MULTINATIONALS: Security Clash Grows In US, Eases In UK

Bottom line: Washington’s raising of Beijing’s foreign technology restrictions to the WTO and London’s acceptance of Huawei equipment could add to pressure on all parties to soften their restrictive actions over use of foreign technology.

US takes nat’l security dispute to WTO

A pair of stories in the headlines today show a growing divergence in how China’s major trading partners are treating their cyber security clashes with Beijing. The larger of the 2 stories has Washington formally posing questions at the WTO over Beijing’s recent restrictions that limit the sale of foreign technology to Chinese banks. The other has seen Britian issue a report saying products from leading Chinese telecoms equipment maker Huawei pose no threat to the nation’s security, or at least that the threat is controllable. Continue reading

INTERNET: Major Hospital Group Takes On Baidu

Bottom line: A rebellion by a major hospital group against Baidu could reflect growing discontent towards the search engine among Chinese advertisers, which could force it to lower prices and make its business practices more transparent.

Medical group takes on Baidu

Local media are swarming to a story that has seen a major hospital association advise its members to yank their advertisements from Baidu (Nasdaq: BIDU), cutting off a top cash cow for China’s leading search engine. The Putian Healthcare Industry Chamber of Commerce is saying the grievances that led to its action are related to the high prices that Baidu charges for its services. But Baidu has weighed in with its own view, calling the move retaliatory for its own refusal to accept ads containing false and exaggerated claims from many Putian members. Continue reading

MEDIA: Chinese Fire Wall Slams Down On Reuters

Bottom line: The latest blockage of Reuters sites in China is probably temporary and related to coverage during the recent National People’s Congress, but still reflects the very real risk of doing business in the tightly controlled media market.

Reuters websites blocked in China

China’s latest crackdown on foreign media has just netted global news giant Reuters (Toronto: RTR), in a potentially worrisome trend that has seen Chinese censors block a growing number of websites operated by big multinationals. Despite longer-term crackdowns on big names like Bloomberg and the New York Times, Reuters had managed to largely steer clear of China’s censors and its websites have remained largely accessible in China for most of the last 2 years.

But I couldn’t access any of Reuters sites in Shanghai starting last Thursday, and later reports confirmed the company’s Chinese- and English-language websites have been blocked throughout the country since then. (English article) Before I go any further, I should disclose that I previously worked at Reuters for a decade, and maintain contact with many of my former colleagues 4 years after leaving the company. Reuters Chinese site also is a regular user of my work, though apparently none of that has been viewable in China for the last few days. Continue reading

News Digest: March 27, 2015

The following press releases and media reports about Chinese companies were carried on March 27. To view a full article or story, click on the link next to the headline.
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  • US Questions China At WTO On Banking Technology Restrictions (English article)
  • Tesla (Nasdaq: TSLA) Completes China Overhaul, No Short-Term Sales Targets (Chinese article)
  • ICBC (HKEx: 1398) Announces Annual 2014 Financial Results (HKEx announcement)
  • Boeing (NYSE: BA) Nears $7.7 Bln Sale Of 787 Jets To China’s Hainan Airlines (English article)
  • Putian Hospitals Take On Baidu (Nasdaq: BIDU) With Online Search Ad Ban (Chinese article)
  • Latest calendar for Q4 earnings reports (Earnings calendar)

INTERNET: Alibaba Begins Taobao Clean-Up

Bottom line: Alibaba’s clean-up of its Taobao marketplace is likely to last for the next year, and could see growth in trading volume on the platform fall by about half of current levels to the 15-20 percent range.

Alibaba evicts 26 sellers from Taobao

Two months after a scandal erupted over high piracy rates on one of its main websites, e-commerce leader Alibaba (NYSE: BABA) has moved to address the problem with the expulsion of 26 merchants from its popular Taobao C2C platform. Alibaba’s description of the campaign shows the company is still avoiding the word “piracy” in its discussion of the clean-up, reflecting the sensitivity of the situation. But the larger question is just how many merchants will ultimately be expelled from Taobao, and what that will mean for Alibaba’s top and bottom lines. Continue reading

NEW ENERGY: Yingli Loss Widens, Joins $1 Club

Bottom line: A new second wave of consolidation is likely to occur in China’s solar panel sector later this year, with money-losing companies like Yingli and ReneSola as the most likely acquisition targets.

New clouds loom over solar sector

Looming signs of new trouble are brewing in the solar panel sector, with shares of Yingli Green Energy (NYSE: YGE) taking a bath after the company reported widening losses and slowing revenue growth. The 15 percent sell-off saw Yingli’s shares re-approach an all-time low from just 2 and a half years ago, as the company joined a small but growing club of US-listed solar panel makers whose shares now trade in the $1-2 range.

