Archives November 2016

Home market seen stable in 2017

China’s housing market is expected to be stable next year although regulatory risks remain high amid rapidly rising home and land prices, international ratings firm Moody’s said in its latest forecast.

“We expect the growth in nationwide contracted sales by value to be flat or slightly negative in 2017, against a high base of contracted sales for 2016,” said Kaven Tsang, vice president and senior credit officer at Moody’s. “We estimate sales growth of around 25 percent year on year for 2016.”

Tsang predicted that sales volume to fall by 5-10 percent next year as major cities in September and October imposed tightening measures, turning the sector outlook to negative. But the drop will be partly offset by a modest rise in prices.

If sales volume rises by above 10 percent annually on a sustained basis and in a low regulatory risk environment, the outlook could shift to positive, Moody’s said.

A sharp price decline seems unlikely in the next six to 12 months, given the relatively low inventory levels in high-tier cities, Moody’s said.

Developers’ gross margin will stabilize next year due to reduced destocking pressure and improved selling prices, amid the strong contracted sales registered in the past 12 to 18 months, said Moody’s, which rated 50 developers in China.

Late on Monday, Shanghai announced down payment for first-time home buyers would be raised to 35 percent from 30 percent from yesterday. People who now don’t own a house but have applied for mortgages from either commercial banks or public housing funds anywhere in the country will have to pay a minimum 50 percent down payment as they are considered second-home buyers in the city from now on.

China’s Top 30 firms post combined revenue up 55 per cent

China’s top grossing firms made 55 per cent more money in 2015 than two years previously, exclusive research by The Lawyer has revealed.

The Lawyer’s third edition of the China Top 30 report – an annual ranking and analysis of China’s leading law firms – found the combined revenue jumped from RMB12.95bn (£1.5bn) in 2013 to RMB20.16bn (£2.3bn) in 2015.

Revenue growth was largely fuelled by recruitment efforts including national expansion through regional bolt-ons.

The total number of lawyers in the top 30 firms increased by around 36 per cent in the same period, to 23,023.

In the two year time period many of the firms opened offices overseas or joined forces with established international firms.

Dentons (formerly Dacheng), King & Wood Mallesons (KWM) and Zhong Lun once again claimed the top three spots in the league table by total revenue, following double-digit revenue hikes.

Dentons, the biggest Chinese firm by revenue, saw its 2015 revenue grow by 29 per cent to RMB2.9bn from RMB2.25bn in 2014. KWM’s revenue increased at a slightly faster rate of 30 per cent to RMB2.1bn. Zhong Lun, the smallest of the top three, recorded the fastest growth, up 34.4 per cent to RMB1.98bn.

Below the top three, there were notable movements in this year’s top 30 firms by revenue list, including several new entries and exits. Shandong-based Jointide and Beijing-based JunZeJun dropped out of the table, while Shanghai’s Llinks and Shenzhen’s Guanghe made their first appearance.

Llinks posted a turnover of RMB236m after achieving a 50 per cent revenue? hike and claimed the 27th place as a result. Guanghe, riding on the country’s booming new over-the-counter equity exchange (new third board), which provides a speedy and favourable way of fundraising for start-ups, ranked 28th. It recorded a 69 per cent increase in revenue, from RMB136m to RMB230m.

The firms in the top 10 group remained largely unchanged on the previous year. However, AllBright, with a 48 per cent increase in revenue, moved up three places to fourth spot. Beijing-headquartered Jingtian & Gongcheng, with a 41.6 per cent revenue growth, made its debut in the top 10, replacing last year’s tenth high-grossing firm, JT&N.

Among the rest of the top 30 firms private equity and technology-focused Han Kun rose most rapidly, by six places to 17th. National giant W&H also moved up six places, to 19th. Beijing-based Tian Yuan was up five places to 11th, overtaking larger rivals such as Kangda, JT&N and Zhonglun W&D.

Some firms’ managing partners expressed concerns regarding continued growth prospects over the combing years, mainly due to China’s slower economic growth and greater uncertainty in some of the world’s largest economies.

However, many of the best performing firms expected to achieve a similar, if not faster, rate of revenue increase in the current financial year.

