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By Ding Yi / Nov 12, 2019 04:00 PM / Business & Tech

Photo: VCG

Photo: VCG

Smartphone-maker Xiaomi retained its dominance in the Indian market in the third quarter of 2019, but its leading status is being challenged by Chinese rivals.

That’s the message from the latest report by market research firm IDC, which showed that Oppo and its subsidiary Realme closed in on Xiaomi’s shipments during the period.

In the three months through September, Xiaomi grew its shipments in India by 8.5% year-on-year to a record 12.6 million units, giving the firm a 27.1% market share, according to the report.

Realme and Oppo respectively claimed the fourth- and fifth-largest market shares, but posted jaw-dropping quarterly sales growth. Realme, which launched last year as a budget sub-brand of Oppo, shipped 6.7 million units, representing a whopping growth of 401.3% from a year earlier. The report attributed the performance to large shipments of Realme’s affordable C2 models and its newly launched 5 and 3i series.

Oppo, meanwhile, posted strong year-on-year growth of 92.3%, the report showed.

The combined market share held by Realme and Oppo during the period accounted for 26.1% of the Indian smartphone market.

Samsung came in second with an 18.9% market share. But the South Korean company suffered a year-on-year growth drop of 8.5%, with quarterly shipments of 8.8 million handsets.

And Vivo, which is developing 5G chip-powered smartphones in partnership with Samsung, ranked third with 15.2% of the Indian market.

In May last year, Realme launched its first model in India. It has gained a strong foothold in the South Asian country thanks to its low-price strategy.

Contact reporter Ding Yi (yiding@caixin.com)

Related: Vivo Chooses Samsung Chips for New 5G Phones

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By Shi Enze and Tang Ziyi / Nov 12, 2019 01:02 PM / Business & Tech

Photo: IC Photo

Photo: IC Photo

Chinese mobile users will finally be able to keep their phone numbers when they switch to a new network provider when a new mobile number portability (MNP) service comes into force nationwide on Dec. 1.

The country’s three wireless carriers, China Mobile, China Unicom, and China Telecom will take charge of the service, according to a statement released by the Ministry of Industry and Information Technology on Monday.

China started trialing MNP in the city of Tianjin and the province of Hainan in November 2010, but nationwide implementation has been postponed several times due to technical obstacles and the resistance to portability from carriers worried about losing customers. Countries including the U.S. and most European nations first rolled out MNP programs in the early 2000s.

Read the story on Caixin Global later today.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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By Du Caicai and Ren Qiuyu / Nov 12, 2019 12:42 PM / Economy

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Photo: VCG

Pork prices in China hit an eight-year high last month according to the latest Consumer Price Index (CPI) released by the country’s National Bureau of Statistics.

The data shows pork prices rose 101% year-on-year and 20.1% from September. The CPI itself rose 3.8% year-on-year, a 0.8% rise from September, with pork prices accountable for about 2.43% of that increase. The price hikes are driven by an ongoing severe pork shortage after China’s stock was decimated by the African swine fever outbreak first reported in August 2018.

The skyrocketing prices for China’s favorite meat are now the highest the country has seen since 2012. Prices for alternative meats like beef, mutton, chicken, and duck also rose due to the rising cost of pork.

Analysts have said that pork may continue to get more expensive until the second half of 2020, with steep increases between November 2019 and February 2020.

Contact reporter Ren Qiuyu (qiuyuren@caixin.com)

Related: China Approves Brazilian Swine-Offal Imports as Pig Fever Rages

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By Wang Xiaoqing, Qian Tong, Xue Xiaoli and Denise Jia / Nov 12, 2019 12:23 PM / Economy

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Photo: VCG

This has been a year of failure in the sharing economy. WeWork’s initial public offering flopped. Uber and Lyft’s stocks have sunk way below their IPO prices. Airbnb faces a safety crisis. Ofo is on the verge of bankruptcy. Didi Chuxing is struggling with resuming its carpooling service after drivers murdered passengers.

