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(Bloomberg Opinion) -- Five years ago, Baidu Inc. founder and Chairman Robin Li sat down with Bloomberg News to explain how foreign investors were getting it wrong.Listed on the Nasdaq a decade earlier, shares of the Chinese search-engine provider had taken a beating over the prior year, and Li’s chief complaint was that Americans just didn’t appreciate the coming changes in its business. The trend in China was toward services like delivery and ride-hailing, as well as bookings for restaurants, beauty salons and doctors. This online-to-offline economy would eclipse search revenue, he predicted.Now, it seems that Li has lost patience. Baidu is looking into the possibility of delisting its shares from the Nasdaq and moving to an exchange closer to home, Reuters reported Friday, citing three people familiar with the matter. Baidu thinks it’s undervalued, according to the report.The backdrop to these discussions is rising hostility to U.S. investments in Chinese assets amid worsening relations between the two countries. The U.S. Senate passed a bill last week that would force companies to delist unless they can prove they’re not under the control of a foreign government.That sounds like a good excuse for Baidu to look for the exit. The reality is that investors lost patience with its management years ago. It was inevitable that the company would seek one day to list elsewhere, as Alibaba Group Holding Ltd. has already done. Baidu’s U.S.-traded stock fell 15% between that September 2015 interview and the end of last year, before the pandemic hit. Over the same period, Alibaba climbed 248%.Li’s problem is that his company failed to grasp the transformation he was talking up half a decade ago. While Alibaba and Tencent Holdings Ltd. have successfully moved into new areas like payments and physical retail, and upstarts like Meituan Dianping and Pinduoduo Inc. now dominate delivery and social-commerce, Baidu has barely changed.Its core business still centers on advertising and accounts for 73% of revenue, which climbed just 2% last year. Investments into new realms like artificial intelligence and autonomous driving have yet to bear fruit. Its other major sales contributor, iQiyi Inc., a video-streaming platform that listed separately on Nasdaq in March 2018, continues to lose money.Around the time that Li complained foreign investors weren’t getting it, some of his contemporaries decided to move home where they felt Chinese investors had a better understanding and would reward them with higher valuations. Internet security company Qihoo 360 Technology Co. was taken private by a consortium that included Citic Group for $9.3 billion in December 2015. It relisted in Shanghai in 2018 via the purchase of elevator maker SJEC Corp., and now trades under the name 360 Security Technology Inc. Chinese investors have soured on 360 Security, pushing the company’s market value down by more than a third since February. There’s a warning for Li. Investors in China won’t assign a higher valuation to a returning company unless it has a convincing growth story to tell. Baidu was a pioneer when it listed on Nasdaq in 2005, paving the way for dozens of Chinese internet stocks to follow. Touted as the Google of China, it symbolized the potential of the sector for American investors. Those days are long gone: Baidu has been eclipsed as China’s technology darling by fasting-growing companies such as Alibaba and Tencent.The problem for Li isn’t that investors don’t understand his business. It may be that they understand it too well. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Good day, ladies and gentlemen, thank you for standing by and welcome to Alibaba Group's March Quarter and Full Fiscal Year 2020 Results Conference Call. With us are Daniel Zhang, Executive Chairman and CEO; Joe Tsai, Executive Vice Chairman; Maggie Wu, Chief Financial Officer.
Stocks edged down Friday morning as ongoing signs of the economic damage from the coronavirus pandemic compounded with fears of rising U.S.-China tensions. A slew of quarterly corporate earnings results came in mixed.
(Bloomberg) -- Alibaba Group Holding Ltd. Chief Financial Officer Maggie Wu said the company is closely monitoring a U.S. bill that aims to delist foreign companies from the country’s stock exchanges and anticipates that it will be able to comply with any new regulations.Wu said the company “will endeavor to comply with any legislation whose aim is to protect and bring transparency to investors who buy securities on U.S. stock exchanges.”The legislation, which was approved by the Senate Wednesday and is targeted at Chinese listings, would require companies to certify that they aren’t under the control of a foreign government. The new rules could mandate that Chinese companies hand over the original auditing documents, which could create some challenges because Chinese law restricts their distribution.In a conference call to discuss the company’s quarterly financial results, Wu said Alibaba has long worked within U.S. accounting rules and is audited by the Hong Kong arm of accounting firm PricewaterhouseCoopers LLP.She also pointed out that U.S. investors who bought Alibaba stock during the company’s 2014 initial public offering would have benefited handsomely. Alibaba’s shares are up 197% since then, compared with a 2% increase in the New York Stock Exchange Composite Index.The proposed law, which has bipartisan support and will next be reviewed by the House, comes as tensions escalate between American and Chinese officials. Alibaba Chief Executive Officer Daniel Zhang said Friday the rising political tensions have added another layer of uncertainty in the post-pandemic world.Alibaba has been plagued by years of Securities and Exchange Commission investigations and questioning from analysts about its financial structure and accounting practices since its U.S. IPO.Inquiries have focused on the consolidation of Alibaba’s businesses and related-party transactions including Ant Financial and its Cainiao Network logistics arm. The company has also been probed on how it calculates “gross merchandise volume,” a key metric to determine its e-commerce growth rate, and how it reports data from its Singles’ Day promotion.Alibaba on Friday reported its slowest pace of revenue growth on record, reflecting the impact of China’s economic contraction across its online marketplaces.Read more: Alibaba Sales Growth Plumbs New Low During China’s SlowdownThe Chinese e-commerce leader forecast growth in revenue this year of least 27.5% to more than 650 billion yuan ($91 billion), compared with the 657 billion yuan average analysts were projecting. Sales rose 22% to 114.3 billion yuan in the March quarter. Net income was 3.2 billion yuan, down from a year ago when it booked an 18.7 billion yuan one-time gain on investments.