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Manufacturing holds key to Industry 4.0

Fuyao Group boss says firm has long aimed at smart production

Industry 4.0 can only be successful when an enterprise has a solid manufacturing capacity, said Cao Dewang, chairman of Fuyao Group, the largest automotive glass supplier in China.

“Industry 4.0 is quite a popular concept at the moment. But my concern is that manufacturers may face the risk of failure if they don’t have a strong manufacturing capacity. China’s manufacturing industry is still not very advanced,” said Cao.

The vision of Industry 4.0 is for “cyber-physical production systems” in which smart embedded devices work together wirelessly directly or through the internet of things. It is seen as the Fourth Industrial Revolution following the first three driven by steam engine, electricity and the personal computer.

Fuyao has adopted a slogan of “Make Industry 4.0 Take Root in Fuyao”. The reason that Fuyao is ready for Industry 4.0 is because it has more than 20 years of developing strong manufacturing competence under a vision on intelligent production, according to Cao.

“I first came to the realization that intelligence is the future when one of my engineers reminded me that software would one day be more valuable than human power in 1988 when I first bought equipment from overseas,” said Cao. “I have been aiming at a smart production process ever since.”

Founded in Fuzhou in the eastern part of China in 1987, Fuyao Group (Fuyao Glass Industry Group Co Ltd) now has a 65 percent share of the domestic market. The company has manufacturing bases in nine countries, including the United States, Russia, and Germany.

Cao was named as manufacturing pioneer in China by Forbes magazine in 2015. It was the first on the 14-member list, followed by Dong Mingzhu, chairwoman of Gree Electric Appliances Inc, Liang Wengen, chairman of Sany Group, and Zhang Ruimin, chairman of Haier Group.

Fuyao’s information technology and automation system have taken the lead among its counterparts in the world, according to Forbes.

It has formulated a sophisticated data system in purchasing, logistics, services and other value-added production links.

Fuyao’s average use of robots is more than 200 robots per 10,000 workers. The level is 300 in Japan and 100 in the U.S. in automotive glass manufacturers, according to Cao.

“The key to success for Industry 4.0 is to design a system that suits the enterprise’ production process. If you don’t know the details in production like the back of your hand, how can you design the system that works the best?” said Cao.

Other factors for the success of Industry 4.0 include large production capacity, good management, the employees’ quality, and high demand for the product. The demand for high value added automotive glass that is more environment-friendly, energy saving, intelligent and integrated is rising fast.

Fuyao is moving up along the value chain by developing intelligent glass of sound proof rate of 90 percent, heat insulating, low energy consumption and auto light adjustment.

It is also developing a windshield that can function as a dash board.

Fuyao realized revenue of 13.6 billion yuan ($2.1 billion) in 2015, a 5 percent increase from the same period in 2014. Its net profit stood at 2.6 billion yuan in 2015, up 17 percent from the end of 2014.

Chinese e-commerce giant JD.com,Wal-Mart partner to expand business

China’s second largest e-commerce platform JD.com partnered with global retail giant Wal-Mart with the latter trading its China online unit for JD.com’s stakes, a strategic step expected to expand Wal-Mart’s reach to more Chinese customers.

Under the deal, JD will take ownership from Wal-Mart Stores of the Yihaodian brand, website and app while giving about a 5 percent equity stake to Wal-Mart, worth about 1.5 billion U.S.dollars at JD’s current valuation, the company announced Monday night.

The deal is expected to give Wal-Mart access to JD’s online traffic and bolster its presence in the extraordinarily lucrative, but increasingly competitive, online marketplace.

Wal-Mart Sam Club China will open a flagship section on JD.com, and both companies will leverage their supply chains and broaden the range of imported goods to meet the growing demands from increasingly affluent and quality-oriented Chinese consumers.

In a statement issued Monday, Wal-Mart CEO Doug McMillon said JD had “complementary business and was an ideal partner.”

Yihaodian has a strong presence in eastern and southern China, selling food and beverages, home goods and electronics.

