RETAIL: McDonald’s, Coke Seek New China Partners in Changing Market

Bottom line: McDonald’s is likely to choose a buyer for its China stores in the next 2 months, while China Foods’ decision to sell its stakes in several Coca-Cola bottling plants is probably a simple business decision that reflects changing priorities.

McDonald's near a sale of China stores
McDonald’s near a sale of China stores

Two western consumer giants are in the headlines of China’s rapidly shifting corporate landscape, led by word that the list of bidders vying to buy McDonald’s (NYSE: MCD) 1,650 China restaurants has been narrowed to 2. The other headline has one of Coca-Cola’s (NYSE: KO) top China business partners, China Foods (HKEx: 506), announcing its intent to dump its stake in several local bottling joint ventures.

Each of these stories illustrates the vital role that local partners play in the operations of foreign companies doing business in China. McDonald’s has largely owned and operated its thousands of China stores independently since entering the market in the early 1990s. But it wants to find one or more local partners to take over those operations as it moves to a more franchise-style model. Coca-Cola also uses a franchise model for the companies that bottle its trademark drinks that include Coke, as well as Sprite and many others. Read Full Post…

GUEST POST: Uber’s U-turn in China: The Real Lesson

Uber learns lessons from Didi

By Kitty Fok                                                               Managing Director, IDC China

Much of the conventional wisdom and press commentary about Uber’s recent decision to sell its China business to Chinese rival Didi portrayed the move not just as a defeat for Uber, but a broader setback for all American tech companies in China.

The New York Times described the development as “a stark signal of how difficult it is for American technology companies to thrive in China,” while the Financial Times wrote that Uber had become “the latest in a succession of US Internet companies that have tried to conquer the China market, and walked away with much less than they had hoped for.” Read Full Post…

China News Digest: August 25, 2016

The following press releases and news reports about China companies were carried on August 25. To view a full article or story, click on the link next to the headline.

  • Sale of China McDonald’s (NYSE: MCD) Restaurants Down to 2 Bidders – Source (Chinese article)
  • China’s Postal Bank to Get $6 Bln in Investor Commitments for HK IPO: Sources (English article)
  • Yintech (Nasadaq: YIN) to Pay $193 Mln for Online Spot Commodity Trading Platform (GlobeNewswire)
  • Citic Securities (HKEx: 6030) Announces Interim Results (HKEx announcement)
  • Xiaomi Portable Bluetooth Speaker Accused of Copying Jawbone Design (Chinese article)
  • Latest calendar for Q2 earnings reports (Earnings calendar)

MEDIA: Wanda Eyes Hollywood Mega-Deals, Paramount in Sight?

Bottom line: Wanda Group is making an aggressive bid to be selected for a $1 billion strategic investment in Paramount, but the bid is likely to fail due to objections by the studio’s controlling shareholder.

Wanda’s Paramount bid likely to fail

New comments from China’s richest man indicate he is aggressively bidding for a stake in leading US film studio Paramount, which was put up for sale earlier this year as its parent sought to find a strategic investor. But separate reports last week show that such a deal could face difficulty due to objections by Sumner Redstone, who controls Paramount parent Viacom (Nasdaq: VIAB).

Redstone and Viacom’s current CEO Philippe Dauman have been locked in a battle for control of the company, but a resolution of that feud now appears to be close. Unfortunately for Wanda, that resolution would see a departure from Viacom by Dauman, the main proponent of the Paramount stake sale plan. That would leave Redstone, who was cool on such a plan, with the final rights to approve or veto a stake sale. Read Full Post…

Shanghai Street View: Cleanup Compulsion

Shanghai steps up security for G20 Summit
Shanghai steps up security for G20 Summit

Beijing may have APEC Blue, but Shanghai is quickly developing its own brand of welcome for the upcoming G20 Summit set to take place next month in nearby Hangzhou. But in this case, it’s an obsession with security that seems to be riveting our city, though perhaps we’ll also see some pollution and traffic-easing measures as the event approaches.

For anyone new to China, the term APEC Blue came into fashion 2 years ago when Beijing hosted the Asia-Pacific Economic Cooperation summit, a meeting of major world leaders that briefly put the city in the global spotlight. A similar light will shine on Hangzhou next month when leaders of the world’s largest economies gather in there for a similar meeting. Many visitors may arrive via Shanghai, which has much more international connections and therefore could also be on prominent display. Read Full Post…

China News Digest: August 24, 2016

The following press releases and news reports about China companies were carried on August 24. To view a full article or story, click on the link next to the headline.

