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Alibaba could be planning Hong Kong media raid

Alibaba’s founder Jack Ma. Alibaba may be set to make a major foray into the media and entertainment industries.

Alibaba may be set to make a major foray into the media and entertainment industries.

After announcing on Friday it was taking over China’s top online video provider in a cash deal, rumors surfaced over the weekend that the mainland-based company is “in discussions” to invest in Hong Kong-based SMCP Group Ltd, which publishes the English-language newspaper South China Morning Post.

On Sunday, a spokesman for Alibaba told China Daily the company does not comment on market rumors. The communications department at SCMP Group did not respond to an inquiry.

The rumor surfaced after SMCP announced on Friday that Wang Xiangwei, the newspaper’s editor-in-chief, was stepping down and Tammy Tam, Wang’s No 2 since 2012, would take over from Jan 1.

Meanwhile, Shanghai-based mobile news app The Paper reported that Alibaba is in talks to take a stake in Sina Corp, which runs online news portal sina.com.cn and Weibo, the Chinese equivalent of Twitter.

Industry observers said that since June, Alibaba has poured billions of dollars into media organizations, including online video giant Youku Tudou Inc.

Tian Hou, an analyst at TH Capital in Beijing, said Alibaba’s media expansion is “very likely”. Huang Guofeng, an analyst at the Internet consultancy Analysys International in Beijing, said Alibaba may have a “big vision to enter people’s living rooms”.

Chinese textile firms look to thrive in new hot spot

Vietnam is becoming a “hot spot” for Chinese textile manufacturers when they look to build factories overseas. [Special coverage]

One of the main reasons is that apparel produced in the Southeast Asian country for the United States market will be tariff-free after last month’s Trans-Pacific Partnership agreement.

Huafang Co, a textile business in Shandong province, plans to set up a high-end fabric factory in Vietnam with a 700 million yuan ($110 million) investment. This will be the company’s first overseas factory.

Another 150 million yuan will be pumped into a research and development center in Vietnam to look into new technologies covering the whole industry chain, including cotton, spinning, weaving and dyeing.

Huafang, which is listed on the Shanghai Stock Exchange, is planning to issue about 120 million shares for corporate investors, with an issuing price of about 7.4 yuan per share. This will help the company raise 900 million yuan to finance its Vietnamese project.

“Before the zero-tariff policy reached by the TPP, many labor-intensive Chinese industries had already shifted to Southeast Asian countries,” said Zhang Jianping, a senior researcher at the Institute for International Economic Research under the National Development and Reform Commission. “The labor costs there are four to five times cheaper than in China.

“Here, the country is undergoing an economic transformation. In China’s developed coastal regions, high-tech industries are springing up to replace labor-intensive industries,” he added. “The trend has been gathering pace, and the new policy will speed up the process.”

Vietnam has become a major importer of fabrics and a leading exporter of clothing. But weak domestic production has left local companies struggling to cope with international demand.

That was another key factor in Huafang’s decision to set up a manufacturing center in Vietnam. Now the company plans to set up two production lines, although it will take up to three years to build the plant.

Pei Chunqu, former deputy minister of trade and industry in Vietnam, said that in the past decade, the textile industry in the country has been growing slowly.

Luen Thai International Group, which is Hong Kong’s largest clothing company, Sanshui Jialida TextileCo, based in Guangdong province, and Vietnam’s Vinatex Co are planning to establish a textile industrial park.

China to deliver 50 bln express parcels by 2020: Official

China aims to deliver 50 billion express parcels annually, generating 800 billion yuan (126.3 billion U.S. dollars) in business revenue, by 2020, a postal official said Wednesday.

The target is equal to the annual sum of deliveries across the globe today, said Ma Junsheng, head of State Post Bureau in an online interview.

Total express deliveries would near 20 billion pieces with business revenue reaching 400 billion yuan in 2015, Ma said, adding that the sector has registered an annual growth rate of over 50 percent in the past five years, according to Ma.

The country plans to build an efficient and safe express delivery system with nationwide coverage, advanced technology and services and international connections by 2020, according to a policy document released last week by the State Council, China’s cabinet.

Despite a slowing economy, express delivery services have grown steadily. The amount of express delivery packages has increased 8.2 times over the past six years. In the first half of 2015, express deliveries jumped by more than 43 percent year on year.

On average, each Chinese person received more than 10 parcels last year, even with only half of the country covered by the delivery network.

