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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.”

Global automakers scramble to assess damage in Tianjin blasts

Global automakers including Volkswagen AG and Toyota Motor Corp are scrambling to assess damage to cars and facilities after two massive explosions in the port city of Tianjin, China’s largest auto import hub. [Special coverage]

The blasts that ripped through a warehouse storing volatile chemicals in Tianjin late on Wednesday were so strong that they damaged buildings a few kilometers away.

French carmaker Renault SA said nearly 1,500 of its imported cars stored in a warehouse at the port had been burned while Toyota said the blasts broke windows at its car assembly, logistics, and research buildings, which are jointly run with China FAW Group Corp.

Operations at the Toyota facilities had been closed for a week-long summer holiday and no one was injured.

“In our current view, the damage isn’t that severe,” a China-based Toyota spokesman said.

Roughly 40 percent of cars imported to China pass through Tianjin’s port, or more than 500,000 units in 2014, according to the Xinhua News Agency.

China imported 372.4 billion yuan ($60.8 billion) in cars last year, official data shows.

Subaru maker Fuji Heavy Industries said more than 100 cars that were imported from Japan and were awaiting customs clearance in a warehouse had been damaged by broken windows.

Volkswagen said that some of its imported cars were damaged but did not know exactly how many had been affected. Photographs from the scene showed rows of Beetles and other VW brand cars badly scorched by the explosion.

“We have a task force in the area to find out more and which is primarily concerned with the well-being of our employees,” a VW spokeswoman said.

Ford Motor Co, Nissan Motor Co and Toyota also said they were checking their cars parked around the port.

South Korea’s Hyundai Motor Corp and Kia Motors Corp had a total of 4,000 cars near the blast site but did not have specific details on the extent of damage, the companies said.

BMW AG said it has two vehicle distribution centers near the port but the damage was unknown given the area had been cordoned off.

Mazda Motor Corp said over 50 cars imported from Japan were also damaged, with peeling paint and scratches.

One nearby showroom was shut on Thursday after its windows shattered, it said.

Lenovo plans to axe 3,200 jobs

A Lenovo outlet in Yichang, Hubei province. The company announced a 51-percent year-on-year decline in net income for its first fiscal quarter on Thursday.

Tech firm says Q1 net income fell by 51% on poor smartphone sales

Lenovo Group Ltd said on Thursday it will lay off 3,200 employees after it announced a 51-percent year-on-year decline in net income for its first fiscal quarter which ended in June.

The cuts, which will mainly occur in the company’s newly acquired Motorola Mobility unit, represent roughly 10 percent of its global non-manufacturing headcount.

Yang Yuanqing, chairman and chief executive of Lenovo, said poor smartphone sales and worsening global demand for personal computers necessitated the job cuts.

“We are planning to reduce expenses by about $1.35 billion for this fiscal year, including reductions of about $800 million from the Motorola unit,” Yang told China Daily in a telephone interview.

“Lenovo is facing extremely intense challenges in the smartphone market and we need quick actions to address the problems.” Yang, however, did not disclose any further details about the layoff plan.

Hit by slowing PC and smartphone demand, the company’s net profit dropped to $105 million in the first quarter, compared with $214 million a year ago, Lenovo said. In the PC business, which has been Lenovo’s cash cow till now, pretax income fell by 8 percent year-on-year despite a growth in market share.

Lenovo shares fell by more than 5 percent in Hong Kong on Thursday to HK$8.01 ($1.03), an 18-month low.

Antonio Wang, a Beijing-based analyst with research firm International Data Corporation, said the global slowdown in smartphone sales has forced Lenovo to find new ways to cut operating costs.

“I think it is reasonable (for Lenovo to cut jobs) as the international market has not been bright and all the players are facing strong headwinds,” Wang said. He expects the company to rebound after witnessing another quarterly drop in profits.

