Bottom line: China should work with its major trading partners to send unified signals on issues like piracy to create a transparent business climate and avoid confusion.
US, China send crossed signals on piracy
In an unusual reversal of roles, Washington officials who regularly criticize China for piracy found themselves defending Alibaba (NYSE: BABA) on the issue last week, just a month after a Beijing regulator blasted the e-commerce leader for allowing rampant fake goods trade on its popular Taobao site. The conflicting messages are at least partly political, since a similar US condemnation would have contradicted Washington’s praise of Alibaba’s piracy-fighting efforts over the last 2 years. Read Full Post…
Bottom line: Carrefour’s new China strategy ends a period of uncertainty about its commitment to the market, though its move into e-commerce is long overdue and could fail due to its lateness.
Carrefour decides to stay in China
After sending a stream of mixed signals over the last 2 years about its commitment to China, global retailing giant Carrefour (Paris: CA) has finally decided it will stay in the market for now, but only after overhauling its operations. The decision will see the company do a major consolidation of its procurement centers, and also push into convenience stores and e-commerce. The signals seem to imply that the days of rapid expansion for its core chain of superstores is probably finished, with e-commerce and smaller stores likely to form the bulk of its China expansion going forward. Read Full Post…
Bottom line: Youku Tudou’s big bet on original content development could pay dividends in the long term, but will push the company further into the loss column in the short term as it spends heavily on the business.
Original content in focus at Youku Tudou
When the history books are written, the story of China’s online video industry could well be called “A Tale of 2 Business Models”. The most common model is seeing a growing number of players invest big money on development of original content, which is what former leader Youku Tudou (NYSE: YOKU) is doing with a major new announcement in that direction. The other model is seeing players like LeTV (Shenzhen: 300104) focus equally or more on distribution by rolling out new products like smartphones and Internet TVs to deliver their content. Read Full Post…
I had to smile to myself on reading the latest statistics about Shanghai’s ongoing crackdown on smoking in public places, which is showing generally positive trends. My smile was partly one of encouragement at the progress, but was more due to amazement at the relatively meager 1.5 million yuan in fines that Shanghai has issued for illegal smoking over the last 5 years.
That translates to just 300,000 yuan in fines for each of the last 5 years, which looks rather low for a city of Shanghai’s size, especially when one considers how common it is to see people smoking in forbidden places like office buildings, restaurants and shopping malls. On a daily basis the figure becomes even more miniscule, translating to just over 800 yuan in fines each day. Read Full Post…
Bottom line: China needs to realize that hardware from private western firms isn’t a risk to national security, and change its stance on new security-related requirements or risk another major trade war.
China’s growing insecurity
China’s growing insecurity is quickly shaping up as the next front line in a seemingly endless series of business disputes with the west, with word that Beijing is weighing a major new anti-terrorism law that would place huge new intrusive conditions on western technology firms. This story has been gaining rapid momentum over the last year, though until now many of the moves have been largely talk and one-time actions aimed at individual companies.
This new move, involving a proposed counter terrorism law, looks set to formally place many of the previous requirements on all foreign tech companies that sell their equipment to Chinese government agencies and other sensitive sectors like banks. Most of the companies being targeted come from the telecoms and related sectors, including networking equipment and the software that runs such equipment. Read Full Post…
Bottom line: Huawei’s massive spending at the world’s biggest telecoms show this week hints at its determination to make big inroads in Europe and the US this year for its older networking equipment and newer smartphone businesses.
Huawei spends millions at big telecoms show
In between running from interview to interview at the world’s largest telecoms show this week in Barcelona, I managed to scribble down some notes on which Chinese firms were spending the most heavily at this year’s Mobile World Congress (MWC). Such spending hints at company priorities for the year ahead, including which markets they are targeting. In this case it’s worth noting that MWC is largely a show for customers from North America and especially Europe, so anyone who attends as an exhibitor is almost certainly eying those markets.
