October 2024 China Update

Business News

PayPal Introduces Payment Systems in China

According to a Press Release from PayPal in late September, PayPal has a “complete payments” system for Mainland China, being an all-in-one platform that integrates a range of customized products and solutions to support Chinese merchants in selling globally. This platform streamlines payment and receivables processes for businesses of all sizes in China.? Suzan Kereere, President, Global Markets, PayPal, said: “We are excited to bring PayPal's Complete Payments solution to China, empowering businesses with secure, seamless cross-border transactions and helping them tap into global markets. This launch marks a significant milestone in PayPal’s mission to revolutionize commerce globally, bridging Chinese businesses with consumers around the world in a more efficient and transparent way.”

China Continues to Approve Large Numbers of Online Games

China’s National Press and Publication Administration approved over 100 online games last month continuing its rapid fire approval policy of the last 12 months. Industry followers will recall that the approval system largely stalled in 2021, leading to concerns being raised as to the ongoing viability of online games developers and distributors, both local and foreign. Tenent’s “Shou” (meaning “hunting” in Chinese) received approval in this latest round of approvals, leading online gamers to speculate as to what the game will involve. Online game approvals for 2024 will surpass those granted in 2023 without a doubt.

China Invests US$1B in Tanzania-Zambia Railway Development known as “Tazara”

The decision comes as Tazara has largely fallen into disrepair. Some commentators see this investment as a direct response to the US announcement of its own African railway infrastructure project to bankroll the refurbishment of the Lobito Corridor between Angola and?Zambia?through the Democratic Republic of the Congo. Observers also say China is keen to get Tazara back to full speed to help transport its mining exports from Zambia and Congo, as the race for critical minerals used in the production of electric vehicle batteries and other key technology systems/components heats up between China, the European Union and the US.? China helped build the original Tazara railway line in the 1970s.

China-Focused Hedge Funds Showing Super Returns

Following the Chinese government open discussions regarding supporting the Chinese stock markets, stock jumps have led many of China’s hedge funds to post huge returns. Hong Kong’s Triata Capital posted a return of 44% last month, taking its nine month performance to 56%. According to Reuters, the US$770 million China-focused fund held long-term investments in data centres, internet giants, e-commerce and travel firms, and those investments bore fruit. Yunqi Capital's China Fund gained 26% in September, focused on “beaten-down U.S.-listed Chinese internet and fintech companies”.

BMW, Mercedes and Porsche Sales Down

For the July-September quarter, BMW's sales fell 13%, while Mercedes reported a 3% drop. Demand in China, was down for the two German companies, with BMW’s sales in China down by one third, while Mercedes’ China sales fell by 13%.? Mercedes’ high-end segment was hit in particular by lower consumer discretionary spending in China, affecting its luxury S-Class lineup. Sales are expected to pick up during Q1 in 2025 as consumer confidence increases following rises in China’s stock markets and other areas, following government stimulus kicking in. As for Porsche, its China sales are down by 30% after a few bumper years in China - its large-engine sports car Panamera and battery-electric sedan Taycan saw the largest drops in China according to Reuters.

GM Revamps China Team

GM President?Mark Reuss?told investors earlier this month that the company would be sticking it out in China, despite increased competition from locally branded Chinese cars and the surge in EV popularity in China. ?According to an article in the WSJ, GM has already shuffled its leadership in China and hashed out a plan with its main joint-venture partner, state-owned SAIC.? As with any market, but especially for China, local knowledge, consumer culture and technology adaptability are key to staying competitive.? The potential rewards for strong auto brands in China continue to be attractive.

Alibaba and Baidu Invest in Chinese Smart-Driving Tech Company’s IPO

Horizon Robotics successfully raised HK$5.41 billion through its Hong Kong IPO last week. Its IPO was warmly received. Founded in 2015, Horizon is led by Chairman and CEO Yu Kai, a machine learning expert and well-known figure in the deep learning technology used by the smart vehicle sector. The company says it was the “first in China to mass produce advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles that make driving safer, more convenient and more comfortable” according to a report from Bamboo Works. Alibaba, Baidu and state-owned Beijing Financial Holdings are among its cornerstone investors. ?

