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Wal-Mart Moved Supplier Enablement from China to India

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that Walmart announced that its Supplier Enablement under Walmart Global Sourcing is moving from China to India. According to Wal-Mart’s commitment, the company will purchase more than US$10 billion of Indian-made products from India. This relocation work has already started. Walmart did clarify later that this is not a move of the Global Supplier Business Unit, which is independent from Walmart China. Walmart China did not respond directly to inquiries about the reason for the relocation. At least one Chinese Walmart supplier confirmed that it did receive the notification. Walmart entered the Chinese retail market in 1996 and opened its first Walmart store in Shenzhen, Guangdong Province. However, in the four year period from 2016 to 2020, Walmart closed 80 stores in China. Starting from the first quarter of fiscal year 2020, Walmart’s gross profit margin in China has declined for 10 consecutive quarters. There are reports in 2021 that more of its business in China will be sold.

Source: NetEase, October 11, 2021
https://www.163.com/dy/article/GM05S4GT05445BQZ.html

Financial Experts: Increase in Cost of Electricity Would Be Devastating to High Energy Consumption Industries

To deal with a power shortage, the National Development and Reform Commission announced on Tuesday that it will, in an orderly manner, lift the electricity price restrictions and will not cap the price increase for high energy consumption companies. Financial experts believe that if China continues to ban coal imports, the coal shortage will remain an issue. It will also have a devastating impact on the high energy-consuming industries such as steel and chip manufacturing.

As price restrictions are lifted, the government is hoping that it will give coal manufacturers and power companies more incentives to find coal. Beijing has imposed a restriction on coal imports from Australia. China imported 780,000 tons of coal from Australia in the first half of the year, down 98.6 percent compared to the same period last year. Meanwhile the price of coal has risen by more than 100 percent.

The electricity price increase will not only impact high energy consumption industries but also residential consumers. In China, industrial electricity consumption is close to 70 percent while residential electricity consumption is about 14 percent. Even though the head of the Commission gave his assurance that the increase in the price of electricity will not impact residential consumers, Huaxi Securities previously predicted that the rise in electricity prices will directly and indirectly affect the consumer price index.

Since late September, a number of cities in three northeastern provinces suddenly had power outages for as short as 5 hours or as long as more than 10 hours. Power outages have caused an inconvenience to people’s lives as many people complained that they couldn’t charge their phones and couldn’t make online payments or contact their relatives and friends. Some areas even had a water outage as well and the schools were forced to close. Later on, the power crisis was extended to 20 provinces throughout the country.

Source: Radio Free Asia, October 12, 2021
https://www.rfa.org/mandarin/yataibaodao/jingmao/ac-10122021051920.html

“Workers’ Lives Matter” Gains Popularity in China

An online survey “Worker’s Lives Matter!” is gaining popularity in China. It is a collection of the working hours for employees who work for high tech and other well-known companies. The survey is sparking a debate about the so-called “overtime culture” in China.

“Worker’s Lives Matter!” – Workers also need to live was launched by four recent college graduates. They posted a form on GitHub for tech company employees to fill out listing their company’s name, their position, and their daily working hours.

By last Thursday, more than 4,000 people had signed up to share their data. The companies they work for include high-tech Internet companies such as Alibaba, Baidu, Tencent and Tik Tok.
The collected information shows that most businesses require a five-day work week, but employees actually work between 10 and 12 hours a day.

Working long hours has been a hot topic in China’s high-tech companies and in other white-collar jobs. In 2019, tech company employees launched a similar online initiative to bring the 996 model to the public’s attention for the first time. 996 means employees work from 9 in the morning till 9 in the evening, six days a week.

In recent months, criticism of overtime has been growing. The government’s recent crackdown on high-tech companies has also begun to focus on the treatment of their employees. This year, Internet companies such as Tik Tok, Kuaishou and Meituan have begun cutting their mandatory weekend overtime. In August, China’s Supreme Court ruled that the 996 model is illegal.

Source: Deutsche Welle, October 14, 2021
https://p.dw.com/p/41gnO

Taiwan Business Investment In Mainland Dropped by Half in Past Decade

Taiwan business investments in mainland China have dropped by almost half from 61.2 per cent to 33.3 per cent in the past decade. This suggests that Taiwanese businesses are fleeing China in large numbers. Those who are still doing business in China face mounting business risks.

Lin Zonghong, a researcher at the Institute of Sociology at the Chinese Academy of Sciences in Taiwan recently spoke at an online forum regarding Taiwan business investment risks in the mainland. According to Lin, Taiwan business investment in the mainland can be divided into three stages. The first stage was from 1992 to 2007. That was when Taiwan’s Foreign Direct Investment (FDI) in the mainland kept rising. By 2002, it passed 60 percent of its total FDI. From the 2008 global financial crisis to 2014 when the Sunflower Student Movement broke out in Taiwan, FDI from Taiwan in Mainland reached its peak. The Sunflower Student Movement refers to a movement in which a coalition of students and civic groups organized  to protest the passing of the Cross-Strait Service Trade Agreement (CSSTA) by the then ruling party, the  Chinese Nationalist Party (KMT). The third stage is post 2015 when Taiwan investments were withdrawn from the mainland and shifted to other southeast Asian countries and the U.S..

Lin believes that China’s FDI has been overstated because it includes investments from Hong Kong, which accounts for 75-80 percent of the total. Those investments from Hong Kong were originally from the mainland. They were re-directed through Hong Kong into the mainland just to qualify for foreign investment tax incentives. If the inflow from Hong Kong was excluded, China would have seen a negative FDI.

