China lays out official stance on trade talks with U.S.

On Sunday, China released a comprehensive white paper to formalize its positions on trade negotiations with the U.S. The set of statements come as the trade war escalates and Beijing threatens to hit back with a retaliatory blacklist of U.S. firms. Here are some key takeaways from the press conference announcing the white paper:

U.S. ‘responsible’ for stalled trade talks

The “U.S. government bears responsibility” for setbacks in trade talks, chided the paper, adding that the U.S. has imposed additional tariffs on Chinese goods that impede economic cooperation between the two countries and globally.

While it’s “common” for both sides to propose “adjustments to the text and language” in ongoing negotiations, the U.S. administration “kept changing its demands” in the “previous more than ten rounds of negotiations,” the paper alleged.

On the other hand, reports of China backtracking on previous trade deals are mere “mudslinging,” Wang Shouwen, the Chinese vice minister of commerce and deputy China international trade representative, said as he led the Sunday presser.

China ready to fight if forced to

China does not want a trade war with the U.S, but it’s not afraid of one and will fight one if necessary, said the white paper.

Beijing’s position on trade talks has never changed — that cooperation serves the interests of both countries and conflict can only hurt both — according to the paper. CNBC’s Eunice Yoon pointed out that Beijing’s latest stance repeats previous statements made back in September.

Deals must be equal

Difference and frictions remain on the economic and trade fronts between the two countries, but China is willing to work with the U.S. to reach a “mutually beneficial and win-win agreement,” stated the paper. However, cooperation has to be based on principles and must not compromise China’s core interests.

“Nothing is agreed until everything is agreed,” Wang said.

He said one needs not “overinterpret” China’s soon-to-come entity list, adding that it mainly targets foreign companies that run against market rules and violate the spirit of contracts, cut off supplies to Chinese firms for uncommercial reasons, damage the legitimate rights of Chinese companies, or threaten China’s national security and public interests.

China respects IP rights

The paper also touched on issues that are at the center of the prolonged U.S.-China trade dispute, including China’s dealings with intellectual property rights. U.S. allegations of China over IP theft are “an unfounded fabrication,” said the white paper, adding that China has made great efforts in recent years to protect and enforce IP rights.

Wang claimed that China pays the U.S. a significant sum to license IP rights every year. Of the $35.6 billion it shelled out for IP fees in 2018, nearly a quarter went to the U.S.

Investments are mutually beneficial

The white paper claimed that bilateral investments between the two countries are mutually beneficial rather than undermining for U.S. interests when taken account of “trade in goods and services as well as two-way investment.”

The Chinese government also pushed back at claims that it exerts influence on businesses’ overseas investments.

“The government is not involved in companies’ business activities and does not ask them to make specific investments or acquisitions,” said Wang. “Even if we make such requests, companies won’t obey.”

In response to China’s probe into FedEx over Huawei packages that went stray, Wang assured that “foreign businesses are welcome to operate legally in China, but when they break rules, they have to cooperate with regulatory investigations. That’s indisputable.”

The Shenzhen-based smartphone and telecom giant has been hit hard by during the trade negotiations as the Trump administration orders U.S. businesses to sever ties with the Chinese firm.

Science publisher IEEE bans Huawei but says trade rules will have ‘minimal impact’ on members

The IEEE’s ban on Huawei following new trade restrictions in the United States has sent shock waves through the global academic circles. The organization responded saying the impact of the trade policy will have limited effects on its members, but it’s hard at this point to appease those who have long hailed it as an open platform for scientists and professors worldwide to collaborate.

Earlier this week, the New York-headquartered Institute of Electrical and Electronics Engineers blocked Huawei employees from being reviewers or editors for its peer-review process, according to screenshots of an email sent to its editors that first circulated in the Chinese media.

The IEEE later confirmed the ban in a statement issued on Wednesday, saying it “complies with U.S. government regulations which restrict the ability of the listed Huawei companies and their employees to participate in certain activities that are not generally open to the public. This includes certain aspects of the publication peer review and editorial process.”

In mid-May, the U.S. Department of Commerce’s Bureau of Industry and Security added Huawei and its affiliates to its “Entity List,” effectively barring U.S. firms from selling technology to Huawei without government approval.

