China halts new enrollments at Jack Ma’s business school: FT

SHANGHAI (Reuters) – Beijing authorities have forced an elite business school backed by Alibaba Group Co Ltd founder Jack Ma to halt enrollments, the Financial Times said on Friday, citing sources familiar with the matter.

The clampdown on the school, founded in 2015 by Ma to train China’s next generation of entrepreneurs, comes as his business empire faces government scrutiny.

Hupan Academy, based in the city of Hangzhou, where Alibaba has its headquarters, suspended a first-year class set to begin in late March, the newspaper said.

Alibaba and Hupan Academy did not immediately respond to Reuters’ requests for comment.

Tuition for the three-year program amounts to 580,000 yuan ($88,500.98). Students listed in the incoming class of 2019 included executives from Keep, a successful Chinese exercise company, and fast-growing domestic chip firm Horizon Robotics.

The school is among the initiatives launched by Ma related to education, a sector the erstwhile English teacher has committed to since stepping down from his role as Alibaba’s chairman in 2019.

The enrollment halt comes amid Beijing’s crackdown on Ma’s businesses. Late last year Ant Group, a financial affiliate of Alibaba, abruptly suspended a planned $37 billion IPO in Shanghai following pressure from the authorities.

The botched listing came after Ma made comments in public criticising China’s financial regulators. He has yet to make a public appearance since, save for a brief 50-second video clip broadcast to a group of teachers.

($1=6.5536 Chinese yuan renminbi)

Reporting by Josh Horwitz; Editing by Clarence Fernandez

China to clear Tencent’s $3.5 billion Sogou deal

(Reuters) – China’s antitrust regulator is ready to clear tech giant Tencent Holdings Ltd’s plan to take the country’s no.3 search engine Sogou private, three people with knowledge of the matter told Reuters, a move that signals the watchdog is willing to wave some deals through even as it ratchets up sector scrutiny.

The regulator, State Administration of Market Regulation (SAMR), has no objection to the $3.5 billion deal for the 60% of U.S.-listed Sogou that Tencent doesn’t already own, the people said, as long as Tencent is willing to set up a special mechanism to ensure data security – a first for SAMR deal approvals.

Tencent must also pay a comparatively small fine – 500,000 yuan ($76,000) – for not reporting deals properly for antitrust reviews, two of the people said, in line with past cases for similar violations.

The move highlights Chinese regulators are still looking to approve merger and acquisition deals in the tech sector, but now with strict conditions after years of a laissez-faire approach. The green light for the closely watched deal will come as a relief for China’s tech sector, reeling from Beijing’s antimonopoly crackdown on home-grown internet giants that culminated weeks after the shelving of fintech firm Ant Group’s $37 billion IPO in November.

“What SAMR wants is enforcement … it is not in their interest to kill or actively block a deal,” said one of the people. “They are fine with companies’ actual market-leading status as long as it doesn’t prevent new entry into the market.”

The people with knowledge of the matter declined to be identified due to the sensitivity of the matter.

Sogou trails only Baidu and Qihoo 360 in China’s enormous internet search market, according to analytics firm SpeedTest, and is the sole search engine on Tencent’s all-in-one mobile app WeChat, a must-have in everyday life in China. Tencent, China’s biggest video game and social media company, first announced plans to take it private last September.

Tencent and SAMR did not immediately respond to requests for comments when contacted by Reuters.

Sogou declined to comment.

DATA CONCERN

One of the areas of heightened scrutiny has been M&A deals in the sector in the recent past, with the regulators taking a dim view of the violation of antitrust rules and, in some cases, data privacy laws.

The linchpin of the deal approval conditions is meeting the regulator’s requirement on data security – defining who can have what kind of access to the bulk of users’ data and personal information, and how to use that, said the three people.

A merger of China’s two leading video games streaming sites – Huya and Douyu, both backed by Tencent – is also under review and will need to satisfy similar requirements on data security, said the sources.

Reuters reported last month that Tencent was having to offer concessions to get approval for its plan to merge the two sites, including giving up exclusivity on some of its content rights.

After the merger, Huya and Douyu will need to set up a firewall in-between and cannot share user data and information to each other, two of the people said.

SAMR would also approve the merger soon after a final touch on the concessions are made, they said.

($1 = 6.5468 Chinese yuan renminbi)

Reporting by Pei Li and Julie Zhu; Editing by Sumeet Chatterjee and Kenneth Maxwell

US blacklists seven Chinese supercomputer groups

The US has blacklisted seven Chinese groups it accuses of building supercomputers to help its military.

It is the first move by the Biden administration to make it harder for China to obtain US technology

On Thursday, three companies and four branches of China’s National Supercomputing Center were added to the US blacklist.

This bars American companies from exporting technology to the groups without proper approval.

