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Tencent sees huge advances for AI in manufacturing

China’s manufacturing sector is set to climb the adoption curve of cloud computing and artificial intelligence this year, after the service industry reaped early gains from the internet, said Pony Ma, chairman of Tencent Holdings Ltd.

As new technologies cascade through markets, less productive business models will cede ground to more innovative ones which are streamlining business processes and optimizing supply and demand, he told a packed audience at a digital economy conference on Thursday.

“With initial strides being made in the service sector, manufacturing, which is the backbone of China’s economy, has begun heavily investing in the building blocks of the internet economy. Traditional manufacturers, rather than internet firms, are leading this wave of disruptive innovation,” Ma said.

Tencent, the gaming-to-cloud computing conglomerate, will play its part as “an infrastructure provider and a connector”, he added, by sharing its big data analytics, location-based services, artificial intelligence and payment solutions with industrial players.

As part of that initiative, Tencent is providing its cloud computing might to build an industrial big-data platform for Sany Group Co Ltd, the nation’s leading machinery equipment maker.

The virtual platform connects Sany’s existing 300,000 devices globally and uses predictive analysis to head off problems before they happen, according to He Dongdong, Sany’s senior vice-president. Through remote monitoring, malfunctions can be detected in real time and repaired within 24 hours, he said.

Ma told the conference that digitally-enabled innovation is likely to penetrate into the agricultural sector. Similar improvements are taking shape in the marketing and distribution of Tongwei Group, a feed and aquatic products maker.

Ma said it relied on Tencent’s WeChat service to pair supply with demand. The increased digital engagement, including the adoption of location-based services, also expanded the company’s reach and enriched customer interactions, he said.

Yang Yuanqing, chief executive officer of Lenovo Group Ltd, said Chinese manufacturers are exploring ways to employ big data on inventories and shipments to improve product planning, and were banking on artificial intelligence to provide predictive analysis and self-servicing capabilities.

“Companies will realize broad productivity gains in their operations by automating processes, streamlining product development and digitally reinforcing their supply chains,” said Zhou Qiren, a professor of the National School of Development at Peking University.

Beijing, Tianjin, Hebei pool $15b rail fund to boost integration

Beijing, Tianjin and Hebei province have set up a 100 billion yuan ($14.54 billion) joint railway fund to boost regional integration, authorities announced on Tuesday.

About 54 billion yuan, or 90 percent of the initial installment, comes from social capital with a time period of 10 years, according to Tianjin Daily.

The fund plans to invest 70 percent on inter-city railway construction, and the rest on land development along the routes.

Regional projects, including Beijing-Tangshan rail, Shijiazhuang-Hengshui-Cangzhou rail, and a second one connecting Beijing and Tianjin, which stops at Binhai New Area, will start construction this year.

Beijing-Tianjin-Hebei Railway Investment Co, the lead coordinator of the fund, signed agreement with 12 financial institutions, including the country’s big five banks, Ping An Asset Management Co, and Capital Development Investment Fund Management Co in Beijing.

The fund is part of year-long effort by local authorities to renovate financing model in railway construction and attract social capital under market mechanism.

In all, Beijing, Tianjin and Hebei will see an addition of nine inter-city rail lines by 2020, with a total estimated investment of 247 billion yuan, according to a notice released by the National Development and Reform Commission (NDRC). Commute time between major cities and their surrounding counties will be significantly reduced.

China rolled out the integration plan for Beijing-Tianjin-Hebei in 2015 to address urban problems such as traffic and air pollution and seek balanced development of the region.

Skoda debuts first electric car in Shanghai

Skoda CEO Bernhard Maier showcases the company’s electric car Vision E on April 17.

Czech carmaker Skoda Auto has unveiled its first ever electric concept car in Shanghai, declaring that electric cars will be a pillar of its development strategy.

The Vision E has a maximum output of 225 kilowatts and can run at a top speed of 180 km/h, with a mileage of 500 km.

The concept also features Level 3 autonomous driving, which means it can drive itself on express ways and park itself without human intervention.

The first of these electric cars will hit the market in 2020.

Skoda CEO Bernhard Maier said it will launch five entirely electric cars in various segments of the market before 2025.

In addition to the concept car, Skoda announced it will release an estate car, Octavia Combi, into the Chinese market later this year.

China has been Skoda’s largest market worldwide.

It sold 317,000 cars to Chinese customers last year, and Skoda plans to double sales by 2020 with its growing portfolio.

