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China tech IPOs to watch in 2021

China tech IPOs to watch in 2021

A slew of Chinese startups went public in 2020, and it looks like Chinese tech IPOs will keep booming through 2021.

Three of China's "four AI dragons" (AI四小龙) are almost certain to go public this year. Some of China's biggest unicorns, such as ByteDance and Didi Chuxing, are also likely to join them. Here are the China tech IPOs you need to know for 2021.

 

 

Companies gearing up for IPOs

Megvii

One of China's largest facial-recognition developers, Megvii is ready for an IPO on the Shanghai Stock Exchange's STAR board, according to an announcement posted by the China Securities Regulatory Commission in mid-January.

 

  • What it does: Megvii is often called one of China's "four AI dragons" alongside SenseTime, Yitu and CloudWalk. The Beijing-based company is the creator of the facial-recognition software Face++, the world's largest open-source computer vision platform. The company provides AI technologies to government agencies and enterprises including Alibaba, Lenovo and Huawei. Megvii was placed on the U.S. Department of Commerce's entity list in 2019 for its alleged role in mass surveillance of Muslim minorities in Xinjiang.
  • Funding: Megvii filed for an IPO in Hong Kong in August 2019, but the application has since expired. In its latest funding round in May 2019, Megvii raised $750 million from investors including Bank of China Group Investment, Alibaba and Australia's Macquarie Group at what Reuters reported was slightly north of a $4 billion valuation.
  • What to watch for: In 2020, Megvii launched Brain++, its own AI productivity platform, and made MegEngine, a major component of Brain++, an open-source deep learning framework. This is largely seen as one element of China's plan to develop home-grown AI tech and reduce Chinese companies' reliance on American open-source frameworks.

 

Yitu Technology

In November 2020, the Shanghai Stock Exchange accepted Yitu Technology's IPO request. The Shanghai-based AI unicorn intends to raise $1.16 billion.

 

  • What it does: Yitu claims to have provided AI tech for more than 800 governments and companies across more than 30 Chinese provinces and regions and more than 10 countries and regions outside China. It's also on the U.S. entity list for its alleged role in aiding the Chinese government's abuse of Uyghurs and other Muslim minority groups.
  • Funding: Valued at about $2.2 billion, the company has financial backing from leading VCs such as Sequoia China, Hillhouse Capital, Gaorong Capital and ZhenFund. Yitu plans to issue 36.4 million shares in the form of Chinese Depositary Receipt on the STAR market.
  • Financials: As disclosed in its prospectus, Yitu's revenue was $111 million in 2019, and it reported a net loss of $567 million in the same period.
  • What to watch for: Yitu has made its name in applying AI to the medical industry and is gradually expanding its business to other fields, including security and finance. The company is expected to lead the AI care sector as major Chinese hospitals continue to embed Yitu's AI products into clinical workflows.

 

CloudWalk Technology

In December 2020, the state-backed facial-recognition developer CloudWalk filed a prospectus with the Shanghai Stock Exchange, seeking to raise roughly $580 million in an IPO on the Star Market.

 

  • What it does: Founded in 2013, CloudWalk Technology is described as the "state team" (国家队) among the four AI unicorns because so many of its investors are state-owned. Its founder and CEO Zhou Xi came from the Chinese Academy of Sciences' Chongqing Research Institute, and a precursor to the company came out of the Chinese Academy of Sciences' facial-recognition research team. CloudWalk was added to the U.S. entity list in May 2020 for allegedly participating in human rights abuses in Xinjiang.
  • Financials: CloudWalk has also been losing money, just like its competitors. Compared with Yitu, CloudWalk's net profit loss is smaller. During the first half of 2020, its net loss reached approximately $44.5 million, and the 2019 annual net loss was about $265 million. Money-losing AI companies all attribute the net losses to business expansion and increasing investments in R&D. Valued at $3.1 billion, CloudWalk ranks No. 3 among the four AI dragons by valuation, according to the 2020 Hurun Global Unicorn Index.
  • What to watch for: Thanks to its state affiliations, CloudWalk will continue to focus on building projects for Chinese government entities, focusing mainly on fintech, smart security and transportation.

 

Rumored IPOs

ByteDance's Douyin and Toutiao

Competitor Kuaishou's $5.4 billion IPO has made people wonder just how big ByteDance's IPO could be. Last November, Bloomberg reported ByteDance was in talks with investors, including Sequoia, over funding that would boost its valuation to $180 billion, and was preparing some of its biggest assets — including Douyin and Toutiao — for an IPO in Hong Kong.

 
  • What it does: ByteDance is the creator of short video-sharing app TikTok, its original Chinese version Douyin and news aggregator Toutiao. The company makes money mainly through advertising, livestreaming and gaming. It has products available in over 150 markets, and has 100,000 employees across 126 offices.
  • Financials: ByteDance is one of the largest Chinese unicorns. While it spent last year at the center of U.S. controversy over data-sharing with Beijing, ByteDance's revenue more than doubled to about $35 billion in 2020, Bloomberg reported. And its operating profit in 2020 grew to around $7 billion, from less than $4 billion the year before.
  • What to watch for: ByteDance has been looking to diversify its revenue stream by expanding its business into fields like education, fintech and SaaS. Last October, ByteDance established an independent education brand, Dali Education (meaning "big power"), whose business encompasses K-12 and adult education software and hardware. Most recently, it reportedly set up a business unit dedicated to expanding the so-called "local life business" in sectors such as culture, tourism and restaurants, where Meituan is winning.

 

Didi Chuxing

The Information reported on Feb. 3 that China's other large unicorn, Didi Chuxing, is in early discussions with Goldman Sachs, Morgan Stanley and JPMorgan Chase about a potential IPO later in 2021, targeting a $100 billion valuation. Reuters previously reported Didi could go public this year in Hong Kong.

 

  • What it does: Didi Chuxing is the dominant carpooling startup in China, founded in 2012. It won a costly turf war with Uber China in 2016 by acquiring the American app's China business. Its other businesses include shuttle bus services, bike-sharing, designated driving, auto after-service, delivery and logistics.
  • Financials: Didi Chuxing has been known as a cash-burner; it didn't turn a profit in its first six years. However, according to The Information, it managed to make an annual profit of about $1 billion in 2020, its first time doing so.
  • Funding: Last valued at $56 billion, Didi's backers include SoftBank, Alibaba and Tencent.
  • What to watch for: In 2020, Didi announced an organizational restructuring, consolidating its services outside its core car-hailing business — including bike-sharing and freight — into a newly established "Urban Transportation and Service Business Group." In an attempt to diversify its revenue stream before its IPO, Didi directed much of its internal resources into community group-buying, which uses grassroots intermediaries to distribute groceries across the "last mile." Its CEO Cheng Wei reportedly said in early November that the company's investment in Chengxin Youxuan, Didi's community group-buying service, would not be capped: that the company would "go all out to take the first place in the market."

 

SenseTime

Tencent News broke the story late January that SenseTime had completed a pre-IPO round of fundraising at the end of 2020 with a valuation of $12 billion. Investors are mostly Chinese state institutions, including state-owned insurance companies and local governments. SenseTime is considering a dual listing in Hong Kong and China, Bloomberg has reported.

 

  • What it does: SenseTime is China's largest artificial intelligence unicorn by valuation. It has developed and established its own deep-learning platform and supercomputing center for its artificial intelligence technologies, which include facial recognition, image recognition, text recognition, video analysis and remote sensing. SenseTime was among eight Chinese tech companies placed on the U.S. entity list in 2019 for allegedly playing a role in massive human rights abuses against Muslim minorities in Xinjiang.
  • Funding: SenseTime has been an investor darling over the past few years, and became the world's most valuable AI startup after it raised over $2 billion in 2018, according to Bloomberg. Its investors include SoftBank, Singapore's Temasek Holdings and Alibaba.
  • Financials: According to Caijing, SenseTime's 2019 operating revenue was $780 million, with a gross margin of 43%, which is lower than Megvii's 64.6% and Yitu's 63.9%.
  • What to watch for: Like other AI unicorns, SenseTime has been getting many government contracts to help build smart cities across China. Caijing reported that its smart city revenue reached approximately $258.6 million in 2019 (nearly 33% of its total revenue). Management expected that in 2020, revenue from smart city projects would reach approximately $621.6 million, comprising about 42.7% of total company revenue.

 

Hellobike

The International Financing Review reported Hellobike is considering a U.S. IPO, seeking to raise up to $1 billion. Chinese-language tech website 36Kr confirmed the bike-sharing company's 2021 IPO plan. It would be China's first bike-sharing company to go public.

