China Press Review – January 8, 2019

Press review

Chinese dealmakers pivot to Europe amid US scrutiny
Chinese corporations looking for acquisitions have turned their attention to Europe as greater government restrictions in the U.S. close the door to deals there. Last year, Chinese investment in U.S. companies fell to $3 billion, 65.8% lower than in 2017 and down 95% from a peak in 2016. M&A activity in Europe shot up 81.7% to $60.4 billion, according to data compiled by Mergermarket.

Chinese acquisitions of US companies plunge 95 per cent in 2018 amid trade war
Major buyers including HNA and Anbang have pulled back since 2016 as Beijing looked to bring capital back to encourage domestic growth The sharp decline contrasted with an increase in global mergers and acquisitions by Chinese buyers, including a large buying spree in Europe

Goldman Sachs at centre of latest bout of nationalism and resentment in China over Sinopec oil deal
American investment bank follows the likes of Dolce & Gabbana, Canada Goose and Lotte to suffer at the hands of negative online debate Beijing government keen to attract overseas investment to offset effects of the trade war with the United States

No word on progress after 2nd day of China-US trade talks
Talks between the U.S. and China on ending their tariff war were ending their second day Tuesday without word on whether they’ve made any progress, as an official newspaper warned not to push Beijing too hard. China is strong and has its own needs, said the Global Times, published by the ruling Communist Party. Washington “cannot push China too far” and must avoid a situation that “spins out of control.”

China’s team of crack trade negotiators will extract their ‘pound of flesh’, experts say
Representatives from the administrations of Xi Jinping and US President Donald Trump meeting in Beijing this week in latest round of trade war discussions Experienced trade negotiators reveal a ruthless and professional bunch representing Beijing who will drive a hard bargain

As Trade Talks Begin, Trump Sees China’s Economic Weakness as U.S. Strength
President Trump is largely ignoring economic warning signs in the U.S., saying China is too weak to keep up the trade fight.

Wilbur Ross says the U.S. hasn’t been hurt by the trade war at all—but “social unrest” may be coming to China.

China’s Stability Is at Risk
Offshore investors who have become enamored of the illusion of economic growth and political stability in China may want to recalibrate the reality gauge in 2019.

As China’s economy begins to stutter, what’s next for its monetary policy?
Analysts expect additional bank reserve requirement ratio cuts this year Cuts in the reserve ratio are a go-to way to boost lending to the econom

China’s foreign exchange reserves rise for second month as yuan expectations stabilise
Accumulation of assets valued in foreign currencies rises by US$11 billion in December to US$3.073 trillion People’s Bank of China keen to support the yuan exchange rate

American Companies Need Chinese Consumers
American Companies Need Chinese Consumers The New York Times Apple’s declining sales reveal how important the health of China’s consumer market is to the world’s economy.

Everyone warns of China’s rise. But its decline could be even worse.
“It’s frightening to think about,” a prominent scholar said.

Will past success inform China’s future policies?
Forty years ago, the Communist Party of China held its third plenum of the 11th Central Committee. The plenum was a defining event of the second half of the 20th century, inspiring reforms that spurred decades of economic growth in China. On the brink of another period of economic transition, the pragmatic approach to development that has been the hallmark of Chinese policymaking over the past four decades remains as valuable as ever.

China’s economic slowdown: How worried should we be?
The cracks in China’s economy appear to be widening, with signs of weakening growth amid a background of trade tensions.

China’s current GDP growth is likely less than 6 percent, economist says
China’s economic growth is likely currently below the 6 percent level amid faltering domestic demand, says Taimur Baig, chief economist at DBS Group Research. Despite negotiations between China and the U.S. underway in Beijing, Baig says it’s unlikely the trade war will end in the next three to six months.

