TELECOMS: China In New Steps Against Foreign Tech

Bottom line: Foreign technology suppliers will complain about new requirements for them to reveal source codes to Beijing for selling to Chinese banks, but will ultimately comply over fears of being shut out of the market.

Beijing to force new security rules on foreign tech

China’s sudden obsession with national security risks posed by foreign technology has taken yet another step forward, with word that Beijing is preparing to place yet more restrictions on foreign firms that supply networking products and services to Chinese banks. As a longtime industry watcher, I need to quickly add my own view that this particular move isn’t really discriminatory against firms like IBM (NYSE: IBM), Cisco (Nasdaq: CSCO) and Hewlett-Packard (NYSE: HPQ), which are likely to feel the biggest effects. Continue reading

INTERNET: Alibaba Plunges As Post-IPO Honeymoon Ends

Bottom line: Alibaba’s sharp slowdown in quarterly revenue growth is unlikely to be a fluke, and will put downward pressure on the company’s stock as its post-IPO honeymoon comes to an abrupt end.

Alibaba revenue growth slows sharply

When the history books are written, this week will almost surely go down as the one that e-commerce leader Alibaba (NYSE: BABA) would like to completely erase from the record. The company has spent most of the week struggling with a nightmare in the publicity and government relations department due to a piracy scandal, and now it’s just released new quarterly results that showed sharply slowing growth at the end of last year. The perfect storm of bad news wiped nearly 9 percent off Alibaba’s stock in the latest trading session, and for the week it’s down about 13 percent. Continue reading

Shanghai Street View: Flavor Feast

Goubuli ties with Gloria Jean’s coffee

A few food-related items, 2 in the news and one in my personal life, made me realize once more just how far China’s eating scene has advanced in the last 2 decades, especially in an increasingly international city like Shanghai. The 2 news items both involved coffee, which I wrote about a few weeks ago as I noted the recent explosion in new chains and coffee houses.

The latest twist has fast-food giant KFC joining the trend, with word that it’s rolling out a premium coffee product in a bid to boost its downscale image. If that wasn’t enough, Gubuli, a well-known local chain whose name is synonymous with baozi, or meat-filled steamed buns, is also entering the upscale coffee business through a new joint venture with Australian chain Gloria Jean’s. Continue reading

News Digest: January 30, 2015

The following press releases and media reports about Chinese companies were carried on January 30. To view a full article or story, click on the link next to the headline.
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  • Alibaba Group (NYSE: BABA) Announces December Quarter 2014 Results (Businesswire)
  • China To Demand Secret Source Codes From Computer Firms: NYT (English article)
  • Tencent (HKEx: 700) To Acquire Gaming News Portal 17173.com – Source (English article)
  • BOC Hong Kong (HKEx: 2388) Considering Sale Of $6 Bln Bank Unit – Sources (English article)
  • Two New China Billionaires Emerge With Shenzhen Stock Rally (English article)

INTERNET: Alibaba Bank Nears, As Piracy Scandal Grows

Bottom line: The piracy scandal rocking Alibaba will blow over in a few weeks with minimal longer-term impact, though the company’s stock will enter a downturn over the next 6 months due to overvaluation.

Piracy scandal grows around Alibaba

This week could well go down as a turning point for high-flying e-commerce giant Alibaba (NYSE: BABA), whose growing war of words with a top government agency is quickly becoming a major scandal. The increasingly heated exchange has almost completely overshadowed the latest media reports that say Alibaba’s financial arm is preparing to launch a bank later this year. A separate company announcement indicates the bank will use an innovative credit rating system that draws on Alibaba’s huge volume of big data generated from the billions of transactions and other information exchanges that cross over its network. Continue reading

FUND RAISING: Car Inc Raises $500 Mln, Thrives On Rentals

Bottom line: Strong pricing for a large new bond from Car Inc reflects good potential for companies in China’s secondary car market, which should see strong growth as new car sales slow.