It’s unclear what makes peer review at the IEEE a technology export, but the science association wrote in its email to editors that violation “may have severe legal implications.”

Whilst it’s registered in New York, the IEEE bills itself as a “non-political” and “global” community aiming to “foster technological innovation and excellence for the benefit of humanity.”

Despite its removal of Huawei scientists from paper vetting, the IEEE assured that its compliance with U.S. trade restrictions should have “minimal impact” on its members around the world. It further added that Huawei and its employees can continue to participate in other activities as a member, including accessing the IEEE digital library; submitting technical papers for publication; presenting at IEEE-sponsored conferences; and accepting IEEE awards.

As members of its standard-setting body, Huawei employees can also continue to exercise their voting rights, attend standards development meetings, submit proposals and comment in public discussions on new standards.

A number of Chinese professors have reprimanded the IEEE’s decision, flagging the danger of letting politics meddle with academic collaboration. Zhang Haixia, a professor at the School of Electronic and Computer Engineering of China’s prestigious Peking University, said in a statement that she’s quitting the IEEE boards in protest.

This is Haixia Zhang from Peking University, as an old friend and senior IEEE member, I am really shocked to hear that IEEE is involved in “US-Huawei Ban” for replacing all reviewers from Huawei, which is far beyond the basic line of Science and Technology which I was trainedand am following in my professional career till now.

…today, this message from IEEE for “replacing all reviewers from Huawei in IEEE journals” is challenging my professional integrity. I have to say that, As a professor, I AM NOT accept this. Therefore, I decided to quit from IEEE NANO and IEEE JMEMS editorial board untill one day it come back to our common professional integrity.

The IEEE freeze on Huawei adds to a growing list of international companies and organizations that are severing ties or clashing with the Chinese smartphone and telecom giant in response to the trade blacklist. That includes Google, which has blocked select Android services from Huawei; FedEx, which allegedly “diverted” a number of Huawei packages; ARM, which reportedly told employees to suspend business with Huawei; as well as Intel and Qualcomm, which also reportedly cut ties with Huawei. 

China’s used car marketplace Uxin to raise $230M via convertible notes

Uxin, a Chinese second-hand car dealer with Leonardo DiCaprio as its latest brand ambassador, is tipped to get a bag of new funding less than a year after it raised $225 million from its public offering on the Nasdaq.

The company announced on Wednesday that it’s selling $230 million worth of convertible notes to 58.com — China’s answer to Craigslist, Warburg Pincus, TPG and other investors. The notes, due in June, convert to Uxin’s Class A ordinary shares at a price of $1.03 per share or $3.09 per ADS. Upon closing the deal, each of 58.com, Warburg Pincus and TPG will obtain the right to nominate one board director to Uxin.

Uxin was trading at $2.46 at the end of Tuesday, a 74 percent decline from its recent peak in January. Its stock tanked in April after short-seller J Capital Research broadsided it over alleged frauds. Uxin denied the accusations, saying they were “false and misleading.”

The Chinese company is in a bruising fight with well-backed rivals including Chehaoduo, which pocketed $1.5 billion from Softbank’s Vision Fund in February, and Renrenche, which raised $300 million led by Goldman Sachs a year earlier.

As part of the transaction, 58.com, a 14-year-old Chinese internet firm that went public in New York six years ago, will come into a strategic partnership with Uxin in areas such as user traffic and inventory acquisition, used-car inspection, big data analysis and SaaS, says Uxin in a statement. The move follows Uxin’s agreement with Alibaba in December to set up a used car section on the ecommerce giant’s Taobao marketplace.

There are increasing synergies between 58.com and Uxin as both are exploring opportunities outside the crowded markets of China’s megacities. 58.com hit a notable milestone in 2018 after it racked up 100 million new users for its classifieds services customized for small-town populations, which include everything from job listings to trading cars.

In the same vein, Uxin has churned out reports that show demand for used cars coming from China’s lower-tier cities has surged in recent years. The boom is in part a result of a new Chinese policy that allows consumers to buy second-hand cars from a different province, enriching the variety of car options for rural residents.

