NEW SLETTER |3 J U LY 2 0 1 7

FCCC/EUCBA activities China Immersion Program for Health Industry – October 23-27, 2017

Activities supported by FCCC The 12 th EU-China Business and Technology Cooperation Fair – 24-31 October 2017 – Chengdu – Qingdao

Advertisement and sponsorship Advertisement and sponsorship opportunities 2017Past events Meeting with the future Belgian Ambassador to China –

Monday 19 June 2017 – BrusselsAdvertisement Hainan Airlines, your direct link from Belgium to China

Coastair: We Fly CargoAutomotive Joyson hopes to take over Japanese airbag maker

Geely to acquire flying car start-up TerrafugiaFinance Evergrande launches largest U.S. dollar bond in Asia

China-led AIIB gets top rating from Moody’sForeign investment “Negative list” to be used for all foreign investment

Foreign trade China willing to negotiate FTA with MexicoHealth China facing diabetes epidemic

IPR protection Alibaba uses big data tech to detect counterfeitsMacro-economy Highlights of Premier Li Keqiang’s speech at the World

Economic ForumChinese CEOs see tech disruption eliminating some market leaders

Mergers & acquisitions SASAC approves merger of Sinomach and China High-Tech Group

Real estate Chinese property investment to drop to ‘normal level’Retail China’s 34 million ‘mass affluent’ consumers to drive

consumptionTencent becomes most valuable Chinese brand

Science & technology Tsinghua University No 14 in Times’ rankingStock markets Logistics firm Best challenges dominant players with IPO

Travel Ski resort Harbin Wanda City opens for businessVIP visits Premier Li meets WEF Executive Chairman Klaus Schwab

FCCC Newsletter No 518, July 3, 2017 Page 1

One-line news

FCCC/EUCBA ACTIVITIESChina Immersion Program for Health Industry – October 23-27, 2017

The Cheung Kong Graduate School of Business (CKGSB) is organizing an immersion program for the health industry from October 23 to 27, 2017. The program is co-developed with the EU-China Business Association (EUCBA), the Flanders-China Chamber of Commerce (FCCC), the China-Britain Business Council, and Luso-Chinesa.

As your pathway to business with China, 2017 CKGSB’s China Immersion Program for Health Industry will immerse participants into the true market realities. CKGSB helps explore the key elements of China’s cultural and business environment. This 5-day blended learning program covers a concise and informative range of classroom learning, exposure to China’s Food and Drug Administration (FDA) and Centre for Drug Evaluation and wide ranging visits to both Western and Eastern companies operating in China in: Pharmaceuticals, Biotechnology, Nutrition, Medical Insurance, Medical devices and applications, as well as Healthcare and its related products and services

PROGRAM DIRECTOR

“Many large European health related companies have benefited tremendously from the booming Chinese economy and its increasing desire for advanced health care products and services. However, SMEs in the European industry have generally missed out on the same opportunities. This is due to the lack of China knowledge, network and partners in China and investment opportunities. China Immersion Program for Health Industry aims to solve this problem by providing European SMEs with the life-changing opportunities to benefit from the lucrative and fast growing Chinese health market.

Through its world recognised faculty, alumni and programs, CKGSB provides an unprecedented level of support to aid Western health care companies in creating a brand and appropriate China stage where organisations are able to drive competitive advantage and distinguish their products. This includes advancements in product quality and packaging design adaptations to the Chinese market, as well as increased access to China’s best distribution channels.”

Bo Ji, Chief Representative of Europe & Assistant Dean, CKGSB

PROGRAM BENEFITS

Participants will have the opportunity to learn from CKGSB’s world-class faculty and benefit from the rich experience of industry practitioners. The program provides the foundations for participants to immerse themselves in what it truly takes to operate a successful health care organization in the Chinese market. Through the use of business case studies, group discussions and company visits, Western executives will learn from and network with like-minded leaders and entrepreneurs from both China and Europe.

WHO SHOULD ATTEND?

This program is aimed at the senior executives who are responsible for creating the organisation’s future strategy closely aligned with the high growth health industry in China. This program targets the following: Pharmaceuticals, Biotechnology, Nutrition, Medical Insurance, Medical device and applications, as well as Healthcare and its related products and services.

Day 1Morning China’s Transformation and its Global ImplicationsAfternoon Chinese Health Industry OverviewEvening Welcome Networking Dinner and Cultural Event with European Union Chamber of Commerce in China

FCCC Newsletter No 518, July 3, 2017 Page 2

Day 2Morning China Entry StrategiesAfternoon Field Visit: Foreign Pharmaceutical Company in China: MNCs in ChinaA wholly state-owned hospital visit Evening CEO & Executive Networking Dinner with MNCs

Day 3Morning Policy, Regulation and Chinese Health IndustryAfternoon Field Visit: CFDA & CDE Speaker: Product Registration & Clinical Testing in ChinaEvening CEO & Executive Networking Dinner withRegulators, Industry Experts

Day 4Morning Health Sales & Marketing in ChinaAfternoon Field Visit: Chinese Health Company: Strategic Alliances & PartnershipsA privately owned hospital visit Evening CEO & Executive Networking Dinner with Selected Chinese Health Executives

Day 5Morning GMP Certification and Manufacturing in ChinaAfternoon Field Visit: Big Health Industrial ParkEvening Networking and Pitch Session with Chinese Health Investors

PROGRAM INFORMATION

Upcoming session: October 23-27, 2017Tuition: €6,000 EUCBA Members are eligible for a 10% discount. Tuition includes class materials as well as selected meals during the program.Location: TBDTravel and accommodation: TBDProgram language: all materials and lectures will be delivered in English.

APPLICATION

You can register for the 2017China Immersion Program for Health Industry by contacting the Program Director, Mr. Bo Ji at boji@ckgsb.edu.cn or by calling the London office on +44 (0)20 7766 8201. We will then issue you a registration form to book your place.

