Tag Archives: technology

GBA firms have potential, need finance – He Xiaojun speech

Edited transcript of a speech by He Xiaojun, Party Secretary and Director of the Guangdong Provincial Local Financial Supervision Administration:

The central government has launched two major initiatives in the region this year, for which we should all be grateful. They are the Greater Bay Area, and the designation of Shenzhen as a Pioneering Zone for Socialism with Chinese Characteristics. With these, we have the means and the framework to conduct significant reforms, especially of the financial sector.

First, let me share some data points. Looking back on international patent applications for the most recent year available, 2017, we see that the three other “bay areas” of Tokyo, New York and San Francisco registered 22,000, 12,000 and 35,000 patents, respectively. Our Greater Bay Area registered more than 176,000, almost eight times that of Tokyo, 16 times that of New York, and about five times that of San Francisco.

However, this is nothing to celebrate. Most of our patents are in the consumer electronics industry and advanced manufacturing. We must be soberly aware that we remain stuck at the lower end of the industrial manufacturing value-added chain. Basic research is where we are lacking.

This can be improved, but it is going to require a more thoughtful approach to how we use financial resources. Policy-based finance and medium- and long-term credit insurance funds, for instance, can help. These can support the construction of national key laboratories and high-level universities. However, this will take a long time.

What is required mostly is a shift in mindset. I went to Dongguan for research some time ago, where I saw a professor who had just come back from the United States and was doing basic research on robotics development in the Songshan Lake district. He lamented the drive to constantly transform scientific research into commercial success. If your only indicator of the success of research is how much money it can generate, the quality will never be good enough.

Clearly, we are still excessively demanding that our scholars develop their research in the direction of industrialization. We have too many short-term and fast-action requirements. We must start to pay more attention to the next step of long-term funding to conduct major breakthroughs in basic research.

The good news is that we have an incredibly strong foundation on which to build a better model for financing industrial growth. Take supply chain finance. There will always be a need for finance to support the continuous optimization of manufacturing and industrial chains. In this regard, we have an unrivalled supply chain, which just needs a better financing mechanism.

There are currently 500 of what I like to call “professional towns” in Guangdong. The combined GDP of these towns accounts for three average Chinese provinces. Of these, 146 each generate output of more than RMB 10 billion per year. A dozen are above the RMB 100 billion level. Those in Dongguan, Foshan and Zhongshan are particularly eye-catching. Xiaolan Town of Zhongshan produces 70% of the world’s lock cylinders. Guangzhou’s Xintang Town produces 60-70% of the world’s denim. But these towns have not been having an easy time rising up the value-added chain, because of access to finance. This is vital to take the next step of Guangdong’s industrial transformation.

Most of these enterprises are small and medium-sized. This is why we have started to build a financing platform for SMEs in Guangdong, since July 17. It makes good use of big data and blockchain technology to build up trustworthy credit profiles for these companies. It is working already, with a good case study being the conglomerate TCL (based in Huizhou). All of TCL’s SME suppliers can now get unsecured loans, which will help them to rebuild and restructure the industrial chain, and further improve the quality of the industry. We are leading the country in this effort.

At the same time, we are also building a platform for the registration and protection of intellectual property. Everyone knows that SMEs have many talents, but they are all light on assets. What they have in abundance is intellectual property rights. Therefore we are raising their capacity to access credit by placing a higher value on that IP.

We are also determined to create the right multi-level financing platform to support the cultivation of “star” enterprises. We need to be more like Japan and South Korea, which have clear plans to cultivate at least 100 companies with global clout. This doesn’t always mean they must be large. They have found that they can have technological leadership in the cross-border trade chain at the SME level. Such stars will be grown into the multinational behemoths of the future.

Guangdong is also preparing such a plan to cultivate star enterprises that can grow into major multinational enterprises.

We have some already: companies with enormous potential that can become global giants with the right access to funding. Take Shenzhen Guangfeng Technology, which recently listed on the Shanghai STAR market, as an example. It makes 150-inch, high-tech laser-projected TVs, which sell for RMB 1.5 million each. Before its recent listing, Guangfeng was valued at between RMB 1 billion and RMB 2 billion. Although its stock price has experienced twists and turns after the listing, it has recently stayed at a market cap of around RMB 15 billion.

Transsion Technology is another. This Shenzhen-based company entered the African market in only 2012, selling cheaper mobile phones. It now has almost half of the entire African market and is currently valued around RMB 38 billion.

We need to bring more of such enterprises to our capital market and cultivate our own stars.

Look at it this way. There are now 600 listed companies in Guangdong, but we have 45,000 state-level high-tech enterprises based here – which means only 1.8% are listed. Under the guidance of the CSRC, Guangdong will address this. We will dig out more star enterprises and encourage them to raise public equity.

Macau could play a valuable role in this endeavour. When I was in Shenzhen, we helped the Macau SAR government draft a plan for the Macau Stock Exchange. I hope that it will become the Nasdaq equivalent for the offshore Renminbi. The plan has been sent to the central government, and I hope that it will be approved before the 20th Anniversary ceremonies are held (on December 20).