 

  • What it does: Hellobike is a mobility service platform based in Shanghai. Founded in 2016, it started as a bicycle-sharing company, later expanded its services to include rented e-bikes and e-scooters, as well as carpooling. Backed by Ant Financial, the company survived the bike-sharing battle that flared up in 2017. Because of its relationship with Ant, Alipay users can rent Hellobike's bikes without downloading a separate app. Hellobike claims to have 400 million registered users.
  • Funding: iFeng Tech reported Hellobike shed 20% of its value over the pandemic, and that the company is now worth $3.2 billion. Fintech giant Ant Financial is a major investor in Hellobike, which powered the startup through Series D to F funding rounds. Other backers include Primavera Capital Group and Fosun International.
  • What to watch for: Local governments distribute very limited compliance quotas to bike-sharing companies. Since 2019, 80% of Chinese cities have adopted quota systems, according to 36Kr. Bicycle-sharing is a business that requires bike distribution scale. Hellobike, even if it's public, will likely face a considerable regulatory challenge.

 

Waterdrop

Online health insurance marketplace Waterdrop plans to file for a U.S. IPO in the first quarter of 2021, with an estimated fundraise of about $500 million, according to IPO Zaozhidao, a WeChat public account tracking IPO scoops. Goldman Sachs and Bank of America are among the underwriters. Last summer, Bloomberg reported Waterdrop was seeking a valuation of about $4 billion.

 
  • What it does: Waterdrop was established in 2016 by Shen Peng, a co-founder of Meituan's meal-delivery unit. The 4-year-old startup focuses on health care crowdfunding. Its major business units include Waterdrop Insurance Mall (its main source of revenue), Waterdrop Mutual Aid (a patient payout platform designed to reduce the financial burden on those afflicted with major injury or disease) and Waterdrop Crowdfunding. Shen Peng boasted more than 250 million paying users across the platforms in 2019. As of September 2020, the cumulative annualized signed premiums of Waterdrop Insurance Mall exceeded $2.8 billion, according to the company. The company has about 140 million users, with 76% from third-tier cities and below.
  • Financials: The startup, which works with China's 30 top insurance companies, announced in August a Series D financing round of over $230 million, co-led by Swiss Re and Tencent. Other backers include IDG Capital, Boyu Capital and Meituan Dianping. TMTPost reported that the valuation of Waterdrop was between $4 billion and $6 billion after its latest round of financing.
  • What to watch for: Waterdrop Mutual Help and Waterdrop Crowdfunding operate somewhat like public services. Waterdrop Crowdfunding allows people to chip in small amounts of money to help those with critical illness, and in return receive payouts when they are in need. But the company is walking on thin ice balancing public welfare and its business interests. The company has encountered scandals where it was accused of mismanaging funds, and a subsidiary was fined last year for deceiving insurers and policyholders and concealing material circumstances related to insurance contracts.

 

BOSS Zhipin

Internet recruitment platform BOSS Zhipin is working with Goldman Sachs and UBS on a U.S. IPO that could occur this year, with the goal of raising $300 million, according to IPO Zaozhidao.

 

  • What it does: BOSS Zhipin means BOSS Direct Recruitment. It's a provider of a recruitment mobile application that matches job candidates and applicants directly with recruiters, human resources staff and company executives. Founded in 2013, it also has features such as customized recommendations, online interview scheduling and candidate screening that enable companies to find ideal candidates with increased efficiency.
  • Funding: According to Qichacha, BOSS has finished five rounds of financing, with the latest round co-led by Tencent in late 2019. In 2019, the company was valued at nearly $500 million.
  • Financials: The company says it broke even in 2017, achieved monthly profitability for the first time in November 2017, and has continued to maintain profitability since 2018, with annual revenue exceeding $150 million in 2019.
  • What to watch for: TalkingData's "2020 College Graduate Job Search Research Report" shows that it was one of the most highly-rated job recruitment apps among Chinese college students and graduates. Between May and October 2020, the app's average number of daily active users was 2.8 million, up 80% from a year ago during the same period. More than 45% of its users spent over 20 minutes on the app each visit.

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Source: By Shen Lu for Protocol

China’s Fintech Revolution

China’s Fintech Revolution

In 2008, Alibaba founder Jack Ma famously declared, “if the banks don’t change, we will change the banks.” His words sparked an entrepreneurial renaissance in China’s fintech industry. ‘Fintech’ (金融科技), a portmanteau of financial technology, refers to the application of new technologies to “improve and automate the delivery of financial services.” Since Ma’s pronouncement, mainland China has produced eight fintech ‘unicorns,’ collectively worth 214.6 billion USD. Although each of these companies works to reimagine a different aspect of banking, on the whole, Chinese fintech has two objectives: to maximize the economic potential of China’s banked, while integrating the country’s remaining unbanked. This piece profiles some of the fintech unicorns engaged in this mission — specifically within two sectors, lending and payments — and explores the global implications of their innovation.

 

 
Empowering China’s Banked
The first half of China’s fintech strategy is to maximize the economic potential of China’s banked.
 
Lending
The largest of all Chinese fintech unicorns, Jack Ma’s Ant Financial (“Ant”) is breathing new life into an outdated lending sector. 39.4% of Ant’s revenue comes from its lending platform, CreditTech, which “addresses the unmet credit demands of unserved consumers and small businesses in China.” Specifically, it leverages Ant’s AI algorithms to more accurately identify default risks and “compress lending costs.” This technological insight allows CreditTech to service individuals and ventures that would otherwise appear too risky to traditional banks.


Lufax is a peer-to-peer (P2P) lending marketplace that matches borrowers with investors. P2P implies that users enter into an agreement with one another, not the company. Lufax simply collects a 4% commission on the total loan for arranging the transaction. Though perhaps riskier for investors, Lufax nevertheless solves a key limitation in the lending sector: capital supply. After all, centralized lenders like Ant can only underwrite so many loans. However, with Lufax, anyone can be a bank. Its decentralized system renders every Chinese saver’s excess deposits available for investment. This fintech breakthrough marks a tremendous democratization of lending services, which until now, had been monopolized by China’s commercial banks, and by extension, the CCP.
 
Payments
China’s innovation in the payments sector is as impressive. Whereas in the U.S., credit cards are the preferred non-cash payment method, in China, ‘e-Wallets’ reign supreme. e-Wallets, as their name suggests, are digital wallets that interact seamlessly with the payments environment. Like regular wallets, they consolidate various payment methods: cash, credit, debit, and more.


China’s e-Wallet space can best be characterized as a duopoly, split between Ant and Tencent. Ant’s product, Alipay, leads slightly with 54.5% market share. The payments giant has 785 million monthly active users and handles upwards of 175 million transactions a day. Tencent’s equivalent, WeChat Pay, comes in at a close second with 39.5% market share. That said, WeChat Pay enjoys one significant advantage over Alipay: compatibility. Unlike Alipay, which is a standalone product, Chinese consumers depend on WeChat for a range of services, from shopping, to food delivery, to ride-hailing. Once in the app, users are unlikely to inconvenience themselves with an external payment method like Alipay.


Even if Alipay and WeChat Pay are industry competitors, from a Western perspective, they represent a united force. Combined, the two e-Wallets processed 20.5 trillion USD in 2016. For reference, PayPal only processed 354 billion USD in 2016. China’s dominance in the e-Wallet space will soon have global implications, with e-Wallets predicted to become the leading payment method globally by 2023.


 
Integrating China’s Unbanked
The second half of China’s fintech strategy is to integrate its remaining 225 million unbanked.
 
In terms of lending, unicorn WeBank specializes in “inclusive finance.” Founded in 2014 by Ant’s rival, Tencent, WeBank provides loans to low-income individuals with little-to-no borrowing records. In fact, 8.2 million of its users had no prior credit. By the numbers, WeBank’s average loan is 8,000 RMB (1,215 USD), the average borrowing period is 52 days, and its self-reported delinquency rate is 0.64%. (U.S.-based Lending Tree’s delinquency rate is 3.3%.) WeBank prides itself on its industry-low borrowing fees: over 70% of borrowers pay less than 100 RMB (15 USD) in interest. As for payments, e-Wallets’ ability to send and receive money via mobile phone makes them perfect for rural unbanked people, who could be miles from the nearest payments terminal.


China is already the largest economy in the world. Integrating the country’s 225 million unbanked — 16% of the total population — would boost its GDP by trillions. This prospect holds not only financial merit, but political significance as well. The World Bank estimates that there are an additional 1.5 billion unbanked beyond China’s borders. Chinese fintech is uniquely positioned to service this demographic. After all, the challenge of delivering financial services to an unbanked farmer in Gansu isn’t all that different from reaching one in Niger or Yemen. As one Tech in Asia reporter notes, “the entire financial system could be due for an overhaul, and China is right at the forefront.”
 
Conclusion
Where exactly China’s fintech revolution will lead is not yet wholly clear. What is clear, in the words of Dr. Julian Gruin, is that “the image of China’s financial system as deeply repressed and dominated by a few large state-owned commercial banks is rapidly becoming outdated.” In its place, a new, decentralized fintech ecosystem is emerging — one better poised to unlock the economic potential of China’s banked, unbanked, and foreigners alike.

 

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Source: CSIS, by Marko Marsans

NIO Selects NVIDIA for Intelligent,...

NIO Selects NVIDIA for Intelligent, Electric Vehicles.

Chinese electric automaker NIO will use NVIDIA DRIVE for advanced automated driving technology in its future fleets, marking the genesis of truly intelligent and personalized NIO vehicles.