Skoda entered the Chinese market in 2007 and has since localized its models with SAIC Volkswagen. Statistics show that it has sold more than 2 million cars in China in the past 10 years.

Disposable income growth outpaces GDP growth in China

Chinese people’s disposable income expanded at a faster pace than economic growth in the first quarter of this year, the National Bureau of Statistics (NBS) said Monday.

Per capita nominal disposable income of Chinese nationwide rose 8.5 percent in the first three months from a year ago, and per capita real disposable income after taking into consideration the effects of inflation increased 7 percent, outpacing the gross domestic product (GDP) growth rate of 6.9 percent in the period, NBS figures showed.

Breakdown figures showed that urban residents’ per capita real disposable income grew 6.3 percent year on year in the first quarter to 9,986 yuan (about 1,452 U.S. dollars), while per capita disposable income of rural residents rose at a faster pace of 7.2 percent in the period to 3,880 yuan.

Other indicators released by the NBS on Monday, including fixed-asset investment and industrial production, pointed to stabilization in the world’s second-largest economy.

NBS spokesperson Mao Shengyong said the economy had achieved a rosy start this year and the income gap between rural and urban residents narrowed, laying a solid foundation to realizing its full-year economic target.

The government trimmed this year’s growth goal to around 6.5 percent from a range of 6.5 to 7 percent for 2016.

Integrity of workers, companies crucial in job-hopping era

The head of a human resources market research company in China has called for companies, based throughout the nation, to strengthen integrity management processes in China’s job market, as well as encouraged government officials to improve relevant laws and regulations.

Tian Yongpo, from the Chinese Academy of Personnel Science, said “integrity at work is even more important in such an era with explosive information about jobs”, and added for example the mobility of Chinese labor forces gradually increased from 2010 to 2014.

Tian said, at a forum held by people.com.cn in Beijing on Wednesday, China’s floating population grew 12.65 percent, moving from 221 million to 253 million people, from 2010 to 2014.

“Huge information about jobs have accumulated during the process,” he said.

“Among explosive information, a problem will certainly arise about information transfer and distortion.

“As a result, our credibility at work is greatly influenced.”

His comments came shortly before a survey, published at the forum, which stated more than 80 percent of respondents said the credibility of Chinese workplaces were poor.

The survey collected information from more than 6000 people, as well as 3000 human resources managers, and was carried out by a website that helps companies investigate personal information, 17zhiliao.com, between March 10 and April 10, 2017.

More than half of the respondents to the survey believed dishonest behavior had resulted in a loss to companies and individuals.

Guo Wenlong, the deputy head for Labor Law Studies of Shanghai Law Society, said the “call for a law is natural since one could not get all the information he needs to (determine if a person in focus is credible or not).”

Guo went on to mention authority figures should improve laws and regulations on the non-competition agreement in the labor law, as the occasional employee has operated in a grey area to avoid company requirements and restrictions.

HR managers listed the worst behavior as missing job interviews, slacking off at work and even job-hopping.

Individuals overstating work performance and experience, as well as falsifying their educational background, were recorded as the most common dishonest behaviors to be seen.

To avoid hiring these types of candidates, 97 percent of HR mangers believed it was necessary to investigate the information job seekers’ provided during the early stages of recruitment.

More than 90 percent of job seekers agreed to the necessity of a background check; however, most people believed companies should seek the candidate’s approval before undertaking their enquiries.

Li Aijun, a law professor with the China University of Political Science and Law, urged companies to follow China’s rules, regulations and laws while undertaking investigations into personal information.

She cautioned the act of obtaining sickness records, property information and particular criminal history records, as these acts could become illegal after a certain point.

China FDI growth slows in March

Foreign direct investment (FDI) into the Chinese mainland rose 6.7 percent year on year in March, slowing from February, official data showed Thursday.

FDI reached 87.8 billion yuan (12.8 billion U.S. dollars) in March, the Ministry of Commerce (MOC) said in a statement.

The growth rate was lower than the 9.2-percent increase recorded in February.

Total FDI in the first three months of the year edged up 1 percent year on year to 226.5 billion yuan, the MOC said.

During the same period, 6,383 new foreign-funded enterprises were established on the Chinese mainland, up 7.2 percent year on year.

Most investment went to the service sector, which saw FDI expand 7.1 percent year on year in the first quarter to account for 73 percent of the total FDI.

Investment in utility services soared 165.6 percent year on year, while high-tech services attracted 28.7 billion yuan of investment, up 12.4 percent year on year.

Investment from the European Union grew 11.2 percent in the first quarter, the MOC data showed.