BYD Continues to Dominate the EV Sector

Last month, BYD posted its fourth straight month of record global sales with 419,430 vehicles sold. Earlier this year, it seized the position as No. 1 carmaker by sales in China ahead of the?VW, which reigned for decades. BYD only makes electric vehicles and plug-in hybrids, which together accounted for 53% of the Chinese market in September 2024, according to figures released by the China Passenger Car Association.?

IKEA Calls for More Stimulus

Swedish furniture manufacturer and retailer, IKEA, a popular place to be for many Chinese on a regular basis, has called for more China stimulus as its China sales have slipped - China accounted for 3.5% of Ingka Group's global sales, down from 3.6%. IKEA opened a new Shanghai store in September, and now has 39 stores in China.? China unveiled an aggressive monetary stimulus package in late September – “We would like to encourage even more stimulation to the market because the market needs a little extra boost.” - Jesper Brodin, CEO of Ingka Group.

Apple Opens Another Research Lab in China – Sees Sales Jump for New iPhones

Apple has continued to show confidence in its China operations, with the opening of an “applied research laboratory” in the Southern Chinese tech hub of Shenzhen. This comes as Huawei’s new cell phone models continue to grab market share in China. The facility is located in the Shenzhen Park in Hetao, a cooperation zone developed under the directive of the central government to deepen the city’s tech partnerships with neighbouring Hong Kong, according to a report issued by the People’s Daily.? Meanwhile Apple’s ?new iPhones got off to a strong start in China, with their sales rising 20% in their first three weeks since their launch compared with its 2023 model, according to data from research firm Counterpoint.? Tim Cook met with China's Minister for Industry and Information Technology Jin Zhuanglong during a visit to Beijing this month - Jin told Cook that he hoped “Apple would continue to deepen its presence in China, increase investment in innovation, grow with Chinese companies and share the dividends of high-quality development, the statement showed.”

China’s Exports Ease

China’s export growth slowed in September, with customs officials citing extreme weather disruptions, global shipping congestion and base effects as contributing factors, although shipments to the United States grew at a faster pace than to the European Union. Exports grew by 2.4 per cent year on year to US$303.71 billion in September, according to customs data.

Shanghai Recognises Big Revenue Foreign Invested Enterprise Contributors

Shanghai acknowledged the top 100 foreign-invested enterprises (FIEs) in four rankings earlier this month, based on their 2023 performance in operating revenue, import and export volume, tax contributions and job creation.? Topping the lists were Apple Computer Trading (Shanghai) Co., Ltd. for operating revenue, Tech-Com (Shanghai) Computer Co., Ltd. for import and export value, Porsche (China) Motors Ltd. for tax contributions and Fast Retailing (China) Ltd. for job creation.

According to Shanghai government publications and Shine News, a total of 258 foreign-invested enterprises made the four lists. Eleven leading multinationals made it to all the four rankings, including BASF, Richemont, Roche Pharmaceuticals, Johnson & Johnson Medical Shanghai Co., Ltd, and Tesla (Shanghai) Co., Ltd. The United States remains the top country with 83 companies included in the listing, followed by 32 Japanese and 28 German companies.

China Property Sales Improve

According to sales figure reports form China Vanke, Country Garden and Shimao Property, property sales edged up in September after Beijing rolled out a programme to support the property market. Shimao Property, disclosed a 13.1% month-on-month increase in contracted sales totalling US$415.4 million for September, reflecting a 45.5% rise from the previous year. Admittedly, these are based off a low base, but they are largely being seen as positive.

Schindler, the Elevator Manufacturer, Sees Sales Decline

In its new 2024 guidance announcement, Schindler said new installations fell globally, most notably in China, while growth continued in its modernisation and service units, which focus on renovation and maintenance. The only region where all three units grew was Asia Pacific, excluding China. Schindler is less exposed to China than its competitors, generating about 15% of its revenue last year from the country.

