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Global media’s take on Alibaba’s IPO

Alibaba’s impending IPO is one of the most talked-about stories in the world. Here is a selection of quotes from international and Chinese media.

“…at the valuation currently being discussed, Alibaba would be more expensive than more-established and better-known companies such as Google Inc. or eBay Inc.”

Alibaba IPO: a big deal, and, backers argue, a real steal

— Wall Street Journal, on Sep 12

“The most critical task Alibaba faces: Reaching the 500 million Chinese consumers who shop, chat, play games and basically run their entire digital lives on smartphones.”

Alibaba IPO: Jack Ma’s scrappy start-up takes on US

— USA Today, on Sep 12

“For Alibaba, it was part of a continuing effort to make the instant gratification of global e-commerce accessible to China’s expanding middle class. If the biggest Internet company in the world’s most populous nation succeeds, it will make everything from culinary delicacies to flashy luxury goods available with a few keystrokes.

The degree to which Alibaba can deliver on this promise will help determine how much the company is ultimately worth and to what extent it can open up the enormous Chinese market to both global retailers and small businesses in search of growth.”

Alibaba is bringing luxury, fast, to China’s middle class

— New York Times, on Sep 11

“As so is told by many brokerages, there’s always chance for [Chinese] retail investors to grab a bite of Alibaba’s IPO. To secure this opportunity, one has to be well-loaded and have some luck.

If you want to be Alibaba’s shareholder, most of brokerages will require $1 million as liquid asset in your account and a minimum subscription of $400,000. Still, no guarantee for a successful allocation.”

How could retail investors grab a bite of Alibaba shares

— Caixin, on Sep 12

“Though Chinese consumers have driven Alibaba’s financial success, they’ll largely be left out of the company’s stock offering.”

Chinese gripe at being left out of Alibaba’s $21 billion IPO

— Bloomberg, Sep 15

“Alibaba is a ‘hybrid’ under the context of globalization. It reveals the financial development in China and its immeasurable potentials, while at the same time exposes shortcomings of Chinese venture capitals and difficulties for companies to seek domestic financing. Alibaba is a real ‘multinational’ company in the internet age. It has been seeking best opportunities globally and grown into ‘first of the world’.”

— Global Times, May 8

Whirlpool gets approval for acquisition of Hefei Sanyo

U.S. appliance-maker Whirlpool Corporation received approval from the China Securities Regulatory Commission to acquire a 51 percent stake in the Shanghai-listed Hefei Rongshida Sanyo Electric Co. Ltd (Hefei Sanyo), according to a Hefei Sanyo statement released on Monday night.

It is the final approval required for the acquisition process.

The transaction will cost Whirlpool 3.382 billion yuan (550 million U.S. dollars), according to the statement.

China will become the world’s largest white goods market and is the focus of Whirlpool’s global layout. The acquisition will combine Whirlpool’s technologies with Hefei Sanyo’s local market expertise to grow its market share, according to the statement.

Michigan-based Whirlpool, with an annual sales revenues of more than 18 billion U.S. dollars, entered into the Chinese market in 1994 but has lagged behind local brands like Haier.

All work, no play


Foreign job-seekers discuss work opportunities at the 4th Expat Job Fair Saturday.


Foreign job-seekers discuss work opportunities at the 4th Expat Job Fair Saturday.

With autumn just around the corner, recent university graduates are putting the carefree days of summer behind them and buckling down in their job search. For foreign job-seekers, Shanghai Expat, one of the city’s most established online English-language communities, held its 4th Expat Job Fair Saturday, the second such event organized by the website this year.

Over 20 companies were in attendance at the fair to discuss open positions in fields such as education, healthcare, information technology, real estate, finance and catering. Over 1,300 job-seekers turned out as well, most of them overseas citizens. Many described the event as an invaluable opportunity where individuals and employers could meet face-to-face.