Last year, China attracted 126 billion U.S. dollars of foreign direct investment, the largest recipient among developing countries, data showed.

German hardware giant establishes first retail store in China

German hardware giant Wurth Group opened its first retail store in northeast China’s Liaoning Province on Monday.

The store, located in the China-Germany Equipment Manufacturing Industrial Park in the province’s capital Shenyang, displays thousands of products, such as fasteners, tools, chemical products and personal protection equipment.

“The favorable location and preferential policies of Liaoning, one of China’s northeastern rust belt provinces, offered many development opportunities for investors,” said Larry Stevens, CEO of Wurth China.

“We hope Wurth can introduce more advanced products and technology into this park, have further cooperation with local companies, as well as offer new ideas for the industrial development,” said Li Baojun, deputy director of the management committee of the industrial park.

Founded in 2015, the China-Germany Equipment Manufacturing Industrial Park covers 48 square kilometers, attracts intelligent manufacturing, high-end equipment, automobile, industrial service and strategic emerging industries.

Wurth Group, founded in 1945, is a world market leader in the assembly and fastening material trade. It entered the Chinese market in 1994 and has 1,200 employees in more than 100 Chinese cities.

Logistics makes shopping seamless in the new era

Logistics will play a critical role in fulfilling a seamless shopping experience in the era of the “New Retail”, experts said.

As merchants begin to lean more on omnichannel sales, retailers need to tailor how a product is purchased and delivered to meet customer demands.

A survey of the world’s leading retailers last November showed the top reasons for embarking on the omnichannel journey are to preserve a slice of the market share and improve customer loyalty.

The survey was conducted by US-based ARC Advisory Group in conjunction with logistics consultancy DC Velocity.

Most retailers are looking for the simplest means possible to integrate the new platforms within their existing infrastructure.

The study found out that three-quarters of retailers fulfilled orders from multiple channels through a single facility, laying a clear foundation of omnichannel practice.

In the survey, 86 percent said they took orders online (including mobile) while 77 percent also said brick-and-mortar, and 42 percent said they took orders from call centers and catalogs.

In terms of handling “last mile” deliveries, most merchants stick to the traditional courier delivery services at 43 percent, followed by third-party logistics partners at 23 percent. But others are experimenting creative options, including deliveries made by store staff and drones.

In China, e-commerce companies are experimenting with omnichannel solutions by offering warehouse-to-home and stores-to-home deliveries through partnerships and investments in offline supermarkets.

For instance, through its Cainiao logistics affiliate, an alliance of top Chinese shipping and courier companies, e-commerce giant Alibaba last year expanded its same-day and next-day deliveries from 50 cities to 200 cities.

According to a study by Goldman Sachs in March, Cainiao had ‘Fulfilment Centers’ dedicated to Alibaba’s Tmall online marketplace operating in 19 cities at the end of last year.

It runs three fresh food distribution centers in three major Chinese cities: Beijing, Shanghai and Guangzhou. All of them support cold chain delivery of fresh food purchased on Taobao and Tmall to the doorsteps of Chinese consumers within 24 hours.

It recently upgraded the service by providing fresh, rather than frozen, imported Australian beef to the dining tables of residents in 12 cities in China. Cainiao said with its new technologies, meat can be preserved fresh between 0-4 degrees for up to 21 days.

Others are also making new moves on prompt deliveries. JD.com Inc has successfully used drones to deliver online purchases to rural shoppers, using unmanned aircraft for last-mile distribution.

Overseas experts expect China’s new economic zone to deepen all-round opening up

Aerial photo taken on March 31, 2017 shows Baiyangdian, north China’s largest freshwater wetland, in Anxin County, north China’s Hebei Province.

International media reports and observers say the establishment of China’s new economic zone not only provides a new blueprint for the coordinated development of Beijing-Tianjin-Hebei (BTH) region, but also indicates China’s determination to deepen its opening up in an all-round way.

China announced Saturday it would establish the Xiongan New Area in north China’s Hebei Province, which is located some 100 km southwest of downtown Beijing.

Well-known international media outlets have enthusiastically reported about the new economic zone, regarding it a major decision of the Chinese government to promote the coordinated development of the BTH region, and a signal of China’s willingness to continue to embrace globalization and free trade.

The Associated Press said the economic area is part of a plan to integrate the capital with its surrounding areas, noting that prior to this, the Chinese government had already planned to jointly develop Beijing, the port city of Tianjin and Hebei Province to boost regional and economic development in the northern region.

