The 11 Stories That Shaped Corporate China in 2018

(Beijing) — Scandals and troubles. These words could sum up the major corporate events unfolding in China in 2018. We saw a household name fall from grace as he was accused of rape; two female passengers killed by drivers of the leading ride-hailing platform; and an Italian fashion brand’s “insensitive ads” invite unwanted attention in the form of backlash and a boycott.

Amid the gloom and doom, there were still some positive developments. China was home to the most Googled TV series in the world, and a company won surprise approval to become the fourth to enter the coveted fifth-generation wireless-carrier arena.

Below are Caixin’s top 11 business news stories, starting with the ones we think are the most significant. We will keep a close eye on what’s happening in the world of Chinese business and bring you more firsthand reports in the new year.

Huawei’s CFO shot to global fame for the wrong reasons

Huawei Technologies Co. Ltd .Chief Financial Officer Meng Wanzhou, a daughter of Huawei’s founder, was detained on Dec. 1 while transiting in Canada. The move came at the request of the U.S. which is seeking her extradition to face fraud charges related to alleged violations of sanctions on Iran. 

The case drew global attention not only because of the significance of the individuals involved but also because of the intricate international implications, as it has come at the same time as heightened tensions due to the China-U.S. trade war.

It’s been a year of setbacks for Huawei, as the U.S., Australia and New Zealand have banned it from their 5G network supplier list.

ZTE came close to closing

Huawei’s smaller hometown rival didn’t have much to boast about either. In April, ZTE Corp. made global headlines when it was found by Washington to have violated a 2017 settlement deal that it made after it sold products to Iran and North Korea. ZTE, one of the world’s leading telecom network-gear suppliers, was then banned from buying U.S.-made components for seven years, a move that Chairman Yin Yimin said would put ZTE into an immediate “coma” and risk the livelihoods of 80,000 employees. 

ZTE breathed a sigh of relief in July, when the U.S. lifted the ban, but the U.S. slapped ZTE with “the harshest penalties and strictest compliance measures ever imposed in such a case.” 

Car sales slump for first time in 28 years

It’s official: China is set to see the first decline in passenger vehicle sales in nearly three decades. Market observers said that was due to slowing growth in spending power in smaller cities, which had been driving up the sales for years. First-tier cities such as Beijing and Shanghai are already inundated by cars, and new car license plates are issued through lotteries. Will the world’s largest vehicle market continue to slump in 2019? Or will it see an uptick?

Substandard vaccines prompt safety fears

It’s “the most stringent administrative penalty on record,” an official from China’s pharmaceutical authorities said, after rabies-vaccine-maker Changchun Changsheng Life Sciences Ltd. was fined more than 9.1 billion yuan ($1.3 billion) and had its production license revoked in November. The company was found to be falsifying data, leading to the sale of nearly 500,000 doses of substandard vaccines for children. That incident triggered widespread fear in a country that already has a troubled medical and food safety record. President Xi Jinping publicly condemned Changchun Changsheng’s behavior as “abominable.”

E-commerce mogul Richard Liu accused of rape

In a case that will probably follow JD.com Inc. founder Richard Liu for the rest of his life, the billionaire tycoon was accused of rape in late August while taking part in a weeklong residency for a Ph.D. program at the University of Minnesota. He was arrested but released 18 hours later without posting bail, and he returned to China. While many juicy details circulated online about the boozy dinner on the night of the incident, prosecutors in the U.S. state of Minnesota said in December they decided not to file sexual assault charges against Liu, citing “profound evidentiary problems.”

Jack Ma to hand over reins of Alibaba

In September, Alibaba Group Holding Ltd.’s founder said he was stepping down to pursue his passion for teaching. Billionaire Jack Ma will be replaced in his chairman’s role on Sept. 10, 2019, his 55th birthday, by current CEO Daniel Zhang. The year will mark the 20th anniversary of Alibaba’s founding. Ma’s departure marks the end of an era of China’s early internet company founders, but his colorful public persona — including donning a wig to perform at the company’s annual parties, and beating kung fu masters such as Jet Li in his first movie role — has opened a new chapter for China entrepreneurs.

Sharing economy faces real trials

Didi has had problems keeping its passengers safe. Ofo may be close to bankruptcy. And users all around are struggling to get their deposits back. Internet startups’ business model of burning cash to quickly increase their customer base seems to have backfired. Since September, bike-sharing platform Ofo has faced a flood of requests for user deposit refunds. The incident escalated to the next level in December, when hundreds of people worrying over the fate of their $30 deposit swamped its Beijing headquarters on a daily basis for refunds.

Ride-hailing Didi hits bumpers after two passengers found killed

China’s most popular ride-hailing app faced a public outcry in August when a second female passenger was raped and murdered within three months. Didi Chuxing has long failed to properly verify drivers’ identify in its carpooling service and bar unqualified drivers from signing up. The surge in market demand and the company’s dominance after acquiring the China unit of U.S. rival Uber Technologies Inc. prompted the car-hailing goliath to loosen its guard further. Didi’s top executives issued a public apology, suspending some services and vowing to step up security measures.

A fourth carrier enters the picture in much-coveted 5G market

At last, some positive news to look forward to in 2019. The monopoly of the top three telecom giants — China Mobile, China Unicom and China Telecom — will finally be broken up by a new player on the scene. Authorities in November granted a fourth fifth-generation (5G) wireless license to China Broadcasting Network Co. Ltd., a state-owned entity that is totally new to the industry. Details remain murky as to how the new carrier will find the nearly $200 billion needed to build a 5G network, but consumers are expected to be the beneficiaries — they will have one more company from which to choose.

D&G sees backlash over ‘racist’ ad

Italian fashion house Dolce & Gabbana (D&G) ran into trouble in November, when its online advertisements were labeled “stereotypical,” “racist,” and “sexist” by netizens. The criticism snowballed into a public relations nightmare — major e-commerce platforms, including Tmall and JD.com, decided to pull thousands of D&G products off their virtual shelves. Celebrities followed suit by giving its annual fashion show a miss and vowing to boycott the brand. State media warned D&G it risked “losing China’s market and the benefits arising from it.” 

The world’s most Googled TV drama came from China

China boasts a new record — 2018’s most Googled TV drama was “Story of Yanxi Palace,” according to a BBC report citing Google analytics. The period costume drama successfully kicked off a new craze for China-made shows in Asia. The story of a witty, fiery woman fighting to become the top concubine in a scheming palace has attracted loyal viewers from many nations, including Singapore, Malaysia and Vietnam. The major beneficiary of the unexpected hit, a low-cost production with few famous faces? It’s iQiyi Inc., or China’s Netflix, which co-produced the serial and has licensed it to more than 70 markets.

Contact reporter Jason Tan (jasontan@caixin.com)