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China Market Update- 17APRIL2017

RMB Markets Developing in Eastern Europe

Beijing Offers Bounty on Foreign Spy’s

China Market Update- 10APRIL2017

Social Justice Warriors Head explodes as they realize they are now poorer than Chinese and Mexican counterparts.

While young people around the world are struggling to get on the property ladder, an HSBC study found that 70% of Chinese millennials have achieved the milestone.

A sizeable 91% also plan to buy a house in the next five years, according to the survey.

The mortgage lender spoke to around 9,000 people based in nine countries.
While China came out top of the pack, Mexico was next with 46% of millennials owning property, followed by France with 41%.

Be afraid: China is on the path to global technology dominance

Dave Dodwell

– China’s Digital Payments Markets is now 50 times larger than the U.S.

I have often jested that the main difference between the United States and China is not that one is capitalist and the other communist. Rather, it is that one is run by lawyers and the other by engineers.

Nowhere is this truer than in the astonishing “catch-up” occurring on the mainland in the explosion of digital technologies and their application to the daily lives of hundreds of millions of ordinary Chinese consumers.

Ask people in the US or Europe about Chinese technology and most will still cast a dismissive smile and say China remains home of the cheap and cheerful copycat stuff that fills Walmart shelves. The dangerous naivity of this view was brought home forcefully at our APEC Business Advisory Council (ABAC) meetings last year – the first in San Francisco and the second in Shenzhen. The first thing we noticed was that our internet worked noticeably faster in Shenzhen than around San Francisco. The second was that our Chinese colleagues were paying for everything via AliPay on their smartphones.

In awe of the smart technologies on display at PayPal, Google and Dolby sound studios, we were blown away by Huawei, where 40 per cent of its 170,000 staff are working on pure research, and the foundations being are being laid for roll-out of 5G across the whole of China by 2020.

Hardly a week goes by without fresh reminders of extraordinary technological developments occurring on the mainland – many unique to China. Take the bike-sharing boom that has gripped Shanghai and other mainland cities over the past year. Many cities worldwide have bike-sharing operations, but none like those offered by Mobike and Ofo in Shanghai: find your brightly-coloured bike (there are an estimated 450,000 of them parked around Shanghai), open the Mobike app on your phone, scan the QR code on the bike, and you are away. AliPay charges you a security deposit, and user charges of RMB1-2 an hour. The bikes are GPS-tracked. This e-payment revolution has left the rest of the world in the dust. China’s digital payments market is today 50 times larger than that in the US.

More seriously, look at the 500-metre-wide radio telescope in Guizhou province that has joined the global search for extraterritorial life. Or the Sunway TaihuLight supercomputer which is by far the fastest in the world. Or lithium battery development. Or 3D-printed blood vessels made from stem cells…the list goes on.

I even noticed this recently when a tech publication compared the specs of the pride of America’s drone market – the GoPro Karma – with the Mavic Pro drone made by DJI in the Pearl River Delta. By every measure the Mavic was superior – it flew faster, flew twice as high, weighed 25 per cent less, could fly 30 per cent longer time, and cost US$749 compared with the GoPro’s US$799. Where do the GoPro team go to slit their wrists? This extraordinary transition from cheap and cheerful to world-matching high tech is not an accident, and in many governments around the world it is triggering alarm and protest. Back in the early 2000s, China’s engineers – whoops, party cadres – realised that as “manufacturer to the world” its companies were playing a mug’s game. They had captured the low-cost assembly parts of the global supply chains of companies worldwide, but this kept their millions of migrant workers in virtual poverty, while they were importing high-value-adding components from manufacturers in the US, Japan, Germany and Korea.

These engineers quickly worked out that if they were ever going to build a middle-class consumer economy, China’s workers would need to earn much higher wages – which meant higher productivity, and the technological capacity to make the high-value-adding sophisticated components inside China. From this, the Made in China 2025 scheme was conceived, attracting billions of dollars into research at home, and the acquisition of foreign companies, and foreign talent, wherever possible.