 

During a global reveal event, the EV maker took the wraps off its latest ET7 sedan, which starts shipping in 2022 and features a new NVIDIA-powered supercomputer, called Adam, that uses NVIDIA DRIVE Orin to deploy advanced automated driving technology.

 

“The cooperation between NIO and NVIDIA will accelerate the development of autonomous driving on smart vehicles,” said NIO CEO William Li. “NIO’s in-house developed autonomous driving algorithms will be running on four industry-leading NVIDIA Orin processors, delivering an unprecedented 1,000+ trillion operations per second in production cars.”

 

 

The announcement marks a major step toward the widespread adoption of intelligent, high-performance electric vehicles, improving standards for both the environment and road users.

 

NIO has been a pioneer in China’s premium smart electric vehicle market. Since 2014, the automaker has been leveraging NVIDIA for its seamless infotainment experience. And now, with NVIDIA DRIVE powering automated driving features in its future vehicles, NIO is set to redefine mobility with continuous improvement and personalization.

 

“Autonomy and electrification are the key forces transforming the automotive industry,” said Jensen Huang, NVIDIA founder and CEO. “We are delighted to partner with NIO, a leader in the new energy vehicle revolution—leveraging the power of AI to create the software-defined EV fleets of the future.”

 

An Intelligent Creation

Software-defined and intelligent vehicles require a centralized, high-performance compute architecture to power AI features and continuously receive upgrades over the air.

 

The new NIO Adam supercomputer is one of the most powerful platforms to run in a vehicle. With four NVIDIA DRIVE Orin processors, Adam achieves more than 1,000 TOPS of performance.

 

Orin is the world’s highest-performance, most-advanced AV and robotics processor. This supercomputer on a chip is capable of delivering up to 254 TOPS to handle the large number of applications and deep neural networks that run simultaneously in autonomous vehicles and robots, while achieving systematic safety standards such as ISO 26262 ASIL-D.

 

By using multiple SoCs, Adam integrates the redundancy and diversity necessary for safe autonomous operation. The first two SoCs process the 8 gigabytes of data produced by the vehicle’s sensor set every second. The third Orin serves as a backup to ensure the system can still operate safely in any situation, while the fourth enables local training, improving the vehicle with fleet learning as well as personalizing the driving experience based on individual user preferences.

 

With high-performance compute at its core, Adam is a major achievement in the creation of automotive intelligence and autonomous driving.

 

Meet the ET7

NIO took the wraps off its much-anticipated ET7 sedan — the production version of its original EVE concept first shown in 2017.

 

The flagship vehicle leapfrogs current model capabilities, with more than 600 miles of battery range and advanced autonomous driving. As the first vehicle equipped with Adam, the ET7 can perform point-to-point autonomy, leveraging 33 sensors and high-performance compute to continuously expand the domains in which it operates  — from urban to highway driving to battery swap stations.

 

The intelligent sedan ensures a seamless experience from the moment the driver approaches the car. With a highly accurate digital key and soft-closing doors, users can open the car with a gentle touch. Enhanced driver monitoring and voice recognition enable easy interaction with the vehicle. And sensors on the bottom of the ET7 detect the road surface so the vehicle can automatically adjust the suspension for a smoother ride.

 

With AI now at the center of the NIO driving experience, the ET7 and upcoming NVIDIA-powered models are heralding the new generation of intelligent transportation.

 

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Source: NVIDIA

 

Navigating Asia’s B2B e-commerce surge

Navigating Asia’s B2B e-commerce surge

Asia may be leading the transformation in B2B e-commerce but there are still untapped opportunities.

If 2020 becomes known as the year e-commerce erupted, then Asia will be remembered as the epicentre of the transformation. In a region that was already emerging as the global hub for e-commerce in 2019 – the top seven countries for online consumer spending growth were all in Asia – the COVID-19 pandemic accelerated the pace.

 

Now, as broadband access widens, 5G networks mushroom and Asia’s middle-class population eclipses its global counterparts, that dominant position is only likely to strengthen. By the end of 2021, Asian e-commerce sales are forecast to reach USD3.5 trillion1, more than three times higher than those in North America, the second-largest region.

 

 

“The surprise has been the sheer pace at which this has happened,” said Mahesh Narayan, Global Product Lead – Mobile Money & E-Commerce at Standard Chartered. “E-commerce will continue to grow exponentially in Asia. It’s even starting to impact more traditional industries amid a shift in consumer habits, regulatory developments and innovations from banks and FinTech companies.”

 

Undoubtedly, the pandemic has accelerated progress. A Bain-Facebook survey found that 85 per cent of people in the region tried new apps for the first time, with e-commerce, food delivery and digital payments among the most popular categories. Online grocery sales in Southeast Asia grew nearly three times during the outbreak. The “Double Five” online shopping festival in Shanghai in May generated USD2.2 billion in orders in 24 hours. And sales during Alibaba’s annual Singles Day shopping event reached a record USD74 billion.

 

Despite the remarkable pace of transformation, there are still abundant untapped opportunities. According to a Bain & Co. study, three-quarters of micro, small and medium-sized enterprises in ASEAN see the potential of digital integration, but only 16 per cent are realising the full potential of technology. A Google-Temasek Holdings report meanwhile estimated that digital integration could deliver a USD1 trillion rise in the region’s GDP by 2025, while its internet economy alone could be worth USD240 billion by the same year.

 

Role of FI partners

As small and medium-sized businesses start digitising their lending operations, FIs are also expanding existing platforms with new services and technologies to address their needs.

 

“We're doing quite a few things in this space,” said Ankur Kanwar, Managing Director, Head of Cash Management, Singapore and ASEAN at Standard Chartered. “One is we're building a state-of-the -art single scalable payment engine. This is a global payment platform that supports both B2B and B2C domestic and cross border payments. We are also investing heavily in the e-commerce space and providing consistent and scalable solutions for online collections, escrow accounts, QR codes and real time direct debits.”

 

Standard Chartered partnered with Deutsche Post DHL Group to co-create a new online collections solution for their DHL Express Division that would allow their customers across Asia to make online payments in local currencies for shipping charges and duties & taxes, using local payment methods (including instant / QR payments, bank transfers, eWallets and cards). The solution is live across six countries and expanding.

 

We also supported them with digitisation of their in-store collections and payments on delivery using QR code and instant payments powered by our proprietary app and integration with the hand held devices of their couriers. This provided DHL with a cost effective solution, enabling elimination of cash in the last mile service, access to a variety of local payment methods across multiple geographies and automation of their reconciliation, all through a single integration and a single contract with Standard Chartered.

 

There are also opportunities for B2B e-commerce technologies to not only help B2B vendors migrate online, but to also optimise both the selling and purchasing process for business partners. Hence, a big area of focus is B2B payments because establishing payment terms or financing is fundamental to B2B e-commerce transactions.

 

Payments surge

B2B e-commerce revenues rose 20 per cent from the beginning of the crisis. Digital payments surged, both in advanced digital markets and traditionally cash-dominated countries. GCash in the Philippines, for instance, reported a 30 per cent increase in payments. SC Pay – Standard Chartered’s payment-processing engine – saw its share of fast payments in Hong Kong grow to 23 percent in the first half of 2020, from 10 per cent a year earlier. The buildout of SC Pay into a single global payments system will be complete in three years.

 

“One of our clients in Hong Kong is a telco,” Kanwar said. “Traditionally they had sent paper bills customers, which were both businesses and consumers. The customers would then make a payment through cheque or cash electronic payments. We helped them transform by printing a QR code on their paper bills. This enabled customers to simply scan the QR code and make an instant payment, cutting down on cash and cheques. In turn, that made the collections more efficient, cutting down the cycle time.”

 

Singapore mall operator CapitaLand introduced a new e-commerce platform featuring the wares of retailers whose shops had been forced to shut during lockdown. Other businesses used the crisis to develop new digital commercial collaborations. In Indonesia, e-commerce company Bukalapak teamed up with ride-hailing firms Grab and Gojek to run deliveries. Gojek partnered with Indonesia’s Agriculture Ministry to help local farmers and market vendors move their services online – and saw rice sales from partnership markets increase 30 per cent. Vietnamese e-commerce platform Sendo began partnering with overseas companies, including giants like Unilever and Proctor & Gamble, to expand the range of products available to local shoppers.

 

The way ahead

On the B2C front, there has already been a huge amount of innovation,” Kanwar said. “B2B has lagged because it’s more complicated. Going forward, B2B innovation is going to be on how do I digitise my entire supply chain? And how do I start interacting with my suppliers on the one side, as well as let's say distributors and consumers on the other side, completely through digital means.”

 

Moreover, progress is uneven across the region. While countries such as China, Singapore and Thailand have surged ahead in e-commerce, other parts of Asia remain underserved. Internet penetration is still low in countries such as Laos (43 per cent), Cambodia (50 per cent) and Myanmar (39 per cent), and many nations also lack the digital, regulatory and financial infrastructure to drive the growth seen elsewhere in the region. Furthermore, the immediate social and cultural expectations of B2B e-commerce users in some of these countries are not being met by existing technologies that have evolved from the West.