“Besides recruitment, companies can also take the opportunity to do branding promotion at the fair. For example, Fields China, an e-commerce company … is very popular among expats. The company not only recruits new staff at the job fair, they also promote their brand and business by providing free snacks,” said Fan Yiting, brand manager from Ringier China, the media group that owns Shanghai Expat.

Some English education institutions saw the job fair as a chance to further their recruitment plans. One of the teaching companies present at the fair, EF Education First, will recruit 200 teachers or so between September and March.

“We do have multiple positions all across China, so we’re looking forward to filling quite a few positions. Basically we’re looking for teachers to work with kids and teens, or at our online center and face-to-face with adults. Our teachers definitely need to have some teaching experience, ideally two years,” said Janice Hu, senior recruiter from EF Education First.

Hu added that the fair is also a good place to meet job-seekers who are already in China. “Lots of times we are dealing with people who are still overseas – maybe from the US or from the UK – and they are coming to China. But at this job fair, it’s a nice chance to see who is already in the city and ready to start a new position,” said Hu.

Some companies, on the other hand, were looking to recruit far fewer individuals.

“We have two open positions: one is for a sales adviser, the other is for an assistant,” said Deanna Greer, senior consultant from Pacific Prime, a provider of insurance services. “The administrative job is more of something we do back at the office, so I’m here specifically looking for the sales position. I’m trying to fill that.”

“We’re looking for someone who obviously has a bachelor’s degree … someone who has some time with other companies. We’re looking for people who are really motivated, very ambitious and sales-driven,” explained Greer, whose company attended the job fair organized by Shanghai Expat for the second time this year. Overall, Greer described her company’s participation in the fair as a positive experience.

“Last year we hired two people from this job fair. They are still with the company today. They’ve been very successful,” she explained.

Still, several employers explained that they regard the fair as merely a venue to connect with potential recruits. Most companies will conduct a more in-depth selection and review process after the fair to assess the candidate’s qualifications.

“The people who want to apply with us have to be very international and bilingual,” said Zhang Wenjing, an asset and tenancy management executive from Asia Pacific Properties. “They will not only face our clients from overseas, but also local people in Shanghai. And they need to have skills to negotiate with them.”

Some employers also spoke about the impact new work visa policies were having on their recruitment plans.

“We want to recruit a few foreign managers for our restaurants,” said Shi Hui, HR manager from Element Fresh. “Although there are many job-seekers here, we have to find some with catering industry experience. Because of tighter visa policies, now only people who have at least two years of full-time work experience in the same industry can apply for a work visa, so many candidates here are not qualified. This adds some difficulty to selecting candidates.”

Harry Vuylsteke from Belgium has been in Shanghai for 13 months. He is looking into technical sales jobs. He has a master’s degree in engineering as well as an MBA which he obtained in Shanghai.

“It would be great if there would be more companies,” Vuylsteke remarked when asked about the employers who were present at the fair. “(The fair) definitely gives you an idea about possible positions in China. I’ve been looking for a job for three weeks. The main feedback I always get is you need to speak Putonghua, so it’s really tough if you want to work in China.” Nevertheless, Vuylsteke added that, “it is really a nice thing to see that there’s a job fair for foreigners.”

ABB CEO stresses confidence in China’s economic growth, market outlook

ABB Inc, a global grid equipments and automation technologies giant, Tuesday stressed its confidence on China’s economic growth and market outlook, as they are continuously bolstered by industry upgrade, energy efficiency, automation applications, alongside with huge infrastructure programs.

Ulrich Spiesshofer, chief executive of ABB, said in a group interview in London that China is a very important market to ABB, as well as a significantly important platform for ABB to take the company to the next level.

Though China’s economic growth is expected to decelerate in the future compared to its past 35-year performance, the country’s ambitious blueprint on industry upgrade, energy efficiency , automation application, alongside with huge infrastructure programs are still able to boost its economic outlook and the rosy picture for the industries concerned, said Spiesshofer.

