Archives August 2015

Youngest Chinese keener entrepreneurs: survey

The youngest generation of the Chinese workforce are more interested in starting their own businesses and are more inclined to change jobs, according to new survey results.

The survey conducted by LinkedIn and data100.com showed 82 percent of working respondents born in the 1990s harbor entrepreneurship ideas, compared with 77 percent of those born in the 1980s.

Based on over 1,000 questionnaires, the poll suggests that the cities of Shenzhen, Beijing and Guangzhou top the chart for entrepreneurship enthusiasm, and that catering is regarded as the ideal sector for starting a business, followed by e-commerce and garment trade.

The “post-1990” generation stay in a job for an average of 18.5 months, while “post-1980” workers stick around for an average of 26.5 months. And while the older of the two groups stress payment and welfare in job hunting, the youngsters care more about their career prospects.

Entrepreneurship is becoming more popular in China, under the encouragement of the government, which hopes to use a wave of startups as a new engine for growth at a time when the economy is slowing. Many cities have set up startup incubators and rolled out preferential policies to encourage youngsters into starting their own businesses.

Warner forms China tie-up

Warner forms China tie-up Pedestrians walk past a Warner Brothers studio in Shanghai. The US company is in talks to partner with China Media Capital to develop Chineselanguage films.

Joint venture with CMC will develop local language movies

Warner Brothers, the studio behind Gravity and Interstellar, is in talks to partner with China Media Capital to develop Chinese-language films for China, where a rapidly growing box office continues to lure Hollywood studios.

The joint venture would be Warner Bros’ second venture in China, after partnering with China Film Group to produce and distribute movies.

“We confirm that CMC is now in talks with WB to create a JV. The talks have been going well, but we cannot disclose more details at this stage,” a spokesperson for CMC confirmed to Variety magazine on Tuesday. Sources at Warner Bros in Los Angeles also confirmed the partnership discussions, Variety said.

Phil Contrino, vice-president and chief analyst of BoxOffice.com, said that filmmakers are trying to respond to demand from local audiences for homegrown movies, as shown by the latest Chinese box office hit Monster Hunt, which has earned $375 million in China since its July release. The fantasy adventure has become the second-highest grossing film at the Chinese box office, outranked only by Furious 7, the seventh in the fast and furious Hollywood franchise.

“Chinese filmmakers in general are still tapping into what the public there wants from their homegrown products, and we’re still getting to a point where homegrown movies are starting to really perform close to what Hollywood movies are doing. That’s crucial. Everybody’s still kind of learning, and figuring it out,” Contrino said.

There have been increasing partnerships between Hollywood and China, with many studios in the United States collaborating with Chinese companies in the hope that it will lead to film releases in China, which allows only 34 foreign films released a year.

Stan Rosen, a Chinese film expert and professor at the University of Southern California US-China Institute, said the combination of the foreign film quota and so-called blackout dates – periods during the year when only Chinese films are allowed to be released, typically around holidays like the Lunar New Year and the summer – mean that Warner Bros’ plan to make Chinese-language films is a “better strategy” for the long term.

“The China market is on track to surpass last year’s market by August this year and it’s going to be the biggest market in the world by about 2018-19, so it makes sense to make Chinese films for the China market. You can’t lose,” he said.

With the number of movie screens in China increasing almost five-fold between 2010 and 2015 – from 5,000 to around 24,000 – making more movies for the Chinese audience will benefit Warner, he said.

“China Media Capital has been very successful,” he said. “Warner is partnering with good people. A lot of details are not yet known, but certainly given the entry in the China market and the increase in film screens, local movies are favored.”

Last October, Warner Bros partnered with media company Shanghai Media Group, Chinese investment fund CMC Capital Partners and communications group WPP to create a fund that invests in Chinese and international film, television and live entertainment. It focuses on Chinese-language programming that is distributed in China and around the world, according to Warner Bros.

CMC, a State-backed entity, has another joint venture deal with DreamWorks Animation SKG called Oriental DreamWorks. Oriental and DreamWorks are currently working on Kung Fu Panda 3, the third installment in the popular animation franchise, due for release in January.

Steel firms slip into red as glut persists

Most of the steel companies listed on the A-share market have seen a sharp erosion in profits during the first six months of the year, due to the glut in domestic production.

Hongxing Co Ltd, a company whose main shareholder is Jiuquan Iron & Steel (Group) Co Ltd, was the worst-performing listed steel company as of Aug 19 with losses of 1.55 billion yuan ($242 million) in the first six months. Hongxing said the losses were mainly due to production overcapacity, a slowing economy and the significant fall in steel prices.

