All posts by anthony@greaterbayinsight.com

P2P to get boost from GBA, says DBS 

China’s peer-to-peer (P2P) lending industry, which has shrunk dramatically under a government crackdown, should get a welcome boost from the development of the Greater Bay Area, according to DBS Bank.

By 2030, P2P lending will enjoy an annual growth rate of 17% in the region, making it the fourth-fastest growing sector, SCMP reported, citing the Singaporean bank’s estimate.

“We see that P2P lending across China could reach one trillion yuan by 2030, and the Greater Bay Area with its particular focus on innovation and entrepreneurship, would be more open to the P2P concept,” said Ken Shih, senior research director at DBS.

“A capital-intensive industry upgrade is inevitable, and P2P platforms can meet the financing needs of new business formats – small and micro companies in particular,” he added.

The bank ranks P2P lending fourth in a table of estimated growth rates for different sectors in the bay area by 2030. Smart appliances top the list with a forecast 30 per cent growth rate, while P2P is just behind online advertising in third place.

Read more.

DJI rejects US data fears over drones 

ZTE, Huawei, DJI: Shenzhen-based companies are coming into the US government’s sights, one by one. The world’s largest maker of consumer drones is the latest. The press release that was likely written months ago was released last night as DJI Technology attempted to refute claims by the US Department of Homeland Security that its products may be sharing data with Chinese authorities.

“At DJI, safety is at the core of everything we do, and the security of our technology has been independently verified by the US government and leading US businesses,” the company said.

Like ZTE and Huawei, DJI is a giant in its industry: it has almost three-quarters of the global market share for its consumer drones. Unlike ZTE and Huawei, however, it is dependent on the US market for revenues: 80 per cent of drones sold in North America are DJI’s.

On May 21, the US’ Homeland Security warned US companies to “be cautious” of Chinese-built drones “as they may contain components that can compromise your data and share your information on a server accessed beyond the company itself.” Although the alert didn’t represent a legal order and DJI was not named, it was obviously intended for no one else.

Established in 2006DJI has 14,000 employees in 18 offices worldwide. Revenues have been skyrocketing, up 80% in 2017 at RMB18 billion. More than 80% of its sales are overseas.

Read more (in Chinese).

Guangdong’s consumers prove resilient, so far 

Retail sales held up in Guangdong in March, judging by Q1 statistics released today. At RMB1.01 trillion, up 6.9% over Q1 last year, growth was 0.5 percentage points higher than the cumulative total for January-February.

Tourism is seen as contributing to the growth, according to local media. Chinese new year brought record numbers to the province, and the momentum has been maintained since then, as seen over the recent Labor Day holidays in early May. Retail sales in the key cities, including the GBA’s nine, accounted for the lion’s share, at RMB881.662 billion, up 6.7%. However, rural areas grew 8.2% to hit RMB136.234 billion.

Local media said growth was likely to speed up more in the rural areas, as major fast-moving consumer goods companies were focused there. So are commercial property developers: In Q1, of all shopping centers opened in the country, 20% were in third-tier cities and 22% in fourth-tier cities.  Moreover, it is consumers from these cities that are seen as driving growth in the bigger cities on shopping trips.

Read more (in Chinese).

HSBC plans more China tech jobs  

HSBC plans to add more than 1,000 jobs this year at its technology development centers in Guangzhou, Shanghai and Xi’an, reports Reuters.

HSBC’s expansion plan in China, a key market for the bank, comes amid growing use of technology in the financial sector – from payments to transactions. At stake is a bigger share of the billions of dollars worth of retail and corporate banking business in a major financial market with a growing customer base.

About 30% of the work done at the Guangzhou center, the largest HSBC tech facility in China with more than 5,000 employees, is for the mainland market and that share is expected to grow over the next couple of years.

Read more.

Netease Pay gets into export settlement 

Netease Pay, Guangzhou-based internet company Netease’s payment arm, has partnered with US-based Citibank to provide cross-border e-commerce operators with accounts that can collect payments in foreign currencies. China UnionPay and China Netcom will handle the forex conversion, reports Yicai Global.

The service is aimed primarily at Chinese exporters and is a new focus for Netease, which established itself as the country’s leading e-commerce platform for Chinese buying goods internationally. Cross-border financing, tax refunds and other services will likely be added in Q3, after the platform has improved its basic functions, according to a company spokesperson.

Netease’s Koala had a 27.5% market share of total cross-border e-commerce in Q1, according to Guangdong-based iiMedia Research. Alibaba’s Aliexpress service is its prime competitor.

Ren Zhengfei’s black swans prove prescient

The newswires are full of analysis today of President Xi Jinping’s visit to a Rare Earths plant and his extolling of “Long March spirit”. We won’t add to it. Better to focus on Ren Zhengfei, enigmatic leader of Huawei, who gave another interview this week at the company’s Shenzhen HQ that demonstrates what the president is talking about. 

This is a man who had black swans placed in the artificial lake outside his windows years ago. If US President Donald Trump’s team thought they were going to catch Ren unawares by putting Huawei on a blacklist last Friday, they clearly haven’t been reading Nassim Nicholas Taleb like he obviously has.

Ren listed a number of measures the company had taken in recent years to prepare for what happened last Friday and which was acted upon yesterday by various US firms such as Google, Intel, Qualcomm and others. If Ren is concerned about Huawei’s ability to survive the depths of the China-US trade war, he isn’t showing it. He had the gumption not only to hit back at the Trump administration, but also to not-so-subtly hint to Chinese policymakers – at least, those that might have been entertaining the thought of intervening – to stand back and let him manage this crisis with his team.

