INTERNET: Uber, Didi Kuaidi End 2015 With Big Milestones

Bottom line: Uber’s 2016 China expansion plan looks aggressive but typical for the company, while Didi Kuaidi should invest its big cash pot on expansion and becoming profitable rather than unrelated services like O2O take-out dining.

Uber, Didi race towards 2016 with big investments

Private car service leaders Uber and Didi Kuaidi are both in the headlines as we race towards the end of 2015, a year that will go down as a watershed for this fast-rising sector both in China and globally. The first news comes from Uber, which is detailing an aggressive expansion plan for 2016 as China surpasses the US to become its largest global market. The second headline has Didi Kuaidi confirming a major new investment in online take-out dining site, just days after separate reports said that e-commerce giant Alibaba (NYSE: BABA) also wants to invest in the company.

This year has certainly been a watershed for both Uber and Didi Kuadi in China, reflecting the rapid rise of their private car services that use location-based (LBS) GPS technology to challenge traditional taxi operators. Uber has said repeatedly that China is its top priority outside its home US market. Reflecting that position, Uber took the unusual step of spinning off its China unit into a separate company earlier this year, and also said it would spend $1 billion in 2015 to build up its service in the market. Read Full Post…

FUND RAISING: Alibaba’s Second-Hand Spin-Off, LeTV’s Unnamed Investor

Bottom line: Alibaba’s spin-off of its C2C marketplace for second-hand goods could reflect a new trend for big Internet firms to separately run individual assets, while LeTV may have provided most of the money in the first funding round for its smartphone unit.

Taobao spins off Xianyu

A couple of fund-raising headlines are spotlighting emerging trends in China, including a nascent move by big companies to spin off smaller units as separately run and funded entities. That move was center stage in new reports that e-commerce juggernaut Alibaba (NYSE: BABA) is spinning off its Xianyu marketplace that specializes in sales of second-hand goods between consumers.

The second headline comes from online video high-flyer LeTV (Shenzhen: 300104), and spotlights a trend that shows rapidly cooling investor sentiment towards overheated sectors like video and smartphones. That news has LeTV declining to name any of the backers in the first funding round for its fledgling smartphone unit, hinting that no serious investors were interested in this particular opportunity that raised $530 million. Read Full Post…

IPOs: Qingdao Leads Chilly Reception for China Bank IPOs in HK

Bottom line: Hong Kong IPOs by Qingdao Bank and Bank of Jinzhou will debut weakly due to concerns about their bad debts, and sentiment is unlikely to improve towards regional Chinese lenders anytime soon.

Qingdao Bank IPO prices weakly

The only thing worse than a national Chinese lender is one of the country’s hundreds of smaller local banks. That’s the message coming from investors this week, as a chilly reception for a new offering from Qingdao Bank (HKEx: 3866) has forced the lender based in eastern Shandong province to slash its fund-raising plan by 10 percent. The news is a bad sign for Bank of Jinzhou (HKEx: 416), based in nearby Liaoning province, which is a few steps behind with its own IPO seeking to raise up to nearly $1 billion.

Two factors are undermining these IPOs by China’s regional banks, which have been flocking to market in the last 2 years after listings by most of the nation’s biggest lenders a decade or more ago. The most immediate factor is a resumption of IPOs on China’s domestic markets, which is set to occur next week after a half-year pause. The second is a broader issue, namely the fact that most of these lenders are sitting on mountains of questionable loans that will probably go bad in the next 1-3 years. Read Full Post…

News Digest: November 27, 2015

The following press releases and media reports about Chinese companies were carried on November 27. To view a full article or story, click on the link next to the headline.

  • LeTV (Shenzhen: 300104) Raises $530 Mln in 1st Funding Round for Smartphone Unit (Chinese article)
  • Taobao to Spin Off C2C Second-hand Goods Trading Platform Xianyu – Source (English article)
  • Bank of Qingdao (HKEx: 3866) HK IPO Gets Chilly Reception, Calls on Friends (Chinese article)
  • Citic Securities (HKEx: 6030) Says Being Probed for Securities Violations (HKEx announcement)
  • Uber Says China to Pass US as Company’s Largest Market by Year-End (Chinese article)

ENTERTAINMENT: Disney Pirates Fined as Shanghai Park Nears

Bottom line: Shanghai’s clampdown on piracy of the Disney brand reflects the city’s desire to protect its huge investment in the soon-to-open Shanghai Disneyland, and also Disney’s growing clout in China.

Shanghai protects Disneyland investment

Disney (NYSE: DIS) pirates, beware. As the grand opening of mainland China’s first Disneyland draws near, the park’s home city of Shanghai is stepping up efforts to protect is multibillion-dollar investment by clamping down on piracy of the Disney brand. That crackdown is certainly long overdue, and has just netted 5 hotels that were illegally using the Disney name to dupe visitors into thinking they were affiliated with the US entertainment giant.

In an interesting aside to this clampdown story, the 5 properties busted in the new clampdown were owned by Shenzhen-based Vienna Hotels Group. That’s significant because in August Vienna was reportedly in talks to be acquired by Shanghai’s leading hotel group Jin Jiang (HKEx: 2006; Shanghai: 600754). (previous post) Thus this latest crackdown could signal the Jin Jiang-Vienna talks ultimately collapsed, since it’s unlikely Vienna would have been targeted in such a high-profile way if it was part of the locally well-connected Jin Jiang. Read Full Post…

FUND RAISING: Weibo Backs Video, Unleashes Guazi

Bottom line: Weibo’s investment in mobile video app Miaopai looks like a smart move to build on its recent momentum, while’s spin-off of its Guazi used car service is mostly a management restructuring. spins off Guazi used car site

A couple of web-related fund-raising stories are in the headlines today, though their relatively small size reflects investor sentiment that is rapidly fading towards these money-losing Internet companies. The bigger of the 2 deals has short video app Miaopai raising $200 million, in a funding round led by China’s Twitter-like Weibo (Nasdaq: WB). The second has leading online classifieds site (NYSE: WUBA) spinning off its Guazi used car businesses, in a move aimed at giving the company more flexibility to raise money for its future growth.

