’s Congress (NPC) in March. But deeply entrenched political interests are still standing in the way of reform of the state sector, said Li Yong, Researcher in international trade at China’s Ministry of Commerce (MOFCOM). Li said foreign and Chinese private firms were “natural” partners when it came to reforming the sector, but the pace of reform was going to be slow.

Geely Automobile Holdings’ first-half net profit slid 40% year-on-year amid a sustained downturn in the China’s auto market, and it forecast an uncertain outlook for vehicle demand for the rest of the year. Geely, China’s highest-profile carmaker globally thanks to the group’s investments in Volvo and Daimler, posted net profit of CNY4.01 billion. Profit in the first half “was negatively affected by higher discounts and incentives to reduce dealers’ inventories ahead of the official implementation” of new emission standards in some areas, Geely said, referring to a stricter vehicle emissions standard that China implemented in July.

First-half revenue was CNY47.56 billion, down from CNY53.71 billion a year earlier, and first-half sales fell 15% to 651,680 vehicles. Retail sales volume recorded “a mild year-on-year growth” during the same period, Geely said, adding it plans to launch at least eight new or revamped models in the next 12 months. China’s overall vehicle sales fell 4.3% in July, down for the 13th consecutive month, according to the China Association of Automobile Manufacturers (CAAM). Sales of new-energy vehicles (NEVs), a category that includes both hybrid and purely electric cars, declined by 4.7% year-on-year in July to 80,000 vehicles, compared with the growth of 80% in NEV sales in June, CAAM data showed.

Although the Chinese government has started to introduce measures to stimulate automobile demand, the market has shown little sign of improvement. The China-U.S. trade dispute is causing more uncertainty for passenger vehicle demand in China in the remainder of the year, Geely said. In July, Geely cut its sales target for the year to 1.36 million units from 1.51 million, seeking to reduce dealers’ inventories amid uncertainty in the overall car market. Geely sold 1.5 million cars last year, up 20% year-on-year, the Global Times reports.

China unveiled its latest rankings for its 500 largest private enterprises, with Huawei topping the list amid sound development of the country’s private business. The list by the All-China Federation of Industry and Commerce (ACFIC) was presented at the China Top 500 Private Enterprises Summit 2019 held in Xining, the capital of Qinghai province. Huawei topped the list with a revenue of CNY721.2 billion in 2018. Top companies also include HNA Group, Suning, Amer International, Evergrande, JD.com, Country Garden, Hengli Group, Legend Holdings and Gome Holdings. To be listed, an enterprise needed to have revenue exceeding CNY18.59 billion last year. Huang Rong, Vice Chairman of the ACFiC, said the total revenue of the top 500 companies reached CNY28.5 trillion in 2018, up by 16.44% year-on-year, while the number of companies with revenue over CNY300 billion has risen from nine to 12, the Shanghai Daily reports.

Huawei and domestic rival ZTE have both already launched 5G smartphones in China and are now joined by Samsung, the first foreign brand to release a 5G model in China.
The CNY7,999 Samsung 5G Galaxy Note 10 Plus will be available next month. In June, the country issued long-awaited 5G licenses, triggering a new market for telecommunications devices and smartphone vendors. Samsung has already sold two million 5G models in South Korea, which gives it an advantage in 5G deployment, according to the company. In 2020, more than 160 million 5G smartphones are expected to be sold, mainly fueled by demand in China, according to Strategy Analytics. Samsung leads the global 5G market but Huawei will dominate in China, the Shanghai Daily reports.

The People’s Bank of China (PBOC) lowered its lending reference rate to 4.25% from 4.35% through a new market-oriented pricing mechanism, providing a modest easing of monetary conditions. The Chinese central bank now requires banks to benchmark their loan rates against the medium-term lending facility (MLF) instead of the official benchmark rate, which can only be changed with the approval of the central government. The PBOC will now have a bigger say in setting lending rates. The one-year loan prime rate (LPR), which is the average of the rates that 18 designated banks charge their biggest clients, was previously set at 4.31%. The decline is not big, so its short-term impact will be limited, especially when participating banks have no strong incentives to lower their rates.

The change by the PBOC, a reform of its interest rate setting mechanism rather than an outright cut in its reference rates, followed steps taken by foreign central banks to cut their official interest rates to bolster economic growth. By basing the main lending reference rate against market rates, the PBOC hopes that commercial banks will provide more credit to small businesses while also lower their fundraising costs, the South China Morning Post reports.

China Banking and Insurance Regulatory Commission’s Shanghai Bureau unveiled a set of new measures to boost the city’s financial technological development and its efforts toward becoming an international innovation center. The newly announced measures aim to lend support to Shanghai’s major projects, including the construction of the new Lingang area of the China (Shanghai) Pilot Free Trade Zone, the STAR Market board, the Yangtze River Delta regional integration program, as well as the brand building of “Made in Shanghai”, the Shanghai Daily reports.

German auto maker Daimler plans to build Mercedes Benz-branded heavy trucks in China by revamping truck plants owned by its local joint venture. The plan will deepen the alliance between Daimler and its Chinese truck JV partner, Beiqi Foton Co, and comes after the purchase of a 5% stake in Daimler last month by its Mercedes Benz passenger car partner, Beijing Automotive Group Co, Foton’s parent group. “Localization of Mercedes Benz-branded trucks had been planned years before, so it has nothing to do with BAIC Group’s recent stake purchase in Daimler,” one source said.

Under the plan, Beijing Foton Daimler Automotive (BFDA) will add Actros trucks to its production lines, which are mainly used to make Auman trucks, the joint venture’s sole truck brand. The JV plans to revamp its No 3 plant, which will have an annual capacity of 60,000 heavy trucks, and expand capacity at its No 2 plant to 100,000 units from 60,000 now. The value of the investment was not known. All Mercedes Benz trucks currently sold in China are imported and priced significantly higher than domestically made Auman trucks.

Founded in 2012, the truck joint venture sold just over 100,000 units in China last year. Daimler is seeking to further develop its truck business with Foton, but the lack of a solid supply chain in China remains an obstacle, sources said. “One of the biggest challenges is to build up a good local supply chain, as many heavy truck components for Mercedes Benz trucks cannot be locally sourced for now,” a source said.

China’s heavy truck market has fared better than the overall auto market this year, thanks to a growing e-commerce industry and improvements in traffic and logistics infrastructure. About 732,000 heavy trucks were sold in China in the first seven months this year, down 1.4% from the same period a year earlier, while the overall auto market dropped 13.5%. Other major heavy truck makers in China include FAW, Dongfeng and Sinotruk, the Shanghai Daily reports.