Greater Bay Area becomes home to successful startups
Further regulations unsettle tech industry
Chinese military exercise off Taiwan’s southern coast
Xiaomi plans car factory
US antitrust case against Chinese companies dismissed
In Profile: Geopolitics expert Manisha Reuter at ECFR
Dear reader,
Not far off Taiwan’s southern coast, Chinese warships are once again circling to defend the “national sovereignty” of the People’s Republic. Only time will tell how far Beijing is actually willing to go to secure its claim over the island nation. Most certainly, however, the recent events in Afghanistan will have a strong impact on the Taiwan affair. Chinese media have already identified it as the end of American leadership.
But this is wishful thinking. Instead, Washington’s determination to confront China’s expansionist policy in the region is likely to surge. Marked by the failure at the Hindu Kush, the US certainly won’t subject itself to another round of mockery like the one it currently faces – and not only from China. But that is just by the by.
Because today we are mainly looking at economic developments in the People’s Republic. Domestic consumption is usually a critical area. This is not changing, even if the habits of Chinese consumers may have changed during the Covid pandemic. Beijing, meanwhile, has fewer troubles when it comes to innovative young talent. The number of young, highly valued tech companies is growing faster than anywhere else in the world. Only the US owns more of these so-called “unicorns”.
The Covid pandemic has accelerated a certain trend in Chinese consumer behavior. The exceptional circumstances of the past 18 months, marked by the fight against the spread of the virus, have made ice cream, milk or bottled water, for example, more sought after by the population.
As for Ice cream, probably because Chinese households have discovered the healing effect of sweetness for the soul in times of restrictions with curfews, quarantine regulations and lockdowns. According to the latest China Shopper Report 2021 by consulting firm Bain & Company, which has been analyzing purchasing behavior in China for ten years now, prior to the pandemic, ice cream was a product people did not really like to indulge at home, but instead was consumed on trips, during a stroll in the park or in restaurants. Now, things have changed, and it seems like Chinese consumers have discovered a new passion. Sales figures remain consistently higher than before the pandemic.
Milk also saw a much higher demand after a well-known Chinese physician attributed it with an immune-boosting effect in April 2020. Concerns for the health of family and oneself spurred sales of bottled water for cooking or drinking. Tap water is no longer trusted by consumers. In addition, people are generally cooking and dining more at home.
But Covid not only has an impact on what is bought, but also how it is bought. The China Shopper Report has identified a significant upswing in so-called community group purchases over the past year. More than a quarter of all Chinese households can now be reached directly by suppliers via this sales type. And this is despite the fact that the trend only came to be a few years ago.
Shopping groups with up to 500 people
In this process, a supplier uses a selected contact person who communicates as a kind of intermediary in his or her self-organized community or group. In China, this is usually done via the messenger service WeChat, which can be used to integrate up to 500 people into a shopping group. If the group leader receives an offer, he forwards it and collects a small commission if buyers are found. The collected orders of a group are subsequently delivered to the group leader, who then takes care of the distribution.
The concept of group buying is boomingduring the pandemic because vendors are able to significantly reduce expenses on logistics through such bulk orders and offer groups correspondingly cheaper prices. “This new distribution approach is reaching such a level of importance that all major retail Internet platforms are now investing heavily in it to stay in touch with consumers,” Bain & Company analysts predict. Internet giants such as delivery service Meituan, retail platforms Taobao and Pinduoduo, and ride-hailing service Didi have specifically set up new businesses to jump on the trend. They do not want to miss out on the supply of Chinese consumers as producers discover direct marketing as a permanent alternative.
However, whether community group purchases are able to continue to develop as rapidly in the future as they have in the past two years also depends on the regulatory arbitrariness of authorities. After all, they have begun to impair the market power of its tech companies in particular. It fears a loss of control and with it a lot of money. But there is also a social component to group buying. Beijing is also fearing for many millions of jobs should logistics of the food industry reach a level of efficiency that many distributors become redundant as a result. Eventually, producers will be able to just cut out retailers as the middleman. That would be a small but promising building block for the reduction of CO2 emissions in the People’s Republic.
China’s consumption rate is significantly lower than Germany’s
Domestic consumption has been one of the weak points of the Chinese economy for years. Compared to other large economies, the Chinese spend less and prefer to save money instead. The People’s Republic is still a long way from achieving a healthy ratio of gross domestic product. It ranks well below 40 percent. By way of comparison, private consumption in Germany accounted for almost 53 percent of the gross domestic product before Covid. As a result, Beijing is increasing its government spending and plugging the gap with public investment. As a result, debt is rising, and the risk of loan defaults is also increasing significantly because many investments made under these conditions all too often do not generate sufficient economic returns.
