Archives 2014

Disney-Shanghai partnership portends a creative boost

Walt Disney Studios and Shanghai Media Group Pictures will co-develop stories with Chinese elements, says an executive of the Magic Kingdom.

“The deal focuses on the weakest point in the Chinese film industry, the storytelling,” says Stanley Cheung, managing director of The Walt Disney Company, China.

Under the deal, US-based action, adventure and fantasy writers will team with locally based Chinese writers and filmmakers to develop stories and scripts that bear all the hallmarks of Disney films and feature authentic Chinese elements fit for local co-production and aimed at the international market.

The two sides will jointly set up a fund, collecting scripts in both English and Chinese and co-owning the copyrights.

“SMG is proud to work with Disney to create a new era of classic content featuring uniquely Chinese storytelling elements for audiences around the world,” says Su Xiao, chief executive officer of SMG Pictures.

“The combination of our media coverage and understanding of the China market and Disney’s long-standing success in telling magical stories will surely spark a brand-new chemistry that transcends age and borders.”

China’s box-office revenue has sustained rapid growth over the past decade. In 2013, the year’s gross was 21.8 billion yuan ($3.5 billion), second only to the United States.

The first quarter of 2014 has seen a 31-percent rise over the same period last year, reaching 6.7 billion yuan.

For Hollywood blockbusters, only 34 of which can be imported for theatrical release every year in China, the country has become a tempting territory.

“The Chinese market is absolutely an important market now,” says Cheung. “Films with Chinese elements should sell.”

The cross-cultural exchange will expand training opportunities between Chinese and US writers and filmmakers.

In 2012, Disney joined with the Ministry of Culture’s China Animation Group to be a founding partner of the National Chinese Animation Creative Research and Development Project. The initiative, now in its third year, aims to advance China’s animation industry and train local talent and promote the development of Chinese content and franchises.

In the Beijing Film Festival, which opened on Wednesday, Disney will host a forum on animation, to be attended by the producer and visual artist behind Frozen, the Academy Award-winning Disney film that has generated nearly 300 million yuan in ticket sales in China.

The nongovernmental communications between filmmakers in the two countries have also been expanding.

In 2013, Paramount Pictures and the Motion Picture Association of America invited five Chinese directors, including Xue Xiaolu of Finding Mr. Right and Wuershan of The Painted Skin series, to visit their studios and see a preview of the films for summer 2014. The directors also met with executives of different departments and exchanged their visions for the industry.

The MPA is also hosting a film workshop during the Beijing Film Festival. Hollywood producers and executives and established Chinese filmmakers will spend two days together, during which rising directors will pitch their stories.

“Creativity is not built in one day,” says Cheung of Walt Disney.

“But I have full confidence that we will finally find appealing global stories with a Chinese touch.”

Internet recruiter aims for base of millions

Liepin.com, China’s leading Internet-based recruitment service provider, plans to set up a global talent development center with a base of 20 million professionals by the end of 2014, its CEO said on Tuesday.

The company announced on the same day that it received C-round financing totaling $70 million from equity investment companies Warburg Pincus and Matrix Partners China, which amounts to the largest investment in the sector for the past five years.

Liepin.com previously received A – and B-round financing totaling about $10 million from Matrix Partners China.

The new funding will be used to set up a global talent development center and promote the company’s brand, Chief Executive Officer Dai Kebin told China Daily.

Dai said the company has already signed up 11 million professional staff, and the candidate base will reach 20 million by year-end.

Dai said Liepin.com has more than 100,000 enterprise clients, and each pays the company more than 10,000 yuan ($1,600) annually.

“Our profits mainly come from enterprise clients and employees,” said Dai, adding that the fees for enterprise clients are very competitive compared with those charged by traditional recruiters.

A headhunter in China will charge an employer about 20 percent to 30 percent of an employee’s annual income, but Liepin.com charges only for a package of services, said Dai.

“Liepin.com will promote the healthy development of the Chinese recruitment services market because we solve the problem of information asymmetry,” said Dai.

Dai said headhunters who only can provide employees’ resumes will be less competitive.

“Warburg Pincus has been following the Internet-based recruitment sector closely in recent years and was impressed with Liepin’s unique business model and the changes Liepin has brought to the recruitment sector,” said Julian Cheng, a managing director of Warburg Pincus.

Cheng said traditional Internet-based recruitment agencies basically operate as advertisement platforms for employers, but Liepin.com has created an online model that is built around the needs of professionals and members.