(Updates with Alibaba share gains in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Alibaba Group Holding Ltd. expects revenue growth to slow this year, reflecting post-Covid 19 economic uncertainty at home as well as the potential for U.S.-Chinese tensions to disrupt its business.The e-commerce giant forecast sales growth this year of at least 27.5% to more than 650 billion yuan ($91 billion), down from 35% previously and slightly below analysts’ estimates. While it posted a better-than-expected 22% rise in March quarter revenue of 114.3 billion yuan, that marked its slowest pace of expansion on record. Alibaba’s shares slid more than 5% in New York.Online shopping began to bounce back from March, executives said Friday. But the tepid outlook demonstrates the world’s second largest economy has yet to fully shake off Covid-19, with consumers still hesitant about spending on big-ticket items. Asia’s largest corporation is tackling also the rise of rivals such as ByteDance Ltd. and Pinduoduo Inc. And the Tmall operator is going head-to-head with Tencent Holdings Ltd. for internet leadership in everything from online media to payments and cloud computing.Alibaba has lost more than $40 billion of market value since the coronavirus first erupted in January, and now has to grapple with not just an uncertain global economic environment but also any potential fallout from U.S.-Chinese financial tensions. On Friday, executives sought to assuage concerns about a U.S. bill that mandates much closer accounting scrutiny of U.S.-listed Chinese companies and may bar them from American bourses.Chief Financial Officer Maggie Wu said Alibaba’s financial statements have been consistently prepared in accordance with U.S. GAAP accounting measures and were beyond reproach. “The integrity of Alibaba’s financial statements speak for itself, we have been an SEC filer since 2014 and hold ourselves to the highest standard,” she told analysts on a conference call. “We will endeavor to comply with any legislation whose aim is to protect and bring transparency to investors who buy securities on U.S. stock exchanges.”The bigger short-term challenge is in reviving growth: Alibaba’s bread-and-butter customer management or marketing business grew just 3% in the March quarter. Much of that stems from weaker consumer sentiment during the coronavirus-stricken quarter, when total Chinese e-commerce rose just 5.9% or at less than a third of 2019’s pace, according to government data.Rival PDD posted a revenue rise of 44% on Friday, down sharply from 91% in the previous quarter, although that still beat expectations. Its sales and marketing expenses jumped 49%.Alibaba’s net income was 3.2 billion yuan, down 88% from a year ago when it booked an 18.7 billion yuan one-time gain on investments. In February, Alibaba declared a waiver of some service fees for merchants struggling financially during the outbreak on its main direct-to-consumer Tmall platform. In April, the company rolled out a new 10-billion-yuan subsidy program for Tmall users to buy electronics, encroaching on JD.com Inc.’s traditional turf. These initiatives may further compress margins for the June quarter.“The challenging part is for them to achieve the same amount of growth this year,” said Steven Zhu, a Shanghai-based analyst with Pacific Epoch. “Just because they are too big, for the same amount of growth, they need to spend much more effort.”But executives were confident in a gradual e-commerce recovery over the year. Beyond its main business, younger divisions such as its cloud computing arm should buoy its bottom line. That division’s revenue jumped 58% in the quarter.“Despite a challenging quarter due to reduced economic activities in light of the COVID-19 pandemic in China, we achieved our annual revenue guidance,” Wu said in a statement. “Although the pandemic negatively impacted most of our domestic core commerce businesses starting in late January, we have seen a steady recovery since March.”What Bloomberg Intelligence SaysThe company’s businesses most impacted by merchant and logistic disruptions are also its most lucrative, such as retail marketplaces Taobao and Tmall, while faster-growing segments like cloud computing and digital entertainment don’t contribute to profit. Subsidies for users and merchants will add to costs. Alibaba may provide an improved growth outlook for the June quarter given the retreat of the pandemic in China, but the recovery could be gradual as consumption sentiment remains weak.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Although it’s not surprising that China’s Alibaba Group Holding Ltd. has joined a long list of global consumer companies that took a hit from the Covid-19 pandemic, the details of its March-quarter earnings indicate that its struggles may not be over after the crisis subsides.Consider online commerce, which investors might expect to benefit from customers being stuck at home. In fact, commissions dropped while ad revenue climbed, with a net result of just 2% growth in a sector that counts for around half of annual sales. Counterintuitively, the consumer segment that did manage solid growth was its physical retail businesses such as groceries. Then there’s those hot new areas that should enjoy strong demand from the stay-at-home economy. Cloud computing is the obvious beneficiary. Companies, consumers and educators have been rushing to online solutions to fill in for in-person events. At Alibaba, that business climbed 58% from a year earlier. That sounds like a huge number but is in fact the slowest level in at least two years. Rather than drive growth, the pandemic seems to have hindered it. This matters because Alibaba is doubling down on cloud computing in recognition of that sector’s