Within two years high-tech experts, particularly in the US, were pressing panic buttons. Robert Atkinson, president of the Information Technology and Innovation Foundation, told the US Congress in January that China had plunged into “an aggressive by-hook-or-by-crook strategy that involves serially manipulating the marketplace and wantonly stealing and coercing transfer of American know-how”.

In truth, China’s government was not doing anything unique or even novel. The Made in China 2025 initiative was based on Germany’s Industrie 4.0 blueprint for technology development. What is awesome is the speed and effectiveness with which they have built this technology self-reliance initiative from scratch. A total of 19 data labs have been established in universities across the country. STEM education (science, technology, engineering and maths) is being prioritised countrywide. A “Qianren Jihua” (Thousand Talents) scheme is trawling the world to attract brilliant scientists.

And for a US official who has for decades had first-hand experience of how US government-funded defence industry research has been carefully used to fuel the US’s technology leadership worldwide, complaints about Chinese government support for high-tech research sounds a tad hypocritical.

But Mr. Atkinson is right to be unnerved, and wary of the massive global implications of what is now occurring across the mainland. From a horse-and-cart economy just three decades ago, China is not only being transformed: its lack of legacy technology infrastructure, and a ruthlessly hypercompetitive private sector, are leapfrogging in ways most of the rest of the world can barely imagine. China’s Huawei in 2015 became the world’s biggest issuer of new international patents. According to the World Intellectual Property Organisation, domestic patent applications inside China have soared from nothing at the start of the century to 928,000 in 2014 – 40 per cent more than the US’s 579,000 and almost three times Japan’s 326,000.

China’s engineers – whoops, party officials – have not simply been driven by the quest for technology leadership, or fear of reliance on technology from overseas. They hate its gigantic deficit in royalty and licence fees to foreign technology-holders. From zero payments for intellectual property in 2000, China today pays royalty and licence fees of almost US$20bn. Since its companies currently earn a meagre US$1 billion a year in such payments from foreign companies, that means an intellectual property deficit of over US$18bn.

As long as China is governed by engineers, I reckon this breakneck transformation will shock, intimidate and challenge us for decades to come. And I suspect Americans will respond the way they know best – as lawyers.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view

Is the U.S. destined for war with everyone?

Editor CMR

There is an article today in the Financial Times written by Gideon Rachman
that asks the question, “Are China and the U.S. destined for War?”

We would re-phrase the question, “Is the U.S destined for war with everyone”?

The United States, an economy that can no longer produce washing machines,
computers, televisions, steel, or automotive components currently operates
more than 700 Military bases worldwide according to the NATO watch committee.
The U.S. has military personal in 156 countries and bases in 63 foreign countries.
The countries military budget places the country on a permanent war footing
during a time that the countries debt has doubled in that last decade and is
riding an exponential curve higher.

What has the U.S. done with there extensive Military power? Have they stopped
the drug cartels or human smugglers from Mexico? Have they dealt with the Mexican
government and its state-run policy to resettle their poor population into
American territory? How about Mexico using NAFTA as a one-stop shop to allow
every other country in the world duty-free access to the U.S. market? Have they
dealt wth North Korea or blocked China from building military bases in the
South China Sea? No..for the most part the U.S. military has been tasked with
acting as the Airforce for Al-Qaeda in Libya and ISIS in Syria.

They supposedly ended the war in Iraq, yet did you see the military budget step
down from a premanent war footing?

Recent military projects such as the F-35 show an increasingly bloated,
incompetent defense industrial complex. It’s not surprising, as the U.S.
industrial base has collapsed there are few Americans who now know how to
cast or forge steel yet alone build electronics. This type of knowledge decay
as seeped into all facets of the American economy. Once a showdown occurs,
I’m not sure software putting cat’s ears on peoples selfies will continue to
gain $15 billion dollar valuations or be able to build out the next generation
of submarines.

