China fines Alipay for violating payment services regulations

BEIJING (Reuters) - The Shanghai head office of China’s central bank has levied a fine of 4.12 million yuan ($ 601,846) on Alipay, the online payment platform of Ant Financial, for violating regulations on payment services, the regulator said on Monday.

FILE PHOTO: An Alipay logo is seen at a cashier in Shanghai, China January 12, 2017. REUTERS/Aly Song/File Photo

It gave no other details.

Reporting by Beijing Monitoring Desk; Editing by Clarence Fernandez

Our Standards:The Thomson Reuters Trust Principles.

Tech

Facebook plans innovation hub in China despite tightening censorship

BEIJING (Reuters) - Facebook has set up a subsidiary in China and plans to create an “innovation hub” to support local start-ups and developers, the social media company said on Tuesday, ramping up its presence in the restrictive market where its social media sites remain blocked.

FILE PHOTO: A Facebook panel is seen during the Cannes Lions International Festival of Creativity, in Cannes, France, June 20, 2018. REUTERS/Eric Gaillard/File Photo

The subsidiary is registered in Hangzhou, home of e-commerce giant Alibaba Group Holding Ltd, according to a filing approved on China’s National Enterprise Credit Information Publicity System last week and seen by Reuters on Tuesday.

“We are interested in setting up an innovation hub in Zhejiang to support Chinese developers, innovators and start-ups,” a Facebook representative said via email, referring to the Chinese province where Hangzhou is located. Facebook has created similar hubs in France, Brazil, India and Korea to focus on training and workshops, the spokesperson said.

Facebook’s website remains banned in China, which strictly censors foreign news outlets, search engines and social media including content from Twitter Inc and Alphabet Inc’s Google.

FILE PHOTO: Facebook logo is seen at a start-up companies gathering at Paris" Station F in Paris, France on January 17, 2017. REUTERS/Philippe Wojazer/File Photo

Setting up a company-owned enterprise in China does not mean Facebook is changing its approach in the country, the company said, adding that it was still learning what it takes to be in China.

Last year Facebook’s messaging app WhatsApp was blocked in the run up to the country’s twice-a-decade congress, and it has remained mostly unavailable since.

The filing listed only one shareholder of the new entity, Facebook Hongkong Ltd.

While censorship controls have hardened under Xi Jinping, who was formally appointed president in 2013, U.S. tech firms with blocked content are increasingly looking for new ways to enter the market without drawing the ire of regulators.

Google has several hundred staff in China and recently launched its own artificial intelligence (AI) lab. It has also tentatively launched several apps for the Chinese market in recent months, including an AI drawing game and file management app.

Apple Inc has also heavily modified its app stores to fit Chinese censorship restrictions in the past year, removing hundreds of apps at the request of regulators.

Reporting by Cate Cadell, Lusha Zhang, Se Young Lee and Jonathan Weber; additional writing by Peter Henderson; Editing by Kirsten Donovan, Emelia Sithole-Matarise and Cynthia Osterman

Our Standards:The Thomson Reuters Trust Principles.

Tech

Micron says China ban unfair but won't hurt revenue

(Reuters) - Micron Technology Inc on Thursday played down the likely impact on its business of a temporary Chinese ban on some chip sales but said it would appeal a decision that has added to U.S.-China trade tensions.

FILE PHOTO: FILE PHOTO: The logo of U.S. memory chip maker MicronTechnology is pictured at their booth at an industrial fair in Frankfurt, Germany, July 14, 2015. REUTERS/Kai Pfaffenbach/File Photo/File Photo

The firm’s estimate that the ban imposed by a Chinese court in a patent infringement lawsuit would weaken quarterly revenue by just 1 percent drove its shares as much as 3.6 percent higher and lifted stocks of other U.S. chipmakers.

Shares in the sector had been shaken on Tuesday by the first reports of the ruling, which added to a growing list of intellectual property disputes between Washington and China in the technology sector.

Micron said the ruling by a Fuzhou Court in a lawsuit filed by rivals United Microelectronics Corporation (UMC) and Fujian Jinhua Integrated Circuit Co temporarily bans it from selling some memory chips and solid state drives in China.

The chipmaker said it would comply with the ruling, but would request the court to reconsider or stay its decision.

“The Fuzhou Court issued this preliminary ruling before allowing Micron an opportunity to present its defense,” said Joel Poppen, Micron’s general counsel.

The lawsuit followed Micron’s complaint in December against Chinese government-backed Fujian and UMC in a California court alleging misappropriation of its trade secrets and other misconduct.

China is trying to build its own semiconductor industry as part of its “Made in China 2025” strategy and as it seeks to lower its reliance on foreign companies, many of them U.S.-based.

The dispute follows a ban on U.S. firms supplying parts to China’s telecom equipment maker ZTE as well as the drawn-out wait for Chinese regulators to approve Qualcomm Inc’s $ 44 billion takeover of NXP Semiconductors.

“It certainly appears semiconductors could move to the prime time in negotiations between the Trump administration and China,” Evercore ISI analyst C.J. Muse said. “Near-term this could favor non-US chipmakers vs. US chipmakers.”

Several Chinese government-backed entities have poured billions into research and for buying companies with a trove of chip patents. Micron itself was the target of a failed takeover attempt by China’s Tsinghua Unigroup in 2015.

The Chinese ban on Micron targeted its products sold through retail outlets and represented only a small portion of the chipmaker’s revenue.

