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By Simin Wen / Oct 18, 2019 06:36 PM / Business & Tech

Photo: VCG

Photo: VCG

Tencent-backed e-book platform China Literature will collaborate with The Walt Disney Co. to produce online Chinese-language versions of dozens of “Star Wars” novels, China Literature announced in a statement Wednesday.

The move marks the first time Disney has granted its electronic copyrights on the Chinese mainland.

The tie-up will see China Literature translate 40 existing “Star Wars” novels into Chinese. The platform will also publish one all-new novel “with Chinese characteristics” written by a Chinese author, according to the statement.

Hong Kong-listed China Literature was founded in March 2015 and boasts 217 million monthly active users. The platform has 7.8 million registered authors and has published 11.7 million literary works as of the end of June, according to the company’s website.

Related: Qutoutiao’s Online Literature Unit Gets $100 Million Windfall

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By Yang Ge / Oct 18, 2019 06:26 PM / Business & Tech

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Photo: VCG

Just when you thought you could avoid those pesky ads in your online videos, along comes artificial intelligence.

That’s the message coming from iQiyi, one of China’s leading online video companies, which has detailed its programming strategy for the year ahead at an event this week in Shanghai. Like most of its Chinese peers, iQiyi is desperately looking for a winning formula to turn a profit even as it shells out big bucks on original programming to keep viewers coming back.

The company announced it has budgeted a hefty 20 billion yuan ($2.8 billion) to make 200 new releases next year, including plenty of fare from the variety show genre that’s popular among the younger set, as well as a healthy dose of new drama series.

But then there’s the fine print, or perhaps not so fine if you’re a viewer. iQiyi says it will force viewers to watch advertisements by embedding them inside its programs using artificial intelligence. That will include the use of ads that pop up automatically during programs — an effective format that viewers find annoying but largely inescapable.

The spending spree and AI ads are all part of iQiyi’s aim to one day turn a profit. The company still operates deeply in the red, posting a net loss of more than 2 billion yuan in its latest reporting quarter. Investors are growing increasingly skeptical that profits may be coming anytime soon, with iQiyi shares down around 40% from a peak reached earlier this year in March.

Related: Alibaba-Backed Streaming Site’s Period Drama Gamble Pays Off

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By Isabelle Li and Xue Xiaoli / Oct 18, 2019 05:46 PM / Business & Tech

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Photo: VCG

It seems almost too good to be true: a mobile app that tracks how many steps you take each day and gives you cash rewards depending on how far you walk.

Now, Chinese authorities say blockchain-based fitness app Qubu might indeed be a scam. Public security officials in central China’s Hunan province are investigating alleged illegal fundraising and financial fraud at the company behind the program amid claims that it operates a Ponzi-like business model.

Qubu works by charging new users 1 yuan ($0.14) to sign up and rewarding those who walk more than 3,000 steps in one day with “candy coins” the company says can be exchanged for real cash through virtual-coin trading platform Global Health Blockchain Club. The app has gained more than 20 million users since its establishment in June last year, according to the developer’s website.

Qubu has been removed from both Apple’s and Android’s app stores but can still be downloaded via invitation codes from other users.

Read the full story on Caixin Global later today.

Contact reporter Isabelle Li (liyi@caixin.com)

Related: Chinese Authorities Warn Against Illegal Crypto Fundraising

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By Simin Wen / Oct 18, 2019 05:38 PM / Business & Tech

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Photo: VCG

Office-share company WeWork has postponed plans to expand in China, the Nikkei Asian Review reported Wednesday citing people familiar with the matter.

The news comes after the firm delayed its IPO and announced founding CEO Adam Neumann would leave the company in an executive capacity.

In China, a nationwide economic slowdown and competition from cheaper local competitors have threatened to dampen demand for the U.S. firm's office spaces.

Although the company will continue to open new locations in 2019 and 2020, expansion plans for 2021 have been put on ice, Nikkei reported.

Contacted by Caixin, a WeWork China spokesperson declined to comment on the company's plans beyond 2019. But they said it was "business as usual" for the firm's China operations which aim to add eight new locations in the Greater Bay Area — the cities of Guangzhou, Shenzhen, and Hong Kong — by the end of the year.