future prospects and is absorbing continued losses. If it’s unable to leverage such an opportunity, then other challenges including competition and regulation pose potential headwinds.Another supposed opportunity comes from digital media and entertainment, which includes streaming service Youku, Alibaba Music and TMall TV. Collectively, this category climbed a mere 5% for the quarter and only 12% for the year and remains the single biggest drag on earnings. If growth is stalling, even as consumers are stuck at home and well before break-even, then investors have to wonder how long Alibaba is going to let this business burn a hole in the earnings statement.It’s easy to dismiss all these items as one-offs, ready to be overcome once sunny skies return. Yet the macro picture for Alibaba is not rosy. Growth is slowing everywhere. Active annual consumer numbers climbed a mere 2.1%, and China’s government earlier Friday scrapped its annual GDP target, an admission that the broader economy is going to suffer.Although investors want to believe that China’s rapid return to work will be like a wave of the wand for its tech titans, Alibaba is no magician.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Billionaire Jack Ma’s Ant Group generated about $2 billion of profit in the December quarter, underpinned by its push to help Chinese lenders dole out money to the country’s under-banked consumers.The finance giant generated about $721 million in profit for Alibaba Group Holding Ltd. during the period, according to the e-commerce giant’s earnings filing. Based on Alibaba’s 33% equity share, that would roughly translate to $2 billion in profit for Ant. A representative for Ant declined to comment.Ant is now valued at about $150 billion, more than Goldman Sachs Group Inc. and Morgan Stanley combined. The company entered the banking arena as a disruptor, raising alarm bells for many of the nation’s 4,500 lenders. But about two years ago, it flipped the idea on its head, and began turning China’s lenders into clients by helping them provide loans and selling them cloud computing power.Ant’s sprawling network of more than 900 million active users means it can help China’s state-back lenders reach consumers in smaller cities that want credit. Outstanding consumer loans issued through Ant may swell to nearly 2 trillion yuan by 2021 according to Goldman Sachs analysts, more than triple the level two years ago, Bloomberg has reported.Ant has aspirations to go public, though it hasn’t decided on a timeline or listing destination.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba CFO Maggie Wu said the results contrasted with the company's guidance from the previous quarter, when it had predicted a drop in revenue. Alibaba has been expanding into new businesses and technologies to cope with increased competition in online shopping from smaller rivals such as JD.com Inc and Pinduoduo Inc, which is popular with residents in China's lower-tier cities. Alibaba's overall revenue rose to 114.31 billion yuan ($16.02 billion) in the quarter ended March 31 from about 93.50 billion yuan a year earlier.
Whether it was for the tax deduction and deferred taxable gains of a traditional IRA or the future tax-free gains of a Roth IRA (after you wait five years and reach age 59 and a half, of course), that contribution will yield rich rewards down the road. Three options that could be great for your IRA are salesforce.com (NYSE: CRM), Visa (NYSE: V), and Alibaba (NYSE: BABA). For years now, cloud computing has been picking up steam and fueling "digital transformation" -- a catch-all phrase for organizations looking to update their operations for the 21st century.
Alibaba Group Holding Limited today announced its financial results for the quarter and fiscal year ended March 31, 2020.
(Bloomberg) -- Netease Inc. aims to list shares in Hong Kong on June 11 and JD.com Inc. a week after, a person familiar with the matter said, completing two mega stock sales for the city at a time of escalating market volatility.U.S.-listed Netease and No. 2 Chinese online retailer JD hope to gain approval for local debuts during listing-committee hearings on Thursday, the people said, asking not to be identified discussing private matters. JD’s stock sale could raise $2 billion or more to help the e-commerce giant shore up its position in an increasingly competitive home market. The retailer’s June 18 target coincides with its largest annual online sales event.The twin debuts follow Alibaba Group Holding Ltd.’s $13 billion Hong Kong stock sale last year, hailed as a homecoming for Chinese companies and a win for Hong Kong Exchanges & Clearing Ltd., which lost many of the largest tech corporations to U.S. bourses because it didn’t allow dual-class share voting at the time -- a requirement that’s since been relaxed. Netease and JD are also listing at a time of escalating tensions between Washington and Beijing, now spilling over into Chinese companies’ access to U.S. capital markets after the downfall of Luckin Coffee Inc. -- one of the country’s brightest startups.Representatives for JD, Netease and Hong Kong’s exchange declined to comment.Read more: JD Is Said to File for $2 Billion Hong Kong Second Listing Shares in U.S.-listed Chinese companies have see-sawed since senators overwhelmingly approved legislation Wednesday that could bar the country’s firms from American exchanges. The decision cast a pall of uncertainty over hundreds of billions of dollars of shares in some of the world’s best-known companies. China this week also moved towards national security legislation for Hong Kong, sowing panic in the city’s $5 trillion stock market.Read more: Hong Kong Stocks Crash On New Concern Over City’s FutureEven if the delisting bill is eventually approved, the impact on China’s largest tech corporations remains unclear. American lawmakers have long raised red flags over the billions of dollars flowing into the Asian country’s biggest firms, much of it from pension funds and college endowments in search of fat investment returns. Alarm has grown in particular that American money is bankrolling efforts by the country’s technology giants to develop leading positions in everything from artificial intelligence and autonomous driving to internet data collection.Baidu Inc. founder Robin Li told the state-backed China Daily the company was concerned about heightened scrutiny of Chinese companies and was constantly exploring options including a secondary listing in Hong Kong or elsewhere.