Now that a Deep-State conspiracy against Trump as turned the the Russians into
the countries greatest threats in the minds of Americans, one must ask themselves
who will ally with the United States in a coming showdown with China? Do the media
ask any of the important questions such as the United States intelligence
communities preparing and executing the Ukrainian and Syrian civil wars?
How about the break-up of Yugoslavia which was also orchestrated by the American
intelligence communities.That was one of the first cooperations between the House
of Saudi, radical Islamists,and the CIA. A second act so to speak after the Afghan
insurgency against the Soviet Union.

Do you think the intelligence agencies will stop overthrowing only foreign
governments? Donald Trump is the first President since Kennedy who was not an
intelligence asset. It is now the American democracy itself that is in the
cross-hairs of the Government-Industrial complex. Russians have been the enemy
for a generation of Washington D.C. bureaucrats. They refuse to loose the Iron-
rice bowl of funding that occurs with creating the Rus boogieman. While they
create the fiction of scary Russians an chase shepards with AK47’s across Central
Asia their own country has been de-industralized and socially broken down with
with mass epidemics of autism and opioid use.

Will the U.S. and China bump heads in the future? Most likely. China is the only
real threat against the United States. Their companies are eating the lunch of
what was once considering the domain of Americans. From Africa to Asia to East
Europe and the Mideast the world now looks to China to re-industralise their
countries and build up their economy capacity. A military showdown with China
is the last domino to fall. The Americans will be embarrassed badly and it will
be the end of a American unipolar world.

Chinese Media Retoric on Taiwan Becomes Very Concerning


After a 10-15 year lull, relationships between the Taiwan Straights are
breaking down. Both sides have been content to open up tourism and
development of business across the two economic areas. Taiwan has now
become completely dependent on business in Mainland China. However, the
political aspirations of people in Taiwan wish to remain a separate
entity despite the lack of formal international political recognition.

Recently , we have seen the media rhetoric on Taiwan increase to levels we
have not seen in 15 years or more. Is this a result of increasingly bold
politicians in Taiwan or President Trump’s statements on putting the Taiwan
issue back on the table?

One thing to be certain is that any support of Taiwan by the U.S. would see
the end of the U.S. Pacific fleet. In fact many war-gamers speculate that an
attack on Taiwan would be to mainly draw in the U.S. Pacific fleet to destroy it
with Dongfeng land based cruise missiles. Once the illusion of American military
superiority is broken over a South Sea conflict or a Taiwan straights conflict,
the U.S. Dollar will collapse from the break in the confidence game of the world’s
fiat reserve currency. Consumer goods shortages in the U.S. will develop as Chinese
exports evaporate or need to be imported from 3rd countries. Blackmarkets will
develop in the U.S. and from there general breakdown will ensue.

U.S. Diplomat Bought by Chinese Security Service for the Price of an iPhone and Fashion School Tuition for her Boy Toy.

Pay attention ladies and gentleman. This is the quality of government official
that is being produced in Washington D.C.

The Department of Justice said Candace Marie Claiborne, 60, knew that the two
Chinese men she had regular contact with while working for the US State Department
in China and other countries were from the Chinese security services and that the
money they gave her was in exchange for US secrets.

She took cash and an iPhone for herself, but most of the funds went to an
unidentified man half her age with whom she lived in Beijing and Shanghai.

The Chinese agents paid for his fashion school tuition, apartment rental, a sewing
machine, vacations, and other needs as requested by Claiborne, according to a
complaint unveiled in the US federal district court in Washington, DC. Claiborne,
who has worked for the State Department since 1999 and had significant financial
problems, was arrested on Tuesday and pleaded not guilty in her first court
appearance on Wednesday, according to the Justice Department.

Chinese chipmaker Tsinghua Unigroup agrees $22bn in state financing

China leading the way for globalization and free trade with state-back replacement
of foreign imports. Oh..wait, what?


Tsinghua Unigroup, the Chinese state-backed semiconductor group, has secured $22bn in new finances from government investors to fund acquisitions and help upgrade the country’s semiconductor industry.

Unigroup, which considered a $23bn bid for US chipmaker Micron in 2015, will receive Rmb100bn ($14.5bn) from China Development Bank and Rmb50bn from the National Integrated Circuit Industry Investment Fund, an investment group in part backed by the Ministry of Industry and Investment Technology.

