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China detains 95, punishes 2,500 firms in latest environment probe

China detains 95, punishes 2,500 firms in latest environment probe

17-May-2021 Intellasia |
Reuters |
5:02 AM

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China has punished more than 2,500 firms and detained 95 people after a state inspection campaign across eight provinces turned up instances of illegal quarrying and wetland encroachments among others, the environment ministry said.

The inspection teams fanned out from Beijing last month to assess compliance with environmental laws and regulations in the provinces and regions of Shanxi, Liaoning, Anhui, Jiangxi, Henan, Hunan, Guangxi and Yunnan.

Their checks uncovered illegal quarrying and mining activities, encroachments on protected wetlands and a persistent problem of “fake” or “perfunctory” compliance by local governments, the ministry said in a notice on Friday.

The teams, part of an initiative begun in 2016, have the power to summon officials of any government department or enterprise, and run spot checks without warning. The public are also encouraged to submit complaints.

A golf course built in a protected nature reserve on the edge of a lake in the southwestern province of Yunnan was among the violations state media have publicised over the past few weeks.

In addition to the 95 detained, the ministry said more than 1,700 officials of the ruling Communist Party had also been summoned to explain themselves, with 844 held accountable for violations.

Total fines amounted to 191 million yuan ($30 million), it added.

($1=6.4367 yuan)

https://www.reuters.com/business/environment/china-detains-95-punishes-2500-firms-latest-environment-probe-2021-05-15/

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Two tornadoes strike China, killing at least 12

Two tornadoes strike China, killing at least 12

17-May-2021 Intellasia |
AFP |
5:02 AM

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Two tornadoes that struck central and eastern China killed at least 12 people and injured more than 400, authorities said Saturday.

Violent winds of more than 260 kilometres per hour (160 miles per hour) blasted the central city of Wuhan on Friday night.

Eight people died and more than 280 were injured there, authorities said, adding that around 30 homes had collapsed.

Vehicles were crushed by falling objects, trees uprooted, buildings partially destroyed and electricity pylons felled, leaving more than 26,000 homes without power.

The gale damaged two construction cranes, one of which toppled onto the site below, causing significant damage.

In Suzhou, near Shanghai, another tornado with winds of more than 200 kilometres per hour wreaked havoc.

Four people were killed and one remains missing, according to local authorities.

Images shared on social media showed a black whirlwind which left a trail of destruction.

In May, a windstorm caused the deaths of 11 people in a different town also close to Shanghai.

https://sg.news.yahoo.com/two-tornadoes-strike-china-killing-055032058.html

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HK and mainland China agree new cooperation mechanism for cross-border insolvency

HK and mainland China agree new cooperation mechanism for cross-border insolvency

17-May-2021 Intellasia |
Jdsupra |
5:02 AM

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Hong Kong and the Mainland have agreed a new cooperation mechanism for cross-border insolvency. Under the agreement, liquidators from Hong Kong may apply to Mainland courts for recognition of insolvency proceedings in Hong Kong, whilst bankruptcy administrators from the Mainland can apply to the Hong Kong High Court for recognition of bankruptcy proceedings in the Mainland.

Hong Kong’s Secretary for Justice, Teresa Cheng SC and vice-President of the Supreme People’s Court (SPC) Yang Wanming, signed the record of meeting concerning mutual recognition of and assistance to insolvency proceedings between the courts of the mainland and the Hong Kong Special Administrative region in Shenzhen today, 14 May 2021.

A panoramic view of the financial area in Hong Kong. [Photo/Xinhua]

A panoramic view of the financial area in Hong Kong. [Photo/Xinhua]

Under the agreement, liquidators from Hong Kong may apply to mainland courts for recognition of insolvency proceedings in Hong Kong, whilst bankruptcy administrators from the mainland can apply to the Hong Kong High Court for recognition of bankruptcy proceedings in the mainland.

In a statement, the Hong Kong government said the new cooperative framework expressly covers bankruptcy compromise and reorganisation in the mainland as well as debt restructuring in Hong Kong, thereby encouraging the use of restructuring of debts to revive businesses with a view to reaching consensus among creditors from both places and abroad.

