Archives December 2015

China foreign service trade deficit narrows

China continued to see a deficit in foreign service trade in November but the volume has narrowed, data from the State Administration of Foreign Exchange (SAFE) showed on Wednesday.

The deficit came in at 15.6 billion U.S. dollars, retreating from 89.2 billion U.S. dollars in October.

The State Council has pledged measures to accelerate development of trade in services, including gradually opening up the finance, education, culture and medical treatment sectors.

SAFE began issuing monthly data on service trade in January 2014 to improve the transparency of balance of payments statistics. Since the start of 2015, it has also included monthly data on merchandise trade in its reports.

In November, China saw a surplus of 51.4 billion U.S. dollars in foreign merchandise trade.

Alibaba to add 200 staff to fight against counterfeit products

A delivery cart with the logo of Tmall.com, Alibaba’s B2C platform, passes the CCTV building in Beijing.

E-commerce giant Alibaba Group Holding Ltd is expected to add 200 personnel in an effort to up its game in the fight against counterfeit products, the company’s senior executive said on Monday.

Zheng Junfang, an Alibaba partner, announced that Alibaba will add 200 people to cooperate with Chinese government organizations to crackdown on counterfeit products online, despite the group’s earlier announcement to strictly control its recruitment quota in fiscal year 2015.

Zheng made the announcement when she gave her first media interview as the group’s chief platform governing officer, a role responsible for cracking down on fake products online and protecting intellectual property.

She said counterfeit products are the “tumors of society”. “Counterfeit products are a challenge faced by all e-commerce platforms,” Zheng said.

According to her, Alibaba used a combined method to fight against fakes. On one hand, Alibaba uses big data technology to trace the sources of fake products and reports the information to Chinese authorities. On the other hand, the company supports the growth of self-developed brands online.

According to Alibaba, it has invested more than 1 billion yuan ?$154 million?in fighting against counterfeit products on its online platforms. It has about 2,000 full-time employees responsible for fighting fakes and 3,000 part-time volunteers.

The new development in fighting against fakes comes days after the Office of the US Trade Representative said it was “increasingly concerned” about Alibaba’s measures to tackle counterfeit products and that more needed to be done.

Alibaba did not reply to the comment, but last Monday it announced it was hiring Matthew Bassiur, vice-president and deputy chief security officer at United States drugmaker Pfizer Inc, to head its global intellectual property enforcement.

Uber-GAC deal to legitimize car-hailing service, boost sales

Uber has been in the headlines since it came to China last year.

Chinese automaker Guangzhou Automobile Group is expected to become an investor in Uber’s operations in China, in a move experts believe will boost the State-owned carmaker’s sales performance and help the car-hailing company win legitimacy.

“One of our subsidiaries is planning to take part in Uber’s B-round of financing… negotiations concerned are underway so details are not being released for the sake of the interests of the parties involved,” GAC said in a reply on Dec 24 to an inquiry from the Shanghai Stock Exchange.

The inquiry came when GAC’s stock price experienced a rare daily limit increase on Dec 23, one day after the Shanghai-listed automaker announced a “comprehensive” deal with Uber that covers investment, sales, maintenance as well as financing and leasing.

Uber will release results of its B-round of financing sometime after Christmas, said Liu Zhen, head of Uber’s China operations, at a news conference in late November.

Analysts said the cooperation would boost GAC’s performance in sales and after-sales services.

“We believe that Uber will become an important sales channel of GAC’s cars and services,” said Wang Dean, an auto analyst at Pingan Securities.

“It is likely that Uber users will become GAC potential customers while GAC can authorize its dealerships to recommend Uber’s car-hailing app to their customers. In addition, GAC can send messages about maintenance and used cars as well as car leasing to Uber users, helping steer online customers to offline stores.”

Uber entered the Chinese market in February 2014 and is now available in 22 cities. It said it has a 35 percent share in China’s car-hailing market and will enter 100 cities in 2016, with the focus on those with a population of 3 million or more.

Despite the popularity of car-hailing apps, both Uber and its rival Didi were summoned this year in Beijing and Shenzhen as they were suspected of organizing private cars for transport services.

Law enforcement officials earlier this year swept Uber’s offices in several cities including Chengdu and Guangzhou, where GAC is headquartered.

Yale Zhang, managing director of Automotive Foresight, said Uber’s deal with GAC might prevent similar incidents and help Uber further penetrate the local market.

“Guangzhou is one of China’s four top-tier cities and it might serve as a strategic point for Uber to bargain about its legitimacy nationwide if it is well established in such an important city.”

Earlier this year, Uber co-founder and CEO Travis Kalanick said the company would seek Chinese investors and partners who know how to interact with the government and who can help localize Uber for the Chinese market.

At the November news conference, Liu emphasized the concept by calling the entity she oversees “China Uber” rather than Uber China.

