Shanghai's existing housing index rose for another month in February, albeit at a slower pace.
The index, which checks price changes of pre-owned homes across the city, rose 2 points, or 0.06 percent, to 2,943 points last month, extending gains for the 21st straight month, the Shanghai Existing House Index Office said yesterday.
In January the index rose 0.26 percent, and 0.63 percent in December.
Citywide, the pre-owned home prices climbed in 49 of the 130 areas monitored by the office while 31 saw a decline. Prices were flat in the remaining 50 areas, the office said.
Nation's largest search engine ready to shift toward new platforms
Baidu Inc, China's largest online search company, is working to develop new products that can replace the search engine to become its most recognized gateway in the mobile Internet era, said Robin Li, the company's chief executive officer.
Li didn't elaborate on the new products but said that last year Baidu spent about 4 billion yuan on research and development. Most of it, he said, was used to develop products that will be as vital to the mobile era as the search engine has been in the personal computer-based one.
"If we had only wanted to maintain our leading position in search, we would have spent only about 20 percent of that amount on R&D," said the 45-old-year Li, who, with a net worth of $12.1 billion, is ranked the third-richest man on the Chinese mainland, according to the latest world's billionaires list from Forbes.
Li shared his vision about innovation and the Internet in an interview with China Central Television on the sidelines of the annual session of the National Committee of the Chinese People's Political Consultative Conference.
He said his Beijing-based company's main competitor is the changing Internet landscape in China, where more than 500 million out of the roughly 600 million Internet users in the country have access to the Internet through mobile phones.
"In the PC era, the search engine was the sole gateway for people to find information on the Internet. But now the channels to gain access are diverse. People have various applications on their smartphones to meet different kinds of demands," he said.
In order to move quickly in the rapidly changing market, Baidu last August bought app store 91 Wireless for $1.9 billion and picked up 59 percent of group-buying website Nuomi the same month. The company moved to gain full control of Nuomi earlier this year.
The US-listed company saw its investment pay off, as mobile accounted for more than 20 percent of Baidu's total revenues in the fourth quarter of last year, the company said in an unaudited 2013 finance report released at the end of February. Apart from shifting to mobile, Li sees opportunities ahead because the Internet has revolutionized many traditional sectors, from retail to finance.
China's online shopping market has grown rapidly to become the world's largest. Many Internet companies, including Baidu, launched financial services last year to offer users better returns than typical bank deposits in a convenient format.
"I don't know much about finance," Li said. "What we do here is to use Internet thinking to improve the efficiency of traditional finance, to simplify purchasing procedures and give better user experience," he added.
Li said that in the future, there will be no dedicated Internet companies, "because every company will somehow embrace the Internet in some way".
Li's self-made Baidu has become involved in finance, online video, tourism and publishing. He said it will certainly expand into new sectors.
"With Internet thinking, there is a lot of room in terms of efficiency improvement in healthcare and education," he said.
With more than 277 million users worldwide, LinkedIn (NYSE: LNKD ) is not only the largest professional social network, it is also one of the best-monetized websites ever created. Unlike Facebook (NASDAQ: FB ) or Google, which mainly rely on advertisements to generate revenue, LinkedIn obtains revenue from its users through advertising, premium memberships, and human resources solutions.
However, despite being one of the best-monetized websites, it is becoming increasingly difficult for LinkedIn to continue growing. In the fourth quarter of 2013, revenue came in at $447 million, up 47%. That being said, management predicted revenue of $455 million-$460 million for this quarter, well below the Street consensus. The company's projections raised worries that it may be starting to have trouble mining its audience for more revenue. At the same time, the company added only 18 million accounts in the fourth quarter, which barely matched the average of additional accounts that LinkedIn has gained in the previous quarters. To improve revenue and user metrics, the company recently announced the introduction of a Chinese-language website. Can LinkedIn succeed in China?
A great opportunity
LinkedIn will be offering a localized version of its website, after more than a decade of having an English-language site there. The company will also be establishing a joint venture with top private equity firms China Broadband Capital and Sequoia China, to attempt to connect more than 140 million Chinese professionals.
Without any doubt, China represents a huge business opportunity for LinkedIn, which already has more than 4 million members in the world's second-largest economy. With a labor force of more than 800 million people, China also has a huge population of active Internet users. Most companies in China still do not use LinkedIn or similar alternatives as recruiting tools, but this could change if LinkedIn succeeds in registering enough users.