“We see enormous growth potential in China’s used car market and believe that the volume of used-car transactions will overtake that of new cars in the years ahead,” said Michael Yao, chairman and chief executive officer of 58.com, which runs its own online used car business.

The deal will allow 58 Used Car to “benefit from Uxin’s tremendous offline transaction-related expertise,” added Yao, referring to Uxin’s mix of digital and physical sales channels. “By jointly integrating our online and offline services, we will be ideally positioned to significantly enhance the user experience for purchasing used cars and drive greater efficiency in this growing market.”

Alibaba reportedly mulling to raise $20B through a second listing in Hong Kong

Massive news just dropped for Hong Kong’s capital markets. Alibaba, one of the world’s largest tech companies, is considering raising $20 billion through a second listing in Hong Kong, Bloomberg reported on Monday citing sources.

TechCrunch has reached out to Alibaba for comment and will update the story if and when we have more information.

Unnamed people told Bloomberg that the money raised in Hong Kong is intended to help Alibaba “diversify funding channels and boost liquidity.” The Chinese ecommerce behemoth is aiming to file a listing application confidentially as early as the second half of 2019, according to the report. That would come five years after Alibaba famously scored a record $25 billion listing on the New York Stock Exchange following Hong Kong’s refusal to approve its filing due to rules around company structure.

But the Hong Kong Stock Exchange is becoming an increasingly popular destination for public offerings that put Chinese tech businesses closer to investors at home, as my colleague Jon Russell explained in 2017. The turning point came when the bourse finally introduced dual-class tech stock listings last year, a major appeal that helped HKEX attract such tech darlings as smartphone maker Xiaomi and food delivery service Meituan Dianping.

The news also arrived at a time when Chinese tech firms are coping with increasing hostility in the US amid a series of prolonged trade negotiations. Just last week, China’s largest chipmaker announced that it would delist from the NYSE and focused on its existing Hong Kong listing, although the company claimed the plan had been brewing for some time and had nothing to do with the trade war.

TikTok parent Bytedance is reportedly working on its own smartphone

It’s been a busy couple of months for Bytedance, one of the world’s most valuable startups and the operator of globally popular video app TikTok. The Beijing-based company has continued to grow its list of apps to include the likes of work collaboration tool Lark, an instant messenger called Feiliao as well as a music streaming app, and now it appears to be taking a bold step into the hardware realm.

Bytedance is planning to develop its own smartphone, the Financial Times reported (paywalled) citing two sources. A spokesperson from Bytedance declined to comment on the matter, but the rumor is hardly a surprise as smartphone pre-installs have long been a popular way for Chinese internet companies to ramp up user sizes.

There’s also urgency from Bytedance to carve out more user acquisition channels. After a few years of frantic growth, Bytedance failed to hit its revenue target for the first time last year amid slowing ad spending in China, according to a report by Bloomberg.

Some of Bytedance’s predecessors include selfie app maker Meitu, which builds smartphones pre-loaded with its suite of photo editors and recently sold this segment to Xiaomi as the latter tries to capture more female users and newcomers, including Snow-owned camera app B612 and Bytedance’s Faceu, close on Meitu’s heels.

Others have taken a less asset-heavy approach in the early days of the Chinese internet. Baidu, Alibaba and Tencent — known collectively as the BAT for their supremacy in China’s tech world — all worked on their own custom Android ROMs, which come with extra features compared to a stock ROM pre-installed by a phone manufacturer.

Alibaba’s ambition also manifested in a $590 million investment in Meizu in 2016 that saw the eommerce giant take up the challenge to develop a tailored operating system for the handset maker. More recently in March, WeChat owner Tencent teamed up with gaming smartphone maker Razor on a number of initiatives that cover hardware.

There were early clues to Bytedance’s smartphone endeavor. The company confirmed in January that it has acquired certain patents and some employees from phone maker Smartisan, although it said at the time the deal was done to “explore the education business.” That was a curious statement as Smartisan’s business has little to do with education. At the very least, the tie-up confers hardware development capability on the mobile internet upstart.