Top 30 by revenue (2015)
Rank 2015 Rank 2014 Rank Change Film
1 1 Equal Dentons (China)
2 2 Equal King & Wood Mallesons (China)
3 3 Equal Zhong Lun
4 7 increase AllBright
5 5 Equal Grandall
6 6 Equal Yingke
7 4 decrease JunHe
8 8 Equal Deheng
9 9 Equal Fangda Partners
10 13 increase Jingtian & Gongcheng
11 16 increase Tian Yuan
12 11 decrease Kangda
13 10 decrease JT & N
14 12 decrease Zhonglun W&D
15 17 increase Zhejiang T&C
16 14 decrease Zhong Yin
17 23 increase Han Kun
18 15 decrease Global Law Offices
19 25 increase W&H
20 18 decrease Longan
21 21 Equal Grandway
22 22 Equal Tahota
23 19 decrease Commerce & Finance
24 29 increase Haiwen & Partners
24 26 increase Beijing DHH
24 24 Equal Guantao
27 #### #N/A Llinks
28 #### #N/A Guanghe
29 27 decrease Co-Effort
30 30 Equal Hylands
Top 20 fastest growing firms by revenue (2015 vs 2013)
Rank Firm Two-Year Revenue Growth
1 Han Kun 185.7%
2 Guangdong Huashang 125.7%
3 Tian Yuan 117.8%
4 Beijing DHH 109.5%
5 Grandall 106.3%
6 Guanghe 98.3%
7 Zhong Lun 91.8%
8 Tiantong & Partners 90.0%
9 Zhejiang T&C 84.4%
10 Yingke 81.4%
11 Kangda 80.5%
12 Hylands 79.1%
13 Jingtian & Gongcheng 77.1%
14 AllBright 75.9%
15 Zhong Yin 72.6%
16 Dentons (China) 62.9%
17 Tahota 62.8%
18 JT & N 61.4%
19 Lifang 60.0%
20 Fangda Partners 58.3%
The Lawyer’s China Top 30 2016 report, released on 26 September 2016, identifies the top performing Chinese firms by various key metrics such as revenue, RPL, revenue growth and RPL growth last year.

The third annual edition of the report also contains three years of financial and technological data and indepth analysis on Chinese law firms’ strategies from some of the country’s most eminent lawyers.

Big Black Friday discount to boost overseas online purchases

The Black Friday shopping season is expected to spur Chinese online purchases overseas despite the recent weakening of the yuan.

Ymatou.com, a Shanghai-based e-commerce company dedicated to overseas products, has already rolled out special offers days before the shopping season and has seen rising sales compared with last year.

The company said it sold 60 million yuan ($8.67 million) worth of goods in the first 10 minutes when the sales started last Friday, a week earlier than the official start of the shopping season.

An 88,999-yuan Birkin bag was snatched up within two minutes and 320 Canada Goose jackets priced over 5,000 yuan were sold out in an hour.

The yuan further weakened on Thursday to pass the threshold of 6.9 against the U.S. dollar.

“The depreciation of the yuan does not dampen the frenzy of shopping abroad as most Western products on sale are still quite cheap compared with same products sold in franchised stores in China,” Zeng Bibo, chief executive officer of ymatou.com, said on Thursday.

Chinese middle class shoppers are becoming increasingly sophisticated. “They want to buy high-quality products, enjoy good services and live a tasteful life,” said Zeng.

The Black Friday shopping season seems a good opportunity for them to live such lives at a relatively low cost. The shopping festival is a period when retailers offer massive discounts to attract consumers.

Chen Tao, an analyst with Beijing-based internet consultancy Analysys, said Black Friday has been growing in popularity in China.

“But it is still in its infancy in China, and its size is quite small compared with China’s homegrown online shopping festival Singles Day,” he said.

“As Chinese middle class shoppers are becoming less and less price sensitive, what they care most about in cross-border shopping is the quality and brands of goods, fast delivery and good return policy, which will be the key areas for online retailers to work on,” he added.

Weibo repositions itself as wide-ranging platform

Weibo, which is often called China’s homegrown version of Twitter, is no longer satisfied with just tweeting.

As part of Chinese internet company Sina Corp, Weibo Corp is positioning itself as a combination of Twitter, Instagram and YouTube in order to gear up its development as a “social media platform”, said the company’s top executive.