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- In a rare public appearance last week, Fosun Group founder and billionaire Guo Guangchang teamed up with one of China’s biggest online marketing celebrities to tout luxury resort packages and masks from French fashion label Lanvin.For the 53-year-old tycoon, the live-streaming act was part of a plan to tap a surge in e-commerce as the coronavirus pandemic locked down many parts of the world, and social distancing drove consumers to the virtual world. In China, retail sales at stores plunged 16% in the first four months of the year, while purchases online grew about 2%, according to official data.“Measures like live-streaming will definitely become an important platform for communicating with customers in the future,” Guo said in an interview. Developing the group’s live-streaming capability is “an important part of Fosun’s overall strategic focus and transformation,” he said.As the contagion gives a boost to online shopping, live-streamed commerce has been gaining popularity in China with Tesla car dealerships to air-conditioner makers such as Gree Electric Appliances Inc. Many firms are stepping up their presence on platforms such as Kuaishou, Weibo and Douyin -- TikTok’s Chinese twin -- for internet marketing in the post-virus world and to even close sales.Shanghai-based Fosun is increasing investments in tools such as live-streaming, Guo said Tuesday. The conglomerate, whose businesses span retail, finance, tourism and health care, will also collaborate with popular e-commerce and social media platforms such as Alibaba Group Holding Ltd.’s Taobao, Tencent Holdings Ltd.’s WeChat and ByteDance Ltd.’s Douyin, he said.Founded in 1992, Fosun is one of the last remaining acquisitive Chinese groups that spent billions of dollars to snap up assets abroad. It operates businesses in markets from China to Europe, U.S. and emerging markets in Asia, South America and Africa, including French fashion house Jeanne Lanvin SA and resort chain Club Med SA.The pandemic has hit the group’s retail and tourism businesses in particular. Unit Fosun Tourism Group called the coronavirus outbreak “the biggest Black Swan event” that will dent earnings, adding it was delaying capital spending on some of its resorts.Fosun staff and live-streaming partners have made nearly 300 live broadcasts this year, generating 100 million yuan ($14 million) in revenue. They made 190 live broadcasts all of last year, the company said, but declined to disclose last year’s live-streaming related revenue.Kim KardashianGuo -- whose net worth is $4.2 billion, according to the Bloomberg Billionaires Index -- first participated in a live-streaming session on April 1 following the annual earnings call for flagship Fosun International Ltd. He sold a $4,050 Lanvin bag during his five-minute appearance on that show, which attracted more than 14,000 viewers.But on May 15, Guo’s managed to lure 19 million views, thanks to Viya, who has over 22 million followers on Taobao. She shot to the international stage last year after streaming with Kim Kardashian on Tmall to promote the U.S. reality television star’s beauty line. Ranked by Alibaba as Taobao’s No. 1 live-streamer, Viya even sold a rocket launch service last month for 40 million yuan.During the appearance with Viya, Guo demonstrated tai chi, an ancient Chinese martial art, and gave away gifts including stays at the plush Atlantis Sanya resort in Hainan, health management plans and fashionable masks. The show, where Viya also sold other Fosun products, generated 62 million yuan in sales, an eight-fold growth from a similar show last year, according to the conglomerate.Family DayThe promotion is part of the annual “515 Fosun Family Day Festival,” one of the group’s largest sales events that ends next month. The two-month festival this year has generated over 1.5 billion yuan in overall sales as of May 17, including over 500 million yuan in online sales, the group said.While the pandemic has generated a lot of buzz about live-streaming commerce in China, it is unclear if it will maintain momentum once the world moves on from the health crisis. The phenomenon also comes with a rising number of complaints over the quality of products sold through live broadcasts and the demand for after-sales service.Fosun plans to train more live-streamers within the group besides working with influencers like Viya, Guo said, adding sales representatives at Fosun’s brands such as Lanvin have been hosting live-streaming shows. Offline sales channels will however remain crucial to the group, Guo said.Live-streaming marketing and sales “will become a normal practice for us,” Guo said.(Updates Guo’s net wealth in ninth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Tencent Holdings Ltd.-backed Missfresh is on the verge of closing $500 million of new financing to quicken expansion after the Covid-19 outbreak bolstered demand for fresh groceries, people familiar with the matter said.Beijing Missfresh Ecommerce Co., which counts Goldman Sachs Group Inc. and Tiger Global Management among its backers, recently wrapped up the second tranche of a funding round that will raise a total of about $300 million and another 1 billion to 1.5 billion yuan ($211 million) of Chinese currency funding, the people said, requesting not to be named because the matter is private. A third and final tranche will be completed soon but the financing has so far valued the grocery delivery startup at about $3 billion before investment, the people said.A company representative declined to comment.Missfresh -- one of a clutch of startups Tencent backed during China’s internet boom -- is competing in a cash-burning sector with deeper-pocketed corporations including Alibaba Group Holding Ltd. Consumers sheltering at home during the Covid-19 pandemic have reinvigorated the once-difficult online groceries arena, and Missfresh now needs ammunition to attack a Chinese online fresh foods sector that could reach $178 billion by 2025.The company, founded in 2014, has more than 1,500 mini-warehouses that promise deliveries as fast as within an hour, it