Friday Tech Briefing: Pinduoduo, iQiyi, Suning

BIG TECH COMPANIES

1. Pinduoduo Shows Widened Net Loss in First Earnings Report After IPO

What: Chinese e-commerce company Pinduoduo reported a 6.64 billion yuan ($1 billion as of June 30) operating loss in the second quarter of 2018, more than five times its operating loss of 122.7 million yuan a year ago, in its first earnings report since its Nasdaq listing in July. The company said its operating expenses had increased significantly due to an increase in company headcount as well as expanded marketing campaigns. Pinduoduo’s total revenue was up 2,489% at 2.71 billion yuan in the second quarter.

Why it’s important: Pinduoduo, a budget online shopping platform, is one of China’s fastest growing e-commerce players. The company, which has faced accusations of allowing counterfeit goods to be sold on its platform, is catching up with industry leaders Alibaba and JD.com with 343.6 million active buyers in the 12 months ending June. (Source: Company filing)

2. China’s ZTE Sees Third-Quarter Profit After First-Half Loss on U.S. Supplier Ban

What: “China’s ZTE Corp said it expects to make a profit in the third quarter after recording its worst-ever first-half net loss on Thursday, the result of a U.S. supplier ban that forced the telecoms gear maker to halt operations for three months,” Reuters reported.

ZTE’s revenue fell 27% to 39.43 billion yuan in the first half of 2018, and the company saw a net loss of 7.83 billion yuan, compared with a net profit of 2.29 billion yuan in the same period last year, ZTE said Thursday. ZTE’s non-operating expenses for the first half of the year were 6.75 billion yuan, mainly due to the payment of a $1.4 billion fine to the U.S. government.

Why it’s important: ZTE was one of the biggest victims of trade conflict between China and the U.S. this year. The company was banned from purchasing critical equipment from U.S. companies in April. The crippling ban was lifted in July after ZTE met a number of conditions set by the U.S. government, including replacing most of its management and paying a $1.4 billion penalty. (Source: Reuters)

3. Suning’s First-Half Profit Rises 1,959.41%

What: Leading online-to-offline retailer Suning.com Co. Ltd. saw its revenue rise 32.16% in the first half of the year to 110.7 billion yuan, while its net profit rose 1,959.41% to 6 billion yuan.

Why it’s important: As of June 30, Suning had a total of 4,813 self-operated stores in 297 cities across the Chinese mainland, Hong Kong and Japan. (Source: Company filing, link in Chinese)

PRODUCTS

4. Imperial Concubine Intrigue May Stem Streamer iQiyi’s Losses

What: China’s top online video streamer iQiyi Inc. has licensed “The Story of Yanxi Palace” to more than 70 markets, the company said in a statement on Aug. 13, one day after the saga of intrigue among imperial concubines attracted over half a billion views in one day — a new Chinese record for single-day online viewership. The 70-episode drama set during the Qing dynasty, which ruled China from 1644 to 1912, was co-produced by iQiyi and studio Huanyu Film and is “one of the most widely distributed China-produced historical costume dramas ever made.”

Why it’s important: Money-losing iQiyi could receive a new lifeline through sales of the right to broadcast the hit series. According to local media reports, the right to broadcast a single 45-minute episode costs about $100,000. The series had racked up a total of 13 billion views as of Sunday, when the finale went live, according to iQiyi.

Big picture: As competition in the streaming industry heats up, companies like iQiyi, Tencent Video and Youku have ramped up efforts to develop original productions to vie for the attention of the country’s 800 million internet users. (Source: Caixin)

POLICY

5. Chinese Legislators Worry New E-Commerce Law Could Hurt Consumer Safety

What: The fourth draft of the e-commerce section of China’s new civil code, which is expected to take effect by 2020, weakens language that applies to companies. If a customer is harmed by an e-commerce platform, the company may face “supplementary liability.” This is lesser responsibility than the “joint liability” in previous drafts. The change was made after a period of public and industry input that started in June.

Why it’s important: The proposed change to the law governing online sales has raised concerns that it may not do enough to hold e-commerce companies accountable for harm to consumers. The proposal also attracted criticism from within the National People’s Congress, which is currently reviewing the civil code, especially given the recent high-profile killing involving a user of mobile ride-hailing platform Didi.

Big picture: China’s e-commerce industry has developed rapidly in recent years, and there have been growing calls for the country to implement laws that specifically address the sector. Work began on e-commerce legislation in 2013, and the first draft of the new civil code’s e-commerce section was first debated by the NPC in late 2016. (Source: Caixin)

Compiled by Shen Xinyue