Tag: China

By Wesley Diphoko for IOL

The Chinese government is flexing its muscle against consumer technology companies and South Africans are affected. It started with just Ant Financial, Jack Ma’s company, and now almost all Chinese consumer technology companies are under the scrutiny of the Chinese government including Tencent, a company which is partly owned by South African founded technology giant, Naspers. It is the Naspers exposure to Tencent that should worry South Africans, here’s why.

Tencent shares have plummeted by over 16% since the Chinese government ordered the company to cease all exclusive music streaming rights and licensing deals with record labels globally. On 24 July 2021) the Chinese technology giant was also fined 500,000 yuan (US$77 000) by authorities, following an official investigation that found that the company has engaged in monopolistic practices that gave it an unfair advantage over its competitors.

Initially, it was Jack Ma led companies that were receiving attention and now there’s more. The Chinese government has also been going after other fintech companies, including those owned by Didi (China’s Uber). As Didi prepared to IPO in the U.S., Chinese regulators announced they were reviewing the company on “national security grounds”, and are now levying various penalties against it. The government has also embarked on an “antitrust” push, fining Baidu — another top Chinese internet company — for various past deals. Leaders of top tech companies (also including ByteDance, the company that owns TikTok) were summoned before regulators and presumably berated. Various Chinese tech companies are now undergoing “rectification”.

As a result of these developments in China, Naspers & Prosus (Naspers sister company) fell sharply in Amsterdam and Johannesburg trading after China’s move to place restrictions on the country’s education-technology sector caused a plunge in shares in online giant Tencent. Earlier this week, Prosus was down 8.5%, while Naspers plunged 8.4%.

The current situation with Naspers should be a matter of concern for South Africans as the Public Investment Corporation is heavily invested in this company.

It’s also important to note that this happens at a time when other tech companies are performing well. Negative developments around Naspers will ultimately impact on South African pensioners who are investors via the PIC.

This should be a matter of concern as changes in China seem to be significant and may last for a foreseeable future. It seems China’s leaders want to prevent the emergence of alternative centres of power. The value of Ma’s business empire has collapsed. China’s attack on its tech companies seems far more comprehensive — it’s not just attacking the biggest internet companies, it’s attacking the entire sector (consumer tech). At the same time China is not attacking companies with the focus on hardware (e.g Huawei) but more on the companies in the consumer and software side of tech, areas that Naspers has invested heavily in.

It’s important that developments in China are understood for what they truly are. The ground seems to be shifting. China is now focusing on the most important part of technology and less on fun stuff in consumer tech.

Alibaba accepts record fine

Source: BBC

Chinese tech giant Alibaba said on Monday that it accepted a record penalty imposed by the country’s anti-monopoly regulator.

Regulators slapped a $2.8bn fine after a probe determined that it had abused its market position for years.

The fine amounts to about 4% of the company’s 2019 domestic revenue.

Alibaba Group’s executive vice chairman Joe Tsai indicated that regulators have taken an interest in platforms like Alibaba as they grow in importance.

“We’re happy to get the matter behind us, but the tendency is that regulators will be keen to look at some of the areas where you might have unfair competition,” he told an investor call on Monday.

The company added that it was not aware of any further anti-monopoly investigations by Chinese regulators, though it signalled that Alibaba and its competitors would remain under review in China over mergers and acquisitions.

The main issue for regulators was that Alibaba restricted merchants from doing business or running promotions on rival platforms.

The company said it would introduce measures to lower entry barriers and business costs faced by merchants on e-commerce platforms.

“With this penalty decision we’ve received good guidance on some of the specific issues under the anti-monopoly law,” Mr Tsai said.

The group does not expect any material impact on its business from the change of exclusivity arrangements imposed by regulators.

The message from Alibaba today in its investor call was: we may be the biggest and the first Chinese tech firm to attract regulators’ attention – but we are by no means the last.

Alibaba executives sought to reassure investors that they are playing ball with the regulators. They’re going to make it cheaper for businesses to sell on their platform, and not force them to pick and choose between platforms – a practice seen by some in the industry as a case of “it’s my way or the highway”.

So far, Alibaba says, the discussions with regulators have been amicable, and the statement from the firm on accepting the penalty is markedly contrite.