Charles Chao, chief executive officer of Sina and chairman of Weibo, said that “apart from being a real-time information network, Weibo is also equipped with the features of social networking systems”.

Chao said the major reason for Weibo’s rapid growth in the past year was the string of adjustments it made in the process of repositioning its strategy. “The next move is to focus on connecting people and content. We will build a vigorous ecosystem that can attract more people from various backgrounds,” he said to China Daily at the sidelines of the third World Internet Conference, which ended on Friday in Wuzhen, Zhejiang province.

Launched in China about seven years ago, Weibo for a time was the leader in China’s cyberspace until its thunder was stolen by WeChat, an instant messaging app launched by Tencent Holdings Ltd in 2011.

But, Weibo’s changing strategy has pushed it to the top once again thanks to its effort to attract young people and users in smaller cities. It allows them to demonstrate fully who they are via text-based tweets, self-generated videos and even live-streaming.

Statistics from data research firm QuestMobile show that Weibo had 390 million monthly active users in September, ranking fourth of all apps in China. Its growth rate was 79 percent year-on-year, the most rapid of the top 10 apps listed by the research firm.

Chao said that Weibo is more open compared with WeChat because its social networking features are not constrained to close friends. “It gives each account — individuals, superstars, web celebrities and institutes –opportunities to demonstrate their views and their capabilities, to set up a business and to spread information and content to a much broader audience,” he said.

“That is the magic of Weibo. It is a wonderland that can make a nobody into a somebody, as long as they have talent,” he added.

Chao discussed the rise of the web celebrity economy on Weibo as an example. By interacting with followers on Weibo, a former magazine model known as Zhang Dayi has become an online sensation. Zhang’s fame in the virtual world helped her set a record of selling 20 million yuan ($2.9 million) worth of clothes online within two hours.

“We will keep making efforts to empower our users,” he said. In the online celebrity sector alone, Weibo is working with more than 300 multichannel networks to help online celebrities gain fans, boost influence and speed up monetization.

Chao said it invested in companies that can bring synergy with Weibo. For example, the company, which debuted on the Nasdaq in April 2014, has already invested in Yixia, a startup with strong technology in video and live streaming.

Companies and Tsinghua work on vehicle communications standardization

Vehicle communication guidelines are set to be published by the end of this year, as wireless communication is now a fundamental technology for intelligent cars. So there needs to be a universal definition and standard.

Carmakers and Tsinghua University recently teamed up to define vehicle communication standards in order to help boost transportation safety and the development of vehicle intelligence. Communication standards are now included as part of the upcoming China Intelligent and Connected Vehicles Technology Roadmap.

“The development of vehicle intelligence requires the technologies of big data, cloud computing, and vehicle-to-vehicle communication,” said Li Keqiang, director of the automotive engineering department at Tsinghua University.

A group was founded in October and is led by Tsinghua University, General Motors Co and Chang’an Automobile Ltd. Supported by the Society of Automotive Engineers of China, the group will exchange standards for vehicle-to-everything communication, or V2X, and complete a definition and demand analysis.

Industry insiders hope the group’s work may help accelerate the application of intelligent transportation systems on a larger scale to prevent transportation accidents.

Yao Danya, professor of automation at Tsinghua University, said: “The focus of V2X communication is on improving transportation safety and easing traffic congestion.”

Yao suggested that “China may accelerate the deployment of the technology, as long as local governments initiate the necessary infrastructure upgrades at high-incidence spots of traffic accidents.”

V2X communications include vehicle-to-vehicle, vehicle-to-infrastructure and vehicle-to-pedestrian communications, and the technology supports Intersection Collision Alert and Emergency Brake Alert.

The deployment of V2X communications may elevate the overall efficiency of the nation’s transportation by 30 percent, according to SAE-China’s prediction. The United States’ National Highway Traffic Safety Administration estimated the technology could help avoid 81 percent of traffic light accidents in the country.

V2X communication is the vehicles’ language, so a complete set of communication standards is necessary for underpinning an intelligent transportation system using intelligent and connected vehicles.

Vehicle intelligence is based on the real-time calculation of big data collected by sensors and radars in the vehicle. The current solution uses a combination of an in-car computer and a cloud computing system.

The computer in the car reacts instantly to emergent safety threats. A lot more traffic information is uploaded through wireless connections to a cloud server for further processing, and the results are downloaded to command the vehicle.