Indeed, a source told the Financial Times that Bytedance founder Zhang Yiming “has long dreamt of a phone with Bytedance apps pre-installed.” Nonetheless, this is tipped to be an uphill battle, at least in China where smartphone sales are cooling and competition intensifies between entrenched players like Huawei, Vivo, Oppo, Xiaomi and Apple.

Bytedance has built a leg up away from home, thanks to its empire of mobile apps. The company is one of the few — and many would argue the first — Chinese internet startups that manage to gain a meaningful foothold globally. TikTok has consistently topped the worldwide app ranking in the last handful of months, though it’s also encountered a few stumbling blocks in some of its larger markets.

In the United States, the Federal Trade Commission imposed a fined on TikTok for violating children’s privacy protection law. The government of India, which has driven much of TikTok’s recent growth, also took issue with the app to temporarily ban it on account of illegal content.

While the US market may be difficult to penetrate given Washington’s concerns around the security threat that Chinese companies may present, India is now crowded with Chinese brands. A research done by Counterpoint found that in the first quarter, Chinese manufacturers led by Xiaomi controlled a whopping 66 percent of India’s smartphone market. That means Bytedance, alongside its potential ally Smartisan, is not only up against local rivals in India but also the familiar faces from its home market.

Amazon finally supports Traditional Chinese books on Kindle

A long-awaited service for readers in Taiwan, Hong Kong, Macau and some other overseas Chinese communities have finally come true: Amazon has just started offering Traditional Chinese books for its Kindle E-reader.

The release filled an obvious gap for Kindle, which debuted back in 2007 and has been growing the number of languages it supports over the years. 2012 marked a major step in its Asia expansion as it began providing E-books in Simplified Chinese — the type of characters used in mainland China — under its China-specific site. That was a prelude to Kindle’s entry into China the next year. We will see if the same pattern of regional push will repeat for Taiwan and Hong Kong, where Kindle isn’t officially distributed at the moment.

Previously, people who read Traditional characters had to find roundabout ways to access the language on Kindle, such as buying Simplified content and converting it into Traditional using customized fonts that became available since Amazon’s 5.9.6 firmware update. Of course, that’s a time-consuming solution riddled with all sorts of calibration issues in spacing and font size.

The Traditional Chinese store kicked off with a list of over 20,000 books that people can read on their Kindle apps and Kindle devices. For some comparison, Kindle carried some 60,000 Simplified titles a year after introducing the language.

Users can now find Traditional Chinese books on a dedicated portal hosted on all existing Amazon.com websites, the company says. The early selection spans popular authors like Hugo Award-winning Liu Cixin and Chinese classics like Dream of the Red Chamber, in addition to translated bestsellers including George R.R. Martin’s A Song of Ice and Fire Series.

The regional launch is also targeted at authors, who can now self-publish their Traditional Chinese books through Kindle Direct Publishing and distribute the works to the language communities around the world.

“Bringing Traditional Chinese language books to Kindle is a step forward on our journey to provide more choice and selection to readers around the world,” said David Naggar, vice president of Kindle Books in a statement. But the store is not as finished as its Simplified counterpart yet, missing editor’s choice, book sales, pre-sales, book rankings and other potentially popular features.

Why Luckin’s ultimate target may not be Starbucks

Starbucks plans to double its store count in China to 5,000 in 2021 and Luckin, a one-year-old coffee startup, is matching up by aiming to reach 4,500 by the end of this year. Luckin’s upsized $651 million flotation has brought American investors’ attention to this potential Starbucks rival in China, where the Seattle giant controlled over half of the coffee market as late as 2017. But as soon as you make your first purchase with Luckin, you realize its ultimate goal may not be to topple Starbucks.

To get your caffeine intake from Luckin, the ordering process happens entirely on its app. First, you will decide how you want to fetch the drink: have it delivered within 30 minutes, pick it up at a nearby Luckin kiosk, or sit back and sip at one of its full-on cafes, or what it calls ‘relax stores.’

Say you’re tied up at the desk, you can input your location to check if you’re within Luckin’s delivery radius. Luckin has essentially built a vast coffee delivery network through its partnership with one of China’s biggest courier services SF Express, which dispatch staff to ferry the drinks on scoot fleets.luckin You then place the order, choosing from a range of drinks and customizing it — hot or cold, the amount of sugar and portions of creamer, the type of syrup flavor and the likes. When you get to the end, Luckin will ask you to pay via its app. If you’re a first-time user, you get a ‘first order free’ voucher, a common strategy for many Chinese consumer-facing apps to lure new users.

