Short news
July 3, 2017 Category Short news, Weekly
Automotive
- China is extending its lead in the development of new-energy vehicles (NEVs) this year, mainly driven by rapid market growth and increasing battery production, a report by German consulting firm Roland Berger said. The country is expected to see annual NEV production and sales quadruple to pass 2 million units by 2020, according to an industry development plan by the Ministry of Industry and Information Technology (MIIT). China has set a target of electric vehicles accounting for 15-20% of total car sales in 2025 and 40-50% in 2030, Roland Berger said in its report.
- Chinese automaker Geely has signed an agreement with Sweden to set up an innovation center. Based in Gothenborg, the 70,000-square-meter center will be Geely’s largest investment in a research facility in Europe. Geely has four design centers in Sweden, Shanghai, Barcelona and California.
Finance
- A Shanghai court has sentenced three Australian and 13 Chinese employees of Australia’s Crown Resorts to nine to 10 months in prison after they pleaded guilty to gambling-related charges. Jason O’Connor, Manager of Crown Resorts’ international VIP programs, was sentenced to 10 months and fined CNY2 million. Their time spent in detention since October 14, 2016 will count toward their sentences. O’Connor, who is based in Melbourne, Australia, was ordered to be deported. The 16 were also fined a total of CNY8.62 million.
- Yishidun, an international trading company that illegally profited more than CNY389 million from futures market manipulation, faces seizure of its ill-gotten gains and a CNY300 million fine, according to the Shanghai No.1 intermediate People’s Court. Two former executives, Gao Yan and Liang Zezhong, were granted three-year reprieves from jail sentences of three years and two and half years respectively. Gao was fined CNY1 million and Liang CNY800,000.
- China Bohai Bank, one of China’s 12 national joint-stock banks, is preparing for an initial public offering (IPO), Chairman Li Fu’an said. Standard Chartered Bank (Hong Kong) is its second-biggest shareholder, with a 19.99% stake. Bohai Bank, based in Tianjin, was the first Chinese-funded commercial bank to introduce overseas strategic investors.
- The yuan will not suffer a sharp depreciation in the coming one or two years and its internationalization remains an “irreversible trend”, said Li Daokui, former PBOC Advisor and Dean of Schwarzman College at Tsinghua University. Eswar Prasad, Professor of Trade Policy at Cornell University in the U.S. concurred, saying “I don’t see much space for a fluctuation of the yuan”.
- The Chinese mainland-Hong Kong bond connect program was launched on July 3. It allows for qualified overseas investors to invest in the Chinese interbank bond market. Overseas investors should register the bonds they purchase under qualified overseas trusteeship bodies.
Foreign investment
- China’s direct investment in the United States will fall this year under tightening scrutiny and regulation, but U.S. investment in China will remain robust led by technology and consumer goods, according to a new study by the Rhodium Group and the National Committee of U.S.-China Relations. Last year, China poured USD46 billion into the U.S., three times that of 2015. Information communications technology was the largest sector for U.S. investment last year, while real estate and hospitality were the favorites for Chinese investments in the U.S.
- Finnish company Nokia, once a dominant global player in mobile phones, is planning a strong comeback in China’s consumer electronics market as it seeks investment opportunities in digital health and virtual reality (VR). Last week, Nokia Technologies launched a portfolio of digital health products on the Chinese market, including wi-fi connected scales, a blood pressure monitor and the Nokia Health Mate app.
Macro-economy
- President Xi Jinping called for more coordinated efforts to implement the reform agenda in key areas such as the restructuring of state-owned enterprises (SOEs) and improving the supervision of outbound investment. Mixed-ownership reform should be accomplished by the end of this year, according to a statement released after the 36th meeting of the Central Leading Group for Deepening Overall Reform, presided over by Xi. Key areas that need attention include improving the corporate governance structure, strengthening supervision of corporate restructuring, and also protecting the interests of employees, the statement said.
- China’s major industrial companies – with an annual revenue of more than CNY20 million – posted faster profit growth in May, supported by larger sales and better investment returns. They reported profits totaling CNY626 billion in May, up 16.7% year-on-year – a growth 2.7 percentage points faster than in April. The NBS data showed 38 of the 41 surveyed industries reported growth in profits, led by the coal and metal industries. January-May total profits rose 22.7% to CNY2.9 trillion. Profits at China’s state-owned enterprises (SOEs) were up 53.3% to CNY652 billion in the January-May period. Private companies’ reported profits grew 14% to CNY963.1 billion in the first five months.