JD.com files complaint against Alibaba for ‘disrupting market order’

Working staff distribute packs in an express company in Hangzhou, East China’s Zhejiang province, Nov 12, 2012. The annual Single’s Day which falls on Nov 11 has become a shopping festival under a continuous sales promotion of e-commerce groups.

JD.com Inc,China’s second-largest e-commerce site, filed a complaint to industry authority claiming that its rival Alibaba Group Holding Ltd was “disrupting the market order”.

In a complaint filed on Tuesday to the State Administration of Industry and Commerce, the Beijing-based company said Alibaba told retailers to pick a side during the upcoming Singles’ Day, China’s largest online shopping festival, which falls on next Wednesday.

“Alibaba conveyed a message to retailers that if they participated in its Tmall’s promotion campaign on the Singles Day, they will not allowed to attend similar events held by rival sites,” JD said in a statement.

Alibaba threatened to direct less traffic to retailers who were unwilling to follow its demands, JD claimed, adding “such behavior poses barriers to market competition and severely undermines consumers’ interests.”

In response, Alibaba said late Tuesday that let consumers decide which platforms they are willing to choose. “Market-related problems should resort to the market for solution. We will continue offering consumers quality products at lower prices,” Alibaba said.

The State Administration of Industry and Commerce was not immediately available for comment.

The dispute comes as the country’s e-commerce sites intensify efforts to vie for retail partners for the upcoming Singles’ Day, when millions of consumers flood to websites for bargain shopping.

Taiwan’s manufacturing index drops again

Taiwan’s manufacturing industry reported sluggish figures in October, echoing the damp situation of the island’s general economy.

The purchasing managers index (PMI), a key indicator for manufacturing, dropped month on month, for a fourth consecutive month, by 0.1 points from September to 46 in October, according to a monthly report from the Chung-Hua Institution for Economic Research, a local think tank.

It also remained below the 50 mark for a fourth straight month, the report said.

A PMI reading above 50 shows expansion in manufacturing activity, while a figure below 50 signals contraction.

All five indicators for the PMI — new orders, production, inventories, employment and supplier deliveries — showed a contraction.

Among six industrial sectors, only the sector of chemical, biochemical and medical rose above 50 to 54.1 points in October from 48.4 the previous month. The rest contracted.

Taiwan’s GDP in the third quarter shrank by 1.01 percent year on year, the first reduction since the fourth quarter of 2009, when the island was affected by the global financial crisis.

Its authorities announced a package of short-term stimulus policies last week, including subsidies for the purchase of energy-efficient home appliances, for travel and for residents who replace their outdated cell phones with smartphones.

Wu Chung-shu, president of the Chung-Hua Institution, suggested that the island should work out long-term policies to cope with the challenges causing economic slowdown, such as the aging labor force and declining fiscal revenue.

Manufacturing still backbone of the economy

Nothing demonstrates the striking power shift between China and the United Kingdom more than the planned investment by China into a high-speed railway and nuclear power station in the UK, deals clinched during President Xi Jinping’s recent state visit.

While the UK’s industrial advantages have declined, China’s have grown. Branded the “world’s factory”, China is the only country that boasts all the industrial categories as classified by the United Nations. Aside from advantages in traditional labor-intensive manufacturing and consumer goods, China has also gained an upper hand in equipment manufacturing, in which its output now accounts for one-third of the world’s total, 2.5 times that of Germany, which ranks second. All this has laid a solid foundation for China’s ascension to become the world’s second-largest economy.

However, there are also pressures threatening China’s role as “world’s workshop”. Such pressures are not just from pure economic factors such as soaring labor costs, but also from the fact that the market value of domestic electronics giants with numerous patents and annual profits of billions of yuan is lower than that of some loss-suffering enterprises whose market value is only based on speculative concepts.

Such concerns are aggravated by the fact that a number of domestic manufactures have shifted their business to real estate and capital operations and there is declining enthusiasm among university students to study science and technology majors.

However, manufacturing is the country’s economic backbone and more importance should be paid to consolidating it as the foundation of the domestic manufacturing sector.

It should be noted that a big country’s sustainable economic development can only be built on industrialization, because the modern service sector, which provides the majority of people with decent incomes and employment opportunities, is also built on the foundation of modern manufacturing. This is true not only for developing countries but also developed countries and economies.

If China’s aim in the past was how to economically catch up with and surpass developed countries, then its current aim should be how to prevent itself from being overtaken.