Tencent’s latest education push is a nod to new collaborative structure

When Tencent announced it had formed a new education brand this week, the internet giant wasn’t just flexing the muscles to conquer China’s booming online education sector. The new initiative is also an early result of Tencent’s long plan to foster more internal collaboration at a time when its core businesses, the lucrative video gaming segment and the billion-user WeChat, are under attack.

Called ‘Tencent Education’, the new brand consists of 20 products across all six of the firm’s business groups, announced executive senior vice president Dowson Tong at the company’s annual ecosystem summit on Wednesday. According to Tong, Tencent has over the years served some 15,000 schools and 70,000 educational institutes, giving it a reach of over 300 million users in the sector.

What this means is when it comes to making education products, there will be more teamwork among Tencent divisions, from the one overseeing WeChat to the entertainment-focused unit operating some of the world’s most played games. The catalog of services ranges from face recognition technology to monitor students during class time (I know, it makes me cringe), to personal development classes for adults.

This level of cross-department cooperation had been rare at Tencent until recently. For years, the Shenzhen-based company fostered a competitive culture it compares to horse races. On the one hand, internal rivalry spawns innovation. The success of WeChat has demonstrated Tencent’s willingness to let a new product eat into its legacy social network QQ. The strategy doesn’t always work, though. To contain TikTok’s rise, Tencent has churned out a dozen short video apps, but none has reached their rival’s supremacy.

Competition, on the other hand, produces internal silos and hurts collaboration. This is a critique that has often come at Tencent, although Tong refuted the notion in a recent interview with local news outlet Yicai, saying that Tencent actually had a history of keeping a data system for internal collaboration.

Meanwhile, its rival Alibaba has gotten more credit for structuring business units under one cooperative umbrella. When founder Jack Ma set up an “underlying unified data, safety, risk management and technology foundation” almost seven years ago, his goal was to tear down “internal corporate walls.” The integration was targeted at customers as well. For instance, Ma envisioned a future where a merchant on Alibaba’s consumer-facing marketplace Taobao would directly source from 1688.com, its business-to-business ecommerce arm.

Tencent is undergoing a similar transformation. In October, the company announced a sweeping reorganization that saw it knit together a few disparate business lines primed for synergies. Take the Platform and Content Group. The newly minted group consolidated all non-WeChat social and content services — spanning QQ, an app store, a web browser, two news apps, an esports platform and several video services — under one single division.

Historically, Tencent has derived a bulk of its income from video games and a handful of popular social media apps. But the cards are increasingly stacked against these ventures as China exerts more control over the gaming sector and Bytedance seizes more online attention, so part of the October reorg was aimed at fending off imminent competition from new rivals by better utilizing internal resources, as it’s the case with PCG.

The other part of the agenda is set for what’s further down the road. Tong told Yicai that the time is ripe for ‘the industrial internet,’ a buzzword in China that refers to the upgrade of traditional industries with technology. Tencent wants to be a leading force in the revolution, and the plan is to open up its technology to other enterprises, as Tencent has done through the education initiative.

“In the age of the industrial internet, I think the ultimate job is to be open… so we are opening a lot of the technologies we’ve accumulated in the past and integrating them for the use of other companies,” said Tong.

Tencent CEO warns companies must keep innovating to survive amid US-China tensions

On Tuesday, Tencent’s usually low-profile founder and CEO Pony Ma made rare comments to weigh in on escalating tensions between the United States and China, calling domestic tech companies to build more self-reliance in a bid to stay competitive.

“China has come to the forefront of development. There is less and less room for taking the best from outside and improving on them. As the ZTE and Huawei cases have intensified recently, we are also constantly watching whether the trade war will turn into a tech war,” said Ma at an event in China’s Yunnan Province per a transcript Tencent provided to TechCrunch.