The solution requires fast wireless connections to transmit big data in a flash and powerful enough servers to process the information in a brief period.

Gong Weijie, deputy secretary general of SAE-China, said: “The challenges to the intelligent vehicles’ communication technologies are in the coordination among varied government bodies, including the Ministry of Transport, and the trans-industrial synergy among the mobile communication operators and equipment suppliers.”

Carmakers have to join with communications operators and internet service providers. The State-controlled mobile operators are working on 5G mobile communication networks to fix the bandwidth bottleneck for data exchange.

The 5G data transmission, 100 times faster than 4G, is capable of transferring more data within a shorter period of time, and 1 million access points are planned to be built in each square kilometer, making V2X communication possible, according to China Mobile.

Alibaba sales to equal to fifth-largest economy

Challenges remain in cross-border trade and regulations

After setting a new record at the annual “Singles’ Day” online shopping event, Chinese e-commerce giant Alibaba Group Holding will generate value that is equivalent to the fifth-largest economy in the future. Industry experts lauded the feat as “unprecedented” but also cautioned about future challenges.

The company surpassed 3 trillion yuan ($440 billion) in annual gross merchandise volume (GMV) for fiscal year 2016, a year-on-year increase of 27 percent, and it is expected to generate more than tens of billions in its daily GMV, mainly driven by this year’s “Singles’ Day,” also known as double 11, shopping festival, Alibaba said in a press release sent to the Global Times during the weekend. Based on the current growth rate, the company will help create a “new economy” that combines billions of individuals and millions of enterprises worldwide, and size up to the equivalent of a GDP just behind the U.S., China, the EU and Japan, the release noted, without providing a timeframe.

A company’s output can’t be compared to a country’s GDP, as the company still faces uncertainties in its corporate operations, but the business model that Alibaba has created will certainly have a significant impact on enterprises not only in China but also overseas, Zhang Yi, CEO of Guangzhou-based market research firm iiMedia Research, told the Global Times on Sunday.

“In the past decade, the e-commerce model has been playing a major role in solving the problem of asymmetric information in the marketplace, but it will focus more and more on how to better integrate online and offline sectors in the future, which will reshape global economic and trade landscape,” he said.

Alibaba’s business-to-consumer platform Tmall recorded a daily sales volume of 120.7 billion yuan on Friday. The 24-hour event this year covered 235 countries and regions, and 94 brands broke sales records of over 100 million yuan, the press release showed. For example, Japanese retailer Uniqlo surpassed 100 million yuan in online sales in less than three minutes, and multinational luxury goods conglomerate LVMH also exceeded expectations, for example its affiliated brand Guerlain broke monthly sales record in 12 minutes on the day.

Alibaba will maintain its growth momentum in the next five years as online retail has not reached the “growth ceiling” yet, said Liu Dingding, a Beijing-based independent industry expert. “Meanwhile, Alibaba is helping create hundreds and thousands jobs, which could also be seen as a contribution to the world development,” he told the Global Times on Sunday.

Challenges remain

However, global trade has been sliding in recent years, and this year the growth will be the slowest since the financial crisis, according to the WTO estimates in September. To boost cross-border transactions, Alibaba included “buy globally, sell globally” in its strategy for this year’s Double 11 shopping razzmatazz, which is in line with the group’s founder Jack Ma Yun’s proposal of building an electronic world trade platform (eWTP).

The eWTP would help small- and medium-sized enterprises (SMEs) overcome complex regulations, processes and barriers that hinder their participation in global commerce.

While pushing forward this idea, Alibaba has been facing mounting pressure from foreign regulators. For example, the U.S. Securities and Exchange Commission has recently probed the counterfeit goods on its platform, which could be seen as a result of the trade frictions between the countries, Liu said, noting however that there is no need to exaggerate the aftermath of this conflict, as the current success of Alibaba will eventually help the real economy, or the SMEs, to upgrade their business models and generate more profits.

Alibaba is not the only e-commerce giant that aims at connecting the world and trying to build a global business cycle, “U.S. e-commerce platform Amazon has been doing the same thing for years, but the outcome is not as good as expected,” Zhang Yi said.

Zhang noted that like Amazon, the Chinese company’s overseas business still accounts for a small part of its overall business due to barriers in international trade.