ABOUT CKGSB

As a world-class business school from China, Cheung Kong Graduate School of Business (CKGSB) aims to develop current and future leaders with a global vision, a humanitarian spirit and an innovative mind-set. Established in Beijing in November 2002 with generous support from the Li Ka Shing Foundation, CKGSB is China’s first faculty-governed, non-profit, independent business school.

Over the past 13 years, CKGSB has developed into a prominent business school with 45 full-time professors, who have earned their PhDs or held tenured faculty positions at leading business schools such as Harvard, Wharton and Stanford. Their research have provided the basis for over 300 case studies of both China-specific and global issues. CKGSB also stands apart for its unmatched alumni network. More than half of the 10,000+ CKGSB alumni are at the CEO or Chairman level and, collectively, lead one-fifth of China’s most valuable brands. Together, their companies shape over $1 trillion in annual revenue, demonstrating the school’s impact and influence.

In addition to its main campus in the center of Beijing, CKGSB has campuses and teaching facilities in Shanghai, Shenzhen and New York, as well as offices in Hong Kong and London. The school offers innovative MBA, Finance MBA, Executive MBA, Dual-Degree EMBA with IMD, Korean EMBA, Finance EMBA, Doctor of Business Administration and Executive Education programs.

FCCC Newsletter No 518, July 3, 2017 Page 3

ACTIVITIES SUPPORTED BY FCCCThe 12th EU-China Business and Technology Cooperation Fair – 24-31 October 2017 – Chengdu – Qingdao

As an important platform for building ever closer relationship between 27 EU member states and China, the 12th EU-China Business and Technology Cooperation Fair, in the context of the importance of the land and marine Silk Roads linking China and Europe, will take place in Chengdu and Qingdao, two vital strategic cities of west and north China, the first phase in Chengdu from 24 till 27 October, 2017 and the second phase in Qingdao from 29 to 31 October, 2017. The fair will gather 1,500 participants of companies, state/regional governments, clusters, business associations, EU-China cooperation experts, universities, R&D institutions from west and north China, the European Commission, EEN partners, and European countries who are seeking potential collaboration and partnerships with their counterparts.

The EU-China Business Association (EUCBA) and the Flanders-China Chamber of Commerce (FCCC) are partners of the 12th EU-China Business and Technology Cooperation Fair.

Cooperation Fair China Tour 2017

Chengdu – Qingdao, 24-31 Oct., 2017One of the Largest Platforms for Investment, Trade and Technological Cooperation between the European Union and ChinaMeet with Over 30 Most Competitive Clusters in ChinaMatchmaking with over 1,000 Chinese EnterprisesLearn the Favorable Policies for European Entrepreneurs to Start up Business in China

Chengdu, 24-27 Oct., 2017Centre of West China, Hometown to Giant PandasInitial Station of Chengdu-Europe Express Railway Lodz, PolandForbes listed Chengdu as one of “The Next Decade’s Fastest Growing Cities Globally”Chengdu Shuangliu International Airport: Ranked 1 st in Mid & West China Direct, Flights to Amsterdam, London, Paris, Frankfurt, Moscow, etc.14 Consulates General settled in ChengduLeading Industries: ICT, Environment, Renewable Energy, New Materials, Life Sciences, Bio-Pharmaceuticals, Aviation, Modern Agriculture

Qingdao, 29-31 Oct., 2017Intersection of Two Silk Roads both through the Continent and over the SeaConverging Point for Asia Pacific Economic Integration70% of China's Academicians and 30% of Senior Researchers on Maritime Sciences and Technologies Are Based in QingdaoEU Is Now the TOP 1 Trading Partner for QingdaoLeading Industries: Maritime Equipment, Maritime Bio-Pharmaceuticals, Renewable Energy, New Materials, Maritime Environment, ICT, Home Appliances, Rolling Stock.

ADVERTISEMENT AND SPONSORSHIPAdvertisement and sponsorship opportunities 2017

The Flanders-China Chamber of Commerce offers several advertising and sponsorship opportunities in order to give your activities more exposure to potential new clients and collaboration.

If you are interested in advertising or sponsoring or need more information, please send an e-mail to: gwenn.sonck@flanders-china.bewww.flanders-china.be

The sponsoring opportunities are the following:

FCCC Newsletter No 518, July 3, 2017 Page 4

1. SPONSORING OF ACTIVITIES

During FCCC activities, you can put a banner of your company at the event and distribute documentation of your company and obtain free invitations.

Invitations are distributed via E-mail and the FCCC website and newsletters. The events are announced in different media channels.The fee is according to each different event.

2. SPONSORING AT THE FCCC WEBSITE

Your logo will be displayed on the FCCC home page with click through to your own website or to your own page on the FCCC-website

GOLDEN SPONSOR (12 months): 1.950 €SILVER SPONSOR (6 months): 1.450 €

3. SPONSORING IN THE FCCC WEEKLY NEWSLETTER

Every Monday, the weekly Newsletters are sent and posted on the FCCC website.

Number of recipients every week: 1200 executives dealing with China

GOLDEN SPONSOR (12 months): 1.950 €SILVER SPONSOR (6 months): 1.550 €SPONSOR (3 months): 895 €

4. SPONSORING IN THE QUARTERLY E-NEWSLETTER IN CHINESE AND ENGLISH LANGUAGE: “NEWS FROM THE HEART OF EUROPE: FLANDERS”

# Newsletters are also posted online at the FCCC website# 1 issue every quarter# Number of direct recipients: +/- 2000 Chinese and Belgian business leaders, local

authorities and institutions# Distributed through the different Chambers of Commerce in China# Your logo on the electronic newsletter and a 200-word profile of China activities

GOLDEN SPONSOR: 1.650 € -3 issues SILVER SPONSOR: 1.250 € - 2 issues

Amounts are excl. VAT.

5. SPONSORING EU-CHINA ACTIVITIES

The EU-China Business Association (EUCBA) is an association of Associations in the European Union countries promoting business relations between European enterprises, institutions and their Chinese counterparts. It is an International non-profit organisation registered in Belgium.The FCCC holds the secretariat-general of the EUCBA.