 

But with its extensive experience across Asian markets, Standard Chartered is developing solutions to overcome these obstacles. In India, for example, the bank has backed SOLV, a 360-degree B2B marketplace platform helping the country’s micro, small and medium enterprises (MSMEs) connect and do business with a large network of buyers and suppliers, build their credit scores, source working capital finance and access business services such as logistics.

 

As lockdowns threatened to cripple businesses, SOLV drew on its network of manufacturers and delivery channels to get essential goods to small village shops, resident welfare societies, NGOs and small hospitals, providing supplies to thousands of families through the SMEs on the platform.  The SOLV adoption rate grew threefold during the first four months of the crisis, signalling both a rising affinity for digital platforms and a greater awareness of the need to build future resilience.

 

“While the broad trend is digitisation for every market, the underlying solutions that are being built are very country specific,” Kanwar said. “That's where banks like Standard Chartered are trying to take the lead. We’re not only investing in all of these technologies across the region, we’re also trying to make sure that from our corporate client perspective, we present a standardised set of solutions and use cases no matter which country they deal with.”

 

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Source: Bloomberg Media Studios in partnership with Standard Chartered.

Coronavirus ends China’s honeymoon...

Coronavirus ends China’s honeymoon in Africa.

ADDIS ABABA, Ethiopia — Africa was supposed to be China’s new stomping grounds. Instead, the novel coronavirus has spawned a growing backlash that threatens to unwind the ties Beijing has carefully cultivated over decades.

 

The trigger for the burgeoning diplomatic crisis: Anger over the treatment of African citizens living in China and frustration at Beijing’s position on granting debt relief to fight against the outbreak.

 

China has spent untold billions in Africa since its emergence as a global power, investing in its natural resources, underwriting massive infrastructure projects and wooing its leaders. The campaign has bought China friends and allies in multilateral institutions such as the United Nations and the World Health Organization, undermining the West’s once-reliable lock on the postwar world order while fueling its economy back home.

 
 

But that decadeslong quest for influence in Africa was gravely challenged last week when a group of disgruntled African ambassadors in Beijing wrote to Foreign Affairs Minister Wang Yi to complain that citizens from Togo, Nigeria and Benin living in Guangzhou, southern China, were evicted from their homes and made to undergo obligatory testing for COVID-19.

 

The incident, which caused widespread discontent both within Africa and among the diaspora after videos posted on social media showed people of African descent being evicted from their homes, resulting in a rare diplomatic showdown between Chinese and African officials.

 

It also broke a long-standing tradition of Africa voicing its problems with China — the continent’s biggest trade partner — behind closed doors.

 

In one incident, Nigeria’s speaker of the House of Representatives, Femi Gbajabiamila, posted a video of himself summoning Chinese Ambassador Zhou Pingjian to his office where he expressed his displeasure about a Nigerian man being evicted from his home.

 

While nobody expects China to lose its place as Africa’s biggest bilateral lender and trade partner, analysts and African diplomats say there is a distinct possibility of lasting damage. Reluctance from China to endorse a G-20 decision to suspend Africa’s debt payments until the end of the year has exacerbated the sense of frustration, they said.

 

“There is a lot of tension within the relationship. I think both of these issues are the newest manifestations of long-term problems,” said Cobus van Staden, a senior researcher at the South African Institute of International Affairs. “Africa’s official response [to its citizens in China] took into account popular sentiment a lot more than it usually would have.”

 

Some scholars have documented how politicians in Africa have boosted their electoral base by mobilizing anti-Chinese sentiment, while many ordinary people perceive China’s success in the region as a threat to their own well-being.

 

Although China’s government and the billionaire founder of the Alibaba Group, Jack Ma, have been among the most generous and eager members of the international community to assist Africa in fighting COVID-19, Beijing’s overtaking of the World Bank as the biggest single lender to Africa has made it less inclined to write off the money it is owed. The Chinese government and the China Development Bank lent more than $150 billion to Africa between 2000 and 2018, according to the China Africa Research Initiative at Johns Hopkins School of Advanced International Studies.

 

 

U.S. officials, including Tibor Nagy, assistant secretary for the U.S. State Department’s Bureau of African Affairs, have strongly condemned the treatment of Africans in China, resulting in China snapping back at Washington by accusing it of sowing unnecessary discord between the pair.

 

Chinese officials have moved quickly to seal the emerging rift. Ambassador Liu Yuxi, Beijing’s head of mission to the African Union, released a photo of himself giving a socially distanced elbow bump to his African counterpart — while distancing the Beijing government from the authorities in Guangzhou.

 

At the same time, Zhang Minjing, political counselor at the mission, downplayed the controversy in comments to POLITICO. Beijing had “championed” a debt initiative agreed upon by the G-20, he said, and is “committed to taking all possible steps to support the poor.” As for the recent tumult in Guangzhou, he said, “the rock-solid China-Africa Friendship will not be affected by isolated incidents.”

 

“China is against any differential treatment targeting any specific group of people. China and Africa are good brothers and comrades-in-arms. We are always there for each other come rain or shine,” he added.

 

But there are also growing concerns in Beijing that its multibillion-dollar infrastructure projects in places such as Zimbabwe have now ground to a halt because of the coronavirus. Not only are engineering personnel unable to travel to the continent, but construction materials are running low as supply chains dry up.

 

Africans are going to need all the help they can get. After years of rapid growth, the International Monetary Fund on Wednesday said sub-Saharan Africa’s gross domestic product would shrink this year by 1.6 percent due to the effects of the coronavirus, low oil prices and poor commodity prices. In Ethiopia alone, the government has estimated that 1.4 million jobs will be lost over the next three months, according to a document seen by POLITICO, roughly 3 percent of the workforce. Africa has recorded 17,701 coronavirus cases and 915 deaths — a toll that will likely climb rapidly, and likely underestimates the scale of the continent’s predicament.

 

So far, the rest of the world has done little to help. On Monday, the IMF granted $215 million in initial debt relief to 25 African countries — a relative pittance compared with the vast sums those countries owe. On Wednesday, G-20 nations, which include China, the U.S., India and others, did offer to suspend debt payments until the end of 2020 despite calls from French President Emmanuel Macron to help African countries by “massively canceling their debt.”

 

But Ngozi Okonjo-Iweala, one of four special envoys to the African Union to solicit G-20 support in dealing with the coronavirus, said Africa was still “pushing for more.” In an interview, Okonjo-Iweala said she believed “China is coming along” to provide Africa with debt relief across the board and not simply on a case-by-case basis. “I don’t believe it’s against supporting African countries on this. I’ve heard actually to the contrary,” she said. “What we need from China is not a case-by-case examination, but an across-the-board agreement.”

 

Stephen Karingi, director of the trade division at the U.N.’s Economic Commission for Africa, said support from the international community should be “weighed against the damage COVID-19 will cause” in Africa. “We think that 2020 and 2021 will be difficult and support should have that in mind or such a horizon,” Karingi said.

 

How damaging the latest events will be to the political and commercial ties that have made China Africa’s largest trading partner are unclear.

 

On the official level, there are signs that all will soon be forgotten. A senior African diplomat to the African Union, who spoke on the condition of anonymity due to the sensitive nature of the issue, said, “When it comes to China, I doubt we will see long-term problems.” “They’ve got a lot invested on the continent, in the AU, in this city,” the official added.

 

“They’re everywhere. Realistically, I think it’s important both sides understand why this is happening and try and resolve this mutually.”

 

Still, a host of African officials have made sure China does not get away lightly with its treatment of Africans living in China. Over the weekend, Moussa Faki, chairman of the African Union Commission, said he had “invited” the Chinese ambassador to the AU to express his “extreme concern” for the situation, while Chinese ambassadors in Nigeria and Ghana were summoned to give an explanation.

 

President Cyril Ramaphosa of South Africa said the ill treatment of African nationals in China was “inconsistent with the excellent relations that exist between China and Africa, dating back to China’s support during the decolonization struggle in Africa.”

 

A senior AU official, who spoke on the condition of anonymity due to the sensitive nature of the matter, said Chinese officials were particularly alarmed by the public dimension of the incident that exploded on social media. But, the official said, many African nations were pleased by remarks delivered by Foreign Ministry spokesman Zhao Lijian on Sunday in which he underlined “the African side’s reasonable concerns and legitimate appeals.”

 

Whether the people living on the continent forget so easily is another matter altogether.

 

“It’s going to be contentious among those communities for a lot longer,” said van Staden of the South African Institute of International Affairs.

 

------------------------------------------------

Sourse: By Simon Marks for Politico

China Tianyan, begins search for extrate...

China Tianyan, begins search for extraterrestrial civilizations

The 500-meter Aperture Spherical Telescope (FAST), known as the "China Tianyan", has officially begun the search for extraterrestrial civilizations, looking for signals from intelligent life deep in the universe, the National Astronomical Observatory of the Chinese Academy of Sciences said today.