“After witnessing the rapid growth of Liepin.com in the past three years, Matrix Partners China is more and more convinced that Liepin’s business model is shaking up the current Internet-based recruitment sector and has singled itself out as the one to win,” said David Zhang, a founding managing partner of Matrix Partners China.

Zhang said the new investment will help the company improve its vertical platform, which incorporrates personal computers, mobile and call center services. That in turn will maximize the value it will provide to its professional members.

According to Zhang, Matrix Partners China favors investing in platform companies, and Liepin.com is a career development platform connecting employers, headhunters and professional managers, and catering to their recruitment needs.

“But operating a good platform company is very difficult, and Liepin.com has made it, so we are not afraid that the Internet giants such as Baidu, Alibaba or Tencent will enter the market,” said Zhang.

Beijing ranked most global city on the mainland


Beijing has made it into the top 10 of the world’s most global cities for the first time, ranking eighth in the A.T. Kearney Global Cities Index.

The index, introduced in 2008 by the global consulting firm, includes 84 cities.

Beijing scored an overall 3.5 in five categories, including business activity, human capital, information exchange, cultural experience and political engagement. It stood out from other Chinese cities in terms of the number of Fortune 500 companies, international schools, broadband subscribers and museums.

New York, London and Paris have held fast to their positions as first through third since 2012.

“The increasing global importance of Chinese companies has helped catapult Beijing to fourth place on the business activity dimension. This, together with some improvement in scores for human capital and cultural exchange, has been more than enough to offset declining relative performance in information exchange and international political engagement,” A.T. Kearney experts explained.

Johnson Chng, managing director of A.T. Kearney Greater China, said, “Clearly Beijing went up in the ranking due to its rising importance as a business center in addition to being the political center of China.”

However, he added, the air pollution issue is now a growing concern for many Beijing residents that, if not addressed soon, will cause an outflow of talent.

“In fact, many of my friends and business associates have moved out of Beijing in the last six months, and many are indeed contemplating the idea, too, for the sake of their family,” he said.

In a recent survey conducted by MRIC Group, an international executive recruitment firm, 47.3 percent of the 269 respondents in Beijing said they would like to relocate this year because of air quality concerns. The most-preferred destinations are North America, Shanghai, Europe, Hong Kong, Singapore and New Zealand.

As human capital is weighing ever more among the five categories, some companies have to improve the working environment to retain talent regarding the air quality in Beijing.

“Companies should prepare air purifiers especially when the buildings don’t have such machines,” said Robert Parkinson, founder and managing director of the international recruitment group RMG Selection.

Shanghai, ranking 18th in the index, was the only city on the Chinese mainland that came close to Beijing. In fact, it scored higher than Beijing in human capital, given its larger foreign-born population. Shanghai also performed well in business activity.

Beijing lags behind Shanghai in human capital because of the capital city’s “size of the foreign-born population, scores of universities in the global 500, number of inhabitants with tertiary degrees, international student population and number of international schools,” explained Chng from A.T. Kearney.

On the other hand, Shanghai ranked lower due to a less-ideal score in political engagement. Specifically, Shanghai is home to a smaller number of international organizations, embassies and consulates, think tanks, political conferences and local institutions with international reach.

The Shanghai Pilot Free Trade Zone will certainly help the city’s globalization in the long term. However, the impact and the speed of that depends on policy implementation as there are still lots of details to be sorted out in terms of how exactly Shanghai FTZ will work, Chng said.

“In the short term, I do not see any material change as most companies are simply trying to take advantage of the FTZ to help with the existing business rather than attracting significant new business,” said Chng.

Other Chinese cities in the list saw their rankings drop.

Guangzhou dropped from its rank of 60 to 66 this year due to a significant decrease in political engagement. Shenzhen dropped from 65 to 73 due to a decline in its human capital score.

Tencent seeks innovation with Qianhai bank

Tencent is scouting for innovation opportunities in Internet finance in the Qianhai Economic Zone in Shenzhen as the company has won the license to set up a private bank.

“Tencent will initiate the establishment of a privately-owned bank in Qianhai, Shenzhen,” the Internet giant said in a statement yesterday. Qianhai has been picked as a special economic zone in Shenzhen to boost cross-border trade and investment with Hong Kong.

Tencent, whose private bank proposal is currently being reviewed by the China Banking Regulatory Commission, will leverage its advantage in the Internet industry to focus on online finance innovation to better serve its users more efficiently, according to the statement.

Tencent is hiring senior managers to develop the new bank’s strategy, China National Radio said on its website yesterday, citing unnamed sources from the Shenzhen Financial Services Office which, however, didn’t comment.