The EUCBA organises high-level EU-China events and also publishes a Quarterly newsbulletin.www.eucba.org

If you are interested in advertising or sponsoring or need more information, please send an e-mail to: gwenn.sonck@flanders-china.be

FCCC Newsletter No 518, July 3, 2017 Page 5

PAST EVENTSMeeting with the future Belgian Ambassador to China – Monday 19 June 2017 – Brussels

From left to right: Johan Verstraete; Board Member FCCC and Vice-President Marketing, Sales & Services Weaving Solutions Picanol; Marc Vinck, future Ambassador of Belgium in the People’s Republic of China; Stefaan Vanhooren, Chairman FCCC and President Agfa Graphics, Member of the Executive Committee of the Agfa Gevaert Group; Gwenn Sonck,

Executive Director FCCC; and Philippe Van der Donckt, Vice-Chairman FCCc and Business Development Director Umicore.

The Flanders-China Chamber of Commerce (FCCC) organized a meeting with the future Ambassador of Belgium in China. This event took place on 19 June 2017 at ING Art Center in Brussels.

Mr Stefaan Vanhooren, Chairman, Flanders-China Chamber of Commerce and Mr Marc Vinck, future Ambassador of Belgium in the People’s Republic of China, delivered speeches at the event, which was concluded by an exchange of views and networking.

FCCC Newsletter No 518, July 3, 2017 Page 6

ADVERTISEMENTHainan Airlines, your direct link from Belgium to China

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FCCC Newsletter No 518, July 3, 2017 Page 7

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Coastair: We Fly Cargo

AUTOMOTIVEJoyson hopes to take over Japanese airbag maker

Chinese automotive parts maker Ningbo Joyson Electronics hopes to take over debt-ridden Japanese airbag maker Takata Corp, which is currently filing the largest bankruptcy case in Japan’s manufacturing history. Shanghai-listed Joyson announced that its wholly-owned subsidiary KSS Holdings had signed a memorandum of understanding (MoU) with Takata to acquire the latter’s assets, excluding its ammonium nitrate propellant business. The transaction is estimated at around USD1.59 billion. The deal is still subject to due diligence, negotiations, and the approval of the world’s 14 leading vehicle manufacturers and Takata’s bankruptcy commissioner. Founded in the 1930s as a textile maker, Takata started producing

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seat belts for Japanese automakers in 1960. In January, Takata admitted to concealing potentially fatal risks from its exploding airbags due to the ammonium nitrate inside for about 15 years. The faulty airbag inflaters are linked with at least 17 deaths and 100 injuries worldwide. The number of cars recalled has now reached more than 100 million globally, including models from Honda, Ford and Volkswagen. Takata filed for Chapter 11 bankruptcy in the U.S. state of Delaware, listing more than USD10 billion in liabilities. The Tokyo Stock Exchange said that Takata will be delisted on July 27. Established in 2004, Joyson Electronics acquired KSS for USD920 million in 2016, which helped Joyson’s income surge by 129.5% in fiscal year 2016. It also acquired German automotive information system provider TechniSat Digital for €180 million in the same year, and in 2011, it acquired German automotive parts company Preh, the China Daily reports.

Geely to acquire flying car start-up TerrafugiaChina’s Zhejiang Geely, which owns the Volvo and Lotus car brands, has agreed to buy Terrafugia, a U.S. startup that designed the world’s first practical flying cars. The acquisition of the 11-year-old U.S. flying car designer is the first attempt by a Chinese company to capitalize on a fancy yet exotic concept of a passenger vehicle that flies like an airplane in the air and drives like a car on the ground. “Flying cars can be seen as an ‘ultimate solution’ to traffic problems and this concept can sound particularly appealing to urban Chinese who are often struggling with serious traffic congestions during peak hours,”said Yale Zhang, Managing Director with consultancy Automotive Foresight. “Although it will take many years for makers of flying cars to achieve commercial success, it makes good sense for Geely to first go in and acquire the know-how for their long-term agenda.” Unlike in the field of driverless cars, only a handful of startups worldwide are chasing a flying car dream, with proposed designs spanning from full-bodied aircraft to helicopter-like models. It is over the recent years that larger firms like Uber have stepped in with own programs dedicated to research on vertical take-off and landing of aerial vehicles. Larry Page, Chief Executive of Alphabet, has also secretly spent more than USD100 million on developing flying cars. Terrafugia, founded by a group of MIT graduates in 2006, is the designer of the world’s first practical flying car, called the Transition. It is currently accepting USD10,000 deposits for prospective buyers to reserve a spot in line to purchase the vehicle, with the first deliveries expected in three years’ time and at an estimated price tag of USD279,000. Terrafugia so far raised a total of USD5.82 million in five funding rounds from Boston-based angel investor Semyon Dukach and venture capital firm Transcendent Holdings, the South China Morning Post reports.

• China is extending its lead in the development of new-energy vehicles (NEVs) this year, mainly driven by rapid market growth and increasing battery production, a report by German consulting firm Roland Berger said. The country is expected to see annual NEV production and sales quadruple to pass 2 million units by 2020, according to an industry development plan by the Ministry of Industry and Information Technology (MIIT). China has set a target of electric vehicles accounting for 15-20% of total car sales in 2025 and 40-50% in 2030, Roland Berger said in its report.

• Chinese automaker Geely has signed an agreement with Sweden to set up an innovation center. Based in Gothenborg, the 70,000-square-meter center will be Geely’s largest investment in a research facility in Europe. Geely has four design centers in Sweden, Shanghai, Barcelona and California.

