ChinaBusiness

Weekly2 July 2019

PAST EVENTS

Visit of the Party Secretary of Weihai to Belgium – 20 & 21 June 2019

Visit to Agfa-Gevaert Visit to Bekaert

On 20 and 21 June 2019, Mr Wang Luming, Party Secretary of Weihai City and his delegation visited Belgium. The Party Secretary visited several of our members, such as Bekaert and Agfa-Graphics. The delegation also had a meeting with the Mayor of the City of Ghent, Mr Mathias De Clercq. Both sides discussed cooperation in different fields. A visit to a leading hospital in Gent was also visited. The Chamber was represented by Ms Gwenn Sonck, Executive Director, FCCC.

Since many years, the Flanders-China Chamber of Commerce has a cooperation agreement with the city of Weihai in order

ChinaBusiness

Weekly2 July 2019

PAST EVENTS

Visit of the Party Secretary of Weihai to Belgium – 20 & 21 June 2019

Visit to Agfa-Gevaert Visit to Bekaert

On 20 and 21 June 2019, Mr Wang Luming, Party Secretary of Weihai City and his delegation visited Belgium. The Party Secretary visited several of our members, such as Bekaert and Agfa-Graphics. The delegation also had a meeting with the Mayor of the City of Ghent, Mr Mathias De Clercq. Both sides discussed cooperation in different fields. A visit to a leading hospital in Gent was also visited. The Chamber was represented by Ms Gwenn Sonck, Executive Director, FCCC.

Since many years, the Flanders-China Chamber of Commerce has a cooperation agreement with the city of Weihai in order

NEWSLETTER 2 JULY 2019 2

to give companies a better understanding of its business-friendly investment environment.

Several of our members, already have major investments in Weihai such as Bekaert, Beaulieu Technical Textiles and Beaulieu Fibers & Yarns.

Weihai City is a coastal city in Shandong province. The city has a diversified economy, with industrial clusters focused on: automotive, medicine, medical devices, electrical and communication equipment, machinery manufacturing, food processing,textiles, and garments. Weihai is also looking to attract investment in new industries, such as: healthcare, intelligent equipment, marine bio industry, and the Internet of things (IoT).

The FCCC can also introduce you to leading Weihai companies that are looking for potential business partners.

Our Chamber also published an interesting brochure on investing in Weihai.

If you are interested to obtain the investment brochure or if you have any specific request, please do not hesitate to contact us at: gwenn.sonck@flanders-china.be, we will be happy to assist you.

ACTIVITIES SUPPORTED BYFCCC

FIT: Princely mission to China – 16 to 22November 2019

China is one of the largest economies in the world and the second-largest importer. It is also one of the biggest countries with an enormous consumer market: the number of people in China's middle class is increasing yearly. It is Flanders' 10th export destination and the third outside Europe.

China's economic development involves technical-scientific progress and innovations. At the same time, China faces big challenges in the fields of environment, energy, transport, health and foodstuffs.

Discover this exiting market during an economic mission from 16 to 22 November 2019, headed by HRH Princess Astrid.

On the program:• Beijing: the political center of China and

Shanghai, China's commercial heart.• As an option, Flanders Investment & Trade is

offering a third destination: a program in Guangzhou or Hong Kong.

• During this multi-sectoral mission, Flanders will focus on cleantech, life sciences and sports & entertainment technology.

• Other key sectors which will be covered include: diamonds, agro-food, smart economy, artificial intelligence, robotics, space, transport and logistics,e-commerce, architecture, sustainability and tourism.

What to expect:• Establish useful high-level contacts in one week.• FIT will prepare a tailor-made program in Beijing,

Shanghai and optionally in Guangzhou or Hong Kong, irrespective of the sector in which you are active.

• During seminars, visits and numerous networking moments, you will acquire a lot of information from your colleagues-entrepreneurs.

Registration is open till 19 August 2019.

Organization: Flanders Investment & Trade in cooperation with the Agency for Foreign Trade, AWEX and hub Brussels Invest & Export.

More information (in Dutch) is available on the FIT website.

Contact: Michèle Surinx, Area Manager East Asia, T: 02 504 87 91 - E: michele.surinx@fitagency.be

NEWSLETTER 2 JULY 2019 2

to give companies a better understanding of its business-friendly investment environment.

Several of our members, already have major investments in Weihai such as Bekaert, Beaulieu Technical Textiles and Beaulieu Fibers & Yarns.

Weihai City is a coastal city in Shandong province. The city has a diversified economy, with industrial clusters focused on: automotive, medicine, medical devices, electrical and communication equipment, machinery manufacturing, food processing,textiles, and garments. Weihai is also looking to attract investment in new industries, such as: healthcare, intelligent equipment, marine bio industry, and the Internet of things (IoT).

The FCCC can also introduce you to leading Weihai companies that are looking for potential business partners.

Our Chamber also published an interesting brochure on investing in Weihai.

If you are interested to obtain the investment brochure or if you have any specific request, please do not hesitate to contact us at: gwenn.sonck@flanders-china.be, we will be happy to assist you.

ACTIVITIES SUPPORTED BYFCCC

FIT: Princely mission to China – 16 to 22November 2019

China is one of the largest economies in the world and the second-largest importer. It is also one of the biggest countries with an enormous consumer market: the number of people in China's middle class is increasing yearly. It is Flanders' 10th export destination and the third outside Europe.

China's economic development involves technical-scientific progress and innovations. At the same time, China faces big challenges in the fields of environment, energy, transport, health and foodstuffs.

Discover this exiting market during an economic mission from 16 to 22 November 2019, headed by HRH Princess Astrid.

On the program:• Beijing: the political center of China and

Shanghai, China's commercial heart.• As an option, Flanders Investment & Trade is

offering a third destination: a program in Guangzhou or Hong Kong.

• During this multi-sectoral mission, Flanders will focus on cleantech, life sciences and sports & entertainment technology.

• Other key sectors which will be covered include: diamonds, agro-food, smart economy, artificial intelligence, robotics, space, transport and logistics,e-commerce, architecture, sustainability and tourism.

What to expect:• Establish useful high-level contacts in one week.• FIT will prepare a tailor-made program in Beijing,

Shanghai and optionally in Guangzhou or Hong Kong, irrespective of the sector in which you are active.

• During seminars, visits and numerous networking moments, you will acquire a lot of information from your colleagues-entrepreneurs.

Registration is open till 19 August 2019.

Organization: Flanders Investment & Trade in cooperation with the Agency for Foreign Trade, AWEX and hub Brussels Invest & Export.

More information (in Dutch) is available on the FIT website.

Contact: Michèle Surinx, Area Manager East Asia, T: 02 504 87 91 - E: michele.surinx@fitagency.be

NEWSLETTER 2 JULY 2019 3

B2B cleantech program in China – November2019

From 17 till 22 November I²PCC is organizing a B2B-program for cleantech companies in China. An extraordinary opportunity to get to know the Chinese market and to network with Chinese companies.

I²PCC? The inter-provincial international project Cleantech China. Four Flemish provinces are cooperating to help Flemish cleantech-SMEs to extend their activities to our partner regions in China. China is facing today (and in the coming years) big challenges in the environmental field. Companies are looking for solutions. Our Flemish cleantechcompanies are No 1 in Europe and can show their services (and products) in China. It's time to prospect.

Participate in the B2B program and meet in a short time period several Chinese companies interested in cleantech solutions. Company visits are also possible. Participation in the program is free of charge. You only pay fees for transport, accommodation and individual translator (if required).

This B2B cleantech program of I²PCC is linked to the economic mission of Belgium to China, presided over by HRH Princess Astrid. Participation in both programs is possible.

For more info and registration, click here.