Note that LinkedIn will become one of the few U.S. social networks with direct exposure to China. Facebook, the largest social network, recently reported revenue of $2.59 billion for the fourth quarter of 2013, an increase of 55%, year over year. However, it has no official presence in China. Eventually, this will become a big problem for the company, which already has more than 1 billion registered users.
Several challenges ahead
LinkedIn will have to compete against several social networks that are already present in the Chinese market. Tianji, a networking site owned by Viadeo, has more than 15 million users in China, where it has been in the market since 2005. Tianji is popular due to some highly social features, like the ability to invite friends and colleagues to evaluate themselves using a Myers-Briggs-type online personality test.
Ushi is an important competitor that released an invitation-only platform in 2010. The company raised $1.5 million in a first round of funding, and has several chief executives registered in its user base. Ushi, which monetizes its site by charging for some premium features, has a deep understanding of Chinese business customs. Before the release, the team spent months in face-to-face meetings with several top executives and business leaders in order to convince them to become early members. This allowed Ushi to become an exclusive hub for elite professionals at an early stage.
On top of competition, LinkedIn will have to comply with several local rules in order to remain online. Complex regulations in China are a reason for the absence of U.S. social media companies in the world's second-largest economy. Facebook has been blocked by firewalls since mid-2009.
Final Foolish takeaway
LinkedIn, the largest social network oriented to professionals, will release a localized version of its website for the Chinese market. This is a privilege, and LinkedIn will become one of the few U.S. social media companies with direct exposure to China. However, there are several challenges ahead, including fierce competition from local competitors like Tianji and Ushi. To succeed in this market, LinkedIn will need to adopt a growth strategy based on a deep understanding of Chinese business customs.
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A Chinese young woman has become the youngest billionaire in Forbes magazine's latest annual billionaire list 2014 which was unveiled on Monday (US Time).
Twenty four-year-old Perenna Kei Hoi Ting is a newcomer to the list, replacing former Facebook co-founder Dustin Moskovitz as the youngest billionaire.
Hailing from Hong Kong, Kei owns an 85 percent stake in Shenzhen-based Logan Property Holdings through various companies and a family trust.
Her father, Ji Haipeng, is chairman and CEO of the Hong Kong Stock Exchange-listed company, which went public in December 2013.
China will not ban web-based financial products like Yu'E Bao, but will strengthen regulation to guide the healthy growth of Internet finance, China's central bank officials said Tuesday.[Special coverage]
With this reassurance, made four times in one day on different occasions by three top central bankers, the dust seemed to have settled following months-long debate about the fate of popular Internet financial products.
The emergence of Yu'E Bao and its peers has brought joy for millions but also unnerved many. Whether authorities should step in to regulate the burgeoning Internet finance has been a widely watched topic as China's lawmakers and political advisors gather this week in Beijing to discuss the country's social and economic policies.
Internet financial products like money market fund Yu'E Bao, created by e-commerce giant Alibaba, have been instant hits among the Chinese public.
Chinese people have pulled money from traditional banks, which offer a maximum 3.3 percent interest rate for one-year deposits, and moved it to web-based money market funds like Yu'E Bao, which offers a seven-day annualized yield of nearly 6 percent.
The better interest rate enabled Yu'E Bao to attract 81 million users with aggregate deposits estimated at around 500 billion yuan (81 billion U.S. dollars) in just eight months.
Big banks are not happy. At a time when China's liquidity is generally tight, such a big migration of money has eaten up much of their profits.
Yu'E Bao and its peers have quickly been labeled "blood suckers" by commentators, while the public has seen the banks and their low rates as miserly.
Rounds of tit-for-tat between the two sides showed no signs of abating until the authorities weighed in on Tuesday.
China will not ban Internet finance, but will improve regulations in the area, said Zhou Xiaochuan, governor of the central bank.
"China encourages technological applications in the financial sphere," he said.
"Improvements must be made in existing policies, supervision and regulation as they cannot cope with new things such as Internet finance and guide its healthy development," said Zhou.
Internet finance encourages innovation and development, and what it needs is improved and coordinated supervision, said Pan Gongsheng, a vice governor of the central bank.
Despite being supportive of innovative financial products like Yu'E Bao, the central bank will take "appropriate measures" to prevent possible risks arising from the sector, said Yi Gang, another vice governor of the central bank.
Yi said the central bank will closely watch market changes to prevent possible risks while warning investors to be more cautious in their choices.
It seems that David has gotten the better of Goliath again, at least for now.