FINANCEEvergrande launches largest U.S. dollar bond in Asia

China Evergrande Group has come under the spotlight after it issued a USD6.6 billion bond, the largest U.S. dollar bond ever completed in Asia, even as it is committed to deleveraging. Evergrande, the country’s largest, yet most indebted developer with a debt-equity ratio over 400%, in March pledged to start deleveraging and has since repaid 70% of its outstanding high-interest perpetual bonds. Analysts said the fundraising could be a pre-emptive move to shore up its resources amid credit tightening. “As credit gets increasingly squeezed domestically, the company wants to accumulate enough cash on hand in advance,” said Danielle Wang, Property Analyst at DBS Vickers. Of the USD6.62 billion bond offering, USD2.82 billion is for debt exchange, and USD3.8 billion is three-tranche new money raised at

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a coupon rate of 6.25%, 7.5% and 8.75% respectively. In a statement, Evergrande said it intended to use the money to refinance existing debt and for general corporate purposes. Franco Leung, Senior Credit Officer at Moody’s said the developer’s gearing could still improve given the USD9 billion in debt is much less than its USD14 billion in perpetual bonds, which was on track to be cleared up by the end of the first half. The global rating agency revised its outlook for Evergrande to stable from negative. The larger than expected size of the bond has shaken up the region’s bond markets. Some investors who oversubscribed to the offer were surprised by its large size, receiving more than they had expected.

China-led AIIB gets top rating from Moody’sThe China-backed Asian Infrastructure Investment Bank (AIIB) received a top-notch credit rating from Moody’s, the rating agency that downgraded China’s sovereign credit rating a month earlier. The long-term foreign currency issuer rating of Aaa granted by Moody’s Investors Service will put the Beijing-based multilateral lender on par with the World Bank and the Asian Development Bank (ADB) and pave the way for the bank to sell bonds to international investors. Moody’s was the first major international rating agency to grant the “highest possible rating” to AIIB. The triple-A rating for AIIB is granted because of the bank’s USD100 billion capital base and prudent policies in risk management, the bank said. The bank now has more than 80 members and lent USD1.7 billion worth of loans last year into nine projects. Sir Danny Alexander, AIIB Vice President, said at the World Economic Forum (WEF) in Dalian that the bank was still in its initial stage of operation and would mobilize private capital to take part in infrastructure projects.

• A Shanghai court has sentenced three Australian and 13 Chinese employees of Australia's Crown Resorts to nine to 10 months in prison after they pleaded guilty to gambling-related charges. Jason O’Connor, Manager of Crown Resorts’ international VIP programs, was sentenced to 10 months and fined CNY2 million. Their time spent in detention since October 14, 2016 will count toward their sentences. O’Connor, who is based in Melbourne, Australia, was ordered to be deported. The 16 were also fined a total of CNY8.62 million.

• Yishidun, an international trading company that illegally profited more than CNY389 million from futures market manipulation, faces seizure of its ill-gotten gains and a CNY300 million fine, according to the Shanghai No.1 intermediate People’s Court. Two former executives, Gao Yan and Liang Zezhong, were granted three-year reprieves from jail sentences of three years and two and half years respectively. Gao was fined CNY1 million and Liang CNY800,000.

• China Bohai Bank, one of China’s 12 national joint-stock banks, is preparing for an initial public offering (IPO), Chairman Li Fu’an said. Standard Chartered Bank (Hong Kong) is its second-biggest shareholder, with a 19.99% stake. Bohai Bank, based in Tianjin, was the first Chinese-funded commercial bank to introduce overseas strategic investors.

• The yuan will not suffer a sharp depreciation in the coming one or two years and its internationalization remains an “irreversible trend”, said Li Daokui, former PBOC Advisor and Dean of Schwarzman College at Tsinghua University. Eswar Prasad, Professor of Trade Policy at Cornell University in the U.S. concurred, saying “I don’t see much space for a fluctuation of the yuan”.

• The Chinese mainland-Hong Kong bond connect program was launched on July 3. It allows for qualified overseas investors to invest in the Chinese interbank bond market. Overseas investors should register the bonds they purchase under qualified overseas trusteeship bodies.

FOREIGN INVESTMENT“Negative list” to be used for all foreign investment

The Chinese government has announced that it will use a “negative list” management approach for all foreign investment, open up more sectors, and further relax restrictions for foreign businesses. From July 28, the negative list approach, which identifies sectors and

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businesses that are off limits or restricted, will be implemented nationwide, said the National Development and Reform Commission (NDRC). Government approvals are no longer required for most foreign investment and only investment on the negative list remains subject to approval. As a result, foreign investments now have easier access to China’s highway passenger transport, processing of certain rare metals, as well as manufacturing of rail transit equipment, and cooking oil, among others. The catalogue also shortened the list of sectors in which foreign investment is completely banned from 36 to 28. Sectors that are off limits include air traffic control and compulsory education institutes.

Foreign banks can now sell and underwrite government bonds in the Shanghai free trade zone (FTZ), according to the latest negative list in the financial service sector. There is also no restriction for international ratings agencies to carry out their business in the Shanghai FTZ. The latest negative list also makes it clear that the proportion of foreign capital in a securities firm cannot exceed 49%. The limit on shares held by a foreign investor in a listed domestic brokerage is unchanged at 20% for a single investor and a total of 25%, the Shanghai Daily reports.

• China’s direct investment in the United States will fall this year under tightening scrutiny and regulation, but U.S. investment in China will remain robust led by technology and consumer goods, according to a new study by the Rhodium Group and the National Committee of U.S.-China Relations. Last year, China poured USD46 billion into the U.S., three times that of 2015. Information communications technology was the largest sector for U.S. investment last year, while real estate and hospitality were the favorites for Chinese investments in the U.S.

• Finnish company Nokia, once a dominant global player in mobile phones, is planning a strong comeback in China’s consumer electronics market as it seeks investment opportunities in digital health and virtual reality (VR). Last week, Nokia Technologies launched a portfolio of digital health products on the Chinese market, including wi-fi connected scales, a blood pressure monitor and the Nokia Health Mate app.