Analysts believe the ban is largely symbolic as hurting the U.S. chipmaker would end up creating more pain for local Chinese firms who would have to rely on Korean firms Samsung Electronics and SK Hynix, pushing up memory chip prices.

“At the end of the day, the Chinese government is not going to impact its own local companies,” said Kinngai Chan of Summit Insights Group.

Micron said it expects quarterly revenue to be within the previously guided range of $ 8.0 billion to $ 8.4 billion.

Shares of Micron, which fell 5.5 percent on Tuesday after the ban, was up 1.9 percent at $ 52.46 in afternoon trading on Thursday.

Other chipmakers also gained. Qualcomm Inc rose 3.2 percent, Broadcom Inc 2 percent and Intel Corp up 2.6 percent.

Reporting by Sonam Rai and Supantha Mukherjee in Bengaluru; Editing by Arun Koyyur

Tech

China media group CMC raises $1.5 billion from Alibaba, Tencent

SHANGHAI (Reuters) - Chinese state-backed media group CMC Inc said on Tuesday that it had raised around 10 billion yuan ($ 1.49 billion) in a fund-raising round from investors including rival tech giants Alibaba Group Holding Ltd and Tencent Holdings Ltd.

FILE PHOTO - Li Ruigang, Founding Chairman, China Media Capital (CMC), People"s Republic of China, attends the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, January 18, 2017. REUTERS/Ruben Sprich

CMC, formerly CMC Holdings which stretches from sports to amusement parks, said the A-round fundraising was led by the two tech firms along with new investors such as property developer China Vanke Co Ltd.

CMC, founded by media magnate Li Ruigang in 2015, added the firm was valued at around 400 billion yuan after the round.

Reporting by Adam Jourdan; Editing by Muralikumar Anantharaman

Tech

Trump to use U.S. security review panel to curb China tech investments

WASHINGTON (Reuters) - U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.

FILE PHOTO: U.S. President Donald Trump speaks during a lunch meeting with Republican members of Congress at the White House in Washington, U.S., June 26, 2018. REUTERS/Kevin Lamarque

The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control investment deals. The legislation expands the scope of transactions reviewed by the interagency panel to address security concerns, Trump said.

The decision marks a victory for Treasury Secretary Steven Mnuchin in a fierce White House debate over the scope of such curbs.

Mnuchin had favored a more measured and global approach to protecting U.S. technology, using authority approved by Congress, while White House trade adviser Peter Navarro, the administration’s harshest China critic, had argued for China-specific restrictions.

“We are not, on a wholesale basis, discriminating against China as part of a negotiation,” Mnuchin said on CNBC on Wednesday.

The investment restrictions are part of the administration’s efforts to pressure Beijing into making major changes to its trade, technology transfer and industrial subsidy policies after U.S. complaints that China has unfairly acquired American intellectual property through joint venture requirements, unfair licensing and strategic acquisitions of U.S. tech firms.

“I have concluded that such (CFIUS) legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said in a statement that did not specifically name China.

U.S. stocks rose after Trump announced the new approach to U.S. investment restrictions but reversed gains in afternoon trading.

Senior administration officials told reporters on a conference call that sticking with CFIUS, a process companies are familiar with, would ensure strong inward investment into the United States while protecting the “crown jewels” of U.S. intellectual property.

Trump said in his statement that upon final passage of the legislation, known as the Foreign Investment Risk Review Modernization Act, he will direct his administration “to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies.”

If Congress fails to pass the legislation quickly, Trump said, he would direct the administration to implement new restrictions under executive authority that could be applied globally.

The decision to stick with CFIUS was a pragmatic move because the new CFIUS legislation “will put a crimp in China’s efforts to move up the value chain in high tech,” said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.

But it will likely do little to stop the activation of U.S. tariffs on $ 34 billion worth of Chinese goods, scheduled for July 6, or jump-start trade negotiations between the two economic superpowers, Kennedy said.

And the mixed messages from the administration do not help Trump’s negotiating position, he said.

“It shows the Chinese that the Trump administration is still undependable and can be moved back from the most hardline positions,” Kennedy added.

Mnuchin on CNBC downplayed the dissent within the administration, saying that Trump wants to hear differing views on important issues, but the administration’s economic team typically comes together on major recommendations such as the investment restrictions.

Mnuchin said the new CFIUS legislation, passed 400-2 in the House of Representatives on Tuesday, would broaden the types of transactions that could be reviewed by the panel on national security grounds, including minority stakes, joint ventures and property purchases near U.S. military bases.

“This isn’t a question about being weak or strong, this is about protecting technology. We have the right tools under this legislation to protect technology,” Mnuchin said.

COMMERCE EXPORT CURBS

Trump also said that he has directed Commerce Secretary Wilbur Ross to examine U.S. export controls and recommend modifications that may be needed “to defend our national security and technological leadership.”

A Commerce Department spokesman could not be immediately reached for comment on the study.

The CFIUS legislation is headed for negotiations between U.S. House and Senate lawmakers in the coming weeks to craft a final version, with guidance from the Treasury.

A sticking point that could emerge is language in the Senate version that would reinstate the ban on Chinese telecom equipment maker ZTE Corp (000063.SZ) from purchasing U.S. components for a year. The Commerce Department ban had effectively shut the Shenzhen-based company down, angering Beijing.

The House version has less stringent language prohibiting the U.S. Department of Defense from purchasing any ZTE communications gear.