Under the arrangement, the SPC will designate a number of pilot areas where the relevant Intermediate People’s Courts and HKSAR courts will commence work on mutual recognition of and assistance in insolvency proceedings in accordance with the laws. The initial pilot areas are Shanghai, Xiamen, and Shenzhen given the close trade ties with Hong Kong.

An opinion and a practical guide have been issued giving further details and model documents to be used when making applications before the court.

The announcement of the mechanism comes as the Hong Kong courts have taken welcome steps to develop the common law principles relating to cross-border insolvency in Hong Kong and mainland China (see our alerts, Round 2 Hong Kong court grants recognition of mainland insolvency proceedings for the second time and Another first Hong Kong court grants provisional liquidators permission to seek Mainland recognition).

We will provide further commentary on this ground-breaking arrangement in due course.

https://www.jdsupra.com/legalnews/hong-kong-and-mainland-china-agree-new-4111545/

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Morgan Stanley cautions against Chinese ADRs as delisting looms

Morgan Stanley cautions against Chinese ADRs as delisting looms

17-May-2021 Intellasia |
Reuters |
5:02 AM

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Morgan Stanley (MS.N) cautioned on Friday against exposure to US-listed Chinese tech firms after the US accounting watchdog moved a step closer to removing non-compliant Chinese companies from American exchanges.

The Public Company Accounting Oversight Board (PCAOB) on Thursday proposed a new rule that signals steady implementation of steps to delist US-listed Chinese companies whose audit work paper cannot be accessed by the PCAOB.

Morgan Stanley said in a research report that the move is negative to Chinese American Depositary Receipts (ADRs) that are already suffering from Beijing’s tighter internet regulations, and simmering concerns of rising inflation, which bodes ill for growth stocks.

“We believe this is negative for those stocks affected and would recommend hedging strategy,” Morgan Stanley wrote.

The PCAOB proposal signals the Holding Foreign Companies Accountable Act (HFCAA), aimed at delisting non-compliant foreign companies listed in the US, “is being implemented steadily and is now closer to being fully executed,” the bank said.

The HFCAA was signed by former US President Donald Trump and has gained bipartisan support.

The S&P/BNY Mellon’s China ADR Index (.BKCNC), which tracks US-listed Chinese firms including Alibaba Group Holding, JD.com and Baidu Inc, is down roughly 10 percent so far this week, having tumbled nearly 40 percent since mid-February.

The sharp fall had been partly driven by China’s deepening anti-monopoly campaign, and uncertainly around rising yields amid heightened inflation expectations.

The PCAOB said its proposed rule provides a framework to use when determining whether it is unable to inspect or investigate completely accounting firms located in a foreign jurisdiction due to local rules.

China has barred foreign access to audit works of certain overseas-listed companies, citing national security concerns. China’s securities watchdog has repeatedly said it is open to discussing the issue with the PCAOB but that its proposed solution got no response from the US side.

Morgan Stanley recommended a hedging strategy, under which investors buy ADRs that are eligible for immediate Hong Kong secondary listing, while selling those ADRs that are ineligible.

https://www.reuters.com/business/morgan-stanley-cautions-against-chinese-adrs-delisting-looms-2021-05-14/

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Alibaba Shares Drop on First Operating Loss as a Public Company

Alibaba Shares Drop on First Operating Loss as a Public Company

17-May-2021 Intellasia |
Realmoney Thestreet |
5:02 AM

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Alibaba Group Holding (BABA) shares lurched 4.0 percent lower in Hong Kong trading on Friday, after the company’s efforts to build business in cut-price group buying caused profit margins to slip, and miss estimates.

The Chinese e-commerce giant is investing heavily in Taobao Deals and its new community-grocery business, in which buyers group together to order goods at a discount. Management said in reporting earnings on Thursday that the company will invest all its incremental profits from fiscal 2022 back into “new retail” and those strategic areas of growth.

It’s a risky strategy, but Alibaba will be counting on its size making the difference. Bulk buying is a crowded field in China, where rivals such as JD.com (JD) and Meituan (MPNGY) are also burning cash to build business. The return is unsure.

The “fundamental credit question for investors is whether this is the beginning of an explosive new market, or a fad that will lead to diminished margins and wasted capital,” S&P noted in a January report on community buying when the trend took off.