said in a statement in July. Missfresh had nearly 25 million monthly active users as of May last year. It handled 10 billion yuan ($1.5 billion) of transactions in 2018 and had generated positive cash flow by the end of that year, the company said at the time.The funding will help tide Missfresh over during tough times in the venture capital market. VC funding plummeted at the start of 2020 with investors stranded at home and increasingly risk-averse. Excluding the latest effort, the Beijing-based startup has raised nearly $900 million via eight funding rounds from investors including Jeneration Group and Genesis Capital, the company has said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- SoftBank Group Corp. said it will raise about 310.2 billion yen ($2.9 billion) by selling a 5% stake in its Japanese wireless subsidiary this month, the latest in a series of asset divestitures intended to fortify its ailing balance sheet.The group intends to sell 240 million shares of SoftBank Corp., reducing its ownership stake to 62.1% after the deal, the parent company said in a statement on Friday. The total amount raised is slightly below that implied by the 1,306.5 yen to 1,320 yen price range SoftBank announced one day earlier. The deal closes on May 26.Founder Masayoshi Son has said he would sell off about $42 billion in assets to help finance stock buybacks and pay down debt. SoftBank disclosed it’s selling shares in Alibaba Group Holding Ltd. through complex contracts, and it’s in talks to sell about $20 billion of T-Mobile US Inc., Bloomberg News reported this week.Read more: SoftBank Is Said to Plan T-Mobile Deal as Soon as This WeekSoftBank Corp. shares fell as much as 3.4% to 1,327.5 yen in Tokyo trading on Friday. The unit first sold shares to the public in December 2018 at 1,500 yen a share.Son is struggling with the impact of the coronavirus on a portfolio of startups weighted heavily toward the sharing economy. Its Vision Fund business lost 1.9 trillion yen last fiscal year after writing down the value of investments from WeWork to Uber Technologies Inc. The billionaire has turned to ever larger stock buybacks to sustain SoftBank in the interim.The mounting losses have also imposed immense pressure on SoftBank’s often opaque structure and management.SoftBank’s Masa-Misra Partnership Strained by Losses, InfightingFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Speaker Nancy Pelosi said the House will review legislation that would impose restrictions on Chinese companies listed on U.S. stock exchanges but stopped short of promising a vote.The California Democrat said in a Bloomberg Television interview Thursday that the legislation approved by the Senate that could lead to some Chinese companies being barred from U.S. stock exchanges passed with no debate so the House would have to give it careful consideration.“We’ll review it in the House,” Pelosi said. “I’ve asked my committees to take a look at” the specifics. She noted that it had overwhelming support from members of both parties in the Senate.The Senate bill, introduced by John Kennedy, a Republican from Louisiana, and Chris Van Hollen, a Democrat from Maryland, was approved Wednesday by unanimous consent and would require companies such as Alibaba Group Holding Ltd. and Baidu Inc. to certify that they are not under the control of a foreign government.Democratic Representative Brad Sherman of California introduced companion legislation in the House the same day, an indication that there’s likely to be bipartisan support there.Amid increasingly tense relations between the world’s two largest economies, lawmakers are focusing on ways to put pressure on China from multiple angles, including its treatment of ethnic and religious minorities, censorship and its handling of the initial coronavirus outbreak in Wuhan.“I take second place to no one in the Congress, House or Senate, in my criticisms over China,” Pelosi said, on issues of trade policies, human rights policies, or proliferation of weapons of mass destruction. “The fact is we have to have a relationship with China and we judge every action as to what it means to us, as well as what it means to them.”Under the Senate legislation, if a company can’t show that it is not under control of a foreign government, or the Public Company Accounting Oversight Board isn’t able to audit the company for three consecutive years to determine that is the case, the company’s securities would be banned from the exchanges.The legislation illustrates the rising bipartisan pushback against China in Congress that had been building over trade and other issues. It has been amplified especially by Republicans as President Donald Trump has sought to blame China as the main culprit in the coronavirus pandemic.Trump escalated his rhetoric against China on Wednesday night, suggesting that leader Xi Jinping is behind a “disinformation and propaganda attack on the United States and Europe.”Among other issues, members of Congress have raised red flags over the billions of dollars flowing into some of China’s largest corporations, much of it from pension funds and college endowments in search of fat investment returns. Alarm has grown in particular that American money is bankrolling efforts by the country’s technology giants to develop leading positions in areas including artificial intelligence, autonomous driving and internet data collection.Lawmakers also said it was a matter of protecting investors.“I do not want to get into a new Cold War,” Kennedy said on the Senate floor, adding that he wants “China to play by the rules.”Transparency for InvestorsVan Hollen said it was a matter of giving investors “the transparency they need to make informed decisions.”In introducing his House measure, Sherman said that Nasdaq moved this week to delist China-based Luckin Coffee after executives at the company admitted fabricating $310 million in sales between April and December 2019.