It may also be heaving a sigh of relief. The 4% of 2019 revenue penalty is a record fine, but for Alibaba, which has a huge war chest, it’s a drop in the ocean.

But there will be more oversight and scrutiny of it and other firms.

The e-commerce giant indicated that while for now Alibaba is in the clear in terms of future investigations, the same could not be said for other firms in this sector.

Chinese tech firms are a powerful force in the country, and Beijing is keen to regulate them. Alibaba’s experience is a sign of more of the same to come.

The penalty is the latest in a chain of events targeting the company that kicked off last October, after its co-founder Jack Ma criticised regulators, suggesting they were stifling innovation.

Shortly after the speech, Chinese regulators scuppered the share market launch of Ant Group, which is Alibaba’s sister company and China’s biggest electronic payments provider.

However, some commentators noted that regulators had legitimate concerns about Ant Group’s consumer finance arm.

Ant Group was expected to be last year’s biggest share market launch on the Hong Kong exchange.

But Alibaba isn’t the only Chinese company to come under scrutiny by China’s increasingly assertive regulators.

Last month, China’s State Administration for Market Regulation (SAMR) said it had fined 12 companies over 10 deals that violated anti-monopoly rules.

The companies included Tencent, Baidu and Didi Chuxing – which are among China’s largest tech companies.

 

By Laura He for CNN Business

Two prominent Chinese media outlets are urging Beijing to kill what they call a “dirty” and “unpalatable” deal intended to keep TikTok operating in the United States.

The editorial boards of China Daily and the Global Times — both state-run publications — this week blasted an arrangement that would give American companies at least some ownership in the short-form video app. TikTok’s parent company ByteDance is based in Beijing.

“What the United States has done to TikTok is almost the same as a gangster forcing an unreasonable and unfair business deal on a legitimate company,” China Daily wrote in an editorial published Wednesday, which called the deal a “dirty and underhanded trick.”

The terms of the tentative deal for China’s most successful global app have caused a lot of confusion.

The initial announcement last weekend implied that ByteDance would continue to own a majority of Tiktok going forward, raising questions about how that could resolve the Trump administration’s national security concerns about Chinese control of the app and its data.

But Trump has since indicated that investors Walmart (WMT) and Oracle (ORCL) would “own the controlling interest.” A person familiar with the deal told CNN Business earlier this week that a new US entity — TikTok Global — will be partially owned by ByteDance’s international and Chinese investors, but that ByteDance itself will hold zero percent of the company to be created by the deal to run the app outside of China.

“It seems as if TikTok can remain in the US. But only if ByteDance allows Oracle and Walmart to effectively take over the company,” China Daily added. “China has no reason to give the green light to such a deal.”

The Global Times, a state-run tabloid, also slammed the deal this week in two editorials calling on Chinese regulators to block it.

“It’s hard for us to believe that Beijing will approve such an agreement,” the Global Times wrote in one editorial. In a second piece titled “TikTok extortion deal is unpalatable gambit,” the publication added that “we should not let Washington control the lifeline of China’s technological development in the future. ”

Chinese state media is a powerful tool in the country’s propaganda machine, and the various outlets and their editorials are often looked upon as barometers of sentiment among senior officials. Some publications, like the Global Times, are more hawkish than others.

Notably, the China Daily and Global Times editorials were published in English — an indication that the TikTok editorials are likely intended for an overseas audience. State media editorials in China may also act as trial balloons for ideas, or to send a message to Western governments. (China Daily is an English-language paper, but Global Times also has a much more popular Chinese edition. Similar editorials were published in that edition, too.)

The extent to which Beijing still needs to review the deal is also not entirely clear.

Last month, Chinese regulators introduced new rules that govern the sale of certain kinds of technology to foreign buyers — a change that experts pointed out would likely require ByteDance to obtain government permission before selling TikTok to a foreign company. ByteDance has said that Oracle would be able to review the app’s source code, but that the deal does not involve the transfer of its algorithms and technologies.
A source familiar with the negotiations, meanwhile, told CNN Business this week that ByteDance isn’t concerned about regulatory approval from China. The source said there are still a few details left to sort out in the United States, indicating optimism that the deal could still close despite the media and political firestorm.