It is a sign of just how successful Alibaba is that these earnings are considered a disappointment. March-quarter revenue rose 64 percent to CJPY 187.4 billion (US$28.6 billion), beating consensus estimates by 4%. The company predicts sales will rise another 30 percent in the year ahead, to CJPY 930 billion (US$144 billion) for the 12 months through March 2022.

That would be startling growth for most companies. But the market is looking at the overall profit margin of 12%, which fell 5 percentage points, and missed estimates by 1.7 percentage points.

Alibaba also recorded an operating loss for the first time since it went public in 2014, thanks to a a record $2.8 billion fine in China for monopolistic behavior. That’s a one-off, though, which caused a loss from operations of CJPY 7.7 billion (US$1.2 billion) for the March quarter. Investors can now look beyond that penalty, caused by practices such as the “Pick One From Two” policy of forcing major brands to offer goods exclusively on the Alibaba platform.

There’s no doubt it has been a dark 12 months for Alibaba shares, which have normally lit up portfolios. They have fallen by one-third from a record high in late October, leaving them at much the same price as they were a year ago. October was also the fateful month when company figurehead Jack Ma took to the stage at a financial conference in Shanghai and criticised China’s financial regulators and system as antiquated and small-minded.

The stock actually jumped 8.5 percent in mid-April after Chinese regulators levied the record fine on Alibaba. The shares bounced then because the fine removed an overhang from the company. It was also eminently payable out of Alibaba’s $51.7 billion cash balance. At 4 percent of total revenue in China, it could have been worse, as high as 10%.

Alibaba’s share fall was at odds with a strong day for shares in general in East Asia, building on US gains the day before. The Hang Seng benchmark in Hong Kong rose 1.1%, while mainland shares advanced 2.4 percent in the form of the CSI 300 index of the largest Shanghai and Shenzhen stocks. The broad-market Topix index in Tokyo added 1.9%.

The March quarter now being reported also represents the end of Alibaba’s fiscal year. Chair and CEO Daniel Zhang championed the “historic milestone” of moving past 1 billion annual active consumers worldwide for the first time. Total gross merchandise volume reached $1.2 trillion.

The Taobao Deals business is booming. Total monthly active customers moved past 150 million in the March quarter, up some 50 percent from the 100 million for the three months through December.

“Community buying” took off during the COVID-19 pandemic, when grocery stores temporarily closed and shoppers were looking to avoid close confines. Groups of consumers appoint a leader to choose items and take delivery, something proving particularly popular in smaller and poorer cities.

S&P estimates community buying hit CJPY 130 billion (US$20.2 billion) in 2020. That is still a small fraction of the overall CJPY 39 trillion (US$6.1 trillion) online spend in China. But bulk buying is likely to grow 50 percent to 60 percent in 2021, the rating agency predicts. It may also help companies shift grocery spending online in China, which is a $770 billion industry.

The question is whether Alibaba will gain by betting big to cater to discount-seeking, less-wealthy shoppers. Community buying has been described as the “most heated battleground in the entire Internet space” by Nomura’s China Internet analysts. China has a history of companies overcrowding into the exact same space, discounting heavily to build business as fast as possible. Inevitably, there’s a crash when the cash burns out.

Meituan, which started out as a grocery-delivery specialist, is already active with bulk buying in 2,000 cities. Pinduoduo (PDD) has also been an early mover in that retail segment. JD.com is investing heavily to catch up, and will likely eke out a slim 1.7 percent net profit margin this year due to that spending.

Alibaba, of course, has the deepest pockets in China. It generated a loss of CJPY 13.7 billion, up 113 percent in a year, from investment into new businesses, mainly Taobao Deals, bulk buying and “new retail.”

Management now says it will reinvest all its incremental profits from the year ahead through March 2022 into those new business lines, including community-grocery buying. That will likely produce flat earnings for the next fiscal year, whereas Nomura’s analysts originally anticipated a 10 percent increase. The gap would represent Alibaba investing additional funding of CJPY 20 billion (US$3.1 billion) in those new business lines.

https://realmoney.thestreet.com/investing/stocks/alibaba-shares-drop-on-first-operating-loss-as-a-public-company-15655353

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China tornadoes kill 10, injure hundreds

China tornadoes kill 10, injure hundreds

17-May-2021 Intellasia |
Theguardian |
5:02 AM

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Back-to-back tornadoes killed at least 10 people in central and eastern China and left more than 300 others injured, officials and state media have reported.