“Had this legislation already been signed into law, U.S. investors in Luckin Coffee likely would have avoided billions of dollars in losses,” he said in a statement.At issue is China’s longstanding refusal to allow the PCAOB to examine audits of firms whose shares trade on the New York Stock Exchange, Nasdaq and other U.S. platforms. The inspections by the little-known agency, which Congress stood up in 2002 in response to the massive Enron Corp. accounting scandal, are meant to prevent fraud and wrongdoing that could wipe out shareholders.Since then China and the U.S. have been at odds on the issue even as companies including Alibaba and Baidu have raised billions of dollars selling shares in American markets. The long-simmering feud came to the forefront last year as Washington and Beijing clashed over broader trade and economic issues, and some in the White House have been urging Trump to take a harder line on the audit inspections.(Updates with remarks by Pelosi, bill sponsors beginning in third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Beijing is accelerating its bid for global leadership in key technologies, planning to pump more than a trillion dollars into the economy through the rollout of everything from wireless networks to artificial intelligence.In the masterplan backed by President Xi Jinping himself, China will invest an estimated $1.4 trillion over six years to 2025, calling on urban governments and private tech giants like Huawei Technologies Co. to lay fifth generation wireless networks, install cameras and sensors, and develop AI software that will underpin autonomous driving to automated factories and mass surveillance.The new infrastructure initiative is expected to drive mainly local giants from Alibaba and Huawei to SenseTime Group Ltd. at the expense of U.S. companies. As tech nationalism mounts, the investment drive will reduce China’s dependence on foreign technology, echoing objectives set forth previously in the Made in China 2025 program. Such initiatives have already drawn fierce criticism from the Trump administration, resulting in moves to block the rise of Chinese tech companies such as Huawei.“Nothing like this has happened before, this is China’s gambit to win the global tech race,” said Digital China Holdings Chief Operating Officer Maria Kwok, as she sat in a Hong Kong office surrounded by facial recognition cameras and sensors. “Starting this year, we are really beginning to see the money flow through.”The tech investment push is part of a fiscal package waiting to be signed off by China’s legislature, which convenes this week. The government is expected to announce infrastructure funding of as much as $563 billion this year, against the backdrop of the country’s worst economic performance since the Mao era.The nation’s biggest purveyors of cloud computing and data analysis Alibaba Group Holding Ltd. and Tencent Holdings Ltd. will be linchpins of the upcoming endeavor. China has already entrusted Huawei to galvanize 5G. Tech leaders including Pony Ma and Jack Ma are espousing the program.Maria Kwok’s company is a government-backed systems integration provider, among many that are jumping at the chance. In the southern city of Guangzhou, Digital China is bringing half a million units of project housing online, including a complex three quarters the size of Central Park. To find a home, a user just has to log on to an app, scan their face and verify their identity. Leases can be signed digitally via smartphone and the renting authority is automatically flagged if a tenant’s payment is late.China is no stranger to far-reaching plans with massive price tags that appear to achieve little. There’s no guarantee this program will deliver the economic rejuvenation its proponents promise. Unlike previous efforts to resuscitate the economy with “dumb” bridges and highways, this newly laid digital infrastructure will help national champions develop cutting-edge technologies.What BloombergNEF SaysChina’s new stimulus plan will likely lead to a consolidation of industrial internet providers, and could lead to the emergence of some larger companies able to compete with global leaders such as GE and Siemens. One bet is on industrial internet-of-things platforms as China aims to cultivate three world leading companies in this area by 2025.Nannan Kou, head of researchClick here for researchChina isn’t alone in pumping money into the tech sector as a way to get out of the post-virus economic slump. Earlier this month, South Korea said AI and wireless communications would be at the core of it its “New Deal” to create jobs and boost growth.According to the government-backed China Center for Information Industry Development, the 10 trillion yuan ($1.4 trillion) that China is estimated to spend from now until 2025 encompasses areas typically considered leading edge such as AI and IoT as well as items such as ultra-high voltage lines and high-speed rail. More than 20 of mainland China’s 31 provinces and regions have announced projects totaling over 1 trillion yuan with active participation from private capital, a state-backed newspaper reported Wednesday.Separate estimates by Morgan Stanley put new infrastructure at around $180 billion each year for the next 11 years -- or $1.98 trillion in total. Those calculations also include power and rail lines. That annual figure would be almost double the past three-year average, the investment bank said in a March report that listed key stock beneficiaries including companies such as China Tower Corp., Alibaba, GDS Holdings, Quanta Computer Inc. and Advantech Co.Beijing’s half-formed vision is already stirring a plethora of stocks, a big reason why five of China’s 10 best-performing stocks this year are tech plays like networking gear maker Dawning Information Industry Co. and Apple supplier GoerTek Inc. The bare outlines of the masterplan were enough to drive pundits toward everything from satellite operators to broadband providers.It’s unlikely that U.S companies will benefit much from the tech-led stimulus and in some cases they stand to lose existing business. Earlier this year when the country’s largest telecom carrier China Mobile awarded contracts for 37 billion yuan in 5G base stations, the lion’s share went to Huawei and other Chinese companies. Sweden’s Ericsson got only a little over 10% of the business in the first four months. In one of its projects, Digital China will help the northeastern city of Changchun swap out American cloud computing staples IBM, Oracle and EMC with home-grown technology.It’s in data centers that a considerable chunk of the new infrastructure development will take place. Over 20 provinces have launched policies