The capital injection comes as China’s top leadership attempts to encourage its technology companies to stop using western-developed chips, of which China imports more in dollar terms than oil.

State-backed groups from China have sought to acquire overseas semiconductor rivals in the hope of bringing the technology back to domestic developers. But the effort has attracted harsh scrutiny from regulators in the US, who have blocked numerous transactions on the grounds that China’s expansion in the industry poses national security concerns.

The company did not provide details on how the cash is to be spent, other than that it will be used to upgrade China’s semiconductor business, bolster its competitiveness and “rapidly expand the scale of the industry”.

Unigroup, which was founded in 1993 by the Tsinghua University in Beijing, gained global recognition in 2015 when it said it was considering an offer for Micron for up to $23bn — what would have been the biggest cross-border acquisition for a Chinese group at the time.

The deal never happened, and the group was then involved in other high-profile efforts such as a $3.8bn bid for the US’s Western Digital, which fell apart in early 2016.

It has succeeded on a number of transactions, however. Since 2013, Unigroup has bought up domestic chipmakers, including Spreadtrum and RDA Microelectronics, and a 51 per cent stake in H3C from Hewlett-Packard for $2.3bn.

The US government has blocked a number of attempts by Chinese groups to acquire technology businesses, citing national security concerns, sometimes far beyond its own borders.

In early December, then-US President Barack Obama shot down a Chinese technology fund’s €670m purchase of German chip equipment maker Aixtron. Early last year, the US Committee on Foreign Investment blocked a $3bn offer from a Chinese consortium for a US-based lighting unit of the Dutch group Philips.

Capital set aside by state groups — so-called “corporate shadow capital” — helped lead to soaring valuations among Chinese companies in 2016. In an attempt to boost some of its ailing industrial sector, the Chinese government launched a $30bn venture capital fund last year aimed at upgrading technology in the sector.

Fake News- More Negative China News

One must wonder if people are not paid per article to imagine negative stories on China. In the article, the author in this piece admits that 70% of vehicles in China are purchased cash -up-front. And the U.S. market is a highly financed market at 80% of vehicles being done through financing. Yet….China’s market is filed by credit.

America’s hidden role in Chinese weapons research


China’s efforts to lure its scientists back from overseas institutions have been paying off militarily, with more than a little help from the United States.
Military projects they have been involved in include China’s development of hypersonic weapons capable of penetrating missile-defence systems and the design of new submarines able to patrol quietly along the US west coast, researchers familiar with the programmes told the South China Morning Post.

For more than a decade, China has been ramping up efforts to lure back talented scientists working at laboratories in the US linked to America’s nuclear weapons programme and other military research, as well as those working for Nasa and companies such as Lockheed Martin Space Systems and Boeing.

Many of the scientists returning to China have worked at the Los Alamos National Laboratory in New Mexico, the birthplace of the atomic bomb, the Lawrence Livermore National Laboratory in California, which plays a key role in today’s US nuclear weapons programme, or the Air Force Research Laboratory at Wright-Patterson Air Force Base in Ohio.

While the numbers remain unknown, so many scientists from Los Alamos have returned to Chinese universities and research institutes that people have dubbed them the “Los Alamos club”.
The Los Alamos laboratory, home to a wide range of defence research facilities, including a supercomputer and particle accelerator used for weapons research, has hired many foreign scientists to compensate for a shortage of American science and engineering talent. Its website says more than 4 per cent of its nearly 10,000 employees are of Asian origin.

In 1999, the US accused Taiwanese-American nuclear physicist Wen Ho Lee, who worked at Los Alamos, of giving the design of America’s most-advanced nuclear warhead to China. The charges were dropped by 2006 due to a lack of evidence but the incident sparked widespread unease among ethnic Chinese scientists at the laboratory, according to media reports.
China has been trying to woo foreign-trained scientists back home since the founding of the People’s Republic in 1949, with one early success being Qian Xuesen, who returned to China from the Massachusetts Institute of Technology in 1955 to lead the country’s space and military rocket research.