FOREIGN TRADE

No new tariffs for now, but existing ones remain,after Xi-Trump meeting

Presidents Donald Trump and Xi Jinping meet in Osaka onthe sidelines of the G20 Summit

After a meeting with Chinese President Xi Jinping on the sidelines of the G20 Summit in Osaka on June 29, U.S. President Donald trump said that “things are back on track”. The meeting lasted for 80 minutes, 10 minutes less than scheduled. Trump said that it was a “very, very good meeting, better than expected”, while the Chinese team said that the U.S. had agreed not to impose additional tariffs and that economic and trade negotiations to end the trade conflict would resume. President Trump confirmed that the U.S. would not impose new tariffs on Chinese imports “at least for the time being”, but also that existing tariffs would not be lifted. He confirmed that China would buy a large amount of U.S.goods for which the U.S. would provide a list. Before the meeting, Chinese importers already bought 544,000 tons of American soybeans.

Concerning Huawei, Trump said that U.S. companies can continue to sell products that do not endanger U.S.security to Huawei. (see next item below)In his opening remarks, President Xi said: “China and the United States both benefit from cooperation and lose in a confrontation. Cooperation is better than friction, and dialogue is better than confrontation”. President Trump added: “I actually think that we were very close and then something happened, it slipped a little bit, and now we are getting a little bit closer, but it would be historic if we could do a fair trade deal”. Neither President took any questions from journalists, the South China Morning Post reports.

NEWSLETTER 2 JULY 2019 3

B2B cleantech program in China – November2019

From 17 till 22 November I²PCC is organizing a B2B-program for cleantech companies in China. An extraordinary opportunity to get to know the Chinese market and to network with Chinese companies.

I²PCC? The inter-provincial international project Cleantech China. Four Flemish provinces are cooperating to help Flemish cleantech-SMEs to extend their activities to our partner regions in China. China is facing today (and in the coming years) big challenges in the environmental field. Companies are looking for solutions. Our Flemish cleantechcompanies are No 1 in Europe and can show their services (and products) in China. It's time to prospect.

Participate in the B2B program and meet in a short time period several Chinese companies interested in cleantech solutions. Company visits are also possible. Participation in the program is free of charge. You only pay fees for transport, accommodation and individual translator (if required).

This B2B cleantech program of I²PCC is linked to the economic mission of Belgium to China, presided over by HRH Princess Astrid. Participation in both programs is possible.

For more info and registration, click here.

FOREIGN TRADE

No new tariffs for now, but existing ones remain,after Xi-Trump meeting

Presidents Donald Trump and Xi Jinping meet in Osaka onthe sidelines of the G20 Summit

After a meeting with Chinese President Xi Jinping on the sidelines of the G20 Summit in Osaka on June 29, U.S. President Donald trump said that “things are back on track”. The meeting lasted for 80 minutes, 10 minutes less than scheduled. Trump said that it was a “very, very good meeting, better than expected”, while the Chinese team said that the U.S. had agreed not to impose additional tariffs and that economic and trade negotiations to end the trade conflict would resume. President Trump confirmed that the U.S. would not impose new tariffs on Chinese imports “at least for the time being”, but also that existing tariffs would not be lifted. He confirmed that China would buy a large amount of U.S.goods for which the U.S. would provide a list. Before the meeting, Chinese importers already bought 544,000 tons of American soybeans.

Concerning Huawei, Trump said that U.S. companies can continue to sell products that do not endanger U.S.security to Huawei. (see next item below)In his opening remarks, President Xi said: “China and the United States both benefit from cooperation and lose in a confrontation. Cooperation is better than friction, and dialogue is better than confrontation”. President Trump added: “I actually think that we were very close and then something happened, it slipped a little bit, and now we are getting a little bit closer, but it would be historic if we could do a fair trade deal”. Neither President took any questions from journalists, the South China Morning Post reports.

NEWSLETTER 2 JULY 2019 4

Addressing the multilateral meeting of the heads of state and government of the G20, President Xi pledged further efforts to open up China’s market, expand imports, improve the country’s business environment for foreign enterprises and press ahead with various trade agreement negotiations. The country will set up six new pilot zones for free trade, add a new area to the China (Shanghai) Pilot Free Trade Zone and speed up the building of Hainan province’s free trade port, Xi added. The President vowed to further cut tariffs independently, make efforts to remove tariff barriers to trade, and cut costs for imports. Noting that China will put its new Foreign Investment Law into effect onJanuary 1, Xi said that the country will increase protection of intellectual property rights, the China Daily reports.

President Xi also told the G20 leaders that foreign businesses that have fallen victim to intellectual property theft will be compensated and a channel will be set up for them to make complaints.The Chinese President also said Beijing would give “comprehensive” equal treatment to foreign investors coming to China and put in place a regular channel for them to voice their grievances. He said China’s opening up was not an “empty promise”. Intalks with Russian President Vladimir Putin and Indian Prime Minister Narendra Modi, Xi said that the three nations should work together to safeguard their interests amid rising protectionism.

Many U.S. business executives testifying during seven days of hearings on proposed additional tariffs on Chinese products said they hadn’t encountered forced transfers of technology and that heavy duties are an inappropriate tool for intellectual property protection. At least 330 businesses and industrial groups testified during the hearings, which concluded last week. The majority of the witnesses said thetariffs would raise consumer prices, disrupt supply chains and undermine businesses. They also argued that their Chinese partners are practically irreplaceable.

IT & TELECOM

Trump to lift ban on selling equipment to Huawei

Following his talks with Chinese President Xi Jinping, Donald Trump also announced that American companies will be allowed to resume selling equipment to Huawei Technologies that does not endanger U.S. security. He said he was ready to lift a ban to allow U.S. companies to sell “extremely complex” equipment to the Chinese firm, as long as it was “no great national security problem”. But a final solution would be postponed till the end of the trade negotiations.

“A lot of people are surprised that we sell to Huawei a tremendous amount of products. We are going to continue selling those products.I like our companies selling things to others, very complex things. These are not things easy to make, our companies were very upset. So if it is not a national security issue, we are allowing them to sell,” Trumpsaid, adding that “Huawei is a complicated situation. We are not discussing Huawei with President Xi yet. We want to see where we end up.” He said the Department of Commerce would hold a meeting on July 2 about taking Huawei off the U.S. “entities list”, which requires U.S. companies to get prior approval before selling components to Chinese firms.

While U.S. companies would be allowed again to sell components and services to Huawei, the sale of Huawei’s products in the U.S. would remain prohibited. Asked about Trump’s comments on Huawei, Chinese Foreign Ministry Envoy to the G20 Wang Xiaolong said he had no idea if theU.S. had lifted restrictions on the technology firm. “We will welcome it if they can do what they have said. Huawei is a private company and its technology is at a pioneering position,” Wang added. Liu Weidong, China-U.S. Affairs Analyst from the Chinese Academy of Social Sciences (CASS), cautioned against too much optimism. “On the

NEWSLETTER 2 JULY 2019 4

Addressing the multilateral meeting of the heads of state and government of the G20, President Xi pledged further efforts to open up China’s market, expand imports, improve the country’s business environment for foreign enterprises and press ahead with various trade agreement negotiations. The country will set up six new pilot zones for free trade, add a new area to the China (Shanghai) Pilot Free Trade Zone and speed up the building of Hainan province’s free trade port, Xi added. The President vowed to further cut tariffs independently, make efforts to remove tariff barriers to trade, and cut costs for imports. Noting that China will put its new Foreign Investment Law into effect onJanuary 1, Xi said that the country will increase protection of intellectual property rights, the China Daily reports.