Reporting by David Lawder; Editing by Jeffrey Benkoe and Steve Orlofsky

Tech

Qualcomm-NXP deal still waiting for China nod: sources

BEIJING/SHANGHAI (Reuters) - China is yet to approve U.S. chipmaker Qualcomm Inc’s (QCOM.O) proposed $ 44 billion acquisition of NXP Semiconductors (NXPI.O), three people close to the talks said, dismissing an earlier media report that said Beijing had already greenlit the deal.

FILE PHOTO: A sign on the Qualcomm campus is seen in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

Chinese clearance would remove a long-running roadblock to the deal that has become entangled with broader trade tensions between the United States and China. The acquisition has already got a nod from eight of the nine required global regulators, with China being the only hold-out.

Hong Kong-based South China Morning Post reported on Friday morning that China had given its go-ahead to the deal, citing people with knowledge of the matter, driving up shares of the U.S. firm in extended trade.

FILE PHOTO: A man works on a tent for NXP Semiconductors in preparation for the 2015 International Consumer Electronics Show (CES) at Las Vegas Convention Center in Las Vegas, Nevada, U.S. January 4, 2015. REUTERS/Steve Marcus/File Photo

But Reuters sources, who are close to the Qualcomm-NXP deal, said they were not aware of any Chinese approval. One of them said planned U.S. tariffs on Chinese goods expected to be unveiled later in the day could impact the process.

Qualcomm did not have an immediate comment on Friday, while NXP did not respond to a request for comment.

China’s State Administration for Market Regulation, the regulator which reviews merger deals, did not immediately respond to a faxed request for comment.

Qualcomm met with regulators in Beijing last month in a bid to secure a clearance, but sources at the time said an approval would depend on the progress of broader bilateral talks and the U.S. government lifting a crippling supplier ban on telecoms equipment maker ZTE Corp (000063.SZ)(0763.HK).

Washington and Beijing have struck a deal to help ZTE back into business. However, trade talks remain in the balance with U.S. President Donald Trump expected to unveil “pretty significant” tariffs on Chinese goods on Friday.

Analysts said a Chinese approval would be significant as it would remove the last major barrier to the NXP deal, which is seen as key for Qualcomm to diversify its business and make a push into new areas like smart cars.

Qualcomm initially announced its bid for Dutch semiconductor company NXP in October 2016.

Reporting by Michael Martina and Matthew Miller in BEIJING, Adam Jourdan in SHANGHAI and Nikhil Subba in BENGALURU; Editing by James Dalgleish, Grant McCool and Himani Sarkar

Tech

Tencent chairman pledges to advance China chip industry after ZTE 'wake-up' call: reports

HONG KONG (Reuters) - Tencent Holdings chairman pledged to advance China’s semiconductor industry, saying the blow to ZTE Corp from Washington’s ban on U.S. firms supplying telecommunications company was a “wake-up” call, local media reported.

FILE PHOTO: Tencent Holdings Ltd Chairman and CEO Pony Ma attends a news conference announcing the company"s annual results in Hong Kong, China March 21, 2018. REUTERS/Bobby Yip

China’s No.2 telecom equipment maker ZTE was banned in April from buying U.S. technology components for seven years for breaking an agreement reached after it violated U.S. sanctions against Iran and North Korea. American firms are estimated to provide 25-30 percent of the components used in ZTE’s equipment.

While the U.S. administration said on Friday it had reached a deal to put ZTE back in business after the company pays a $ 1.3 billion fine and makes management changes, the plan has run into resistance in Congress, indicating ZTE was still far from out of the woods. Also, ZTE is yet to confirm the deal.

FILE PHOTO: A sign of Tencent is seen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province, China November 16, 2016. REUTERS/Aly Song/File Photo

“The recent ZTE incident made everyone more clearly realize that however advanced one may be in mobile payment, without the mobile, the chips and the operating system, you still cannot compete,” Chinese media reports cited Tecent’s Pony Ma as saying at a forum in Shenzhen on Saturday.

FILE PHOTO: A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China May 14, 2018. REUTERS/Stringer

Tencent, which alternates with Alibaba Group to be Asia’s most-valuable listed company, is the largest social media and gaming company in China and operates the popular WeChat app.

Ma said “even though the ZTE situation was in the process of being resolved, we must not lose vigilance at this time and should pay more attention to fundamental scientific research”.

Tencent is looking into ways it could help advance China’s domestic chip industry, which could include leveraging its huge data demand to urge domestic chip suppliers to come up with better solutions, or using its WeChat platform to support application developments based on Chinese chips, Ma said.

“It would probably be better if we could get in to support semiconductor R&D, but that is perhaps admittedly not our strong suit and may need the help of others in the supply chain.”

China has been looking to accelerate plans to develop its semiconductor market to reduce its heavy reliance on imports and has invited overseas investors to invest in the country’s top state-backed chip fund.

Reporting by Sijia Jiang; Editing by Himani Sarkar

Tech

Foxconn's unit targets raising $4.3 billion in biggest China IPO since 2015

TAIPEI/SHANGHAI (Reuters) - Foxconn Industrial Internet (601138.SS), a subsidiary of the world’s largest contract manufacturer Foxconn (2317.TW), announced plans to raise up to 27.1 billion yuan ($ 4.26 billion) in what will be mainland China’s biggest IPO in almost three years.

FILE PHOTO: Visitors are seen at a Foxconn booth at the World Intelligence Congress in Tianjin, China May 19, 2018. REUTERS/Stringe

The Foxconn unit, which is known as FII and makes electronic devices, cloud service equipment and industrial robots, is offering up to 1.97 billion shares at 13.77 yuan per share in Shanghai, according to a statement it filed to the stock exchange late on Tuesday.