Selina Wang contributed to this report.

By Eddie Spence for Bloomberg

President Donald Trump’s tariffs on Chinese imports are getting a lot of blame for slowing the global economy, but it’s all the uncertainty from his Twitter habit and trade policy more broadly that could be even more harmful.

According to a report by Bloomberg Economics’ Dan Hanson, Jamie Rush and Tom Orlik, uncertainty over trade could lower world gross domestic product by 0.6% in 2021, relative to a scenario with no trade war. That’s double the direct impact of the tariffs themselves and the equivalent of $585 billion off the International Monetary Fund’s estimated world GDP of $97 trillion in 2021.

China would be hit harder by the uncertainty factor, with its GDP lower by 1% compared with a 0.6% chunk taken out of America’s economic output, the analysis showed.

“The tweet is mightier than the tariff,” the Bloomberg economists wrote in their report.

The U.S. president’s social media posts on trade, many of which are about China, sometimes appear several times a day and other times not at all. His contradictory takes on the progress of negotiations with Beijing send a chill through businesses that are making decisions about investing and hiring.

A survey released last week by the Federal Reserve Bank of New York found a growing conviction among businesses that tariffs were hitting their bottom line.

The Fed responded to economic headwinds with a rate cut of 0.25% last month. The Bloomberg Economics report said that while monetary policy can be used to mitigate uncertainty shocks, it cannot prevent the damage entirely. If central banks respond to demand weakness, world GDP will be 0.3% lower in 2021 than it would be in a no-trade-war scenario.

By Tom Head for The South African

South Africa could be set for another round of drama from Eskom, as the ailing power utility has reportedly failed to receive R7 billion in loan payments initially set to come from the Chinese Development Bank (CDB).

That’s according to City Press, who have reported that the creditors do not trust their promises over proposed maintenance work. It would be the second time in just over two weeks that one of Eskom’s promised loans failed to materialise after the Brics New Development Bank also did not part with their billions.

Why haven’t Eskom received the loan?
On Easter Friday, Finance Minister Tito Mboweni was forced to grant the power giants an emergency bailout in order to meet salary demands and diesel costs. It’s reported that the CDB has taken note of their actions, and fear that this particular instalment of their cash will be used to plug holes, rather than go towards maintenance.

The loan in question will come to R33 billion in total, and it has been earmarked for the development of the Medupi and Kusile power plants. The new builds are yet to get up to full speed, and they’re struggling to produce the amount of electricity needed to keep South Africa illuminated as more “old units” come to the end of their lifespans.

Load shedding fears resurface
Eskom is very much living hand-to-mouth at the moment. In fact, some of their biggest critics believe this will be the last week where the lights stay on: Natasha Mazzone of the DA has accused the firm of diverting funds from long-term projects in order to keep voters happy before the general election this Wednesday.

Public Enterprises Minister Pravin Gordhan has also refused to rule out the return of load shedding this winter, despite unveiling plans to nip it in the bud at the beginning of April. We’ve already seen how one defaulted payment can spark a financial crisis, so a second one within two weeks is a terrible omen for the company… and its consumers.

By Lily Hay Newman for Wired 

For two hours on Monday, internet traffic that was supposed to route through Google’s Cloud Platform instead found itself in quite unexpected places, including Russia and China. But while the haphazard routing invoked claims of traffic hijacking—a real threat, given that nation states could use the technique to spy on web users or censor services—the incident turned out to be a simple mistake with outsized impacts.

Google noted that almost all traffic to its services is encrypted, and wasn’t exposed during the incident no matter what. As traffic pinballed across ISPs, though, some observers, including the monitoring firm ThousandEyes, saw signs of malicious BGP hijacking—a technique that manipulates the web’s Border Gateway Protocol, which helps ISPs automatically collaborate to route traffic seamlessly across the web.

ThousandEyes saw Google traffic rerouting over the Russian ISP TransTelecom, to China Telecom, toward the Nigerian ISP Main One. “Russia, China, and Nigeria ISPs and 150-plus [IP address] prefixes—this is obviously very suspicious,” says Alex Henthorne-Iwane, vice-president of product marketing at ThousandEyes. “It doesn’t look like a mistake.”