The US commerce department said the groups were involved in building supercomputers used by Chinese “military actors” and facilitating programmes to develop weapons of mass destruction.

The sanctioned groups are leading China’s supercomputing development and are key players in Beijing’s plan for chip self-sufficiency.

US Commerce Secretary Gina Raimondo said the Biden administration would use “the full extent of its authorities to prevent China from leveraging US technologies to support these destabilising military modernisation efforts”.media captionWhat is quantum computing?

The Trump administration had also targeted dozens of Chinese companies it suspected of using American technology for military uses, including phonemaker Huawei.

Mr Biden’s move on Thursday requires the seven Chinese groups to obtain licences to access American technologies, including chip infrastructures designed by Intel and other U.S chipmakers.

While the blacklist bars US-based companies from providing services and products to the Chinese firms, it doesn’t bar those that are produced in facilities outside of the US.

One such company is TSMC, the Taiwan-based company that has become the world’s most advanced semiconductor manufacturer.

What is a supercomputer?

Supercomputers have a considerably higher level of performance compared to a general-purpose computer and can make billions of calculations per second.

Supercomputers are made up of thousands of connected processors and are used for functions like forecasting weather and climate trends, simulating nuclear tests and for pharmaceutical research.

They are also necessary for the development of advanced weapons such as hypersonic missiles.

“Supercomputing capabilities are vital for the development of many – perhaps almost all – modern weapons and national security systems, such as nuclear weapons and hypersonic weapons,” Ms Raimondo added.

‘Not waiting around’

The US is worried about China gaining access to American technology that helps its army close the gap with the US military.

The Biden administration is currently reviewing dozens of China-related actions that Donald Trump took, including an order that prohibits Americans from investing in Chinese companies believed to be linked to the military.

“Do you think China is waiting around to invest in its digital infrastructure or research and development? I promise you, they are not waiting,” Mr Biden said in a speech on Wednesday.

Mr Biden said China and the rest of the world “are racing ahead of us in the investments they have in the future”.

Uniqlo posts 23% jump in half-yearly profit

TOKYO (Reuters) – Japan’s Fast Retailing, the owner of clothing brand Uniqlo, reported on Thursday a 23% jump in half-yearly operating profit and raised its full-year profit estimate.

Fast Retailing said operating profit was 168 billion yen ($1.53 billion) in the six months through February against 136.7 billion yen a year earlier.

The company raised its full-year operating profit forecast to 255 billion yen from 245 billion yen. The average estimate in a Refinitiv poll of 15 analysts was 262.9 billion yen.

Fast Retailing has been among the most resilient retailers during the coronavirus pandemic, as Uniqlo’s focus on China and Japan helped it escape the worst of the retail downturn that hit the United States and Europe.

Uniqlo briskly sold masks and saw strong demand for its stay-at-home jogging pants and other comfortable apparel.

($1 = 109.6500 yen)

Global chip supply chain vulnerable to massive disruption – Research finds

(Reuters) – A new study from a U.S. industry group found that the global semiconductor supply chain has become increasingly vulnerable to natural disasters and geopolitical disruptions because suppliers have become more concentrated in distinct regions.

The report comes amid a global chip shortage that started with overbooked factories in Taiwan late last year, but has since been exacerbated by a fire at a plant in Japan, a freeze that knocked out electricity in the U.S. state of Texas and a worsening drought in Taiwan this year. The shortage has idled some production lines at automobile factories in the United States, Europe and Asia.

Modern chipmaking involves more than a thousand steps and requires complex intellectual property, tools and chemicals from around the world. But the Semiconductor Industry Association, representing most U.S. chipmakers, on Thursday said it found more than 50 places in the supply chain where a single region has more than 65% market share.

Intellectual property and software to design cutting-edge chips, for example, is dominated by the United States, while special gases key to fabricating chips come from Europe. And the manufacturing of the most advanced chips is completely located in Asia – 92% of it in Taiwan.

If Taiwan were unable to make chips for a year, it would cost the global electronics industry almost half a trillion dollars in revenue, the report found: “The global electronics supply chain would come to a halt.”

Still, the study warned, a go-it-alone approach in which governments try to replicate the supply chain domestically is infeasible because it would cost $1.2 trillion globally – with up to $450 billion of that cost in United States alone – causing the price of chips to skyrocket.

In some cases, though, it called for incentives to create “minimum viable capacity” in regions that lack any part of the supply chain.

In the case of the United States and Europe, that would mean new advanced chip factories to balance concentration in Taiwan and South Korea.

“We don’t have enough semiconductor manufacturing in the United States … And it’s got to be fixed with the assistance of the U.S. government,” John Neuffer, chief executive officer of the association, told Reuters.