With 10 percent of its enlarged capital offered in the initial public offering (IPO), Shenzhen-based FII would have a valuation of about $ 43 billion at listing. Bookbuilding for the IPO is on May 24.

The listing is widely seen as a step for Terry Gou’s Foxconn, a major Apple Inc (AAPL.O) supplier formally known as Hon Hai Precision Industry Co (2317.TW), to wean itself off heavy reliance on manufacturing smartphones for the California-based iPhone maker and to diversify into new areas.

Foxconn has signaled previously that FII will launch projects in areas including smart manufacturing, industrial internet, cloud computing, and fifth-generation wireless technologies.

The IPO is also a reflection of Beijing’s seriousness in luring tech giants onto mainland exchanges.

At about $ 43 billion, the unit’s valuation would not be far behind parent company Foxconn’s market capitalization of about $ 49 billion.

The IPO’s pricing represents 17 times FII’s historical earnings, well below the valuation cap of 23 times favored by Chinese regulators.

FII plans to sell 30 percent of its public share offering to a group of strategic investors in a rare move for mainland deals.

The strategic investors are not being called cornerstones - investors who accept a lock-up period in return for large allocation, which is a practice common in other Asian markets such as Hong Kong to bolster demand for large deals.

However, the group will function as such, with its investments tied up for between one and three years. In an additional unusual move, 70 percent of institutional investors’ allocated shares will also be locked up for 12 months.

FII’s IPO ranks as the fourth largest in the mainland over the past 10 years, outpaced only by China State Construction Engineering (601668.SS), which raised $ 7.3 billion in 2009; China Railway Construction (601186.SS), which sold shares worth $ 5.7 billion in 2008; and Guotai Junan Securities (601211.SS), which raised $ 4.8 billion in 2015.

Clients of FII include companies such as Amazon (AMZN.O), Apple (AAPL.O), Cisco (CSCO.O), Dell, Huawei and Lenovo (0992.HK).

Reporting by Jess Macy Yu in Taipei and Julie Zhu and Jennifer Hughes in Hong Kong; Additional reporting by Engen Tham and Yiming Shen in Shanghai; Editing by Muralikumar Anantharaman

Tech

U.S., China nearing deal to remove U.S. sales ban against ZTE: sources

BEIJING (Reuters) - Washington and Beijing are nearing a deal that would remove an existing U.S. order banning American firms from supplying Chinese telecommunications firm ZTE Corp, two people briefed on the talks told Reuters.

FILE PHOTO - Visitors pass in front of the Chinese telecoms equipment group ZTE Corp booth at the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/File Picture

The people, who declined to be identified because the negotiations were confidential, also said the deal could include China removing tariffs on imported U.S. agricultural products, as well as buying more American farm goods.

ZTE, hit by a seven-year ban in April which effectively crippled its operations, would gain a major reprieve after the world’s two largest economies stepped back from the brink of a fully blown trade war following talks last week.

The company did not immediately reply to requests for comment.

White House advisors have said publicly that the ban against ZTE is being reexamined, but that the firm would still face “harsh” punishment, including enforced changes of management and at board level.

One person told Reuters there was a “handshake deal” on ZTE between U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He during talks in Washington last week that would remove the U.S. Commerce Department’s ban on American companies selling to ZTE in exchange for the purchase of more U.S. agricultural products.

The second person said China may also eliminate tariffs on U.S. agriculture products it assessed in response to U.S. steel duties as a part of the deal, and that ZTE could still be forced to replace its corporate leadership, among other penalties.

Both sources said the deal, while not yet cemented, was likely to be finalised before or during a planned trip by U.S. Commerce Secretary Wilbur Ross to Beijing next week to help finalize a broader trade agreement to avert a trade war.

The company, publicly traded but whose largest shareholder is a Chinese state-owned enterprise, had been hit with penalties for breaking a 2017 agreement after it was caught illegally shipping U.S. goods to Iran and North Korea, in an investigation dating to the Obama administration.

Reporting by Michael Martina; Additional reporting by Se Young Lee and Adam Jourdan; Editing by Muralikumar Anantharaman

Tech

Toshiba eyes cancelling chip unit sale if no China approval by May: media

TOKYO (Reuters) - Japan’s Toshiba Corp has decided it will cancel the planned $ 18.6 billion sale of its memory chip unit if it does not get approval from China’s anti-monopoly regulator by May, the Mainichi newspaper said on Sunday.

The logo of Toshiba Corp is seen behind cherry blossoms at the company"s headquarters in Tokyo, Japan April 11, 2017. REUTERS/Toru Hanai

A consortium led by U.S. private equity firm Bain Capital last year won a long and highly contentious battle for the unit, which Toshiba put up for sale after billions of dollars in cost overruns at its Westinghouse nuclear unit plunged it into crisis.

But Toshiba was unable to complete the sale by the agreed deadline of March 31 as it was still waiting for approval from China’s antitrust authorities.

Toshiba raised $ 5.4 billion from a share issue to foreign investors late last year and it had now decided it did not need to go through with the sale, the Mainichi newspaper reported. It did not cite any source.

“Toshiba has come to a decision that there is little necessity for the sale as it is no longer in insolvency,” the newspaper reported, adding that Toshiba would consider listing the unit if the sale did not go ahead.

A Toshiba spokesman said the company was still aiming to complete the sale as soon as possible.

In early April, Toshiba Chief Executive Nobuaki Kurumatani said his company would not use the option of cancelling the sale unless there was any “major material change” in circumstances.