The bursting bubble has forced Wall Street and investors to question their judgment, startups to revamp their growth strategies and governments to consider how to regulate the emerging sector.

WeWork created the most dramatic scene after the shared-workspace provider canceled its initial public offering (IPO) and stuck private equity investors led by Japan’s SoftBank Group with catastrophic losses. In the July-September quarter, SoftBank’s Vision Fund wrote down investments in more than 20 other companies, including Uber, as the sharing economy startups failed to deliver profits.

While SoftBank is one of the most-exposed tech investors, the sector’s rough 2019 is sending ripple effects broadly through the nascent sharing economy industry. The failure of WeWork’s IPO and the disappointing stock performance of already-listed companies show that investors in public markets have been more realistic than private equity investors like SoftBank. It’s expected that there will be more reverse valuations of tech companies between the private and public markets.

Read the full story on Caixin Global.

Related: WeWork Putting the Brakes on China Push: Report

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By Zhao Runhua / Nov 12, 2019 12:11 PM / Business & Tech

Photo: VCG

Photo: VCG

(Hangzhou) — China’s “Double 11” shopping extravaganza is over for another year. But after smashing through a litany of records, where do the country’s e-commerce giants go next?

On Monday, Alibaba’s one-day gross merchandise volume — the total revenues of orders placed across its online platforms via its affiliated payment service Alipay — hit a record high of 268.4 billion yuan ($38.3 billion), despite growing at the lowest ever year-on-year rate of 25.7%, official data showed.

Over at rival JD.com, which held a number of similar sales promotions, total sales revenue hit 204.4 billion yuan during the first 11 days of November. The company is yet to release detailed performance data for Nov. 11.

Meanwhile, Suning.com only released daily transaction growth figures, not its one-day trading volume. Insurgent competitor Pinduoduo, which is now more valuable than JD.com, remains similarly cagey on the specifics.

Alibaba’s slowing Double 11 growth rate shows the difficulties e-commerce platforms face in sustaining high levels of expansion given their existing large revenue base and concerns that China’s consumption power may be flagging.

In addition, Chinese consumer attitudes toward Double 11 seem to be changing. Jiang Fan, the head of Alibaba’s Tmall and Taobao e-commerce platforms, described a new mobile game which gives players coupons for inviting friends to join the buying frenzy as an “interesting” shopping experience. Online comments from shoppers made it clear many saw it as a marketing gimmick.

Consumers also appear increasingly impatient when it comes to Double 11’s complex shopping rules. Although many sellers offer direct discounts on their goods, e-commerce platforms, including Alibaba’s, often require shoppers to jump through complex mental hoops to weigh up the relative value of the discount coupons they issue to stimulate more sales.

Perhaps Alibaba’s ever-more-jaded customers helped prompt the company to transform this year’s Double 11 into a product-launch event as well as a shopping festival. Jiang told reporters at Alibaba’s Hangzhou campus Monday that vendors, particularly cosmetics partners, rolled out a total of more than 1 million new products during the festival, about 120,000 of which were imported goods.

Nevertheless, Double 11 remains a boon for brands. Nearly 300 companies posted one-day sales revenue in excess of 100 million yuan on Monday, the company said.

This year’s festival also marked Alibaba’s first without the company’s effervescent former CEO Jack Ma at the helm. His replacement, Daniel Zhang, appeared relaxed when he appeared at the company’s Hangzhou press center for the final wrap-up. As Alibaba mulls a Hong Kong IPO and faces down a year full of uncertainties, Zhang will undoubtedly be delighted that this year’s Double 11 went off without a hitch.

Related: Unwrapping the Truth Behind ‘Double 11’ Shopping Extravaganza

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By Bloomberg / Nov 12, 2019 10:54 AM / Business & Tech

Photo: VCG

Photo: VCG

(Bloomberg) — China’s government says it’s confident that Brazil will choose Huawei Technologies to build its ultra-fast fifth generation mobile network, a high-stakes decision that would likely put President Jair Bolsonaro on a collision course with the United States.