“Lenovo wants to be fully exposed to the losses in the current and subsequent quarters and will try to regain its growth trajectory later this year,” Wang said.

Lenovo also pledged to release new Moto smartphones every six months to stay competitive in the handset business.

Chen Xudong, Lenovo’s senior vice-president in charge of mobile businesses, said sales of Motorola’s G and X series missed targets because of slow device updates and decision-making.

“Lenovo smartphones did not perform well in China due to unsuccessful product designs and marketing strategies,” Chen said.

According to Chen, the company is attempting to seek new opportunities in other emerging markets such as the Middle East and Africa to lift shipments.

The 16.2 million units of Lenovo and Motorola smartphone shipped in the second quarter registered a mere 2.4 percent annual growth, while Apple Inc, Huawei Technologies and Xiaomi Corp recorded more than 30 percent growth in shipments, according to IDC.

Lenovo purchased Motorola from Google Inc in early 2014 for $2.9 billion.

Chen admitted that Lenovo handsets are “too complicated” for customers to understand. The company will focus on one or two flagship devices to reach more Chinese buyers in the future, he said.

Lenovo now has three sub-brands for smartphones. Besides Lenovo and Motorola branded devices, its affiliate launched a ZUK-branded affordable phone two days ago, targeting the 2,000 yuan ($333) market.

Nicole Peng, research director at Shanghai-based consultancy Canalys China, said Lenovo fell out of the top five in the second quarter because of sluggish sales and lower China market share.

Peng said Lenovo needs to completely overhaul its smartphone lineup.

Alibaba growth slowest in three years; revenue falls short of analysts’ estimates

Alibaba Group Holding’s revenue for the three months ended June rose 28 percent, missing analysts’ estimates, with growth slowing to its lowest rate in more than three years.

China’s biggest e-commerce company posted quarterly revenues of $3.27 billion on Wednesday, below an expected $3.39 billion, according to a Thomson Reuters poll of 28 analysts.

The drop in revenue growth came as gross merchandise volume – the total value of goods transacted across Alibaba’s platforms – rose 34 percent to 673 billion yuan ($105 billion), also rising at its slowest pace in more than three years.

Alibaba, which has a market value of $194 billion, is branching out from its core online-only shopping platforms in a bid to stem a slowdown in revenue growth and the total value of goods transacted over its websites.

“[We] made significant progress monetizing our mobile traffic, with our mobile revenue exceeding 50 percent of our total China commerce retail revenue for the first time,” said Maggie Wu Wei, Alibaba’s CFO, in a press release on Wednesday.

On Monday, Alibaba said it would invest $4.6 billion in brick-and-mortar retailer Suning Commerce Group Co Ltd.

The deal could give Alibaba more traction in logistics and electronics, areas in which smaller but growing rival JD.com Inc specializes.

Alibaba’s strategic priorities are internationalization, beating out competition in mobile, expanding into rural China and investing in cloud computing, Chief Executive Zhang Yong said in Wednesday’s release.

The company also announced a $4 billion, two-year share repurchase program.

Tsinghua arm readies to take on Qualcomm

Tsinghua Holdings Co Ltd, a technology conglomerate backed by Tsinghua University, plans to invest at least 30 billion yuan ($4.76 billion) in developing mobile chip technology, highlighting the company’s ambition to challenge Qualcomm Inc’s dominance in the country’s chip market.

“To catch up with Qualcomm as soon as possible, we will pour 30 billion yuan, and probably even more, into the research and development of mobile chips in the next few years,” Xu Jinghong, chairman of Tsinghua Holdings, told China Daily in an interview on Tuesday.

Tsinghua Holding said a certain proportion of the money will come from government funding and its partners. In February, its unit Tsinghua Unigroup Ltd said it has received 10 billion yuan from governments to invest in chip companies.

“Frankly, compared with global competitors, we are still three-to-five years behind in technology, especially in cutting-edge 4G and 5G products,” Xu said, “but if we don’t close the technological gap, we will never win.”