Six people died in the inland city of Wuhan and four others in the town of Shengze, about 600km (370 miles) east, in Jiangsu province, local government statements said.

A tornado first struck Shengze about 7 pm on Friday, toppling factory buildings and damaging electricity facilities, the official Xinhua news agency said. The Suzhou city government, which oversees the town, said in a social media post that four people had died and 149 others had minor injuries. Shengze is near Shanghai on China’s east coast.

A tornado then hit Wuhan at about 8.40pm with winds of 86km an hour (53 mph), destroying more than two dozen homes and triggering a power outage affecting 26,600 households, Xinhua reported. The Wuhan government said six people had died and 218 were injured.

Xinhua said that 27 homes collapsed in Wuhan, and another 130 were damaged. Construction site sheds and two cranes were also damaged, while downed power lines knocked out electricity, the news agency reported.

Photos showed a swarm of rescuers searching through building debris in Wuhan after midnight Friday and workers clearing metallic debris at a factory in Shengze in the morning.

Covid-19 first emerged in Wuhan in late 2019.

https://www.theguardian.com/world/2021/may/15/china-tornadoes-kill-10-injure-hundreds

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Mosques disappear as China strives to ‘build a beautiful Xinjiang’

Mosques disappear as China strives to ‘build a beautiful Xinjiang’

15-May-2021 Intellasia |
Reuters |
7:10 AM

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The Jiaman mosque in the city of Qira, in the far western Chinese region of Xinjiang, is hidden behind high walls and Communist Party propaganda signs, leaving passersby with no indication that it is home to a religious site.

In late April, during the Muslim holy month of Ramadan, two ethnic Uyghur women sat behind a tiny mesh grate, underneath a surveillance camera, inside the compound of what had long been the city’s largest place of worship.

Reuters could not establish if the place was currently functioning as a mosque.

Within minutes of reporters arriving, four men in plain clothes showed up and took up positions around the site, locking gates to nearby residential buildings.

The men told the reporters it was illegal to take photos and to leave.

“There’s no mosque here there has never been a mosque at this site,” said one of the men in response to a question from Reuters if there was a mosque inside. He declined to identify himself.

Minarets on the building’s four corners, visible in publicly available satellite images in 2019, have gone. A large blue metal box stood where the mosque’s central dome had once been. It was not clear if it was a place of worship at that time the satellite images were taken.

In recent months, China has stepped up a campaign on state media and with government-arranged tours to counter the criticism of researchers, rights groups and former Xinjiang residents who say thousands of mosques have been targeted in a crackdown on the region’s mostly Muslim Uyghur people.

Officials from Xinjiang and Beijing told reporters in Beijing that no religious sites had been forcibly destroyed or restricted and invited them to visit and report.

“Instead, we have taken a series of measures to protect them,” Elijan Anayat, a spokesman for the Xinjiang government, said of mosques late last year.

Foreign ministry spokeswoman Hua Chunying said on Wednesday some mosques had been demolished, while others had been upgraded and expanded as part of rural revitalisation but Muslims could practise their religion openly at home and in mosques.

Asked about restrictions authorities put on journalists visiting the area, Hua said reporters had to try harder to “win the trust of the Chinese people” and report objectively.

Reuters visited more than two dozen mosques across seven counties in southwest and central Xinjiang on a 12-day visit during Ramadan, which ends on Thursday.

There is a contrast between Beijing’s campaign to protect mosques and free religious freedom and the reality on the ground. Most of the mosques that Reuters visited had been partially or completely demolished.

‘LIFE IS BEAUTIFUL’

China repeatedly says that Xinjiang faces a serious threat from “separatists, terrorists and religious extremists” who plot attacks and stir up tension between Uyghurs who call the region home and the ethnic Han, China’s majority community.

A mass crackdown that includes a campaign of restrictions on religious practice and what rights groups call the “forced political indoctrination” of more than a million Uyghurs and other Muslims began in earnest in 2017.

Beijing denies detaining people in detention camps, calling them vocational training centres.

The government says there are more than 20,000 mosques in Xinjiang but no detailed data on their status is available.