Chinese President Xi Jinping is scheduled to meet his Brazilian counterpart in Brasilia this week — their second meeting in less than a month — during a summit of the BRICS group which also includes Russia, India and South Africa.

“I am confident in terms of the cooperation between China and Brazil over 5G technology,” China’s Ambassador to Brasilia Yang Wanming said in reply to emailed questions. Brazil “will take into account its own development interest” when it analyzes Huawei’s bid, he added.

Yang said that Brazil’s attitude toward Huawei has remained objective and rational amid a campaign of “bad faith and defamation” from the U.S.

U.S. officials have warned their allies against relying on Huawei components in their 5G networks, saying this would facilitate spying by Beijing. U.S. Secretary of State Mike Pompeo reiterated the warnings in a speech in Germany on Friday, saying the company can’t be fully trusted since it is under the thumb of China’s ruling communist party, a claim that both Huawei and the Chinese government deny.

Related: CX Daily: Huawei Could Well Take Much of Europe

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By Peng Yanfeng and Denise Jia / Nov 12, 2019 06:11 AM / Business & Tech

Photo: VCG

Photo: VCG

Chinese air conditioner giant Gree Electric Appliances Inc. is continuing to push forward its chipmaking ambition by investing 2 billion yuan ($290 million) in another domestic chipmaker.

Gree announced a plan to subscribe for a 4.76% stake in the private placement of San’an Optoelectronics Co. Ltd., China’s largest LED chips producer. The investment is Gree’s second chip investment this year, part of an ambitious plan to invest 50 billion yuan over three years to develop chips.

Shanghai-listed San’an Optoelectronics said it will issue as many as 816 million shares to raise as much as 7 billion yuan in the private placement. The company said it will use the proceeds for semiconductor research and industrialized projects, which will require a total of 13.8 billion yuan of investment.

Earlier this month, Gree bought a 12.33% stake in smartphone-maker Wingtech Technology Co. Ltd., to fund the company’s acquisition of a Dutch semiconductor manufacturer.

The Zhuhai-based home appliance maker has started using self-developed chips in some of its air conditioners, said Huang Hui, Gree’s executive president, at a shareholders meeting in June.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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By Dave Yin / Nov 12, 2019 05:53 AM / Economy

Photo: VCG

Photo: VCG

China raised its 2019 national rare earths production quotas by at least 10% last week amid heightened optimism of a phased trade deal with the U.S., though such hopes weakened over the weekend based on remarks by U.S. President Donald Trump.

The world’s largest producer of the chemical elements set its mining quota for the year at 132,000 tons and the smelting and separation quota at 127,000 tons, according to a statement (link in Chinese) Friday by the Ministry of Industry and Information Technology. The quotas were up 10% and 10.4% respectively from 2018 allotments.

The announcement followed months of speculation that China might leverage its dominance in rare earths in the trade war by restricting sales to the U.S., a major buyer. The country’s exports fell 18.2% year-on-year in May amid comments from Beijing that it would not tolerate use by countries that seek to hurt China’s interests.

Rare earths are 17 minerals used in products ranging from consumer electronics to military equipment. China releases national quotas semiannually, though this year’s November release came three months later than last year’s second-half announcement.

On Thursday, the Ministry of Commerce said China and the U.S. agreed to roll back tariffs on each other’s goods in phases, raising expectations of an imminent deal. The same day, China’s State Council issued new guidelines on foreign capital that would lift many restrictions on foreign financial institutions seeking to operate in the country.

However, Trump disputed that there was a breakthrough in negotiations, telling reporters Friday that he had not agreed to a rollback.

China accounted for 80% of U.S. rare earths supply in 2018, and the country controls at least 80% of the world’s processing capacity for these elements. In a bid to cut dependence on the country, U.S. and Australian officials are discussing joint development of critical mineral deposits.