China approves first GMO crop imports from United States in 18 months
Five genetically modified crops approved by China’s Ministry of Agriculture and Rural Affairs as ‘goodwill gesture towards the resolution of the trade issues’ Latest approvals after Chinese officials met their US counterparts in Beijing on Monday for the first face-to-face trade talks since December

Alibaba Group’s smart assistant, Tmall Genie, will launch in select vehicles from the BMW Group in China by the end of the year, the two companies announced at CES in Las Vegas on Monday.

Getting Counterfeits of YOUR Products Off the Chinese Web — Alibaba, JD.Com, DHGate, Taobao, etc.
Barely a day goes by without one of our China IP lawyers getting contacted by an American or European company telling us that its products are being counterfeited and would we please get so and so (usually the alleged counterfeiter or the online site on which the counterfeit products are posted) — to remove the offending items immediately. If only it were that simple. Our lawyers have a near 100% success rate at getting counterfeit products removed from Chinese e-commerce websites like Tmall and Taobao and the same holds true for American e-commerce sites. But our success rate depends largely on the advertised product truly being a counterfeit, as that term is commonly defined by lawyers not businesspeople.

Apple’s sales warning is a symptom of what’s ailing the US economy
David Brown says amid a shift in global economic power from west to east, the US economy is buoyed by policies that compound its budget and trade deficits. Without a radical overhaul, a downturn in the economic cycle will have a devastating impact

American Companies Need Chinese Consumers
Apple’s declining sales reveal how important the health of China’s consumer market is to the world’s economy.

Apple’s China Problem Isn’t Just the Economy. Chinese Rivals Are Gaining, Too
Tim Cook may have blamed Apple’s weak sales performance in China on the slow economy, but another factor could be at play: More premium phones from homegrown brands like Huawei.

The Biggest Story Heading Into CES 2019 Is … China
As the annual Consumer Electronics Show kicks off this week in Las Vegas, the buzz might be more about international trade relations than technology

Head of China’s tech ministry calls for enterprises to support core technology
Wang Zhigang, head of China’s Ministry of Science and Technology, has called for private enterprises to make full use of local policies to gain access to sponsorship and subsidies while aiding in the country’s development of core technologies.

Xiaomi purchases 0.5% stake in electronics giant TCL
Chinese smartphone maker Xiaomi has purchased more than 65 million shares in electronics giant TCL, amounting to nearly 0.5% of the company. TCL said that the shareholding is aimed at extending the cooperation between the two firms. Last month, TCL signed an agreement with Xiaomi to carry out joint research and invest in high-end hardware components.

Huawei launches new chip as it seeks growth in cloud computing
Chinese telecommunications giant Huawei on Monday launched a server chipset dubbed the Kunpeng 920. Designed by Huawei’s chipmaking subsidiary HiSilicon, the chipset marks an increased push to boost its credentials a semiconductor designer. However, Huawei stipulated that it has no intention of becoming solely a chipmaking company, saying the newly launched tech is part of its “system solution and cloud servicing for clients.

Lenovo China restructures to become more customer-centric
Electronics firm Lenovo China will restructure its businesses to become more customer-centric. The move follows a slew of recent reorganization announcements by Chinese tech companies including Baidu and TCL.

China is most important battleground for carmakers
The automotive industry is coming under increasing pressure worldwide due to a growing focus on electric mobility, autonomous driving and digital services. Competition from China is also on the rise.

Chinese travel firms restructure apps to comply with new e-commerce law
A Ctrip representative told TechNode that the company would “strictly abide by the E-commerce Law’s relevant provisions, enacting stricter supervision over products on the platform and safeguarding consumers’ right to know, freely choose, and make fair transactions.”
The draft law was first reviewed in December 2016. It was later deliberated in October 2017 and June 2018 and came into effect earlier this month. The law has had wide-ranging effects, holding companies to account for the goods sold on their platforms. In December, for instance, social e-commerce platform Pinduoduo imposed stricter rules on its merchants in a bid to weed out fake goods. Ahead of Jan. 1, it vowed to put merchants with bad evaluations onto a watchlist for violations of the rules.