 

 

The search for and monitoring of radio pulsars is a core scientific objective of FAST. And the search for extraterrestrial civilizations is one of the scientific goals of the FAST telescope. In September 2018, researchers from the National Astronomical Observatory of the Chinese Academy of Sciences, the University of California, Berkeley, and Beijing Normal University conducted installation tests on the high-resolution extraterrestrial civilization search backend at the FAST site.

 
 
 

In July 2019, the researchers again analyzed and processed the obtained drift scan data to achieve a frequency resolution of 4 Hz and successfully removed most of the RF interference to screen out multiple sets of narrowband candidate signals.

 

 

On April 14, the FAST Scientific Research and Data Processing Center, which will be built in Gui'an New District, has been approved by the National Development and Reform Commission for the feasibility study of the project. The FAST Scientific Research and Data Processing Center project has a total investment of about 170 million yuan and a construction area of 28,000 square meters, including a scientific research center and data processing center. After the completion of the project, "China Tianyan" will finalize the three complete scientific research frameworks of observation, research, and data, providing the conditions for the storage and calculation of the huge amount of data generated by the long-term operation.

 

 

"China Tianyan" was conceived by the Chinese astronomer Nan Rendong in 1994 and took 22 years to build and opened on September 25, 2016. It is a radio telescope led by the National Astronomical Observatory of the Chinese Academy of Sciences, with independent intellectual property rights in China, the world's largest single-caliber, most sensitive radio telescope. Its integrated energy is ten times that of the famous radio telescope Arecibo.Tianyan literally means Eye of the Sky. It is a radio telescope located in the Dawodang depression, a natural basin in Pingtang County, Guizhou.This project is a major national science and technology infrastructure consisting of several parts, such as an active reflector system, a feed support system, a measurement and control system, a receiver and a terminal, and an observation base.

 

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Source: CNTechPost

China’s energy transition 2020-2050...

China’s energy transition 2020-2050.

Decades of rapid economic growth have dramatically expanded China’s energy needs. China is now the world’s largest consumer of energy, the largest producer and consumer of coal, and the largest emitter of carbon dioxide. However strong growth of renewable power is currently the key driver of China’s energy transition.

 

 

Projections for 2050

2% to 14% Increase in primary energy between 2018 and 2050

-44% to -94% Decline in coal consumption between 2018 and 2050

34% to 55% Share of renewables in power generation by 2050

 

 

Projections Summary

  • China's economy grows at 3.5% p.a. between 2018 and 2050, down from 9.6% p.a. between 1990 and 2018.
  • Primary energy consumption in China increases slightly, in all three scenarios. With the economy size nearly tripling from 2018 to 2050, China’s energy intensity declines by over 60% in all scenarios.
  • China’s share in global energy demand drops from 24% in 2018 to 23% in Rapid, 22% in Net Zero and 21% in BAU by 2050. Nonetheless, China remains the world’s largest consumer.
  • Renewables expand rapidly, with an annual growth rate >5.5% p.a. in all scenarios. Renewables’ share of the energy mix increases sharply, reaching 48%, 55% and 23% in Rapid, Net Zero and BAU, respectively.
  • Coal’s share of the China power generation mix declines sharply under all scenarios, falling to 4% in Rapid, 1% in Net Zero and 31% in 2050 in BAU.
  • Production of coal declines in China, dropping by nearly 90% in Rapid, and 57% under BAU.
  • Nuclear power grows quickly in all scenarios, increasing its share of primary energy demand from 2% in 2018, to 11%, 12% or 9% in Rapid, Net Zero and BAU scenarios respectively.
  • Production of natural gas greatly increases in China, by 76% in Rapid and 114% in BAU scenario. Conversely, production of oil declines by 73% in Rapid and 21% in BAU.
  • Under all three scenarios liquids demand in China peaks in the next 5 years, driven by increased efficiency and fuel substitution in industry and mobility.
  • Net CO2 emissions from energy use drop by 99% in the Net Zero scenario, 84% under Rapid and 35% under BAU.

 

 

Powering China’s Future

China is increasingly looking toward securing its future energy needs with sustainable alternatives. In accordance with the 2016 Paris Agreement, China has committed to make non-fossil fuel energy 20 percent of its energy supply by 2030.

 

 

China is the world’s largest investor in clean energy. Between 2013 and 2018, the country’s investments in renewables grew from $53.3 billion to an impressive peak of $125 billion. This figure has fallen in recent years, but in 2019 China’s investments still stood at $83.4 billion – roughly 23 percent of global renewable energy investment.

 

 

China is also becoming the largest market in the world for renewable energy. It is estimated that 1 in every 4 gigawatts of global renewable energy will be generated by China through 2040.

 

 

Due to large-scale investments in massive infrastructure projects, hydroelectric power has become China’s main source of renewable energy production. The controversial Three Gorges Dam, completed in 2012 at a cost of over $37 billion, is the largest hydroelectric dam in the world and boasts a generation capacity of 22,500 MW. The dam generates 60 percent more electricity than the second-largest hydropower dam, the Itaipu dam in Brazil and Paraguay.

 

 

Including the Three Gorges Dam, China has constructed 4 of the top 10 largest energy-producing hydroelectric dams in the world. From 2000 to 2017, China more than quintupled its generation of hydroelectricity, from 220.2 billion Kilowatt Hours (kWh) to 1,145.5 kWh. As a result of the Three Gorges Dam and other projects, China became the world leader in hydropower in 2014.

 

 

Over the past decade, China has also emerged as a global leader in wind and solar photovoltaic (PV) energy. China’s electricity generated by wind power accounted for just 2.1 percent of its total consumption in 2012, compared to 3.7 in the United States and 9.4 percent in Germany. By 2017, China’s wind-energy generation surged to 304.6 billion kWh, a 28.5 percent increase from the previous year. As a result, China accounted for over a quarter of global wind-energy generation in 2017.

 

 

In solar PV, China is both the leading supplier and consumer. Due to rapidly decreasing costs, aggressive policy incentives, and low-interest loans from local governments, China has dramatically increased its production of solar panels. In 2014, China became the world’s largest producer of solar panels, and a year later it surpassed Germany’s solar power generation capacity.

 

 

China is now home to two-thirds of the world’s solar-production capacity. The future development of China’s solar industry, however, has been called into question. Due to an over-saturated domestic market, Beijing halted all new solar projects and lowered tariffs on imported clean energy in June 2018. Additionally, the ongoing trade dispute between the US and China could further disrupt China’s solar panel industry. In January 2018, President Donald Trump announced a 30 percent tariff on solar panel imports from China.

 

 

 

How does China currently secure its energy needs?

Much of China’s foreign energy supply comes from politically unstable regions and must travel through narrow straits and contested waterways before reaching China. Securing guaranteed access to foreign sources of energy is vital for China’s ongoing growth and development.

 

 

China holds the third largest coal reserves in the world, which it has historically leaned on to satisfy its domestic energy needs. Yet as its economy has grown, China has increasingly relied on imported coal. In 1990, China produced 1.02 billion tons of coal for consumption, needing just 2 million tons of additional imports. By 2009, China’s rising demand drove it to become a net importer of coal, importing 125.8 million tons of coal to meet domestic consumption demand.

 

 

China fulfills its demand for coal by purchasing it from regional neighbours. In 2017, its coal imports primarily came from Australia (79.9 million tons), Indonesia (35.2 million tons), Mongolia (33.5 million tons), and Russia (25.3 million tons). Prior to 2017, North Korea was China’s fourth largest coal supplier, ahead of Indonesia and Mongolia. Due to the implementation of UN sanctions on North Korea, China has suspended all coal imports from the regime. As a result, China has shifted to rely more on Russia and Mongolia to fulfill its coal needs.

 

 

China’s demand for crude oil similarly outpaces its domestic production. Since 1993, China has been a net importer of crude oil, and in 2017 it surpassed the United States as the largest importer in the world. According to China National Petroleum, more than 70 percent of China’s crude oil supply in 2018 will come from imports. This dependence on foreign energy is likely to increase. Some estimates have suggested that by 2040 around 80 percent of China’s oil needs will be sourced from elsewhere. While China has taken steps to diversify its oil portfolio, it still must confront potential bottlenecks to access.

 

 

Given its political instability, the Middle East represents an important energy security concern for China, as roughly half of China’s oil imports come from the troubled region. China’s reliance on Middle Eastern oil is only likely to increase in the future. The International Energy Agency predicts that China will double its Middle East imports by 2035.

 

 

China’s oil trade with Iran is especially illustrative of this uncertainty. While sanctions against Iran had for years restricted Chinese access to Iranian oil, this quickly changed once a preliminary agreement on Iran’s weapons program was reached in November 2013. Chinese imports of Iranian oil in 2014 surged by 28 percent compared to 2013. In 2017, China imported 7.5 percent of its crude oil from Iran, just behind Oman at 7.7 percent and Iraq at 8.6 percent. The withdrawal of the US from the Iran nuclear deal in May 2018 has had seemingly little effect on this exchange, as China remains the top destination for Iranian oil.

