Newsletter2 May 2018

FCCC/EUCBA ACTIVITIES

Seminar: China’s Economic Outlook and Key Issues for Foreign Investors after the 19th Party Congress– 16 May 2018 – 09:00 – Ghent

The Flanders-China Chamber of Commerce and KBC Bank are organizing a briefing on “China’s economic outlook and key issues for foreign investors after the 19 th Party Congress”. This event will take place on Wednesday 16 May 2018 from 9:00-11:00 at KBC Bank, Kortrijksesteenweg 1100, 9051 Ghent.

During this briefing, two bankers from KBC Bank in China will discuss the following topics:

• Economic outlook & key issues for foreign investors• Major developments after the 19 th Party Congress• Opportunities for Belgian companies: Greater Bay Area, Belt & Road

Programme08:30 Registration and networking09:00 Introduction by Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce09:10 Presentation by P.C Leung, General Manager, KBC Bank N.V. Shanghai Branch and William Ip, Head of Corporate Banking, KBC N.V. Hong Kong Branch10:00 Q & A discussion

Practical InformationLocation: KBC Bank, Kortrijksesteenweg 1100, 9051 GhentPrice for members: €66,55 (incl. 21% VAT)Price for non-members: €90,75 (incl. 21% VAT)

Newsletter2 May 2018

FCCC/EUCBA ACTIVITIES

Seminar: China’s Economic Outlook and Key Issues for Foreign Investors after the 19th Party Congress– 16 May 2018 – 09:00 – Ghent

The Flanders-China Chamber of Commerce and KBC Bank are organizing a briefing on “China’s economic outlook and key issues for foreign investors after the 19 th Party Congress”. This event will take place on Wednesday 16 May 2018 from 9:00-11:00 at KBC Bank, Kortrijksesteenweg 1100, 9051 Ghent.

During this briefing, two bankers from KBC Bank in China will discuss the following topics:

• Economic outlook & key issues for foreign investors• Major developments after the 19 th Party Congress• Opportunities for Belgian companies: Greater Bay Area, Belt & Road

Programme08:30 Registration and networking09:00 Introduction by Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce09:10 Presentation by P.C Leung, General Manager, KBC Bank N.V. Shanghai Branch and William Ip, Head of Corporate Banking, KBC N.V. Hong Kong Branch10:00 Q & A discussion

Practical InformationLocation: KBC Bank, Kortrijksesteenweg 1100, 9051 GhentPrice for members: €66,55 (incl. 21% VAT)Price for non-members: €90,75 (incl. 21% VAT)

NEWSLETTER 2 MAY 2018 2

If you are interested in participating in this event, please subscribe before 11 May 2018. GO TO THIS EVENT

ContactFCCC: info@flanders-china.be

About the speakers

P.C Leung, General Manager, KBC Bank N.V. Shanghai BranchAfter 10 years with Bank of China Group, P. C. joined KBC Bank Hong Kong Branch at 1991 as Financial Controller. He started his China banking career in KBC Bank Shanghai Branch in 1997. He also worked in KBC Bank Taiwan Branch for 3 years thereafter. He is now the General Manager of KBC Bank Shanghai Branch. P.C. earned a MBA degree and a Master ofInformation System degree. He is a Chartered Professional Accountant of Canada .

William Ip, Head of Corporate BankingJoining KBC Bank NV Hong Kong Branch since 2006, William Ip is now the Head of Corporate Banking. He has been working in the commercial banking field with primary focuses on credit and relationship management over 25 years. Prior to KBC, William had worked for Bank of China Group, Fortis Bank and DBS. William earned his bachelor degree in Industrial Economics from University of Warwick and master degree in Financial Management from University of London.

PAST EVENTS

China Insights: Partner Choice, Know-howProtection and Contract Enforcement – 26 April

2018 – Brussels

The Flanders-China Chamber of Commerce organized a luncheon focused on “China Insights: Partner Choice, Know-how Protection and Contract Enforcement”. This event took place on 26 April in Brussels.

Keynote speaker: Mr Jan Holthuis, Partner at Buren N.V.