In the meantime, China’s Ministry of Commerce fears that lower private spending could jeopardize the country’s growth targets. It already launched a consumption campaign in the spring. A state-concerted online shopping festival offered domestic products as well as items from the partner countries of the Silk Road Initiative and numerous discount campaigns in other areas such as tourism, culture and sports. In a recent study, investment bank Goldman Sachs had recently warned that the Covid pandemic would significantly curb domestic consumption.
In this respect, the latest figures from the National Statistics Office earlier this week confirm predictions. With an increase of 8.5 percent in retail sales, predictions for the month of July fell well short of expectations, since analysts had expected just under eleven percent. While it might seem like an embarrassment of riches, the severe economic setback caused by the Covid pandemic around the globe, also makes current high growth figures an allegory of the depth of the previous crash. grz
Despite the pandemic, the number of “unicorns” in China reached a new high last year. Unicorns are start-ups less than ten years old and already worth more than one billion US dollars. There are currently 600 of these particularly highly valued young companies worldwide, and the number is rising. By May this year, China accounted for one-fifth of global unicorn companies, according to a report by global management and consulting giant Accenture. According to the report, China was home to 137 unicorns as of May 2021. That’s 94 more than five years ago. The US, however, is still far ahead with 288. The trend is clear, however. China is following on the heels of the Americans and the gap is getting smaller.
The metropolitan region around the Pearl River Delta in southern China, consisting of nine cities and two special administrative zones, is proving particularly important to new companies. Megacities such as Shenzhen, Hong Kong and Macau are also counted among them. Today, it already has 86 million inhabitants, which is more than the entirety of Germany. And Beijing wants it to become an economic cluster with a population of 100 million by the middle of the century. The area around the Pearl River Delta is also called the Greater Bay Area (GBA).
China’s State Council had already unveiled a detailed roadmap for the development of the Greater Bay Area back in February 2019. The China Development Bank, China’s top creditor, has pledged 360 billion yuan($55.5 billion) in financing to support the project.
Although the GBA accounts for only 0.6 percent of China’s landmass and for five percent of its population, it generated twelve percent of China’s gross domestic product (GDP), or 1.7 trillion US dollars in 2020. By comparison, Germany’s GDP with a smaller population amounts to 3.9 trillion US dollars. That is 2.3 times as much. So the GBA obviously still has a lot of room for improvement.
According to a study by real estate market researcher Colliers, the economy of the metropolitan area will have more than doubled by 2030, reaching $3.6 trillion. It would then not only be the economically largest coastal area in the world, but would also eclipse economic and innovation centers such as the San Francisco Bay Area, the New York metropolitan area and the Tokyo metropolitan area. And it would have significantly reduced its gap to Germany.
Thriving Startups in the Greater Bay Area
According to a white paper by WHub, a Hong Kong startup community platform, the GBA is already home to 43 unicorns, with a combined value of around US$1.1 trillion. They are primarily focused on five key industries: E-commerce, health tech, robotics, fintech and biotech. WeBank, a digital bank backed by Chinese tech giant Tencent, is the region’s most valuable startup with a valuation of US$18.5 billion. It is also the only fintech company in the top five, meaning it is the only fully digital financial services provider.
The four other unicorns at the top are the world’s largest drone manufacturer DJI($22 billion), AI specialist SenseTime ($7.5 billion), consumer electronics startup Meizu ($5.8 billion) and UBTech ($5.5 billion), a company specializing in AI and humanoid robotics.
The report points to Shenzhen’s key role in the region: 25 of the GBA’s 43 unicorns originate from the tech metropolis. Shenzhen also accounts for half of the patents filed in China. The city is home to more than 10,000 high-tech companies. It also has more than 80 universities with over one million students.
Shenzhen leads, Hong Kong remains strong
Shenzhen is followed by Hong Kong with eight unicorns and Guangzhou with seven. Hong Kong continues to serve as a stepping stone for startups venturing into mainland China via the GBA. A recent survey by the Hong Kong Trade Development Council (HKTDC) found that 34 percent of Hong Kong startups already have business operations within the GBA, while 43 percent were interested in expanding further into the region. “Hong Kong could play a key role as a business services and innovation hub for the Greater Bay Area, for example in key areas such as finance, trade and logistics, and legal and accounting services,” the HKTDC report said.