Reporting by Makiko Yamazaki, Kiyoshi Takenaka; Editing by Robert Birsel

Tech

Bad humour: China watchdog shuts Toutiao joke app over vulgar content

BEIJING/SHANGHAI (Reuters) - In China, a platform for risqué jokes is no laughing matter.

FILE PHOTO - The logo of Bytedance"s news feed platform Toutiao is seen as its building in Beijing, China October 21, 2017. Picture taken October 21, 2017. REUTERS/Stringer

Toutiao, a hugely popular news and online content portal that is luring investors, was forced to pull its joke sharing “Neihan Duanzi” app, literally meaning “implied jokes”, after a watchdog said it included “vulgar and improper content”.

The move comes amid a broader clamp-down targeting online content from livestreams and blogs to mobile gaming, as the country’s leaders look to tighten their grip over a huge and diverse cultural scene online popular with China’s youth.

China’s State Administration of Radio and Television ordered the app to be taken down permanently in a post on Tuesday for low values that had “caused strong disgust amongst netizens”. It urged Toutiao to regulate similar content on its other sites.

Toutiao, one of the country’s fastest-growing tech start-ups which was valued at around $ 20 billion last year, has been in hot water with regulators lately. Earlier this week, its main mobile app was also removed from a number of Chinese smartphone app stores following reports of increased censorship.

In a public letter titled “Apology and Introspection”, Toutiao founder Zhang Yiming pledged to raise the number of in-house censors - referred to as content auditors - to 10,000 people from 6,000 currently to keep its content wholesome.

“This product walked the wrong path and had content in deviation of socialist core values,” he wrote in the letter posted on his official microblog account on Wednesday.

Reporting by Pei Li and Adam Jourdan; Editing by Michael Perry

Tech

Walmart opens first small high-tech supermarket in China

BEIJING/NEW YORK (Reuters) - Walmart Inc has opened its first small high-tech supermarket in China, where smartphones can be used to pay for items that are mostly available on the U.S. retailer’s store on Chinese online marketplace JD.com, it said on Monday.

FILE PHOTO: Pedestrians walk past a signboard of Wal-Mart at its branch store in Beijing, China, October 15, 2015. REUTERS/Kim Kyung-Hoon/File Photo

The world’s largest retailer, known for its hypermarkets, is expanding in China as shopping with mobile devices gains popularity in the country, and as retailers and technology companies such as Alibaba Group Holding Ltd and Tencent Holdings Ltd cut deals to integrate online and offline shopping.

Walmart is also targeting more online shoppers, who spend twice as much in the United States when buying on its website.

Walmart had run smaller Walmart Express stores in the United States, with 12,000 to 15,000 square feet, compared with about 105,000 square feet for its typical supermarket. But the concept did not take off and the retailer was forced to shut them down in 2016.

Walmart did not specify the size of the China store, in the southern city of Shenzhen. The company did not immediately respond to a request for comment.

The outlet will stock more than 8,000 items ranging from stir-fried clams to fresh fruit, 90 percent of which will be available online, it said in a statement. Items can be delivered within a 2 kilometer (1.2 mile) radius as quickly as 29 minutes, said Walmart, which owns a stake in JD.com.

Customers can opt to pay with their smartphone using a program on Tencent Holding Ltd’s WeChat messaging.

In March, Walmart said it would expand its grocery home deliveries in key markets to reach more than 40 percent of U.S. households, or 100 metro areas from six currently.

Reporting by Pei Li and Brenda Goh in Beijing and Nandita Bose in New York; Editing by Muralikumar Anantharaman and Richard Chang

Tech

Trump to unveil China tariff list this week, targeting tech goods

WASHINGTON (Reuters) - The Trump administration this week will unveil the list of Chinese imports targeted for U.S. tariffs to punish Beijing over technology transfer policies, a move expected to intensify trade tensions between the world’s two largest economies.

U.S. President Donald Trump delivers remarks on the Infrastructure Initiative at the Local 18 Richfield Training Site in Richfield, Ohio, U.S., March 29, 2018. REUTERS/Yuri Gripas

The list of $ 50 billion to $ 60 billion worth of annual imports is expected to target “largely high-technology” products and it may be more than two months before tariffs take effect, administration officials have said.

The U.S. Trade Representative’s office needs to unveil the list of products by Friday under President Donald Trump’s China tariff proclamation signed on March 22.

The tariffs are aimed at forcing changes to Chinese government policies that USTR says results in the “uneconomic” transfer of U.S. intellectual property to Chinese companies.

The agency’s “Section 301” investigation authorizing the tariffs alleges China has systematically sought to misappropriate U.S. intellectual property through joint venture requirements, unfair technology licensing rules, purchases of U.S. technology firms with state funding and outright theft.

China has denied that its laws require technology transfers and has threatened to retaliate against any U.S. tariffs with trade sanctions of its own, with potential targets such as U.S. soybeans, aircraft or heavy equipment.

On Sunday, Beijing slapped extra tariffs of up to 25 percent on 128 U.S. products including frozen pork, as well as wine and certain fruits and nuts in response to steep U.S. tariffs on imports of aluminum and steel announced last month by the Trump administration.

Fears have arisen that the two countries will spiral into a trade war that will crush global growth.

TARGETING ‘MADE IN CHINA 2025’

U.S. technology industry officials said they expected the Trump administration’s list to target products that benefit from Beijing’s “Made in China 2025” program, which aims to upgrade the country’s domestic manufacturing base with more advanced products.