China’s Export Controls for Dual-Use Items

According to Xinhua, Chinese Premier Li Qiang has signed a decree of the State Council to unveil regulations on export control of so-called dual use items, which will take effect on 1 December. The regulations “aim to improve transparency and standardization of export control policies and to boost export control capabilities of items that may be used either for civilian or military purposes”, according to Xinhua. The new regulations put in place a permit system for the export of dual use goods and create a list of restricted goods. Exporters of such goods will have to disclose the ultimate user and the intended use of the exported goods. Further details are expected to be laid out in the near future.

China’s Wind Turbine Manufacturers Reach Agreement

According to an article from Yicai, twelve leading manufacturers of wind turbines have signed an agreement, pledging to be “self-disciplined so as to bring to an end a period of price undercutting that has eroded their earnings.” Goldwind Science & Technology, Envision Energy, Windey Energy Technology Group, Ming Yang Smart Energy Group, Sany Renewable Energy, and seven others will refrain from malicious price-cutting and negative campaigns against rivals. ?It is thought that input has been received by the Anti-Monopoly regulators regarding this agreement, as its effect on competition could be significant.

China Rolls Out US$112 Billion Funding Schemes to Bolster Stock Market

Earlier this month, China's central bank kicked off two funding schemes that will initially pump US$112.38 billion into the stock markets through newly-created monetary policy tools.

The People's Bank of China spelt out operational details of the swap and relending schemes first announced in late September, aiming to support "steady development" of capital markets. According to Reuters, the announcement came after China's financial regulators held a meeting with key financial institutions,?urging them to implement expansive policies to support the economy and capital markets.

Chinese Banks Cut Mortgage Rates

According to China’s State Council, China's major national commercial banks have started to implement the mortgage rate adjustment plans announced earlier this month to bolster confidence in the property sector, as recovery continues. The mortgage rates for first homes, second homes and more have been reduced to 30 basis points below the loan prime rate. This reduction, affecting over 90 percent of existing mortgage loans, is expected to save borrowers 150 billion yuan (US21.1 billion) and benefit 50 million households, said Tao Ling, deputy governor of the People's Bank of China (PBOC).

Australian Wine Exports Jump, Whilst Lobster Exports to Resume

According to Wine Australia and reports from Bloomberg, in the 12 months ended September 2024, Australian wine exports increased by 34 per cent in value to AU$2.39 billion and by 7 per cent in volume to 643 million litres. These are the highest levels of shipments by both volume and value since the 12 months ended August 2021, and the growth was driven by the re-entry of Australian wine exports to mainland China following the removal of import duties on Australian bottled wine in late March 2024. The Australian government recently announced that the import ban on Australian lobsters has been lifted by China, with exports set to resume in December.

China’s Top Legislature to Meet in November

According to Xinhua, China's top legislative body will meet from 4 to 8 November. Draft laws and amendments to be discussed at the meeting of the National People's Congress (NPC) Standing Committee will cover mineral resources, energy, anti-money laundering measures, maritime issues and other areas. Stimulus and debt measures are also expected to feature.

Intel Invests US$300 million in China Chip Packaging and Testing Plant

According to Intel, it plans to invest US$300 million in expanding its chip packaging and testing facility in Chengdu, China. This move aims to “enhance packaging capacity and customer support” as per Intel China’s WeChat account. Intel’s decision to invest in Chengdu comes amid competitive pressures in the semiconductor industry, particularly in AI technology. Intel reported a US$1.6 billion loss in the last quarter. In more Intel news, the company has been subjected to claims that its chips include security backdoors at the direction of America's NSA. The accusations were made earlier this month from a Chinese industry group the which alleged Chipzilla had embedded a backdoor “in almost all” of its CPUs since 2008 as part of a "next-generation security defense system.” In an apparent show of support for Intel, China's Ministry of State Security turned announced on its WeChat page that persons in China should caution against cyber security threats.

