Archives March 2015

Alibaba, SAIC say will launch Internet car in 2016

May find it hard to get favorable market reception

China’s e-commerce giant Alibaba Group Holdings and State-owned SAIC Motor Corp jointly announced on Thursday that they would launch their first Internet car in 2016.

The car is expected to adopt Alibaba’s Yun operating system, enabling drivers to obtain timely traffic information, music service and fast route options based on Alibaba’s Internet services such as cloud computing and big data, according to a press release that Alibaba e-mailed to the Global Times on Thursday.

This decision came after the two signed an “Internet Car” agreement on July 23, 2014.

Analysts said Internet cars can be a promising market, which does not just refer to a vehicle connected to the Internet, but is expected to be a next-generation tech product that can communicate with other such products and lead to better traffic management as well as self-driving.

But Feng Shiming, an executive director with Shanghai-based auto consultancy Menutor Consulting, thinks the market is far from taking off and is skeptical about the prospects for SAIC’s Internet car.

“I do not think the two companies’ first networked car will have a great market reception, because the Internet car is still regarded as a concept by most consumers, who may think about buying one only after at least 5 years,” Feng told the Global Times Thursday.

Feng also said he questioned the car’s reliability and user experience, citing the quick launch date.

Meanwhile, the two said in the press release that they will set up a 1 billion yuan ($160 million) fund that will also be open to other companies, in an attempt to further integrate their own respective advantages as well as jointly lead the development of China’s Internet car industry.

“The establishment of such an open fund will attract more companies’ participation and then fast-track the promising Internet car sector in China,” Zhang Yi, CEO of Guangzhou-based iiMedia Research, told the Global Times Thursday.

An Internet car may be something that SAIC, China’s leading domestic carmaker, can bank on to draw some limelight away from overseas auto brands, which are still widely preferred in China due to advanced technology and high brand value, said Zhang.

China sold 1.47 million domestic brand vehicles during the two months through February, while the overall sales stood at 3.43 million, according to data released by China Association of Automobile Manufacturers on Tuesday.

After the disclosure of its latest cooperation with Alibaba, SAIC’s listed arm on the Shanghai bourse saw its shares rise by 4.79 percent, closing at 24.71 yuan on Thursday.

SAIC and Alibaba came together after similar joint ventures were formed by overseas companies.

Apple Inc and carmakers including Ferrari, BMW and Mercedes-Benz introduced an in-car networking and multimedia platform, dubbed as CarPlay, in March 2014, according to information on Apple’s website. Three months later after Apple’s move, Google Inc announced on its site a similar platform named Android Auto, which is expected to be built in Audi, Hyundai, and Nissan cars.

Alibaba’s archrivals in China – Baidu Inc and Tencent Holdings – have also made similar moves. In April 2014, Baidu said it launched an in-car networking system CarNet, featuring location-based services and voice-driven navigation with the advantage of Baidu’s mapping technology. A similar product by Tencent called Lubao Box, released at the Global Mobile Internet Conference held in May 2014, offers real-time safety and maintenance information as well as discounted roadside assistance via cooperation with People’s Insurance Co of China, according to a statement e-mailed to the Global Times in August 2014.

Both Zhang and Feng think the cooperation between SAIC and Alibaba will likely allow the two to stand out from fierce competition.

Alibaba’s advantages, especially in online shopping platforms, can help SAIC’s Internet car win over female drivers, which account for a large proportion of Internet cars’ potential buyers as they seem to consider the safety and technology of cars more than male drivers, said Feng.

In addition, Alibaba’s active expansion into the navigation industry can contribute a lot to its Internet car development, he noted.

In February 2014, Alibaba announced the acquisition of AutoNavi Holdings, which iiMedia in November estimated would seize 50.6 percent of the Chinese mobile mapping and navigation market in 2014, followed by Baidu’s mapping services with 39.3 percent.

UK companies seek new opportunities in China

China’s economic “new normal” can bring more opportunities for UK companies, British business leaders said on Wednesday.

James Sassoon, chairman of the China-Britain Business Council, said China is undergoing a period of further transformation.

“It is stepping away from labor-intensive exports toward a more highly mechanized and service-originated economy, with heightened resilience on domestic demand and added emphasis on environmental sustainability,” he said at the China Business Conference in London.

Premier Li Keqiang announced a growth target of about 7 percent for this year at the ongoing National People’s Congress annual session as China moves toward a “new normal” of lower, more sustainable growth.