The state-led program targets 10 strategic industries for replacing imports with Chinese-made products: advanced information technology, robotics, aircraft, shipbuilding and marine engineering, advanced rail equipment, new energy vehicles, electrical generation equipment, agricultural machinery, pharmaceuticals and advanced materials.

“Foreign technology acquisition through various means remains a prime focus under Made in China 2025 because China is still catching up in many of the areas prioritized for development,” USTR said in its report justifying the tariffs.

U.S. Trade Representative Robert Lighthizer has said that preserving America’s technological edge is “the future of the U.S. economy.”

Reports that the tariff list may also include consumer goods such as clothing and footwear drew strong protests from U.S. business groups, which argued that it would raise prices for U.S. consumers.

LIMITED TIME FOR TALKS

While there have been contacts between senior members of the Trump administration and their Chinese counterparts since Trump announced his intention to impose tariffs, there has been little evidence of intensive negotiations to forestall them.

“The administration is following the Japan model from the 1980s,” said a tech industry executive. “They’ll publish a Federal Register notice of tariffs on certain products, then try to reach a negotiated settlement over the next 60 days.”During his first stint at USTR in the Reagan administration, Lighthizer employed similar tactics to win voluntary Japanese export restraints on steel and autos.

Wendy Cutler, a former deputy USTR in charge of Asia negotiations, said that addressing the sweeping intellectual property allegations identified by USTR would require major changes to China’s industrial policy. A 60-day settlement may not be realistic in that case.

“I think they’ve set up a high bar for what they need to achieve, in order not to impose these types of tariffs and investment restrictions,” Cutler said.

Reporting by David Lawder; Editing by Peter Cooney

Tech

Smugglers Caught Using Drones to Drop $80 Million Worth of iPhones Into China

Chinese customs officers have arrested smugglers who attempted to drop millions of dollars worth of iPhones from drones into China.

Twenty-six suspects were arrested in China recently after they tried to use drones to fly two 660-foot cables from Hong Kong to Shenzhen, according to Reuters. Those cables were going to be used to lift iPhones worth 500 million yuan ($ 79.6 million) to the mainland, where they could be sold via the black market for a hefty profit, according to the report. A local Chinese report from the Legal Daily said it was the first time drones were employed to smuggle phones.

The operation was set to go off at night, where smugglers would pack small bags with approximately 10 iPhones and attach them to the drones. Those drones would then fly from Hong Kong to the mainland in just a matter of seconds. According to Reuters, the smugglers had the ability to transport up to 15,000 iPhones each night.

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Smuggling of high-value products—like iPhones, jewelry, and luxury products—is nothing new in China. In fact, the government has been working hard to crackdown on the practice and do a better job of breaking up what has become an increasingly powerful black market.

Smuggling gangs often steal devices or buy them at a deeply reduced rate and sell them for a higher price in China. They’re careful, however, to keep their prices below the going rate for those who purchase products legitimately. The result is a profitable business for smugglers and an opportunity for Chinese consumers to get authentic goods at a cheaper price.

Despite breaking up the drone attempt, Shenzhen officials warned that smuggling would continue. According to Reuters, the customs officers are planning to use several types of equipment to thwart other attempts by the smugglers.

Tech

China busts smugglers using drones to transport smartphones: state media

BEIJING (Reuters) - Customs officers in southern China’s technology hub Shenzhen busted a group of criminals using drones to smuggle 500 million yuan ($ 79.8 million) worth of smartphones from Hong Kong to Shenzhen, the official Legal Daily reported on Friday.

Authorities arrested 26 suspects who used drones to fly two 200-meter (660-feet) cables between Hong Kong and the mainland to transport refurbished iPhones with a total value of 500 million yuan, the paper said in a report on the crackdown by Shenzhen and Hong Kong customs.

“It’s the first case found in China that drones were being used in cross-border smuggling crimes,” the Legal Daily reported, citing a news conference held by Shenzhen customs on Thursday.

The smugglers usually operated after midnight and only needed seconds to transport small bags holding more than 10 iPhones using the drones, the report quoted customs as saying. The gang could smuggle as many as 15,000 phones across the border in one night, it said.

Regulating the use of drones has become an important task for China, the world’s largest manufacturer of consumer drones.

China published strict rules last year to tackle incidents of drones straying into aircraft flight paths, including requiring owners of civilian drones to register craft up to a certain weight under their real names.

Shenzhen customs was quoted by the Legal Daily as saying it would closely monitor new types of smuggling with high-tech devices and enhance their capability with technical equipment, including drones and high-resolution monitors, to detect smuggling activity.

Reporting by Lusha Zhang and Se Young Lee; Editing by Paul Tait

Tech

Budget fashion brand H&M launches on Alibaba's Tmall in China

SHANGHAI (Reuters) - H&M, the world’s second-biggest fashion retailer, launched its core brand on Alibaba’s giant online marketplace Tmall on Wednesday to try to keep up with competition in China.

FILE PHOTO: People walk past a H&M fashion chain store at Tsim Sha Tsui shopping district in Hong Kong, China August 1, 2016. REUTERS/Tyrone Siu/File Photo

It is the first time that H&M, which also has seven newer add-on labels, has sold its main budget apparel brand through a third party. By moving on to Tmall, it is playing catch-up with some of its major rivals.

Market leader Inditex’s main brand Zara opened an online store on Tmall in 2014, joining western brands such as Gap and ASOS , while Amazon joined in 2015, alongside its own online store in the country.