Malicious BGP hijacking is a serious concern, and can be exploited by criminals or nation state actors to intercept traffic or disrupt a target service—like Google. Hence, many developers and website builders alike ensure to bolster the security of their website by seeking the help of agencies like https://thedigitalswarm.com and optimise their websites. But the technique also has a dopey, well-intentioned cousin known as a prefix leak, or sometimes “accidental BGP hijacking.”

In both cases, rerouting occurs when an ISP declares that it owns blocks of IP addresses that it doesn’t actually control. This can be an intentional deception, but can also simply come down to a configuration error that, while disruptive, is not intentional. On Monday, a Google spokesperson said that the company didn’t see signs of malicious hijacking, and instead suspected that the Nigerian ISP Main One had accidentally caused the problem.

“The problem here is a failure to apply basic best current practices to these routing sessions.”

There are minimum best practices that ISPs should implement to keep BGP routes on the up and up. These are important, because they apply filters that catch errors in the event of a route leak and block problematic routes. Not all ISPs implement these protections, though, and in a prefix leak like the one that affected Google, traffic will flow chaotically across networks, not based on efficiency or established paths, but based on which networks haven’t put the BGP safeguards in place and will therefore accept the rogue routing.

Indeed, on Tuesday morning Main One said in a statement that, “This was an error during a planned network upgrade due to a misconfiguration on our BGP filters. The error was corrected within 74mins.”

In this case, it appears that the Russian and Chinese ISPs, and perhaps others as well, offered a path to the Google traffic because they hadn’t implemented protective configurations.

The protocols underlying the internet were written decades ago, in a different era of computing, and many have needed major security overhauls and additions to improve trust and reliability around the web. There was the effort to encrypt web traffic with HTTPS, and the growing movement to secure the internet’s Domain Name System address lookup process so it can’t be used to spy on users, or for malicious rerouting.

Similarly, ISPs and internet infrastructure providers are starting to implement a protection called Resource Public Key Infrastructure that can virtually eliminate BGP hijacking, by creating a mechanism to cryptographically confirm the validity of BGP routes. Like HTTPS and DNSSEC, RPKI will only start to provide true customer protection when a critical mass of internet infrastructure providers implement it.

“This incident had a non-trivial impact because Google and some other prominent network routes were accidentally leaked,” says Roland Dobbins, a principal engineer at the network analysis firm Netscout. “But the problem here, as it is in most of these cases, is a failure to apply basic best current practices to these routing sessions. The key is for network operators to participate in the global operational community, get these kinds of filters put in place, and move to implement RPKI.”

While Google’s incident wasn’t a hack and instead gets into obscure internet protocol drama, the impact for users on Monday was apparent—and shows the pressing need to resolve issues with BGP trust. The flaw has been maliciously hijacked before, and could be again.

By Denis Balibouse for Wired

In 2010, Google made a moral calculus. The company had been censoring search results in China at the behest of the Communist government since launching there in 2006. But after a sophisticated phishing attack to gain access to the Gmail accounts of Chinese human rights activists, Google decided to stop censoring results, even though it cost the company access to the lucrative Chinese market.

Across nearly a decade, Google’s decision to weigh social good over financial profit became part of Silicon Valley folklore, a handy anecdote that cast the tech industry as a democratizing force in the world. But to tech giants with an insatiable appetite for growth, China’s allure is just as legendary.

The country has more internet users—772 million—than any other country. Hundreds of millions more are not yet connected to the internet. The dizzying prospect of a billion new users reportedly prompted Facebook CEO Mark Zuckerberg to offer President Xi Jinping the chance to name his first daughter in 2015. (Xi declined.) A more typical arrangement is the one made by LinkedIn, which agreed to play by local censorship rules.

Now, according internal documents obtained by The Intercept, Google itself may soon rebalance its moral accounts, just as lawmakers and consumers around the globe begin to reckon with industry’s potential to spread disinformation, sow social discord, and prop up authoritarian regimes. The Intercept said Google is in advanced stages of plans to launch a custom Android search app in China that will comply with the Communist Party’s harsh censorship policies on human rights, democracy, free speech, and religion.