It finished its first-round financing in September, during which the company received $1.2 billion from investors including Baidu.

Downturn adds to salary woes of migrant workers

A worker at a furniture workshop in Dongguan, Guangdong Province.

Cases of salary cuts or pay defaults involving migrant workers increased by 34 percent in the first three quarters, partly due to the ongoing economic downturn, according to a trade union official.

Zhang Bo, an official at the All-China Federation of Trade Unions, said such cases and other violations of workers’ rights are still rampant, especially in Guangdong, Anhui and Heilongjiang provinces and the Inner Mongolia autonomous region.

“They are no longer limited to the construction industry?they have spread to the manufacturing sector as well,” he added.

According to the business news website Yicai.com, only 30 percent of manufacturing companies can pay wages on time. Many such companies are facing financial strains and are having to make huge layoffs.

Last year, there were 274 million migrant workers in China, with an average monthly income of 2,864 yuan ($572.8), according to a National Bureau of Statistics report released in April 2014.

The report said 0.8 percent of the migrant workers, or 2.19 million, could not receive their pay on time.

The average salary amount in default was 9,511 yuan. More than 60 percent of the migrant workers did not sign labor contracts with employers.

Zhou Litai, a lawyer specializing in protection of migrant workers’ rights and interests, said the situation this year could be even worse because the economic downturn has affected many traditional industries.

“The wage cuts and defaults happened mostly in the construction sector. Most migrant workers cannot get their money until a project is completed,” said Zhou, who is based in Chongqing.

“Many projects were illegally outsourced several times before they were officially started.

“What is worse, some project contractors borrowed money from loan sharks. When they receive payment for the project, they have to pay the loan sharks first, and then have no money for the migrant workers,” Zhou said.

Zhang said his federation would support the government in establishing a monitoring and warning system on salary-related issues to help migrant workers get paid. “Some local trade unions also explored a new mechanism to ensure migrant workers receive payment. For example, the union in Shanxi province has set up a fund that will pay migrant workers first before getting the money back from their employers.”

17 banks have fund-manager licenses revoked

The China Banking Regulatory Commission has revoked the private fund-manager licenses of 17 commercial banks, over what sources said were legal concerns.

A person close to the CBRC said on Wednesday the specific reason could be that they had violated certain conditions under the Law on Commercial Banks, which does not allow lenders to operate integrated securities investment operations.

Instead, they have to set up subsidiary companies to engage in the business, but only after undergoing close government examination and approval.

The 17 are believed to include China Everbright Bank, Ping An Bank, SPD Bank, China Minsheng Bank, Bank of Ningbo, Bank of Beijing and China Zheshang Bank.

Five of these banks registered departmental general managers with the Asset Management Association of China as their qualified private fund managers, while the 12 others named their chairmen, according to Caixin Media.

Nine of the banks applied as securities investment managers, four as private equity investment firms, and four as other types of investment operations.

All private equity and securities investment funds are required to register with the Asset Management Association to gain licenses.

The Asset Management Association declined to comment on the issue.

Huang Peng, a partner at Beijing-based Guantao Law Firm, said commercial banks conducting such investment business remain controversial, both in China and overseas.

Some have suggested that banks running simultaneous lending and investment operations could increase the risk of moral hazard, while others have said it is feasible, as long as different departments manage the businesses separately.

Huawei ships 100 mln smartphones in 2015

Chinese tech company Huawei announced Tuesday its smartphone shipments have topped 100 million this year, breaking the record among domestic players and making it the world’s third biggest mobile brand following Samsung and Apple.

The market share of Shenzhen-based Huawei Technologies Company has risen to 9 percent globally and surpassed 15 percent in China, leading for six consecutive months, data from a third-party market consulting agency showed.

“It’s a stunning increase,” said He Gang, president of Huawei’s mobile phone line. “Beginning in 2010 with a sales figure of no more than 3 million, Huawei took five years to reach 75 million and another year to achieve 100 million.”

He said Huawei has gained a firm foothold in the middle and high-end market over the past year, thanks to innovation and marketing. Middle and high-end smartphones costing more than 2,000 yuan (308 U.S. dollars) jumped to 33 percent of Huawei’s total shipments in the third quarter in China.

Huawei’s Mate 7 alone has sold 7 million sets so far, making it one of the most popular smartphone models in China. Sales of the new Mate 8 in the first two weeks were ten times that of Mate 7.

Mate 8 falls in the same price category as the Samsung Galaxy series and Apple’s iPhone models.

“It’s just a matter of time before we introduce high-end smartphones at a price above 5,000 yuan,” He said.

Huawei has also been nurturing its overseas terminal market. The company’s mobile phones are sold in more than 170 countries and regions.