- The Chinese economy is expected to enjoy stable growth and is capable of reaching the growth target of around 6.5% for the whole year, according to the research institute of the Bank of China (BOC). It predicted that China’s economy would expand by around 6.8% year-on-year in the second quarter and by 6.7% in the third quarter. The economy will grow this year at an annual rate of 6.8%, the report added.
- The official manufacturing purchasing managers index (PMI) came in at 51.7 in June, which was better than expected. It was also at its highest mark in three months and signaled that growth in the economy is picking up, despite financial tightening. New orders in June increased to 53.1 from May’s 52.3, while export orders jumped to 52, 1.3 points higher than in May. “Exports have recovered at a pace that beats market expectations,” said Ren Zeping, Chief Economist of Founder Securities. The service sector saw robust growth last month, with the sub index coming in at 53.8, up from 53.5 in May.
Mergers & acquisitions
- Yanzhou Coal Mining has won a take-over battle after sweetening its offer at the eleventh hour for coal assets in Australia sold by Rio Tinto. Rio Tinto confirmed Yancoal Australia to be the preferred buyer of its power-station coal mining unit Coal & Allied Industries, citing a “high level of completion certainty, a further improved offer of USD2.69 billion, with all regulatory approvals received or waived”. The Coal and Allied acquisition will add 556 million tons of “marketable” coal reserves on top of Yancoal’s current reserve of 274 million tons, and more than double its output.
Real estate
- SOHO China has sold a mixed-use office and retail complex, Hongkou SOHO in Shanghai’s Hongkou district, to Keppel Land China, a wholly-owned subsidiary of Singapore-based Keppel Land and Alpha Investment Partners, a wholly-owned subsidiary of Keppel Capital Holdings, for CNY3.6 billion. The average selling price of the building, designed by Japanese architect Kengo Kuma, was around CNY51,000 a square meter based on leasable gross floor area – 53% higher than the cost, SOHO China said in a statement.
- Home buying sentiment rose for the first time in four weeks in Shanghai amid a strong recovery in home sales in outlying areas. The area of new residential properties sold, excluding government-subsidized affordable housing, jumped 33.5% to 159,000 square meters in Shanghai in the week of June 19, Shanghai Centaline Property Consultants Co said. “The latest rebound was mainly fueled by largely improved transactions in remote districts such as Jiading and Qingpu. However, the recovery might be just a temporary one as the traditional low season of July and August is approaching.
Retail
- A survey by Channel News Asia showed that 60% of Chinese consumers prefer foreign brands over local brands. Liu Shijin, Vice Chairman of the China Development Research Foundation told a panel at Summer Davos in Dalian that Chinese consumers will probably warm more to domestic brands in three to five years. “Chinese consumers have three advantages in a global context: first, their scale, the largest in the world; second, they are increasingly picky and quality conscious; and third, they actively embrace innovation,” Liu said.
- Shanghai tops other cities in the dining consumption index of Alibaba’s lifestyle service unit, Koubei. Diners in Xiamen, Guangzhou and Tianjin prefer Western food more than consumers in other regions, while Shanghai residents favor Cantonese and Sichuan cuisine. Last year, China’s dining and catering industry was worth CNY3.5 trillion, according to the National Bureau of Statistics (NBS).
Science & technology
- Shenzhen-based drone maker DJI Innovation Technology signed a memorandum of understanding with Dow AgroSciences to work on the research and application of crop protection drones and technology. DJI is the world’s largest drone maker, accounting for 70% of the global consumer drone market. Its MG series crop protection drones will be used in cooperation with Dow. China has the largest number of agricultural drones worldwide.
- China was the world’s second biggest investor in artificial intelligence (AI) enterprises last year, injecting USD2.6 billion into the sector, according to Chinese think tank the Wuzhen Institute. The U.S. topped the list with USD17.9 billion.
- ZTE, China’s largest listed telecommunications equipment maker, will earmark at least CNY2 billion every year through 2020 for 5G research and development, revving up to commercialize the next generation mobile technology that could be 20 times faster than current standards.