The $200 million figure is one of the largest we’ve seen in recent months, but is well below mega-fundings in the first half of this year when China’s stock markets were rallying and fundings of $1 billion or more were almost ordinary. But the flow of money has slowed sharply in recent months as investors get impatient for profits, forcing a number of former rivals into mergers to accelerate their drive to profitability. Read Full Post…

RETAIL: Alibaba Gets Appetite for, Indigestion from Meituan

Bottom line: A new landscape in China’s O2O restaurant services market is taking shape around the “big 3″ firms of Alibaba, Baidu and Tencent, with a Tencent-backed Meituan-Dianping the most likely to succeed.

Alibaba eyes investment
Alibaba eyes stake

We’re seeing more signs of a major shuffle in the China market for online-to-offline (O2O) dining services, with e-commerce leader Alibaba (NYSE: BABA) at the center of 2 major new developments in the space. One would see Alibaba invest $1.5 billion for about a third of, the leader in O2O takeout dining services. The other has media reporting that Alibaba is looking to sell its 7 percent stake in Meituan-Dianping, China’s recently formed leading group buying site that operates a rival takeout dining service.

The big driver behind both of these stories is a major consolidation taking place in the O2O marketplace, where money-losing companies are suddenly scrambling to find wealthy backers after being cut off by their more traditional funding sources. Many of those companies have found a receptive audience from China’s cash-rich “big 3″ Internet titans of Alibaba, Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU). Read Full Post…

News Digest: November 26, 2015

The following press releases and media reports about Chinese companies were carried on November 26. To view a full article or story, click on the link next to the headline.

  • Ganji Founder to Yang Haoyong Leaves as (NYSE: WUBA) Co-CEO, Joins  (PRNewswire)
  • Sina (Nasdaq: SINA) Leads $200 Mln Investment in Mobile Short Video App ‘Miaopai‘ (English article)
  • UnionPay, Apple (Nasdaq: AAPL) Said to Reach Apple Pay Agreement for China (English article)
  • Qunar (Nasdaq: QUNR) Reports Q3 Financial Results (GlobeNewswire)
  • Xiaomi’s $45 Bln Valuation Seen `Unfeasible’ as Growth Cools (English article)

TELECOMS: Unicom, China Telecom Study 4G Network Sharing

Bottom line: A plan to pool 4G network resources between Unicom and China Telecom could be a cost saving move, but could also be the latest signal that the regulator may ultimately merge the pair.

New signs of Unicom, China Telecom merger

China’s 2 smaller telcos are reportedly studying a plan to pool their 4G networks, in the latest sign that a major industry overhaul could be coming that would see the merger of Unicom (HKEx: 763; NYSE: CHU) and China Telecom (HKEx: 762; NYSE: 728). It’s hard to say what’s happening behind the scenes in China’s opaque telecoms sector, since any plans for such a merger are probably only known to regulators at the secretive Ministry of Industry and Information Technology (MIIT).

A high-ranking MIIT official said recently that he was unaware of plans for such a merger, indicating that nothing was imminent. But a growing number of signs are pointing to such a plan, though the cautious MIIT appears to be taking a very slow approach whose end goal wouldn’t necessarily be an outright merger but could instead also include a complex network-sharing arrangement. Read Full Post…

SMARTPHONES: Xiaomi, LeTV Stars Fade Further

Bottom line: Xiaomi’s newest product launch focused on cheap smartphones and LeTV’s scrapping of an IPO for its film-making unit reflect fading prospects for these former superstars due to stiff competition.

Xiaomi rolls out more bargain phones

Former Chinese superstars Xiaomi and LeTV (Shenzhen: 300104) are in the headlines with new setbacks, reflecting the meteoric rises and equally fast falls that China is producing in its own version of the dot-com bubble. But this bubble has distinctly Chinese characteristics, and is coming in a more mature Internet where rampant competition and copycatting make it very difficult to make profits.

The first headline has Xiaomi rolling out 3 of its newest smartphones that are decidedly low-end, representing a big setback for the company’s drive to produce higher-end models that have fatter profit margins. The second headline has LeTV scrapping a plan to make a separate listing for its filmed entertainment unit, a year after hyping a new IPO that it hoped could mimic the meteoric rise in its own stock earlier this year. Read Full Post…

Shanghai Street View: Offline Enforcement

Fenxian school bans smartphones in class

I often use this space to spotlight news where Shanghai looks like a trendsetter, and that certainly looks like the case with a small but hopefully significant item involving the smartphones that have become an indispensable fixture of everyday life for many, myself included. This particular news has seen an entire department at a local university take the bold step of banning students from bringing their smartphones into class.

As a university teacher, I have to enthusiastically applaud the move by the School of Art, Design and Media at East China University of Science and Technology in Fengxian District. I also hope that many departments and perhaps entire universities will follow suit, and that the move could spark a broader debate about when, where and how it’s appropriate to use smartphones in a big city like Shanghai. Read Full Post…