Yingli’s announcement makes it the last of China’s major solar panel makers to report their fourth-quarter results, painting a picture that hints of more consolidation on the way for a sector that has already undergone a painful restructuring over the last 2 years. Two camps are emerging: One that is profitable, including names like Canadian Solar (Nasdaq: CSIQ) and Trina (NYSE: TSL); and one that is losing money, which includes Yingli and ReneSola (NYSE: SOL), which became the charter member of the $1 club when its shares sank below $2 last November. Continue reading

MEDIA: Caixin Lawsuit Takes On Pirates At Sina, Sohu

Bottom line: Caixin’s new lawsuit against leading portals Sohu, Sina and Hexun could mark the start of a much-needed clean-up that will end the practice of rampant copyright violations among major Chinese news sites.

Caixin sues Sina, Sohu for illegal copying

I’m giving this week’s special award for bravery to cutting-edge financial news publisher Caixin, which is challenging the widespread illegal copying of copyrighted articles that occurs daily on Chinese news sites. Everyone knows that this kind of piracy is rampant in China, but some might be surprised to learn that companies targeted in Caixin’s new lawsuit include some of China’s top news portals, led by Sina (Nasdaq: SINA) and Sohu (Nasdaq: SOHU). I was also just slightly embarrassed to see that one of the companies being sued is financial news and information site Hexun, which is backed by my former employer Reuters (Toronto: TRI). Continue reading

News Digest: March 26, 2015

The following press releases and media reports about Chinese companies were carried on March 26. To view a full article or story, click on the link next to the headline.
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  • Alibaba (NYSE: BABA) Shutters 26 Online Shops In Taobao Clean-Up (Chinese article)
  • Ctrip (Nasdaq: CTRP) Invests To Form Zhonghui Hotel Big Data Unit (Chinese article)
  • Yingli Green Energy (NYSE: YGE) Reports Q4 and Full Year 2014 Results (PRNewswire)
  • ZTE (HKEx: 763) Announces 2014 Annual Results (HKEx announcement)
  • Huace Film (Shenzhen: 300133), Xiaomi Partner On Content Distribution (English article)
  • Latest calendar for Q4 earnings reports (Earnings calendar)

FUND RAISING: Alibaba-Tencent Insurance JV Raises Big Funds

Bottom line: Alibaba, Tencent and Ping An’s online insurance joint venture should easily find backers for its first major fund-raising, and could even exceed its $8 billion valuation target due to strong demand.

Zhong An targets $1 bln in new funds

This year’s list of major private funding raising by high-tech firms continues, with word that an online insurance joint venture involving 2 of China’s biggest Internet names is seeking to raise a hefty $1 billion in its first funding round. This particular venture certainly has a strong pedigree, as it’s backed by Alibaba (NYSE: BABA) and Tencent (HKEx: 700), China’s 2 leading Internet companies with a combined market value of nearly $400 billion. The pair are joined in the venture by Ping An (HKEx: 2318; Shanghai: 601318), China’s second largest insurer and also one of the most aggressive players in its space. Continue reading

IPOs: China Internets Set For Soft Landing On Wall St

Bottom line: Chinese Internet stocks are likely to see a soft landing after a correction period in the first half of the year, with leaders and high-growth second tier players likely to experience a rebound in the second half.

China Internet stocks headed for soft landing

A new scorecard is casting a worrisome spotlight on the bumper crop of Chinese Internet firms that listed last year, pointing out that more than half are now trading below their IPO prices. The sagging prices continue a trend that I pointed out in my IPO scorecard at the end of last year. That trend has seen shares of many New York-listed Internet firms come back to their offering levels or lower as investors pocketed profits from strong post-IPO rises. (previous post) But rather than label this a reason for worry, I would argue instead this broader wave represents a rationalization of the market that will ultimately see the best-performing names rewarded and the money losers languish. Continue reading

Shanghai Street View: Enigmatic Names

Chinese names get stranger

As the spring semester gets underway at the university where I teach, I’m once again confronted with an issue that seems to get trickier with each passing year. That issue involves my ongoing quest to improve my written Chinese, and the constant challenge posed by a trend that has parents choosing increasingly obscure names for their kids.

My Chinese was far worse when I first came to Beijing in the 1980s, and yet it was quite easy for me to read and pronounce names back then. That’s because many people had very similar names, often with revolutionary themes incorporating characters like hong for red, or bing or jun for soldier. Nowadays I struggle to read many of my students’ names on our first day of class, and many students themselves don’t know the meanings of the obscure characters their parents have chosen for them. Continue reading