"The fundamentals of our business remain strong in Greater China, and we remain committed to the continued success locally," the spokesperson said.

WeWork’s Greater China arm makes up a big wedge of its global portfolio, accounting for 15% of its total facilities and generating revenue of nearly $100 million in 2018, according to an official filing.

The company reportedly needs an average occupancy rate of at least 65% to break even. In Shenzhen, a city thronging with tech startups, it only has an occupancy rate of 30% to 50%, Nikkei reported.

Related: WeWork's China Rival Is Said to Seek Up to $200 Million U.S. IPO

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By Zhao Runhua / Oct 18, 2019 03:00 PM / Business & Tech

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Photo: VCG

There has been “no new progress” in ongoing talks regarding a joint venture between Shenzhen-listed carmaker Zotye Auto and Ford, Zotye said Thursday in an update published on a platform affiliated the Shenzhen Stock Exchange.

The statement offered no further details. In 2017, Ford and Zotye signed a definitive agreement to set up a 50-50 joint venture, Zotye Ford Automobile, to produce electric vehicles for Chinese consumers.

But the trail went quiet soon afterward, prompting some investors to question whether the tie-up was dead in the water. In August, state-run media outlet China Daily reported that the two companies were re-evaluating the partnership, citing sources close to the matter that attributed the talks’ stagnation both to “dramatic changes” in China’s car market and to industrial policies such as the phasing out of subsidies for new-energy vehicles.

Some of those concerns seem well-founded. During the first six months of 2019, Zotye sold a total of 63,825 vehicles, only 1,868 of which were pure-electric. Those figures were respectively 115,044 and 12,802 over the same period last year — a sign of China’s cooling car market.

The collapse in sales has threatened Zotye’s bottom line, with the company posting a 290 million yuan ($41 million) net loss during the first half of 2019, down from a 305 million yuan profit over the same period last year. The company anticipates a net loss of at least 450 million yuan for the first three quarters of this year.

Related: Ford’s Would-Be EV Partner Caught Up in China Auto Slump

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By Liu Shuangshuang and Mo Yelin / Oct 18, 2019 01:32 PM / Business & Tech

Photo: VCG

Photo: VCG

The online literature unit of Tencent-backed content aggregator Qutoutiao has raised $100 million from investors, the U.S.-listed company said in a statement Wednesday.

The funding on the unit, known as “Midu,” was led by CMC Capital and followed by Qutoutiao, according to the statement. Qutoutuao will remain as Midu’s controlling shareholder.

The money will be used to expand Midu’s content library and marketing capacity in order to “consolidate and improve Midu’s competitiveness in the industry,” Qutoutiao said in a separate statement.

Launched in May 2018, Midu had 10 million monthly active users as of April. Qutoutiao has said it aims to make that the number of active users per day by the end of this year.

Read the full story on Caixin Global later today.

Contact reporter Mo Yelin (yelinmo@caixin.com)

Related: Tencent's China Literature Sinks Amid Nation's Crackdown on 'Obscene' Content

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By Bloomberg / Oct 18, 2019 12:28 PM / Business & Tech

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Photo: VCG

(Bloomberg) — The National Basketball Association’s crisis in China, triggered by the Houston Rockets general manager tweeting support for Hong Kong protesters, has already cost the league “substantial” losses.

“The financial consequences may go on and be fairly dramatic,” Commissioner Adam Silver said Thursday at the Time 100 Health Summit in New York. But the league is willing to take on the costs to support free expression, he said.

The NBA was plunged into turmoil earlier this month after the Rockets’ Daryl Morey posted the tweet in support of pro-democracy demonstrators in Hong Kong. He soon deleted the message, but China took umbrage and the NBA’s sponsors in the country cut ties with the league.

Silver said that Chinese interests asked for Morey to be fired for the tweet.

“We said there’s no chance that’s happening — there’s no chance we’ll even discipline him,” said Silver, a longtime NBA executive who became commissioner in 2014.

It all happened on the eve of two NBA preseason games that were played in China. Though they went ahead as planned, local broadcasts were canceled in China and partners pulled out.