Sassoon added, “We should welcome and embrace these changes, and make sure we are well positioned to seize the opportunities they present.”

Attended by about 500 delegates from Britain and China, the conference is organized by the council, a leading organization helping British companies to increase and develop their business with China. The aim is to create a forum for discussion and cooperation to position business between the two countries.

David Robinson, president of Speedo International, which is based in Britain and manufactures and distributes swimwear and accessories, said China’s “new normal” will place great emphasis on fitness and healthy lifestyles.

Speedo’s products are available in most first- and second-tier cities in China, and the company is now working on increasing its e-commerce presence.

Chris Hill, development manager of Lifecycle Marketing, which provides education programs for pregnant women, said China’s “new normal” will boost the market for his business, with great emphasis being placed on healthy lifestyles and quality of living.

Hill said although China’s economic growth is slowing, the country still represents a huge market for Lifecycle, with the annual pregnancy rate in China standing at 16 million, compared with 800,000 in Britain.

The company is looking to expand into China through joint ventures and marketing strategies to attract China’s emerging middle class, Hill added.

Ni Jian, charge d’affaires at the Chinese embassy in London, explained, “China’s growing demand for brands provides great opportunities for reputable British brands with high-recognition and reputation in the Chinese market.

“The fast growth of e-commerce in China will also provide increasing opportunities for British products to enter the Chinese market.”

Exports of British cars to China have increased sevenfold since 2009, according to the British Society of Motor Manufacturers and Traders. Last year, 137,410 UK-built cars were exported to China, a year-on-year increase of 14.5 percent.

Last year saw enhanced Sino-UK economic cooperation, with bilateral trade reaching a new high of $80.9 billion, a year-on-year increase of 15.3 percent, according to the Chinese embassy in Britain.

Ni said China’s growing need for innovation is leading to a big demand for new technology, techniques and products.

Britain, with its advanced manufacturing, high-technology and clean-technology sectors is well positioned to supply this market, Ni added.

The past year also key mergers and acquisitions and China’s investment in the UK exceeded $7 billion.

“As China opens up its service industry further to foreign investment to satisfy its big domestic demand, foreign capital in finance, healthcare, education and pension sectors will have great opportunities to expand in China,” said Ni.

What’s more, the internationalization of the renminbi is providing great opportunities to the UK, as a competitive offshore renminbi center, Ni said.

Paul Rogers, author of Little Bridge World Ltd, an English language education provider, said that China’s new normal will boost the demand for English language learning because highly educated and internationally minded talents will be valued more in the market.

“As China focuses more on innovative growth and internationalization of its companies and industries, there will be a bigger market for English learning,” Rogers said.

The internationalization of Chinese firms have also provided great opportunities for Central Hall Westminster, an iconic London venue which is increasingly hosting outbound Chinese events and firms in recent years.

Examples include a conference by the Chinese telecommunications giant Huawei, and also Chinese film festivals in London, said Kevin Blackman, senior sales manager at Central Hall Westminster.

“As Chinese businesses become more international minded as a result of China focusing on international growth and innovative growth, we will have more clients from China, and we are going through a process to adjust our services to their needs,” Blackman said.

Sina Weibo sees 77% rise in revenue

China’s Twitter-like microblog platform Sina Weibo reported a 77 percent surge in net revenue to $334.2 million in 2014, said the company on Tuesday.

Weibo ended last year with a net loss attributable to ordinary shareholders of $63.4 million, which was in part due to the change in fair value of investor option liability and Alibaba’s investment in the company, said its latest earnings report.

Its stock was down 5.8 percent to $14.02 per share in after-hours trading after the company released the results.

The microblog platform reported a 78 percent year-on-year increase in advertising and marketing revenues to $264.8 million in 2014.

“On the monetization front, mobile ad revenues now make up more than half of Weibo’s total ad revenues,” said Wang Gaofei, the company’s CEO in the statement, adding that “2015 will be another high growth year for mobile and social marketing in China, and we are well positioned to take advantage of this trend.”

For the fourth quarter of 2014, Weibo reported a net revenue increase of 47 percent year-on-year to $105.2 million and a sharp decrease in net income attributable to ordinary shareholders from $21.6 million same period in 2013 to $4.6 million.

The social media projects its net revenues in the first quarter to be between $93 million and $96 million, according to the financial report.

The Beijing-based company debuted on the Nasdaq in April last year with a $286 million initial public offering. It introduced Alibaba as a stakeholder in 2013.