Contact reporter Dave Yin (davidyin@caixin.com)

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By Zhao Runhua / Nov 11, 2019 07:18 PM / Business & Tech

Photo: A view of an Alibaba-hosted Double 11 event in Hangzhou, eastern China's Zhejiang province. Zhao Runhua/Caixin

Photo: A view of an Alibaba-hosted Double 11 event in Hangzhou, eastern China's Zhejiang province. Zhao Runhua/Caixin

(Hangzhou) — Don’t tell Alibaba’s much-hyped “Double 11” shopping extravaganza about China’s slowing economy. The company surpassed its 2018 one-day sales record of 213.5 billion yuan ($30.5 billion) less than 17 hours into the latest shopping fest.

The country’s largest online shopping carnival — also called “Singles Day” because the date it takes place, Nov. 11, contains four “1”s when written numerically — has been setting new records on its own 11th anniversary.

Orders placed via Alipay on Alibaba’s e-commerce and services platforms, including overseas units Lazada and AliExpress, hit the 100 billion yuan ($14.3 billion) milestone less than 64 minutes after midnight, more than 40 minutes faster than last year. By 8 a.m., the figure had surpassed 150 billion yuan.

On Alibaba’s Xixi Campus at its Hangzhou headquarters, the tea rooms were decorated with fast-growing bamboo for its auspicious connotations of strong and steady growth to new heights. Visitors sat and drank barley tea specially served because its Chinese name, “damai,” is a homonym for “big sales.”

Alibaba’s wishes came true around 5 p.m. when the new one-day sales record was announced. But the eye-popping numbers were not a total surprise to the company. During a Sunday interview, Alvin Liu, the company’s head of import and export business, had confidently told reporters that this year’s festival would set multiple new records given the consumption power of China’s less-developed areas and the younger generation.

Locals certainly seemed caught up in the annual shopping craze. A woman surnamed Zhang showed off her brand-new pair of Nike sneakers to Caixin at a café Monday afternoon, adding that she was browsing more deals on her phone.

According to Alibaba’s real-time trading data, pet food, smart home appliances, and nutrition supplements have been some of today’s bestselling imported products, while Huawei’s Mate 30 smartphone and the iPhone 11 were among the most purchased new releases.

For the first time, livestreaming has been a major marketing force in the shopping festival. Within nine hours of the festival kicking off, livestreamers on Alibaba’s Taobao platform had contributed 10 billion in revenue to the festival, Alibaba told Caixin. It adding that more than half of vendors from the company’s other main Tmall platform have adopted the new promotion method.

Although the final figures for this year’s Double 11 won’t be available until Tuesday morning, they are expected to boost to Alibaba’s fourth-quarter performance. That could help the U.S.-listed company navigate plans for a second IPO in Hong Kong, during which it seeks to raise between $10 billion and $15 billion.

During last year’s Double 11 festival, Chinese shoppers spent over $45 billion across platforms including Alibaba’s Taobao and Tmall, JD.com, and Pinduoduo. Alibaba, which started Double 11, notched a record 213.5 billion yuan in products sold during the festival last year, though the figure grew at a slower rate than in years past.

Related: Update: Alibaba Heads to Hong Kong — Finally 

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By Matthew Walsh / Nov 11, 2019 04:38 PM / Environment

Photo: VCG

Photo: VCG

As China’s e-commerce giants generate hundreds of billions of yuan in sales from Monday’s “Double 11” shopping extravaganza, environmental groups are reminding consumers that online shopping comes at a cost to the planet.

The country’s e-commerce and express delivery sectors used a whopping 9.4 million tons of packing materials last year, with the courier sector producing an estimated 13 million tons of carbon emissions, according to a report by three environmental NGOs whose release was timed to coincide with the world’s largest shopping fest. A business-as-usual scenario will see both sectors churn out an estimated 41.3 million tons of packaging annually by 2025, the report said.

Although some 80% of paper-based packaging waste gets recycled, plastic packaging is not recycled 95% of the time, the report found. In urban areas, most plastic mixes with other kinds of solid waste and ends up in either landfills or incinerators.