Hong Kong offers a number of programs to help local startups find the right partners in the Greater Bay Area. These include an initiative by InvestHK, a government agency responsible for foreign direct investment, which works closely with GBA cities. The HKTDC, a semi-governmental non-profit organization founded in 1966, has set up a platform called GoGBA for this purpose, which introduces local start-ups to companies in the province of Guangdong.
The Hong Kong Science and Technology Parks Corporation (HKSTP) also offers support. Esther Wong, Managing Director of SenseTime, says: “Hong Kong has unique advantages. It has a very vibrant talent pool with some of the best universities in the region, and a comprehensive legal and financial system, which is an important backbone for start-ups.” As part of the GBA, Hong Kong provides easy access to one of the fastest-growing markets and talent pools in the world, she added.
The port city of Guangzhou, located to thenorthwest of Hong Kong, is also drawing in young entrepreneurs, for example with generous subsidies for business costs and a favorable environment for raising capital. In January 2020, the province of Guangdong announced to provide a total of 3.1 billion yuan ($480 million) in tax subsidies for foreign professionals working in the Greater Bay Area.
Economy
Finance
Hongkong
Macau
Shenzhen
Stock Exchange
Technology
News
Authority presents draft for far-reaching tech regulation
The State Administration for Market Regulation (SAMR) has published a draft for a new regulation prohibiting unfair competition on the Internet, 禁止网络不正当竞争行为规定. It requested the public and affected industries to comment on the draft. The main purpose of the law package is to ensure better data protection. SAMR is accepting comments on the regulations until 15 September.
The publication of the document has caused a stir in the stock market. Shares of affected tech companies dropped sharply on Tuesday. Bilibili lost 6 percent, Meituan 3 percent, Alibaba 2.9 percent and Tencent 2 percent.
According to the new regulations, companies would be prohibited from using algorithms to influence users’ decisions. However, the evaluation of large amounts of data in order to induce purchasing decisions is the core business of the e-commerce industry. Companies would also no longer be allowed to spread misleading information about competitors. According to the draft, retailers will be prohibited from offering rewards for good ratings on the internet. fin
Alibaba
Meituan
SAMR
Tech Crackdown
New Threat: China’s military holding drills close to Taiwan
The Chinese military has launched an extensive exercise not far from Taiwan’s southern coast. Forces of the eastern units of the People’s Liberation Army 中国人民解放军东部战区, one of the five regional command bases of the People’s Liberation Army, are conducting assault drills including fighter jets and warships. A spokesman for the base justified these drills with alleged provocations by the US and Taiwan, which had made it necessary for China to “defend its national sovereignty”.
In the week before, the US and its ally Taiwan had agreed on regular exchanges between the respective coast guards of the two nations. In addition, Washington had approved the sale of an artillery weapon system to Taipei for 750 million US dollars.
But the biggest outrage was caused when Taiwan announced its participation in the US democracy summit in December, initiated by President Joe Biden. The People’s Republic fears that Taiwan will send its president Tsai Ing-wen to the US and could thus be legitimized by the Americans. Beijing claims Taiwan as an “inseparable part” of the People’s Republic. China has already announced the “biggest diplomatic crisis in decades” should Tsai attempt to travel to the US.
The United States and Taiwan had repeatedly “provoked and sent grave wrong signals,” according to a statement by the Chinese military. China’s sovereignty had been “seriously violated,” and peace and stability in the Taiwan Strait “seriously undermined.” grz
Geopolitics
Military
Taiwan
Rumors: Xiaomi plans car factory in Beijing
Xiaomi’s plans to enter the vehicle business are apparently moving forward. The manufacturer of electronics and household appliances has chosen Beijing as the location for its first car factory, Pandaily reports, citing Auto Business Review. Back in March, Xiaomi had already announced plans to offer smart electric cars (as reported by China.Table). For Xiaomi, cars would be an addition to its wide product range including fitness trackers, vacuum cleaners, rice cookers and camera drones. In Germany, the company is best known for its low-cost smartphones and PCs. These devices are consistently networked with each other – an aspect German companies often neglect because they still highly focus on physical, stand-alone products. fin
Car Industry
Electromobility
Technology
Xiaomi
USA: No verdict against Chinese exporter
An appeals court in New York has for the second time dismissed an antitrust lawsuit against a Chinese exporter of vitamin C. The judges ruled that the North China Pharmaceutical Group Corp (NCPC) could not be held liable for a violation of US antitrust lawdue to Chinese export regulations. The set of rules in the People’s Republic made it impossible for the company to meet conditions to export to the United States. The court dismissed the case accordingly. US manufacturers had sued for damages amounting to 147 million US dollars.