But it has stepped up its efforts in recent years, using financial incentives, appeals to patriotism and the promise of better career prospects to attract scientists with overseas experience in defence research.

One scientist who returned from Los Alamos was Professor Chen Shiyi, who as director of the State Key Laboratory for Turbulence and Complex Systems at Peking University played a key role in the development of China’s hypersonic glide vehicle, a researcher at the Chinese Academy of Sciences (CAS) in Beijing told the Post.

China tested the hypersonic glide vehicle, capable of travelling at speeds of up to 11,000km/h – about 10 times the speed of sound – in April last year. At those speeds it could deliver a nuclear warhead anywhere on the planet in just over an hour – too fast for any existing anti-missile system to respond to.

Fires Breaks Out at HongKou Stadium

Over 40% of global courier delivery volume in China

Shanghai Daily

CHINA continued to lead the world in courier delivery volume in 2016, a report showed Tuesday.

China made up over 40 percent of global express delivery volume last year, contributing about 60 percent to the sector’s growth, according to a report released by the State Post Bureau (SPB).

The total number of packages delivered increased by 51.4 percent year on year in 2016 to more than 31 billion.

Last year, couriers delivered over 4 trillion yuan worth of retail sale products that had been bought online, accounting for 12.5 percent of total retail sales, the report showed.

The delivery network expanded from 4.8 depots per 100,000 people and 6.7 depots per 1,000 square kilometers in 2010 to 15 and 19.1 depots, respectively, in 2016, according to the report.

Meanwhile, service quality also improved, with fewer complaints.

China Market Update- 27MARCH2017

Chinese drone factory in Saudi Arabia first in Middle East

Saudi Arabia’s key science and technology organisation has confirmed that one of the deals sealed during Saudi King Salman’s visit to China this month was an agreement to set up the first factory for Chinese hunter-killer aerial drones in the Middle East.
IHS Jane’s Defence Weekly reported on Thursday that the King Abdulaziz City for Science and Technology (KACST) had signed a partnership agreement on March 16 with China Aerospace Science and Technology Corporation (CASC), which makes China’s CH-4 unmanned aerial vehicle (UAV), a model with similar capabilities to the American Air Force’s MQ-1 Predator.

China and Saudi Arabia signed US$65 billion worth of deals in ­energy, culture, education and technology during the king’s visit in the middle of this month.
A Chinese military website and military experts said Saudi Technology Development and Investment Company (TAQNIA) had signed a protocol with China’s Aerospace Long-March International Trade (ALIT) for the drone production line at the biennial International Defence Exhibition and Conference (IDEX) in Abu Dhabi in February.
TAQNIA is a subsidiary of Saudi Arabia’s Public Investment Fund, while ALIT is a Chinese export-import company that specialises in aerospace technologies.

A report published by the Stockholm International Peace Research Institute (SIPRI) in February said Iraq had imported 56 per cent of its arms from the United States over the past five years. However, Iraq’s defence ministry said in a report it had opted for the CH-4 over the US Predator because it was cheaper. A CH-4 drone costs US$4 million, while the US Air Force website says a package including four MQ-1 Predators and a ground control station costs US$20 million.

The SIPRI report showed that arms imports by states in the Middle East had risen 86 per cent in the past five years and accounted for 29 per cent of global imports, with Saudi Arabia being the world’s second-largest arms importer after India.

China’s artificial intelligence sector in danger of becoming a ‘bubble’, experts warn

Artificial intelligence (AI) is on the verge of becoming a ‘bubble’ in China as a large influx of money and talent heat the market, analysts and experts warn.

“For the job market in China’s AI sector, I see a bubble already exists now. Some practitioners in the AI industry and are paid salaries that are unfairly high,” said Wang Xiaochuan, chief executive officer of Chinese internet company Sogou. “Investors expect too high a return on their investments, and the valuations of China’s AI enterprises are much more expensive than those in the US.”