The report, co-published by Greenpeace East Asia, Break Free From Plastic China, and the All-China Environment Federation, also takes aim at the “limited” efforts made by e-commerce and delivery companies to address their mounting waste problems. “Superficially” green initiatives like narrowing the plastic tape used on parcels and rolling out digital ordering systems “obviously do not get to the core of the issue,” the study found.

The report makes a number of recommendations on how to reduce packaging waste. Lawmakers should speed up legislation demanding or incentivizing sustainable packaging practices like reusable containers, and the introduction of national standards could clamp down on wasteful behaviors like overpackaging and the use of harmful or single-use materials, researchers say.

In addition, they suggest that companies recognize they are responsible for the entire life cycles of the packaging materials they use, and that consumers actively seek information about the sustainability of the delivery services they use.

Tang Damin, a Beijing-based plastics campaigner with Greenpeace East Asia, urged Chinese tech companies to adopt more creative approaches to packaging waste. “I’m curious who will be the first to step forward with a bold idea,” he told Caixin. “Chinese people aren’t the consumerist stereotype that ‘Singles Day’ sells,” he said, using another name for Double 11. “They want something more.”

Tang also called on the government to adapt its direct approach to nudge the e-commerce sector toward greener packaging practices. “The state’s hands-on role will be a huge factor in industry response,” he said. “Currently, there’s no real requirement for e-commerce or delivery companies to address this waste problem.”

When asked about the environmental impact of its packaging waste, Cainiao, the Alibaba-controlled logistics affiliate that handles deliveries for the e-commerce giant’s shopping platforms, told Caixin that the company values sustainability and is working to make the sector more environmentally friendly.

Cainiao has already rolled out a number of successful initiatives to combat packaging waste, including its self-developed smart-packaging algorithm, e-shipping labels, and cooperative agreements with merchants to reduce plastic use, the company added.

JD.com, China’s second-largest e-commerce company, declined to comment directly on the study. But it referred Caixin to an October announcement that the company had joined the Science Based Targets Initiative, a global campaign designed to promote corporate action on climate change.

Contact reporter Matthew Walsh (matthewwalsh@caixin.com)

Related: Alibaba Increases Stake in Cainiao Network to 63% From 51%

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By Ding Yi / Nov 11, 2019 04:14 PM / Business & Tech

Photo: VCG

Photo: VCG

The chairman and CEO of Chinese internet behemoth Tencent has proven he’s far from a one-trick pony.

For the fourth consecutive year, Pony Ma has made it onto the Harvard Business Review’s annual list of the world’s best-performing CEOs.

Ma ranked 63rd overall this year and second in terms of financial performance.

Jensen Huang, CEO of U.S. tech company Nvidia, claimed the top spot on the overall list, up from second place last year.

Robin Li, CEO of Baidu, and Jack Ma, who stepped down as Alibaba CEO earlier this year, did not make the cut this year.

The list considers both financial performance and environmental, social, and governance (ESG) practices when evaluating each CEO. ESG scores account for 20% of each CEO’s final ranking.

Contact reporter Ding Yi (yiding@caixin.com)

Related: Tech Entrepreneurs Dominate Latest Hurun Rich List

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By Tang Ziyi / Nov 11, 2019 04:07 PM / Business & Tech

Photo: VCG

Photo: VCG

Two Chinese companies making initial public offerings (IPOs) on the Nasdaq raised significantly less than their original targets, becoming the latest Chinese listings to downsize their goals amid cooling investor sentiment.

36Kr Holdings, a Beijing-based news and data provider, raised $20 million on its Friday debut and finished down 10%. This comes after the company already slashed the size of its offering to 1.4 million American depositary shares (ADSs) from 3.6 million ADSs at $14.50 apiece, the low end of its indicative price range. It initially aimed to raise $100 million, according to the company’s prospectus filed with the U.S. Securities and Exchange Commission in September.