However, 17 years had passed prior to the ruling last Monday. In 2005, the US companies had filed a lawsuit against three Chinese competitors for alleged price-fixing. At the time, two affected exporters settled out of court with the plaintiffs for a payment of around 22 million dollars each. NCPC, however, has continued its legal battle for years, and previously obtained a dismissal of the case in 2016. The US companies subsequently appealed to the US Supreme Court, but were instead referred to the Court of Appeals in New York.
The judges now noted that the true conflict existed between U.S. and Chinese law and also pointed out that the Department of Justice, for its part, had refrained from filing a lawsuit. The judges also recommended the use of “alternative means” such as diplomacy, the involvement of the World Trade Organization or other international forums to protect antitrust interests of the United States.
China found the verdict satisfactory. Legal experts and party officials saw the NCPC’s success, after years of litigation, as an additional motivation for other Chinese companies to defend their legal interests abroad. grz
Antitrust law
Export
Trade
Profile
Manisha Reuter – Expert on Indo-Pacific Strategy
Manisha Reuter, Program Coordinator of the Asia Program at the European Council on Foreign Relations (ECFR)
Ever since childhood, she regularly visits India and spent time in China as a pupil and student – today, Manisha Reuter is professionally involved with both countries. At the ECFR, one of her responsibilities is the promotion of discourse on China in Europe. A special focus lies on people from business or politics who are involved with China in various ways but are no experts. ” We help them understand what is going on in the China debate,” says Reuter.
Another topic that is currently keeping the 29-year-old very busy is the EU’s Indo-Pacific strategy. Together with a colleague from France, she is working on a report on the perceptions and motivations of various European countries regarding the EU’s projects in the Indo-Pacific region. Manisha Reuter also owes her interest in Asia to her family: Her mother is from India. She regularly visits her family in the state of Gujarat and also speaks the local dialect, Gujarati.
As a schoolgirl, she spent several weeks in Shanghai and through a scholarship, she took part in a language and culture program and was overwhelmed by the glitter of huge shopping malls. During her studies, she spent a semester abroad in Hong Kong – one of the best moments of her life, as she says. She lived in a dormitory – a shared room of eight square meters – and went hiking on the weekends: To the right, the view of the idyllic countryside, on the left, the vista of the city. Reuter regrets the recent developments in Hong Kong. She had always hoped to return to the Hong Kong she once knew. But that is no longer the case.
It is important to remain in dialogue with China, Reuter stresses – especially when it comes to issues on climate. At the same time, however, Germany and the EU must set limits, for example in regard to human rights violations such as those in Xinjiang. “I think it is in our best interest to draw clear red lines and sometimes just be a bit brave.”
The signal of the frigate remained unused
The signal effect of some decisions should not be underestimated. Germany has not taken advantage of a current opportunity to send a strong signal. After all, the German frigate currently underway to the Indo-Pacific is also making a friendly visit to a Chinese port. However, it would have sent a stronger signal if it had avoided China and instead called exclusively at ports in India, Australia or Japan. “I think that would have been a great signal to partners in the region,” Reuter said. In this respect, Germany and the EU could learn from India, which is often less than timid when it comes to dealing with China – for example, by banning Chinese apps from the Indian market.
Manisha Reuter studied Political Science and Business Psychology in Lüneburg and then went to Frankfurt (Main) for her Master’s in International Studies and Peace and Conflict Research. Before joining ECFR in August 2020, she worked for the Asia Program of the German Marshall Fund. There she worked under Janka Oertel, now Director of the Asia Program at ECFR. When Oertel moved to the ECFR, Reuter followed her.
Reuter spoke with China.Table shortly before her vacation in Austria. She has two plans for her time off: to read a book “that has nothing to do with the geopolitical events in this world”. And hiking – like she did in Hong Kong a few years back. Sarah Schaefer
ECFR
Geopolitics
Indo-Pacific
Executive Moves
Dennis Spindler has moved from Volkswagen’s headquarters in Wolfsburg to Volkswagen (China) Investment in Beijing, working in the Department of Integrity and Compliance. Spindler previously worked in Controlling and Organizational Development.
Clarence Chan transferred from Canadian securities company BMO Global Asset Management to China Asset Management in Hong Kong. He will be responsible for the further development of services at the exchange-traded index fund (ETF).
Dessert
The season begins: fishing boats leave the port of Putian in the province of Fujian. At the start of the week, a quarter-year grace period for fish ended. The provincial government supports the industry with 700 million yuan (90 million euros) annually. The money is being used to build new infrastructure for the fishing fleets – such as the breakwater (bottom of the picture). The official goal of the fisheries authority is to “make people rich and the environment healthy”.