Beijing Shougang Co Ltd, another major producer, has forecast losses of about 200 million yuan to 300 million yuan for the first half of the year.

According to data provided by the National Development and Reform Commission, large and medium-sized steel companies earned revenue of about 1.5 trillion yuan in the first six months of the year, down 17.9 percent from the same period a year earlier. However, the steel-making business of these firms ran up losses of about 21.7 billion yuan during the period, up 16.8 billion yuan from the same period in 2014.

About 43 steel companies registered losses during the period, while only three reported growth in profits. Fushun Special Steel Shares Co Ltd saw its net profit surge to 131 million yuan, an 803 percent year-on-year growth.

Daye Special Steel Co Ltd reported net profit of 139 million yuan by the end of June this year, up 5.42 percent from the same period in 2014. According to the company, the domestic steel market is still bogged down by production overcapacity and the lack of new growth drivers. Daye attributed its profit growth to measures taken to reduce output costs.

China stocks in sharpest fall since 2007

An investor looks through stock information at a trading hall of a securities firm in Luoyang, central China’s Henan Province, Aug. 24, 2015. China stocks nosedived on Monday with the benchmark Shanghai Composite Index dropping 8.49 percent to close at 3209.91 points, the sharpest decline since Feb. 27, 2007.

The Chinese stock markets had their worst day in eight years with the benchmark Shanghai Composite Index tumbling 8.49 percent to close at 3209.91 points.

This is the steepest dive since Feb. 27, 2007, and comes less than a month after a similar plunge on July 27 this year, when the stock market lost 8.48 percent.

The astonishing loss came one day after the government’s approval to allow the state pension fund to invest in the stock market, which analysts said should boost the market.

Nearly 2,200 shares tumbled by the daily limit of 10 percent. The overall loss was narrowed to around 6 percent in the afternoon as shares in blue chip companies, such as PetroChina and China Life Insurance, rose sharply. The index quickly fell back after 2 p.m.

Asia stocks across the board dived, too. The Hong Kong Hang Seng Index slumped more than 5 percent on Monday, its lowest point in 17 months. Japan’s Nikkei 225 Index closed down 4.61 percent, hitting a six-month low. Singapore’s Straits Times Index also tumbled almost 4 percent.

Monday’s sharp decline almost wiped out all of this year’s gains, despite government intervention, such as pouring in funds and restricting sell-offs.

In its latest move to prop up the market, pension funds were given permission to invest a maximum of 30 percent of net assets in stocks and equities.

The pension fund is worth an estimated 3.5 trillion yuan, however, but it is still unknown at this moment how much the sector will decide to invest, said Industrial Securities in a research report.

The report said that this entry by the pension fund is more of a psychological move by the government to assure investors that the A-share market is not an “abandoned child,” the report said.

The future of the stock market still depends on the fundamentals. Overvaluation is one of the main factors stoking fears among investors, said Guolian Securities.

The price-to-equity ratio of the ChiNext Index has been lowered but still stands at 76, similar to the level in November 2010, the highest point before this round of bull market.

Weak economic data also dampened investor confidence. The Caixin flash China general manufacturing PMI retreated to 47.1 in August, the lowest reading since March 2009.

The flash index is the earliest available indicator of manufacturing sector conditions in China. The continuous fall in the index in recent months indicates that the economy is still bottoming out, said He Fan, chief economist at Caixin Insight Group.

As the market continues to struggle, speculation is rife over whether the central bank will cut the reserve requirement ratio (RRR), again. The China International Capital Corp. (CICC) predicts that the central bank will “aggressively lower RRR” by at least another 150 basis points by the end of this year.

On Monday, the Shenzhen Component Index fell 7.83 percent to close at 10,970.29 points. The ChiNext Index, tracking China’s Nasdaq-style board of growth enterprises, lost 8.08 percent to end at 2,152.61 points.

GM China JV builds 200,000 new energy vehicle plant

SAIC-GM-Wuling Automobile Co. on Friday started construction of a new energy vehicle plant with the intention of turning out 200,000 vehicles each year.

Investing 3 billion yuan (470 million U.S. dollars), SAIC-GM-Wuling joined many rivals in the new energy vehicle sector betting on huge market potential.

China pays high subsidies on new energy vehicles to reduce pollution.

In the first seven months of this year, sales of new energy vehicles increased by 2.6 times year on year to nearly 90,000 despite weak auto sales in general.

On Friday, the automaker also started operations of an assembly plant with an annual production capacity of 400,000 conventional vehicles.

The company sold 217,000 Baojun cars in the first seven months of the year, up 424 percent.