JD chief executive Richard Liu expects the alliance to help improve the customer experience and boost business for Yihaodian thanks to JD’s logistics capabilities and wide range of products.

JD has nearly 6,000 delivery and pickup stations in about 2,500 counties and districts across China, with a huge customer base and an outstanding same-day delivery network.

The company launched a 20-day long online shopping promotion campaign starting from June 1 to June 20, which received orders worth over 100 million yuan, about 85 percent of transactions were on mobile devices.

The NASDAQ-listed Chinese online retailer saw its shares surge nearly 8 percent before trading was halted Monday.

Volkswagen to produce more electric cars in China

Volkswagen China said on Monday that it expects electric vehicles to account for up to 25 percent of its total auto production by 2025.

Vehicles driven purely by electricity will sell two to three million units by 2025 as Volkswagen expands its electric vehicle line to over 30 models in the next 10 years.

Batteries for electric vehicles could emerge as a new source of income, the automaker said, adding it is evaluating the research needed and potential income.

The automaker will continue to expand its business in China, such as customized auto services either through in-house research or acquisition.

Large shareholders selling spree spooks retail investors

A number of companies listed in Shanghai and Shenzhen have been reducing their holdings since the beginning of May, according to disclosures to the bourses concerned.

Market observers said this paring of holdings may dent small investors’ confidence and hurt prices of the stocks concerned.

In the first seven trading days this month, large shareholders sold 543 million shares worth 14.02 billion yuan ($2.13 billion) in various companies, according to the China Securities Journal.

This almost matched similar selling through all of May, which saw big shareholders’ sales of 435 million shares worth 14.43 billion yuan.

Each large shareholder holds more than five percent in a company’s stock.

According to the Journal, 45 companies, through 52 filings, disclosed large shareholders’ plans to sell 1.216 billion shares worth 29.14 billion yuan or $4.43 billion.

They will sell these shares gradually in three months to a year as per regulations. A big shareholder is required to disclose any substantial paring of its holding and complete such sales within a given timeframe.

Since the beginning of May, big shareholders in nine companies listed in Shanghai and Shenzhen disclosed that they are going to sell all their holdings. Among them, three firms will see big shareholders selling shares worth more than 1 billion yuan within 12 months.

Many of the companies that are seeing selling by large shareholders are small- to medium-cap enterprises in emerging sectors such as biochemicals and high-tech.

For instance, Shanghai Hile Bio-Pharmaceutical Co Ltd, a drugmaker, has seen heavy selling in their counters.

On May 3, the first trading day of the month, shares in Hile Bio-Pharma closed at 42.97 yuan in Shanghai. But by June 1, they fell to 16.37 yuan. They closed at 15.22 yuan on Friday, marking a 65 percent decline since May 3.

Although the meltdown is attributable to the automatic price shrinkage due to the company’s 13-for-10 stock split on May 4, the large shareholders’ selling is also believed to be a major factor.

A research note from Ping An Securities said quite a number of companies in emerging sectors listed recently, suggesting that large shareholders may be exiting to secure their gains.

Citing filings, analysts attributed the selloff to big shareholders’ desire to stay liquid.

A research note from Chang Xin Asset Management said recent paring of holdings had a limited impact on the A-share market so far, given the small size of sales relative to the whole market. But small investors holding shares in these stocks may feel the pinch due to falls in prices.

Zhang Shaofen, 56, a Shanghai-based small investor, said it is understandable if big shareholders like institutional investors reduce their holdings to boost their liquidity. But, if individuals such as company founders or senior executives, or their family members, are behind such sales, it could mean they are cashing out or eager to get rid of the company’s shares for some reason.

“Usually, individual large shareholders have close knowledge of a company’s profitability, operations and financial situation. If such individuals sell shares in bulk deals, small investors may interpret the move as a sign of erosion of confidence in the company’s future.”

But brokerages said block deals do not necessarily mean big shareholders are giving up on the company or that they are cashing out or exiting for good.

