Wednesday Tech Briefing: May 30

POLICIES

1. U.S. Moves Ahead on China Trade Curbs, Including Tech

WHAT:

•   The White House said it will announce investment restrictions and “enhanced export controls” for Chinese individuals and entities “related to the acquisition of industrially significant technology” by the end of June

•   In a response hours later, China’s Commerce Ministry pledged to defend its “core national interests”

WHY IT’S IMPORTANT:

•   The tech restrictions were part of broader U.S. announcement saying it would launch a final list of $50 billion in Chinese imports subject to punitive 25% tariffs

•   U.S. move surprised many after the White House said earlier this month it would put its trade war with China on hold while negotiating a broader deal to reduce two sides’ trade imbalance

BIG PICTURE:

•   With Commerce Secretary Wilbur Ross heading to Beijing later this week, the latest announcement could give the U.S. added leverage as trade talks resume

•   The U.S. is increasingly concerned the Chinese are using industrial policy and government subsidies to obtain U.S. technology

Source: The Wall Street Journal

BIG TECH COMPANIES

2. ZTE Sidelines Two More Executives Amid U.S.-China Negotiations: Report

WHAT:

•   ZTE chief technology officer Xu Huijun and Huang Dabin, who oversees corporate operations, have been sidelined and are no longer performing their typical duties, according to unnamed sources

•   The company’s chief compliance and legal official Cheng Gang was similarly replaced in March

WHY IT’S IMPORTANT:

•   The Trump administration has reportedly reached a deal to put the telecom giant back in business after it pays a significant fine and made management changes last week. The management changes may be part of the deal

BIG PICTURE:

•   Chinese officials sought a pullback on life-threatening U.S. sanctions against ZTE, which is being punished for illegally selling American products to Iran, as part of any broader deal to prevent a trade war

Source: South China Morning Post

DEALS AND FUNDRAISING

3. Dangdang Chairman to Step Down After Company Sold to HNA Tech

WHAT:

•   HNA Tech, a unit of debt-ridden Chinese conglomerate HNA Group, has finalized terms to acquire Dangdang Inc. in a deal that values the e-commerce company at 7.5 billion yuan ($1.2 billion)

•   After the acquisition, Dangdang Chairman Li Guoqing and his wife Peggy Yu will step down and no longer be members of board

WHY IT’S IMPORTANT:

•   The deal comes as HNA is grappling with a huge pile of debt after years of aggressive spending, including $50 billion of acquisitions in aviation, tourism, real estate and other sectors

BIG PICTURE:

•   HNA has slowed its acquisition pace since last year and is beginning to sell assets, amid broader regulatory scrutiny over private companies’ high debt levels

Source: Caixin (link in Chinese)

4. Alibaba Leads $1.38 Billion Investment in Delivery Giant ZTO

WHAT:

•   Alibaba Group Holding Ltd. is leading the purchase of 10% of Chinese courier ZTO Express Inc. for $1.38 billion

WHY IT’S IMPORTANT:

•   The cash infusion will bolster U.S.-listed ZTO as it expands its network to keep pace with fast-growing rivals

BIG PICTURE:

•   Chinese express delivery has ballooned in recent years alongside a boom in online shopping, producing around half a dozen major players

•   Alibaba’s Cainiao logistics unit has been forming multiple tie-ups with third-party logistics providers as part of its business model

Source: Bloomberg

5. Ant Financial Raises $10 Billion in Latest Funding Round, Sources Say

WHAT:

•   Ant Financial Services Group, operator of China’s biggest online payment platform Alipay, has raised $10 billion in its latest funding, valuing it at $150 billion

WHY IT’S IMPORTANT:

•   Ant’s valuation has jumped dramatically over the past few years, from about $60 billion in 2017

BIG PICTURE: 

•   Ant is at the head of China’s young and fast-growing field of companies that have thrived as Beijing opens financial services to private investment

Source: Caixin

6. Babytree Grows Up With $2.2 Billion Valuation

WHAT:

•   Online cosmetics seller Jumei International Holding Ltd. has sold down part of its stake in Babytree Group, in a deal that values the popular online parenting community operator at about $2.2 billion

WHY IT’S IMPORTANT:

•   The transaction marks one of the first publicly disclosed valuations of Babytree, an 11-year-old company whose investors include Chinese private equity giant Fosun

BIG PICTURE:

•   Education and children services companies in China have been experiencing fast growth in recent years with the advent of online learning, spawning a clutch of related IPOs in New York over the last 12 months

Source: Caixin

Compiled by Hou Qijiang, Qian Tong and Zhang Erchi

The sixth item has been updated to correct the company’s valuation.