The following topics were discussed:• Chinese partners background checks: what

information is available in China? What are the most important facts to get?

• Technology transfer: Strategies to protect your know-how and IP

• Chinese legal practice: Can a foreign party win in Chinese courts

The event started with a networking lunch and word of welcome by Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, followed by the presentationby Mr Jan Holthuis, Partner at Buren NV. A Q & A session concluded the event.

Unicorn or Dragon: How to Tap into the ChineseMarket for Growth? – 25 April 2018 at 17h00 –

Brussels

The Flanders-China Chamber of Commerce and Startups.be have organized a conference on 'Unicorn or Dragon: How to Tap into the Chinese Market for Growth?' on 25 April 2018 at BECENTRAL in Brussels.

With a population over 1.3 billion and 1 billion cyber citizens, sharing 1/5 of world GDP, China is now the secondlargest economy in the world. It is definitely a booming market. Global business leaders consider China as a key market in their global business strategies. Chinese business models, consumer behaviours, e-commerce, and social media have changed tremendously in the last 30 years. It is essential for entrepreneurs to understand the way of doing business in China taking into account the important potential of the Chinese market. Expanding to China becomes a must but with challenges to lead ahead.

This event provided a unique opportunity for start-ups to learn how to avoid failures, overcome difficulties and succeed in China. It provided participants with deep insights about Chinese business models and ways to enter the Chinese Market.Following a word of welcome by startups.be and a speech by Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, Bo Ji, Chief Representative & Assistant Dean of CKGSB Europe, presented the keynote

NEWSLETTER 2 MAY 2018 2

If you are interested in participating in this event, please subscribe before 11 May 2018. GO TO THIS EVENT

ContactFCCC: info@flanders-china.be

About the speakers

P.C Leung, General Manager, KBC Bank N.V. Shanghai BranchAfter 10 years with Bank of China Group, P. C. joined KBC Bank Hong Kong Branch at 1991 as Financial Controller. He started his China banking career in KBC Bank Shanghai Branch in 1997. He also worked in KBC Bank Taiwan Branch for 3 years thereafter. He is now the General Manager of KBC Bank Shanghai Branch. P.C. earned a MBA degree and a Master ofInformation System degree. He is a Chartered Professional Accountant of Canada .

William Ip, Head of Corporate BankingJoining KBC Bank NV Hong Kong Branch since 2006, William Ip is now the Head of Corporate Banking. He has been working in the commercial banking field with primary focuses on credit and relationship management over 25 years. Prior to KBC, William had worked for Bank of China Group, Fortis Bank and DBS. William earned his bachelor degree in Industrial Economics from University of Warwick and master degree in Financial Management from University of London.

PAST EVENTS

China Insights: Partner Choice, Know-howProtection and Contract Enforcement – 26 April

2018 – Brussels

The Flanders-China Chamber of Commerce organized a luncheon focused on “China Insights: Partner Choice, Know-how Protection and Contract Enforcement”. This event took place on 26 April in Brussels.

Keynote speaker: Mr Jan Holthuis, Partner at Buren N.V.

The following topics were discussed:• Chinese partners background checks: what

information is available in China? What are the most important facts to get?

• Technology transfer: Strategies to protect your know-how and IP

• Chinese legal practice: Can a foreign party win in Chinese courts

The event started with a networking lunch and word of welcome by Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, followed by the presentationby Mr Jan Holthuis, Partner at Buren NV. A Q & A session concluded the event.

Unicorn or Dragon: How to Tap into the ChineseMarket for Growth? – 25 April 2018 at 17h00 –

Brussels

The Flanders-China Chamber of Commerce and Startups.be have organized a conference on 'Unicorn or Dragon: How to Tap into the Chinese Market for Growth?' on 25 April 2018 at BECENTRAL in Brussels.