Adidas sees strong sales in China

Sportswear group Adidas said sales in China grew 10 percent in 2014 to 1.81 billion euros (US$1.97 billion) as its core products performed strongly.

The company aims to drive further growth by opening special segment stores. The first specialty store for outdoor sportswear is set to open in the first quarter of this year, Colin Currie, managing director for Adidas Group China, said in a media briefing in Shanghai yesterday.

“Although special segment stores only account for a small portion of our total number of stores in China, they offer consumers a special assortment of products,” Currie said.

He added that these stores also help Adidas retain customers who would otherwise shop at other stores.

The segmented retail strategy is part of Adidas’ overall retail expansion plan in China.

Technology set to transform factories

China will rely more on new technologies in future to maintain the vitality of the manufacturing sector, the head of the industry’s watchdog said on Friday.

The country is already the world’s largest manufacturer, and aims to become one of the strongest in the next 10 years, according to Miao Wei, head of the Ministry of Industry and Information Technology.

The adoption of the “Internet of Things”, a technology that enables a wide range of machines and devices to be interconnected, and the introduction of robots are major ways for Chinese factories to improve their global competitiveness, Miao said.

“We are relying on the ‘Made in China 2025’ strategy to bring down operating costs and boost efficiency and innovation in the manufacturing sector,” he said, adding that the 7 percent growth target will be a “very high bar” for traditional manufacturing enterprises to achieve without support from new technologies.

Premier Li Keqiang said on Thursday that China will push forward the integration of modern IT, including cloud computing and big data, with traditional manufacturing segments.[Special coverage]

“Manufacturing is traditionally a strong area for China,” Li said in the annual Government Work Report. “We will implement the Made in China 2025 strategy; seek innovation-driven development; apply smart technologies; strengthen foundations; pursue green development; and redouble our efforts to upgrade China from a manufacturer of quantity to one of quality.”

The slow pace of adoption of new technology is harming the quality of Chinese manufacturing.

The country has 23 robots for every 10,000 workers compared with a figure of 273 in Germany, Miao said. In Japan and South Korea, the figure is approaching 300.

The low adoption rate for high technology reduces the competitiveness of made-in-China products on global markets.

“While the German government is introducing ideas for building Industry 4.0, many enterprises in China still need to fill the gap between Industry 2.0 and Industry 3.0. The deficit is obvious,” Miao said.

Industry 4.0 is a concept of value chain organization in which sensors are installed in machines so that every part of the chain can create, transfer and share statistics, boosting efficiency and product quality. Industry 3.0 and 2.0 are earlier levels of industrial development.

The ministry pledged to encourage local innovation and introduce policies that favor companies willing to adopt more new technology.

‘Internet Plus’ to fuel innovation, development

The notion of “Internet Plus” mentioned by Premier Li Keqiang on Thursday has drawn wide attention, as many see it as a sign of the government’s increasing emphasis on the Internet industry.[Special coverage]

When delivering the government work report, Li said, China will develop the “Internet Plus” action plan to integrate mobile Internet, cloud computing, big data and the Internet of Things with modern manufacturing, to encourage the healthy development of e-commerce, industrial networks, and Internet banking, and to help Internet companies increase their international presence.

“From the report, we can see that the promotion of trans-boundary integration of the Internet has become a focus of government work,” said Fang Xingdong, chairman of think tank China Labs.

Internet Plus is the integration of the Internet and traditional industries through online platforms and IT technology, it is expected to help economic restructuring, improve people’s livelihoods and transform of government functions, according to Wu Hequan, academic of Chinese Academy of Engineering.

Xu Linshen, vice general manager of the Beijing-based Qing-Feng Steamed Dumpling Shop, said: “Efficiency has improved since we brought in an e-commerce system that monitors sales. For example, if sales slip for one particular item we are notified and can investigate the reasons behind it.”

The Internet is also a driving force for the transformation of traditional manufacturing. Zheng Jie, a deputy to the National People’s Congress (NPC) and general manager of Zhejiang branch of China Mobile, suggested that more “Made in China” products should use intelligent network and mobile Internet technology.

Internet financing is a rising industry and has promoted restructuring of traditional financing institutions. Major banks, including China Merchants Bank, China Minsheng Bank, and China development Bank, have launched online petty loan applications in recent years.

Wu Hequan said Internet Plus not only had economic benefits, but will also improve public services.

“For example, taxi-hailing apps can help save energy and cut emissions. Online appointment with doctors, telemedicine, and video lectures are also more convenient for busy people,” he said.