 

 

China has diversified its oil portfolio by investing heavily in Africa. Africa only possesses around 9 percent of global proven petroleum reserves (compared to 62 percent in the Middle East), but there is considerable potential for gaining access to untapped resources. China has pursued a strategy of offering economic development loans to African states, such as Angola, in exchange for favorable access to oil reserves. Additionally, in 2015 China sent troops to support UN peacekeeping operations in South Sudan, where China has considerable oil investments. While South Sudan’s oil represents a miniscule amount of China’s total imports, 96 percent of its oil exports were sent to China in 2017.

 

 

Securing maritime energy shipments is another critical energy-security priority for China. Over 80 percent of Chinese maritime oil imports by sea pass through the Strait of Malacca. Therefore, this strategic waterway represents a potential risk to China should it be unable to protect its shipping interests in the narrow strait.

 

 

Another means through which China is seeking to mitigate its dependence on foreign oil is by building a strategic petroleum reserve (SPR), which is designed to insulate China from external market shocks. In November 2014, China’s Bureau of Statistics announced for the first time the size of China’s SPR, claiming to have 91 million barrels, or around nine days of reserves. China’s most recent update on SPR levels came in December 2017, when it reported a volume of 276.6 million barrels. China aims to accumulate 600 million barrels of oil, which would meet the OECD standard of 90 days of import reserves.

 

 

Although China holds the world’s largest shale gas reserves, the amount of natural gas readily available for extraction is much lower due to geographical complexities. Some deposits are buried as deep as 3,500 meters underground, making extraction difficult. In 2017, 38.4 percent (95.5 billion cubic meters) of China’s natural gas needs were met by foreign sources, a 27 percent increase from 2016.

 

 

With over 60 percent of its trade in value traveling by sea, China’s economic security is closely tied to the South China Sea.China currently relies on foreign natural gas delivered via land pipelines and carriers in the form of liquefied natural gas (LNG). Two existing pipelines supplied 46 percent of China’s natural gas imports in 2017, with three-quarters of this coming from Turkmenistan. The share of overland energy sources is likely to increase in the coming years. In 2014, China and Russia signed a 30-year, $400 billion deal to deliver Russian natural gas to China, and in December 2019, the $55 billion Power of Siberia pipeline sent its first shipments of natural gas from Russia to China.

 

 

However, China also imports LNG from several other countries, including Australia (47 percent), Qatar (21 percent), and Malaysia (11 percent) in 2017. The International Energy Agency predicts that in 2030, over 60 percent of China’s natural gas demands will have to be met through imports. In late 2019, China became the world’s top importer of LNG, overtaking Japan for two consecutive months. While monthly imports fluctuate significantly, China is expected to replace Japan as the world’s top LNG importer annually by 2022.

 

----------------------------------------------------------------

Source: BP Insights, International Energy Statistics

China-UAE Trade Corridor: New MoUs and...

China-UAE Trade Corridor: New MoUs and agreements to boost BRI.

The UAE has set its sights on boosting trade and investment ties with the world's second largest economy – China. While the economic powerhouse of Asia has been a strong market for UAE oil exports, the relationship between the two countries has deepened over the past few years as they find synergies and areas of co-operation in a wide range of sectors that go beyond hydrocarbons. China and the UAE launched a US$ 10 billion fund in late 2015, which focuses on sectors of strategic importance to them.

 

 

"This fund will also play a critical role in supporting the One Belt, One Road initiative, as we work towards improving connectivity and co-operation with our regional partners across Eurasia," Chinese president Xi Jinping said at the time. The relationship was further cemented in 2018 when Xi visited the UAE and signed a raft of deals to deepen China's ties with the Arab world's most diverse economy.

 

 

''UAE-China strategic partnerships constitute an important model in the international economic relations. Agreements signed during president Xi Jinping's state visit to the UAE will definitely catapult this partnership to new heights,'' said Sultan bin Saeed Al Mansouri, minister of economy. The two countries said they are building on their strategic partnership, which was launched in 2012, and expanding their co-operation to develop China's 'Belt and Road Initiative', while establishing sustainable trade and investment ties to achieve their common interests. The two sides are also working together to organise conferences and forums under the 'Belt and Road' banner. In November, for example, UAE was one of more than 130 countries that took part in the China International Import Expo (CIIE) in Shanghai. During the event, president Xi reiterated China's commitment to global free trade. In addition, the UAE is a founding member of the Asian Infrastructure Investment Bank (AIIB), a Chinese initiative, which aims to support development efforts in Asia.

 

 

Collaborative Projects

Another area of collaboration is the expansion of co-operation in e-commerce specialised training, developing cross-border e-commerce, and supporting the development of bilateral trade via e-commerce. The UAE and China are also considering a 'framework agreement' to work on various projects. They intend to collaborate in fields involving innovation, technology transfer, and economic diversification, as well as leverage the UAE-China Business Committee to co-operate in the areas of logistics, transport, industry, technology, artificial intelligence and energy, renewable and food security fields, and training for small and medium enterprises (SMEs).

 

 

The two sides are exploring partnerships in the free trade zones through ports and by building special export-oriented economic zones, establishing industrial projects, including fourth generation and other advanced industries. A testament to this initiative was the decision in 2016 of China's COSCO Shipping Limited, the world's largest container operator, to choose Khalifa Port as hub for its operations in the Middle East. It also has plans to expand the annual capacity to 6 million TEUs at the facilities – making it the largest container freighter station in the region. The move will make the Abu Dhabi-based Khalifa Port attractive to investors in Eastern Asia.

 

 

And since 2017, more than 15 Chinese companies have set up base in the Khalifa Industrial Zone Abu Dhabi (Kizad) to build various industries with a total investment of US$ 1 billion, according to Mohamed Juma al Shamsi, chief executive of Abu Dhabi Ports.

 

 

Cross-Border Deals

The two countries also plan to take their partnership across the border with joint investments in the African continent and Pacific Islands. UAE and China are keen to boost financial services ties by enabling bank branches in each other's countries to facilitate support for trade and bilateral investment, by strengthening co-operation between the UAE international financial centres and Shanghai Stock Exchange.

 

 

In 2018, the Abu Dhabi Global Market (ADGM), an international financial centre signed a memorandum of understanding with Shanghai Stock Exchange, China's largest securities exchange, to establish a “Belt and Road" Exchange in ADGM. When created, the “Belt and Road" Exchange in Abu Dhabi will serve as a key international capital-raising platform supporting Chinese enterprises, foreign companies and global organisations to finance their investments, including along the Silk Road Economic Belt network, the companies said. ADGM followed up the deal by opening its first overseas representative office in Beijing, to strengthen Abu Dhabi's ongoing collaborations with the Chinese government and financial and business community. Meanwhile, ADGM and the Hong Kong Securities and Futures Commission recently agreed to jointly promote and support financial services innovation in Hong Kong and the UAE. Together, the two regulators aim to develop financial technology (fintech) ecosystems and bolster the financial industries in their respective markets.

 

 

Other areas of co-operation outlined in the memorandum of understanding include education, science and technology under the "Partnership Programme between China and Arab countries in Science and Technology". Under the programme, young Emirati scientists will be facilitated to conduct short-term scientific research in China and learn new technologies.

 

 

Finally, the two countries will work on developing crude oil trade; exploration and development of oil and natural gas resources and engineering construction services for oil fields and for networking of strategic storage facilities; refining derivatives and petrochemicals domains; and other industries and related business activities. The agreements should help enhance the UAE's role as a regional gateway for China, as about 60 per cent of exports from the Asian country pass through UAE ports. China has been the UAE's top trading partner for the past three years, with trade between the two partners likely to cross US$ 70 billion by 2020, according to a UAE official.

 

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Source: HSBC Insight & Research

China’s Infrastructure investments...

China’s Infrastructure investments to sustain copper rally.

Despite a precipitous plunge in March, the price of copper has risen 7.6% since the start of 2020 and looks set to maintain momentum in the coming months and beyond as China's economic recovery gathers steam.

Copper prices plummeted from a high of US$6,270 per tonne in mid-January to a low of US$4,617.50/t in late March after the World Health Organization declared the spread of COVID-19 to be a pandemic but has since recovered to levels last seen in 2018.

China's appetite for industrial metals returned swiftly as the world's leading copper consumer shook off the pandemic with a sustained recovery thus far. Despite dipping month over month in August due to seasonal factors, China's unwrought copper imports remained higher than a year ago, which suggests that manufacturing activity in the country is still rebounding, BCS Global Markets said in a Sept. 8 note.

While the pandemic is expected to wipe US$630 billion off China's GDP in 2020, the Asian powerhouse's GDP is still expected to rise by 1.2%, down from S&P Global Ratings' previous forecast of a 5.7% increase, even as the world economy contracts by 3.8% overall.

China's recovery is being driven by three things: stimulus-related infrastructure investment, the electronics sector, and sales and new investment in property, S&P Global Ratings' Asia-Pacific chief economist, Shaun Roache, told Market Intelligence. "This mix of demand is certainly boosting demand for coal, iron ore, and a range of other commodities, including copper. As Chinese consumers start to spend again, we would expect stimulus to wane but this is more likely to affect 2021."