“We are very optimistic on China’s long-term development in infrastructure programs,” he said.

Spiesshofer also elaborated its understanding on China’s “new normal” pattern of economic growth.

He said China has to tackle with the environmental pollution problems from economic growth, and this could happen in two ways, one is to cut down the energy consumption per unit of gross domestic product, the other one is to create environmental friendly technologies.

Spiesshofer added that ABB will collaborate with Chinese government for their action on anti-trust, a process that could incubate and optimize the competitive market environment,

On the same day at its annual Capital Market Day in London, Spiesshofer announced a surprising four billion U.S. dollars share buyback plan after the stock’s dismal performance over the past year.

ABB also outlined the new long-term targets for the company, with plan to increase operational earnings per share by 10 to 15 percent on a compound annual basis from 2015 to 2020. And the like-for-like sales is expected to grow by four to seven percent per year over the same period.

On Friday last week, however, the world’s largest power-grid maker announced a strategic collaboration with China’s BYD Co., Ltd. to jointly develop new solutions for energy storage building.

The Switzerland-based ABB Group of companies operate in around 100 countries and employ about 145,000 people.

Relaxing restrictions on foreign investments


Vice-Premier Wang Yang (center) holds a golden key to signal the opening of the 18th China International Fair for Investment and Trade on Monday.

Service sector will be steadily opened-up

China will further open its investment and cooperation system and optimize the environment for foreign investment, Vice-Premier Wang Yang said on Monday.

“China’s policy of investment and cooperation will be kept in the long run, although the inbound and outbound investment situation is witnessing big changes,” said Wang.

Wang made the remarks at an international investment forum during the 18th China International Fair for Investment and Trade, which opened on Monday in Xiamen, Fujian province.

The annual international investment event provided more than 30,000 potential investment projects and attracted companies and government organizations from 54 countries and regions, according to the organizers.

The competitiveness of the domestic companies in the world’s second-largest economy has grown remarkably and there are fundamental changes that foreign investment will have to adapt to, said Wang.

Traditional manufacturing businesses are returning to developed countries and developing economies are boosting efforts to introduce foreign investment, which has affected the international capital flows, he explained.

But he said, “We will not ignore the role that foreign investment plays in the Chinese economy and will not reject foreign-invested companies.”

However, according to Wang, China will not simply introduce foreign capital in the future, instead it will look to introduce advanced technology, managerial experience and intelligence resources and build various market-oriented systems in accordance with international practices.

“We will relax the restrictions on foreign investments, and steadily open-up the finance, education, culture and healthcare markets,” Wang said.

According to Wang, the Chinese government will strengthen efforts to protect foreign investors’ interests by tackling the problems of monopolies, commercial bribery and copyright infringements to improve the domestic investment environment.

This year marks the 30th anniversary of China’s first group of national-level economic and technology development zones, and Wang said such zones need to be further transformed and upgraded.

“China’s economic and technology development zones should be driven by innovation and they should make better use of foreign investment for their future success,” Wang said.

Such zones are also being encouraged to enhance communication with their foreign counterparts to promote new growth models, according to Wang, who pointed out that China’s 215 national-level economic and technological development zones realized one-fifth of the country’s foreign investment and one-eighth of its GDP in 2013.

Commerce Minister Gao Hucheng said the Chinese government will adhere to its policy of mutual benefits and strive to build an open economic system, actively working with international organizations and governments to promote a healthy recovery of the global economy.

“The annual international investment fair has proved to be an efficient platform to create investment and cooperation opportunities. I hope all participants will take full advantage of this event to boost investment and cooperation,” Gao said.

Gao urged domestic economic and technological development zones to play an active role in boosting international investment.

“Such development zones have not only promoted the country’s development they have also become an important platform for international investment,” Gao said.

