Recruiting in China

A Bank of China branch in Yichang, Hubei province. China's top five banks will raise 128 billion yuan ($20.8 billion) over a two-week period.

China's top five banks will raise 128 billion yuan ($20.8 billion) in a two-week bond offering spree following a yearlong hiatus, as regulators signal a willingness for lenders to aggressively tap fixed-income markets.

The country's banking regulator began phasing in new higher capital adequacy requirements last year, in line with global rules known as Basel III, and aggressive implementation of the third Basel accord is a key element of China's plan to fortify banks against risks from a slowing economy.

China Construction Bank Corp and Agricultural Bank of China Ltd, the country's second and third-largest banks, respectively, have announced plans to raise 50 billion yuan worth of Basel III-compliant Tier 2 capital via domestic bond issues on Friday.

Bank of Communications Co Ltd, the country's fifth-biggest lender, plans to raise 28 billion yuan on Monday.

The issues follow two large offerings last week, the first from the country's top five banks since early 2013 and China's transition to Basel III.

Industrial and Commercial Bank of China Ltd and Bank of China, the country's largest and fourth-largest lenders, together offered 50 billion yuan of bonds last week.

The flurry of offerings shows Chinese regulators have signed off on the giant deals despite their potential drain on market liquidity, and are comfortable with the new Basel III-compliant bond structure, sources told IFR Asia, a Thomson Reuters publication.

China's economy showed further signs of softening in July despite a burst of government stimulus measures, and banks have tightened lending to risky areas such as the property sector.

The government embarked on a massive credit-fueled economic stimulus program from 2008 to 2010 to pull the economy through the global financial crisis. Many analysts expect a large portion of bank loans extended during that time to turn sour.

The fundraising spree still leaves China's top lenders lagging regional counterparts.

Asian banks (excluding Japan and Australia) have raised more than $32 billion in Basel III compliant securities to date, which includes $26 billion issued in 2014, in local and international markets, according to Moody's data.

Steven Chan, a banking analyst at Maybank Kim Eng, a Singapore-based research firm said the amount being raised was small viewed against the assets of China's top lenders. "It's very small compared with the trillions of assets," he said.

China's big State-owned banks have announced plans to raise $43.5 billion in on- and offshore Tier 2 capital by the end of 2015.

Agricultural Bank of China plans to sell 50 billion yuan of Tier 2 securities, Bank of Communications is in for 40 billion yuan and China Construction Bank for 60 billion yuan. ICBC is eyeing a total of 60 billion yuan, while Bank of China will make a play for the same.

All that makes for a total of 270 billion yuan in Basel III compliant bonds that will hit the market - more than from any other single country.

Lenders are issuing to replace old-style Tier 2 bonds that are about to mature and hold yields down, Chan said.

"If you don't repay bondholders, the yield will increase automatically, so the best way is to issue bonds at a similar or lower rate to repay the earlier one."

A total of 93 billion yuan of subordinated bonds from China's commercial banks will mature next year, according to China Central Depository & Clearing, a State-owned clearinghouse for onshore bonds.

Beijing home sales fell at a slightly slower pace in the Jan.-July period as price declines drove potential home buyers to snap up bargains last month.

Real estate developers in the city sold 5.05 million square meters of housing during the first seven months of this year, down 30.3 percent year on year, the municipal bureau of statistics said in a statement Thursday. The decline for the first half of the year was 35.2 percent.

Housing starts edged 3.8 percent lower to 8.04 million square meters against the backdrop of a gloomy property market.

Sales of commercial buildings, which include residential and commercial property, fell 31.5 percent, compared with 34.8 percent for the first half. The sales reached 6.77 million square meters, it said.

China's property market remains weak prompting dozens of cities nationwide to lift three-year-old purchase limits in a bid to revive sales and boost the economy.

Nationwide, property sales witnessed a steeper decline in the Jan.-July period. Sales in terms of floor area dropped 7.6 percent year on year, 1.6 percentage points higher than the decline seen in the first half.