Greater Bay Area becomes home to successful startups
Further regulations unsettle tech industry
Chinese military exercise off Taiwan’s southern coast
Xiaomi plans car factory
US antitrust case against Chinese companies dismissed
In Profile: Geopolitics expert Manisha Reuter at ECFR
Dear reader,
Not far off Taiwan’s southern coast, Chinese warships are once again circling to defend the “national sovereignty” of the People’s Republic. Only time will tell how far Beijing is actually willing to go to secure its claim over the island nation. Most certainly, however, the recent events in Afghanistan will have a strong impact on the Taiwan affair. Chinese media have already identified it as the end of American leadership.
But this is wishful thinking. Instead, Washington’s determination to confront China’s expansionist policy in the region is likely to surge. Marked by the failure at the Hindu Kush, the US certainly won’t subject itself to another round of mockery like the one it currently faces – and not only from China. But that is just by the by.
Because today we are mainly looking at economic developments in the People’s Republic. Domestic consumption is usually a critical area. This is not changing, even if the habits of Chinese consumers may have changed during the Covid pandemic. Beijing, meanwhile, has fewer troubles when it comes to innovative young talent. The number of young, highly valued tech companies is growing faster than anywhere else in the world. Only the US owns more of these so-called “unicorns”.
The Covid pandemic has accelerated a certain trend in Chinese consumer behavior. The exceptional circumstances of the past 18 months, marked by the fight against the spread of the virus, have made ice cream, milk or bottled water, for example, more sought after by the population.
As for Ice cream, probably because Chinese households have discovered the healing effect of sweetness for the soul in times of restrictions with curfews, quarantine regulations and lockdowns. According to the latest China Shopper Report 2021 by consulting firm Bain & Company, which has been analyzing purchasing behavior in China for ten years now, prior to the pandemic, ice cream was a product people did not really like to indulge at home, but instead was consumed on trips, during a stroll in the park or in restaurants. Now, things have changed, and it seems like Chinese consumers have discovered a new passion. Sales figures remain consistently higher than before the pandemic.
Milk also saw a much higher demand after a well-known Chinese physician attributed it with an immune-boosting effect in April 2020. Concerns for the health of family and oneself spurred sales of bottled water for cooking or drinking. Tap water is no longer trusted by consumers. In addition, people are generally cooking and dining more at home.
But Covid not only has an impact on what is bought, but also how it is bought. The China Shopper Report has identified a significant upswing in so-called community group purchases over the past year. More than a quarter of all Chinese households can now be reached directly by suppliers via this sales type. And this is despite the fact that the trend only came to be a few years ago.
Shopping groups with up to 500 people
In this process, a supplier uses a selected contact person who communicates as a kind of intermediary in his or her self-organized community or group. In China, this is usually done via the messenger service WeChat, which can be used to integrate up to 500 people into a shopping group. If the group leader receives an offer, he forwards it and collects a small commission if buyers are found. The collected orders of a group are subsequently delivered to the group leader, who then takes care of the distribution.
The concept of group buying is boomingduring the pandemic because vendors are able to significantly reduce expenses on logistics through such bulk orders and offer groups correspondingly cheaper prices. “This new distribution approach is reaching such a level of importance that all major retail Internet platforms are now investing heavily in it to stay in touch with consumers,” Bain & Company analysts predict. Internet giants such as delivery service Meituan, retail platforms Taobao and Pinduoduo, and ride-hailing service Didi have specifically set up new businesses to jump on the trend. They do not want to miss out on the supply of Chinese consumers as producers discover direct marketing as a permanent alternative.
However, whether community group purchases are able to continue to develop as rapidly in the future as they have in the past two years also depends on the regulatory arbitrariness of authorities. After all, they have begun to impair the market power of its tech companies in particular. It fears a loss of control and with it a lot of money. But there is also a social component to group buying. Beijing is also fearing for many millions of jobs should logistics of the food industry reach a level of efficiency that many distributors become redundant as a result. Eventually, producers will be able to just cut out retailers as the middleman. That would be a small but promising building block for the reduction of CO2 emissions in the People’s Republic.
China’s consumption rate is significantly lower than Germany’s
Domestic consumption has been one of the weak points of the Chinese economy for years. Compared to other large economies, the Chinese spend less and prefer to save money instead. The People’s Republic is still a long way from achieving a healthy ratio of gross domestic product. It ranks well below 40 percent. By way of comparison, private consumption in Germany accounted for almost 53 percent of the gross domestic product before Covid. As a result, Beijing is increasing its government spending and plugging the gap with public investment. As a result, debt is rising, and the risk of loan defaults is also increasing significantly because many investments made under these conditions all too often do not generate sufficient economic returns.