Smartphones sold for between 400 and 500 euros claimed a market share of more than 60 percent in some Western European countries. Huawei also saw a good year in Central, Eastern and Northern Europe, where the number of smartphones it sold reached more than 3.46 million and increased 114 percent compared with the same period last year.

Huawei has already overtaken Samsung and Apple in some developed countries, including Spain and Portugal. International sales are expected to account for 40 percent of the company’s revenue by 2016.

According to a company report released on Tuesday, Huawei invested 40.8 billion yuan in research and development in 2014, or 14.2 percent of annual revenue.

Huawei has set up 16 overseas R&D institutions, according to CEO Ren Zhengfei, adding his company has invested more than 190 billion yuan in technological innovation and holds a total of 76,687 patents. More than 18,000 patents are related to terminals, which has laid a foundation for expanding its smartphone offerings.

“We are putting money in all the cutting-edge technology in the communications industry. Huawei is not second to global brands such as Ericsson and Nokia in technology,” He said.

“Believe it or not, our goal is to overtake Apple in the near future,” He said.

China’s electronics, IT manufacturing industry grows fast

The added value of China’s electronics and IT manufacturing industry rose by 10.8 percent year on year from January to November in 2015, according to the Ministry of Industry and Information Technology.

The statistics only covered the enterprises whose annual business revenue each exceeds 20 million yuan (3.09 million U.S. dollars).

The growth rate was 4.7 percentage points higher than the average level of the country’s entire industrial sector in the period.

According to the ministry, the electronics and IT manufacturing industry reported 8.89 trillion yuan in bulk business revenue in the first ten months of the year, up 8 percent from a year ago, with its net profits surging 14.4 percent to 403.7 billion yuan.

Internet Plus in full swing, welcomes foreign investments

Lin Nianxiu, deputy head of the National Development and Reform Commission, at a sub-forum of the ongoing World Internet Conference that runs through Friday.

China welcomes foreign companies to join the tide of the country’s Internet development to achieve win-win outcomes, as the sector is now in full swing under the Internet Plus strategy, said a senior official from the country’s top economic planner on Thursday. [Special coverage]

“The Internet Plus model is able to effectively bridge demand and supply, generating a market of trillions of yuan,” said Lin Nianxiu, deputy head of the National Development and Reform Commission, at a sub-forum of the ongoing World Internet Conference that runs through Friday.

Foreign investments are more than welcome in China to help boost the Internet Plus strategy with their complementary advantages, he added.

“Cooperation from home and abroad will generate win-win results”, as the country is seeking to streamline the new business format with improved regulations and mechanism, said Lin.

Earlier this year, the country put forward the Internet Plus strategy in a bid to connect isolated industries and upgrade traditional industries amid nationwide reconstructing and transformation.

China has witnessed a rapid development of its Internet industry over the past two decades. The Internet has profoundly affected almost every facet of Chinese people’s lives including communication, transportation, and entertainment.

As of July 2015, the number of Internet users had reached 668 million, the most in the world, according to official figures. All cities and towns, and 93.5 percent of administrative villages in China now have access to the Internet.

The thriving Internet industry and the gigantic market potential have also bred countless Internet companies, and some of them, such as Baidu, Tencent and Alibaba, have become international goliaths.

Chinese authorities have attached more importance to the Internet, pledging to transform China from a big Internet nation to a great one. The Internet, with better management, will be more open to the world.

AstraZeneca to invest in China

British-Swedish drugmaker AstraZeneca plans to invest more than $800 million in China in the next 10 years and strengthen cooperation with local partners, especially in the biologics sector.

AstraZeneca strengthened collaboration between its biologics unit MedImmune and local research organization Wuxi AppTec.

The UK company has an option to acquire WuXi AppTec’s biologics manufacturing capacity in Wuxi with an overall investment valued around $100 million.

“These initiatives will allow us to connect local untapped pharmaceutical needs with our global portfolio,” said Mark Mallon, executive vice president of International businesses at AstraZeneca.

The drugmaker will also invest $50 million to expand its development and launch facility on top of its existing manufacturing site in Wuxi to support both local and overseas markets.

Wuhan Iron & Steel ‘will cut jobs’

Wuhan Iron & Steel Co (Wugang) will lay off 6,196 people by the end of February 2016, news portal jiemian.com reported on Monday.

The workforce stood at 27,760 people based on the company’s 2014 financial report, so the job cut will cover more than 20 percent of its staff.

Wugang’s parent company, Wuhan Iron and Steel (Group) Corp (WISCO), will likely eliminate roughly 11,000 jobs, with a 20 percent pay cut to be imposed on all employees in 2016, the same report said, citing several anonymous sources at WISCO.

But Sun Jing, director of WISCO’s communication department, was quoted as saying in the report that there have been no layoffs or pay cuts. He also explained that according to company policy, an employee may face a pay cut of up to 20 percent only when he or she fails to complete the workload.