By attracting foreign direct investment, catalyzing the development of industrial clusters and adopting new technologies and management practices, the economic and technology development zones have played a key role in China’s economic success, said Cai Jinyong, chief executive officer of the International Finance Corporation.

“Successful programs, which can contribute to the long-term future of the zones, are the ones that focus on market demand and are integrated into the domestic economy. The development of any zone should be based on an identified market opportunity,” he said.

Among the Fortune 500, size isn’t everything

A record 100 Chinese corporations made the Fortune Global 500 list this year, including 91 companies from the Chinese mainland.

The list shows that Chinese companies are rising in international stature. However, according to a report from the China Business News this week, 16 of the Chinese mainland companies on the list ran in the red in 2013. By comparison, there were only four US companies on the list that ran at a deficit.

These companies won high positions on the list based on their total assets and average revenues, but they lagged behind other companies in terms of profit.

For example, the 95 companies based on the Chinese mainland and in Hong Kong earned an average profit of $3.22 billion over the past fiscal year, below the average of $3.91 billion for all the companies on the list, according to media reports.

Chinese mainland companies also employed more workers to earn their profits. The Chinese mainland companies on the list had 190,000 employees on average, well above the average of 130,000 workers for all the companies on the list.

It is obvious that there are huge gaps in efficiency between mainland companies and their international competitors. To catch up, mainland companies should not only concentrate on expanding their size, but also focus on boosting their competitiveness.

Among the companies on the Fortune Global 500, there were 16 from the mainland that had a total deficit of 37.7 billion yuan ($6.11 billion) in 2013. Most of these companies are in industries suffering from overcapacity, such as coal and steel. They include Ansteel Group, Aluminum Corp of China and Kailuan Group. All 16 companies used to be industrial powerhouses, but overcapacity problems in their industries have taken a toll.

The central government has taken note of the overcapacity problems. It has issued calls for companies in these industries to upgrade to more advanced technology to improve productivity and reduce carbon emissions.

During this period of adjustment, many companies have sought to boost their productivity through mergers and acquisitions, which has left many of them heavily in debt, according to a report in June by China Chengxin?International?Credit?Rating?Co.

The report also mentioned that many State-owned enterprises (SOEs) have trouble controlling costs.

Indeed, most of the Chinese companies made the Fortune Global 500 list simply because of their size, which was the result of the aforementioned mergers and asset restructuring.

For instance, Ansteel Group was born of the merger of Anshan Iron and Steel Group Corp and Panzhihua Iron and Steel Group Corp in 2010. Hebei Iron and Steel Group was the result of the merger of Tangshan Iron and Steel Group Corp and Handan Iron and Steel Group Corp in 2008.

It is easy to build a giant company through mergers and acquisitions, but without long-term planning, the combined company is likely to face a host of problems, particularly in industries rife with spare capacity.

For instance, Hebei Iron and Steel Group has made the Fortune Global 500 list for six straight years. The company produced as much as 42.8 million tons of crude steel in 2013, the most of any company in China. Still, the company reported a net loss of $138 million last year. Scale doesn’t necessarily translate into profit. A company has to hone a competitive edge.

Losses haven’t been limited to companies in industries struggling with overcapacity. Three other mainland firms also reported losses recently, including COSCO Group and China National Chemical Corp.

COSCO reported a deficit of nearly 2.28 billion yuan in the first half of this year due in part to the sluggish international shipping market.

It should also be noted that the Beijing-based oil giant Sinopec Ltd became the first Chinese company to break into the Fortune Global 500’s top three, trailing US retailer Wal-Mart Stores Inc and Royal Dutch Shell.

China National Petroleum Corp and State Grid Corporation of China also made the top 10. But they are SOEs in industries monopolized by the State.

These companies on the list highlight China’s growing economic strength. However, they still need to prove they can be profitable in a competitive market.