One of the biggest lingering questions was how severe the financial fallout would be. The NBA is the most popular U.S. league in the world’s most populous country — with some 800 million Chinese viewers — and its business there is already a billion-dollar enterprise.

As of right now, NBA games aren’t back on the air in China, Silver said at the conference, where he mostly spoke about mental health.

Tencent Holdings, the internet giant that has a $1.5 billion, five-year deal to stream league games online in China, also blacked out video of the exhibition events in the country. The platform is scheduled to resume streaming Oct. 23 as the regular NBA season starts.

Related: China’s Tencent Resumes Streaming NBA Games

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By Zeng Lingke, Zhang Zizhu, and Ren Qiuyu / Oct 18, 2019 12:22 PM / Environment

Photo: VCG

Photo: VCG

Key cities in northern China will aim to cut the average concentration of PM2.5, a toxic air pollutant, by 4% year-on-year during the 2019-2020 fall-winter period, according to an action plan released Wednesday by the country’s Ministry of Environment and Ecology (MEE).

The plan applies to a group of 28 cities, including the Beijing and Tianjin municipalities, from Oct. 1 to March 31 next year, a period that typically sees high rates of air pollution. The 4% target aims to drive down last winter’s average PM2.5 concentration of 82 micrograms per cubic meter, but does not reference the lower pollution levels witnessed during the winter of 2017-2018, when the average PM2.5 concentration was as low as 78 micrograms per cubic meter, a 25% drop on the year prior.

The plan also sets pollution-control requirements for the industrial, energy, and transportation sectors, including “emergency management” measures to cope with severe pollution. The ministry will classify enterprises into three categories depending on the intensity of their emissions, the Wednesday announcement said.

Stay tuned for more on the action plan coming to Caixin Global later today.

Contact reporter Ren Qiuyu (qiuyuren@caixin.com)

Related: Grassroots Carbon Control Projects Could Help China Beat Paris Pledge: Study

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By Lin Jinbing / Oct 18, 2019 11:30 AM / Economy

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Photo: VCG

China’s economic growth slowed further in the third quarter, reaching a new low not seen for nearly three decades, amid sluggish domestic and global demand clouded by the ongoing trade war with the U.S.

Year-on-year growth in China’s gross domestic product (GDP) edged down to 6% in the third quarter from a 6.2% rise in the previous quarter, marking the lowest level in available figures dating back to 1992, according to data (link in Chinese) released Friday by the National Bureau of Statistics (NBS). The reading marked the second straight quarter of slowdown, and was in line with the average forecast for the period among economists polled by Caixin.

In the first three quarters of this year, the country’s GDP grew 6.2% year-on-year.

Read the full story on Caixin Global later today.

Contact reporter Lin Jinbing (jinbinglin@caixin.com), editor Yang Ge (geyang@caixin.com)

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By Bloomberg / Oct 18, 2019 01:39 AM / Business & Tech

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Photo: VCG

Tesla Inc.’s first Chinese car factory is officially plugged in.

State Grid Corp. of China opened the first transmission line in a power connection project that increases electrical supply to the Tesla plant to a level required for preliminary production, according to a statement from the Chinese company’s Shanghai branch. State Grid said it will eventually increase the power supply eightfold for the factory to run at capacity.

State Grid said the project — involving 55 kilometers of cables and about 17 kilometers of ducts — was among the quickest it has completed, taking only six months.

Palo Alto, California-based Tesla plans by the end of this year to produce at least 1,000 of its top-selling Model 3 cars a week at the plant, where construction only began at the start of this year. China has exempted Tesla from a 10% sales tax, and the company — founded by Elon Musk — has also secured hundreds of millions of dollars in loans from local banks.

Tesla was included on a list of car manufacturers that China’s Ministry of Industry and Information Technology released Thursday for consideration for approval and public review, which runs to Oct. 23.


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By Simin Wen / Oct 17, 2019 06:20 PM / Business & Tech

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Photo: VCG

China’s dominant ride-hailing company Didi Chuxing is considering expansion into Costa Rica, extending its growing footprint in Latin America, Reuters reported Thursday.

A job listing on networking platform LinkedIn showed the company is hunting for a rider and driver operations associate in the Latin American country, although the company is no longer accepting applications. A Didi spokesman later confirmed the company’s interest in Costa Rica to Reuters.