FOREIGN TRADEChina willing to negotiate FTA with Mexico

China is open to negotiating a free-trade agreement (FTA) with Mexico, the Chinese Ambassador to the country Qiu Xiaoqi said. No discussions had been held so far. “Mexico is China’s second-largest trading partner in Latin America and China is Mexico’s second-largest trading partner in the world. This is a highly important relationship and we have great interest in deepening and broadening these ties,” he said. Mexico is keen to cut its economic reliance on the United States out of concern that access may be restricted by the policies of U.S. President Donald Trump, who has pledged to protect American jobs from going outside the country. Qiu’s comments are a potential boost for President Enrique Pena Nieto, whose attitude towards China has been mixed – leading to an off-and-on trade relationship. “I think any agreement to make trade easier is very worthy,” Qiu told the media after a speech at the National Autonomous University of Mexico to mark the 20 th anniversary of Hong Kong’s return to China.

HEALTHChina facing diabetes epidemic

China is facing the largest diabetes epidemic in the world with around 11% of the population suffering from the illness, while nearly 36% are pre-diabetic. A survey, which included 170,287 participants and was conducted in 2013, was analyzed with the assistance of Linhong Wang from the Chinese Center for Disease Control and Prevention and was published in the journal of the American Medical Association. Researchers measured the levels of fasting plasma glucose of each participant. Those with levels of 126 milligrams per deciliter or higher were defined as diabetic while those with levels between 105 and 126mg/dl were defined as pre-diabetic. Among China’s diabetic population, 36.5% were aware of their diagnosis and 32.2% were receiving treatment. Among those being treated, 49.2% had adequate glycemic control. The adult diabetic rate in China of 10.9% is close to the United States’ 9.3%, according to

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2014 figures. China’s pre-diabetic rate of 35.7% was also close to the U.S. rate of 37%. With approximately 1.09 billion adults in China, some 388.1 million were projected to be pre-diabetic, the Shanghai Daily reports.

IPR PROTECTIONAlibaba uses big data tech to detect counterfeits

Alibaba said big data technologies have helped it detect more than 61,000 individuals or groups suspected of operating shops that sell counterfeit goods on Taobao, its online shopping portal. In addition, it has detected 1,640 factories that produce fake goods and supply them to online dealers, Zheng Junfang, Alibaba’s Chief Platform Governance Officer, said at a media briefing. Taobao closed 180,000 stores from March last year to February which were found to have sold counterfeit items. “The people who control such online shops and benefit from selling counterfeits are not usually the people who register as being responsible for the shops. They use other people’s ID to hide their real identities, but big data technologies have allowed us to detect and locate them,” Zheng said. The location of the behind-the-scene big bosseswas related to industrial clusters in different regions. “We’ll try our best to block vendors with bad reputations from re-entering our shopping portal, no matter how they disguise their identities,” Zheng said.

MACRO-ECONOMYHighlights of Premier Li Keqiang’s speech at the World Economic Forum

China would like foreign businesses to keep their profits in the country and reinvest them, Premier Li Keqiang said in his keynote speech at the World Economic Forum (WEF) in Dalian on June 27, although he added there would be no restrictions moving funds out of the country. “I also promise you, for all foreign business profits generated in China, you can move the funds freely in and out of China, and there won’t be any limitations,” said Li. China’s economic growth is gaining fresh momentum and there will be no hard landing, Premier Li said. The unemployment rate in May dropped to 4.91%, he noted, the lowest level in many years. China will continue to open its markets in the services and manufacturing sectors. It will loosen restrictions on shareholdings by foreign companies in joint ventures and will ensure China will continue to be the most attractive investment destination, Li added. The Chinese government will not rely on stimulus to bolster economic growth. Instead, it will use structural adjustment and innovation to maintain economic vitality. The government will keep stable macro policies – a prudent monetary policy and a proactive fiscal policy – to ensure clarity and stability in financial markets. China is fully capable of containing financial market risks and avoiding systemic ones. There are rising geopolitical risks and increasing voices opposing globalization. China will keep its promises in combating climate change and will work to promote globalization, Premier Li Keqiang concluded.

Chinese CEOs see tech disruption eliminating some market leadersA majority of Chief Executives of Chinese companies believe technological changes will “weaken” or “eliminate” some market leaders, but they also see such disruption as providing new opportunities, according to a KPMG survey released at the World Economic Forum (WEF) in Dalian. Eight out of 10 Chief Executives of China-headquartered companies expect there will be major disruption in their industries due to technological changes. More than half believe that some of the traditional leaders in their sectors will be “weakened or eliminated by technological disruption”. Some 70% also believe their organizations are struggling to keep pace with the rate of technology disruption and are concerned about whether they are staying up to date with new technologies, the KMPG report said. The survey, titled “2017 China CEO Outlook – Disrupt and Grow”, polled 1,261 Chief Executive’s worldwide, including 125 from China. “The CEOs I speak with recognize they are operating in a rapidly changing and complex business environment,” Benny Liu, Chairman of KPMG China, told a media briefing at the WEF in Dalian. “China’s restructuring process and increasingly sophisticated consumers are leading to both challenges and opportunities, and CEOs are responding to this by embracing technological disruption to innovate their production and distribution models, as well as to create new products,” Liu added. In the survey, 44% of Chinese Chief Executives ranked “emerging technology” as the risk they are most concerned with. However, three

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quarters of them view the disruption as an opportunity rather than a threat, the South China Morning Post reports. Over the next three years, 86% of Chinese Chief Executives say they will invest in cybersecurity, 83% in digital infrastructure and 73% in emerging technologies.

• President Xi Jinping called for more coordinated efforts to implement the reform agenda in key areas such as the restructuring of state-owned enterprises (SOEs) and improving the supervision of outbound investment. Mixed-ownership reform should be accomplished by the end of this year, according to a statement released after the 36 th

meeting of the Central Leading Group for Deepening Overall Reform, presided over by Xi. Key areas that need attention include improving the corporate governance structure, strengthening supervision of corporate restructuring, and also protecting the interests of employees, the statement said.