Online finance to expand household investment


Internet-based services will make credit more accessible: BCG

The rise of Internet-based finance in the Chinese mainland is set to catapult the average household’s investment readiness and credit accessibility of small businesses in the coming years, management consultancy Boston Consulting Group (BCG) said in a report released on Thursday.

Currently, the demand of the vast majority of households in the Chinese mainland for low-cost, more efficient financial services are unmet, which, coupled with the advancement in technology and the Chinese government’s support for financial innovation, serve to drive growth in online finance in the market, Tang Tjun, Hong Kong-based senior partner and manager director at BCG, told a news conference in Beijing on Thursday while releasing the report.

In 2013, mainland households with investable assets below $100,000 accounted for 94 percent of the mainland’s total number of households, far above the ratios in developed markets which generally stand below 50 percent, data from BCG showed, indicating unaddressed demand for more affordable and accessible investment conduits.

With sustained growth momentum expected in Internet-based financial services, investment readiness of normal households will grow substantially over the next few years, according to the BCG report.

The consulting group estimates that by 2020, the number of mainlanders purchasing fund-based wealth management products as a percentage of the total population will rise to 25-30 percent from a mere 3 percent in 2012.

For small and micro-sized enterprises and individually owned businesses in the country, the emergence of online financing will also help meet their credit demand that has long been marginalized. As a result, the number of small and micro-sized enterprises receiving credit will surge to 30-40 percent of the total by 2020 compared to 11 percent in 2013, the BCG report predicted.

As for emerging areas in online finance, particularly peer-to-peer (P2P) lending which involves tremendous risks, differential business models that target specific financing needs must be sought for survival in the face of uncertain prospects, David He, principal for the consulting firm in Beijing, said at the news conference.

In a sign of prevailing risks for P2P lending in the country, 11.3 percent of more than 1,100 P2P platforms in the country have been shut down or fled with clients’ money by July, said a report released in late August by rong360.com, a Beijing-based online private lending search service provider.

While the country has yet to lay down detailed rules for the regulation of the fast-growing P2P arena, tougher policies are expected to be in the pipeline to rein in the risks of unrecoverable loans, Feng Lin, a senior analyst at Hangzhou-based China E-Commerce Research Center, told the Global Times on Thursday.

Possible rules could include putting a licensing system in place to filter out the unqualified players and setting reserve requirements for P2P platform operators, Feng suggested, noting a coordination between different government bodies such as the People’s Bank of China (PBC), the country’s central bank, and the China Banking Regulatory Commission (CBRC) is also essential in the oversight of the emerging online finance trend.

A registration mechanism with transparent disclosure of investors and intermediary service providers, namely operators of P2P platforms, also needs to be created, He Bo, an analyst at Shanghai-based fund consultancy Howbuy, told the Global Times on Thursday.

Detailed regulations specifically designed for the P2P sector may come out as early as the end of the year, according to recent Chinese media reports which are yet to be officially confirmed by either PBC or CBRC.

Top Chinese companies grow, but face bottlenecks


16 banks made more profits than top 300 manufacturing companies

Despite their growing size, China’s top companies are facing profitability and innovation bottlenecks compared with their global counterparts, according to a recent domestic ranking of China’s top 500 companies released on Tuesday.

In the 2014 edition of the Top 500 Chinese Enterprises, unveiled in Beijing Tuesday, China’s oil giant Sinopec Group snatched the top slot for a 10th consecutive year with revenues of 2.95 trillion yuan ($479 billion).

The list was complied by the China Enterprise Confederation (CEC) and the China Enterprise Directors Association based on Chinese companies’ 2013 revenues.

Although total profits for the 500 companies grew by 10.6 percent from the previous year to 2.4 trillion yuan in 2013, their profit-revenue ratio edged down for a third consecutive year, dropping 0.1 of a percentage point to 4.24 percent.

“Although the growth rate of China’s top companies slowed down from over 20 percent two years ago, they continue to expand. They accounted for 35 percent of the nation’s total tax revenue in 2013,” Li Jianming, deputy director at the China Enterprise Confederation, told the Global Times Tuesday.