On the same day, health and wellness products retailer Ecmoho raised $44 million by offering 4.4 million ADSs at $10 apiece, the low end of its range. The company initially sought to raise $150 million, according to its September filing. Shares of Ecmoho rose 1% on Friday.

Read the full story on Caixin Global later today.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

Related: Money-Losing Letting Agency Raises Only Half of What It Wanted in U.S. IPO

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By Huang Huizhao, Liu Lixin, Li Lanxin, and Ren Qiuyu / Nov 11, 2019 01:31 PM / Society & Culture

Photo: VCG

Photo: VCG

Chinese students face immense pressure in school, especially when it comes to the notorious college entrance examination, the gaokao. For many years, stories have abounded in the country’s media of time-consuming extracurricular classes and competitions, a focus on grades over recreation, and the sometimes-extreme effects of the stress students often feel, including mental health problems, suicides, and even murder.

In a magazine essay, Caixin lifts the curtain on one of China’s recent educational success stories: Dancheng County No. 1 High School in impoverished rural Henan province. Since 2012, Dancheng High has seen more than 20 students admitted to China’s top two universities, Tsinghua and Peking, each year. In 2016 and 2019, the school topped the nation for the number of students admitted to the top two institutions — with 44 and 43 students respectively.

But how, exactly, has a country school in a poor county transformed into such an educational powerhouse? How has it seemingly managed to reverse the rural-to-urban brain drain and attract thousands of students from across the region? Is it a model for other rural schools, or is there something else going on?

This story has been updated to correct the number of students that Dancheng High admits to China's top two universities each year.

Stay tuned for Caixin Global’s deep dive into Dancheng, which reveals how the school’s administration has charted a path to success by gaming government schemes and a public-private business model that has driven its rapid expansion.

Contact reporter Ren Qiuyu (qiuyuren@caixin.com)

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By Wu Hongyuran and Guo Yingzhe / Nov 11, 2019 01:27 PM / Finance

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Photo: VCG

China’s banking regulator denied that it is considering a sweeping wave of mergers involving problematic small- and medium-sized banks, saying it will not take a “one-size-fits-all” approach to cope with risks facing the world’s biggest banking system.

Bloomberg reported Thursday that Chinese financial regulators are discussing a plan to merge or restructure troubled banks with less than 100 billion yuan ($14.3 billion) of assets as part of escalating efforts to shore up small lenders.

Zhou Liang, a vice chairman of the China Banking and Insurance Regulatory Commission, told Caixin on Sunday it is impossible for the regulator take such measures. To defuse risks on small and midsize banks, the regulator will not take one-size-fits-all measures or give a hardline order for banks with less than 100 billion yuan of assets to merge, he said.

China has more than 4,500 financial institution overseen by the banking regulator, most of which are small and midsize institutions. Some are struggling with mounting bad loans resulting from poor internal risk management and downward pressure on economic growth.

Authorities have been taking measures to bail out banks caught in profound crisis, seizing control of Baoshang Bank in May and restructuring two others.

Read the full story on Caixin Global later today.

This story has been updated to clarify that China has more than 4,500 financial institutions overseen by the country's banking regulator.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: China Is Said to Mull Wave of Bank Mergers to Bolster Stability

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By Ding Yi / Nov 11, 2019 11:32 AM / Business & Tech

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Photo: VCG

Chinese internet giant Tencent is reportedly looking to deepen ties with Japanese videogame-maker Nintendo to develop console games for the American market.

As Chinese authorities tighten domestic scrutiny over games with measures including a curfew for teenage players, Tencent is eyeing the U.S. market, where it has already acquired stakes in leading American studios like Epic Games and Activision Blizzard.

The partnership with Nintendo is part of Tencent’s plans to expand out of China. A Tencent official told the Wall Street Journal that the Chinese company wants to “create console games with Nintendo characters and learn the essence of making console games from Nintendo engineers,” the paper reported Sunday.

Nintendo, meanwhile, hopes to leverage the Tencent tie-up to fast-track localization of its Switch games in China, where authorities remain vigilant about foreign-made titles.