to support enterprises utilizing cloud computing services, according to a March note from UBS Group AG. Tony Yu, chief executive officer of Chinese server maker H3C, that his company was seeing a significant increase in demand for data center services from some of the country’s top internet companies. “Rapid growth in up-and-coming sectors will bring a new force to China’s economy after the pandemic passes,” he told Bloomberg News.From there, more investment should flow. Bain Capital-backed data center operator Chindata Group estimated that for every one dollar spent on data centers another $5 to $10 in investment in related sectors would take place, including in networking, power grid and advanced equipment manufacturing. “A whole host of supply-chain companies will benefit,” the company said in a statement.There’s concern about whether this long-term strategy provides much in the way of stimulus now, and where the money will come from. “It’s impossible to prop up China’s economy with new infrastructure alone,” said Zhu Tian, professor of economics at China Europe International Business School in Shanghai. “If you are worried about the government’s added debt levels and their debt servicing abilities right now, of course you wouldn’t do it. But it’s a necessary thing to do at a time of crisis.”Digital China is confident that follow-up projects from its housing initiative in Guangzhou could generate 30 million yuan in revenue for the company. It’s also hoping to replicate those efforts with local governments in the northeastern province of Jilin, where it has 3.3 billion yuan worth of projects approved. These include building a so-called city brain that will for the first time connect databases including traffic, schools and civil matters such as marriage registry. “The concept of smart cities has been touted for years but now we are finally seeing the investment,” said Kwok.(Updates with more details on projects from around China in tenth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The Senate overwhelmingly approved legislation Wednesday that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchanges amid increasingly tense relations between the world’s two largest economies.The bill, introduced by Senator John Kennedy, a Republican from Louisiana, and Chris Van Hollen, a Democrat from Maryland, was approved by unanimous consent and would require companies to certify that they are not under the control of a foreign government.U.S. lawmakers have raised red flags over the billions of dollars flowing into some of China’s largest corporations, much of it from pension funds and college endowments in search of fat investment returns. Alarm has grown in particular that American money is bankrolling efforts by the country’s technology giants to develop leading positions in everything from artificial intelligence and autonomous driving to internet data collection.Shares in some of the biggest U.S.-listed Chinese firms, including Baidu and Alibaba, slid Thursday in New York while the broader market gained.If a company can’t show that it is not under such control or the Public Company Accounting Oversight Board, or PCAOB, isn’t able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges.“I do not want to get into a new Cold War,” Kennedy said on the Senate floor, adding that he wants “China to play by the rules.”“Publicly listed companies should all be held to the same standards, and this bill makes common sense changes to level the playing field and give investors the transparency they need to make informed decisions,” Van Hollen said in a statement. “I’m proud that we were able to pass it today with overwhelming bipartisan support, and I urge our House colleagues to act quickly.”House BillStricter U.S. oversight could potentially affect the future listing plans of major private Chinese corporations from Jack Ma’s Ant Financial to SoftBank-backed ByteDance Ltd. But since discussions on increased disclosure requirements began last year, many other Chinese companies have either listed in Hong Kong already or plan to do so, said James Hull, a Beijing-based analyst and portfolio manager with Hullx.“All Chinese U.S.-listed entities are potentially impacted over the coming years,” he said. “Increased disclosure may hurt some smaller companies, but there’s been risk disclosures around PCAOB for a while now, so it shouldn’t be a shock to anyone.”In a sign of broad support for the measure, Representative Brad Sherman, a California Democrat on the House Financial Services Committee, introduced a companion bill in that chamber. Sherman said in a statement that Nasdaq moved this week to delist China-based Luckin Coffee after executives at the company admitted fabricating $310 million in sales between April and December 2019.“I commend our Senate counterparts for moving to address this critical issue,” Sherman said. “Had this legislation already been signed into law, U.S. investors in Luckin Coffee likely would have avoided billions of dollars in losses.”House leaders are discussing the legislation -- and a separate Senate-passed bill to sanction Chinese officials over human rights abuses against Muslim minorities -- with lawmakers and members of the relevant committees, a Democratic aide said.The Senate measure -- S. 945 -- is an example of the rising bipartisan pushback against China in Congress that had been building over trade and other issues. It has been amplified especially by Republicans as President Donald Trump has sought to blame China as the main culprit in the coronavirus pandemic.GOP lawmakers have in recent weeks unleashed a torrent of legislation aimed at punishing China for not being more forthcoming with information or proactive in restricting travel as the coronavirus began to spread from the city of Wuhan, where it was first detected.Trump escalated his rhetoric against China on Wednesday night, suggesting that leader Xi Jinping is behind a “disinformation and propaganda attack on the United States and Europe.”“It all comes from the top,” Trump said in a series of tweets. He added that China was “desperate” to have former Vice President Joe Biden win the presidential race.Kennedy told Fox Business on Tuesday that the bill would apply to U.S. exchanges such as Nasdaq and the New York Stock Exchange.