We can also use “green finance” to help our technological innovation efforts become more competitive at the international level. In Guangzhou, we have established a national-level “green financial experimental zone”. Guangdong’s carbon emissions trading already accounts for 70% of the national total this year. This is why it makes sense to establish the Guangzhou Futures Exchange. It should be approved before the end of this year.

These things will make Guangdong and the entire Greater Bay Area’s financial innovation initiatives speed up.

Looking at the demand side of the equation, it is clear that we need to catch up. The Greater Bay Area has a population of 77 million, with per-capita GDP exceeding US$20,000. That is a developed-country level, with high potential for a takeoff in consumer spending. But these consumers need more sophisticated financial products.

Look at the statistics. Online shopping in Guangdong ranks first in the country. Of 100 households, 43 have cars. Residential property markets turn over 100 million square meters of space every year. Seven of the country’s 12 youngest cities are here, with the average age of residents at least 10 years younger than the Yangtze River Delta. We need a better financial industry.

This is all before the rise of the industrial internet, thanks to the rollout of new 5G mobile networks, which will provide a golden opportunity for equipment leasing. Guangdong will be at the forefront of development of the industrial Internet of Things. This will quickly become a RMB 1 trillion industry. Through financial leasing, enterprises can better sell products that will be rapidly upgraded, rather than relying on longer product life-cycles.

The Greater Bay Area’s future clearly lies in cross-border finance. We have always attached great importance to this aspect, and we are applying technological solutions quickly. For example, we recently launched a provincial trade financing platform using blockchain technology. Orders are encrypted and tracked, verified with Customs and external management. There is no “false water” trade finance data, in other words. This platform is being trialed at the moment and is expected to be put into use by the end of October. Such innovations will provide a good support for cross-border capital flow monitoring.

The iterative development of the financial industry itself is a very important area of ​​technological innovation. Take the example of Webank (owned by Tencent), which opened less than three years ago. It has loans outstanding of RMB 3 trillion, with 150 million registered users, 70% of whom are blue-collar workers – and of these, 37% did not have any prior credit record. The bank’s average loan size is just RMB 8,000. They have extended more than 300,000 corporate loans without any written materials, approved within the same day.

Where is our banking industry going? Webank’s general ledger system is built on blockchains. It has fewer than 2,000 staff, half of whom are science and technology personnel. The ecology of the banking system itself is also changing.

Ping An Technology is another great example. It has more than 1,700 patents on financial technology, the world’s No. 1, surpassing Bank of America and many others. The company has 99,000 software engineers. Its voiceprint recognition, facial recognition, and artificial intelligence technology is world-leading.

Indeed, the development of technology is changing our world. Those who don’t keep up can only expect their financial leadership to be affected. Therefore, in the next step, we must pay special attention to the renewal and development of financial technology, and lead our financial technology companies to jointly promote the progress of everyone.

Shenzhen splashes startup cash

Shenzhen wants everyone to be an entrepreneur, it seems. The city has doubled basic allowances for “startups” and widened their definition to include, well, just about the entire population that works for itself, rather than for corporate titans such as Huawei, Tencent, and Ping An, from what we can see.

According to the Shenzhen Daily News, the basic subsidy for “start-up enterprises”, which can be individuals, has been doubled, from RMB 5,000 to RMB 10,000 yuan. In the case of “partnerships”, i.e., limited liability companies, it goes from RMB 50,000 to RMB 100,000.

Continue reading Shenzhen splashes startup cash

Guangdong to launch its own STAR Market

Not usually one to play catch-up to Shanghai, Guangdong has announced it is getting its own Science and Technology Innovation Board, otherwise known as a STAR Market. 

Shanghai launched the first STAR Market on July 22. Its first day of trading made national headlines as share prices soared, but they came down in the subsequent days as traders locked in early profits. 

Now, it has been decided that Guangdong is following suit, under guidelines released by the central government earlier this year aimed at boosting innovation by making it easier for small and micro enterprises to raise equity on regional exchanges.

Continue reading Guangdong to launch its own STAR Market

Shenzhen ramps up 5G use

Licenses have only recently been issued to four network operators, but 5G mobile communications services are already being rolled out across a wide variety of industries in Shenzhen. In an interesting feature, Southern Metropolis Daily takes a look at some of these:

Medical care:The Peking University Shenzhen Hospital has adopted 5G in its Shenzhen-Shantou clinic, where ultrasound experts conduct remote consultations between Shenzhen and Shantou via mobile phones or tablets. 

Schools:The Longhua district plans to have full 5G coverage for primary schools and kindergartens by the end of this year. Technologies such as AI, ALOT platform and big data has already been adopted in some schools. 

Smart Transport:The Luohu district will have 600 5G base stations by the end of the year to support its Smart Network Vehicle Demonstration Zone, where auto-driving bus services are being developed. Drones, meanwhile, will be further integrated into the city’s transport network via 5G.