 

 

Infrastructure investments driving up prices

"Infrastructure investment is significant to copper demand, as the metal is heavily used in a wide range of the end-uses impacted such as building materials all the way through to consumer durables," Market Intelligence commodity analyst Thomas Rutland said in an interview.

In the wake of the global financial crisis, copper prices crashed to as low as US$2,809.50/t in December 2008 but rebounded quickly to a peak of US$10,179.50/t in February 2011 after China funneled funds into infrastructure such as railways, roads, and airports.

"China's Ministry of Transport has recently committed to huge investments in its transport systems, which combined with the government's stimulus measures could be behind the reported stockpiling of metal in the country," Rutland said.

The price of the metal has averaged US$5,790/t so far this year, according to Fitch Solutions, which recently raised its 2020 price forecast for the base metal to US$6,000/t in 2020 from US$5,900/t.

Bernstein Research is more bullish than most on the metal and predicts the price to reach US$6,400/t in 2021 and US$6,900/t in 2022, versus analysts' consensus of US$5,478/t and US$6,261/t, respectively, according to a Sept. 14 note.

While Fitch expects the Chinese government's stimulus as well as recovery in global economic activity to sustain demand, prices are likely to remain volatile as the pandemic evolves. The analytics provider sees downside risks to its updated price forecast of should widespread lockdowns reappear, according to a September report.

"A couple of the key questions are: just how far will the Chinese recovery and stockpiling take copper prices? Will copper prices continue to be pushed higher into 2021 or will prices start to fall off as refined output increases during the third and fourth quarters?" Rutland said.

 

 

Copper shortage seen as push for decarbonization intensifies

The closure of some mines, particularly in South America, due to the coronavirus pandemic has offset reduced demand, keeping the market tight. As of late September, 2.9% of annual supply remained disrupted by the pandemic, with Chile and Peru accounting for more than half of the missing 702,000 tonnes per year of output, VTB Capital said in a Sept. 21 note.

The brokerage highlights the transition to renewable energy stoking demand for the metal. Renewable energy assets require as much as 15 times more copper per unit of installed capacity than conventional power sources, according to Bernstein's analysts, and the transition to a low-carbon energy mix will result in a copper shortage as demand outstrips supply.

BHP Group, whose copper segment contribute an average of 24% to group revenue, expects demand for the metal to more than triple over the next 30 years, under the 1.5-degree-C scenario of the Paris Agreement on climate change, versus the past three decades as global efforts to decarbonize gain momentum, according to a September presentation.

The ICSG estimated the apparent deficit of refined copper in the first half of 2020 at 235,000 tonnes, and analysts expect it to grow over the coming years. Fitch estimated the shortfall to reach as much as 510,000 tonnes in 2027 as power, vehicle, and infrastructure usage increases.

 

--------------------------------------------------

Source: S&P Global Market Intelligence

China’s EV Startup Xpeng Motors Export...

China’s EV Startup Xpeng Motors Exports its First Vehicles to Norway.

Chinese electric vehicle startup and Tesla challenger Xpeng Motors has exported its first batch of vehicles to Europe, expanding its global presence. It's the first time the automaker is selling its electric vehicles outside of its home country.

 

 

Xpeng loaded 100 of its G3i fully electric SUVs on a cargo ship which will be shipped to Norway, which has the highest EV adoption rate. Roughly 75% of all new vehicles sold in Norway are plug-in hybrids of fully-electric models.

 

 

With Xpeng's expansion to Norway, the EV startup will give Tesla some additional competition in both China and in Europe. The Tesla Model 3 has sold briskly in the Scandinavian country, but so have Tesla's in general. Tesla was the second best selling car brand in Norway in 2019, selling roughly 18.8 thousand cars last year, according to data from Statista.

 

 

Xpeng is shipping the latest version of its G3 to Norway, which first went on sale in 2019. The newest version offers a longer range and other technology improvements from the previous model. The upgraded G3i is available with an extended NEDC driving range of 323 miles (520 km). It was launched at this year's Chengdu Motor Show.

 

 

"The first European-spec super-long-range Xpeng G3 intelligent SUVs formally left for Norway today, which made us so proud. It indicates that Xpeng Motors has made headway in various links such as product R&D, intelligent manufacturing and market expansion, and its products started to be tested by overseas consumers," said Xia Heng, co-founder and president of Xpeng Motors.

 

 

The Guangzhou-based EV manufacturer will partner with Zero Emission Mobility AS (ZEM), a Norway's automobile dealer. ZEM will be responsible for marketing after-sale service to local consumers, according to China's news outlet Gasgoo.

 

 

Xpeng had to make some minor changes to the vehicles to meet local regulations and standards of the European market. The European-spec version however will include Xpeng's popular autonomous valet parking feature. The automated parking feature is supported by a suite of 20 sensors including ultrasonic radars, high-definition cameras and millimeter-wave radars.

 

 

 

Xpeng alos modified its AI-powered Xmart OS in-car Intelligent System which supports voice commands for many of the vehicle's controls. The system will now be able to recognize words in English.

 

 

Xpeng is a strong competitor to Tesla in China, but now Tesla too is planning to ship its electric vehicles built at its Shanghai factory to Europe. Tesla's Shanghai factory is its first overseas plant.

 

 

Two weeks ago, Bloomberg reported that Tesla also plans to export its Model 3s built in China to Europe in an effort to boost profitability. The California company began delivering the first Model 3's built in China in December of last year.

 

 

The China-built Model 3s for delivery outside the country likely will start mass production in the fourth quarter of this year, the people said, asking not to be identified because the details are private. 

 

 

"Exporting Model 3s to Europe would take advantage of China's lower production cost base in a bid to improve profitability," said Michael Dean, a Bloomberg Intelligence analyst.

 

 

Xpeng Motors was founded in 2014 and its electric vehicles are viewed as a popular alternative to Tesla models in China.

 

 

Xpeng's second electric model is the P7 smart sedan which went on sale in April. The electric sedan comes loaded with advanced technology, including self-parking like the G3. It's billed as a lower priced alternative to the Tesla Model S in China, costing less than half the price.

 

 

The automaker says it's offering the same level of technology, connectivity features and performance for around $50,000 less than Tesla's flagship Model S sedan. Xpeng's P7 also achieves an NEDC Range of 439 Miles, the longest of all EVs sold in China, including the Model S. The car features an all-wheel-drive setup with dual electric motors.

 

 

 

Xpeng Motors is backed by China's e-commerce giant Alibaba, which is China's equivalent of Amazon.

 

 

The company raised $1.5 billion in its U.S. IPO in August becoming a public company. Xpeng's stock now trades on the New York Stock Exchange under the stock symbol "XPEV."

 

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Source: FutureCar

Aldi integrating into neighbourhoods...

Aldi integrating into neighbourhoods.

Aldi has become the latest overseas supermarket operator to open stores in China, the 8th was recently opened in Shanghai,  but the German company faces a battle to win over customers in a fragmented market in which foreign operators have traditionally struggled: Tesco and Spain’s Dia abandoned operations in the country and Germany’s Metro is selling its China unit. Walmart and Carrefour have struggled to gain more than a single-digit market share.

 

 

Overseas companies have been hampered by remote decision making and difficulties adapting to Chinese shoppers’ preference for making regular small purchases of fresh vegetables to cook at home rather than weekly shops, according to analysts. However Aldi is taking a different approach, opting for smaller, smarter retail stores that are equipped with WeChat technology and offer speedy delivery options. The small size lets ALDI integrate the store deep in neighbourhoods and communities while offering around 1,000 products ranging from Ready-to-Eat meals to body care products.  It plans to launch over 100 of these stores going forward.

 

 

Where WeChat Fits In

Aldi’s scan-and-go WeChat mini-program indicates its commitment to creating a localized Chinese shopping experience, negating the need for checkouts. Home delivery is offered within a 3km range. They take a page out of Alibaba's smart Hema/Freshippo stores:  smaller, more centrally-located supermarkets selling quality imported grocery items. It is estimated that e-commerce sales account for 60% of total sales at Freshippo, indicating that all the money invested in smart retail technology is worth it.

 

 

Tmall Global as a Launchpad

Aldi first tested the China market in April 2017 by launching a flagship store on Tmall Global – what many to consider to be a brand’s official presence in China.

 

 

Tmall Global sells imported cross-border e-commerce items that don’t have to be formally imported in China, skipping over lengthy product registration and approval processes. Aldi sells cheap, high-quality private-label items such as dried apricots, Knoppers chocolate wafers, and Farmdale milk powder.

 

 

But what's more is that Aldi opened a sourcing office in Hong Kong long ago in 2015, enabling it to build out a robust supply chain for its Asia operations (including Australia). This means that it has been preparing for the China market for quite some time. Aldi's Tmall store gave it a channel to test new products and customers' reaction to them, without having to export them in bulk and incur inventory risk.

 

 

The three main channels through which customers can buy Aldi products: offline retail, WeChat delivery, and Tmall.