Car Inc raises $500 mln in bond offer

Let’s take a brief break from Internet companies to look at recently listed auto rental specialist Car Inc (HKEx: 699), which has excited the market with a new $500 million bond offering. Despite its earlier setbacks, including an aborted previous IPO, Car Inc has done quite well since its listing last September, as Chinese car-related plays find a strong audience among international investors. Interest seems especially strong toward car companies that target the second-hand market, as new car sales look set to slow sharply due to China’s slowing economy and restrictions being imposed by many cities to control pollution. Continue reading

INTERNET: WeChat Draws Advertisers, Food Delivery, Youth

Bottom line: Tencent’s strong early showing for a new WeChat-based advertising service and its investment in a take-out dining service reflect building momentum in its drive to build WeChat into a major new profit center.

BMW, Coke launch ad campaigns on WeChat

A couple of media reports are shining a spotlight on Tencent’s (HKEx: 700) WeChat, and some of the new steps it is taking to monetize the hugely popular service that is rapidly expanding beyond its roots as a mobile messaging service. At the same time, another report from Tencent itself is providing some insight into who exactly uses WeChat. It should come as no surprise that the report shows WeChat’s biggest fans are young and mostly male users, which are some of the most attractive targets for the online merchants and advertisers that Tencent wants to do more business on the platform. Continue reading

News Digest: January 29, 2015

The following press releases and media reports about Chinese companies were carried on January 29. To view a full article or story, click on the link next to the headline.
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  • China Regulator Blasts Alibaba (NYSE: BABA) For Illegal Business On Its Websites (English article)
  • Qualcomm Doesn’t Pay Fine, Defends Self In China Anti-Trust Probe (Chinese article)
  • LeTV (Shenzhen: 300104) Enters Smartphone Arena (Chinese article)
  • Lions Gate (NYSE: LGF) Plans Film Production Deal With China’s Hunan TV (English article)
  • Rental Car Firm Car Inc (HKEx: 699) To Raise $500 Mln Through Bond Issue (HKEx announcement)

CELLPHONES: Apple Steals China Smartphone Crown

Bottom line: Apple’s surge in fourth-quarter China sales owes to its iPhone 6 release and growing relationship with China Mobile, though it could have trouble retaining its new crown as the nation’s top smartphone brand.

iPhone sales zoom in China

Skeptics who thought Apple (Nasdaq: AAPL) might be losing its luster in China might have to rethink that theory, following release of a new report that says the gadget giant grabbed the title of China’s biggest smartphone seller for the first time ever in the fourth quarter. That surprising result came as Apple released new quarterly earnings that showed China sales also surged 70 percent in its latest quarter, more than double the pace of its global revenue growth.

The surprising China surge comes as Apple works closely to address Beijing’s concerns about national security risks and the privacy of Chinese iPhone users, issues that reflect one of the continuing challenges it will face in the market. Continue reading

INTERNET: Alibaba Responds To Audit, Gets New Owners

Bottom line: Alibaba’s stock is likely to come under continued pressure over the next 6 months, as it grapples with overvaluation, piracy issues and a large volume of shares coming back into the market from Yahoo.

Yahoo to spin off Alibaba stake

E-commerce giant Alibaba (NYSE: BABA) is in a couple of major headlines today, raising questions about its future ownership and also its open platform business model. On the ownership side, US Internet giant Yahoo (Nasdaq: YHOO) has announced it will spin off its large stake in Alibaba into a separate company, and then distribute shares in that new firm to existing Yahoo shareholders. On the business model side, Alibaba has enlisted one of the thousands of merchants on its popular Taobao C2C marketplace to respond to a government audit that found nearly two-thirds of goods sold on Taobao were fakes. Continue reading

WEIBO TALK: Huawei Shows Frustration, Xiaomi Elation

Huawei frustrated at lack of attention

Two of China’s most successful tech companies, Xiaomi and Huawei, took center stage in the microblogging realm over the past week, engaging in a rare direct war of words over their competing products in the nation’s overheated smartphone market. Their online sparring aside, the pair of tech stars also engaged in their own separate globally-focused activities that emphasized attempts by each to become the nation’s first truly international smartphone brand.

Huawei’s media-shy founder Ren Zhengfei traveled to the World Economic Forum in Davos, Switzerland, where he gave a rare public speech in which he appealed to the US to accept his company’s products, in remarks chronicled by some of his top deputies on their microblogs. Meantime, several recently recruited member of Xiaomi’s high-profile international team met at the company’s headquarters in Beijing, where they were talking strategy as the company continues its global expansion. Continue reading