With a population over 1.3 billion and 1 billion cyber citizens, sharing 1/5 of world GDP, China is now the secondlargest economy in the world. It is definitely a booming market. Global business leaders consider China as a key market in their global business strategies. Chinese business models, consumer behaviours, e-commerce, and social media have changed tremendously in the last 30 years. It is essential for entrepreneurs to understand the way of doing business in China taking into account the important potential of the Chinese market. Expanding to China becomes a must but with challenges to lead ahead.

This event provided a unique opportunity for start-ups to learn how to avoid failures, overcome difficulties and succeed in China. It provided participants with deep insights about Chinese business models and ways to enter the Chinese Market.Following a word of welcome by startups.be and a speech by Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, Bo Ji, Chief Representative & Assistant Dean of CKGSB Europe, presented the keynote

NEWSLETTER 2 MAY 2018 3

speech on “Unicorn or Dragon: How to tap into the ChineseMarket for Growth”. Q&A and networking sessions concluded the event.

From 9 – 13 July 2018, Startups.be and EYnovation organise a high-level startup mission to Hong Kong and Shenzhen, with a focus on fintech, IOT and health. It is a perfect opportunity to discover the fast- growing Shenzhen and Hong Kong ecosystems by attending Asia’s most important startup conference (RISE Conference) and meet all the important players in the local communities.

Workshop Negotiating with the Chinese: CulturalRoots & Practical Recommendations – 24 April

2018 – Zwevegem

“Building a win-win partnership through the art ofnegotiation”

The Flanders-China Chamber of Commerce, VOKA West Flanders and the Cheung Kong Graduate School of Business have organized the workshop: ‘Negotiating with the Chinese: Cultural Roots & Practical Recommendations’ on April 24 at Bekaert NV in Zwevegem.

Mr Bo Ji, Chief Representative Europe & Assistant Dean Global Executive Education of the Cheung Kong Graduate School of Business was the keynote speaker.This seminar offered guidance to business leaders on how to leverage cultural differences, complexity, uncertainty, andconflicts during the negotiation process with their Chinese partners.

Following opening remarks by Ms Gwenn Sonck, ExecutiveDirector, Flanders-China Chamber of Commerce, Mr Bo Ji talked on the topics of “China vs West: different cultural negotiating models”, “Chinese cultural roots and elements to shape the negotiating skills” and “Strategies that lead you to a better negotiation outcome”. A group discussion and networking session concluded the event.

Info session: Opportunities in the horticulturesector: World Horticulture Expo 2019 – 23 April

2018 – Ghent

The Flanders-China Chamber of Commerce (FCCC) and the Province of East-Flanders organized an information session on the opportunities of participating in the Belgian garden at the World Horticulture Expo in Beijing in 2019. The seminar was held on 23 April 2019 at PAC – Het Zuid, in Ghent.

The World Horticulture Expo, themed 'Live Green, Live Better', will be held from April 29 till October 7, 2019. TheExpo covers an area of 503 hectares, of which the Belgian garden will cover 1,500 square meters to promote Belgianhorticulture. The organizers expect to welcome 16 million visitors, 20% from outside China. Expo 2019 will be organized for the first time in the vicinity of the Great Wall.

The Expo will focus on green technology, the best availabletechnology and innovative applications, including vertical cultivation, multilayer cultivation, and hydroponics.

Martine Verhoeve, Vice Governor Foreign Affairs and Economy, Province of East-Flanders, welcomed the participants. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, gave an introduction, followed by a speech by Pieter Van Oost, Secretary, Belgian Nurserymen and Growers Federation (AVBS). Aldwin Dekkers, Belgian Commissioner General's Office of International Expositions, FOD Economy, gave a speech on“The Belgian Garden at the World Horticulture Expo”. A testimonial was presented by Reginald Deroose, CEO, Deroose Plants & Exotic Plant in China. A Q&A and networking reception concluded the event.

Since late 2017 the Belgian federal government has recognized the importance of participating in the Beijing International Horticultural Exhibition in 2019. The Belgian Nurserymen and Growers Federation (AVBS) is calling on interested companies to participate in the exhibition. Information collected will be transmitted to the Belgian garden designer.

More information is available on the AVBS website (in Dutch) and the organizer's web si te.