In the meantime, China’s Ministry of Commerce fears that lower private spending could jeopardize the country’s growth targets. It already launched a consumption campaign in the spring. A state-concerted online shopping festival offered domestic products as well as items from the partner countries of the Silk Road Initiative and numerous discount campaigns in other areas such as tourism, culture and sports. In a recent study, investment bank Goldman Sachs had recently warned that the Covid pandemic would significantly curb domestic consumption.
In this respect, the latest figures from the National Statistics Office earlier this week confirm predictions. With an increase of 8.5 percent in retail sales, predictions for the month of July fell well short of expectations, since analysts had expected just under eleven percent. While it might seem like an embarrassment of riches, the severe economic setback caused by the Covid pandemic around the globe, also makes current high growth figures an allegory of the depth of the previous crash. grz
Despite the pandemic, the number of “unicorns” in China reached a new high last year. Unicorns are start-ups less than ten years old and already worth more than one billion US dollars. There are currently 600 of these particularly highly valued young companies worldwide, and the number is rising. By May this year, China accounted for one-fifth of global unicorn companies, according to a report by global management and consulting giant Accenture. According to the report, China was home to 137 unicorns as of May 2021. That’s 94 more than five years ago. The US, however, is still far ahead with 288. The trend is clear, however. China is following on the heels of the Americans and the gap is getting smaller.
The metropolitan region around the Pearl River Delta in southern China, consisting of nine cities and two special administrative zones, is proving particularly important to new companies. Megacities such as Shenzhen, Hong Kong and Macau are also counted among them. Today, it already has 86 million inhabitants, which is more than the entirety of Germany. And Beijing wants it to become an economic cluster with a population of 100 million by the middle of the century. The area around the Pearl River Delta is also called the Greater Bay Area (GBA).
China’s State Council had already unveiled a detailed roadmap for the development of the Greater Bay Area back in February 2019. The China Development Bank, China’s top creditor, has pledged 360 billion yuan($55.5 billion) in financing to support the project.
Although the GBA accounts for only 0.6 percent of China’s landmass and for five percent of its population, it generated twelve percent of China’s gross domestic product (GDP), or 1.7 trillion US dollars in 2020. By comparison, Germany’s GDP with a smaller population amounts to 3.9 trillion US dollars. That is 2.3 times as much. So the GBA obviously still has a lot of room for improvement.
According to a study by real estate market researcher Colliers, the economy of the metropolitan area will have more than doubled by 2030, reaching $3.6 trillion. It would then not only be the economically largest coastal area in the world, but would also eclipse economic and innovation centers such as the San Francisco Bay Area, the New York metropolitan area and the Tokyo metropolitan area. And it would have significantly reduced its gap to Germany.
Thriving Startups in the Greater Bay Area
According to a white paper by WHub, a Hong Kong startup community platform, the GBA is already home to 43 unicorns, with a combined value of around US$1.1 trillion. They are primarily focused on five key industries: E-commerce, health tech, robotics, fintech and biotech. WeBank, a digital bank backed by Chinese tech giant Tencent, is the region’s most valuable startup with a valuation of US$18.5 billion. It is also the only fintech company in the top five, meaning it is the only fully digital financial services provider.
The four other unicorns at the top are the world’s largest drone manufacturer DJI($22 billion), AI specialist SenseTime ($7.5 billion), consumer electronics startup Meizu ($5.8 billion) and UBTech ($5.5 billion), a company specializing in AI and humanoid robotics.
The report points to Shenzhen’s key role in the region: 25 of the GBA’s 43 unicorns originate from the tech metropolis. Shenzhen also accounts for half of the patents filed in China. The city is home to more than 10,000 high-tech companies. It also has more than 80 universities with over one million students.
Shenzhen leads, Hong Kong remains strong
Shenzhen is followed by Hong Kong with eight unicorns and Guangzhou with seven. Hong Kong continues to serve as a stepping stone for startups venturing into mainland China via the GBA. A recent survey by the Hong Kong Trade Development Council (HKTDC) found that 34 percent of Hong Kong startups already have business operations within the GBA, while 43 percent were interested in expanding further into the region. “Hong Kong could play a key role as a business services and innovation hub for the Greater Bay Area, for example in key areas such as finance, trade and logistics, and legal and accounting services,” the HKTDC report said.