All that said, it should come as no surprise that telecoms giants Huawei and ZTE (HKEx: 763; Shenzhen: 000063) were the 2 biggest spenders among Chinese firms at this year’s show, based on my own analysis. PC giant and smartphone aspirant Lenovo (HKEx: 992) was the only other Chinese firm with major representation. But perhaps most surprising was the size of Huawei’s presence, which easily dwarfed both ZTE and Lenovo. Read Full Post…
While many spent their Lunar New Year in a cutting-edge world of smartphones and virtual red envelope grabs, I had a chance to travel back to an older edition of China with a trip to interior Shanxi province. Several experiences there seemed uncomfortably close to the China from my memory in the 1980s, including a brief but chaotic ride on a local train that was packed to the gills with Spring Festival travelers.
But one particular experience seemed to summarize the many growing pains that China continues to feel in its ongoing transformation to the modern era. That experience saw the small historic banking city of Pingyao plunged into complete darkness not once, but around half a dozen times during my brief two-day sightseeing visit. Read Full Post…
Bottom line: ZTE’s decision to slim down its cellphone product line and focus on 4 key areas looks like a smart formula for success, but its big bet on voice could bring trouble if the technology fails to gain momentum.
ZTE slims down cellphone product line
After a painful but necessary restructuring, telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063) has largely withdrawn from the price wars that have plagued China’s smartphone market and is focusing on a strategy that emphasizes simplicity and higher-end products. The simplification strategy takes its cues from Apple (Nasdaq: AAPL), whose focus on just 2 or 3 new smartphones each year contrasts sharply with the many different models rolled out by its now-struggling chief rival Samsung (Seoul: 005930).
I quite like the simplification strategy for a number of reasons, even though consumers ultimately get less choice. Fewer models lowers product development costs, and allows a company to focus on a smaller number of phones with better designs. Such a strategy also creates stronger focus in consumers’ minds, which in turn helps to build a brand’s identity and the kind of customer loyalty that Apple has found. Read Full Post…
The following press releases and media reports about Chinese companies were carried on March 5. To view a full article or story, click on the link next to the headline.
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China Says Tech Firms Have Nothing To Fear From Anti-Terror Law (English article)
China’s Net Mobile Users Could Shrink This Year – Unicom (HKEx: 762) Chief (Chinese article)
Trina Solar (NYSE: TSL) Announces Q4 And Full Year 2014 Results (PRNewswire)
Phoenix SatelliteTV (HKEx: 3002) Warns Of 24-32 Pct Profit Drop For 2014 (HKEx announcement)
China Mobile (HKEx: 941) Launches 4G Roaming Services in 71 Countries And Regions (PRNewswire)
Bottom line: China Mobile’s new unnamed social networking platform based on RCS technology has a 50-50 chance of posing a serious challenge to WeChat due to the many advantages it will enjoy from its China Mobile connections.
New China Mobile platform to challenge WeChat
After 2 years of standing on the sidelines as Tencent’s (HKEx: 700) WeChat rapidly stole its text messaging business, leading telco China Mobile (HKEx: 941; NYSE: CHL) is finally preparing to fight back with its own competing product offering, according to ZTE (HKEx: 763; NYSE: CHL), which is supplying networking equipment for the product. ZTE’s cloud computing chief Zhu Jinyun told me the new product will be an entire platform for social networking and other services based on rich communications suite (RCS), a technology developed by a global telecoms association.
I’m admittedly not too familiar with RCS, though some web searches showed it’s a platform that allows for a wide range of functions, from one-on-one instant messaging to group chats, file transfers, IP voice calls and location-based services (LBS). Anyone looking at that list will instantly recognize that many of those features are already present on WeChat, whose popularity has rapidly siphoned texting business from China Mobile and the nation’s other telcos. Read Full Post…
Bottom line: LeTV could be a company to watch as it embarks on a global expansion, drawing on a savvy business model that sells smart TVs and smartphones at low prices in exchange for video subscription contracts.
LeTV makes cryptic debut at trade show
A major telecoms show happening this week in Spain was filled with small bits of news, but one of the biggest surprises came when I stumbled on an area decked out with signage for the racy online video firm LeTV (Shenzhen: 300104). So far as I could tell, none of the company’s many rivals like Youku Tudou (NYSE: YOKU) and iQiyi were at the show, and even global leader YouTube was absent. That’s not hard to understand, since the Mobile World Congress taking place in Barcelona is a telecoms show whose main attendees are telecoms equipment and smartphone makers. Read Full Post…