A total of 92 of the companies also landed in the US-based Fortune Magazine’s rankings of the world’s 500 largest companies, Li said.

However, some experts point out that bigger does not necessarily means stronger. Weak profitability and ability to innovate mean that many of these companies still have a long way to go before they can be counted among the world’s best companies.

Li Jin, chief researcher with the China Enterprise Development Research Institute (CEDRI), said many of the top 500 companies are State-owned enterprises(SOEs) that lack vitality and efficiency, and lack incentives to reform, although he added that the central government aims to change this.

Jin said that China’s top 500 companies are concentrated in the resource and manufacturing sectors, with fewer companies in high-value added sectors such as IT.

Experts said that relatively few top Chinese companies are technical leaders in their fields.

Two such examples, PC manufacturing giant Lenovo and telecommunications equipment maker Huawei Technologies, ranked 45th and 48th on the list respectively.

“[As a whole, these companies’] ability to innovate is weak. As the economy has slowed down, the rate of increases in R&D investment dropped for a second straight year in 2013, which is alarming,” Li Jianming of CEC said.

In 2013, Chinese companies’ investment in R&D grew by 7.36 percent year-on-year. That figure was 11.37 percent in 2012 and 16.50 percent in 2011, according to news portal 163.com.

According to Li, the manufacturing sector’s profitability is at concerning levels.

“The 16 Chinese banks on the top 500 list made more profits than the top 300 manufacturing companies combined in 2013, and accounted for over half of the total profit of the top 500 companies, raising concerns of a ‘hollowing-out’ of domestic industry,” Li Jianming said.

In comparison, the top 18 US banks only accounted for around 10 percent of total profit for the top 500 US companies.

With SOEs occupying the top 37 spots on the list, home appliance retailer Suning Commerce Group Co took the 38th spot as the largest company from the private sector, with annual revenues of 279.81 billion yuan.

The 2014 version of the list includes 200 companies from the private sector.

A total of 131 companies reported revenues of more than 100 billion yuan in 2013, up from 123 companies a year earlier, while the top 500 Chinese companies had combined revenues of 56.68 trillion yuan in 2013, up 13.31 percent from a year earlier, according to CEC.

Weak sentiment dampens sales of Shanghai new houses

New home sales fell for the second straight month in Shanghai in August amid weak sentiment.

The sales of new homes, excluding government-funded affordable housing, fell 6.7 percent from July to 654,000 square meters, the lowest volume in three months, Shanghai Deovolente Realty Co said in a report released yesterday.

“Despite a cooler-than-expected weather in August, most homeseekers continued to take a ‘wait-and-see’ attitude as they hope for significant price cuts by developers,” said Lu Qilin, a Deovolente researcher.

But few developers have offered attractive discounts — a major reason for the sluggish sales, Lu said.

The average cost of a new home fell 0.3 percent from July to 26,290 yuan (US$4,276) per square meter.

China Eastern Airlines’ profits decline 98 pct

China Eastern Airlines, one of the country’s leading carriers, has posted a net profit drop of 97.76 percent from the same period last year in the first half of 2014.

With a net profit of 14 million yuan (2.28 million U.S. dollars), the company registered a business revenue of 42.59 billion yuan in the first six months, according to a statement it filed to the Shanghai Stock Exchange on Sunday.

The revenue was a 2.68-percent increase from the same period last year, said China Eastern Airlines.

It attributed the lackluster performance to “geopolitical instability, fewer high-end business travelers, and more convenient high-speed railway services.”

The airline foresees both opportunities and challenges in the second half of this year due to a mixed picture consisting of “uncertainties in global economic recovery, continuous growth in China’s airline market, and fierce competition.”

By June 30, the Shanghai-based carrier had 485 planes, including 459 passenger ones, 12 cargo, and 14 corporate jets under its trusteeship.