President Xi also told the G20 leaders that foreign businesses that have fallen victim to intellectual property theft will be compensated and a channel will be set up for them to make complaints.The Chinese President also said Beijing would give “comprehensive” equal treatment to foreign investors coming to China and put in place a regular channel for them to voice their grievances. He said China’s opening up was not an “empty promise”. Intalks with Russian President Vladimir Putin and Indian Prime Minister Narendra Modi, Xi said that the three nations should work together to safeguard their interests amid rising protectionism.

Many U.S. business executives testifying during seven days of hearings on proposed additional tariffs on Chinese products said they hadn’t encountered forced transfers of technology and that heavy duties are an inappropriate tool for intellectual property protection. At least 330 businesses and industrial groups testified during the hearings, which concluded last week. The majority of the witnesses said thetariffs would raise consumer prices, disrupt supply chains and undermine businesses. They also argued that their Chinese partners are practically irreplaceable.

IT & TELECOM

Trump to lift ban on selling equipment to Huawei

Following his talks with Chinese President Xi Jinping, Donald Trump also announced that American companies will be allowed to resume selling equipment to Huawei Technologies that does not endanger U.S. security. He said he was ready to lift a ban to allow U.S. companies to sell “extremely complex” equipment to the Chinese firm, as long as it was “no great national security problem”. But a final solution would be postponed till the end of the trade negotiations.

“A lot of people are surprised that we sell to Huawei a tremendous amount of products. We are going to continue selling those products.I like our companies selling things to others, very complex things. These are not things easy to make, our companies were very upset. So if it is not a national security issue, we are allowing them to sell,” Trumpsaid, adding that “Huawei is a complicated situation. We are not discussing Huawei with President Xi yet. We want to see where we end up.” He said the Department of Commerce would hold a meeting on July 2 about taking Huawei off the U.S. “entities list”, which requires U.S. companies to get prior approval before selling components to Chinese firms.

While U.S. companies would be allowed again to sell components and services to Huawei, the sale of Huawei’s products in the U.S. would remain prohibited. Asked about Trump’s comments on Huawei, Chinese Foreign Ministry Envoy to the G20 Wang Xiaolong said he had no idea if theU.S. had lifted restrictions on the technology firm. “We will welcome it if they can do what they have said. Huawei is a private company and its technology is at a pioneering position,” Wang added. Liu Weidong, China-U.S. Affairs Analyst from the Chinese Academy of Social Sciences (CASS), cautioned against too much optimism. “On the

NEWSLETTER 2 JULY 2019 5

surface, this might look like Trump has softened his stance on Huawei, but he made no mention about under what conditions he would actually do anything.There has to be a concession he is looking for from China, and that might even be a concession that he knows China will not make,” Liu said.

Christopher McNally, Professor of political economy at Chaminade University in Hawaii, said it was surprising that Trump talked so widely on Huawei. “It is quite a significant move because at least he mentioned it. We did not expect much to be said about Huawei,” McNally said. He added that Trump did not refer to the ban on Huawei selling equipment in the U.S., “meaning it is probably going to stay in place”. But there could be movement on the ban on American companies selling equipment to the Chinese firm,“which could be a self-defeating policy in the first place”. Headded that the policy had angered American tech companies selling to Huawei and that letting Chinese companies buy these products would be good to balance the trade deficit that Trump was intending to fix in the first place, the South China Morning Post reports.

The case of Huawei CFO Meng Wanzhou, who is under house arrest in Canada awaiting an extradition hearing on a U.S. extradition request, was not discussed at the meeting. Huawei Founder Ren Zhengfei said the company still wants to make Canada its “global center for theoretical research,” according to an interview with The Globe and Mail. Huawei plans to buy land from Montreal to Vancouver though the process has slowed, he said. Ren criticized Canada for not resisting the U.S. extradition request for his daughter and urged the country’s Justice Minister to free her.

China Unicom opens experience stores to letconsumers try out 5G

View of the Mobile World Congress (MWC19) exhibition inShanghai

A day after China Unicom won its 5G license for commercial use, the telecom operator announced that it had opened experience stores across 40 cities to encourage consumers to try applications powered by the superfast 5G technology. One of the 5G experience centersis located in Terminal 2 of Shanghai’s Pudong International Airport. Visitors can play with mechanical robot arms, watch4K high-definition live streaming, wear virtual reality goggles to play 3D games, and gain first-hand experience of 5G smartphones that are not yet available to order. As China officially kicked off the 5G era with the issuing offour 5G licenses on June 6, all the state-of-the-art applications are getting closer to the public than ever and telecom carriers are working to build a sound network infrastructure to accelerate its commercialization.

“After all the hype about 5G, the new era has finally started.The next question for telecom carriers is how to better time the network construction so as to bring 5G applications to the public as fast as possible while avoiding heavy financialpressure on themselves,” said Xiang Ligang, Director General of the Information Consumption Alliance, a telecomindustry association. China Mobile, the world’s largest telecom carrier by mobile subscribers, has adopted a more aggressive strategy, with investment in its first phase of 5G build out in 2019 set at CNY19.26 billion. On June 10, China Mobile also said that it will buy 10,100 smartphones from five domestic manufacturers for 5G testing. The company aims to offer 5G commercial services in 40 cities by September.

The third telecom carrier, China Telecom, said that it will speed up its 5G coverage to more than 40 cities and regions, based on its current trial application of the technology in 17 cities. Wei Leping, an official at theMinistry of Industry and Information Technology (MIIT), saidthe big three telecom carriers are likely to build 80,000 to 90,000 5G base stations this year. The United States in comparison has so far only several thousand base stations,Wei added.

For now, companies are implementing the NSA, or non-standalone architecture, meaning that the 5G network rideson the existing 4G network infrastructure, because the standards on the SA, or stand-alone architecture, are not finalized yet and its solutions won’t be mature until next year. “Using NSA can help quickly deploy 5G equipment, but it has several shortcomings, including high costs, high power consumption and short technical service life, so it is not suitable for large-scale deployment,” Wei added. The costs of NSA 5G equipment is three times that of 4G base stations. The country’s telecom carriers are forecast to

NEWSLETTER 2 JULY 2019 5

surface, this might look like Trump has softened his stance on Huawei, but he made no mention about under what conditions he would actually do anything.There has to be a concession he is looking for from China, and that might even be a concession that he knows China will not make,” Liu said.

Christopher McNally, Professor of political economy at Chaminade University in Hawaii, said it was surprising that Trump talked so widely on Huawei. “It is quite a significant move because at least he mentioned it. We did not expect much to be said about Huawei,” McNally said. He added that Trump did not refer to the ban on Huawei selling equipment in the U.S., “meaning it is probably going to stay in place”. But there could be movement on the ban on American companies selling equipment to the Chinese firm,“which could be a self-defeating policy in the first place”. Headded that the policy had angered American tech companies selling to Huawei and that letting Chinese companies buy these products would be good to balance the trade deficit that Trump was intending to fix in the first place, the South China Morning Post reports.

The case of Huawei CFO Meng Wanzhou, who is under house arrest in Canada awaiting an extradition hearing on a U.S. extradition request, was not discussed at the meeting. Huawei Founder Ren Zhengfei said the company still wants to make Canada its “global center for theoretical research,” according to an interview with The Globe and Mail. Huawei plans to buy land from Montreal to Vancouver though the process has slowed, he said. Ren criticized Canada for not resisting the U.S. extradition request for his daughter and urged the country’s Justice Minister to free her.