Chen Zhiwu, professor of finance at the Yale School of Management, said at the Boao Forum last week that private banks should operate in regions that lack financial services and where state-owned banks don’t have a presence. He suggested Gansu, Yunnan and Shaanxi provinces and the Guangxi Zhuang Autonomous Region.

The State Council has approved the program to set up five private banks in Shanghai, Tianjin and the provinces of Guangdong and Zhejiang.

Wal-Mart to shut down outlet in Hangzhou


A customer shops at Wal-Mart’s Zhaohui store in Hangzhou on Tuesday. Wal-Mart, the world’s largest retailer by revenue, decided to shut down more than 20 outlets in China this year.

Closing part of company’s plan to jettison underperforming stores

Wal-Mart Stores Inc, the world’s largest retailer by revenue, plans to shut down another underperforming store?in Hangzhou, Zhejiang province?in late April, while a compensation dispute with employees from an inland store that closed in March remains unsolved.

Hu Yinghua, a saleswoman at Wal-Mart’s Zhaohui store in Hangzhou, said they had a meeting on Wednesday afternoon as a formal notice of the closing of the store by the end of this month.

“The informal notification came on Tuesday night via text message. We have to choose before April 23 whether to be sent to other Wal-Mart stores in the city, or leave the company with a certain amount of compensation,” she said.

Hu said upper-level managers explained during the meeting that the closure was strategically necessary.

There were a few customers at the store on Wednesday, but some shelves were already empty.

Shirley Zhang, media director from Wal-Mart China’s Department of Corporate Affairs, confirmed that the store will close on April 23 as a part of the company’s plan of shutting down those failing to make a profit.

The multinational company has opened about 400 stores on the Chinese mainland since it entered the market in the mid-1990s. The company decided to shut down more than 20 outlets in China this year because those stores comprise about 9 percent of the total, but have contributed only 2 to 3 percent of the total sales volume from 2013 to date, she said.

“We take these moves to achieve quality of growth, and we think the strategy adjustment will help us to better meet the demands of customers,” she said.

Zhang said the company has tried to make proper arrangements for the employees affected by the closures, including allowing them to transfer to any outlet in China and subsidizing their relocation expenses, including transportation and accommodations.

However, the company’s retreat from Changde was not seen as reasonable or fair by most of its local employees. More than 70 out of 135 employees from the store have asked their trade union to seek better compensation from the company after Wal-Mart told the workers on March 5 that the store would be closed in two weeks.

Huang Xingguo, chairman of the Changde store’s trade union, said Wal-Mart did not provide an official notification to the trade union in advance for such a vital decision as the law stipulates and failed to show due respect to its employees.

“The day they announced the closure, employees from other cities arrived at the supermarket to replace our workers. It was humiliating and discriminatory,” said Huang, whom employees elected as the trade union chairman in 2013.

He said the union has asked city authorities for formal arbitration to seek workers’ rights in terms of collective negotiation, higher compensation for the mass layoffs, and pay for time not worked during the dispute.

“We ask Wal-Mart to double the existing compensation, but that is negotiable if the company is willing to resume dialogue,” he said. “However, the company is busy removing its assets and has refused dialogue since late March.”

Huang said Wal-Mart’s tough stance was backed by inappropriate intervention from the local government.

He said the district’s labor department provided written material to recognize that Wal-Mart closed its store in Changde legally, and police arrested several workers who took part in peaceful protests on March 21.

A labor inspection official surnamed Tan from Changde’s Wuling district, who has been working as a mediator in the case, said the situation is “complicated” and urged workers to resort to legal channels to defend their rights.

Zhang, the media director from Wal-Mart China, defended the company’s moves.

“Personally, I feel sympathetic toward these workers and understand their requirement for higher compensation, but our company has to handle that in accordance with the law,” she said.

But Chang Kai, head of the School of Labor and Human Resources at Renmin University of China who participated in the legislation work for the Labor Contract Law from 2006 to 2008, believes Wal-Mart lacks legal justification for its behavior.

“The Changde outlet is just a branch of Wal-Mart, so it can’t terminate employees’ contracts under the name of disbanding the enterprise,” he said. Under Chinese law, the company needs to provide an official resolution from a shareholders meeting to legitimize its decision to end its contracts with employees.

“What Wal-Mart did is actually a mass layoff, which requires the employer to inform workers one month in advance and listen to the trade union’s suggestion for staff reallocation, which Wal-Mart has failed to do,” he said.