Some functioning mosques have signs saying congregants must register while citizens from outside the area, foreigners and anyone under the age of 18 are banned from going in.

Functioning mosques feature surveillance cameras and include Chinese flags and propaganda displays declaring loyalty to the ruling Communist Party.

Visiting reporters were almost always followed by plainclothes personnel and warned not to take photographs.

A Han woman, who said she had moved to the city of Hotan six years ago from central China, said Muslims who wanted to pray could do so at home.

“There are no Muslims like that here anymore,” the woman, said, referring to those who used to pray at the mosque. She added: “Life in Xinjiang is beautiful.”

‘ETHNIC UNITY’

Some state-sanctioned mosques are shown off to visiting journalists and diplomats, like the Jiaman Mosque in Hotan.

“Everything is paid for by the party,” said a Hotan official at the mosque on a visit arranged for Reuters by the city propaganda department.

The official, who went by the nickname “Ade” but declined to give his full name, said men were free to pray at the mosque five times a day, according to Islamic custom.

While reporters were there, several dozen men, most of them elderly, came to pray as dusk fell. Afterwards, they broke their fast with food provided by the local government.

The mosque, more than 170 years old, is one of four in the region earmarked as cultural relics, with funds for renovation from the central government, the Xinjiang government said.

As the mosque’s leader or imam removed his shoes, Ade demonstrated a machine given by the government that shrink-wraps shoes in plastic.

“Now you don’t even need to take your shoes off in the mosque, it’s very convenient,” he said.

In Changji, about 40 km west of the regional capital, Urumqi, green and red minarets of the city’s Xinqu Mosque lay broken below a Chinese flag flying over the deserted building’s courtyard.

A part of a minaret broken off from the former Xinqu Mosque lies near a Chinese national flag in a yard adjacent to the former house of worship in Changji outside Urumqi, Xinjiang Uyghur Autonomous Region, China, May 6, 2021. Picture taken May 6, 2021. REUTERS/Thomas Peter

A part of a minaret broken off from the former Xinqu Mosque lies near a Chinese national flag in a yard adjacent to the former house of worship in Changji outside Urumqi, Xinjiang Uyghur Autonomous Region, China, May 6, 2021. Picture taken May 6, 2021. REUTERS/Thomas Peter

Reuters analysed satellite imagery of 10 mosques in Changji city and visited six of them.

A total of 31 minarets and 12 green or gold domes had been removed within a period of two months after April 2018, according to dated images.

At several mosques, Islamic architecture was replaced with Chinese-style roofing. These included Changji’s Tianchi road mosque, whose gold dome and minarets were removed in 2018, according to publicly available satellite images.

Reuters was unable to reach local officials or authorities in Xinjiang for comment on how the mosque was being used.

Researchers at the Australian Strategic Policy Institute estimated in 2020, after a survey of 900 Xinjiang locations, that 16,000 mosques had been partially or completely destroyed over the previous three years.

Signs outside the Xinqu Mosque said a housing development would soon be built on the site.

“For ethic unity, build a beautiful Xinjiang,” a sign read.

https://www.reuters.com/world/china/mosques-disappear-china-strives-build-beautiful-xinjiang-2021-05-13/

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Danone to return most of Chinese divestment proceeds to shareholders

Danone to return most of Chinese divestment proceeds to shareholders

15-May-2021 Intellasia |
Reuters |
5:02 AM

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French food group Danone (DANO.PA) on Thursday said that most of the proceeds from a $2 billion divestment of its stake in China Mengniu Dairy Company (2319.HK) will be returned to shareholders through a share buyback programme, it said on Thursday.

Danone, under pressure from investment funds over its shareholder returns, on Wednesday said it would sell its 9.8 percent stake in Chine Mengniu Dairy.

“The transaction resulted in total gross proceeds of 15.4 billion Hong Kong dollars, representing about 1.6 billion euros ($1.94 billion). The settlement of the transaction will take place on May 17,” Danone said.

Shares in the French company, the brands of which include Actimel yoghurt and Evian water, fell 0.6 percent in early trading, outperforming a 1.8 percent decline for the CAC 40 (.FCHI) index in Paris.

Former Danone boss Emmanuel Faber was ousted as chair and CEO this year after clashes with some board members over strategy and calls from activist funds for him to resign over the group’s lacklustre returns compared with some rivals.