China Unicom opens experience stores to letconsumers try out 5G

View of the Mobile World Congress (MWC19) exhibition inShanghai

A day after China Unicom won its 5G license for commercial use, the telecom operator announced that it had opened experience stores across 40 cities to encourage consumers to try applications powered by the superfast 5G technology. One of the 5G experience centersis located in Terminal 2 of Shanghai’s Pudong International Airport. Visitors can play with mechanical robot arms, watch4K high-definition live streaming, wear virtual reality goggles to play 3D games, and gain first-hand experience of 5G smartphones that are not yet available to order. As China officially kicked off the 5G era with the issuing offour 5G licenses on June 6, all the state-of-the-art applications are getting closer to the public than ever and telecom carriers are working to build a sound network infrastructure to accelerate its commercialization.

“After all the hype about 5G, the new era has finally started.The next question for telecom carriers is how to better time the network construction so as to bring 5G applications to the public as fast as possible while avoiding heavy financialpressure on themselves,” said Xiang Ligang, Director General of the Information Consumption Alliance, a telecomindustry association. China Mobile, the world’s largest telecom carrier by mobile subscribers, has adopted a more aggressive strategy, with investment in its first phase of 5G build out in 2019 set at CNY19.26 billion. On June 10, China Mobile also said that it will buy 10,100 smartphones from five domestic manufacturers for 5G testing. The company aims to offer 5G commercial services in 40 cities by September.

The third telecom carrier, China Telecom, said that it will speed up its 5G coverage to more than 40 cities and regions, based on its current trial application of the technology in 17 cities. Wei Leping, an official at theMinistry of Industry and Information Technology (MIIT), saidthe big three telecom carriers are likely to build 80,000 to 90,000 5G base stations this year. The United States in comparison has so far only several thousand base stations,Wei added.

For now, companies are implementing the NSA, or non-standalone architecture, meaning that the 5G network rideson the existing 4G network infrastructure, because the standards on the SA, or stand-alone architecture, are not finalized yet and its solutions won’t be mature until next year. “Using NSA can help quickly deploy 5G equipment, but it has several shortcomings, including high costs, high power consumption and short technical service life, so it is not suitable for large-scale deployment,” Wei added. The costs of NSA 5G equipment is three times that of 4G base stations. The country’s telecom carriers are forecast to

NEWSLETTER 2 JULY 2019 6

spend CNY900 billion to CNY1.5 trillion on 5G network construction from 2020 to 2025, according to the China Academy of Information and Communications Technology. The Global System for Mobile Communications Associationpredicts that China will become the world’s largest 5G market by 2025, the China Daily reports.

China Mobile meanwhile released its first batch of 42 5G phones in Shanghai, which will be available in the market as early as this month. It also kicked off a self-branded 5G smartphone which will be available in August. Many 5G smartphones will debut in China at the end of this year, with a price of about CNY5,000 on average, Wang Hengjiang, Vice General Manager of China Mobile’s mobileend business, told Shanghai Daily. The price will be cut to CNY1,000 to CNY2,000 by the end of 2020. China is expected to invest USD184 billion on 5G by 2025, half of Asia’s total budget of USD370 billion. It is forecast that 28%of China’s mobile connections will be running on 5G networks by 2025, accounting for about a third of all 5G connections globally.

ADVERTISEMENT ANDSPONSORSHIP

Interested in advertisement in the FCCC Weekly or on the FCCC website? Send an e-mail to info@flanders-china.be

CHINA NEWS ROUND-UP

New shortened negative list for foreigninvestment published

China published a new, shortened negative list for foreign investment, cutting the items off limits to foreign investment from 48 down to 40. Seven major sectors, including shipping agencies, gas and heat pipelines in cities with more than 500,000 people, cinemas, value-added telecom services, and oil and gas exploration and development, saw ownership restrictions relaxed or removed. Jointly released by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM), the new negative list will become effective on July 30. A separate listgoverning foreign investment in China's free trade zones (FTZs), which enjoy a higher degree of openness, slashed restricted areas from 45 to 37. The NDRC also vowed to

scrap all remaining restrictions outside the negative list before the end of the year.

The negative list will provide a greater degree of market access and allow foreign investors to run majority-share joint ventures or wholly-owned businesses in more sectors. More than 80% of the newly opened or modified investmentfields are in manufacturing, including 5G core components, semiconductors, chip making, and cloud computing. Foreign firms will be treated on an equal basis with Chinese companies when they enter industries outside the negative lists. “Shortening the negative list is by no means a forced move, but rather China's new effort to further pursue opening-up at a wider scope and to a deeperdegree," said Bai Ming, Deputy Director of the Ministry of Commerce's International Market Research Institute. Chinahas been routinely slashing the negative list governing foreign investment in recent years. In 2018, the country's catalogue covering investments appeared for the first time as a negative list, borrowing from similar approaches used in China's pilot free trade zones.

In the first five months this year, China's actual use of foreign direct investment in U.S. dollar-denominated terms increased 3.7% year-on-year to USD54.61 billion. U.S. investment in China was up 7.5%, the Global Times reports.

China also scrapped a list of recommended battery suppliers for electric cars, which did not includeforeign firms when it was first published in 2015. Because new energy vehicles equipped with batteries from companies on the list qualified for government subsidies, the list created favorable conditions for local Chinese battery makers and helped spur their growth over the past years. Local companies CATL and BYD have a combined 60% market share. International battery makers said they welcome the move. South Korean battery makers LG Chemand Samsung SDI have been increasing their investment inChina amid expectations for a gradual change in policy. LG Chem, the world’s fourth largest battery maker, announced in June its plans to build a USD188 million joint venture withChinese carmaker Geely. China is expected to abolish subsidies for electric vehicles (EVs) by the end of 2020.

Chinese government sets up Dajia Insurance totake over Anbang’s assets

The Chinese government has established a new insurerto take over the operations of Anbang Group, more than16 months after one of the country’s biggest asset buyers

NEWSLETTER 2 JULY 2019 6

spend CNY900 billion to CNY1.5 trillion on 5G network construction from 2020 to 2025, according to the China Academy of Information and Communications Technology. The Global System for Mobile Communications Associationpredicts that China will become the world’s largest 5G market by 2025, the China Daily reports.

China Mobile meanwhile released its first batch of 42 5G phones in Shanghai, which will be available in the market as early as this month. It also kicked off a self-branded 5G smartphone which will be available in August. Many 5G smartphones will debut in China at the end of this year, with a price of about CNY5,000 on average, Wang Hengjiang, Vice General Manager of China Mobile’s mobileend business, told Shanghai Daily. The price will be cut to CNY1,000 to CNY2,000 by the end of 2020. China is expected to invest USD184 billion on 5G by 2025, half of Asia’s total budget of USD370 billion. It is forecast that 28%of China’s mobile connections will be running on 5G networks by 2025, accounting for about a third of all 5G connections globally.

ADVERTISEMENT ANDSPONSORSHIP

Interested in advertisement in the FCCC Weekly or on the FCCC website? Send an e-mail to info@flanders-china.be

CHINA NEWS ROUND-UP

New shortened negative list for foreigninvestment published

China published a new, shortened negative list for foreign investment, cutting the items off limits to foreign investment from 48 down to 40. Seven major sectors, including shipping agencies, gas and heat pipelines in cities with more than 500,000 people, cinemas, value-added telecom services, and oil and gas exploration and development, saw ownership restrictions relaxed or removed. Jointly released by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM), the new negative list will become effective on July 30. A separate listgoverning foreign investment in China's free trade zones (FTZs), which enjoy a higher degree of openness, slashed restricted areas from 45 to 37. The NDRC also vowed to

scrap all remaining restrictions outside the negative list before the end of the year.