Established in 2002, the automaker is a joint venture between General Motors, Shanghai Automotive Industry Corp. and Liuzhou Wuling Motors Co. Its sales in 2014 exceeded 1.8 million vehicles.

China increases tax breaks for small businesses

The State Council, China’s cabinet, on Wednesday decided to extend tax breaks to more small businesses, recognition of their roles in generating jobs and growth.

From Oct. 1, 2015 to the end of 2017, companies with annual taxable income under 300,000 yuan (46,900 U.S. dollars) will have their corporate tax halved, said a statement released after a meeting chaired by Premier Li Keqiang. Previously, the threshold was 200,000 yuan.

The meeting also promised tax breaks for companies with a monthly revenue under 30,000 yuan. They will be exempted from value-added tax and business tax until the end of 2017.

The move is the latest attempt to help small businesses, as they provide nearly 80 percent of urban jobs.

In the first six months, about 2.39 million small and micro enterprises in China paid reduced taxes, saving them about 8.6 billion yuan.

Wednesday’s meeting also decided promote big data processors, promising to make government data on transport, medical care, employment and social security available to the public.

The meeting also agreed to free controls on foreign investment in the logistics sector to allow them to establish purchase and distribution centers in China.

Didi Kuaidi and partners invest U.S.$350 million in GrabTaxi

China’s largest ride-hailing application Didi Kuaidi said it has invested in Malaysia-based taxi-booking application GrabTaxi Holdings along with venture capital firms and China’s sovereign wealth fund China Investment Corporation.

The total amount of this funding reached U.S.$350 million, and other investors including GGV Capital, Coatue Management, and existing shareholders, according to an email statement today.

CIC is also an investor of Didi Kuaidi.

Didi Kuaidi President Liu Qing said it would share data mining experience and data technology with GrabTaxi, whose main business is in Southeast Asia, and that the latter’s experience in Southeast Asia would also help Didi Kuaidi’s overseas expansion.

GrabTaxi’s vice president of marketing Cheryl Goh said it currently has no plan to be acquired by Didi Kuaidi, as she was quoted by tech news website Techcrunch.com.

Malaysia-based GrabTaxi currently operates in 26 cities in six countries and has successfully diversified its offering to include private cars and motorbikes.

Didi Kuaidi and partners invest U.S.$350 million in GrabTaxi

China’s largest ride-hailing application Didi Kuaidi said it has invested in Malaysia-based taxi-booking application GrabTaxi Holdings along with venture capital firms and China’s sovereign wealth fund China Investment Corporation.

The total amount of this funding reached U.S.$350 million, and other investors including GGV Capital, Coatue Management, and existing shareholders, according to an email statement today.

CIC is also an investor of Didi Kuaidi.

Didi Kuaidi President Liu Qing said it would share data mining experience and data technology with GrabTaxi, whose main business is in Southeast Asia, and that the latter’s experience in Southeast Asia would also help Didi Kuaidi’s overseas expansion.

GrabTaxi’s vice president of marketing Cheryl Goh said it currently has no plan to be acquired by Didi Kuaidi, as she was quoted by tech news website Techcrunch.com.

Malaysia-based GrabTaxi currently operates in 26 cities in six countries and has successfully diversified its offering to include private cars and motorbikes.

Equities slump on economic concerns

Retail investors check share prices at a brokerage in Qingdao, Shandong province, on Aug 18. The benchmark Shanghai Composite Index plunged by 6.15 percent to close at 3,748.16 points.

Share prices plunged on Tuesday as jittery investors resorted to huge sell-offs on concerns that the government has halted its plan to buy equities to stabilize the market.

The benchmark Shanghai Composite Index sank by 6.15 percent, or 245.5 points, to close at 3,748.16. It was the biggest loss in three weeks since an 8.5 percent dip on July 27.

State-owned enterprises, which are expected to undergo major ownership reforms, led the decline with more than 1,600 stocks on both the Shanghai and Shenzhen bourses tumbling by the 10 percent daily limit.

The market slump came after the country’s securities regulator said on Friday that the State-owned margin lender China Securities Finance Corp will not step into the market unless there are abnormal market fluctuations.

The regulator’s announcement has been widely interpreted as a signal that the government is ending its direct intervention and letting the market mechanism play a bigger role after the benchmark rebounded by about 15 percent from a bottom on July 8.

But Tuesday’s decline underscored that investors’ sentiment remained fragile as a slowing economy and the depreciation of the yuan continued to weigh on the market.

Jiang Chao, an analyst with Haitong Securities Co, said that the monetary authorities appear to be in a dilemma over the easing policies and the monetary uncertainty may continue to destabilize the market.