Ma’s concern is not unexpected. As recent US-China negotiations show, the Shenzhen-based telecommunication and smartphone giant has become deeply entangled in the trade spat. The Commerce Department last week restricted American companies from selling components and other technology to Huawei — which the Trump administration has labeled as posing a national security threat — though it has since scaled back the ban. That would eventually cut Huawei off from certain services from Google, chips made by Qualcomm and Intel, and its other American suppliers.

Despite China’s efforts to lead in global innovation, many of its tech startups and champions still rely heavily on imported technologies to deliver products and services. People have celebrated this level of interdependence as a result of trade, but increasingly they worry decoupling the US and China will hurt companies on both sides and lead to a bifurcation of the global tech economy.

“[China]’s digital economy will be a high-rise built on sand and hard to sustain if we don’t continue to work hard on basic research and key knowledge, not to mention the transformation from old to new forms of drivers or high-quality development,” Ma pointed out.

Jack Ma, founder of Tencent’s arch-foe Alibaba, remarked along the same line following a similar ban placed on the sale of American components to Huawei rival ZTE in April of last year.

“It is the compelling obligation for big companies to compete in core technology,” said Alibaba’s Ma at an industry event per a report from the South China Morning Post.

The latest technology ban from the US has now accelerated Huawei’s efforts to become more technologically independent. That includes designing its own chips and rolling out its own smartphone operating system, though observers and stakeholders, including Huawei’s founder Ren Zhengfei himself, have raised questions on their viability in the short run.

“We will give it a try. Making the operating system isn’t too difficult. What’s difficult is the ecosystem. How do you build an ecosystem? This is a big project, and it will take time,” said Ren during an interview with state media on Tuesday.

When it comes to Huawei’s homegrown chips, Ren said the company is “capable of making American-quality semiconductors, but that doesn’t mean it won’t buy them.” On the other side, chip experts interviewed by Reuters have called out Huawei for its claim, saying it would be difficult for the Chinese company to manufacture network gears without American suppliers.

Smart TVs add fuel to Xiaomi’s Q1 earnings

Chinese smartphone company Xiaomi just released its first quarterly results since announcing its $1.48 billion pledge to focus on smartphones and ‘AIoT’, an acronym for Internet of Things powered by artificial intelligence.

Xiaomi’s adjusted net profit for the first quarter increased 22.4 percent year-over-year to 2.1 billion yuan ($300 million), while total revenue climbed 27.2 percent to 43.8 billion yuan ($6.33 billion).

Sales in India, where Xiaomi handsets dominate, as well as other countries outside China, continued to be a bright spot for the company. International markets brought in 38 percent of its total revenue over the first quarter, representing a 35 percent increase. Xiaomi’s overseas momentum came amid a global slowdown in the smartphone sector and at a time its rival Huawei copes with a technology ban that threatens to hobble international sales.

Smartphones remained as Xiaomi’s biggest revenue driver, though the segment had shrunk from 67.5 percent of total revenue in Q1 of 2018 to 61.7 percent a year later. According to Canalys, Xiaomi was the world’s fourth-largest smartphone maker by units shipped in the first quarter. A brand traditionally popular among male consumers, Xiaomi has made efforts to court female users by taking over Meitu’s smartphone business that would allow it to sell selfie-optimizing devices.

Xiaomi’s ‘IoT and lifestyle’ unit, which churns out a wide range of home appliances from air purifiers to suitcases, saw its share of revenue jump from 22.4 percent to 27.5 percent year-over-year.

Xiaomi said growth of this segment was primarily driven by smart TV sales, a new area of focus at the smartphone company. In January, Xiaomi announced taking a 0.48 percent stake in TV manufacturer TCL, deepening an existing alliance that saw the two work together to integrate Xiaomi’s operating system into TCL products.

Xiaomi has long tried to differentiate itself from other hardware firms by making money not just from gadgets but also from software and internet services sold through those devices. But the latter portion is still relatively paltry, accounting for just 9.7 percent of Xiaomi’s total revenue, compared to 9.1 percent a year before.

As of March, Xiaomi owned 261 million monthly active users through its MIUI operating system installed across all devices, a 37.3 percent growth YoY. The number of IoT devices, excluding smartphones and laptops, jumped 70 percent to reach approximately 171.0 million units.