Founder of TikTok owner ByteDance Now China’s Wealthiest Person

ByteDance founder Zhang Yiming is now China’s richest person, with a personal wealth of US$49.3 billion, Hurun’s China Rich List showed this week. He overtook bottled water magnate Zhong Shanshan, who slipped to second place as his fortune dropped 24 percent to US$47.9 billion. Despite a legal battle over its US assets, According to Hurun, ByteDance’s global revenue grew 30 percent last year to US$110 billion.

Legal News

Intellectual Property

CNIPA Announces 2024 “Top 10 and Excellent Cases” in Intellectual Property Information Services

In order to fully leverage the exemplary role of best practices in public intellectual property (IP) services and to summarize and promote advanced experiences in IP public services, the CNIPA announced the 2024 Top 10 Cases and Excellent Cases in Intellectual Property Information Services on September 29, 2024. This initiative aims to facilitate exchange and learning among public service institutions, allowing them to draw from successful experiences, broaden service channels, innovate service methods, and enrich service content to comprehensively enhance the efficiency of IP public services. Please our website for an article providing a detailed analysis.

China Releases Trademark Statistics for the Third Quarter of 2024

On 14 October 2024, the China National Intellectual Property Administration (“CNIPA”) published statistics on the number of trademark applications and registrations nationwide in the third quarter of 2024 from 16 December 2023 to 15 September 2024. According to the statistics, compared with last year's period, the number of trademark applications has decreased by 1.8%, while the number of trademark registrations has increased by 14.24%.

As of 15 September 2024, there were 46,744,072 valid trademark registrations in the country. The regions with the most valid trademark registrations are Guangdong Province with 8,919,678, Zhejiang Province with 4,712,129, Beijing with 3,198,435, and Jiangsu Province with 3,077,917. In Guangdong Province, Shenzhen has the most valid trademark registrations of 2,851,691. In addition, it submitted the most trademark applications and has the most trademark registrations this year, with 276,426 and 190,019 respectively. Meanwhile, the Tibet Autonomous Region has the fewest valid trademark registrations in the country, with only 65,238. Currently, Classes with the most valid trademark registrations are Class 35 with 5,202,548, Class 30 with 3,068,606, Class 25 with 2,901,572, and Class 9 with 2,629,555. On the other hand, the Class with the least is Class 13 with 98,106.

The number of trademark applications submitted this year has decreased. In the first three quarters of this year, the total number of trademark applications was 5,162,444, a decrease of 95,957 compared to last year. The most designated Classes were Class 35 with 665,196 applications, Class 30 with 379,911 applications, Class 43 with 289,940 applications, and Class 29 with 283,705 applications. The least designated Class was Class 13 with 9,951 applications. Compared with last year, the top two regions in terms of trademark applications are still Guangdong and Zhejiang, but the total number of applications has decreased. In particular, the decline in Guangdong Province is obvious, from 947,137 last year to 897,262 this year. The Tibet Autonomous Region submitted the fewest applications this year, with only 8,660.

Ecommerce

China’s E-Commerce Platforms Commit to Enhancement of IP Protection

On September 20, 2024, the State Administration for Market Regulation (SAMR) announced on its official website that it held a signatory ceremony of the Self-disciplinary Convention on Improving the Level of Protection of Intellectual Property Rights by E-commerce Platform Operators. It is said that 81 e-commerce platforms participated in the signatory, including representatives from 23 platforms, such as Taobao and Tmall, Tencent, Douyin, Pinduoduo, etc., singed at the main ceremony place of the SAMR, as well as other e-commerce platforms in the sub-meeting of the signatory ceremonies held in other provinces (e.g., Guangdong, Hainan, etc.) on the same day. It is reported that the meetings above emphasized that both the market supervision departments and enterprises need to make efforts to promote economic development. According to the sub-meeting held in Guangdong province, it shall 1) strengthen the industry’s self-discipline and promote corporate compliance. The enterprises shall strengthen the protection of intellectual property rights on their platform and assume the social management responsibilities that are compatible to their social influence; 2) effectively strengthen the ability to prevent intellectual property risks and handle disputes, and promptly deal with intellectual property violations; 3) strengthen the cooperation with government departments, actively cooperate with the special enforcement action of “guarding intellectual property rights,” and help improve the effectiveness of supervision and enforcement, etc. Please our website for an article providing a detailed analysis.