We don’t yet know how much any of this will mean, given the uncertain reaction of consumers to product changes, as well as the extent to which Huawei is exposed to the US ban. That will take time to ascertain. We do admire Ren’s coolness, however, and believe it will come as reassuring not only to Huawei staff, but to many others in the company’s supply chain, and many others who call the Greater Bay Area home.

As we have written previously, Huawei is not any company. It is a symbol of China’s emergence as a tech power every bit as much as it is a tech innovator. If Huawei is able to make good on Ren’s promises in the coming weeks and months, many participants in the GBA economy will have less to worry about, not just all those gazing out at the black swans.

Where the China-US trade war goes next is anyone’s guess. We are still on the side of the cautious optimists who believe that reason will prevail, in time, and the worst-case scenarios being reflected in recent waves of stock-market selling will not be realized. In the meantime, it’s best to stay tuned to SupChina, Sinocism and Trivium for detailed daily analysis at the national level, and stay tuned to GBA Today at the regional level.

Ho Iat Seng to run for Macau CE

Whenever Hong Kong politicians and media refer to the GBA as “Hong Kong and the 10 cities”, one has to feel for Macau. The other SAR, although less than a tenth of Hong Kong’s size, deserves better credit for its key role in the region’s “9+2” masterplan. Macau is slated to integrate with the GBA primarily via Hengqin island, but it is also expected to act as a bridge between China and the Lusophone countries. The former Potuguese colony’s casino revenues, meanwhile, are driving the growth of a world-class tourism industry on the western side of the Bay and will continue to provide an economic engine for thousands of SMEs throughout the region in the coming years.

Moreover, there is clearly a much bigger, more carefully guarded, role for Macau to play in the GBA’s integration over the remainder of the 50-year  term outlined in the SAR’s mini-constitution, the Basic Law. It is to forge ahead in finding creative ways to merge the legal and regulatory systems of the three vastly different jurisdictions of Hong Kong, Macau and Guangdong. Nearly halfway to 2047, Hong Kong is incessantly paralysed by political gridlock; Macau, on the other hand, has two things going for it: a populace less inclined to agitate for broader political participation, and a political/business/bureaucratic elite less steeped in colonial-era institutionalized mindsets. The city’s community of lawyers, academics and other thought-leaders is better positioned to find outside-the-box solutions to the conundrum of how to merge East and West ideologically and legally upon the expiration of the two SARs’ agreements with their former colonial masters.

The person who will likely get started on that effort stood up yesterday and declared his candidacy for Macau’s Chief Executive election. Ho Iat Seng (pronounced ho yat seng) is currently the president of Macau’s legislature. He has been the focus of intense speculation in Macau for many years, accelerating in recent months as the election has drawn nearer, as to his political ambitions. His announcement yesterday that he will resign his position on the NPC Standing Committee in Beijing  (which alone speaks volumes of his political pedigree) and run in the elections is being widely seen as Beijing’s informal nod for him to take the job.

There is still the formality of an election to go through, of course, and it is possible that the current Secretary for Finance and the Economy, Lionel Leong, will stand against him, which will ignite further speculation about a competitive tussle for the reins of power in Macau. But no well-informed analysts still think this will be more than a show.

Ho is an interesting person, as a recent backgrounder from Macau Business magazine explains (available to subscribers in PDF). His grandfather founded the forerunner of today’s flagship newspaper, Oumun Yatbo (Macau Daily News) and his father began building the family’s industrial fortune in the 1950s. What is more interesting for current events, however, is how Ho chose to prioritize his statements to the media when announcing his candidacy yesterday. As reported by Macau Business:

When replying about the reasons for accepting entering the “hot kitchen”, Mr. Ho said “many people put their expectations on me.”

“I could play an appropriate role in connecting the Macau and the Mainland legislative systems,” he told journalists. “I hope I could bring my legislative experience to the better integration of Macau into the Greater Bay Area and the development of a diversified economic environment.”

This is someone to watch in the coming days and months.

Premier pledges boost for investors in HK, MO, Taiwan

China’s newly revamped Foreign Investment Law will bring greater opportunities for investors in Hong Kong, Macau and Taiwan, Premier Li Keqiang has announced. The premier further said that specifics are being worked out and will soon be clarified through detailed supporting regulations, reports the South China Morning Post.

Speaking at the Boao Forum on Thursday, Li said preferential policies that had proved effective would remain unchanged and the country would broaden market access for investment from the three regions, further opening sectors such as finance, professional services and high-end manufacturing.

Read more here. 

Guangdong research funding open to HK, MO institutions

Scientific research institutions from Hong Kong and Macau are now eligible for research funding granted by Guangdong and may use them in the SARs, according to a report in China Daily Hong Kong.

Previously, institutions from the two special administrative regions had to form joint ventures with other mainland institutions or set up branches in Guangdong.

Under the new three-year pilot scheme, which was unveiled this week, two institutions from Hong Kong and Macau will enjoy equal rights with their counterparts in Guangdong in competition for a total of RMB500 million (US$74.2 million) in funding and key sci-tech projects supported by the province.

The policy also encourages cooperation in key fields identified by the Greater Bay Area masterplan, such as artificial intelligence and robotics.

Read more here.