“This an extremely disappointing move,” says Eva Galperin, director of cybersecurity for the Electronic Frontier Foundation. Google’s willingness to censor its own results takes the onus away from the Chinese government. “They are essentially using Google as a propaganda tool and Google is letting themselves be used.”

A spokesperson for Google told WIRED, “We provide a number of mobile apps in China, such as Google Translate and Files Go, help Chinese developers, and have made significant investments in Chinese companies like JD.com. But we don’t comment on speculation about future plans.”

Google never fully exited China, even after its search service was blocked. The company has three offices and more than 700 employees in China. Last month, Google launched a so-called mini-game on China’s popular WeChat service.

The search project, code-named Dragonfly, began in spring 2017, but accelerated in December after a meeting between top Chinese officials and Google CEO Sundar Pichai, the Intercept says. Google has already demoed the app with Chinese government. If China approves the app, it could be launched within six to nine months.

In the documents, Google says it will automatically filter websites blocked by China’s so-called Great Firewall, The Intercept reports. Banned websites will be removed from the first page of search results, with a disclaimer saying “some results may have been removed due to statutory requirements.” Wikipedia and the BBC are cited as examples of sites that could be censored. The documents also say that Google’s search app will “blacklist sensitive queries,” by returning no results when people search for certain words or phrases. The restrictions would extend beyond text search. Features like image search, automatic spell check, and suggested search will also comply with the government’s blacklists.

Google is not the only company revving up its presence in China. Last August, Apple, which makes the vast majority of its products in China and reported sales of nearly $45 billion in Greater China in the year ended September 2017, removed virtual private network (VPN) apps from the App store. In 2016, the New York Times reported that Facebook was developing software for a censorship tool that would enable a third party to monitor popular stories and topics in China and then decide whether those posts should be visible to users.

“Facebook should also be ashamed of itself,” Galperin says. “It is one thing for the government to censor you, and another to say stand back and say, ‘Don’t trouble yourself with having to repress me, I’m just going to repress myself.’”

A 2008 Citizen Lab study said search engines from Google, Microsoft, and Yahoo all censored certain content in China, and “may be engaged in anticipatory blocking,” before the government even asked.

News about Google’s plans comes as tech workers have begun organizing against some of their employers’ business decisions. Meredith Whittaker, the founder of Google Open Research and co-director of AI Now, an institute focused on ethics and artificial intelligence at New York University, was involved in protests within Google to oppose a company contract with the Pentagon to apply artificial intelligence to drone footage in conflict zones. Wednesday, Whittaker tweeted that Google’s censorship could violate Article 19 of the Universal Declaration of Human Rights, as well as Pichai’s recent guidelines on AI ethics.

By Lameez Omarjee for Fin24 

The rand came under “massive pressure” on Tuesday morning, having weakened from R13.63 to R13.90, following news that US President Donald Trump is threatening new tariffs on Chinese imports.

TreasuryONE’s lead dealer Wichard Cilliers said in a snap note that all eyes would now be on the trade spat.

By 09:14 the local currency was trading 1.92% weaker at R13.90 against the US dollar after breaching this level for the first time since November 27 last year when the rand traded at R14.00/$.

“The trade wars are heating up with US president Trump to identify $200bn in Chinese imports for additional tariffs of 10% and on another $200bn after that if Beijing retaliates,” said Cilliers.

Trump reportedly said that the United States will no longer be taken advantage of on trade by China and other countries in the world. “We will continue using all available tools to create a better and fairer trading system for all Americans,” Trump said.

The IMF noted that this could place global growth at risk.

Bloomberg reports the tariffs could be the latest round of punitive measures in an escalating dispute over the large trade imbalance between the two countries. Trump recently ordered tariffs on $50bn (R692.77bn) in Chinese goods in retaliation for intellectual properly theft. The tariffs were quickly matched by China on US exports.

Apart from the trade wars, locally load shedding is also adding to currency weakness, commented NKC Africa Economics.

NKC expects the rand to trade within a range of R13.65/$ to R13.95/$.

RMB economist Mpho Tsebe noted that the rand was among Monday’s worst-performing emerging market currencies, along with the Colombian peso and the Thai baht.

“Given the fragile growth outlook and inflation contained within the 3%-6% target band, the SARB (South African Reserve Bank) is unlikely to increase interest rates to support the currency,” she said.