A research note from Guangfa Securities said some block deals could well be in anticipation of possible mergers and acquisitions. M&A activity usually stands a better chance of success when the equity structure is clear and simple.

Didi Chuxing nets $4.5b to fight off rivals

China’s most popular ride-hailing application Didi Chuxing said yesterday that it netted $4.5 billion in fundraising in its latest financing round to help it fight both foreign and domestic rivals.

The investors included Internet giants, state-owned enterprises and private firms such as Apple, China Life and Ant Financial, together with existing investors Tencent, Alibaba, China Merchants Bank and SoftBank.

The proceeds will be used to upgrade technology, Big Data research and operations to improve rider and driver experience, as well as exploring new businesses and opportunities.

“Didi is prepared to continue this momentum of growth with advantages in technology and platform synergies,” founder and Chief Executive Officer Cheng Wei said in a statement.

This marked the second financing round after Didi and Kuaidi, the two former leaders in the ride-hailing sector in China, merged to form Didi Chuxing in early 2015.

Didi Chuxing raised over US$3 billion in a previous fundraising exercise in September.

Didi said it handles an average of 14 million rides through its platform daily, serving close to 300 million users in more than 400 Chinese cities.

Shanghai Zhenhua bets on automation


Shanghai Zhenhua Heavy Industries Co Ltd’s booth at the China International Offshore Oil and Gas Exhibition in Shanghai.

ZPMC sees high-tech port terminals as the key to its long-term growth prospects

In less than 24 years, Shanghai Zhenhua Heavy Industry Co Ltd has developed into the world’s largest port machinery manufacturer. Its plan for the next decade is to make automated container terminals a new growth engine of the company.

“ZPMC is now trying to focus a great amount of resources on automatic terminals, and we expect this sector to bolster our development in the coming decade,” said Song Hailiang, chairman of ZPMC and vice-president of China Communications Construction Co Ltd.

According to Song, the future of terminals lies in unmanned technology. Through remote control, intelligent container terminals will have better performance and lower operational costs than traditional ones.

“ZPMC won’t miss this great revolution. The development of automated terminals will be able to combine ZPMC’s existing core business of steel cranes and related services with more diversified development,” he said.

The Shanghai-listed company has already made its mark in the automated terminal sector as it is currently constructing the automated terminal project of Qingdao Port and the fourth phase of the Yangshan Deep-water Port in Shanghai.

In addition, the nation’s first automated container terminal built by ZPMC at Xiamen Ocean Gate Container Terminal is under trial operation.

Furthermore, the company also received orders for automated terminals from Rotterdam World Gateway in the Netherlands and the Italian port of Vado Ligure, while 36 sets of port equipment went into service at the automated Long Beach Container Terminal in California in the United States in April.

“All the lifting equipment of the $1.2 billion investment LBCT automated port, including 14 quay cranes (shore bridges), 70 automated rail cranes, and five automated railway crane, will be delivered by ZPMC around 2019,” said Song.

The firm’s first order from Hamburg terminal CTA in 2000 for four cranes is regarded by Song as a landmark of the company.

All the achievements were made through persistent research and development. For more than two decades, ZPMC has kept allotting more than 3 percent of its revenue to its R&D department which now has expanded to more than 2,000.

ZPMC’s reputation hit a peak during Premier Li Keqiang’s trip to the China (Shanghai) Pilot Free Trade Zone in November 2015. The premier encouraged the group to realize breakthroughs and marketing promotion in automated port technology and grasp the opportunity of the national plan “Made in China 2025” issued to upgrade the country’s industry.

In 1992, ZPMC was founded in Shanghai as a heavy-duty equipment manufacturer.

Baidu alters crowdfunding pay-for-performance search services

May drive small players out but help sector’s development: experts

Search engine giant Baidu Inc is altering its pay-for-performance service for crowdfunding platforms to favor larger, better-financed participants with significant shareholders, a move that experts said Tuesday will benefit the industry in the long term.