Sweden’s H&M launched its own independent online store in China in 2014, after entering the country around a decade ago, but China’s e-commerce market is dominated by virtual shopping centers such as Alibaba’s Tmall and Taobao.

Magnus Olsson, H&M’s China country manager, said in an interview in Shanghai that H&M needs to be on the platforms where most of the customers are, adding that pricing and offering on Tmall would differ little from that on hm.com in China.

The H&M group has seen sales growth stall and shares dive in recent years as it has struggled to adapt to the shift online. It sees future growth mainly in new markets such as China although the bulk of business is still in Europe.

    Last year the group generated around 11 billion Swedish crowns ($ 1.3 billion) of its total 200 billion in revenues in China where it has around 500 of its 4,700 stores.

FILE PHOTO: An employee works at a Tmall logistic centre in Suzhou, Jiangsu province, China, October 28, 2015. REUTERS/Aly Song/File Photo

REGIONAL FASHIONS

Olsson said competition was getting tougher in China amid a major shift online that was boosting rivals and increasing price transparency, and H&M was now adapting its ranges more in the country to meet regional demand. 

“Something we’re really focusing on is trying to understand where consumer behavior, and especially here, the fashion sense of the consumer is heading,” he said. “We create more and more Asia specific or China specific collections.”

H&M, which had already launched its Monki brand on Tmall, plans to launch its other brands too on the platform.

Olsson expects the Tmall partnership to help pave the way for store expansion in smaller Chinese cities where brand recognition is still slim.

“There are also other advantages with the Tmall tie-up and that is that in most of the tier 3 or 4 cities where we’re not present, H&M might not be as well known, but Tmall is, so they find H&M through that platform until we come with a store,” he said.

($ 1 = 8.2115 Swedish crowns)

Reporting by Adam Jourdan, writing by Anna Ringstrom in Stockholm, editing by Keith Weir

Tech

Apple brings Alibaba-linked payment system into China stores amid market push

BEIJING/SHANGHAI (Reuters) - Apple Inc will accept Chinese mobile payment app Alipay in its local stores, boosting its ties with giant e-commerce firm Alibaba Group Holding Ltd amid a push by the iPhone maker to revive growth in the world’s No.2 economy.

The tie-up will make Alipay, run by Alibaba affiliate Ant Financial, the first third-party mobile payment system to be accepted at any physical Apple store worldwide, Ant Financial said in a statement on Wednesday. Apple’s own payment system has had a lukewarm reception in China.

The Cupertino-based firm will accept Alipay payment across its 41 brick-and-mortar retail stores in China, said Ant Financial, which was valued at $ 60 billion in 2016.

Apple, whose China website, iTunes store and App Store have been accepting Alipay for more than a year, did not immediately respond to requests for comment.

The deal comes as Apple is doubling down on the market and looking to strengthen ties with local Chinese partners and government bodies. The firm’s CEO Tim Cook has made regular recent visits to the country.

Apple is also shifting user data to China-based servers later this month to meet local rules and last year removed dozens of local and foreign VPN apps from its Chinese app store.

Alipay is China’s top mobile payment platform, but faces stiff competition from rival internet giant Tencent Holdings Ltd’s payment system that is embedded within its hugely-popular chat app WeChat.

China’s official Xinhua news agency said late on Tuesday that Apple would build its second data center in China in Inner Mongolia Autonomous Region after it set up a data center in the southern province of Guizhou last year.

Reporting by Pei Li in BEIJNG and Adam Jourdan in SHANGHAI; Editing by Himani Sarkar

Our Standards:The Thomson Reuters Trust Principles.

Tech

China's Tech Revolution: Tencent Owns Screen Time In China

Series Introduction:

This will be a four-part series on China"s rapid technological growth in the past few years. Each part will focus on a different investment you could make today in order to get a piece of China"s booming technology sector.

Tencent Overview:

TCEHY data by YCharts

If you spend any amount of time in Beijing or Shanghai, you"ll notice something interesting almost right away. No one is carrying cash or credit cards, and almost no one uses their cellphone number as their primary means of communication. Instead, they"re using an app called WeChat, which is similar to having Facebook (FB), PayPal (NASDAQ:PYPL), Skype, and text messaging all bundled together into one app. Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) owns this application, which has over 950 million active users.

Tencent"s revenue growth has been astounding, and analysts expect that trend to continue into the future:

The reason for this massive growth is because Tencent owns people"s screen time in China. Whether you"re paying bills, playing a game, talking with friends, or hailing a taxi, you never have to leave Tencent"s world.

Speaking of games, Tencent also just happens to be the world"s leader in mobile gaming based on revenues. It"s currently ahead of Apple (AAPL), Microsoft (MSFT), Sony (SNE), King (KING), Electronic Arts (EA), Zynga (ZNGA), etc. What"s even more impressive is that despite being the top player in this area, it still grew its gaming revenue by 39% in the past year, and its market share in the space is continuing to increase.

Tencent has accomplished this dominance in the gaming sphere by partnering with a lot of the major players in the space to bring online versions of FIFA, Call of Duty, NBA 2K, and other extremely popular games to China.

Another interesting area where Tencent operates is streaming. Basketball is a perfect example of its foresight into this space. The popularity of the sport in China has exploded over the past decade, thanks in large part to Yao Ming. So what did Tencent do? It went out and struck a deal with the NBA to stream games in China. 65 million people watched the NBA finals last year from their phones in China through Tencent.