The comment came after Tsinghua Unigroup Ltd filed a plan to buy US chipmaker Micron Technology Inc for $23 billion. Xu said earlier it was still in discussions for a potential deal.

“We will continue to expand our presence in the integrated circuit industry through both acquisition and self-research,” he said, adding chips will be one of the focuses of the Beijing-based company.

Roger Sheng, senior analyst at research firm Gartner Inc, said the government’s emphasis on the semiconductor sector is the biggest advantage for Tsinghua Unigroup.

“Few tech companies in China have such a large amount of capital at their disposal as Tsinghua Holdings does,” Sheng, said adding “despite its current technological weakness, it has ambitions and is acting very quickly”.

“Qualcomm’s pioneering efforts in the sector also established a successful business patten which Tsinghua can follow,” Sheng said.

Tsinghua Holdings’ intensified efforts to boost its chip-related resources come as the Chinese government seeks to reduce the country’s reliance on foreign technology, on worries that it may hurt national security.

The company evolved into the largest chip firm in China after it acquired Spreadtrum Communications Inc, the world’s third-largest mobile phone chip maker, and RDA Microelectronics Inc, the fourth-largest, in 2013.

“If we can manage to catch up with Qualcomm technologically, our innovation capability, the huge smartphone market in China as well as the labor cost, which starts rising but is still lower than that of the US, can offer us considerable commercial opportunities,” Xu said.

Earlier this month, Tsinghua Holdings announced it has made a breakthrough in chemical mechanical polishing, an important process in manufacturing chips. One of its unit successfully developed the first 12-inch polishing machine in China which could planarize semiconductor wafers to an extent that every square of a nanometer (billionths of a meter) is flat.

“The machine shows that we are the first Chinese company to have mastered the technology, and enables us to produce extremely tiny chips for smart wearable gadgets,” said Li Zhongxiang, vice-president of Tsinghua Holdings.

Alibaba, Suning enter into ‘marriage’

Alibaba, China’s largest e-commerce company, and Chinese home appliance retailer Suning have inked a multi-billion dollar collaboration deal for online and high-street sales.

Alibaba will invest about 28.3 billion yuan (4.63 billion U.S. dollars) in Suning to become its second-largest shareholder, while Suning will buy no less than 27.8 million new shares in Alibaba for 14 billion yuan, Alibaba said on microblogging service weibo.com on Monday.

Making the investment through its subsidiary Taobao (China) Software Co. Ltd., Alibaba will hold 19.99 percent of Suning after the non-public offering, slightly less than the more than 20 percent held by Suning chairman Zhang Jindong, according to a statement issued by Suning filed to the Shenzhen Stock Exchange.

The share price was set at 15.23 yuan, 5.76 percent more than the average price in the previous 20 trading days.

Suning was established in eastern China’s Jiangsu Province in 1990 and was listed in Shenzhen in 2004.

Trading of Suning’s shares was suspended a week ago as it planned this round of non-public offering. Trading will resume on Tuesday, the company said.

Suning said the deal was still “uncertain,” as it still needs the approvals by its stockholders’ meeting and regulatory authorities, without specifying a time scale.

Suning will hold about 1.09 percent of Alibaba, which is traded in the Unites States, at a price of 81.51 U.S. dollars per share, according to another statement of Suning.

“Both sides will increase efficiency and provide better services to Chinese and overseas customers by linking online and offline businesses,” Alibaba said.

More than 1,600 stores, 3,000 aftersales service centers and other offline service stations of Suning will be “seamlessly connected with Alibaba’s strong online network,” Alibaba said.

Suning will open a flagship shop on Alibaba’s brand-focused online retail platform Tmall.com. The two sides will also cooperate on logistics, payment and aftersales services, as well as overseas business integration.

The cooperation will optimize consumer experience, and improve delivery services and aftersales, Alibaba said.