• China’s major industrial companies – with an annual revenue of more than CNY20 million – posted faster profit growth in May, supported by larger sales and better investment returns. They reported profits totaling CNY626 billion in May, up 16.7% year-on-year – a growth 2.7 percentage points faster than in April. The NBS data showed 38 of the 41 surveyed industries reported growth in profits, led by the coal and metal industries. January-May total profits rose 22.7% to CNY2.9 trillion. Profits at China’s state-owned enterprises (SOEs) were up 53.3% to CNY652 billion in the January-May period. Private companies’ reported profits grew 14% to CNY963.1 billion in the first five months.

• The Chinese economy is expected to enjoy stable growth and is capable of reaching the growth target of around 6.5% for the whole year, according to the research institute of the Bank of China (BOC). It predicted that China’s economy would expand by around 6.8% year-on-year in the second quarter and by 6.7% in the third quarter. The economy will grow this year at an annual rate of 6.8%, the report added.

• The official manufacturing purchasing managers index (PMI) came in at 51.7 in June, which was better than expected. It was also at its highest mark in three months and signaled that growth in the economy is picking up, despite financial tightening. New orders in June increased to 53.1 from May’s 52.3, while export orders jumped to 52, 1.3 points higher than in May. “Exports have recovered at a pace that beats market expectations,” said Ren Zeping, Chief Economist of Founder Securities. The service sector saw robust growth last month, with the sub index coming in at 53.8, up from 53.5 in May.

MERGERS & ACQUISITIONSSASAC approves merger of Sinomach and China High-Tech Group

The State-owned Assets Supervision and Administration Commission (SASAC) has approved the merger of China National Machinery Industry Corp (Sinomach) and China High-Tech Group Corp, as it continues to reform the structure of state-owned enterprises (SOEs). Sinomach ranked 293rd in the Fortune 500 in 2016, with 2015 profit totaling CNY4.8 billion on revenue of CNY222.7 billion. China High-Tech’s main business is textile equipment making. it reaped CNY43.4 billion in sales and CNY100 million in profit last year. The merger brings down the number of China’s central SOEs to 101.

• Yanzhou Coal Mining has won a take-over battle after sweetening its offer at the eleventh hour for coal assets in Australia sold by Rio Tinto. Rio Tinto confirmed Yancoal Australia to be the preferred buyer of its power-station coal mining unit Coal & Allied Industries, citing a “high level of completion certainty, a further improved offer of USD2.69 billion, with all regulatory approvals received or waived”. The Coal and Allied acquisition will add 556 million tons of “marketable” coal reserves on top of Yancoal’s current reserve of 274 million tons, and more than double its output.

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REAL ESTATEChinese property investment to drop to ‘normal level’

Real estate investment, a key pillar of China’s economy, is expected to fall back to a “normal” level – about 2% to 3% growth – in the second half of this year, according to Liu Shijin, Vice Chairman of the China Development Research Foundation. “Real estate investment actually would have peaked in 2014 if there hadn’t been an upsurge in 2016. So the year-on-year growth will slip to 2% to 3% in the second half, or even negative growth, due to the high comparison base. But that should be a norm in the future,” Liu said on the sidelines of the World Economic Forum (WEF) in Dalian. Real estate investment in China grew 6.9% in 2016 to hit CNY10.26 trillion, 17.2% of total fixed-asset investment (FAI), according to the National Bureau of Statistics (NBS). The growth accelerated in the first four months of the year to 9.3%, in response to a surge in property sales in previous months, but slowed down in parallel with the sales slow-down. Liu said government measures to curb demand were not enough to rein in the excessive price growth. He suggested the government should instead ramp up “supply-side” reforms. He said it is essential to scale up land supply in top-tier cities. Residential land supply as a portion of total land supply should be doubled to above 40% in these cities, and rural land should also be allowed to be sold. The government should also put greater effort into developing suburban areas and enhancing those regions’ access to hospitals, schools and public transportation to alleviate the over-concentration of resources in downtown areas. The rental market, a long underdeveloped sector in China, should be fostered, Liu added. He said property tax, a long overdue reform, is a “fundamental institution” for a healthy property market and efforts to push ahead with its introduction should be intensified, the South China Morning Post reports.

• SOHO China has sold a mixed-use office and retail complex, Hongkou SOHO in Shanghai’s Hongkou district, to Keppel Land China, a wholly-owned subsidiary of Singapore-based Keppel Land and Alpha Investment Partners, a wholly-owned subsidiary of Keppel Capital Holdings, for CNY3.6 billion. The average selling price of the building, designed by Japanese architect Kengo Kuma, was around CNY51,000 a square meter based on leasable gross floor area – 53% higher than the cost, SOHO China said in a statement.

• Home buying sentiment rose for the first time in four weeks in Shanghai amid a strong recovery in home sales in outlying areas. The area of new residential properties sold, excluding government-subsidized affordable housing, jumped 33.5% to 159,000 square meters in Shanghai in the week of June 19, Shanghai Centaline Property Consultants Co said. “The latest rebound was mainly fueled by largely improved transactions in remote districts such as Jiading and Qingpu. However, the recovery might be just a temporary one as the traditional low season of July and August is approaching.

RETAILChina’s 34 million ‘mass affluent’ consumers to drive consumption

China is about to undergo a consumer revolution driven by an emerging group of 34 million “mass affluent” consumers who have built their personal wealth in the new economy, according to a report by Oliver Wyman. Spending by this emerging demographic, which represents 2.5% of China’s population, is set to rise, such that by 2020 they will account for more than 75% of the country’s total consumption. They are the “mass affluent”, generally young, tech-savvy individuals with CNY650,000 to CNY6 million of investable assets, who are more free spending than their Western counterparts. The survey, which polled 1,000 mass affluent Chinese consumers, showed that they are more inclined to spend on entertainment such as sporting activities and cinema, as well as domestic vacations. “They are now seeking meaningful experiences to elevate lifestyles, spending more on experiences that result in higher levels of self-fulfillment,” said Jacques Penhirin, Partner at Oliver Wyman and co-author of the report. “Millennials are jetting off to more exotic destinations. Places like Sweden and Iceland are trending right now and are on track to take over from the generic Asian tourist attractions like Thailand.” The poll also revealed that China’s mass affluent consumers are expressing widespread and profound discontent over the cost of living. “Chinese consumers demand better welfare benefits as they set money aside for future health care treatment and

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education,” said Penhirin, as reported by the South China Morning Post.