Chang also said the trade union of Changde’s Wal-Mart seeking better treatment for workers is significant, as it will set an example for similar cases in the future.

E-membership shows strong potential in O2O business

An online membership product jointly launched by department store operator Intime Retail (Group) Co Ltd and e-commerce giant Alibaba Group Holding Ltd has showed strong potential for developing online-to-offline business by gaining 1.7 million users within a month.

According to a press release from Intime Retail on Wednesday, the virtual membership card helped Intime gain more than 1.7 million members in 30 days. The department store operator gained about 1.3 million offline members during the past 16 years since it was founded.

The e-membership, which launched on March 8, is the first online membership product in China that allows customers at brick-and-mortar stores to make payments for offline purchases through mobile phones.

The innovative e-product named Yintaibao is integrated with customers’ membership information. Members can enjoy the advantages of Intime membership by taking their smartphones to any brick-and-mortar store of the company across China, and can pay through mobile devices as well.

The e-membership product is a major move by Intime and Alibaba to develop their online-to-offline business.

Alibaba said at the end of March it had invested as much as HK$5.37 billion ($692.5 million) in Intime to develop its online-to-offline business.

The investment is expected to give Alibaba a stake in Intime of about 9.9 percent when the deal is completed. The convertible bonds are estimated to allow Alibaba to take no less than 25 percent of Intime when it converts those bonds into common stock shares within three years.

German companies upbeat on China’s future growth

China’s growth slowdown is normal as it is going through an economic transformation period, with the transition offering new opportunities for foreign firms, an official from the German Chamber of Commerce has told Xinhua.

“We expect general growth to slow which is a natural economic development when the reference base is increasing. The switch from a rapid to a more sustainable economic progress in China is the right course,” said Alexandra Voss, executive chairwoman of the German Chamber of Commerce, North China, on Monday evening during an interview.

China is heading in the right direction by rebalancing its economy and slowly introducing consumption as one of the main economic drivers in addition to exports and large-scale investments in infrastructure development like highways and housing, she added.

There are about 4,500 German companies operating in China. Of these, 60 percent are members of the German chamber. In 2013, 400,000 people in China were employed by German companies.

According to the organization’s annual Business Confidence Survey, members of the German chamber are very positive about their business forecast in the coming years. In 2012, 22.4 percent of respondents perceived their business outlook to be improving; in 2013 this rose to 40.5 percent, showing more confidence in the development of the Chinese market.

Chinese President Xi Jinping said during his visit to Germany in late March that China’s internal impetus is driving the country’s sustainable and stable growth, thus providing a huge market and opportunities for its cooperation partners, including Germany.

China needs “German quality”, while Germany’s growth requires the Chinese market and “China speed”, the president said.

During his stay in Germany, Deutsche Bundesbank and People’s Bank of China announced the establishment of a clearing center for transactions with RMB in Frankfurt am Main, the business and financial center of Germany.

“This important step is highly beneficial for many German SMEs doing business with Chinese counterparts by easing financial issues between them and lowering the transition costs of deals,” Voss said.

She predicted that certain strategic industries will grow and offer opportunities during China’s market-oriented reform, such as sustainable urbanization, green building creation and energy saving consultation.

The strong focus of the Chinese government on environment and energy and its decision to put more emphasis on these areas will bring great business opportunities for German companies, she said.

But Voss pointed out that German companies still see themselves confronted with a number of challenges in China such as Intellectual Property Rights protection. They also expect easier and wider market entry for foreign companies.

“We reckon that a successful execution of the reforms will ignite competition, provide more opportunities, and minimize challenges for foreign companies. Then it is only a matter of time before natural market forces facilitate more sustainable growth”, she said.

Jack Ma’s firm buys into financial software company

A company in which Chinese e-commerce billionaire Jack Ma Yun owns 99 percent of has agreed to buy a 20.62 percent stake in the country’s leading financial software company Hundsun Technologies Inc for 3.3 billion yuan ($531.3 million) in cash, Shanghai-listed Hundsun said in a filing on Thursday.

That will give Ma’s investment management firm Zhejiang Finance Credit Network Technology a controlling share of Hundsun, the filing said.

The deal has not been finalized yet and still needs the approval from the Ministry of Commerce.

Analysts said that Ma’s acquisition aims to improve Alibaba Group’s Internet financial services technologically, even though Hundsun tried to emphasize in the filing that the deal has nothing to do with the e-commerce giant, founded by Ma.