Is China’s manufacturing sector able and determined to pursue further development and prevent itself from being overtaken by its counterparts in the rest of the world? The answer is yes. A series of emerging trends, from intensified efforts to try new business models and open new markets by some domestic manufacturers to the exploration of the “Internet plus” model, show the foresight and adaptability of domestic producers.

In 2014 alone, a total of 53,140 scientific and technological fruits were registered in China and applications were filed for more than 1.3 million patents. Meanwhile, China’s R&D input was 2.09 percent of its gross domestic product that year. The proportion was even higher among such manufacturing giants as TCL.

What China now lacks is not excellent and hardworking technicians and scientists, nor entrepreneurs with a strong market vision and the courage to withstand pressure, nor enthusiastic investors and capital. What it lacks is equitable evaluation of its manufacturers and positive incentives.

It is hoped that the 13th Five-Year Plan (2016-20) can give the domestic manufacturing sector a deserved status and the capital market reasonably evaluates enterprises.

The author, Mei Xinyu, is a researcher at the Ministry of Commerce’s International Trade and Economic Cooperation Institute.

Tech, Internet, logistics firms bask in limelight

Benchmark ends higher after volatile swings on bourses

Stock prices posted marginal gains on Tuesday as a rally in the technology, Internet and logistics sectors kept the buying interest active.

The benchmark Shanghai Composite Index opened 0.6 percent lower in the morning at 3,409.14 points amid selling pressure after Monday’s gains, but made an about-turn in the afternoon and closed 0.14 percent higher at 3,434.34 points.

The Shenzhen Component Index opened 0.6 percent lower at 11,588.94 points, started to gain before noon and closed at 11,758.41 points, a 0.6 percent gain.

The diverse outlooks among investors for the long-term performance of various sectors clouded market sentiment, analysts said.

On the positive side, the benefits of the central bank’s rate cuts and removal of caps on interest rates have been gradually profiting the stock market and the real economy alike, according to a research note by Shanghai-based Haitong Securities Co.

However, sluggish growth has narrowed profit margins for many sectors and lower-than-expected data have become a matter of concern, especially after economic growth slipped to its lowest level since 2009 in the third quarter.

“Recent events have tended to illustrate the scale of the task confronting the authorities in managing the policy trade-offs involved in structural rebalancing,” said Jenny Shi, managing director and country manager for China at global credit ratings agency Moody’s Investors Service.

China needs to engineer economic restructuring, policy reform, market liberalization, and slower credit uptake with the aim of shifting economic growth drivers away from State-led investment, without sacrificing short-term macroeconomic stability, which is a re-balancing challenge, according to Moody’s.

More than 500 companies listed in Shanghai and Shenzhen had released their third-quarter results or result forecasts by Tuesday, among which more than half reported gains, according to data from China Galaxy Securities.

Firms in the retail and textile sectors reported positive cash flows, showing signs of recovery in the third quarter after a tough period, said a report in the Securities Times.

Most of the other Asian bourses dropped slightly on Tuesday. Japan’s Nikkei 225 lost 0.9 percent, closing at 18,777.04 points while South Korea’s KOSPI dropped 0.17 percent, closing at 2,044.65 points.

Alibaba’s Q2 results likely to dim outlook for mainland consumers

Chinese e-commerce giant Alibaba Group Holding’s second-quarter revenue growth is likely to have slumped to half the year-earlier rate, undermining hopes consumer spending will temper a slowdown in the world’s second-biggest economy.

China is hoping that private consumption will pick up the slack as exports fall and it tries to rebalance the economy – now heading for its slowest full-year growth in 25 years – away from a reliance on trade and government spending.

But Alibaba’s second-quarter results due on Tuesday are expected to cloud the increasingly grim outlook for consumer spending, which accounted for 60 percent of China’s economic growth in the first half of 2015.

“Much focus will be paid to the deceleration in volume growth Alibaba guided to mid-quarter. Investors will be looking to see if Alibaba can improve take rates to make up for this slowdown,” Wedbush Securities analyst Gil Luria said.

Lackluster data from the firm behind China’s biggest and most successful e-commerce platforms could provide fresh fodder for bears predicting China is heading for a much harder economic landing than the official figures would suggest.

Having warned in September of slower-than-expected sales, Alibaba’s revenue in the three months through September is expected to be 21.3 billion yuan ($3.35 billion), according to Thomson Reuters data analyzing forecasts from 28 analysts.