“We’ve gotten a notice from Baidu that the company won’t open new accounts for crowdfunding platforms that offer pay-for-performance services,” an employee of Shanghai-based crowdfunding platform zhongchoujia.com, who preferred to be anonymous , confirmed to the Global Times on Tuesday.

Pay-for-performance services allow companies to be featured more prominently in Baidu’s search results.

The notice said that crowdfunding platforms will only be eligible to use pay-for-performance services in Baidu if they meet at least one of five criteria, which include membership of the Payment & Clearing Association of China, having shareholders from banks or having the support of State-owned enterprises, according to the employee.

Platforms that don’t qualify were supposed to be dropped from pay-for-performance services as of Tuesday, the employee said, although the account of zhongchoujia.com was still active because Baidu probably still needs time to deal with the issue.

Baidu didn’t respond to the Global Times’ request for comment as of press time.

The five conditions are basic requirements, and further metrics will be used to evaluate each platform’s financial condition, a person close to the matter told the Global Times on Tuesday, speaking on condition of anonymity.

Baidu’s requirements are unfair to small crowdfunding firms that are heavily dependent on the Internet, said the zhongchoujia.com employee.

Crowdfunding is the practice in which new companies or project managers privately raise funds from a large number of investors. In many cases, using the Internet is the best or only way of doing so.

“There’s some background to Baidu’s action. For instance, government authorities have been calling for controlling financial risks since 2015,” Chang Zongfeng, co-founder of baichouhui.com, a Shanghai-based crowdfunding platform, told the Global Times on Tuesday. “Also, Baidu needs to improve its public image by reducing risks.”

Baidu announced in May it would set aside 1 billion yuan to compensate users who were harmed by fraudulent marketing information on its website.

The government authorities requested Baidu to take several remedial measures in May after the death of a 21-year-old student Wei Zexi who used Baidu to search for the hospital to treat his cancer.

“During the short term, some crowdfunding firms that depend on the search engine to raise user flow will be affected a lot,” said Chang, noting that some other search engines may follow Baidu’s moves.

However, there are risks in the crowdfunding industry caused by “irregular practices,” noted Chang.

For example, some firms lower the requirements for investors and some dubious products are offered on some platforms looking for investors, said Chang.

As of the end of the first quarter this year, there were at least 399 online crowdfunding firms in China, with 132 firms having been closed or transiting to other businesses, according to a report by Beijing-based financial information provider -01caijing.com in May .

In the first quarter, online crowdfunding firms raised about 3 billion yuan in total.

“It’s good for Baidu to strengthen the regulations, which will benefit the industry in the long term,” noted Chang. “In particular, equity crowdfunding should have more stringent requirements for investors as it’s riskier than crowdfunding ordinary projects of lower value.”

Yu Wenhui, founder of vchello.com, an equity crowdfunding platform based in South China’s Guangdong Province, agreed with Chang.

“Strict regulation is good for the sound development of the industry,” Yu told the Global Times on Tuesday.

Baidu could work with government authorities to evaluate platforms’ qualifications, said Yu.

Tianjin boosts finance leasing to help small businesses


Technicians check a pilotless helicopter at a startup company in the Binhai New Area of Tianjin.

Finance leasing is becoming the second-largest source of capital, after bank loans, for small and medium-sized businesses in Tianjin, an industrial and logistics hub in northern China, according to the city’s financial watchdog.

“The finance-leasing segment is in expansion mode, as it offers much-needed funds to various companies, especially those small and medium-sized ones,” said Sun Jingyun, deputy director of the Tianjin Bureau of Financial Affairs.

Small and medium-sized enterprises often have difficulty getting bank loans, so finance leasing provides much needed liquidity because of its more flexible policies, added Sun.

Baolai Precision Machinery Industry Group in the city is a beneficiary of the booming finance-leasing business. In the past decade, the company bought manufacturing equipment through 27 finance-leasing deals worth 60 million yuan ($9.23 million).

Baolai has more than 800 high-end processing machines and 50 quality detection devices. According to company President Cui Yachen, more than 40 percent of its equipment was bought through finance leases, and the value of the company’s annual output increased by 20 percent on average over the past 10 years.