Peregrine Treasury Solutions’ Bianca Botes said investors are dumping emerging markets for safe haven assets, including US treasury bonds. “South Africa, due to the liquidity that our local market offers, often leads the losing streak, she said.

“Should these tensions elevate and strong data from the US keeps making its way to market, emerging market currencies will remain under pressure and one could very well see the rand target R14/$,” Botes warned.

However, Andre Botha, senior currency dealer at TreasuryONE was optimistic that the rand could recover.

“We still believe that the rand is overdone at these levels and should the tide turn and risk-taking behaviour start taking precedent again the rand could stage a comeback.” He echoed views that the rand’s performance largely depends on global events rather than local factors.

China is likely to see price rises for paper products this year on a shortage of raw materials and imported waste paper, according to Hong Kong-listed Nine Dragons, one of Asia’s largest packaging and paper producers.

Cheung Yan, the company’s chairwoman and one of China’s richest women, said at a press conference in Hong Kong on Tuesday that the company was likely to raise product prices in 2018, pressured by increased costs in raw materials, whose supply has been hit by Beijing’s tighter controls on imported waste paper, an important source for manufacturing paper products.

“The government’s tightened control on imported recovered paper has resulted in significant volatility in both imported and domestic recovered paper prices,” said Guangdong-based Nine Dragons in an interim results filing to the Hong Kong stock exchange.

In the six months ended December 31, the company saw its net profit more than doubled to 4.33 billion yuan (US$690 million), up from the previous 1.91 billion yuan.
Separately, Vinda International Holdings, China’s third-largest tissue manufacturer, said last month that it had raised tissue product prices by 4 to 5 per cent since last October in response to rising pulp prices.
China’s tissue giant Vinda expects further industry consolidation as Beijing tightens environmental controls
US pulp prices have risen more than 35 per cent in the past year, contributing to the hike in toilet-paper costs among other factors, according to Bloomberg.

The toilet paper price hike has sparked panic buying in Taiwan over the weekend after suppliers told local supermarkets they would raise prices by 10 to 30 per cent from next month.
Raw materials accounted for around 48 per cent of the costs for toilet paper products, and almost all of the pulp was imported from abroad, said Taiwan’s Ministry of Economic Affairs.

Vinda has operations in Taiwan, but it is not immediately known the level of price increase they will put in place for their products on the island.

Source: BusinessLive

The technology industry is the crowning glory of America’s economy. It supports 7-million well-paid jobs at home, and allows America to set standards globally.

Silicon Valley generates almost $200-billion of profits from abroad each year, several times the benefit that America gets from having the world’s reserve currency. But after losing its lead in exports and manufacturing, is America’s tech supremacy now under threat from China?

For years Silicon Valley dismissed Chinese tech firms—first as an irrelevance, then as industrial spies and copycats. Most recently China has been seen as a tech Galapagos, where unique species thrive than would never spread abroad. But as our Schumpeter column explains this week, China’s technology industry has been catching up far faster than expected. American venture capitalists return from trips to China blown away by its energy. China’s government has set a goal of becoming dominant in artificial intelligence by 2030.

China still has huge weaknesses. Its tech firms are only worth about a third as much as America’s, and their investment budgets pale in comparison with those in the United States. They generate relatively little revenue abroad, and are puny in semiconductors and business-related software. Moreover, Chinese companies in other industries make less intense use of technology products than their American counterparts do. And although China does have two giant tech firms in Tencent and Alibaba, as well as lots of small ones, it has relatively few mid-sized companies in the range of $50-$400bn.

Nonetheless, China is now approaching parity on the most forward-looking measures. In e-commerce and mobile payments, its industry is now bigger than America’s. Its universe of “unicorns” (unlisted firms worth over $1bn) is almost as large, as is its venture-capital sector. Both are proxies for China’s ability to produce tomorrow’s giant firms. And in cutting-edge areas such as facial and speech recognition, China now has recognised leaders. There are even some signs that it is catching up in hard science: it has produced nearly as many papers on artificial intelligence cited by parties other than their author as America has.

At its present pace, China is still 10-15 years away from reaching tech parity with America. But for American tech firms, the time to get paranoid is now.

Source: The Economist

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