PROFITS VS. RISKS
Financial innovations like Yu'E Bao are nimble and attractive, but economic pundits have warned that they are not risk-free and should be regulated to avoid any adverse effect on the general economy.
China International Capital Corporation, China's largest investment bank, said in its latest research note that Yu'E Bao has placed 92 percent of its assets in interbank deposits and used the different terms of maturity between investors to reap high interests.
However, such Web-based money funds may face huge risks, warned Lyu Suiqi, deputy dean of the finance department at Peking University.
"As the assets of Internet finance products like Yu'e Bao increase, so will their liquidity management pressure," Lyu said, adding that such money funds rely too much on interbank deposits for high interest.
Their ability to bargain with traditional banks will weaken as market liquidity improves and more competitors enter the race, he said.
Millions of investors woke up on Tuesday to find the seven-day annualized interest of Yu'e Bao eased to 5.93 percent, the lowest level since December.
"The biggest problem for the development of Internet finance is default risks that might inflate within a short period of time," said Li Daokui, an economist and member of the National Committee of the Chinese People's Political Consultative Congress, the top political advisory body.
That said, there is no reason to throw the golden baby out with the bath water if a little amount of regulation will nurture financial innovations for maximum benefit to the Chinese economy.
Not only do these new products offer a sign of hope for individual savers, but they have assisted micro businesses and spurred China's interest rate reform.
"The public is more concerned about what real changes Yu'e Bao could bring to the financial monopoly," said Xu Xuelan, secretary-general of the Chinese Institute of Electronics. "We are expecting much more reform resolve and action in this regard."
Higher mortgage rates, concern over impact of tax reduce volume of transactions as year gets underway
Experts say there are signs of cooling in the Chinese property market after a decade of growth, with the transaction volume starting to fall and mortgage rates rising nationwide.
Jia Kang, head of the Institute for Fiscal Science Research under the Ministry of Finance, said China's housing market also showed signs of a differentiation in prices in January, which may lead to a price slump in second- and third-tier cities, although prices in Beijing and Shanghai are likely to maintain their current level.
"Although precisely how the trend in differentiation will develop is yet to be seen, second- and third-tier cities will be more vulnerable than Beijing and Shanghai during this round of market fluctuation," he said on the sidelines of a news conference of the Hainan-based China Institute for Reform and Development in Beijing on Friday.
Jia advised investors to take care when making investment decisions.
China's real estate sector showed signs of cooling at the beginning of 2014, with most of the nation's cities recording falling transactions on both a yearly and monthly basis. Prior to that, the Chinese property market witnessed 12 years of sustained growth.
According to the real estate research institute China Real Estate Information Corp, shrinking supply and tightened mortgages played important parts in the drop in the number of transactions.
Li Wei, head of the Development Research Center of the State Council, said in a recent speech on the Chinese economy that new home construction may be slashed given the high stockpiles of homes in third- and fourth-tier cities, where supply has exceeded demand.
Li's team previously concluded in a report that housing demand will increase at a much slower pace after 2012 and demand will continue to slide under raised mortgage rates and an upcoming property tax.
Li warned about an "important change" expected to take place in China's property market after its breathtaking growth of more than a decade.
A declining market outlook was also linked by some experts to rising mortgage rates, with nearly 90 percent of 69 bank branches in 22 Chinese cities no longer offering preferential mortgage rates to first-home buyers, according to the China Real Estate Information Corp.
"We have to watch closely the trend of price differentiation in different cities, take precautions and note the role of the government in real estate control," he said, adding he believes it is highly unlikely China's property market can maintain the rises it witnessed in previous years because the environment for industrial development and the inner drive for expansion have both been altered.
Jia, from the finance institute, suggested speeding up legislation regarding property tax because more people are looking forward to the government expanding its trial to regulate the market.
In the two cities where property tax has been levied as a pilot program since 2011, individuals in Shanghai are taxed at a rate of 0.4 percent or 0.6 percent of the total price of their property annually if the housing area for each person exceeds 60 square meters. In Chongqing - the other trial city - the tax is levied only on high-end properties, such as villas, at a rate between 0.5 percent to 1.2 percent of the property price on an annual basis.
"We have to be prudent about bringing more cities into the trial and be especially cautious when drawing a watershed between homes where a tax is beneficial and those in which it isn't. Any expansion of the trial should be aimed at regulating the high-end property market, instead of levying taxes on all properties alike," he said.
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