French paper Les Echos this week reported that Antoine de Saint-Affrique was frontrunner to become Danone’s new CEO. Danone declined to comment on that report.

($1 = 0.8266 euros)

https://www.reuters.com/world/china/danone-return-most-chinese-divestment-proceeds-shareholders-2021-05-13/

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Record fine drags e-commerce giant Alibaba to rare loss

Record fine drags e-commerce giant Alibaba to rare loss

15-May-2021 Intellasia |
AFP |
5:02 AM

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Chinese e-commerce giant Alibaba Group said Thursday it fell to a $1.17 billion operational loss in its latest financial quarter due to a record fine levied by the government for anti-competitive practises.

The Hangzhou-based company was fined 18.2 billion yuan ($2.78 billion) last month, as part of a push by regulators to rein in dominant digital platforms that have achieved unprecedented influence over the daily lives of hundreds of millions of Chinese consumers.

Alibaba said however that its business continued to post solid growth and that without the hole blown in its finances by the fine, it would have achieved an operating profit of $1.6 billion in the January-March period, up 48 percent.

Alibaba, Tencent, JD.com and other big tech players became hugely profitable on growing Chinese digital lifestyles, plus government restrictions on major US competitors in the domestic market.

But concern has risen over their influence in China, where tech-savvy consumers use them to communicate, shop, pay bills, book taxis, take out loans and a range of other daily tasks.

Alibaba has faced particular scrutiny after billionaire co-founder Jack Ma publicly criticised Chinese regulators in October for reining in a push into online lending, wealth management and insurance products by Alibaba’s online payments arm Ant Group.

The government said it imposed the fine over Alibaba’s practise of forbidding merchants who wish to sell their wares on its popular online marketplaces from simultaneously offering them on rival e-commerce sites, saying the company had “abused its dominant position in the market.”

Concern over Big Tech

Alibaba officials subsequently vowed to make operational adjustments to address the criticisms but have shrugged off any business impact.

In its Thursday earnings announcement, Alibaba said little about the affair, focusing instead on its otherwise solid business performance.

It said that in the full fiscal year ending March 31 its revenues grew 41 percent, though full-year operating profit was flat due to the fine.

In a statement accompanying the earnings, CEO Daniel Zhang said Alibaba would continue to “support our merchants and invest into new businesses and key strategic areas.”

The Alibaba fine was a record and nearly three times the almost $1 billion levied by China against Qualcomm in 2015, Bloomberg said.

Even before the fine, the regulatory crackdown had cost Ma and Ant Group dearly.

A planned record-shattering $35 billion Hong Kong-Shanghai IPO by Ant Group, which would have added to Ma’s already massive wealth, was abruptly shelved.

Ma subsequently disappeared from public view for weeks, and Ant Group was ordered by regulators to return to its roots as an online payment services provider.

The government crackdown has weighed on Alibaba shares as well as those of other major Chinese tech players amid fears that they also might face further fines and restrictions.

The Wall Street Journal reported earlier this year that Alibaba was also being pushed to shed wide-ranging media assets, including a potential sale of Hong Kong’s South China Morning Post.

The Chinese government moves echo global concern over the increasing clout of Big Tech that has Facebook, Google and others also facing scrutiny at home and abroad.

https://sg.news.yahoo.com/record-fine-drags-e-commerce-114623953.html

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Alibaba posts first quarterly loss in nine years after $2.8 billion antitrust fine, spoiling the sales surge on consumer recovery

Alibaba posts first quarterly loss in nine years after $2.8 billion antitrust fine, spoiling the sales surge on consumer recovery

15-May-2021 Intellasia |
South China Morning Post |
5:02 AM

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Alibaba Group Holding Limited swung to a loss in its final quarter after swallowing a record fine by China’s antitrust regulators, but reported sales that surpassed forecasts as retail consumption in its home market grew with China’s recovery from the coronavirus pandemic.

The company reported a loss of 7.65 billion yuan (US$1.185 billion), after accounting for 18.2 billion yuan in fines to the State Administration for Market Regulation (SAMR). Sales jumped 64 per cent to 187.4 billion yuan for the three months ended March, in line with analysts’ estimates.