 

  • Offline retail gives customers the chance to discover and try new products in the store, which is important for categories such as fresh groceries.

 

 

  • The delivery services give customers the option of ordering food when they don't feel like going to the store, or if they forgot to purchase an item, or even if they just don't feel like carrying all those heavy groceries home.

 

 

  • And lastly, Tmall Global gives customers the option of purchasing imported cross-border e-commerce items that may be more difficult to find in offline retail stores in China. For Aldi, it also gives management the ability to test new products online and customers' reaction to them before exporting them in bulk to China.


 

Why Hasn’t Apple Pay Replicated Alipa...

Why Hasn’t Apple Pay Replicated Alipay’s Success?

Even before Covid-19, mobile payment platforms were experiencing a boom in the U.S. and China. Apple Pay (U.S.) and Alipay (China) have radically changed the way people transact, offering secure, contactless payment options through mobile phones. Though both platforms are growing, Alipay is outperforming its U.S. peer: As of late 2019, Bain & Company found that only 9% of American consumers had adopted Apple Pay while 81% of Chinese consumers used Alipay. Given the size difference between the two countries, the difference between the number of Alipay users in China and Apple Pay users in the U.S. is staggeringly large. What are some of the factors driving this stark contrast?

 

 

Based on our extensive financial services industry experience and work with platform companies, we found two key strategic drivers for successful platform adoption: 1) Create value for all parties and 2) Monetize the ecosystem, not just the product. So far, Apple Pay has only marginally accomplished the first while Alipay has mastered both. Other platform leaders can learn from their examples.

 

 

Apple Pay focused on the consumer.

The Steve Jobs-driven culture of focusing relentlessly on customer experience was core to Apple’s development of Apple Pay, which launched in 2014. The premise was simple: Apple Pay relied on encrypted near-field communication (NFC) signals from point of sale devices that would allow users to pay with their iPhones instead of a credit card. Apple Pay seemed to offer a genuinely futuristic consumer experience that was secure, seamless, and fast: NFC technology is extremely quick, and consumers can use their fingerprint to authenticate the transaction, significantly reducing fraud. But for the average U.S. consumer, paying with Apple Pay only saved a few seconds during in-store transactions and thus was only marginally more convenient than paying with a debit or credit card.

 

 

Apple was less focused on mutually beneficial partnerships with banks and merchants. Assuming customers would adopt their platform quickly, Apple attempted to monetize it from the very beginning and charged banks and issuers around 0.15% per transaction for Apple Pay — on top of regular credit card processing fees, which range from 1.15% + $0.05 to 3.15% + $0.10 per transaction. This meant that there was little incentive to adopt the new technology — especially given implementation costs for new NFC-equipped point of sale terminals, which could cost between $1,000 and $2,000 when accounting for necessary software and training for employees. Around the time of Apple Pay’s launch, only around 10% of all point of sale terminals were NFC enabled, and the cost challenge to merchants and limited benefit to consumers hampered adoption.

 

 

In 2019, five years after its launch, Apple Pay’s domestic growth remained slow: Only around 6% of people who could use Apple Pay at a physical point of sale were doing so, despite the fact that almost all point-of-sale terminals that are shipped in North America today are NFC enabled. There’s good reason to believe the number of users has grown significantly during the pandemic, but it would require years of exponential growth in adoption to even begin to match Alipay’s dominance in China.

 

   

 

Alipay focused on creating value for all parties, not just for consumers.

Alipay, which was spun off from Alibaba in 2011 and became Ant Financial (now Ant Group) in 2014, grew from a consumer need for a trusted, verified way to pay for goods purchased from parent company Alibaba’s massive e-commerce sites. Alipay was the solution, but the strategy behind it went beyond payments.

 

 

Alipay charges around a 0.6% transaction fee to merchants to process a transaction, roughly half of the fee for processing local credit cards. While the fee is more expensive than allowing customers to use cash, merchants could often expect a lift in sales that came from accepting Alipay. Further, for merchants, the implementation cost to accept Alipay in stores is extremely low, as Alipay doesn’t rely on NFC or any specialized point-of-sale system, but relies on QR codes, which require little more than a camera and an internet connection to make a purchase.

 

 

Alipay took a different approach to creating value and monetizing the platform than Apple Pay. It shared many types of consumer insights with merchants, so they could offer new services to clients and launch accurate promotions for free. Ant Group worked with merchants and consumers who used Alipay to improve security protection and reduce losses, helping merchants make more money and decrease their risk. Small to medium-sized businesses flocked to Alipay to capture new business with minimal investment. From 2014 to 2018, the number of merchants that accepted Alipay went from approximately 1 million to 30 million, meaning roughly 70% of all merchants in China accepted the platform.

 

 

As Alipay grew, Ant Group was also able to use the data to build new partnerships and offer new services, which they monetized. Trillions of dollars of transactions flow through Alipay versus billions on Apple Pay. Based on the payment data that Ant Group receives, the company can offer a host of high-margin products to both consumers and merchants. For young and lower-class consumers, Ant Group offers credit cards and wealth management services. For small to medium-sized merchants, Ant offers small, short-term loans. These products are not traditionally available to these segments and are hugely valuable. The success of these products has prompted Ant Group’s valuation to go from $75 billion in 2016 to $200 billion just four years later.

 

 

What aspiring platform leaders can learn.

To be sure, there are caveats to the story. First, there are important differences between the U.S. and Chinese mobile payments space. Among them, China is jumping from cash to mobile payments while the U.S. is transitioning from credit cards to contactless payments, which include mobile payments and “tap to pay” credit and debit cards. The mobile internet also evolved much more rapidly in China than the U.S., and mobile payments were a logical part of that evolution. Additionally, the Chinese economy has grown very rapidly, giving Chinese payments players — including Alipay’s main competitor, WeChat Pay — strong tailwinds.

 

 

Consumer preferences are also changing. Prior to Covid-19, many U.S. consumers and merchants were concerned with speed, convenience and security when transacting. Now, these same parties are focused on health and safety and are adopting contactless payments in greater numbers. In this context, Apple Pay has emerged as a solution to a different problem than the one it originally meant to solve.

 

 

This shift in preferences, already clearly underway, may require that payment companies think about value differently than before. The lesson for platform leaders, therefore, has two parts. First, leaders must provide value for all parties on the platform by addressing high-priority pain points, which may change over time. Second, platform leaders must monetize the ecosystem and not just the product, ensuring that they do not burden customers on one side of platform and hamper overall adoption in the process. By learning from mobile payments and considering the strategic drivers of adoption, platform leaders in other industries can ensure they are thought of as more Alipay than Apple Pay.

 

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Source: Harvard Business Review: Ian Gross, Kristofer “Kriffy” Perez and Bee-Lian Quah

European Business in China, Position...

European Business in China, Position Paper 2020-21

The European Union Chamber of Commerce in China has released its European Business in China – Position Paper 2020/2021 (Position Paper). This annual publication delivers to the Chinese Government over 800 detailed recommendations for improving the business environment, spread across 34 industry sectors and horizontal issues. The Position Paper details how persistent issues, such as limited market access and a complex regulatory environment, prevent European businesses from contributing fully to China’s sustainable development.

 

 

This significant amount of untapped market potential could help to not only boost economic growth, but also stave off serious problems that have for some time threatened China’s development, like its burgeoning debt situation and rapidly ageing population. While the European Chamber has been advocating for increased market access and a level playing field for its members for the past two decades, it is now critical for China to enact meaningful reforms due to the economic devastation wreaked by the COVID-19 pandemic and the looming threat of decoupling.

 

 

Although European companies remain committed to the market, a number of ‘dichotomies’ that have emerged in recent years raise questions over which direction China will eventually decide to move in:

 

 

  • The ‘one economy, two systems’ model, which divides the private and state-owned economies
  • The country’s economic potential versus its market access regime
  • The persistent divide between China’s rhetoric and the reality on the ground
  • The clash of China’s charm offensive towards European business and its ‘wolf warriors’ in Europe

 

 

These issues are further compounded by the increased politicisation of doing business in China. This is a serious factor that threatens business operations in ways that companies can neither predict nor control. European leaders currently still have the appetite for engagement, but public opinion in the Old Continent is souring on China: voters are voicing their concerns over the unbalanced economic relationship, allegations of forced labour in Xinjiang and the autonomy of Hong Kong. These issues present a real challenge for the EU and China to find an effective way forward before the window of opportunity closes.

 

 

It is therefore imperative that the EU and China strive for a political agreement on the Comprehensive Agreement on Investment (CAI) by the end of 2020. A half-baked deal that leaves the most critical issues unaddressed would be unwelcome and futile. Instead, it must deliver tangible results and secure open and fair markets on both sides to bolster the relationship and lay the groundwork for further productive engagement.

 

 

“Having inked bold economic agreements with numerous diverse partners in recent years, it is not revolutionary that the EU should expect a market that is as open and fair as its own when entering into such an agreement with China,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “After more than 30 painful rounds of CAI negotiations, there’s a real sense that this is now or never.”

 

 

Please click here to download the report (registration witth an email required).

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