BlackRock closes Shanghai unit: Focus on mutual fund business

SHANGHAI (Reuters) – Global asset manager BlackRock has folded a private fund unit in Shanghai as it focuses on launching its mutual fund business in the world’s second-biggest economy.

BlackRock last week voluntarily cancelled the business registration of its wholly foreign-owned enterprise (WFOE) unit in Shanghai, according to the website of the Asset Management Association of China (AMAC).

Last August, BlackRock became the first global asset manager to win Chinese regulatory approval to set up a mutual fund unit in the country, and was given six months to establish the business.

BlackRock said it is still preparing the launch of the mutual fund business.

China fully opened its $3.3 trillion mutual fund industry to foreign managers last April. Global players including BlackRock, Fidelity International, Neuberger Berman and Schroders have applied to set up mutual fund units in China.

But not all are confident of succeeding in a market crowded with 147 players and 8,202 mutual fund products.

Earlier this month, Vanguard Group dropped a plan to obtain a mutual funds licence in China, citing a “crowded” market.

($1 = 6.5577 Chinese yuan renminbi)

H&M confirms commitment to China after backlash

STOCKHOLM (Reuters) – H&M said on Wednesday its commitment to China remained strong and it was dedicated to regaining shoppers’ and partners’ trust following a recent backlash in the country against comments it made in 2020 on China’s Xinjiang region.

“We are dedicated to regaining the trust and confidence of our customers, colleagues, and business partners in China,” the Swedish fashion retailer said in a statement on its website.

“By working together with stakeholders and partners, we believe we can take steps in our joint efforts to develop the fashion industry, as well as serve our customers and act in a respectful way,” it said.

H&M swings to loss in first quarter

H&M reported a quarterly loss on Wednesday and said that it was dedicated to regaining shoppers’ and partners’ trust in China following the recent backlash in the country after comments it made last year on the Xinjiang region.

The world’s second-biggest fashion retailer is under fire from consumers and officials in China after an H&M statement from 2020 began circulating in social media expressing concern over reports of forced labour in Xinjiang, saying it would no longer source cotton from the region.

It said on its website that its commitment to China remained strong and it was dedicated to regaining the trust and confidence of customers, colleagues, and business partners in China.

H&M reported a pretax loss for the December-February period, its fiscal first quarter, of 1.39 billion crowns ($159 million) against a year-earlier profit of 2.50 billion. Analysts polled by Refinitiv had on average forecast a 1.41 billion crown loss.

Sales in March 1-28 were up 55% measured in local currencies.

H&M said it would not propose a dividend at its annual general meeting but saw good prospects of one in the second half of the year.

($1 = 8.7416 Swedish crowns)

Fridges, microwaves fall prey to global chip shortage

A global shortage of chips that has rattled production lines at car companies and squeezed stockpiles at gadget makers, is now leaving home appliance makers unable to meet demand, according to the president of Whirlpool Corp in China.

The U.S. based company, one of the world’s largest white goods firm, is falling behind on exports to Europe and the United States from China, by as much as 25% on some months, Jason Ai told Reuters in Shanghai.

“It’s a perfect storm,” he said on the sidelines of the Appliance and World Electronics Expo.

“On the one hand we have to satisfy domestic demand for appliances, on the other hand we’re facing an explosion of export orders. As far as chips go, for those of us in China, it was inevitable.”

The company has struggled to secure enough microcontrollers, simple processors that power over half of its products including microwaves, refrigerators, and washing machines.

While the chip shortage has affected a range of high-end suppliers like Qualcomm Inc, it originated and remains most severe for mature technologies, for example power-management chips used in cars.

The chip shortage, which began in earnest in late December, was caused in part as automakers miscalculated demand and pandemic-fuelled sales of smartphones and laptops surged. It forced carmakers including General Motors to cut production, and increased costs for smartphone makers such as Xiaomi Corp.

And with every company that uses chips in its products panic buying to shore up its stockpile, the shortage has blindsided not just Whirlpool but other appliance makers too.

Hangzhou Robam Appliances Co Ltd, a Chinese white goods maker with over 26,000 employees, had to delay the release of a new high-end stove vent by four months because it couldn’t source enough microcontrollers.

“Most of our products are already optimised for smart home use, so of course we need a lot of chips,” said Dan Ye, marketing director at Robam.

He added that the company had found it easier to source chips from China than overseas, prompting it to re-evaluate future supplies.

“The chips we use in our products aren’t the most cutting edge. Domestic chips can satisfy our needs completely.”

Already cutthroat, profit margins at white goods firms are getting further squeezed due to the shortage.

Robin Rao, planning department director of China’s Sichuan Changhong Electric Co Ltd, said lengthy replacement cycles for appliances, coupled with intense competition and a slowing real estate market, have long kept profit margins thin.