The negative list will provide a greater degree of market access and allow foreign investors to run majority-share joint ventures or wholly-owned businesses in more sectors. More than 80% of the newly opened or modified investmentfields are in manufacturing, including 5G core components, semiconductors, chip making, and cloud computing. Foreign firms will be treated on an equal basis with Chinese companies when they enter industries outside the negative lists. “Shortening the negative list is by no means a forced move, but rather China's new effort to further pursue opening-up at a wider scope and to a deeperdegree," said Bai Ming, Deputy Director of the Ministry of Commerce's International Market Research Institute. Chinahas been routinely slashing the negative list governing foreign investment in recent years. In 2018, the country's catalogue covering investments appeared for the first time as a negative list, borrowing from similar approaches used in China's pilot free trade zones.

In the first five months this year, China's actual use of foreign direct investment in U.S. dollar-denominated terms increased 3.7% year-on-year to USD54.61 billion. U.S. investment in China was up 7.5%, the Global Times reports.

China also scrapped a list of recommended battery suppliers for electric cars, which did not includeforeign firms when it was first published in 2015. Because new energy vehicles equipped with batteries from companies on the list qualified for government subsidies, the list created favorable conditions for local Chinese battery makers and helped spur their growth over the past years. Local companies CATL and BYD have a combined 60% market share. International battery makers said they welcome the move. South Korean battery makers LG Chemand Samsung SDI have been increasing their investment inChina amid expectations for a gradual change in policy. LG Chem, the world’s fourth largest battery maker, announced in June its plans to build a USD188 million joint venture withChinese carmaker Geely. China is expected to abolish subsidies for electric vehicles (EVs) by the end of 2020.

Chinese government sets up Dajia Insurance totake over Anbang’s assets

The Chinese government has established a new insurerto take over the operations of Anbang Group, more than16 months after one of the country’s biggest asset buyers

NEWSLETTER 2 JULY 2019 7

was put under state ward and Chairman Wu Xiaohui was jailed for fraud. Dajia Insurance Group was registered on June 25 in Beijing with CNY20.4 billion of capital put up by the same shareholders holding the same stakes as those ofAnbang. The move is the clearest sign that the China Banking and Insurance Regulatory Commission (CBIRC) is moving ahead to transfer Anbang’s business operations. The insurer, which began as a regional seller of car insurance founded by Wu Xiaohui in 1994, had CNY1.9 trillion in assets as of February 2017, before Wu’s arrest and conviction.

Dajia, which means “everyone” in Chinese, shares the same shareholding structure with Anbang. The China Insurance Security Fund, controlled by the Ministry of Finance, owns 98.2% of Dajia, exactly matching its stake inAnbang after a cash injection of CNY60.8 billion last April. China Petrochemical Corp owns 0.55% of Dajia, as it does in Anbang. Shanghai Automotive Industry Corp (SAIC) owns 1.2% in both insurers. Anbang was one of China’s most aggressive asset buyers, acquiring the Waldorf Astoria hotel in New York in 2014 for nearly USD2 billion, South Korea’s Tongyang Life for USD1 billion in 2015, and VIVAT insurer from the Dutch state for €700 million. Anbangalso entered a USD14 billion bidding war in 2016 for controlof Starwood Hotels and Resorts Worldwide, which was ultimately sold to Marriott Hotels International.

All the acquisitions ended in the summer of 2017, when China’s regulators and central bank put Anbang and several other asset buyers under intense scrutiny to force them to reduce their debts. Xiang Junbo was fired as Chairman of the China Insurance Regulatory Commission (CIRC), and the CIRC itself was absorbed by the China Banking Regulatory Commission (CBRC) to become the CBIRC, which took over management of Anbang until February 22, 2020. Anbang as a brand name may be eliminated in future. Founder Wu Xiaohui was sentenced to 18 years in prison for fundraising fraud, the South China Morning Post reports.

China to focus on developing crucial softwaredomestically

China will ramp up its push to achieve breakthroughs in crucial software, with a focus on encouragingfundamental theoretical innovation and promoting cross-sector cooperation, Miao Wei, Minister of Industry and Information Technology, said. The move comes as companies are placing growing emphasis on domestically developing crucial software as a backup plan in case

foreign products become unavailable. China will strengthen research on software engineering and fundamental computer algorithms to move up in the global industrial chain.

China’s software industry has made significant progress in recent years, but it still faces challenges, including the lack of globally competitive enterprises and structural shortages of talent. The nation’s software sector posted revenue growth of 14.8% year-on-year in the year’s first four months, according to the Ministry. The number of software copyright registrations exceeding 1.1 million in 2018. The Ministry will also promote international cooperation in software products and services, Minister Miao added.

Chen Zuoning, Vice President of the Chinese Academy of Engineering (CAE), said China has quite a fewbright spots in consumer software, such as the social networking mobile app WeChat. The development cycle for this type of software is relatively short, and China has the world’s largest market, which can fuel its growth. “But the country has a weak voice in industrial software, which requires long-term effort for fundamental and comprehensive research as well as hefty capital investment. We should have the determination to develop such software over years or decades,” Chen said. He also called for a greater research push on next-generation operating systems intended for artificial intelligence (AI) applications. “We need to consider how an operating system will function in the AI era. It can feel and recognize objects, be able to reason and make decisions. Within a certain scope, it will even be able to alter how it works by learning from what has happened,” Chen said.

Wang Yanhui, Secretary General of the Mobile China Alliance, said companies are placing greater emphasis on developing globally competitive homegrown software after the United States government restricted Huawei from using Google’s operating system in its mobile phones and that of Microsoft in its personal computers, the China Daily reports.

Industrial companies return to profit growth

The profit growth of China’s industrial companies returned to positive territory in May as sales quickened, with the private sector and high-tech manufacturers registering notable improvements, the National Bureau of Statistics (NBS) said. To cement the improving momentum of the economy, policymakers should strengthen countercyclical measures and keep pushing economic restructuring forward, analysts said. Major industrial

NEWSLETTER 2 JULY 2019 7

was put under state ward and Chairman Wu Xiaohui was jailed for fraud. Dajia Insurance Group was registered on June 25 in Beijing with CNY20.4 billion of capital put up by the same shareholders holding the same stakes as those ofAnbang. The move is the clearest sign that the China Banking and Insurance Regulatory Commission (CBIRC) is moving ahead to transfer Anbang’s business operations. The insurer, which began as a regional seller of car insurance founded by Wu Xiaohui in 1994, had CNY1.9 trillion in assets as of February 2017, before Wu’s arrest and conviction.

Dajia, which means “everyone” in Chinese, shares the same shareholding structure with Anbang. The China Insurance Security Fund, controlled by the Ministry of Finance, owns 98.2% of Dajia, exactly matching its stake inAnbang after a cash injection of CNY60.8 billion last April. China Petrochemical Corp owns 0.55% of Dajia, as it does in Anbang. Shanghai Automotive Industry Corp (SAIC) owns 1.2% in both insurers. Anbang was one of China’s most aggressive asset buyers, acquiring the Waldorf Astoria hotel in New York in 2014 for nearly USD2 billion, South Korea’s Tongyang Life for USD1 billion in 2015, and VIVAT insurer from the Dutch state for €700 million. Anbangalso entered a USD14 billion bidding war in 2016 for controlof Starwood Hotels and Resorts Worldwide, which was ultimately sold to Marriott Hotels International.

All the acquisitions ended in the summer of 2017, when China’s regulators and central bank put Anbang and several other asset buyers under intense scrutiny to force them to reduce their debts. Xiang Junbo was fired as Chairman of the China Insurance Regulatory Commission (CIRC), and the CIRC itself was absorbed by the China Banking Regulatory Commission (CBRC) to become the CBIRC, which took over management of Anbang until February 22, 2020. Anbang as a brand name may be eliminated in future. Founder Wu Xiaohui was sentenced to 18 years in prison for fundraising fraud, the South China Morning Post reports.