The Strait Times of Singapore said the removal of non-capital functions from Beijing is part of a greater strategy to integrate the development of Beijing, Tianjin and Hebei for a better economic structure, a cleaner environment and improved public services.

Bloomberg cited Bill Bowler, a sales trader at Forsyth Barr Asia Ltd. in Hong Kong, as saying that this would be one of the centerpieces of a high-level development plan for the Beijing-Tianjin-Hebei region.

Moreover, overseas analysts believe that the establishment of the new economic area will broaden economic growth and improve the level of China’s opening-up.

Jose Ignacio Martinez, an international relations researcher from the National Autonomous University of Mexico, said Xiongan New Area’s intended focus on developing high-end, high-tech industries has positive meaning for the country’s overall industrial upgrading, and will stimulate a new round of China’s economic growth.

Martinez also noted that Xiongan New Area’s policy on opening up will further promote foreign direct investment and improve the level of China’s opening up, citing the the successful examples of Shenzhen Special Economic Zone and the Shanghai Pudong New Area.

Paola De Simone, an expert on international law and economic analyst from Argentina, said China’s determination to build the area is an important component of the effort to promote economic globalization, and the setting up of Xiongan New Area will continue to boost the openness and inclusiveness of China’s foreign communication and cooperation.

Simone added that Xiongan New Area, along with the seven new free trade zones, demonstrates China’s open and friendly attitude toward the world.

She said China’s step-by-step promotion of opening up is conducive to improving its production efficiency, driving its consumption, boosting foreign direct investment and enhancing innovative ability.

Managing economic development as well as risks

A worker at a plant in Xingtai, Hebei province, Jan 25, 2017.

Despite China’s slower but more sustainable growth path, economic growth remains high by global standards as the country’s population ages and the economy re-balances from investment to consumption and from manufacturing to services.

Still, as China’s economic reforms continue, risks need to be addressed, as President Xi Jinping said recently, to cope with corporate over-leveraging, as well as to reduce overcapacity in the real estate and heavy industry sectors.

In the last few decades, the government has always been careful to pay attention to economic signals, including those against potential risks and problems, and carefully planned the structural reforms. The recently concluded annual sessions of the country’s top legislature and top political advisory body also took note of the financial risks and adopted measures to tackle them.

Why is this important? Because the debt of non-financial enterprises in China has reached almost 170 percent of GDP by the end of last year, the highest level among leading economies, with State-owned enterprises accounting for more than 70 percent of the total corporate debt. In this context, the government’s measures to tackle financial risks should include the gradual removal of implicit guarantees to SOEs and restricting leveraged investment in the assets markets.

China has already made progress on this front. Namely, the guidelines to deepen reforms of SOEs, issued in September 2015, describe six priority areas including aspects like mixed ownership and transitioning to a modern enterprise system. And 68 percent of the central government-controlled SOEs under the State-owned Assets Supervision and Administration Commission of the State Council had introduced non-State managers by the end of 2015, and more than 80 percent of all the SOEs under SASAC have set up or are in the process of setting up a board.

In addition to allowing companies with high debts (especially those in overcapacity industries) to exit the market, the government should also help them restructure, and ensure that the process takes place gradually in order to prevent the waste of valuable resources (which could be better used more efficiently or to make growth more inclusive).

Therefore, the Organization for Economic Cooperation and Development suggests that insolvency procedures of the so-called zombie enterprises could be accelerated to reduce uncertainty and compensate laid-off workers.

Another aspect emphasized by the OECD regards the sharing of the benefits of growth, since China’s tax and transfer system remains less efficient than those in other leading economies. For example, many low-income households pay a higher share of their incomes as social security premiums than the richer ones. And workers who are outside the formal labor market are not required to participate in the pension and medical insurance schemes, potentially increasing their financial vulnerability.

Hence, the OECD believes that the authorities should base the calculation of social security contributions of low-income households on their actual incomes, instead of the current system that prescribes a minimum contribution calculated on an imputed value of their earnings equivalent to 60 percent of the previous year’s local average wage. The subsequent loss of revenue can be partly offset by the money that can be realized by reforming the individual income tax system, say, by abolishing the tax exemptions that favor high-income households. For instance, the interest received on government bonds or savings in banks, which now is non-taxable income, should be taxed.

All in all, it is important to highlight that the Chinese economy will remain the major driver of global growth, which is good news to the world economy. And once enterprises improve their performance through innovation and entrepreneurship, and the SOE reforms gain pace through exposure to market mechanisms, more jobs will be created and the benefits of economic growth can be shared by all.