Mobile platforms continue to give a lift to Internet company's portfolio

Tencent Holdings Ltd, China's largest listed Internet company, reported strong quarterly earnings on Wednesday as the company further deepened mobile engagement across its social, gaming and media platforms.

Net profit for the quarter ending in June jumped 58 percent year-on-year to 5.83 billion yuan ($947 million). Revenue in the quarter climbed 37 percent to 19.75 billion yuan.

The solid performance in the second quarter beat analysts' estimates of 5.73 billion yuan in revenue, a Reuters report said.

Ma Huateng, chairman and chief executive officer of Tencent, said in a statement that the company's ecosystem continues to expand as it pursues the strategy of working with category leaders, including NavInfo, a mapping service provider, and 58.com, a local listing platform.

"We are seeing the benefits of this approach, as evidenced in the successful listing of JD.com. Looking forward, we will continue to grow our platform, invest in areas such as online-to-offline business and content production, and enhance our user experience," he said.

The Shenzhen-based Tencent seems to have succeeded in integrating its social networking tools, such as mobile messaging tools mobile QQ and WeChat, with companies in which it invests, such as JD.com Inc, China's largest online direct sales platform.

Tencent, which has engaged in a buying spree along with e-commerce conglomerate Alibaba Group Holding Ltd since late last year, has made a lot of investments, including taking a 15 percent stake in JD.com in March.

Through connecting its core social capabilities with JD.com, users of Tencent's WeChat, a dominant mobile social tool in China, can purchase directly from the e-commerce giant through a direct access point on the app. Tencent said that the combined monthly active users of WeChat, both in and outside China, increased by 57 percent year-on-year to 438 million by the end of June.

Neil Flynn, head equity analyst at chineseinvestors.com, a leading analysis firm for US-listed Chinese companies, said a year-on-year profit growth of 58 percent was very impressive given the size of Tencent.

The Beijing-based Baidu Inc also reported a net income that beat analysts' estimates in the second quarter in late July. The search giant saw its net income grow by about 34 percent year-on-year to 3.55 billion yuan in the quarter that ended in June, fueled by strong growth in mobile applications.

"Out of China's big three tech firms, Tencent has a major advantage over Alibaba and Baidu because it has the WeChat messaging platform, which is simply untouchable," said Flynn, who has followed China's Internet sector for years.

Alibaba last year tried to launch a similar service called Laiwang, but it just could not compete.

"What we are seeing is that Tencent is adding more and more features to its platforms, such as a permanent link to JD.com, so that users never have to leave the Tencent ecosystem," Flynn said. "I think we will continue to see more of these features because Tencent can help other firms get greater exposure to customers through its QQ and WeChat platforms.

"WeChat will essentially become a portal for users where they can not only message friends but also shop and play games. From this, we will see stronger advertising revenues because advertisements can be personalized for each user," he said.

Tencent reported that its online advertising business increased by 75 percent quarter-on-quarter to 2.06 billion yuan in the second quarter. The company's financial report noted that "this primarily reflected more favorable seasonality in the second quarter, as well as the positive impact of the FIFA World Cup and our strategic cooperation with JD.com."

The Chinese government on Wednesday unveiled measures to develop the insurance industry, vowing to raise premium incomes to 5 percent of GDP by 2020.

The package, announced on the State Council website, let the insurance industry play a bigger role in the fledgling social security network.

The second of its kind since 2006, the package could see citizens paying an average of 3,500 yuan (565 U.S. dollars) per capita in premiums by 2020.

Commercial insurance will become the primary undertaker of individual and household programs and an important supplier of corporate pensions and health insurance.

The insurance will be given a bigger role in the prevention and relief of disasters and accidents through the introduction of catastrophe insurance products.

Insurance funds will be encouraged to invest in bonds and equities to support major infrastructure projects, urban renewal and urbanization.