“I would not turn my back on the Chinese Communist Party if they were two days dead,” Kennedy said. “They cheat. And I’ve got a bill to stop them from cheating.”At issue is China’s longstanding refusal to allow the PCAOB to examine audits of firms whose shares trade on the New York Stock Exchange, Nasdaq and other U.S. platforms. The inspections by the little-known agency, which Congress stood up in 2002 in response to the massive Enron Corp. accounting scandal, are meant to prevent fraud and wrongdoing that could wipe out shareholders.ClashSince then China and the U.S. have been at odds on the issue even as companies including Alibaba and Baidu have raised billions of dollars selling shares in American markets. The long-simmering feud came to the forefront last year as Washington and Beijing clashed over broader trade and economic issues, and some in the White House have been urging Trump to take a harder line on the audit inspections.Last week, Trump said in an interview on Fox Business that he’s “looking at” Chinese companies that trade on the NYSE and Nasdaq exchanges but do not follow U.S. accounting rules. Still, he said that cracking down could backfire and simply result in the firms moving to exchanges in London or Hong Kong.While not technically part of the government, the PCAOB is overseen by the Securities and Exchange Commission. The ability to inspect audits of Chinese firms that list in the U.S. is certain to come up at a roundtable that the SEC is holding July 9 on risks of investing in China and other emerging markets.Senators Kevin Cramer, Tom Cotton, Bob Menendez, Marco Rubio and Rick Scott are also sponsors of the bill. Rubio applauded the passage of the Kennedy-Van Hollen bill and said it incorporated aspects of a similar bill he introduced last year.“I was proud to work with Senator Kennedy on this important legislation that would protect American retail investors and pensioners from risky investments in fraudulent, opaque Chinese companies that are listed on U.S. exchanges and trade on over-the-counter markets,” Rubio said in a statement. “If Chinese companies want access to the U.S. capital markets, they must comply with American laws and regulations for financial transparency and accountability.”According to the SEC, 224 U.S.-listed companies representing more than $1.8 trillion in combined market capitalization are located in countries where there are obstacles to PCAOB inspections of the kind this legislation mandates.(Updates with analyst voice in eighth paragraph. An earlier version corrected that Wuhan is a city, not a province, in 12th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- ByteDance Ltd.’s valuation has risen at least a third to more than $100 billion in recent private share transactions, people familiar with the matter said, reflecting expectations the owner of video phenom TikTok will keep pulling in advertisers.Stock in the world’s most valuable startup has changed hands recently at a price that suggests its value has risen more than 33% from about $75 billion during a major round of funding two years ago, the people said, asking not to be identified because the matter isn’t public.Some trades recently valued the Chinese company between $105 billion and $110 billion on the secondary markets, some of people said. It has also traded as high as $140 billion, one person said.The trades are private transactions and may not fully reflect broader investor expectations. Stock in the secondary market is usually valued at a discount to primary shares since it’s less liquid and there are fewer financial details on company performance available to investors.“The trading of ByteDance is reflective of the global wave of consumers who agree that ByteDance can displace Facebook as the leading social network,” said Andrea Walne, a partner at Manhattan Venture Partners who follows the secondary markets.In the past decade, Bytedance is surpassed only by Alibaba Group Holding Ltd. and Ant Financial Services Group as companies that have traded at a higher premium in the secondary market, she added.ByteDance has grown into a potent online force propelled in part by a TikTok short video platform that’s taken U.S. teenagers by storm. Investors are keen to grab a slice of a company that draws some 1.5 billion monthly active users to a family of apps that includes Douyin, TikTok’s Chinese twin, as well as news service Toutiao. That’s despite American lawmakers raising privacy and censorship concerns about its operation. This week, it poached Walt Disney Co. streaming czar Kevin Mayer to become chief executive officer of TikTok.The company was in the very early stages of exploring a share sale abroad last year, people familiar have said. But any float remains a longer-term objective given ByteDance remains well-funded, the people added. ByteDance declined to comment on Wednesday. Its backers include SoftBank Group Corp., General Atlantic and Sequoia.The Chinese startup in the ballpark of the market capitalizations of some of the world’s biggest public companies, ahead of rivals such as Twitter Inc. and Snap Inc. but still behind Facebook Inc. ByteDance -- whose TikTok remains the venue of choice for half a billion lip-syncing, dancing music video aficionados -- is now going head-to-head with Chinese internet leaders from Tencent Holdings Ltd. to Alibaba for user traffic and marketing dollars.It’s also strengthening its operations in newer arenas such as e-commerce and gaming. ByteDance this year kicked off a wave of hiring it envisions hitting 40,000 new jobs in 2020, hoping to match Alibaba’s headcount at a time technology corporations across the globe are furloughing or reducing staff.Longer term, the company will have to grapple with rising scrutiny from Washington. Two prominent senators have urged investigations into TikTok, labeling it a national security threat.Read more: ByteDance Launches Global Hiring Spree With 10,000 New Jobs(Updates with a quote, new details in the fifth paragraph. An earlier version of the story was corrected to reflect executive’s proper title.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Baidu's (NASDAQ: BIDU) stock popped after the Chinese tech giant posted its first-quarter earnings on Monday. Its revenue declined 7% annually to 22.5 billion yuan ($3.2 billion) but beat expectations by $90 million.