China to focus on developing crucial softwaredomestically

China will ramp up its push to achieve breakthroughs in crucial software, with a focus on encouragingfundamental theoretical innovation and promoting cross-sector cooperation, Miao Wei, Minister of Industry and Information Technology, said. The move comes as companies are placing growing emphasis on domestically developing crucial software as a backup plan in case

foreign products become unavailable. China will strengthen research on software engineering and fundamental computer algorithms to move up in the global industrial chain.

China’s software industry has made significant progress in recent years, but it still faces challenges, including the lack of globally competitive enterprises and structural shortages of talent. The nation’s software sector posted revenue growth of 14.8% year-on-year in the year’s first four months, according to the Ministry. The number of software copyright registrations exceeding 1.1 million in 2018. The Ministry will also promote international cooperation in software products and services, Minister Miao added.

Chen Zuoning, Vice President of the Chinese Academy of Engineering (CAE), said China has quite a fewbright spots in consumer software, such as the social networking mobile app WeChat. The development cycle for this type of software is relatively short, and China has the world’s largest market, which can fuel its growth. “But the country has a weak voice in industrial software, which requires long-term effort for fundamental and comprehensive research as well as hefty capital investment. We should have the determination to develop such software over years or decades,” Chen said. He also called for a greater research push on next-generation operating systems intended for artificial intelligence (AI) applications. “We need to consider how an operating system will function in the AI era. It can feel and recognize objects, be able to reason and make decisions. Within a certain scope, it will even be able to alter how it works by learning from what has happened,” Chen said.

Wang Yanhui, Secretary General of the Mobile China Alliance, said companies are placing greater emphasis on developing globally competitive homegrown software after the United States government restricted Huawei from using Google’s operating system in its mobile phones and that of Microsoft in its personal computers, the China Daily reports.

Industrial companies return to profit growth

The profit growth of China’s industrial companies returned to positive territory in May as sales quickened, with the private sector and high-tech manufacturers registering notable improvements, the National Bureau of Statistics (NBS) said. To cement the improving momentum of the economy, policymakers should strengthen countercyclical measures and keep pushing economic restructuring forward, analysts said. Major industrial

NEWSLETTER 2 JULY 2019 8

companies saw their total profits grow by 1.1% year-on-year in May, reversing a slide of 3.7% in April.

During the first five months, industrial profits totaled CNY2.38 trillion, down 2.3% year-on-year. “Sales growth quickened sharply in May, with industrial revenue up 5% from a year earlier, versus a decline of 0.7% in April,” NBS official Zhu Hong said. Profits of high-tech manufacturing industries were up 6.2% in May, versus a 15.1% decrease in April. Privately owned industrial companies recorded a 6.6% increase in profits during the January-May period. “Earnings picked up as macro policies to stabilize growth and corporations’ efforts to counter the impact of trade tensions took effect,” said Liu Chunsheng, Associate Professor at the Beijing-based Central University of Finance and Economics. Stimulus through tax and fee cuts came into play in May. According to Ministry of Finance data the value-added tax revenue dropped by about 20% year-on-year in May. Looking ahead, industrial profits may continue to be shored up by the nearly CNY2 trillion worth of tax and fee cuts and register full year growth of between 3% and 5%, according to a report from the Shanghai-basedEverbright Securities.

The Chinese economy is developing in a healthy and resilient way, with the transformation from old growth engines to new ones accelerating, but deeply rooted problems remain and external instabilities are on the rise, the People’s Bank of China (PBOC) said.

China’s largest drone-maker to assembleproducts in the U.S.

DJI, China’s largest drone-maker, plans to assemble drones in the U.S. and make high-security Government Edition drones to meet the increasing demand of the U.S. market, but the company has no intention of moving its production facilities out of China. Shenzhen-based DJI plans to repurpose a warehouse in Cerritos, California, to assemble a new version of a drone that has been popular among federal and local government agencies. The company's Mavic 2 Enterprise Dual drone is in high demand in North America, and it was developed in close cooperation with U.S. partners. Assembling the drone in theU.S. for domestic sales will bring significant business benefits, DJI said. Once it receives approval from U.S. authorities, DJI's first overseas assembly line will be built in California, also allowing more U.S. companies to provide components.

The production of the company's other products will remain in Shenzhen, DJI said. Establishing a U.S. assembly line had been discussed for a long time, and the development of the Government Edition drone began in 2017, the GlobalTimes reports. In May, the U.S. Department of Homeland Security issued an alert claiming Chinese-made drones may be sending sensitive flight data to Chinese manufacturers, which could be accessed by the Chinese government. DJI responded that its customers have full andcomplete control over how their data is collected, stored and transmitted.

The newly introduced Government Edition drone savesdata only on the drone itself, DJI said in a statement. It is specifically designed for use in high-security situations by government agencies around the world. There is no viable competitor to DJI. U.S. companies 3D Robotics and GoPro were rivals, but both withdrew from the consumer market due to fierce competition. DJI drones have been used to shoot scenes in many U.S. TV series and movies, includingGame of Thrones. The use of DJI drones was banned in the U.S. army in 2017, but the U.S. Air Force is still interested in procuring DJI's Mavic Pro Platinum drones because there is no comparable alternative, the Global Times reports.

FedExCorp apologizes for another Huaweidelivery “mistake”

FedEx has returned a package containing a Huawei phone due to an “operational error,” and the company said that it would deliver all products made by Huawei Technologies to addresses other than those of Huawei and affiliates placed on a U.S. national security blacklist. China’s Foreign Ministry asked for a full explanation as to why the U.S.-bound handset was returned to its sender, a Britain-based writer for U.S. publication PC Magazine, which later reported about the matter. The incident comes as Chinese authorities investigate FedEx for misrouting packages sent by Huawei last month. China is also drawing up an Unreliable Entities List of foreign firms, groups and individuals. The list mirrors the U.S. Entity List that Huawei was added to in May, essentially barring it from buying U.S.technology upon which it is reliant.

FedEx rival United Parcel Service also confirmed that it would not ship to Huawei addresses on the Entity List but had no “general ban” on Huawei products. A Huawei spokesman told Reuters that the Chinese firm was currentlynot using either FedEx or UPS services. Huawei tweeted it was not within FedEx’s right to prevent the delivery and

NEWSLETTER 2 JULY 2019 8

companies saw their total profits grow by 1.1% year-on-year in May, reversing a slide of 3.7% in April.

During the first five months, industrial profits totaled CNY2.38 trillion, down 2.3% year-on-year. “Sales growth quickened sharply in May, with industrial revenue up 5% from a year earlier, versus a decline of 0.7% in April,” NBS official Zhu Hong said. Profits of high-tech manufacturing industries were up 6.2% in May, versus a 15.1% decrease in April. Privately owned industrial companies recorded a 6.6% increase in profits during the January-May period. “Earnings picked up as macro policies to stabilize growth and corporations’ efforts to counter the impact of trade tensions took effect,” said Liu Chunsheng, Associate Professor at the Beijing-based Central University of Finance and Economics. Stimulus through tax and fee cuts came into play in May. According to Ministry of Finance data the value-added tax revenue dropped by about 20% year-on-year in May. Looking ahead, industrial profits may continue to be shored up by the nearly CNY2 trillion worth of tax and fee cuts and register full year growth of between 3% and 5%, according to a report from the Shanghai-basedEverbright Securities.

The Chinese economy is developing in a healthy and resilient way, with the transformation from old growth engines to new ones accelerating, but deeply rooted problems remain and external instabilities are on the rise, the People’s Bank of China (PBOC) said.

China’s largest drone-maker to assembleproducts in the U.S.