Full-year revenue rose 41 per cent to 717.3 billion yuan. The company, which owns this newspaper, had projected full-year revenue to jump 82 per cent to a record 930 billion yuan, as consumption in its home market mostly recovered from the coronavirus pandemic. The strong results propelled Hangzhou-based Alibaba, which operates e-payment services, cloud computing and the world’s largest online shopping platforms, to its most profitable year since its establishment 21 years ago in the apartment of former English teacher Jack Ma.

“Revenue was ahead, with customer management revenue broadly in line with expectations, but a larger-than-expected step-up in investment led to a material adjusted Ebita [earnings before interest, taxes, and amortisation] miss,” Atlantic Equities analyst James Cordwell told Bloomberg. Cordwell has an overweight rating on Alibaba.

Alibaba chair and chief executive Daniel Zhang Yong was keen to play up growth in consumers amid the pandemic.

“We have gone through all kinds of challenges, including Covid-19, fierce competition, as well as the anti-monopoly investigation,” Zhang said in an earnings call with analysts, noting that the company reached the milestone of one billion annual active customers. “We plan to invest all of our incremental profits in the coming year into core strategic areas such as technology innovation, support for merchants to lower their operating costs, user acquisition and experience enhancement.”

The stronger-than-expected financial earnings show how one of China’s largest home-grown technology companies has managed to emerge from nearly half a year of regulatory scrutiny by SAMR, which began last Christmas Eve and ended in a record fine on April 10. The company, which earned a fourth-quarter profit of 3.2 billion yuan in the previous financial year, said it would pay the penalty out of its financial reserves.

Active consumers on the company’s e-commerce retail platforms rose 41 per cent in Alibaba’s last financial year to 811 million users, beating the 788.4 million customers at Pinduoduo, and helping to bolster the annual gross merchandise volume (GMV) to a record $1.2 trillion. The company aims to grow its customer base to surpass 1 billion by the end of this financial year.

Alibaba is China’s largest provider of cloud computing services, competing with Amazon, Microsoft and Tencent Holdings. The division’s revenue grew 50 per cent last year to 60.12 billion yuan, driven by customers in the internet, public sector and financial industries, with the quarter’s growth increasing 37 per cent to 16.76 billion, Alibaba said.

Alibaba “remains committed to investment in globalisation and the enterprise internet, which could drive long-term revenue and earnings growth, ” Huatai Securities wrote in a research report.

Alibaba’s shares have fallen by about a third since its record in late October, just before China’s regulators abruptly halted the $35 billion initial public offering (IPO) by its Ant Group affiliate. Since then, the company had been under a cloud of antitrust investigations, with official probes kicking off on Christmas Eve and culminating in the fine on Alibaba last month.

In a sign that the worst may be over, Ant Group the world’s largest fintech company by value before its IPO was pulled had its financial license renewed today by the People’s Bank of China. Alibaba’s founder Ma, the controlling shareholder of Ant Group, made a rare public appearance three days earlier at Alibaba’s campus in Hangzhou during the company’s family day. Ma retired as Alibaba’s chair in 2019 on his 55th birthday.

“The penalty decision [by SAMR] has motivated us to reflect on the relationship between the platform economy and society, ” said Zhang, who took over from Ma, on the company’s earnings call. “As well as our social responsibilities and commitments we believe that the self reflection and adjustments we’ve made, will help us better serve our community of consumers, merchants and our partners into the future.”

Zhang acknowledged on the call that the SAMR penalty had resulted in an operating loss for the quarter, the first in Alibaba’s history as a public company.

“The increase in revenue came mainly from Alibaba’s existing channels and platforms, but it is facing fierce competition now from the likes of Pinduoduo and JD.com,” said Li Chengdong, chief executive of e-commerce consultancy Dolphin Think Tank. “It could lose its edge easily. Besides, the showdown over the anti-monopoly investigation is not over yet, so there’s still uncertainty.”

Alibaba’s share price has dropped 8 per cent since the start of the year, closing at HK$213.2 in Hong Kong on Thursday before the latest quarterly results were announced. Alibaba’s US-listed shares were down about 3 per cent at $213.3 in early New York trading on Thursday.

https://www.scmp.com/tech/big-tech/article/3133384/alibaba-swings-fourth-quarter-loss-after-swallowing-us28 billion

Category: China

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