Stock markets
- Initial public offerings (IPOs) will slow down in China in the second half with tighter criteria to help stabilize the market amid slower growth and tightening liquidity, Ernst & Young said. The number of A-share IPOs quadrupled in the first half from the same period of last year to 246, raising a combined CNY125.6 billion. But a slowdown of iPOs already started in the second quarter when major economic indicators began to moderate and financial regulators tightened policies to accelerate deleveraging. The China Securities Regulatory Commission (CSRC) rejected 14% of iPO applications in the first half, twice the number of last year.
- There is likely to be a rash of new technology sector initial public offerings (IPOs) over the next 12 to 18 months, especially by companies already backed by China’s technology giants. Research firm CB Insights says that out of the 46 “unicorns” in China, 21 are backed by China’s Big Four internet giants, Alibaba, Baidu, JD.com, and Tencent or their affiliates, such as Ant Financial. Likely IPO candidates include: logistics company Best; Zhong An Online Property and Casualty Insurance, the first online-only insurer in China; China Reading, the country’s largest online publishing and e-book company; Sogou, China’s third-biggest search engine; and Ant Financial, the online finance arm of Alibaba.
- Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, is seeking to raise USD1.5 billion by listing in Hong Kong. Founded in 2013, Zhong An’s largest shareholder is Alibaba’s financial-services affiliate Ant Financial, which has a 16% stake. Tencent, and Ping An Insurance, China’s second largest insurer, are the joint-second largest shareholders, each with 12.08%. If the deal goes through, Zhong An will be the first financial technology company to be listed in Hong Kong.
- HSBC and Bank of East Asia (BEA) have both received approval to establish their securities joint ventures in the Qianhai economic zone. Both lenders will partner with Qianhai Financial Holdings, a wholly-owned subsidiary of the economic zone. It has taken over a year and a half for the two banks to get the go-ahead from the China Securities Regulatory Commission (CSRC). BEA will own 49% of its venture, East Asia Qianhai Securities, but will be the largest shareholder. Qianhai Financial Holdings will own 4.9%, while Shenzhen Infogem Technologies and Chenguang Holding Group have 26.1% and 20% respectively. HSBC will own 51% of its joint venture, HSBC Qianhai Securities. The bank said that would make it the first foreign lender to hold a majority stake in a securities joint venture in China.
Travel
- Guangshen Railway Co, which operates a high-speed line between Guangdong and Shenzhen, is part of a consortium that has been shortlisted to run the United Kingdom’s planned HS2 high-speed line between London and Birmingham, the British government announced. It is the first Chinese company to be part of a shortlist for a British rail project. Hong Kong metro operator MTR, accountancy firm Deloitte, and WSP Parsons Brinckerhof are also part of the consortium. The HS2 line is due to start operating by 2026.
- Mobike, one of China’s largest bike-sharing operators, has launched an initial 1,000 bikes in Manchester and Salford in the United Kingdom. Chinese bike-sharing companies have also entered the United States, Singapore and Kazakhstan.
- Hong Kong-based airline Cathay Dragon said it will grow its network in mainland China through the expansion of its code share arrangement with Shenzhen Airlines. The subsidiary of Cathay Pacific Airways will add three mainland cities to its list of destinations, including the eastern cities of Yantai and Jinan in Shandong province, and Harbin in northeast China.
- China Southern Airlines has become China’s first carrier to use facial recognition software in the boarding process, launching the system at Jiangying airport in Nanyang, Henan province. Passengers have their faces scanned in lieu of using boarding passes. The scanning process lasts just one second. The airline developed its new facial recognition software with Baidu and GRG Banking, a Guangzhou-based ATM supplier.
VIP visits
- Chinese President Xi Jinping is setting out on a trip to Russia and Germany on July 3. In Hamburg, he will attend the 12th G20 Summit and is expected to have a side meeting with U.S. President Donald Trump. China’s Ministry of Commerce announced that China and Russia would study the feasibility of linking China’s “Belt and Road Initiative” to the Russia-backed Eurasian Economic Union. As President Xi Jinping visits Russia, the link will be on the agenda during his talks with his counterpart, Vladimir Putin. The Eurasian Economic Union was proposed by Russia, Belarus and Kazakhstan in 2014, aiming to create a single market with a free flow of labor, capital and goods by 2025.
- Chinese President Xi Jinping attended the ceremonies for the 20th anniversary of the handover of Hong Kong to Chinese sovereignty and the swearing-in of incoming Hong Kong Chief Executive Carrie Lam.
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