The government will encourage the house-for-pension insurance experiment and launch a pilot program to introduce compulsory insurance for environmental pollution, food safety, medical accidents and campus safety.

Zhao Xianghuai, an analyst with Guotai Junan Securities, believes the package will open more space for China's insurance industry, which had a total assets worth 9.4 trillion yuan by the end of June this year.

"The package has elevated the position of the insurance industry and created new room for development," Zhao said.

Boosted by the announcement, Chinese insurers rose across the board on the stock markets, with New China Life Insurance Co., Ltd. leading the gains, up 3.57 percent to 25.27 yuan.

Having struggled for a long time to make a dent in China, LG Electronics expects to seek a fresh start in the market with its recently released flagship smartphone.

The G3 smartphone was launched in China by the Seoul-headquartered consumer-electronics giant on Fridaytogether with South Korean actor Lee Min-ho, who enjoys huge popularity in China after playing leading roles in South Korean shows including Boys Over Flowers.

The sale of the handset started exclusively Monday via jd.com, China's second-largest online retailer by market share. PR representatives with JD.com Inc and LG refused to reveal the sales figures when contacted Tuesday.

The gadget appears to be something LG could bank on to fight its way to the top of China's fiercely competitive smartphone arena.

Indeed, the G3 has received a lot of praise from the media and tech experts. US tech news network The Verge reported on May 27 that LG sets "the new benchmark for overpowered smartphones" with its G3 by being the first big name to apply a Quad HD display, nearly twice the resolution of Full HD display, to smartphones.

However, analysts said that the G3 may suffer a cold market reception as China has become increasingly tough for foreign handset manufacturers, except Apple Inc.

??Seeking a new start

"G3 is expected to make LG's products more popular among consumers, which is the most crucial step toward the company's revival in China's phone market," Shin Moon-bum, CEO of LG's China unit, told reporters during a group interview held in Beijing Friday.

Yet, even after years of hard work in the Chinese market, LG has always been a marginalized brand. As early as 2012, there were even market rumors of its retreat from the market.

According to a report issued by US-based market research firm IDC in late July, the company did not even crack the top 10 list in China in the second quarter, despite being the fifth-largest smartphone vendor worldwide over the same period.

"I believe the G3 would contribute a lot to the company in the market…although we had a late start [in China's smartphone market], we can make a difference in five years," said Shin.

To cater to Chinese consumers and meet the requirements of local telecom carriers, the company appears to have put more effort in customizing its G3, which entered China nearly three months later than its public release in other markets.

For instance, the G3 for Chinese users supports dual SIM cards and 4G cellular telecom networks as well as 2G and 3G networks, in response to China's ongoing transition from 2G or 3G telecommunication services to 4G.

Shin expected the sales of the G3 in China to more than triple that of its predecessor the G2, launched in the market on September 2013. He did not set a target date or reveal a specific figure but said that over 60,000 units of the G2 were shipped in China in its early stages.

Some analysts predicted that LG's global G3 shipments would hit 3 million in the third quarter, according to media reports. However, those numbers are small when compared with the 108.5 million smartphones that US-based market research firm Canalys said were shipped in China during the second quarter.

The gadget has reportedly taken on Samsung's Galaxy S5 at home, hitting sales of more than 100,000 units within five days after the phone's release in the country in late May, while sales of the Galaxy S5 in South Korea stood at only 7,000 to 8,000 a day in its first week.

Uphill challenges

The success achieved by the G3 in its home market would be unlikely in China's fiercely competitive smartphone battleground, Wang Yanhui, head of Shanghai-based Mobile China Alliance, told the Global Times Sunday.

LG's G3 seems to have no distinctive advantage over feature-rich phones offered by local players such as Beijing-based Xiaomi Technology.

"Higher resolution is one of the G3's major selling points, but it's not a necessity for me and would further shorten the device's battery life," said Li Yu, a 29-year-old Beijing resident, who prefers cheaper homegrown Android phones over global ones which he said have failed to offer appealing features worth their high costs.