In terms of investment in AI enterprises, China was in second place in 2016 on US$2.6 billion, followed by the UK on US$800 million, according to data from Chinese think tank WuZhen Institute. The US topped the list on US$17.9 billion.

“The amount being invested in AI in Asia is growing by the day,” said KPMG partner Egidio Zarrella. “2017 will be the year investors will look at AI and say, ‘if you’re not investing in it, you’re missing the boat’.”

The vast amounts of capital and talent flooding into AI industries in China is not without good reason. Artificial intelligence is poised to transform almost every aspect of people’s lives, even though it is currently somewhat limited in scope, generally working on repetitive tasks based on big data and complex calculation.

“From an economic standpoint, I believe AI will replace human beings, including managerial and technical jobs, as well as manual labour jobs. It is almost unavoidable,” said Ben Goertzel, chief scientist at Hanson Robotics, a company that claims it is developing the worlds’ most human-like robots.

Sogou’s Wang echoed this view, saying that AI has numerous critical roles to play in business.Data provider i-Research expects the value of China’s AI market to reach US$9.1 billion in 2020 by growing at a 50 per cent annual compound rate.

With such an the explosive and potentially rewarding market, it’s not just venture companies that are springing up across China. The country’s internet giants are racing to ramp up their efforts in the artificial intelligence field too.Alibaba, the country’s largest e-commerce company and owner of the South China Morning Post, announced a new suite of AI products last year which includes everything from audio transcription to financial risk analysis. Meanwhile Tencent, the operator of China’s largest social network, has assembled more than 250 people for its AI Lab to research and develop areas such as machine learning, computer vision, speech recognition and natural language processing.

And China’s biggest search engine, Baidu, hired former Microsoft executive Lu Qi as part of its plan to become a “global leader in AI”. However, its chief scientist Andrew Ng , the core driver of its AI development, announced last week that he was stepping down. Zhang Yaqin, Baidu’s president, said: “The movement of talent is common in the market and it is pity that Ng left but lucky that Lu joined us.”

China Market Update

Chinese scientists repurpose silkworms as virus shredders


Chinese scientists have found a way to turn silkworms into virus killers, a technology they say will not only increase worldwide silk production but can also fight human viruses such as HIV.

The researchers transformed a popular gene-editing tool into a weapon that the silkworm can use to shred deadly viral strains into fragments, according to a paper in the latest issue of the Journal of Virology.

A bacteria named CRISPR/CAS is an immune system that attacks attack foreign genes in a host body. CAS9, a simplified version of the system, has been widely used by life scientists as a “molecular scalpel” to modify animal and human genes.
The research team in Shanghai tweaked the CAS9 system so it could recognise and attack Bombyx mori nucleopolyhedrovirus, a virus responsible for more than 80 per cent of unnatural deaths of domestic silkworms. They injected the system into worm eggs and produced a new transgenic species capable of generating CAS9 in its cells.

Data traffic lifts China Mobile revenue above $100 Billion USD


China Mobile saw wireless data traffic become its largest revenue source for the first time in 2016, outstripping the combined inflows from voice, text messages and multimedia messages.

Operating revenue for the state-owned telecoms operator rose 6 per cent year on year to Rmb708.4bn ($102.8bn), with revenue from telecommunications services up 6.7 per cent and accounting for Rmb623.4bn. Wireless data traffic revenue grew by 43.5 per cent year on year to account for 46.2 per cent of annual revenue from telecommunications services.

Net profit rose 0.2 per cent to Rmb108.7bn ($15bn), coming in a median estimate from analysts of Rmb108.3bn compiled by Bloomberg.

China Mobile raised its final dividend to HK$1.243 per share ($0.16), bringing the total dividend for the full year to HK$2.2732 per share, a payout ratio of 46 per cent.

The company, which has 71 per cent of China’s 4G subscribers, added 223m 4G customers in the twelve months to December, bringing its subscriber base for these services to 535m.

China Mobile said it expects government policies – such as the need to upgrade bandwidth as part of Premier Li Keqiang’s “internet plus” strategy and the scrapping of domestic long-distance and roaming charges starting from October – to negatively impact its 2017 results.