Caixin
Aug 06, 2020 08:50 AM
CHINA BUSINESS DIGEST

CX Daily: China's Services Sector Softens to Three-Month Low

The staff of the Tianjin Grand Theater disinfect the theater on July 27.
The staff of the Tianjin Grand Theater disinfect the theater on July 27.

Economy /

Caixin PMI shows China services sector losing momentum

China’s services sector expansion softened to a three-month low in July as an increase in new business slowed, a Caixin-sponsored survey showed Wednesday, adding to evidence that the world’s second-largest economy could lose some of its momentum in the second half of this year.

The Caixin China General Services Business Activity Index, which gives an independent snapshot of operating conditions in the services sector, fell to 54.1 last month — the weakest reading in three months — from a decade-high of 58.4 in June. Readings higher than 50 signal expansion.

The reading contrasts with an increase in manufacturing activity in the Caixin China General Manufacturing Purchasing Managers’ Index (PMI) for July, released Monday, which rose to 52.8, the highest since January 2011. The Caixin China Composite PMI, which covers both manufacturing and services companies, came in at 54.5 last month, down from 55.7 in June, the Wednesday survey showed.

FINANCE & ECONOMICS

Chip /

China steps up policy support for integrated circuits and software

China’s State Council, the cabinet, issued new rules (link in Chinese) Tuesday to bolster the country’s integrated circuit and software industries in support of the push to expand and upgrade domestic chip-making capacity.

The new rules outline tax incentives including as many as 10 years of tax exemptions for qualified integrated circuit makers. They also encourage companies to raise funds from share sales. The cabinet pledged to streamline the review procedure for integrated circuit and software companies’ domestic listings.

The cabinet also encouraged private capital to set up funds to support the industries, pledged financing support to companies and vowed to enhance intellectual property protection.

Chinese Chipmaker Stocks Surge on Supportive Policy

Trade /

China’s share of Australian exports hits 48.8%, an all-time high

China’s share of Australian exports reached an all-time high, rising to 48.8% and driving the 30th consecutive monthly trade surplus to A$8.2 billion ($5.8 billion).

Official figures showed the exports to China — mainly due to iron ore, especially in the June quarter — reached a record A$14.6 billion. Goods exports to China are now worth around 8.5% of Australia’s GDP.

“The sharp rebound in goods exports comes as China aggressively stimulates its economy, seemingly outweighing recent political headwinds,” National Australia Bank’s Tapas Strickland said.

Rural exports also lifted after the fall in May, rising 3.6% in June with wool exports surging. China is the largest market for Australia’s wool, with upwards of 90% of Australian wool being exported to China.

Fintech /

PBOC moves ‘digital central bank’ strategy along with new fintech unit

The People’s Bank of China (PBOC) took another step forward in its strategy to build a digital central bank, setting up a financial technology subsidiary, Chengfang Financial Technology Co. Ltd., that will help drive the government’s broader goal of modernizing the financial system, boosting innovation and improving governance.

On July 30, Chengfang was officially established in Beijing by five institutions and companies controlled by the PBOC with registered capital of about 2 billion yuan ($287 million), according to the National Enterprise Credit Information Publicity System. The company’s main businesses include software development, technology consulting and services, data processing, computer system services, and leasing and sales of equipment, according to its registration documents.

Fund embezzlement /

Debt-ridden Tunghsu explains why it was unable to withdraw its own cash

Shenzhen-listed Tunghsu Optoelectronic Technology Co. Ltd. failed to withdraw 7.9 billion yuan ($1.1 billion) of deposits put into a finance subsidiary due to the subsidiary’s liquidity issues, the company said Tuesday in a filing (link in Chinese) in response to an inquiry from the Shenzhen Stock Exchange.

At the end of last year, Tunghsu Optoelectronic, a maker of electronic display panels, reported about 11.6 billion yuan in outstanding money funds. Among the funds, about 7.9 billion yuan was deposited into a finance company jointly set up by Tunghsu Optoelectronic and its controlling shareholder, Tunghsu Group Co. Ltd., but the withdrawal of the money was restricted as the finance company faced a liquidity crisis, Tunghsu Optoelectronic said.

Caixin previously learned from a source at Tunghsu Optoelectronic that the company’s money stored at the finance company had actually been taken by debt-ridden Tunghsu Group to pay its debt.

Quick hits /

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BUSINESS & TECH

1

Luckin, once seen as China’s challenger to Starbucks, has been rocked by internal volatility after its $300 million financial reporting fraud was brought to light in April.

Luckin, once seen as China’s challenger to Starbucks, has been rocked by internal volatility after its $300 million financial reporting fraud was brought to light in April.

Startup /

Luckin shareholders seek to reverse board changes

Luckin Coffee opened a new chapter in an ongoing boardroom fight for control of the scandal-ridden company, scheduling an extraordinary shareholders meeting next month to discuss undoing board changes made in July that worked in the favor of ousted co-founder and former Chairman Charles Lu Zhengyao.

Two shareholders linked to Hong Kong-based Centurium Capital requested the meeting for reinstating Sean Shao as a director on Luckin’s board. The shareholders also proposed the removal of Zeng Ying and Yang Jie as independent directors, Luckin said Monday in a U.S. exchange filing. Zeng and Yang are linked to Lu.

The company, once seen as China’s challenger to Starbucks, has been rocked by internal volatility after its $300 million financial reporting fraud was brought to light in April, leading to its delisting from the Nasdaq stock exchange in July.

Patent /

Chinese tech firm renews bid to sue Apple over Siri patent infringement

Apple Inc. was sued for billions of yuan by a Chinese company that claims the U.S. tech giant infringed on one of its patents, the latest development in a years-long legal battle between the two companies.

Shanghai Zhizhen Intelligent Network Technology Co. Ltd. filed a lawsuit Monday with the Shanghai High People’s Court seeking an estimated 10 billion yuan ($1.43 billion) in damages from Apple for the alleged infringement of its patent on a chatbot similar to Apple’s Siri virtual assistant.

Shanghai Zhizhen, also known as Xiao-I, first made this claim in a lawsuit filed in 2012, in which Apple argued the patent was invalid and thus could not have been infringed upon. Xiao-I sued Apple again after China’s highest court in June ruled that the patent in question was valid.

Utilities /

Exclusive: State Grid’s profit collapses on Covid-19 fallout

State Grid Corp. of China, the behemoth that transmits and supplies nearly 90% of the country’s electricity, recorded an 81% year-on-year plunge in first-half profit, Caixin learned.

The power utility’s first-half net profit nosedived to 5.66 billion yuan ($811 million), although its revenue dipped just 4.7% year-on-year to 1.2 trillion yuan, according to company chair Mao Weiming. Mao disclosed the first-half figures, which the company doesn’t make public, in an interim financial meeting on July 22, people familiar with the matter told Caixin. State Grid reports only annual figures. Of the 27 provincial power companies owned by State Grid, only eight made a profit during the period.

Autos /

Commercial vehicle sales drive recovery in China auto market

China’s auto sales for July were expected to rise for the fourth consecutive month to 2.08 million, up 14.9% from July 2019, according to preliminary data released Tuesday by the China Association of Automobile Manufacturers (CAAM).

The spike was mostly driven by commercial vehicles, sales of which jumped 59.6% year-on-year last month. Sales of passenger cars showed an uptick of 5.3% compared with the same period in 2019. In the first seven months of the year, an estimated 12.34 million vehicles were sold in China, down by 12.7%, according to the CAAM.

Quick hits /

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