While LG priced the G3 at 3,999 yuan ($649.8) for price-sensitive Chinese consumers, which is much cheaper than its launch price of 899,800 won ($869) at home, that is still more than twice as expensive as phones developed by Chinese companies.

The company's South Korean rival Samsung, No.1 global smartphone vendor in the second quarter, has already felt the squeeze in China.

Its share of the market by sales volumes reached 15.4 percent in the second quarter, down from 18.1 percent in the first quarter, while Xiaomi was second with 13.5 percent, Beijing-based market research firm Analysys International said on August 6.

Canalys even said in a report on August 4 that Xiaomi became China's top smartphone vendor by sales in the second quarter with 14 percent, outselling Samsung for the first time. Canalys ranked Samsung second in the report but without disclosing its share in China.

Boosting brand

In order to stand out, foreign companies like LG and Samsung need to ramp up efforts in brand enhancement, said Zhang Yi, CEO of Shenzhen-based iiMedia Research.

"Foreign brands barely have any chance to snatch a slice of the medium- and low-end phone market, which is already dominated by local peers," Zhang told the Global Times.

Zhang's opinion was shared by LG's senior executives, who believe the G3 can help the company build up a high-end image in the minds of Chinese consumers.

Both Zhang and Wang believe it is not easy for LG to stand out as a premium brand in the Chinese phone market, where its current brand strength is rather weak.

"For me and most people around me, LG is a global premium manufacturer of home appliances other than smartphones," Beijing's Li said. "Only Apple is a high-end phone brand."

In addition to brand enhancement, LG also needs to broaden its selling network in China, said Wang. "The tie-up with the three local telecom carriers is significant for its future performance, as they account for 40 percent to 50 percent of handset sales in China."

LG shows no intention of having local carriers sell the G3. While jd.com for now is LG's only sales partner to cut distribution costs, the company said they will provide off-line options for Chinese consumers later.

A UCWeb stand promotes its mobile game distribution platform 9game at an exhibition in Guangzhou.

Yu Yongfu has his eyes on a billion users, and overseas ventures are vital to realize that goal

Starting as an entrepreneur, then becoming a successful business owner before becoming an angel investor is a well-trodden career path in the corporate world.

But investor-turned-entrepreneur Yu Yongfu is an exception.

Yu, who quit as vice-president of China's leading venture capital investment firm Legend Capital Management LLC and joined startup mobile browser company UCWeb Inc in 2006, said that being an investor is like sitting in the passenger seat of a car, while being a chief executive officer means you are in the driver's seat.

"Being a passenger is comfy, but without having the fun of a driver who controls the wheel of the car," said the 38-year-old.

Yu, who agreed to sell UCWeb to Alibaba Group Holding Ltd in June in China's largest Internet takeover, is determined to steer his Guangzhou-based company through a global expansion plan, especially after teaming up with the deep-pocketed e-commerce giant.

"Our goal is to rapidly double the number of people using the UC browser to 1 billion. If you look at Internet companies around the world, only Google Inc and Facebook Inc have established user groups that are as large as 1 billion.

"I think UCWeb and Tencent Holdings Ltd's WeChat are the two companies in China that have the potential to grow their user bases to that size," he told China Daily.

The goal cannot be reached without expanding to overseas markets, said Yu, who admitted that one of the main reasons he agreed to sell UCWeb to Alibaba is that the extremely profitable e-commerce giant can give his company's globalization plan a strong push.

UCWeb, the second-largest mobile browser in China after Tencent's QQ browser, is known for reducing data usage for those who surf the Internet through mobile devices.

The company saw its market share by active users in China drop 3.2 percentage points quarter-on-quarter to 31.6 percent in the first quarter of 2014, according to Analysys International. But its globalization strategy, launched in 2010, seems to be going well.

The company claims that its mobile browser has a market share of more than 10 percent in 10 countries. The UC Mobile browser even became the leading mobile browser in India earlier this year, accounting for 35 percent of the market.