That would represent an increase of 26.7 percent from the same quarter last year, when year-on-year growth was a sizzling 53.7 percent.

In the April – June quarter, revenue and gross merchandise volume – the total value of goods transacted across Alibaba’s platforms – both eased to their slowest rates in more than three years.

To be sure, government data shows retail sales have continued to grow above 10 percent so far this year, even as GDP growth has slowed to 6.9 percent in the third quarter.

But a China consumer confidence index produced by ANZ Bank and polling company Roy Morgan fell to a record low in August, and research firm Gartner said smartphone sales recorded their first fall in the Chinese mainland in the second quarter.

China’s rate cut to promote growth

Workers are busy at a manufacture base of Dongbei Special Steel Group Co., Ltd. in Dalian, northeast China’s Liaoning Province, Oct. 13, 2015.

China’s central bank on Friday cut interest rates and lowered the reserve requirement ratio (RRR) to promote growth and interest rate liberalization.

The People’s Bank of China (PBOC) cut its benchmark one-year lending and deposit rates by 25 basis points each to 4.35 percent and 1.5 percent, from October 24. The bank also cut the RRR for all financial institutions by 50 basis points.

This is the fifth RRR reduction and the sixth round of interest cuts in the last year.

LIQUIDITY INJECTION

Any rate cut’s direct impact on growth tends to be limited, but it reduces the interest rate burden for corporates and local governments and reduces financial risk, said a J.P. Morgan report sent to Xinhua.

“The monetary easing is supplemented by additional fiscal policy adjustment to mitigate the funding constraint faced by local governments. Local government debt swap program was expanded to 3.2 trillion yuan in 2015, and policy banks issued 300 billion yuan special financial bond to support infrastructure investment,” according to J.P. Morgan

“As the real economy faces tough challenges, the cuts in interest rates and RRR are building a sound monetary environment for stable growth,” said Zeng Gang, researcher at the Chinese Academy of Social Sciences.

The move is meaningful for enterprises as they will reduce financing costs and improve operating conditions, Zeng said.

Wang Tao, a UBS economist, expects the PBOC to cut rates one more time this year, and again in early 2016 to bring the one-year deposit rate to 1 percent and the lending rate to 3.85 percent.

“This would push the real deposit rate into negative territory, as often happened in the past, which could encourage consumption, support asset prices and anchor inflation expectations,” said Wang.

INTEREST RATE LIBERALIZATION

As a step towards full interest rate liberalization, the central bank also announced on Friday removal of the 50 percent upper-bound for deposit rates, in principle leaving banks free to set their own deposit rates.

The removal of the deposit rate ceiling completes interest rate liberalization, though it will take longer for rates to be fully determined by market, said Wang.

To that end, Wang suggests breaking implicit credit guarantees, reforms of SOEs and financial sectors, and a more price-based monetary policy.

HELPING INTERNATIONALIZATION OF RMB?

The rate move came after deputy PBOC governor Yi Gang’s remarks at the IMF annual talks in Lima last week that China hopes the RMB will be included in the special drawing rights (SDR) basket later this year.

The PBOC issued its first offshore RMB note in London on Wednesday,worth 5 billion yuan at a rate of 3.1 percent, due in 2016. It has also extended an agreement on a reciprocal currency swap scheme with the Bank of England.

The PBOC opened the onshore inter-bank FX market to foreign central banks, sovereign wealth funds and multilateral financial institutions on Sept. 30. Paul Mackel, head of EM FX strategy at HSBC, described the PBOC activity as addressing “some” of the IMF’s initial considerations for the next SDR review.

“There have also been several other announcements that are not directly targeted at the upcoming SDR review, but are nevertheless supportive of the RMB playing a more important global role over the medium term, be it in asset management, the invoicing of goods and services trade, FX trading, or as a funding currency,” Mackel said in a report.

Earlier this month, the first phase of the China international payment system was launched in Shanghai. Also on Oct. 8, the central bank announced that China’s official statistics will conform to special data dissemination standards (SDDS), an IMF statistical system to improve transparency.

On October 6, SWIFT said that the RMB overtook the Japanese yen in August to become the world’s fourth most important payment currency.

The SDR is currently made up of the dollar, euro, Japanese yen and the British pound. The yuan failed to be included in 2010 when the IMF said the currency did not meet the “freely usable” criteria.