During the ongoing “two sessions”, NPC deputy and Tencent chairman Pony Ma, proposed that mobile Internet can be used to to solve social problems, such as medical treatment, education resources and smog.

According to China Internet Network Information Center, China had 649 million Internet users by the end of 2014, and some 557 million used cell phones to get online.

Li Jiang, a consultant of Beijing Municipal Commission of Economy and Information Technology, said, besides market, the government should also take up the responsibility to promote the Internet penetration and application, especially in terms of information security, data sharing among different social sectors, and the setting of IT standards.

In the opinion of Fang Xingdong, the Internet is not only reshaping the economy, society and governance, but is also creating new opportunities to connect China and the rest of the world.

China has been transforming from a follower into a major player in the world’s Internet industry during the past two decades, he observed.

“The next decade will be a time for the Chinese Internet to broaden its reach globally,” he said, “with the help of Internet, China will pursue its development opportunities with a global vision.”

Wanda chairman Wang ousts Ma on Forbes list

The less-than-stellar performance of Alibaba Group Holding Ltd’s business and shares helped Wang Jianlin, chairman of Dalian Wanda Group Co, to beat Jack Ma to the title of the richest man on the Chinese mainland on the 2015 Forbes Billionaires List.

Recapturing top position from Ma this year, Wang saw his personal wealth rise to $24.2 billion from $15.1 billion a year earlier, according to the rich list released on Monday.

And it was the first time that Wang caught up with American financier George Soros to tie for the 29th position on the world’s rich list,

That represents huge progress, considering Wang’s 64th position on the same list in 2014.

Wanda Commercial Properties Co went public in Hong Kong at the end of last year, the largest initial public offering by a real estate development company. Wanda Cinema Line Co was listed in Shenzhen at the end of January this year.

As both shares rose, Wang saw his wealth increase accordingly as the largest shareholder.

According to Everbright Securities Co, Wanda Cinema Line has been successful with a large member system. Its performance will be further boosted by the increased number of new screens and the prospering industry.

Ma fell to second place with personal wealth of $22.7 billion, although that was up from $10 billion in 2014. His global ranking was 33rd this year.

Although Alibaba made a record IPO of $25 billion on the New York Stock Exchange in September, its share price sank at the beginning of this year due to disappointing fourth-quarter earnings in 2014 and a skirmish over counterfeit goods between Alibaba and the Chinese industry and commerce regulator.

Li Hejun, chairman of Hanergy Thin Film Power Group, overtook Robin Li of Baidu Inc and Pony Ma of Tencent Holdings Ltd this year to become the third-richest man on the Chinese mainland on the Forbes list with estimated wealth of $21.1 billion. He also saw his global ranking reach 38th this time around.

Hanergy, based in Yunnan province and listed in Hong Kong, saw its share price nearly double since the start of this year from HK$2.77 (35 cents) to HK$5.25. Its market value surged to $19 billion in a two-month period as of February.

After purchasing three Western thin-film solar businesses in 2013, Li added a fourth, Alta Devices from California, in 2014, and is benefiting from Beijing’s incentives for the industry.

In all, 213 Chinese billionaires are on this year’s Forbes rich list, 71 of whom made their debuts. The number of Chinese billionaires is now only second to that of the US.

58.com acquires Anjuke

Chinese online classifieds market 58.com Inc will buy 100 percent of Shanghai-based real estate Internet platform Anjuke Inc in stock and cash valued at US$267 million.

The deal also includes the issuance of nearly 5.1 million new ordinary shares of 58.com and US$160 million in cash, the company said yesterday.

Zhuang Jiandong, senior vice president of the company, will head the newly combined 58 Anjuke Real Estate Business Group, while Mike Liang, former CEO of Anjuke, is leaving to start a new business related to property.

“There is still very robust demand for real estate in China and the opportunity for the best online real estate platform remains massive,” Yao Jinbo, CEO of 58.com, said yesterday.

“After the deal, we hopefully will be the biggest information provider of real estate market by users and revenue.” Yao added.

Before the deal, Anjuke had raised US$72 million in four rounds of funding.

Changes crucial to boost new energy car industry

Visitors look at a Dongfeng electric car. Industry insiders warn against Chinese new energy carmakers falling into the “same trap” of allowing foreign automakers to dominate the Chinese market.

Fresh outlook, policies and subsidies key to hit goals and harness opportunities

The Chinese government is considering new preferential policies for the emerging new energy car industry.

