Thursday Tech Briefing: ZTE, Cainiao, Didi

BIG TECH COMPANIES

1. ZTE Seeks More Than $10 Billion in Credit Lines

What: ZTE said that it plans to apply for a 30 billion yuan ($4.9 billion) line of credit from Bank of China and another $6 billion from China Development Bank. The plan is subject to shareholder approval at a meeting scheduled for June 29.

Why it’s important: ZTE resumed trading Wednesday after a nearly two-month suspension. The company’s stock plunged by 42% in Hong Kong, as investors fretted about the impact of a $1.4 billion penalty and major management changes imposed by the U.S. government.

Big picture: The ZTE case has been a major issue in ongoing trade negotiations between China and the U.S. China’s No. 2 telecom equipment-maker is expected to soon be back in operation after a settlement was reached with the U.S. government to lift sanctions for illegal sales to Iran. The case has also drawn attention for spotlighting the high dependence of China’s high-tech industries on foreign know-how. (Source: Company press release)

2. Cainiao Partners with Emirates on Dubai Logistics Hub

What: Cainiao Network Technology Co., the logistics arm of Alibaba Group, set up a partnership with Emirates SkyCargo, the freight division of Emirates airline, to jointly develop a logistics hub in Dubai. No financial details were released.

Why it’s important: The deal is part of Cainiao’s broader effort to provide 72-hour global delivery anywhere worldwide through an expanding network. The Hangzhou-based company recently unveiled plans to build five global hubs in Dubai, Hangzhou, Kuala Lumpur, Liege and Moscow, involving a total investment of hundreds of billions of yuan.

Big picture: Cainiao has been stepping up investment and facilities construction in recent months. Last week, it announced that it will set up a joint venture with China National Aviation Corp. (Group) Ltd. and YTO Express Group Co. to invest $1.5 billion in a new logistics center at Hong Kong International Airport. China’s logistics industry has seen a broader boom in new investment fueled by the popularity of e-commerce in the country. (Source: Caixin)

3. Didi Chuxing Resumes Carpooling Service at Night with New Rules

What: China’s biggest ride-hailing company Didi Chuxing said its carpooling service drivers can only pick up passengers of the same sex in the early morning and late evening, in new rules published since the murder of a passenger by one of its drivers.

Why it’s important: The carpooling service at night was suspended last month after a 21-year-old female flight attendant was killed while traveling from an airport hotel to the downtown area of the eastern Chinese city of Zhengzhou. Her driver — the suspected killer — bypassed defective safety controls in the app.

Big picture: Didi’s new rule comes at a time when the Chinese government is also stepping in to regulate the ride-hailing industry. Earlier this month, China’s Ministry of Transport and six other ministries said they will launch joint supervision of the industry, for both in-progress rides and after-journey services. (Source: Company press release)

4. Muddy Waters Shorts Chinese Education Firm TAL

What: Famous short seller Muddy Waters is shorting TAL Education Group, accusing it of fraud. Muddy Waters pointed out that although TAL is a “real business”, it has been fraudulently overstating its profits since at least 2016. The firm estimates that in 2016 through 2018, TAL overstated its net income by at least 43.6%.

Why it’s important: U.S.-listed shares of TAL dropped nearly 10% after the report came out. Muddy Waters is best known for spotting fraud at Sino-Forest Corp., a Canadian-listed Chinese company whose stock fell 74% after an attack by the short seller. That case cast a broader spotlight on questionable accounting practices sometimes used at Chinese firms. (Source: Muddy Waters press release)

POLICY

5. Zhejiang University to Introduce Blockchain Course for Undergraduates

What: Zhejiang University, one of China’s top universities, will open a blockchain course titled “Blockchain and Digital Assets” to undergraduates this fall.

Big picture: As blockchain goes mainstream, there is a growing need to cultivate talent specializing in the technology. Many top business schools in the U.S. are expanding classes in digital currency and blockchain. China is also moving aggressively to promote blockchain and other technologies that can help it move up the value chain away from its traditional position as a low-end manufacturer. (Source: Xinhua, Link in Chinese)

PRODUCTS

6. Smartphone Shipments Edge Up in May

What: China saw its smartphone shipments rise slightly in May, reversing a year and a half of contraction after eight years of expansion. Shipments reached 36 million units for the month, up nearly 2% year-on-year, according to a report released by the China Academy of Information and Communications Technology, a research arm of the country’s telecom regulator.

Why it’s important: Three of the world’s top five smartphone makers are now based in China, making the country the world’s largest and most competitive market. When the market shrinks, these manufacturers, many making similar low-cost models, have to compete fiercely and many are believed to be losing money. (Source: Caixin)

Compiled by Ye Zhanqi