DJI, China’s largest drone-maker, plans to assemble drones in the U.S. and make high-security Government Edition drones to meet the increasing demand of the U.S. market, but the company has no intention of moving its production facilities out of China. Shenzhen-based DJI plans to repurpose a warehouse in Cerritos, California, to assemble a new version of a drone that has been popular among federal and local government agencies. The company's Mavic 2 Enterprise Dual drone is in high demand in North America, and it was developed in close cooperation with U.S. partners. Assembling the drone in theU.S. for domestic sales will bring significant business benefits, DJI said. Once it receives approval from U.S. authorities, DJI's first overseas assembly line will be built in California, also allowing more U.S. companies to provide components.

The production of the company's other products will remain in Shenzhen, DJI said. Establishing a U.S. assembly line had been discussed for a long time, and the development of the Government Edition drone began in 2017, the GlobalTimes reports. In May, the U.S. Department of Homeland Security issued an alert claiming Chinese-made drones may be sending sensitive flight data to Chinese manufacturers, which could be accessed by the Chinese government. DJI responded that its customers have full andcomplete control over how their data is collected, stored and transmitted.

The newly introduced Government Edition drone savesdata only on the drone itself, DJI said in a statement. It is specifically designed for use in high-security situations by government agencies around the world. There is no viable competitor to DJI. U.S. companies 3D Robotics and GoPro were rivals, but both withdrew from the consumer market due to fierce competition. DJI drones have been used to shoot scenes in many U.S. TV series and movies, includingGame of Thrones. The use of DJI drones was banned in the U.S. army in 2017, but the U.S. Air Force is still interested in procuring DJI's Mavic Pro Platinum drones because there is no comparable alternative, the Global Times reports.

FedExCorp apologizes for another Huaweidelivery “mistake”

FedEx has returned a package containing a Huawei phone due to an “operational error,” and the company said that it would deliver all products made by Huawei Technologies to addresses other than those of Huawei and affiliates placed on a U.S. national security blacklist. China’s Foreign Ministry asked for a full explanation as to why the U.S.-bound handset was returned to its sender, a Britain-based writer for U.S. publication PC Magazine, which later reported about the matter. The incident comes as Chinese authorities investigate FedEx for misrouting packages sent by Huawei last month. China is also drawing up an Unreliable Entities List of foreign firms, groups and individuals. The list mirrors the U.S. Entity List that Huawei was added to in May, essentially barring it from buying U.S.technology upon which it is reliant.

FedEx rival United Parcel Service also confirmed that it would not ship to Huawei addresses on the Entity List but had no “general ban” on Huawei products. A Huawei spokesman told Reuters that the Chinese firm was currentlynot using either FedEx or UPS services. Huawei tweeted it was not within FedEx’s right to prevent the delivery and

NEWSLETTER 2 JULY 2019 9

said the courier was engaged in a “vendetta.” The latest incident sparked renewed criticism of FedEx on Chinese social media, with the topic “FedEx apologizes again” trending on Weibo, China’s Twitter-like microblog platform, the Shanghai Daily reports.

FedEx also filed a lawsuit against the U.S. Commerce Department over rules on exports, as the company is unable to monitor hundreds of thousands of shipments for regulatory violations, CEO and Chairman Fred Smith, said. FedEx said in a statement that the Export Administration Regulations (EAR) “violate common carriers' rights” and poses “impossible burdens on common carriers like FedEx,which is a transportation company, not a law enforcement agency,” it said. FedEx’s filing said that the U.S. Department of Commerce's restrictions “essentially deputize FedEx to police the content of the millions of packages it ships daily even though doing so is a virtually impossible task, logistically, economically, and in many cases, legally.” The lawsuit did not mention the Huawei incidents specifically.

On the other hand, FedEx also stated that it ”strongly supports the objectives of U.S. export control laws.” The lawsuit shows the U.S. firm's strong desire to repair its damaged reputation with Chinese consumers, Analyst Mei Xinyu told the Global Times. U.S. carrier companies such as FedEx are now caught between a rock and a hard place,experts said, noting that on the one hand, as a U.S. company, they are obliged to obey U.S. regulations, but on the other hand, obeying U.S. regulations could ruin their business reputation with global clients. FedEx could be the first U.S. firm to be added on China's unreliable entity list.

Carrefour sells 80% in its China unit to Suning

French supermarket firm Carrefour has become the latest foreign retailer to either retreat from China or sell their Chinese operations to local companies, as they continue to lose ground in the fast-changing and increasingly competitive Chinese market. Carrefour Nederland has agreed to sell an 80% stake in its China unit, Carrefour China Holdings, to Suning International Group Co, a unit of Chinese retailer Suning.com, for CNY4.8 billion, according to a filing to the Shenzhen Stock Exchange. Foreign retailers are quickly losing market share in China as local competitors rise, which highlights the need for foreign companies to rethink their strategy in China, as the country continues to open up its massive market, analysts said.

The transaction is expected to be completed by the end of the year as Carrefour China, which operates 210 hypermarkets and 24 convenience stores, has seen a sharp decline in sales. In 2018, sales were down almost 10% year-on-year to €3.6 billion. Carrefour China's majoritystake sale follows other foreign supermarkets that have pulled out from China, such as Tesco from the UK and LotteMart from South Korea. Other retailers have sought local partnerships, like Walmart, which teamed up with Chinese internet firm Tencent in 2018.

The troubles of foreign retailers in China stem from their failure to adjust their business strategies to the fast-changing trends in the Chinese market, where consumers increasingly turn to online shopping platforms, rather than brick-and-mortar stores, for their daily needs. “Online stores deliver to your door step. Who would want togo to the store in the summer heat?,” Jiang Yuanrui, a Beijing resident, told the Global Times. "It's more cost-effective to shop online.” Online retail sales in China grew 25.4% year-on-year to over CNY7 trillion in 2018, accounting for 45.2% of China's total sales of consumer goods for the year, the Global Times reports.

Upscale Japanese department store Takashimaya will close its sole China outlet in Shanghai in August. Shanghai Takashimaya occupies 60,000 square meters of floor space over seven stories near the city’s Hongqiao airport. “Rapid changes in the consumption structure and fierce industry competition have exceeded our expectations,” said the Osaka-based retailer. “The future store operation would be very hard. Due to these circumstances, we have decided to close the business.” The department store had been operating a mere seven years in China. Takashimaya owns 19 department stores in Japan and has overseas outlets in Singapore, Thailand andVietnam. Earlier, U.S. department store operator Macy’s and UK’s Marks & Spencer both pulled out of China, while Germany’s Metro is also said to be offloading a majority stake in its Chinese businesses.

NEWSLETTER 2 JULY 2019 9

said the courier was engaged in a “vendetta.” The latest incident sparked renewed criticism of FedEx on Chinese social media, with the topic “FedEx apologizes again” trending on Weibo, China’s Twitter-like microblog platform, the Shanghai Daily reports.

FedEx also filed a lawsuit against the U.S. Commerce Department over rules on exports, as the company is unable to monitor hundreds of thousands of shipments for regulatory violations, CEO and Chairman Fred Smith, said. FedEx said in a statement that the Export Administration Regulations (EAR) “violate common carriers' rights” and poses “impossible burdens on common carriers like FedEx,which is a transportation company, not a law enforcement agency,” it said. FedEx’s filing said that the U.S. Department of Commerce's restrictions “essentially deputize FedEx to police the content of the millions of packages it ships daily even though doing so is a virtually impossible task, logistically, economically, and in many cases, legally.” The lawsuit did not mention the Huawei incidents specifically.