The Ministry of Science and Technology issued a draft of the government’s plan to support research and development of new energy vehicles to gain public opinion on Feb 16.

Beijing authorities also announced that the city would be friendlier to new energy car owners, by allowing them to pay less in parking fees and highway tolls by the end of March.

In 2012, the State Council set a goal of getting 5 million new energy vehicles on the road by 2020.

To meet this target the government plans to establish a research and development system and industrial chains for electric cars by 2020.

According to the China Association of Automobile Manufacturers, the output and sales of new energy vehicles in China were 78,499 and 74,763 in 2014, 3.5 and 3.2 times the figure in 2013.

Despite the growth, there is still a way to go to reach the central government’s goal to have 500,000 new energy cars on the road by the end of this year.

Compared with sales of more than 23 million cars in China last year, the sales of new energy vehicles only accounted for a small proportion.

Dong Yang, secretary-general of the automobile manufacturers association, said he did not think the government would hit its new energy car goals unless it offered new preferential policies, as projected sales this year are about 150,000 to 200,000.

Ambition

The draft plan said electrification of power, lightweight structure and vehicle intelligence were the core technologies for the future development of new energy cars.

The next five to 10 years will be a period of strategic importance for the reorganization, transformation and upgrading of the global automobile industry.

According to the Ministry of Science and Technology, the Chinese automobile industry faces three challenges: the transition from a global sales leader to a leading manufacturing power, pollution control of car exhausts and energy security and national development at a low carbon level.

The government wants to achieve three goals through developing the country’s new energy automobile market: upgrading the automobile industry, protecting the environment and using less fuel.

Several industry insiders believe that with the huge domestic market, electric cars will offer China new opportunities to grow. However, they warned that the Chinese automobile industry should not fall into the “same old trap” where foreign carmakers take the main share of the market.

The government has different attitudes towards electric cars and hybrid electric cars. It offers financial backing for technology research and development, as well as high subsidies for electric car buyers. For hybrid electric vehicles, the government only financially supports technology and promotion.

Big State-owned automobile enterprises’ position in the two markets may be the reason why the government acts differently.

In the past 50 years, many Chinese automobile companies established joint ventures with foreign car manufacturers to learn advanced techniques. The result was that foreign players now dominate the Chinese auto market.

The government policies mean that electric cars from foreign companies are not eligible for subsidies, but those from joint venture companies are.

As a result, foreign companies tend to produce electric cars with local joint ventures, which is the “same route” as the development of fuel cars in China.

Industry insiders question whether Chinese companies will learn techniques through the electric vehicle joint venture process to help themselves grow competitively.

So far, the performance of Chinese automobile giants in the new energy industry has fallen flat. FAW’s plug-in hybrid car Hongqi is still a concept and Dongfeng Motor Corporation has kept a low profile on new energy vehicles.

Private carmaker BYD is the only real “early bird” in the field.

“With central and local governments’ strong support, China now has embraced the best environment for the growth of the new energy vehicle industry,” said Hu Xiaoqing, PR and marketing director of Shenzhen BYD Daimler New Technology Co.

Emerging force

With State-owned big names showing lackluster performance in big- and medium-size cities, smaller brands have potential to enter the market, especially in small cities, townships and villages.

Most smaller brands offer low-speed electric cars, which run at speeds of less than 80 kilometers per hour and are sold for between 25,000 yuan ($3,997) to 50,000 yuan. Many electric motorcycle producers can also manufacture the cars.

Public security departments in many places do not issue plates to low-speed electric cars, as they do not consider them “real” vehicles.

However this could change after the government recognized low-speed electric cars as “normal” electric vehicles, in a draft standard for the industry in November.

Unlike big cities, small cities, townships and villages have plenty of land to build charging posts, which is an important foundation for the niche market ignored by many big enterprises.

Jia Xinguang, a Beijing-based independent industry analyst, said the government should focus more on promoting the sale and use of new energy automobiles in medium- and small-sized cities. “The subsidies in the smaller places are much lower than Beijing and Shanghai. They need more battery-charging stations and better after-sales service facilities,” he said.

Learn from Germany

The German government’s policies for new energy cars could provide inspiration for the Chinese government.

The German authority believes the development of electric cars should be a systemic plan that includes not only vehicles but also intelligent transportation and smart grids.

With this in mind it plans to create a new energy car environment, which will involve vehicles, city planning and an energy and industry chain.

Instead of subsidizing electric cars buyers, the German government financially backs companies in fields such as automobile manufacturing, energy and electric power to develop related products.