Tencent becomes most valuable Chinese brandTencent Holdings has become the most valuable Chinese brand, followed by Alibaba Group Holdings and China Mobile. The three companies were listed in the top 20 of the 100 most valuable global brands in 2017 by BrandZ. With the increasing popularity of WeChat, an instant messaging tool developed by Tencent, the share price of Tencent surged about 60% in the past 12 months. Thirteen of the global top 100 brands are based in China, up from only one brand, China Mobile, 12 years ago. In terms of brand value,Chinese brands surged 937% in brand value over 12 years. Their total value now reached USD406 billion and they now comprise 11% of the total. Zhou Qiren, Professor at the National School of Development at Peking University, said: “Quality is the foundation of brands. Now, we need to start a quality revolution in China, so that Chinese brands will gain a footing globally.” As China pivots to a consumption-led economy, the most impressive performance has been posted by brands providing products and services for the urban middle classes, said the report, published by WPP and Kantar Millward Brown. Apple and Google remained the No 1 and No 2 brands on the list, and Amazon entered the top 10, with a 41% growth in brand value, reaching USD139 billion. The value of the top 100 brands increased 8% year-on-year, reaching a combined USD3.64 trillion.

• A survey by Channel News Asia showed that 60% of Chinese consumers prefer foreign brands over local brands. Liu Shijin, Vice Chairman of the China Development Research Foundation told a panel at Summer Davos in Dalian that Chinese consumers will probably warm more to domestic brands in three to five years. “Chinese consumers have three advantages in a global context: first, their scale, the largest in the world; second, they are increasingly picky and quality conscious; and third, they actively embrace innovation,” Liu said.

• Shanghai tops other cities in the dining consumption index of Alibaba’s lifestyle service unit, Koubei. Diners in Xiamen, Guangzhou and Tianjin prefer Western food more than consumers in other regions, while Shanghai residents favor Cantonese and Sichuan cuisine. Last year, China’s dining and catering industry was worth CNY3.5 trillion, according to the National Bureau of Statistics (NBS).

SCIENCE & TECHNOLOGYTsinghua University No 14 in Times’ ranking

Harvard University took the top spot for the seventh year in a row in The Times Higher Education’s World Reputation Rankings, published in June. With 42 institutions in the top 100, the United States continues to dominate. Tsinghua University is the highest ranking Chinese university, placing 14th, and is the second most prestigious Asia-Pacific university. The third is Peking University, which is 17th overall. Both have gained four places compared with last year. Zhejiang University has performed well, rising 30 places to the joint 51-60 bracket. It overtook both Fudan University and Shanghai Jiao Tong University, both found in the 81-90 band. Nanjing University has broken into the top 100 for the first time and is ranked 91-100. The University of Hong Kong features in the top 40 for the first time in five years after climbing six places to joint 39th. The Chinese University of Hong Kong and the Hong Kong University of Science and Technology are in the 71-80 band.

• Shenzhen-based drone maker DJI Innovation Technology signed a memorandum of understanding with Dow AgroSciences to work on the research and application of crop protection drones and technology. DJI is the world’s largest drone maker, accounting for 70% of the global consumer drone market. Its MG series crop protection drones will be used in cooperation with Dow. China has the largest number of agricultural drones worldwide.

• China was the world’s second biggest investor in artificial intelligence (AI) enterprises last year, injecting USD2.6 billion into the sector, according to Chinese think tank the Wuzhen Institute. The U.S. topped the list with USD17.9 billion.

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• ZTE, China’s largest listed telecommunications equipment maker, will earmark at least CNY2 billion every year through 2020 for 5G research and development, revving up to commercialize the next generation mobile technology that could be 20 times faster than current standards.

STOCK MARKETSLogistics firm Best challenges dominant players with IPO

Alibaba-backed logistics firm Best has announced plans for an initial public offering (IPO) in New York. Best, formerly known as Best Logistics Technologies, aims to sell shares worth USD750 million, becoming the latest Chinese delivery company to go public, according to a Securities and Exchange filing. The fundraising plan came after Best, in which Alibaba Group has a 23.4% share, reported business growth for 30 consecutive months, which could put it in a better position against the five dominant players – SF Express, YTO Express, STO Express, ZTO Express and Yunda Express. The company said the proceeds of the IPO would be used for general corporate purposes. “Overall, the express delivery market in China will continue to grow, but Best is emerging to be a dark horse that will outgrow its rivals, banking on its financial strength,” said Zhao Xiaomin, an independent researcher in China’s logistics sector. “It is likely to make the list of the country’s top three delivery companies soon.” Best, despite posting a loss of USD198 million for 2016, saw its revenue from the parcel delivery segment for the first quarter of this year jump 114% to USD304 million. Best, founded by Johnny Chou, a former Greater China President of Alphabet’s Google in 2007, received USD750 million from investors including Citic Private Equity and Goldman Sachs in its latest round of financing last September. China’s express delivery sector is striving to improve operating efficiency, avoid price wars, and fine-tune services to clients in a USD1.6 trillion logistics market. According to consulting firm iResearch, express delivery is expected to grow at an annualized 22.8% pace between 2016 and 2021 in terms of parcel volume, the South China Morning Post reports.

• Initial public offerings (IPOs) will slow down in China in the second half with tighter criteria to help stabilize the market amid slower growth and tightening liquidity, Ernst & Young said. The number of A-share IPOs quadrupled in the first half from the same period of last year to 246, raising a combined CNY125.6 billion. But a slowdown of iPOs already started in the second quarter when major economic indicators began to moderate and financial regulators tightened policies to accelerate deleveraging. The China Securities Regulatory Commission (CSRC) rejected 14% of iPO applications in the first half, twice the number of last year.