On the other hand, FedEx also stated that it ”strongly supports the objectives of U.S. export control laws.” The lawsuit shows the U.S. firm's strong desire to repair its damaged reputation with Chinese consumers, Analyst Mei Xinyu told the Global Times. U.S. carrier companies such as FedEx are now caught between a rock and a hard place,experts said, noting that on the one hand, as a U.S. company, they are obliged to obey U.S. regulations, but on the other hand, obeying U.S. regulations could ruin their business reputation with global clients. FedEx could be the first U.S. firm to be added on China's unreliable entity list.

Carrefour sells 80% in its China unit to Suning

French supermarket firm Carrefour has become the latest foreign retailer to either retreat from China or sell their Chinese operations to local companies, as they continue to lose ground in the fast-changing and increasingly competitive Chinese market. Carrefour Nederland has agreed to sell an 80% stake in its China unit, Carrefour China Holdings, to Suning International Group Co, a unit of Chinese retailer Suning.com, for CNY4.8 billion, according to a filing to the Shenzhen Stock Exchange. Foreign retailers are quickly losing market share in China as local competitors rise, which highlights the need for foreign companies to rethink their strategy in China, as the country continues to open up its massive market, analysts said.

The transaction is expected to be completed by the end of the year as Carrefour China, which operates 210 hypermarkets and 24 convenience stores, has seen a sharp decline in sales. In 2018, sales were down almost 10% year-on-year to €3.6 billion. Carrefour China's majoritystake sale follows other foreign supermarkets that have pulled out from China, such as Tesco from the UK and LotteMart from South Korea. Other retailers have sought local partnerships, like Walmart, which teamed up with Chinese internet firm Tencent in 2018.

The troubles of foreign retailers in China stem from their failure to adjust their business strategies to the fast-changing trends in the Chinese market, where consumers increasingly turn to online shopping platforms, rather than brick-and-mortar stores, for their daily needs. “Online stores deliver to your door step. Who would want togo to the store in the summer heat?,” Jiang Yuanrui, a Beijing resident, told the Global Times. "It's more cost-effective to shop online.” Online retail sales in China grew 25.4% year-on-year to over CNY7 trillion in 2018, accounting for 45.2% of China's total sales of consumer goods for the year, the Global Times reports.

Upscale Japanese department store Takashimaya will close its sole China outlet in Shanghai in August. Shanghai Takashimaya occupies 60,000 square meters of floor space over seven stories near the city’s Hongqiao airport. “Rapid changes in the consumption structure and fierce industry competition have exceeded our expectations,” said the Osaka-based retailer. “The future store operation would be very hard. Due to these circumstances, we have decided to close the business.” The department store had been operating a mere seven years in China. Takashimaya owns 19 department stores in Japan and has overseas outlets in Singapore, Thailand andVietnam. Earlier, U.S. department store operator Macy’s and UK’s Marks & Spencer both pulled out of China, while Germany’s Metro is also said to be offloading a majority stake in its Chinese businesses.

NEWSLETTER 2 JULY 2019 10

Your banner at the FCCC website or newsletter

Companies interested in posting a banner/an advertisement on the FCCC website or FCCC weekly newsletter are kindly invited to contact the FCCC at: info@flanders-china.be

Organisation and founding members of the Flanders-China Chamber of Commerce

Chairman: Mr. Stefaan Vanhooren, President Agfa Graphics, Member of the Executive Committee of the Agfa Gevaert Group, NV THE AGFA-GEVAERT GROUP SAVice-Chairmen: Mr. Bart De Smet, Chief Executive Officer, NV AGEAS SAMr. Philippe Van der Donckt, Director Government Affairs Asia, NV UMICORE SASecretary and Treasurer: Wim Eraly, Senior General Manager, NV KBC Bank SAExecutive Director: Ms. Gwenn Sonck

Members of the Board of Directors and Founding Members:Mr. Stefaan Vanhooren, President Agfa Graphics, Member of the Executive Committee of the Agfa Gevaert Group, NV THE AGFA-GEVAERT GROUP SAMr. Christian Leysen, Executive Chairman, NV AHLERS SAMr. Filip Pintelon, Senior Vice President, GM Healthcare, NV BARCO SAMr. Philip Eyskens, Senior Vice President Legal, IT and M&A, NV BEKAERT SAMr. Philip Hermans, General Manager, NV DEME SAMr. Bart De Smet, Chief Executive Officer, NV AGEAS SAMr. Wim Eraly, Senior General Manager, KBC Bank SAMr. Johan Verstraete, Vice-President Marketing, Sales & Services Weaving Solutions, NV PICANOL SAMr. Philippe Van der Donckt, Director Government Affairs Asia, NV UMICORE SA

Membership rates for 2019 (excl. VAT)

● SMEs: €405 (€490.05 incl. VAT)● Large enterprises: €1,025 (€1,240.25 incl. VAT)

Contact

Flanders-China Chamber of CommerceOffice: Ajuinlei 1, B-9000 Gent – Belgium New telephone and fax numbers: Tel.: +32/9/269.52.46 – Fax: ++32/9/269.52.99E-mail: info@flanders-china.be Website: www.flanders-china.be

Share your story

To send your input for publication in a future newsletter mailto: info@flanders-china.be

The FCCC Newsletters are edited by Michel Lens, who is based in Beijing and can be contacted by e-mail michel.jc.lens@gmail.com . Disclaimer: the views expressed in this newsletter are not necessarily those of the FCCC or its Board of Directors.

NEWSLETTER 2 JULY 2019 10

Your banner at the FCCC website or newsletter

Companies interested in posting a banner/an advertisement on the FCCC website or FCCC weekly newsletter are kindly invited to contact the FCCC at: info@flanders-china.be

Organisation and founding members of the Flanders-China Chamber of Commerce

Chairman: Mr. Stefaan Vanhooren, President Agfa Graphics, Member of the Executive Committee of the Agfa Gevaert Group, NV THE AGFA-GEVAERT GROUP SAVice-Chairmen: Mr. Bart De Smet, Chief Executive Officer, NV AGEAS SAMr. Philippe Van der Donckt, Director Government Affairs Asia, NV UMICORE SASecretary and Treasurer: Wim Eraly, Senior General Manager, NV KBC Bank SAExecutive Director: Ms. Gwenn Sonck

Members of the Board of Directors and Founding Members:Mr. Stefaan Vanhooren, President Agfa Graphics, Member of the Executive Committee of the Agfa Gevaert Group, NV THE AGFA-GEVAERT GROUP SAMr. Christian Leysen, Executive Chairman, NV AHLERS SAMr. Filip Pintelon, Senior Vice President, GM Healthcare, NV BARCO SAMr. Philip Eyskens, Senior Vice President Legal, IT and M&A, NV BEKAERT SAMr. Philip Hermans, General Manager, NV DEME SAMr. Bart De Smet, Chief Executive Officer, NV AGEAS SAMr. Wim Eraly, Senior General Manager, KBC Bank SAMr. Johan Verstraete, Vice-President Marketing, Sales & Services Weaving Solutions, NV PICANOL SAMr. Philippe Van der Donckt, Director Government Affairs Asia, NV UMICORE SA

Membership rates for 2019 (excl. VAT)

● SMEs: €405 (€490.05 incl. VAT)● Large enterprises: €1,025 (€1,240.25 incl. VAT)

Contact

Flanders-China Chamber of CommerceOffice: Ajuinlei 1, B-9000 Gent – Belgium New telephone and fax numbers: Tel.: +32/9/269.52.46 – Fax: ++32/9/269.52.99E-mail: info@flanders-china.be Website: www.flanders-china.be

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The FCCC Newsletters are edited by Michel Lens, who is based in Beijing and can be contacted by e-mail michel.jc.lens@gmail.com . Disclaimer: the views expressed in this newsletter are not necessarily those of the FCCC or its Board of Directors.