In July, Caixin reported that Tencent and Pokémon had agreed to produce games together to help the Nintendo-backed company crack the Chinese market.

In the first half of 2019, sales of Chinese-made games in overseas markets rose 20.2% year-on-year to $5.6 billion, according to a report released by the China Game Publishers Association.

Contact reporter Ding Yi (yiding@caixin.com)

Related: Tencent Teams Up With Nintendo-Backed Pokemon to Create Games

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By Ding Yi / Nov 11, 2019 11:16 AM / Politics & Law

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Photo: VCG

Water-powered cars, toxic crayfish, and dodgy cancer cures have at least one thing in common.

They all featured in made-up stories that circulated widely on the Chinese internet this year.

A report by internet giant Tencent claims the most common examples of online ‘misinformation’ were related to medical care, food safety, and social issues, according to state news agency Xinhua.

The report said use of machine learning technology, mostly by news apps, is accelerating the spread of false information across China’s internet.

But it also pointed a stern finger at that introduced by overseas websites, saying the “false” information was a “communication risk,” without actually specifying what type of information it was referring to, or how much was considered sensitive by the Chinese government.

Within the three categories of medical care, food safety, and social issues, 42% of the examples were completely made up, 36% were partly true, and 10% were disguised as the findings of authoritative research institutions, according to the report.

Tencent conducted the investigation under the direction of the China’s Central Cyberspace Affairs Commission, the state body that oversees China’s internet-related affairs.

Beijing sees such information as a potential threat to social stability and has taken several measures to combat online rumors in recent years, including the establishment of a platform named “Piyao” in 2018 that allows people to report and refute it. 

Contact reporter Ding Yi (yiding@caixin.com)

Related: China Considers Blacklist for Online Rumormongers
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By Bloomberg / Nov 11, 2019 10:25 AM / Politics & Law

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Photo: VCG

(Bloomberg) — China is considering further cuts to subsidies for electric-vehicle purchases, according to people familiar with the matter, threatening to deal another blow to a once-burgeoning industry that’s facing an unprecedented slump.

Industry regulators in the world’s largest EV market have been discussing the proposal but are holding off on a decision until they weigh car sales data over the coming months, according to the people, who asked not to be identified because the discussions are private. The plan involves reducing subsidies on consumers’ purchases of EVs next year but discussions are still at an early stage so there’s no guarantee the cuts will happen then, two of the people said.

China, which began subsidizing EV purchases in 2009 to promote the industry, has been gradually reducing handouts in the past few years to encourage automakers compete on their own. But the last time the government cut subsidies it triggered the country’s first drop in EV sales on record, exacerbating what had already been the most prolonged downturn in the world’s largest auto market.

The slump in China has dragged down the global EV sector as the country accounts for about half of the world’s sales of electrified cars. Still, regulators continue to face pressure to reduce handouts as state support helped bankroll the livelihood of hundreds of local startups and fueled concerns about a bubble in the industry.

But here’s the dilemma: Pull the levers too fast and it risks undermining China’s bigger ambitions of leading the world away from fossil-fueled gas guzzlers. China considers EVs as a strategically important sector and is mulling a target for 60% of all automobiles sold in the country to run on electric motors by 2035, people familiar with the matter have said.

China’s finance ministry, which has been overseeing the discussions, didn’t immediately respond to faxed queries.

Related: China’s New NEV Battery Recycling Mandate Puts the Onus on Struggling Carmakers

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By Lin Jinbing / Nov 09, 2019 06:27 PM / Economy

China should not cut back in supporting traditional industries while it strives to catch up with the world’s rapid technological advancement, a renowned researcher said in a panel discussion at the 10th Caixin Summit in Beijing on Friday.

Policymakers should attach equal importance to upgrading traditional industries and cultivating emerging industries in their pursuit of high-quality economic development, said Yang Weimin, a deputy director of the economic committee of the Chinese People’s Political Consultative Conference, the country’s highest political advisory body.