Product Quality

China’s Supreme Court Strengthens Judicial Guidance on Product Quality Cases

To legally protect the legitimate rights and interests of consumers, rural contracted households, and other entities, and to enhance judicial guidance on cases related to product quality, on September 29, 2024, the Supreme People’s Court released six typical cases involving product quality. These cases cover aspects such as food safety protection, the quality protection of agricultural products, support for administrative agencies in exercising quality supervision rights, and the protection of the rights of victims of defective products. Below is a brief introduction to these cases and a summary of their typical significance.? Please our website for an article providing a detailed analysis.

MOFCOM’s New Notice on the Recycling of End-of-Life Motor Vehicles

On 16 October 2024, the Ministry of Commerce of China (“MOFCOM”) released a Notice on Strengthening the Supervision and Administration of Recycling of End-of-Life Motor Vehicles. The notice was jointly formulated by MOFCOM, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of Ecology and Environment, the Ministry of Transport and the State Administration for Market Supervision based on the Measures for the Management of End-of-Life Vehicle Recycling (“Measures”) and the Notice by the Ministry of Commerce and Other 13 Ministries and Commissions of Issuing the Action Plan for Promoting Trade-ins of Consumer Goods on 29 September 2024. It involves four aspects of the regulations in terms of qualification identification and qualification improvement of end-of-life vehicle recycling enterprises (“ELV enterprises”), severe punishment for illegal recycling, and strengthening organization implementation. Please our website for an article providing a detailed analysis.

Government Policy

China Issues Draft Law on Promoting the Private Economy

In an effort to foster steady growth in the private economy and improve the business environment for private enterprises, China’s Ministry of Justice and National Development and Reform Commission released the Draft Law on Promoting the Private Economy (hereafter referred to as “the Draft”) on October 10, 2024. This document invites public opinion and seeks to provide clearer legal protections and policy support for private enterprises, and the deadline for public opinion is November 8, 2024. As early as August 1, 2023, the National Development and Reform Commission (NDRC) and other departments issued the Notice on Implementing Several Measures to Promote the Development of the Private Economy. This was a clear signal from China to revitalize the private sector and boost business confidence. Besides, on June 25, 2024, the NDRC, on behalf of the State Council, submitted a Report on the Development of the Private Economy to the Tenth Meeting of the Standing Committee of the 14th National People’s Congress. This report identified six key tasks to further enhance the private economy, including the proposal for enacting the Private Economy Promotion Law, revising the Regulations on Payment of Small and Medium Enterprises’ Receivables to address overdue payments. ?Responding to the State Council’s call, the Ministry of Justice and NDRC drafted the Draft. The Draft outlines measures in areas such as market access, financing, government services, and technological innovation to create a fair and transparent environment for private businesses.? Please our website for an article providing a detailed analysis.

Priority Review and Approval Procedures Issued for Special Medical Purpose Formula Food Registration

To encourage innovation and meet urgent clinical nutrition needs, the State Administration for Market Regulation (SAMR) has issued the Priority Review and Approval Procedures for Special Medical Purpose Formula Food Registration (hereinafter referred to as the “Procedures”).? The Procedures aim to streamline and accelerate the registration process for SMPF products, addressing urgent clinical nutrition needs efficiently. For enterprises, understanding and leveraging the priority review policies is essential to drive innovation and expand market presence. During the application process, it is crucial to ensure that submitted materials are complete and compliant with regulatory requirements and to maintain effective communication with the Review Center. Through this green channel established by SAMR, the registration process for critical SMPF products can be expedited, offering greater support for patients with rare diseases and others in urgent need. Moving forward, enterprises should focus on product innovation and take advantage of regulatory policies to accelerate the development and launch of new products. Please our website for an article providing a detailed analysis.