Didi has been pursuing an expansion campaign in Latin America since last year. In early 2018, it acquired Brazil-based ride-hailing startup 99, and later moved into the Mexican, Chilean, and Colombian markets.

The company covers more than 1,000 cities in Latin America with a combined population of 140 million, according to a statement on its website.

Related: Shanghai Threatens Didi With App Removal as Ride-Hailing Violations Mount

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By Qu Hui and Tang Ziyi / Oct 17, 2019 04:51 PM / Business & Tech

Photo: VCG

Photo: VCG

Angry owners of some homes built by one of China’s largest developers in the southern Chinese city of Zhaoqing vented their fury at the company earlier this month after it slashed house prices for new buyers in order to perk up sales.

Homeowners who had already paid the original price crowded a local Evergrande sales office at a development in Zhaoqing’s Dinghu district to demand refunds. Some told Caixin they were riled by the property giant’s decision to knock hundreds of thousands of yuan off the asking prices of certain apartments.

One homeowner, who asked not to be named, said he shelled out 1.2 million yuan ($170,000) for a 129 square meter unit on the project last year only to see the price fall to around 900,000 yuan earlier this year.

The move comes as housing demand cools in many of China’s smaller cities.

Read the full story on Caixin Global later today.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

Related: How Cash-Hungry Property Developers Are Skirting Curbs on Trust Loans
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By Zhao Runhua / Oct 17, 2019 03:11 PM / Business & Tech

Photo: VCG

Photo: VCG

Listed firm Qtone Education Group’s proposed 1.5 billion yuan ($223 million) acquisition of the company behind a popular WeChat public account may have gone up in smoke, but similar firms are still making a buzz in the deal-making realm.

A similar company called Beijing Siwei Zaowu Information Technology is seeking a public listing on China’s recently launched high-tech board — known as the STAR market. Siwei operates two popular online outlets: paid knowledge-sharing and online course app Dedao, and content provider Luoji Siwei.

According to an official document released by the Beijing unit of the China Securities Regulatory Commission, Beijing Siwei Zaowu has selected investment bank China International Capital Corp. to help prepare its IPO application materials by December.

It’s not clear when Beijing Siwei Zaowu will file its prospectus. But markets are already skeptical about its IPO attempt after Qtone announced in September that it was suspending its acquisition of the firm behind “Wu Xiaobo Channel,” a wildly popular business and finance content provider. Qtone cited a failure to agree on certain details, but the markets widely interpreted the deal’s collapse as bowing to pressure from regulators suspicious of the opaque operations and sky-high valuation of the target company.

Founded in 2014, Siwei Zaowu is run by Luo Zhenyu, a controversial Chinese opinion leader known for his slick-tongued business insights. Dedao is now so popular that in September the head of a research institute at China’s central bank, Mu Changchun, used the platform to explain the country’s move into digital currency.

Siwei Zaowu was valued at 8 billion yuan in 2017, after completing an undisclosed funding round backed by high-profile investors including Sequoia Capital China, China Renaissance, and an investment affiliate of Tencent, public records show.

Related: Regulator, Education Group Go Back-and-Forth on $223 Million WeChat Account Deal

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Bao Zhiming, Yuan Ruiyang, Liu Shuangshuang, and Mo Yelin / Oct 17, 2019 01:54 PM / Business & Tech

Photo: VCG

Photo: VCG

Fast-growing Chinese e-commerce startup Taojiji has become embroiled in a crisis after using money earned by its merchants to offer new customers cash incentives for signing up to the platform.

The company drew widespread attention when it registered more than 11 million users within two months of being founded in August 2018, even though that growth relied on attracting new shoppers with massive subsidies backed by some early investors.

Once those funds dried up, Taojiji began raiding the pockets of its merchants, who typically have to wait one month before they can withdraw money earned by selling products on the platform.

The company now owes sellers as much as 1.6 billion yuan ($225 million), Caixin has learned.

After admitting the company had misused merchants' funds, Taojiji CEO Zhang Zhengping recently met merchants from across the country at the firm's Shanghai headquarters, where sellers had gathered to reclaim their earnings.