“Hundsun does a good job of providing IT services for traditional financial institutions. And the acquisition could help Alibaba obtain certain experience over how to run financing offline directly from Hundsun and further its presence in China’s financial services sector,” said Li Chao, an Internet financing analyst with Beijing-based market research firm iResearch.

Hangzhou-based Hundsun, founded in 1995, provides software solutions to financial clients including banks, insurance firms, brokerages and fund management companies.

According to the company’s annual report, it held a leading position in providing IT services for financial businesses including fund management and banking. The report for last year is not available on the Shanghai bourse.

Upon the completion of the deal, the company and its shareholders will stay independent in terms of human resources, operations, finances and structure, said Hundsun. Its trading will be resumed on Tuesday.

According to the filing, it has no plan of changing current main business in the next 12 months either and the deal will not impact the financial results this year.

But Li said that some of its financial clients may consider turning to Hundsun’s rivals, as Alibaba’s current financial services compete with those offered by traditional financial institutions.

Chinese Internet companies including Alibaba, Baidu and Tencent Holdings, are all stepping up efforts in providing financial services, which has become a big threat to banks, according to Li.

Alibaba set up a financial service platform, named “Zhaocaibao,” in Shanghai Thursday, enabling financial institutions and customers to complete transactions online, news portal 163.com reported.

But the firm told the Global Times Thursday evening that it did not hold any press conferences about “Zhaocaibao.”

The deal also raises concerns that Alibaba’s Internet finance company may get access to Hundsun’s financial database and gain an unfair advantage, according to media reports.

Manufacturing data a mixed bag

China’s manufacturers had a mixed performance in March with state-owned companies reporting the first rebound in four months while private firms saw their business plunge to an eight-month low, two separate surveys showed Tuesday.

It was not a surprise that the survey results were divergent, analysts said, generalizing that China’s economy remained on the soft side since the rebound was so limited in scale.

The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in China’s state-owned industrial companies, ticked up to 50.3 in March from 50.2 a month earlier, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 means expansion, and the latest rate was the first increase since November.

The components showed that production edged up to 52.7 in March from February’s 52.6, while new orders rose 0.1 point to 50.6, and employment gained 0.3 points to 48.3. Input prices lost 3.3 points to 44.4, indicating little inflationary pressure for the future.

Zhao Qinghe, an analyst with the bureau, said the indices indicated a stabilizing industrial sector in the world’s second-largest economy.

“Chinese manufacturers resumed their businesses after the Spring Festival holiday, which helped push up the official PMI,” Zhao said. “The warming-up demand in external markets also bolstered the headline index, with new export orders returning to growth for the first time since December.”

However, the HSBC PMI, which gauges conditions at mostly private and export-oriented manufacturers, fell to 48 in March, an eight-month low that was down from 48.5 in February.

It marked the third straight month that the HSBC PMI pointed to contracting activities.

Qu Hongbin, chief economist for China at HSBC Holdings Plc, said the latest deterioration was the strongest since July 2013.

“It confirmed the weakness of domestic demand conditions,” Qu said. “This implies that the first-quarter economic growth is likely to fall below the annual target of 7.5 percent.”

Li Maoyu, an analyst at Changjiang Securities Co, said China’s activities were on the soft side even through the official PMI staged a slight rebound. “The increase in the official PMI was so weak that it can’t defy the economic slowdown which was evident in many sectors.”

Huawei overtakes Ericsson in revenue

Shenzhen-based Huawei Technologies Ltd surpassed arch rival Ericsson Inc for the first time in 2013 after it posted an 8 percent rise in revenue to 239 billion yuan (US$38.4 billion), China’s biggest telecommunications equipment maker said Monday.

Huawei, which last year posted the fastest profit growth in four years, also expects revenue to grow 10 percent annually from this year to US$70 billion in 2018.

Huawei’s net profit rose 34.4 percent to 21 billion yuan last year as it benefited from a steady carrier business and rapidly growing enterprise and consumer activities.

Its revenue in 2013 beat Ericsson’s US$35.3 billion revenue.

“Thanks to the favorable global macro-economic and industry environment, as well as the effective execution of our company strategy, Huawei achieved our business targets for 2013,” Eric Xu, Huawei’s chief executive, said in a statement.

Huawei, now the world’s No. 3 smartphone maker, benefits from companies investing heavily in cloud and mobile computing as well as selling more telecom devices and smartphones, industry insiders said.

Although Huawei’s carrier network business grew only 4 percent, it still accounted for 166.5 billion yuan or 70 percent of its total income. The enterprise business surged 32 percent while the consumer business, including the phone unit, jumped 18 percent last year.