Cui said it is more difficult to obtain bank loans, and their repayment periods are comparatively short, placing a big strain on the company’s cash flow.

“Although the fee for finance lease is higher, repayment periods can stretch as long as three to five years, granting us more time for product sales and the repayment pressure is much lower,” Cui noted.

To cut the costs for firms in finance leasing, the Tianjin municipal government is offering a subsidy to lessees.

“From 2016 to 2017, Tianjin will provide 3 billion yuan in subsidies, to cover about 70 percent of leasing fees for qualified enterprises,” said Chen Yu, deputy chief of the Tianjin Bureau of Financial Affairs.

The annual interest rates for finance leasing range from 5 percent to 8 percent. The government subsidy will help cut the rate to less than 3 percent for Baolai, which is heading for a stock market listing in August.

In contrast, a local bank loan’s average annual interest rate is about 5.16 percent.

Cui said Baolai plans to spend 10 million yuan buying new equipment through finance leasing this year, and another 30 million yuan to 50 million yuan next year.

Statistics from the Tianjin government show there are 773 finance leasing institutions in the city, and the overall value of leasing on asset has hit 680 billion yuan.

Central bank drains 220 bln yuan from market

China’s central bank drained 220 billion yuan (33.85 billion U.S. dollars) from the market this week to ensure stable money supply.

This follows a drain of 290 billion yuan from the financial system last week.

The People’s Bank of China (PBOC) conducted 360 billion yuan in seven-day reverse repurchase agreements (repo) this week, a process in which central banks purchase securities from banks with an agreement to resell them in the future.

With 580 billion yuan’s worth of repos maturing this week, the PBOC ended up draining a net 220 billion yuan from money markets.

On Friday’s interbank market, the benchmark overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one another, was down by 0.1 basis points to 2 percent.

The Shibor for seven-day loans fell 0.3 basis point to 2.326 percent. The Shibor for three-month loans dropped 0.2 basis point to 2.894 percent.

Lenovo sets up fund for startups


Yang Yuanqing, chairman and CEO of Lenovo.

Lenovo Group Ltd announced on Wednesday the establishment of a $500 million investment fund, seeking new growth points as the world’s largest personal computer maker is wrestling with a declining global demand for PCs and a faltering smartphone business.

The fund, solely financed by Lenovo, will be used to finance startups in cloud computing, big data, artificial intelligence, robotics, Internet Plus and other emerging sectors.

Yang Yuanqing, chairman and CEO of Lenovo, said the new investment unit, Lenovo Capital and Incubator Group, will help the company find the biggest commercial opportunities in the next decade.

“We won’t place a limit on the size of our investment in innovation as long as startups’ products fit with Lenovo’s broad strategies and really boast cutting-edge techs,” Yang said.

According to Yang, Lenovo is also encouraging its employees to work on innovation projects, which can grow into independent firms, become the company’s units and leverage capital from other investment firms to scale up.

He Zhiqiang, Lenovo’s senior vice president in charge of the new investment unit, said the company will invest in 10 to 20 startups every year and help spin off at least 10 companies from Lenovo’s internal incubation projects this year.

“We value quality over quantity, with focus on early-stage startups,” He said, adding the company is also eyeing overseas investment opportunities.

Lenovo’s intensified efforts to boost innovation came as the company is facing mounting pressure in the PC and smartphone businesses, two of its major revenue sources.

In the first quarter of 2016, Lenovo failed to make its way into global top five smartphone vendors for the first time, according to the research firm International Data Corp.

The company is having difficulty in reviving its appeal to consumers who are willing to buy more expensive handsets while its Chinese peers Oppo Electronics Corp and vivo Mobile Communication Technology Co Ltd leap forward.

In the same period, the global demand for PCs hit a nine-year low, despite that Lenovo maintained its leading position in terms of quarterly shipments.

Di Jin, a research manager at IDC China, said Lenovo’s products are facing fierce competition, so it makes sense for the company to look beyond smartphones and PCs for new opportunities.