“Finding complementary areas for doing business is crucial for Alibaba, as shown by JD.com, another Chinese online supplier, which has purchased some of overseas retail marketplaces to better serve the diversified demand in China,” he said.

China’s Singles Day offers big opportunity for British retailers

Forget Black Friday, said a Telegraph report, as China’s Singles Day, the world’s biggest online shopping day of the year, kicked off at 0:00 local time (1600 GMT) on Friday.

More than one billion U.S. dollars was spent within the first five minutes and the number has soared to 9 billion as of 8:00 local time (2400 GMT), according to Chinese media reports.

Singles Day, which started as an “anti-Valentine’s” celebration for single people in China back in the 1990s, was adopted by China’s e-commerce giant Alibaba in 2009 and has since become the world’s biggest online shopping day.

Last year, Chinese consumers bought 14 billion dollars of goods from Alibaba’s Taobao and Tmall in just 24 hours, which resulted in 467 million parcels being delivered after 710 million payments were made, said Telegraph.

The sheer scale of the market combined with the acute Chinese appetite for British goods has opened a significant new sales venue, the Guardian said in a report.

Topshop, a British multinational fashion retailer of clothing, shoes,make-up and accessories, saw its sales surge by over 900 percent in 2015, it said.

“These results clearly indicate how impactful this online calendar moment has become, and as a key focus market for the brand we see 11.11 as a great way to raise brand awareness and conversion in China,” a Topshop spokesperson was quoted as saying by the Guardian.

Fung Global expects sales of British brands to surge this year, driven by a tailwind from Chinese online shoppers’ demands for overseas goods, said Telegraph.

The Hut Group, which owns beauty sites and Protein World, said it expects sales to double compared to 2015 with brands offering 40 percent off haircare products, it said.

Vitamin retailer Holland & Barrett is hoping to make 1.2 million dollars from the event alone this year, it added.

Waitrose, a chain of British supermarkets, partnered with Chinese marketing and logistics company and has started exporting to China in April, selling through the Royal Mail shop on Tmall, said the Guardian.

“Singles Day is a big occasion for consumers and businesses in China and has the potential to give the products we offer more exposure and provide another opportunity to test demand for our brand,” Nigel Roberts, Waitcose B2B growth and development manager, was quoted as saying by the Guardian.

Ad market reverses sales drop

China’s overall advertising market edged up 0.1 percent in the first three quarters of this year, reversing from a 3.5 percent drop over the same period a year ago.

Traditional ad spending in the first nine months fell 5.5 percent, narrowing from the loss of 7.3 percent a year ago and a 6.2 percent drop in the first half of this year, CTR said in its quarterly report yesterday.

TV ad grew 1.4 percent in September, the biggest monthly gain since the start of this year, due to rising spending from key industries such as transport and real estate.

Newspapers saw worsening ad income which plunged 40 percent in the first three quarters, with property, commercial services and entertainment companies all cutting spending. Magazines also suffered a 29.9 percent loss in ad income from a year earlier.

Ad spending in movie theaters was the fastest growing sector in the first three quarters, jumping 57 percent.

Double-digit growth in Hangzhou

Hangzhou’s gross domestic prod-uct for the first three quarters was 778.07 billion yuan ($116.13 billion), up 10 percent from a year earlier. The economy remained in the double-digit figures for six consecutive quarters, faster than the national average of 6.7 percent and the provincial aver-age of 7.5 percent, according to official statistics.

The city’s service industry reported 475.19 billion yuan in added value, a year-on-year increase of 13.4 percent. The manufacturing industry achieved 281.54 billion yuan, up 5.4 percent while agriculture edged up 1.5 percent to 21.34 billion yuan.

The information sector, a key industry in the city’s economic re-structuring, expanded 23.1 percent year-on-year to 186.58 billion yuan, and accounting for 24 percent of the city’s GDP.

Retail sales rose 10 percent to 369.5 billion yuan, online retail sales jumped 29.3 percent to 210.7 billion yuan, and online consumer spending expanded 30 percent to 92.63 billion.

From January to August, the city registered 59,100 new companies, 26.3 percent more than the same period of last year. The average in-come for urban and rural residents reached 42,225 yuan and 21,404 yuan, respectively, up 8 percent and 8.4 percent.