Besides gaming and streaming, Tencent"s other two major areas are social networks and advertising, which grew by 51% and 55% in the past year, respectively. Tencent is a $ 488 billion company that is still growing like a start-up. If you scroll back to the revenue chart above, you"ll see that the company"s revenue is expected to double by 2019.

Tencent"s social networks are particularly interesting to me. We"ve already discussed WeChat a little, but it has another app called QQ that has 850 million active users. Both QQ and WeChat together dominate China"s mobile payment space. Today, QQ and WeChat have over 300 million bank accounts linked to their mobile payment system.

As if all this wasn"t enough, QQ also has an application called QQMusic, which is considered to be the Spotify of China. This is an area where I anticipate Tencent will see a lot of growth moving forward.

Growth Potential:

Tencent has numerous potential catalysts that could push the stock price higher, but there are a handful that I want to specifically point out that are quite promising.

The first is in the gaming space, specifically with e-sports. China has the world"s largest video game market, which is expected to generate about $ 27.5 billion in sales this year. This incredibly large video game market has spurred an immense interest in e-sports in China and other Asian countries. In fact, the Olympic Council of Asia recently announced that it would be including e-sports at the Asian Games in Hangzhou in 2022.

E-sports have grown so popular in Asia that a crowd of more than 40,000 people recently packed into a stadium to watch two of South Korea"s biggest gaming stars play each other head-to-head. Tencent has a stranglehold on this market. The company recently signed a deal with the city of Wuhu to build an e-sports university and a stadium for events.

Tao Junyin, the market director of a top e-sports content company recently said, "Tencent has a controlling power in the whole industry, so we have to find a way to work with Tencent. You either die or you go Tencent." Tencent has a stranglehold on the e-sports market in Asia and will benefit tremendously from its rapid growth.

Another area where the company could see growth is the music streaming space. Tencent owns QQ music, KuGou, and Kuwo, which together make up over 75% of China"s music streaming market.

(Source)

Tencent has exclusive online distribution deals with Sony Music, Warner Music Group, and Universal Music Group. Its deals with the three largest music labels and dominance of market share put Tencent in a great position to control China"s music streaming market, which is relatively immature at the moment.

While China is the world"s most populous country, with over 1.3 billion people, it is only 12th in the world in terms of recorded music revenue. That"s up from 14th in 2015 according to the International Federation of Phonographic Industry (IFPI). This jump was largely due to the 30.6% growth in streaming and China"s 20.3% growth in music revenue, which was almost four times the 2016 global average of 5.9%.

Despite these impressive growth numbers, China"s music industry is still lagging behind the rest of the world. This gap won"t last forever, and as China begins to catch up with everyone else, Tencent stands to be the main beneficiary.

Finally, I just wanted to quickly point out that China"s mobile internet use is only expected to grow faster in the coming years, something that will clearly benefit Tencent.

(Source)

Risks:

There are two main risks I want to point out before you invest your money into Tencent. The first is its valuation. After everything we just discussed, it should be no surprise that you"re going to have to pay a premium to get into this name. Tencent"s 51.69 P/E ratio currently reflects that.

Tencent has enjoyed a nice run-up over the past year, so some short to medium-term weakness certainly wouldn"t surprise me. If you plan on investing money that you may need within the next year, Tencent might not be the best investment for you. That being said, I"m a long-term investor, so some short to medium-term weakness would allow me to add to my current position at a cheaper price.

The second risk comes with investing in almost any Chinese company, and that"s the risk of regulation. Any regulations in China dealing with the internet could make life more difficult for Tencent and potentially limit its capabilities.

Conclusion:

Tencent seems to be doing everything right. They are major players in almost every facet of China"s tech revolution, which is why some people expect Tencent to become the world"s biggest company by 2025.

If you want to own some of China"s technology revolution, Tencent is one of the best places to start. Stay tuned for Part 2 of this series coming in the next few days.

Author"s note: If you would like to follow along with my China Series and other analysis, I would encourage you to hit the follow button next to my name at the top of the page. I enjoy interacting with my followers, so please comment below!

Disclosure: I am/we are long TCEHY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor"s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Tech

Skype Has Disappeared From App Stores in China. It’s Not Clear Which Law It Broke

Microsoft’s Skype may still be functioning in China, but it’s becoming increasingly difficult to find a way to download it in that country.

According to a New York Times report on Tuesday, Skype has been unavailable on Apple’s Chinese App Store and on various Android app repositories for almost a month now.

Apple (aapl) told the publication that it had been “notified by the Ministry of Public Security that a number of voice over internet protocol apps do not comply with local law,” so it had removed those apps in its Chinese store.

Android app stores run by local web giants such as Huawei and Xiaomi also don’t carry Skype anymore—Google (googl) doesn’t run its Play Store in the country because of local laws, so Android users have to turn to third-party services such as these for their app downloads.

Microsoft (msft) told the Times that Skype’s removal from Apple’s App Store was only temporary, and it was “working to reinstate the app as soon as possible.”

It’s not clear which law Skype is breaking. It doesn’t provide end-to-end encryption, though it might be that the Chinese authorities don’t like its encryption of messages in transit between people’s computing devices and Skype’s servers. It’s also possible that Skype is falling foul of a recently introduced Chinese rule that demands the use of verified real names on online platforms.

China has recently been particularly restrictive of online speech, due to the high-stakes Communist Party meeting that took place last month. However, Skype’s disappearance from the app stores seems to have taken place after that event.

Apple took flak from digital rights activists earlier this year when it removed from its Chinese App Store apps that could be used to bypass state censorship in the country.

Tech