Since 2007, Taiwan businesses have been losing tax and labor benefits that they used to receive on the mainland. Many of them ended up moving to middle or western regions in China. In 2007, there were still 356 Taiwanese businesses in the mainland. By 2017, the number was 124. By 2020, only 108 were left. Also compared to Taiwan, business costs are higher in the mainland. The data suggests that the gross profit for Taiwan businesses operating in the mainland is less than it is for those operating in Taiwan.

Since Taiwan businesses entered the mainland in 1998, Taiwan has seen factory closures, unemployment, low wages among the younger generation and an increase in poverty. Lin reiterated that Taiwan businesses must understand the business risks in the mainland and look at the current business environment in the mainland as a warning for future business decisions.

Source: Epoch Times, October 17, 2021
https://www.epochtimes.com/gb/21/10/17/n13310415.htm

Development and Reform Commission: Private Capital Shall not Engage in News Gathering, Editing and Broadcasting Business!

According to the website of the National Development and Reform Commission, the National Development and Reform Commission publicly solicited opinions on the “Market Access Negative List (2021 Edition)” on the 8th of October. The draft mentions that it is forbidden to conduct news and media-related businesses in violation of regulations.

1. Private capital shall not engage in the news gathering, editing and broadcasting business.

2. Private capital shall not invest in the establishment and operation of news organizations, including but not limited to news agencies, newspaper publishing companies, radio and television broadcasting organizations, radio and television stations, and Internet news information collection, editing and publishing service organizations.

3. Private capital shall not operate the layout, news frequency, news channel, column, or public accounts owned by news organizations.

4. Private capital shall not engage in live broadcast services of activities and events involving politics, the economy, the military, diplomacy, major society, culture, science and technology, health, education, sports, and other related political directions, public opinion orientations, and value orientations.

5. Private capital shall not introduce news released by overseas entities.

6. Private capital shall not hold forums or summits and award selection activities in the field of news and public opinion.

Source: Xinhua, October 9, 2021
http://www.news.cn/fortune/2021-10/09/c_1127938584.htm

Related Article: China to Ban Private Capital in the News Business
http://chinascope.org/archives/27909

 

Alibaba’s Ant Group Has Sold All Its Shares in Caixin Media, According to Report

Chinese Internet giant Tencent posted news that Netease originally reported saying  that Ant Group (which Alibaba owns) has recently sold all of its shares in Caixin Media and completely withdrawn from investment. According to publicly available information, Caixin Media had previously introduced external investors such as Zhejiang Shu Culture, Tencent, CMC Capital, and Ant Group through A, B, C, and D rounds of financing. As of now, Ant, Zheshu Culture, and others. have disappeared from the list of Caixin shareholders. Tencent still holds a small number of Caixin shares through the Shenzhen Litong Industrial Investment Fund.

{Note: Caixin Media is a private all-media group that provides financial news and information services.  Hu Shuli, the former editor-in-chief of Caixin magazine was the founder. It is said that former Chinese Vice President Wang Qishan is one of the backers of Caixin Media.}

Also, on September 23, Alibaba sold all of its shares of Mango Excellent Media, a major TV-based entertainment media in Shanghai, at a loss of over 2 billion yuan (US$ 310 million).

Source:
1. Tencent, October 12, 2021
https://new.qq.com/omn/20211012/20211012A076VC00.html
2. Sina, September 24, 2021
https://finance.sina.com.cn/stock/s/2021-09-24/doc-iktzqtyt7741702.shtml

Government: People’s Daily Reported Fantasia Holdings Missed Its U.S. Debt Payment

Fantasia Holdings announced that it was unable to make a U.S. debt payment of $206 million on its due date of October 4. The company was owned by Zeng Baobao, the niece of Zeng Qinghong, a former Chinese Communist Party (CCP) top official and the right-hand man of former CCP head Jiang Zemin. Many media have reported that Zeng heads the Jiang faction since Jiang has been in poor health and their group has taken many actions against Xi Jinping.

People’s Daily reported on Fantasia’s missing the $206 million debt payment. It also reported that Fantasia raised 3.3 billion yuan (US$ 512 million) by selling a core business Li Li Le (邻里乐) from Color Life, a property management company that Fantasia owns, to Country Garden Services Holdings, another real estate giant in China.

The fact that People’s Daily, the official newspaper of the CCP Central Committee, reported the negative news about Fantasia, may convey a strong political message.

Also, an article analyzing Fantasia has appeared in many Chinese media. The article said that Fantasia appeared to have plenty of money when it reported its bank balance and its cash of 27.1 billion yuan (US$ 4.21 billion) on June 30, 2021. Actually, however, for real estate companies, the cash they hold may be the cash deposits from different house buyers, so banks will freeze that. Also, Fantasia may not have mentioned other debts that it has hidden from its report.

The article commented that Fantasia might have been blocked from issuing bonds and it therefore had no choice but to borrow money on the capital market. By June 30, 2021, its capital debt was 67 percent of its total debt, with the U.S. dollar debt accounting for 53 percent of the total debt. Among the 12 U.S. dollar debts that it has, only one has an interest rate lower than 8 percent; the other 11 all have rates of around 10 percent or higher, way above the average 7.5 percent interest rate on Renminbi debt.

Related postings on Chinascope:

Sources:
1. People’s Daily, October 11, 2021
http://finance.people.com.cn/n1/2021/1011/c1004-32249384.html
2. 163.com, October 9, 2021
https://www.163.com/dy/article/GLT66O960515VS38.html