Alibaba is deepening its partnership with Berlin-based data Artisans, collaborating to build up Apache Flink, software created by dA to process large amounts of data, the companies said Monday.

MORGAN STANLEY RESEARCH FINDINGS SHOW RISK “We’ve written extensively on Amazon’s build-out of its internal logistics network, but given Amazon’s plans to take delivery of 40 planes and build an air hub that could potentially handle 100 planes, we’ve taken a closer look at the impact of Amazon Air (its in-house Express Air network) on UPS/FedEx Air volumes,” state the researchers, who point to their own interactive online map.

China’s Central Bank Has Lost Its “Sex Appeal”
“It is very hard to be bullish on China right now,” Janet Mui, an economist with Cazenove Capital in London told me over two months ago now. She was right. Between the trade war and structural changes in China, this new stimulus package has lost the sex appeal of stimulus packages of old. “China,” she said, “will not be able to do the stimulus that it used to do.” Or will it? Take one look at the headlines on Caixin Global on Monday and it is clear: The central bank is nervous. They are lowering mortgage rates. China’s President Xi Jinping is not a fan of building and buying real estate just for the sake of … building and buying real estate. The central bank is also busy shoring up the local bond market. Liquidity is not so liquid.

Don’t Be Fooled by China’s Old Debt Playbook
Cranking up infrastructure projects has lifted shares of construction and engineering companies. But the benefits are likely to be limited to big, state-run firms.

Banks may cut mortgage rates to boost housing sales
Chinese banks may be about to lower mortgage rates in a bid to stimulate lending for new home purchases and bulk out developers’ cash levels amid signs of a slowing property market, according to China’s Bank of Communications

Chexit Time? How to Leave China without Losing Friends or Offending People
Businesses leaving China will probably be back in some form in the next 18 months. The time may be right for your CHEXIT, but make sure you keep your options open:

China’s ‘Facebook of cosmetic surgery’ faces an uncertain future
SoYoung has been the largest beneficiary of this boom by appealing directly to China’s self-conscious millennials. According to the company’s research, China is unusual in that 96% of people undergoing cosmetic procedures are under 35 years old, compared to just 25% in the US.

China’s Health Care Crisis
DIY cancer drugs, violence in hospitals, doctor shortages: We take you inside China’s broken health care system to reveal how dire the situation is for over a billion people.

Chinese VPN user fined $150 for accessing banned websites
A Chinese internet user surnamed Zhu received an RMB 1,000 (around $150) fine from the government of southern China’s Guangdong province for accessing banned websites by using virtual private network services without their permission, allowing him to jump over state-imposed firewalls. Zhu was punished for breaching the Provisional Regulations of China’s Administration of International Networking of Computer Information, which prescribes that individuals and organizations can only connect to international networks through channels provided by the government.

Manchester United banking on selling experience to China with deal for Beijing, Shanghai and Shenyang centres
Three new ‘fan centres’ to be built by 2020 with Chinese firm Harves Beijing, Shanghai and Shenyang will host entertainment and experience centres

9 Things Only a Large Company Can Obtain in China/Vietnam
I see some good advice, published in Linkedin or elsewhere, aimed at importers sourcing products from China, Vietnam, or other low-cost Asian countries. A lot of this advice is sound. However, I noticed that a good chunk is NOT applicable to companies buying under 20 million USD a year — and, sometimes, not under 1 billion USD a year.

China’s ‘Smart Locks’ Are Vulnerable to Hackers, CCTV Reports
China’s market watchdog has determined that a significant number of “smart locks” — those that are electronic rather than key-operated — are flawed and easily hackable, state broadcaster China Central Television (CCTV) reported Sunday.