Photography:5G technologies will be adopted in photography and videography, enabling high-resolution live video and the adoption of VR and AR. It will also improve the storage capacity and the protection of data and copyright online. 

Read more in Chinese.

Shenzhen to add 2,000 tech firms

The Shenzhen Hi-tech Zone began as a patch of 11.52 sq km in the Nanshan district and has mushroomed, particularly over the past decade. This widely known fact was recognized in April this year, when the “zone” was officially expanded to 159.48 sq km, covering not only Nanshan but the Pingshen district as well. (To understand what exactly a Hi-tech Zone is, read our explainer.) 

Now, the city government has announced that, far from resting on its laurels as the tech capital of southern China, it plans to accelerate the development of this zone. In so doing, it plans to attract and/or develop no fewer than 2,000 new hi-tech enterprises this year. These will be focused on building commercial applications for AI, new energy, integrated circuits, robotics, and new materials. 

At the same time, Shenzhen will focus on building an integrated supply chain in the hi-tech sector, starting from basic research, through manufacturing and financing. It will also construct a number of key scientific and technological infrastructure projects and build a number of key laboratories and pilot bases. These will include high-level innovation incubators, research institutes, and a group of professional technology service institutions.

Read more.

GBA Briefs: 25/6/2019

Vienna, anyone? China Southern Airlines opened a new route on June 18 from Guangzhou Baiyun International Airport to Vienna, Austria, via Urumqi in Xinjiang. Read more. 

Smart Ports:A new 5G Smart Port Innovation Lab was launched in Shenzhen by China Merchants Group in collaboration with Huawei and China Mobile, with the aim of implementing 5G technology to create more efficient port operations. Read more.

Tianhe Leads 5G:Guangzhou’s Tianhe district will be the first to be covered with a comprehensive 5G network in the GBA, building more than 2500 5G base stations by the end of September. Read more.

Fees Cut:Fees for passport application and travel pass to Hong Kong and Macau are being cut. From July 1, passport fees will drop from RMB160 to RMB120, and for a travel pass to Hong Kong and Macau from RMB80 to RMB60. Read more.

Qingyuan to launch first maglev line – but at gentle speed

The province will get its first glimpse of magnetic-levitation railway lines in October next year, when a medium-speed line will open in Zhaoqing’s city center of Qingyuan.

Construction began on the line, which will run trains at 160km/h, in late 2017. Much faster lines using the maglev technology are being planned for the Guangzhou-Shenzhen-Hong Kong route, as was reported last week. But they have not yet been tested. Moreover, the technology is apparently capable of running at close to the speed of sound, 1,000 km/h, but only in underground “tubes”.

Read more.

Inside Huawei’s efforts to build an OS

SCMP has an interesting read out today – an exclusive look inside the efforts of Huawei to develop its own operating system (OS) so that it doesn’t have to depend on US technology now that Google and Microsoft have been barred from supplying it.

The new OS is supposed to be ready after the summer, but it is unclear yet whether it can meet the biggest challenge: letting apps designed for Android run on it.

Read more on SCMP.

Guangdong zooms ahead with electric cars

New Energy Vehicle* production is surging in Guangdong, which is already the country’s largest market for electric cars. In Q1, sales jumped 252.1%, by far the fastest in the country. Leading the charge were Guangzhou Auto (+71% YoY) and Shenzhen-based BYD (+147%).

Guangdong is the country’s biggest producer and consumer of NEVs. There are more than 250,000 on provincial roads, which is around one-eighths of the country’s total. Add in the number of Teslas in Hong Kong – it is the largest per-capita market for Tesla worldwide – and the Greater Bay Area’s dominance in electric vehicles becomes clearer.

Despite falling car sales overall, and despite the headlines about carnage in the startup sector for electric cars, the NEV market is accelerating quickly: around 1.7 million are expected to be sold nationwide this year.

Shanghai will likely catch up in terms of production once Tesla’s Gigafactory there starts pushing out Model 3s, but the Greater Bay Area is expected to remain in the lead on sales. Moreover, looking ahead, production capacity is accelerating fastest here.

Three factors are driving this growth in the GBA. One, industrial policy adjusted quickest here once the central government made it a national priority. This enabled traditional manufacturers such as Guangzhou Auto to undertake major upgrades of production capacity while their startup compatriots were still raising money and learning how to make cars. Total production capacity of NEVs in Guangdong under construction has already exceeded 2 million units annually, including 400,000 for the new energy line of Guangzhou Auto and 400,000 for its Japanese joint venture, GAC Toyota. These should be completed by 2022.

Two, electric vehicles fit into the national game plan for stimulating consumption, and Guangdong has been quick to launch supportive policies such as increasing the quotas for new licenses.

Three, two of the world’s most efficient multinational car companies have been attracted here by favorable policies and deeper consumer markets. They are Toyota, which has invested RMB11 billion into its existing partnership with Guangzhou Auto to produce NEVs, and Mercedes-Benz, which is partnered with BYD.

Read more (in Chinese).