But Yu wants UCWeb to have 1 billion users in three to five years and 50 percent from countries outside China.

"Being part of the Alibaba Group means that UCWeb is able to invest more in its overseas expansion. Alibaba is a very profitable company, which allows us to focus on long-term development rather than make short-term money," he said, adding that Alibaba's rich experience in tapping into e-commerce markets in other countries can also be valuable to UCWeb.

Yu said that 2014 is the year for UCWeb to gear up its globalization plan with a strong focus on developing countries.

When testing the waters in a new market, UCWeb tends to fly its engineers there and introduce its product to local tech fans. It will set up offices only when the number of users in a particular country reaches 20 million.

It has local offices in India, Indonesia and the United States, and it is expected to set up offices in Russia and Vietnam later this year.

"The Internet is the industry that is most suitable for global expansion. Users usually don't care which country the service provider comes from as long as the product is good," he said.

Unlike the personal computer-based Internet sector, which was pioneered by Western companies (US companies in particular), Yu said that Chinese firms can be leaders instead of followers in the mobile Internet industry.

"The mobile Internet has a lot to do with lifestyle. For example, people in the US and Europe spend a lot of time driving to work, while the majority of Asian people use public transportation to commute. That means that Asian smartphone users on average spend more than two hours every day on the mobile Internet."

The strong reliance on the mobile Internet leads to innovation. What's more, the PC-based Internet is an industry with a unified world standard, while the mobile Internet industry varies among regions, he said.

Wang Jian, an analyst with the Beijing-based Internet consultancy Analysys International, said that as one of the earliest mobile browser companies in China, UCWeb has strong advantages in going abroad as China has the most complex market in the world.

"Chinese users are very demanding and they are not used to paying, even if your product is good. So for those companies that have already established themselves in China, it is safe to say that they are ready to conquer other markets," said Wang.

Yu agreed, saying that entering a new market is like doing subtraction. "Sometimes we simply remove some features from the Chinese version of our product and it can become a hit in other countries," he said, adding that the most important thing to do when going abroad is choosing the right market.

He has divided the global market into four areas: China, developing countries, Japan and South Korea, and Europe and the US.

The top priority for global expansion is developing countries, because Chinese mobile Internet technologies are usually two years ahead of what is available in those countries. He said UCWeb has no plans to move into Japan or South Korea at this stage because it is very difficult to break into their industrial chains.

"The US and Europe are not easy markets, either. But we will keep looking for opportunities in those markets," he said.

Neil Flynn, head equity analyst at Shanghai-based website Chineseinvestors, which provides financial analysis of US-listed Chinese companies, said the most important aspect of Chinese companies' development strategies should be to expand into emerging economies.

"Consumer trends are similar to those in China, and these firms will have the experience and knowledge to profit," said Flynn, who has followed Chinese Internet companies for years.

"In the Western developed economies, we see the likes of Google and Amazon being dominant players for the same reason. These countries have similar consumer trends, so it's relatively easy for them to adapt their business models."

It might seem that UCWeb has chosen the right path, but Jane Zhang, principal research analyst at technology research Gartner Inc, begged to differ, saying that a mobile browser cannot serve as a powerhouse that will ensure sustainable growth for Yu's company.

She argued UCWeb's core selling point in China is saving money through reduced data usage. That alone, she said, is not enough to attract users in other countries.

"Most importantly, a browser itself is not badly needed by users in the mobile Internet era. If they want search facilities, or social media or shopping, they can directly go to apps with the necessary functions without going through browsers like they used to do in the PC Internet era," Zhang said.

It seems that UCWeb is aware of the challenges. But Yu said that the odds of success are usually higher when most people don't recognize an opportunity.

UCWeb has already launched a mobile game distribution platform called 9game and a mobile search engine known as Shenma, aiming to use a multiproduct strategy to hook more users on its way to becoming an information service gateway.