First automated rail port in China
Chengdu International Railway Port will become China’s first unmanned ‘smart’ railway port

China is key to arresting a surge in methamphetamine production that has seen Myanmar become one of world’s largest suppliers, claims new report Chemicals used in making the drug are pouring over border, while separatist groups are exploiting China’s infrastructure plans for the region, it says

View: Will China go to war over Taiwan?
China may be reaching for the moon, but Xi’s speech was a reminder that its greatest territorial ambitions may lie much closer to home. Even if Beijing isn’t on the verge of attacking the island, his rhetoric raises the risk that there may eventually be outright war. In a world where the risk of conflict between major nations seems to ratchet higher every year, China’s desire to dominate Taiwan may yet be what lights the spark.

China Is Shooting Itself in the Foot Over Huawei
Beijing’s hostage diplomacy is confirming the West’s suspicions.

Justin Trudeau and Donald Trump discuss China’s ‘unlawful’ detention of two Canadians, agree to seek their release
Canada’s Prime Minister and the US President also discussed the US extradition bid for Huawei executive Meng Wanzhou, who was arrested in Vancouver last month Trump and Trudeau ‘reaffirmed the importance of respecting judicial independence and the rule of law’

The Belt and Road backlash
China’s Belt and Road Initiative is trumpeted as a ‘win-win’ for all, but is it everything it’s cracked up to be? Or are countries on its route, wary of Beijing’s motives and fearful of being trapped by debt to China’s big development banks, losing faith in the plan?

India, France to widen Indo-Pacific partnership to balance China’s ambitions
India and France will hold high level negotiations this week to widen their security partnership in the Indo-Pacific region amid growing Chinese ambitions. The potential for cooperation between India and France in the Indian Ocean maritime region covers a whole range of issues, from defence to political matters, and economic to environmental. The forthcoming dialogues will take forward their existing strategic partnership in the Indian Ocean Region.

Perhaps nowhere has the center of gravity shifted more decisively than in the United States. Supported by a crystalizing bipartisan consensus, the Trump administration has opened several new fronts against China on economic protectionism, cyber security, and human rights violations. It has issued indictmentsfor Chinese hackers, given the Pentagon more flexibility to conduct freedom of navigation patrols in the South China Sea, unveiled new restrictions on foreign investments, and ordered the detention of the head of a major Chinese telecom firm. The European Union, Australia, and others have begun following suit, unveiling new screening measures on foreign investments and outlawing foreign political donations while more vocally denouncing China’s predatory trading practices and illegal detention of foreign citizens. Nor is this a western phenomenon. From Sri Lanka to Malaysia, and from the Maldives to Kenya, China’s brand, and that of the Belt and Road, are under duress. To date, this backlash has translated into a more concerted effort to limit or scrutinize engagement with Beijing, as opposed to producing the more cohesive and widespread military balancing that realist theory might predict. Whether the latter eventually happens will depend very much on China’s actions and how Beijing responds not only to mounting international criticism, but also to more challenging domestic economic conditions. If Beijing doubles down on the more assertive and repressive trajectory it has charted since 2008, it may end up fulfilling the realists’ prophecy and triggering a new tide of balancing after all.

North Korean leader Kim Jong-un spends his birthday in talks with Chinese President Xi Jinping
Kim seeks to strengthen Pyongyang’s position ahead of meeting with US President Donald Trump, expected within weeks

Bvlgari’s Chinese New Year Campaign Isn’t Kosher
Launching creative marketing campaigns to celebrate the upcoming Chinese Lunar New Year has proven to be a minefield for luxury brands. While Chinese consumers are still occupied with criticizing Burberry’s weird Chinese New Year tribute, another brand, Bvlgari, got caught in a different controversy this weekend after linking Jewish culture with pigs to welcome China’s 2019 Lunar New Year. On February 5, it will become the Year of Pig, according to Chinese astrology. In Mandarin, the word “pig” is pronounced as “zhu (猪),” which is similar to the pronunciation of Jew in English.

Alain Gillard
Information Officer
Service Asie Pacifique
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