  • Wanda’s Wang Says Set to Seal Two Billion-Dollar US Film Deals (English article)
  • Alibaba Pictures (HKEx: 1060) in 100 Mln Yuan Deal for Hangzhou Cinema Operator (Chinese article)
  • Trina Solar (NYSE: TSL) Announces Q2 Results (PRNewswire)
  • China Foods Mulls Sale of Mainland Coca-Cola (NYSE: KO) Bottling Stakes (English article)
  • Sky-mobi (Nasdaq: MOBI) Enters into Agreement for Going Private Transaction (GlobeNewswire)
  • Latest calendar for Q2 earnings reports (Earnings calendar)

IPOs: Meitu Eyes HK, US Ad Firm Goes to China

Bottom line: Meitu’s Hong Kong IPO plan is likely to get a positive reception due to strong sentiment for Chinese tech companies, while a plan to list US-focused in China via a backdoor IPO is likely to fail  due to numerous obstacles.

Meitu eyes HK listing by year end

A couple of IPO stories are in the headlines, including what could become the largest listing for a Chinese tech firm this year by Meitu, operator of an app that helps users make self-enhanced selfies. The other deal looks quite unusual, and has a Chinese investor group buying US advertising services startup, with plans to list the company in China through a backdoor-style process. In all my years covering China this is the first time I’ve seen this kind of deal, which looks both interesting but also quite speculative.

Each of these deals is quite different, and both have one or two notable points. Meitu looks most notable not only for its size, which could be up to $1 billion, but also for its location. IPOs for this kind of high-tech company have traditionally come in New York, and more recently on China’s Nasdaq-style ChiNext board, but are seldom seen in Hong Kong.  Read Full Post…

BANKING: Local Govt Meddling Worsens Chinese Bad Debt Crisis

Bottom line: Beijing and local governments need to let struggling companies fail and stop ordering banks to continue lending to them, or risk exacerbating the country’s growing bad debt crisis.

Banks ordered to lend to sinking companies

A couple of news stories last week cast a spotlight on how local governments are preventing banks from effectively managing their growing volume of bad loans, creating obstacles that could cause the problem to worsen and even spiral out of control. Neither story was actual “news”, but instead detailed practices increasingly used by local officials to support struggling state-owned companies, often to the detriment of local banks.

In one case officials ordered banks to lend to a failing local ship builder, even though the company was almost certain to default. The other case detailed how local officials had compiled lists of struggling companies for their own records, but then withheld the information from banks due to worries that disclosure might cause those companies to lose access to new loans. Read Full Post…

China News Digest: August 23, 2016

The following press releases and news reports about China companies were carried on August 23. To view a full article or story, click on the link next to the headline.

  • Yahoo (Nasdaq: YHOO) Ad Partner Sells to China Group for $900 Mln (English article)
  • Tencent (HKEx: 700) Closes More than 35,000 WeChat, QQ Accounts with Gambling Links (Chinese article)
  • China Selfie App Meitu Aims to Raise up to $1 Bln in HK IPO (English article)
  • US Clearance of ChemChina’s Syngenta Deal Removes Key Hurdle (English article)
  • LeEco (Shenzhen: 300104) Finally Solves TV Licensing Issue After 2 Years in Limbo (Chinese article)
  • Latest calendar for Q2 earnings reports (Earnings calendar)

IPOs: Lufax Plan on Track, Yunda Slips Through Backdoor

Bottom line: Lufax’s reiteration of plans for an IPO by year-end indicate China’s regulator may increase new listing approvals as the market stabilizes, while progress in Yunda’s backdoor listing also may reflect a relaxing attitude by the regulator.

Lufax sticks to plan for IPO by year-end

After an anemic flow of domestic IPOs so far this year, building pressure and a stabilizing stock market may finally be prompting the regulator to step up the pace as we head into fall. That appears to be the thinking at Lufax, China’s leading P2P lender, which says it is still targeting an IPO by the end of this year, after previously indicating China would be its first choice for such a listing. Meantime, an easing of the IPO climate won’t come soon enough for parcel delivery firm Yunda, which has joined many of its peers in moving ahead with a backdoor listing plan in Shenzhen. Read Full Post…

SMARTPHONES: Stumbling Apple Brings R&D Center to China

Bottom line: Apple’s announcement of its first China R&D center looks like a hastily crafted initiative aimed at generating positive publicity, but is unlikely to halt its recent slide in the market.

Apple announces first China R&D center
Apple announces first China R&D center

Just a day after new data showed just how badly Apple (Nasdaq: AAPL) is stumbling in China, the iPhone maker has finally taken a step it should have made long ago with the announcement that it will build an R&D center in the country. Apple’s hesitation over such a move has been quite embarrassing, especially since China has surged to become its second largest market in the last 3 years. The lack of such investment is also embarrassing for China because India, a much smaller market for Apple, became the first Asian recipient of an R&D center from the US tech giant earlier this year. Read Full Post…