“There is need to inject more liquidity as the depreciation of the yuan is likely to trigger capital outflows. But the market rescue efforts have led to a surge in the broad monetary supply which created a policy dilemma,” he said in a research note.

The recovery of the country’s home prices has also dimmed investors’ expectation for further monetary easing, some analysts said.

Li Daxiao, chief economist at Yingda Securities Co, urged investors not to overreact to Tuesday’s decline, but warned about the risk of excess valuations of companies in the military industry.

Share prices of listed military-related companies have ballooned substantially ahead of the country’s military parade commemorating the end of World War II and on expectations of major reforms.

The average valuation of the industry has been ranked the top among all industries with the price-to-earnings ratio of most companies exceeding 100 times, according to estimates.

“There is a big risk of the bubble bursting in military-related stocks, which is even worse than the startup board,” Li said.

PepsiCo enters China dairy industry via JD.com

PepsiCo announced during a press conference in Beijing on August 14 that it has signed an agreement with leading online direct sales company JD.com Inc (JD) to sell Quaker High Fiber Oats Dairy Drink, its first premium dairy product in China, on JD’s e-commerce platform.

It is PepsiCo’s first launch of a new product exclusively through e-commerce outside of the US, and it showcases both the significance of PepsiCo’s entrance into China’s popular dairy beverage market and the strength of JD’s e-commerce platform. Through this strategic partnership, both parties will provide Chinese consumers with the latest healthy product choices as well as convenient and fast-paced shopping experiences.

PepsiCo is introducing this product to take advantage of China’s fast-growing, value-added dairy market and to satisfy consumers’ demand for a healthy and fast-paced lifestyle. It is made from the finest Australian Quaker oats and high quality milk from New Zealand.

The Quaker High Fiber Oats Dairy Drink is produced through its patented “Solu-Oats” unique technology, completely blending the grinded oats with milk. The unique drink keeps not only the nutritional ingredients of natural whole grains, but also boasts a very smooth and silky texture with plentiful dietary fiber.

PepsiCo’s launch of its first dairy drink on JD is a combination of mutual strengths of both companies. JD has over 100 million annual active users, a mature e-commerce operating platform and a self-owned logistics system covering all of China. The consumer goods sector, in which foods reside, has always been the strategic priority of JD. Launching its brand new products through JD, PepsiCo can quickly promote and popularize its brands and boost its product sales by leveraging JD’s platform and premium services.

PepsiCo has rich experience in the oats-based dairy sector around the world, with proprietary patents and technologies in grain research and development, as well as branded products that are popular among consumers, including Quaker Oats, with over 100 years of history, quality and a fine reputation.

The new Quaker High Fiber Oats Dairy Drink will be sold exclusively on JD for two months. The characteristics of the e-commerce platform, coupled with the marketing of digital media, can directly reach consumers in first-tier, second-tire and third-tier cities and even lower, breaking the geographic divisions challenging traditional sales. By marketing a new product exclusively on an e-commerce platform, PepsiCo hopes to understand consumers’ varying needs faster and more deeply.

Online and offline interactions will also help PepsiCo conduct product innovation in a faster and better way so as to provide more products to satisfy consumers’ changing tastes.

E-commerce has become an important engine in driving domestic consumption, boosting the upgrade of traditional sectors and developing modern services across China. Survey results indicate that Chinese online consumers are ranked among the most advanced in the world. China has over 500 million social networking sites users who are pioneering the world’s e-commerce development.

As a global leader within the food and beverage industry, PepsiCo is seizing the opportunity in choosing China as the first international market in the world to launch and promote a premium new product exclusively through e-commerce. Such a campaign demonstrates PepsiCo’s long-term commitment to the Chinese market and its confidence in the development of e-commence in China.

Prior to this launch, PepsiCo had invested incrementally in e-commerce business by actively cooperating with major e-commerce platforms in various areas.

“Adhering to the principle of our ‘customer-first’ mission, JD is committed to providing products with high cost-performance and superior shopping experiences, hence achieving a win-win with our partners,” said Shen Haoyu, CEO of JD Mall, “We are very happy to be the platform to launch and sell PepsiCo’s first dairy drink product in China.”

Mike Spanos, CEO and President of PepsiCo Greater China, also has a confidence in this partnership.

“With the continued development of the Chinese economy, consumers have ever-more demand for healthy and nutritious dairy drink products,” he said. “Entering China’s dairy beverage market is a crucial piece of our growth strategy, as it opens new opportunities for PepsiCo in China and will allow more Chinese consumers to enjoy the latest and delicious PepsiCo products.”