Alibaba chairman Ma Yun said at a press conference Monday that the deal reached after two months of negotiations was “like a wedding.”

“If we do not integrate with offline, we will not have a future,” Ma said.

Zhang Jindong said that combining online and offline businesses fulfilled not only the needs of the two companies, but also clients’ demands.

“Customers do not care whether you are online or offline, they only care whether their needs are satisfied and whether it is convenient,” according to Zhang.

If the cooperation model becomes a success in China, it can be rolled out to the global market and help promote the sales of Chinese products globally, Zhang said.

Suning has reaped great benefits from its transition from a traditional chain store to a more Internet-oriented entity.

In 2014, the company’s profit jumped 555.28 percent year on year to 946 million yuan.

JD.com Inc narrows loss, stresses cooperation with Yonghui Superstores

Deal part of e-commerce giant’s strategy to create a new business model

JD.com Inc, China’s second-largest e-commerce site by sales, has released its financial report for the second quarter of 2015 and announced investment into an off-line supermarket.

Over the weekend, JD reported a 61 percent year-on-year rise in quarterly revenue, topping expectations, powered by a jump in the number of shoppers and goods bought on its platform.

Second-quarter revenue of 45.9 billion yuan ($7.4 billion) exceeded an average estimate of 44.45 billion yuan from Reuters.

But the company’s growth rate is expected to slow in the third quarter. JD said it sees third-quarter revenue of 43.2 billion to 44.7 billion yuan, which would be up 49 percent to 54 percent from the previous year.

JD, a distant rival to Alibaba Group Holding Ltd, is investing heavily in off-line operations to complement its Internet platform.

The company is taking activities such as warehousing and deliveries into its own hands.

This business model, similar in style to that of U.S.-based Amazon.com Inc, has taken a toll.

JD made a net loss of 510.4 million yuan, shrinking only slightly from the year-earlier 583 million yuan despite the leap in revenue.

The catalyst for that jump was the 118 million annual active customer accounts on JD in the 12 months ended June 30, up 72 percent from the same period a year earlier.

Those customers drove an 82 percent jump in the total value of products sold on the company’s platforms in the quarter, to a total of 114.5 billion yuan.

JD also said it will buy 10 percent of Chinese supermarket operator Yonghui Superstores Co Ltd for 4.31 billion yuan, with the right to nominate two directors to the board.

Cooperating with Yonghui is part of JD’s online-to-offline (O2O) plan, which is of key strategic significance compared with other O2O projects, JD’s CFO Huang Xuande said on a post-earnings conference call, according to media reports.

Yonghui is one of China’s top providers of fresh products but apparently its 350 stores cannot cover the national market, Huang said.

As a result, there is ample potential for the two sides’ cooperation, Huang said, noting that Yonghui has suppliers and inventories while JD has a wide logistics network.

JD has sought to create a new business model by combining suppliers with online platforms to provide customers with a more convenient and timely service, Liu Xuwei, an industry analyst with market research firm Analysys International, told the Global Times on Sunday.

JD has hired thousands of part-time delivery staff to operate a wider delivery network, which will lower the logistics cost and make the delivery process more efficient, Liu said.

As of Friday, there were more than 50,000 part-time delivery staff registered on JD’s logistics platform, with increasing orders, Liu Qiangdong, founder and CEO of JD, said on the conference call.

These part-time staff mainly carry orders for daily necessities from nearby stores to customers’ doors, which is a cooperation project called “JD to your front door” between JD and off-line supermarkets.

Although fresh food usually cannot provide high profit margins, customers buy it with high frequency, Liu said, noting winning customers on fresh food purchases will lead a large amount of visits to JD’s platform, which is crucial to e-commerce companies.

JD also attracted many visitors from social media platforms such as Tencent’s WeChat and QQ.

More than 20 percent of JD’s new customers gained in the second quarter came from the two platforms, Huang said.