“But because of these core components and chips, our supply chain capital costs have increased.”

To deal with the shortage of microprocessors and flash memory chips, Dreame Technology – a vacuum cleaner brand funded by Xiaomi – cut its marketing budget and hired extra staff just to manage relationships with suppliers.

Dreame has also spent “several million yuan” to test out chips that could serve as alternatives to the ones it typically uses, said Frank Wang, the company’s marketing director.

“We’re working to have deeper control of our suppliers, and have even invested in a few suppliers,” he said.

By: Kwamed2k

Tencent-backed Waterdrop to halt mutual aid service – Chinese scrutiny

BEIJING (Reuters) – Tencent-backed Waterdrop said on Friday it would shut down its online healthcare mutual aid programme at the end of March amid China’s tightening of financial technology regulations.

Waterdrop’s mutual aid programme, which provides users with a basic health plan covering various types of critical illnesses and participants share the risk of becoming ill and bearing the medical cost, has served 80 million users, mostly in smaller cities in China, it said in a statement.

One of the leading providers in the mutual aid industry, besides Waterdrop, is Ant Group’s [688688.SS] Xiang Hu Bao, which was launched in 2018 on Alipay and has since accumulated hundreds of millions of users. Others include ride-hailing giant Didi Chuxing.

Chinese food delivery giant Meituan shut down its online mutual aid service in January.

China’s Banking and Insurance Regulatory Commission (CBIRC) has said since late last year that all financial activities needed to be overseen by regulators and all businesses needed to be licensed to operate. Mutual aid platforms are not licensed by the CBIRC.

Waterdrop, that counts Tencent, reinsurer Swiss Re, Boyu Capital and Meituan as investors, was valued at about $2 billion in a funding round last August. It has been planning a U.S. IPO to raise about $500 million, IFR has reported.

Founded in 2016, Beijing-headquartered Waterdrop runs three core businesses – Waterdrop Insurance Mall, Waterdrop Mutual and Waterdrop Crowdfunding.

Chinese smartphone maker Xiaomi to make EVs – Sources

China’s Xiaomi Corp plans to make electric vehicles (EVs) using Great Wall Motor Co Ltd’s factory, said three people with direct knowledge of the matter, making it the latest tech firm to join the smart mobility race.

The tech firm’s stock price was up more than 9% in afternoon Friday trade after Reuters reported the plan. Great Wall’s Hong Kong stock rose more than 15% and its Shanghai shares gained by their maximum 10% daily limit.

Xiaomi, one of the world’s biggest smartphone makers, is in talks to use one of Great Wall’s plants in China to make EVs under its own brand, said two of the people, who declined to be identified as the information is not public.

Xiaomi will aim its EVs at the mass market, in line with the broader positioning of its electronics products, the two people said.

Great Wall, which has not before offered manufacturing services to other companies, will provide engineering consultancy to speed up the project, said one of the people.

Both companies plan to announce the partnership as soon as early next week, said another person.

Xiaomi and Great Wall declined to comment.

SMARTER VEHICLES

The plan comes as Xiaomi seeks to diversify its revenue streams from the smartphone business which accounts for the bulk of its income but carries razor-thin profit margins. It flagged on Wednesday rising costs from a global chip shortage and reported quarterly revenue below market estimates.

The move also comes against the backdrop of automakers and tech firms working closer together to develop smarter vehicles with technology such as smart cabins and autonomous driving.

Chinese search engine provider Baidu Inc said in January it plans to make EVs using an auto plant owned by Geely – an automaker with aspirations to offer engineering consultancy and contract manufacturing.

Reuters has also reported Apple Inc and Huawei Technologies Co Ltd’s respective auto ambitions.

Xiaomi’s founder and chief executive, Lei Jun, believes the firm’s expertise in hardware manufacturing will help accelerate the design and production of its EVs, one of the people said.

“Xiaomi wants to find a mature automobile manufacturer to provide model infrastructure, enabling its own advantages in mobile internet technology,” said Alan Kang, senior analyst at LMC Automotive.

“Xiaomi’s advantages in operating systems and home furnishing also bring a lot of imagination for such cooperation in the future.”

Alongside smartphones, Xiaomi makes dozens of internet-connected devices including scooters, air purifiers and rice cookers.

The firm plans to launch its first EV around 2023, one of the people said. It will enable its cars to connect with other devices in its product eco-system, the people said.

Baoding-based Great Wall, China’s biggest pickup truck maker, this year launched a standalone brand for electric and smart vehicles. It is also building an EV factory in China with Germany’s BMW AG.

The automaker sold 1.11 million vehicles last year helped by the popularity of models such as the P-series pickup truck and Ora EVs. It is currently building its first factory in Thailand.