Hong Kong offers a number of programs to help local startups find the right partners in the Greater Bay Area. These include an initiative by InvestHK, a government agency responsible for foreign direct investment, which works closely with GBA cities. The HKTDC, a semi-governmental non-profit organization founded in 1966, has set up a platform called GoGBA for this purpose, which introduces local start-ups to companies in the province of Guangdong.
The Hong Kong Science and Technology Parks Corporation (HKSTP) also offers support. Esther Wong, Managing Director of SenseTime, says: “Hong Kong has unique advantages. It has a very vibrant talent pool with some of the best universities in the region, and a comprehensive legal and financial system, which is an important backbone for start-ups.” As part of the GBA, Hong Kong provides easy access to one of the fastest-growing markets and talent pools in the world, she added.
The port city of Guangzhou, located to thenorthwest of Hong Kong, is also drawing in young entrepreneurs, for example with generous subsidies for business costs and a favorable environment for raising capital. In January 2020, the province of Guangdong announced to provide a total of 3.1 billion yuan ($480 million) in tax subsidies for foreign professionals working in the Greater Bay Area.
Economy
Finance
Hongkong
Macau
Shenzhen
Stock Exchange
Technology
News
Authority presents draft for far-reaching tech regulation
The State Administration for Market Regulation (SAMR) has published a draft for a new regulation prohibiting unfair competition on the Internet, 禁止网络不正当竞争行为规定. It requested the public and affected industries to comment on the draft. The main purpose of the law package is to ensure better data protection. SAMR is accepting comments on the regulations until 15 September.
The publication of the document has caused a stir in the stock market. Shares of affected tech companies dropped sharply on Tuesday. Bilibili lost 6 percent, Meituan 3 percent, Alibaba 2.9 percent and Tencent 2 percent.
According to the new regulations, companies would be prohibited from using algorithms to influence users’ decisions. However, the evaluation of large amounts of data in order to induce purchasing decisions is the core business of the e-commerce industry. Companies would also no longer be allowed to spread misleading information about competitors. According to the draft, retailers will be prohibited from offering rewards for good ratings on the internet. fin
Alibaba
Meituan
SAMR
Tech Crackdown
New Threat: China’s military holding drills close to Taiwan
The Chinese military has launched an extensive exercise not far from Taiwan’s southern coast. Forces of the eastern units of the People’s Liberation Army 中国人民解放军东部战区, one of the five regional command bases of the People’s Liberation Army, are conducting assault drills including fighter jets and warships. A spokesman for the base justified these drills with alleged provocations by the US and Taiwan, which had made it necessary for China to “defend its national sovereignty”.
In the week before, the US and its ally Taiwan had agreed on regular exchanges between the respective coast guards of the two nations. In addition, Washington had approved the sale of an artillery weapon system to Taipei for 750 million US dollars.
But the biggest outrage was caused when Taiwan announced its participation in the US democracy summit in December, initiated by President Joe Biden. The People’s Republic fears that Taiwan will send its president Tsai Ing-wen to the US and could thus be legitimized by the Americans. Beijing claims Taiwan as an “inseparable part” of the People’s Republic. China has already announced the “biggest diplomatic crisis in decades” should Tsai attempt to travel to the US.
The United States and Taiwan had repeatedly “provoked and sent grave wrong signals,” according to a statement by the Chinese military. China’s sovereignty had been “seriously violated,” and peace and stability in the Taiwan Strait “seriously undermined.” grz
Geopolitics
Military
Taiwan
Rumors: Xiaomi plans car factory in Beijing
Xiaomi’s plans to enter the vehicle business are apparently moving forward. The manufacturer of electronics and household appliances has chosen Beijing as the location for its first car factory, Pandaily reports, citing Auto Business Review. Back in March, Xiaomi had already announced plans to offer smart electric cars (as reported by China.Table). For Xiaomi, cars would be an addition to its wide product range including fitness trackers, vacuum cleaners, rice cookers and camera drones. In Germany, the company is best known for its low-cost smartphones and PCs. These devices are consistently networked with each other – an aspect German companies often neglect because they still highly focus on physical, stand-alone products. fin
Car Industry
Electromobility
Technology
Xiaomi
USA: No verdict against Chinese exporter
An appeals court in New York has for the second time dismissed an antitrust lawsuit against a Chinese exporter of vitamin C. The judges ruled that the North China Pharmaceutical Group Corp (NCPC) could not be held liable for a violation of US antitrust lawdue to Chinese export regulations. The set of rules in the People’s Republic made it impossible for the company to meet conditions to export to the United States. The court dismissed the case accordingly. US manufacturers had sued for damages amounting to 147 million US dollars.