It remains unclear whether Taojiji has broken the law.

Read the full story on Caixin Global later today.

Contact reporter Mo Yelin (yelinmo@caixin.com)

Related: In Depth: After Conquering the Bargain Basement, Pinduoduo Sets Sights on Big Cities

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By Tang Ziyi / Oct 17, 2019 03:12 AM / Business & Tech

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Photo: VCG

U.S.-sanctioned Chinese technology giant Huawei Technologies Co. said its revenue rose by 24.4% in the first three quarters this year despite a U.S. export ban.

The company Wednesday posted strong revenue of 610.8 billion yuan ($86.1 billion) during January to September in an unaudited earnings report, providing a snapshot of its quarterly business performance, which is not required for a private company. Huawei’s sales revenue in the third quarter were about 209.5 billion yuan, according to Caixin’s calculation.

In May, Huawei was added to the U.S. Department of Commerce's Entity List, effectively banning the Chinese company from doing business with American suppliers without government approval.

The Shenzhen-based company didn’t disclose net profit during the first nine months, but it said the net profit margin was 8.7% in the period.

Huawei, which is the world’s second-largest smartphone vendor after South Korea’s Samsung, said global shipments jumped 26% to 185 million units in the first three quarters even its American partner Google stopped providing licensed Android service and popular apps such as Gmail for Huawei’s newly released handsets.

Huawei also said it has signed more than 60 5G commercial contracts with carriers worldwide to date, defying the U.S. administration’s efforts to lobby other markets in the world to exclude equipment from the telecommunication giant from their 5G construction projects.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

Related: Germany Leaves 5G Door Open to Huawei, Reuters Reports


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By Bloomberg / Oct 17, 2019 03:07 AM / Business & Tech

Photo: Bloomberg

Photo: Bloomberg

Ant Financial Services Group is seeking a syndicated loan of as much as $3.5 billion at a lower rate, joining other Chinese technology giants in moving to slash debt costs.

The company is in talks with lenders for a $2.5 billion financing that comes with a $1 billion greenshoe, or over-allotment, option, according to people familiar with the matter. The price discussed for the three-year loan is less than 100 basis points, or 1 percentage point, over Libor, said the people, who are not authorized to speak publicly and asked not to be identified. The company didn’t immediately respond to emailed requests for comment.

Billionaire Jack Ma’s Ant Financial last came to the syndicated loan market in 2017, raising a $3.5 billion three-year facility that pays 135 basis points over Libor, according to Bloomberg data. The latest funding plan comes amid a refinancing spree for Asian tech companies as they take advantage of abundant liquidity from lenders in the wake of fewer loan deals in the region.

Smartphone maker Xiaomi Corp. is in talks for a $1 billion refinancing at a lower rate after Chinese social media giant Tencent Holdings Ltd. clinched its biggest and cheapest dollar-based facility in August. Ant Financial’s affiliate Alibaba Group Holding Ltd. completed an amendment and extension of its $4 billion loan in May.

Ant’s new loan, if completed, will be used for general corporate purposes, the people said. The company is formally known as Zhejiang Ant Small & Micro Financial Services Group Co.


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By Matthew Walsh / Oct 16, 2019 08:09 PM / Business & Tech

The Menglian customs station in Yunnan province on the China side of the China-Myanmar border. Photo: VCG

The Menglian customs station in Yunnan province on the China side of the China-Myanmar border. Photo: VCG

China has frozen a number of social media accounts suspected of engaging in fraud along its border with Myanmar as part of a clampdown on telecom fraud believed to be originating in northern parts of the Southeast Asian nation.

Some users of popular programs like QQ, WeChat, and Alipay found their accounts suddenly became inaccessible on Monday, according to domestic Chinese media reports. Some users on Chinese social media posted screenshots bearing a pop-up message stating that their accounts had been suspended “because the account is suspected of fraud.”

Caixin was unable to independently verify the screenshots or confirm how many people were affected.

On Tuesday, an affiliate of the criminal investigation department of China’s Ministry of Public Security published a notice on its official Weibo account saying the shutdowns were in response to “rampant” telecom fraud emanating from northern Myanmar that “seriously violated the people’s property security.” The notice did not specify the nature of the fraud, its suspected perpetrators, or when normal service will be resumed.