Local governments should not blindly shut down companies in traditional industries just because of pollution problems or hidden risks, Yang warned.

In the foreseeable future, China will still have a large domestic market space, with a huge population of 1.4 billion people, in which traditional industries like agriculture, food, textiles and chemical manufacturing can thrive, Yang said, adding that consumption of many products produced by traditional industries — except coal consumption — is far from its peak.

Furthermore, traditional sectors can still produce high-tech, high-quality and high value-added products through digital transformation and intelligent development, he said.

Contact reporter Lin Jinbing (jinbinglin@caixin.com)

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By Denise Jia / Nov 09, 2019 01:36 AM / Business & Tech

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Photo: VCG

China’s e-commerce giant Alibaba Group Holding Ltd. is doubling down on its logistics affiliate Cainiao Smart Logistics Network, raising its equity stake to 63% from 51%.

Alibaba said Friday that it would invest an additional 23.3 billion yuan ($3.3 billion) to subscribe for newly issued Cainiao shares in its latest round of financing and would purchase additional equity interest from an existing shareholder.

Alibaba didn’t disclose which existing shareholder it’s buying shares from. It co-founded Cainiao in 2013 along with five package delivery companies, including SF Holding Co., STO Express Co. and ZTO Express Inc. Other investors include department store owner Intime Group, conglomerate Fosun Group, Singapore’s sovereign wealth funds Temasek Holdings and GIC, Malaysia’s sovereign wealth Khazanah Nasional, and Chinese private equity firm Primavera Capital Group.

Other existing shareholders also participated in the fundraising, Alibaba said.

Cainiao contributed 4.76 billion yuan of revenue in the quarter ended Sept. 30, or 4% of Alibaba’s total revenue. The unit’s revenue increased 48% from the same quarter in 2018, according to Alibaba’s earnings report.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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By Dave Yin / Nov 09, 2019 01:27 AM / Environment

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Photo: VCG

China’s hundreds of electric car makers, already fighting for survival, must now dedicate resources to the post-consumer process.

China’s industry regulator called on manufacturers of new-energy vehicles (NEVs) and others to set up and standardize recycling plants for batteries of electric cars. These facilities will be shared by NEV manufacturers, battery makers, wrecking yards, integrated companies and more.

Guidelines published Thursday (link in Chinese) by China’s Ministry of Industry and Information Technology (MIIT) outline two types of recycling facilities that the industry must establish, depending on the need, although they must both be located in administrative areas where companies sell electric cars – starting at prefecture-level cities.

Smaller, “collection-style” recycling centers are for temporary storage and are limited to holding a total of 5 tons of batteries, whereas larger “concentrated storage-style” plants will have a minimum capacity of 30 tons and are designed for long-term storage. The larger centers are required in areas where NEV companies keep more than 8,000 vehicles or where existing recycling facilities lack storage capacity and safety standards.

Dedicated electric car battery recycling facilities are required to collect, sort, store, package and ship worn-out units, though they are forbidden from disassembling them for any purpose aside from conducting safety inspections. They are also expected to use digital tools to trace and collect data on their inventory and hand the information over to manufacturers, which must in turn report recycling data in a “timely fashion,” the ministry said.

Existing facilities were given six months to meet the guidelines’ requirements.

The directive updates 2018 provisions on NEV battery recycling, in which the ministry also urged the auto and battery industries to jointly build recycling pilot projects in several major Chinese cities. However, this week’s mandate follows a government commitment to phase out subsidies for all types of NEVs, which include all-electric, fuel cell and hybrid cars, to pare back the roughly 500 companies that have sprung up in response to government grants.

BYD, China’s biggest NEV maker, reported an 89% drop in third-quarter earnings and warned that profit could fall as much as 43% in 2019. BAIC BluePark New Energy Technology, China’s biggest maker of all-electric cars, also forecast a 2019 loss.

Contact reporter Dave Yin (davidyin@caixin.com)

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