However, 17 years had passed prior to the ruling last Monday. In 2005, the US companies had filed a lawsuit against three Chinese competitors for alleged price-fixing. At the time, two affected exporters settled out of court with the plaintiffs for a payment of around 22 million dollars each. NCPC, however, has continued its legal battle for years, and previously obtained a dismissal of the case in 2016. The US companies subsequently appealed to the US Supreme Court, but were instead referred to the Court of Appeals in New York.
The judges now noted that the true conflict existed between U.S. and Chinese law and also pointed out that the Department of Justice, for its part, had refrained from filing a lawsuit. The judges also recommended the use of “alternative means” such as diplomacy, the involvement of the World Trade Organization or other international forums to protect antitrust interests of the United States.
China found the verdict satisfactory. Legal experts and party officials saw the NCPC’s success, after years of litigation, as an additional motivation for other Chinese companies to defend their legal interests abroad. grz
Antitrust law
Export
Trade
Profile
Manisha Reuter – Expert on Indo-Pacific Strategy
Manisha Reuter, Program Coordinator of the Asia Program at the European Council on Foreign Relations (ECFR)
Ever since childhood, she regularly visits India and spent time in China as a pupil and student – today, Manisha Reuter is professionally involved with both countries. At the ECFR, one of her responsibilities is the promotion of discourse on China in Europe. A special focus lies on people from business or politics who are involved with China in various ways but are no experts. ” We help them understand what is going on in the China debate,” says Reuter.
Another topic that is currently keeping the 29-year-old very busy is the EU’s Indo-Pacific strategy. Together with a colleague from France, she is working on a report on the perceptions and motivations of various European countries regarding the EU’s projects in the Indo-Pacific region. Manisha Reuter also owes her interest in Asia to her family: Her mother is from India. She regularly visits her family in the state of Gujarat and also speaks the local dialect, Gujarati.
As a schoolgirl, she spent several weeks in Shanghai and through a scholarship, she took part in a language and culture program and was overwhelmed by the glitter of huge shopping malls. During her studies, she spent a semester abroad in Hong Kong – one of the best moments of her life, as she says. She lived in a dormitory – a shared room of eight square meters – and went hiking on the weekends: To the right, the view of the idyllic countryside, on the left, the vista of the city. Reuter regrets the recent developments in Hong Kong. She had always hoped to return to the Hong Kong she once knew. But that is no longer the case.
It is important to remain in dialogue with China, Reuter stresses – especially when it comes to issues on climate. At the same time, however, Germany and the EU must set limits, for example in regard to human rights violations such as those in Xinjiang. “I think it is in our best interest to draw clear red lines and sometimes just be a bit brave.”
The signal of the frigate remained unused
The signal effect of some decisions should not be underestimated. Germany has not taken advantage of a current opportunity to send a strong signal. After all, the German frigate currently underway to the Indo-Pacific is also making a friendly visit to a Chinese port. However, it would have sent a stronger signal if it had avoided China and instead called exclusively at ports in India, Australia or Japan. “I think that would have been a great signal to partners in the region,” Reuter said. In this respect, Germany and the EU could learn from India, which is often less than timid when it comes to dealing with China – for example, by banning Chinese apps from the Indian market.
Manisha Reuter studied Political Science and Business Psychology in Lüneburg and then went to Frankfurt (Main) for her Master’s in International Studies and Peace and Conflict Research. Before joining ECFR in August 2020, she worked for the Asia Program of the German Marshall Fund. There she worked under Janka Oertel, now Director of the Asia Program at ECFR. When Oertel moved to the ECFR, Reuter followed her.
Reuter spoke with China.Table shortly before her vacation in Austria. She has two plans for her time off: to read a book “that has nothing to do with the geopolitical events in this world”. And hiking – like she did in Hong Kong a few years back. Sarah Schaefer
ECFR
Geopolitics
Indo-Pacific
Executive Moves
Dennis Spindler has moved from Volkswagen’s headquarters in Wolfsburg to Volkswagen (China) Investment in Beijing, working in the Department of Integrity and Compliance. Spindler previously worked in Controlling and Organizational Development.
Clarence Chan transferred from Canadian securities company BMO Global Asset Management to China Asset Management in Hong Kong. He will be responsible for the further development of services at the exchange-traded index fund (ETF).
Dessert
The season begins: fishing boats leave the port of Putian in the province of Fujian. At the start of the week, a quarter-year grace period for fish ended. The provincial government supports the industry with 700 million yuan (90 million euros) annually. The money is being used to build new infrastructure for the fishing fleets – such as the breakwater (bottom of the picture). The official goal of the fisheries authority is to “make people rich and the environment healthy”.