The porous China-Myanmar boundary is a well-documented hotbed of cross-border telecom fraud. Gangs of Chinese scammers typically reside in Myanmar and liaise with contacts in China to fool unsuspecting phone users into handing over their personal details, before stealing money from them.

However, China and Myanmar law enforcement have recently busted a succession of the fraudsters’ often-elaborate schemes. Last month, police in southwest China’s Chongqing municipality arrested 69 suspects in a cross-border telecom fraud case that involved almost 10 million yuan ($1.4 million). Fraudsters masquerading as customer service staff at Taobao, Alibaba’s e-commerce platform, persuaded victims they would receive refunds by scanning WeChat QR codes. Instead, they found sums sometimes totaling thousands of yuan had been snatched from their bank accounts.

Similar cases were also recorded in August and June, according to state media outlet Xinhua.

Contact reporter Matthew Walsh (matthewwalsh@caixin.com)

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By Yang Ge / Oct 16, 2019 05:44 PM / Business & Tech

Photo: VCG

Photo: VCG

Something was clearly lost in the translation.

That’s the message coming from Youdao, the popular translation app owned by gaming giant NetEase, which has just announced a massive reduction in the size of its planned New York IPO.

According to its latest filing on Tuesday with the U.S. securities regulator, Youdao is now aiming to raise up to $116 million through its listing on the New York Stock Exchange. That’s down sharply from the maximum amount of $300 million it was originally hoping to raise when it made its initial filing at the end of September.

The company set a price range of $15 to $18 for its American Depositary Shares (ADSs).

Despite the tepid Wall Street reception, institutional investor Orbis Investment Management still plans to go ahead with its plan to buy $125 million worth of the company’s shares concurrent with the public offering, a knowledgeable banking source told Caixin.

Youdao bills itself as an online education company, but is best perhaps known for its free online translation tool and dictionary that is popular among Chinese users. Because those tools are free, the company’s main revenue comes from online advertising and instruction courses.

The company has never turned a profit. It recorded a net loss of 168 million yuan ($24 million) in the first half of this year, twice as wide as a year earlier.

Related: NetEase’s Youdao Unit Files for $300 Million IPO in New York 

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By Simin Wen / Oct 16, 2019 05:06 PM / Business & Tech

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Photo: VCG

Alibaba-backed Xiaohongshu is once again available in some app stores, more than two months after the popular social e-commerce app was removed from stores to conduct “self-examination and self-correction.”

The app, whose name means “little red book” in Chinese, reappeared in Android-based stores on Monday after “thoroughly reviewing and rectifying” its online content and hiring an unspecified number of moderators, Chinese domestic media reported. It remains unavailable on Apple’s App Store.

Although Xiaohongshu is primarily an e-commerce platform, it is also home to a lively community of around 300 million registered users who like to compare and discuss their various shopping experiences. Those users could still access the app following its takedown by from app stores in late July and early August, but new users couldn’t join the platform.

At the time of its disappearance from app stores, sources told Caixin that Xiaohongshu’s largely unregulated user-generated content was a likely reason why it landed in hot water. Xiaohongshu had previously drawn criticism for hosting fraudulent advertisements and inappropriate content.

Related: Alibaba-Backed ‘Little Red Book’ Crosses Little Red Line

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By Shan Leijing, He Shujing and Tang Ziyi / Oct 16, 2019 04:50 PM / Business & Tech

Photo: VCG

Photo: VCG

Realme, the low-priced sub-brand of Chinese smartphone giant Oppo, seems to be targeting a more upscale market with its most expensive model yet.

Unveiled Tuesday, the company’s X2 Pro series is priced between 2,599 yuan ($367) and 3,299 yuan, depending on storage capacity and design. The model, which touts a faster processor and a more vivid display, is significantly more expensive than Realme’s previous handsets, which were priced between 900 and 2,000 yuan.

Realme’s pivot to pricier phones is in line with its homegrown rivals such as Redmi, the low-cost spinoff of Xiaomi, which recently launched high-margin premium smartphones in the face of stiff competition at the lower end of the domestic market.

Read the full story on Caixin Global later today.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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