• There is likely to be a rash of new technology sector initial public offerings (IPOs) over the next 12 to 18 months, especially by companies already backed by China’s technology giants. Research firm CB Insights says that out of the 46 “unicorns” in China, 21 are backed by China’s Big Four internet giants, Alibaba, Baidu, JD.com, and Tencent or their affiliates, such as Ant Financial. Likely IPO candidates include: logistics company Best; Zhong An Online Property and Casualty Insurance, the first online-only insurer in China; China Reading, the country’s largest online publishing and e-book company; Sogou, China’s third-biggest search engine; and Ant Financial, the online finance arm of Alibaba.

• Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, is seeking to raise USD1.5 billion by listing in Hong Kong. Founded in 2013, Zhong An’s largest shareholder is Alibaba’s financial-services affiliate Ant Financial, which has a 16% stake. Tencent, and Ping An Insurance, China’s second largest insurer, are the joint-second largest shareholders, each with 12.08%. If the deal goes through, Zhong An will be the first financial technology company to be listed in Hong Kong.

• HSBC and Bank of East Asia (BEA) have both received approval to establish their securities joint ventures in the Qianhai economic zone. Both lenders will partner with Qianhai Financial Holdings, a wholly-owned subsidiary of the economic zone. It has taken over a year and a half for the two banks to get the go-ahead from the China Securities Regulatory Commission (CSRC). BEA will own 49% of its venture, East Asia Qianhai Securities, but will be the largest shareholder. Qianhai Financial Holdings will own 4.9%, while Shenzhen Infogem Technologies and Chenguang Holding Group have 26.1% and 20% respectively. HSBC will own 51% of its joint venture, HSBC

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Qianhai Securities. The bank said that would make it the first foreign lender to hold a majority stake in a securities joint venture in China.

TRAVELSki resort Harbin Wanda City opens for business

Harbin Wanda City, a USD6 billion resort development opened for business in Harbin. The resort features Russian architecture, a movie cineplex and a grand piano-shaped indoor ski resort that allows 3,000 people to ski or snowboard on six runs, all in an area covering 1.6 square kilometers. Up to 30,000 people will be hired to work in the resort when it is completed. It will provide winter sports throughout the year. According to industry consultancy Aecom, a total of 59 new theme parks will open in China by 2020, serving an estimated 220 million visitors.

• Guangshen Railway Co, which operates a high-speed line between Guangdong and Shenzhen, is part of a consortium that has been shortlisted to run the United Kingdom’s planned HS2 high-speed line between London and Birmingham, the British government announced. It is the first Chinese company to be part of a shortlist for a British rail project. Hong Kong metro operator MTR, accountancy firm Deloitte, and WSP Parsons Brinckerhof are also part of the consortium. The HS2 line is due to start operating by 2026.

• Mobike, one of China’s largest bike-sharing operators, has launched an initial 1,000 bikes in Manchester and Salford in the United Kingdom. Chinese bike-sharing companies have also entered the United States, Singapore and Kazakhstan.

• Hong Kong-based airline Cathay Dragon said it will grow its network in mainland China through the expansion of its code share arrangement with Shenzhen Airlines. The subsidiary of Cathay Pacific Airways will add three mainland cities to its list of destinations, including the eastern cities of Yantai and Jinan in Shandong province, and Harbin in northeast China.

• China Southern Airlines has become China’s first carrier to use facial recognition software in the boarding process, launching the system at Jiangying airport in Nanyang, Henan province. Passengers have their faces scanned in lieu of using boarding passes. The scanning process lasts just one second. The airline developed its new facial recognition software with Baidu and GRG Banking, a Guangzhou-based ATM supplier.

VIP VISITSPremier Li meets WEF Executive Chairman Klaus Schwab

China is ready to push forward with institutional reforms and tap market potential through innovation and entrepreneurship to seize opportunities brought by the latest round of global technological and industrial revolution, Premier Li Keqiang said in a meeting with Klaus Schwab, Founder and Executive Chairman of the World Economic Forum (WEF) in Dalian. Li and Schwab recalled their first meeting in Dalian 12 years ago when the first Summer Davos Forum was held. Premier Li said China is resolved to push forward with a new roundof opening up and vowed to create a fair investment environment for overseas investors. Klaus Schwab said the World Economic Forum is willing to enhance its cooperation with China.

President Xi Jinping vowed to push forward China’s cooperation with northern Europe while meeting Swedish Prime Minister Stefan Lofven and Finnish Prime Minister Juha Sipila. The two Prime Ministers are in China to attend the Summer Davos Forum in Dalian. Xi noted that Sweden was the first Western country to set up diplomatic ties with China.

Over 2,000 prominent leaders from politics, business, civil society, academia and the arts from 84 countries and regions, attended this year’s Summer Davos, which was held under the theme “Achieving Inclusive Growth in the Fourth Industrial Revolution”.

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• Chinese President Xi Jinping is setting out on a trip to Russia and Germany on July 3. In Hamburg, he will attend the 12 th G20 Summit and is expected to have a side meeting with U.S. President Donald Trump. China’s Ministry of Commerce announced that China and Russia would study the feasibility of linking China’s “Belt and Road Initiative” to the Russia-backed Eurasian Economic Union. As President Xi Jinping visits Russia, the link will be on the agenda during his talks with his counterpart, Vladimir Putin. The Eurasian Economic Union was proposed by Russia, Belarus and Kazakhstan in 2014, aiming to create a single market with a free flow of labor, capital and goods by 2025.

• Chinese President Xi Jinping attended the ceremonies for the 20 th anniversary of the handover of Hong Kong to Chinese sovereignty and the swearing-in of incoming Hong Kong Chief Executive Carrie Lam.

ONE-LINE NEWS• “Outstanding” foreign graduates will enjoy more job opportunities in Shanghai this year

as they will no longer require two years of work experience before being allowed to work in the city. “Outstanding” means students with an average academic score of 80 and above. Foreigners who graduate from Shanghai universities need only gain a bachelor’s degree if their future employers are in the Free Trade Zone or the Zhangjiang area.

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