To apply for participation, contact Pieter.Van.Oost@avbs.be

NEWSLETTER 2 MAY 2018 3

speech on “Unicorn or Dragon: How to tap into the ChineseMarket for Growth”. Q&A and networking sessions concluded the event.

From 9 – 13 July 2018, Startups.be and EYnovation organise a high-level startup mission to Hong Kong and Shenzhen, with a focus on fintech, IOT and health. It is a perfect opportunity to discover the fast- growing Shenzhen and Hong Kong ecosystems by attending Asia’s most important startup conference (RISE Conference) and meet all the important players in the local communities.

Workshop Negotiating with the Chinese: CulturalRoots & Practical Recommendations – 24 April

2018 – Zwevegem

“Building a win-win partnership through the art ofnegotiation”

The Flanders-China Chamber of Commerce, VOKA West Flanders and the Cheung Kong Graduate School of Business have organized the workshop: ‘Negotiating with the Chinese: Cultural Roots & Practical Recommendations’ on April 24 at Bekaert NV in Zwevegem.

Mr Bo Ji, Chief Representative Europe & Assistant Dean Global Executive Education of the Cheung Kong Graduate School of Business was the keynote speaker.This seminar offered guidance to business leaders on how to leverage cultural differences, complexity, uncertainty, andconflicts during the negotiation process with their Chinese partners.

Following opening remarks by Ms Gwenn Sonck, ExecutiveDirector, Flanders-China Chamber of Commerce, Mr Bo Ji talked on the topics of “China vs West: different cultural negotiating models”, “Chinese cultural roots and elements to shape the negotiating skills” and “Strategies that lead you to a better negotiation outcome”. A group discussion and networking session concluded the event.

Info session: Opportunities in the horticulturesector: World Horticulture Expo 2019 – 23 April

2018 – Ghent

The Flanders-China Chamber of Commerce (FCCC) and the Province of East-Flanders organized an information session on the opportunities of participating in the Belgian garden at the World Horticulture Expo in Beijing in 2019. The seminar was held on 23 April 2019 at PAC – Het Zuid, in Ghent.

The World Horticulture Expo, themed 'Live Green, Live Better', will be held from April 29 till October 7, 2019. TheExpo covers an area of 503 hectares, of which the Belgian garden will cover 1,500 square meters to promote Belgianhorticulture. The organizers expect to welcome 16 million visitors, 20% from outside China. Expo 2019 will be organized for the first time in the vicinity of the Great Wall.

The Expo will focus on green technology, the best availabletechnology and innovative applications, including vertical cultivation, multilayer cultivation, and hydroponics.

Martine Verhoeve, Vice Governor Foreign Affairs and Economy, Province of East-Flanders, welcomed the participants. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, gave an introduction, followed by a speech by Pieter Van Oost, Secretary, Belgian Nurserymen and Growers Federation (AVBS). Aldwin Dekkers, Belgian Commissioner General's Office of International Expositions, FOD Economy, gave a speech on“The Belgian Garden at the World Horticulture Expo”. A testimonial was presented by Reginald Deroose, CEO, Deroose Plants & Exotic Plant in China. A Q&A and networking reception concluded the event.

Since late 2017 the Belgian federal government has recognized the importance of participating in the Beijing International Horticultural Exhibition in 2019. The Belgian Nurserymen and Growers Federation (AVBS) is calling on interested companies to participate in the exhibition. Information collected will be transmitted to the Belgian garden designer.

More information is available on the AVBS website (in Dutch) and the organizer's web si te.

To apply for participation, contact Pieter.Van.Oost@avbs.be

NEWSLETTER 2 MAY 2018 4

ACTIVITIES SUPPORTED BYFCCC

China International Import Expo – November 5-10, 2018 – Shanghai

In May 2017, Chinese President Xi Jinping announced at the Belt and Road Forum for International Cooperation that China will hold the first China International Import Expo (CIIE) starting from 2018. It is a significant move for the Chinese Government to hold CIIE to firmly supporting tradeliberalization and economic globalization and actively opening the market to the world.We have the pleasure to inform you that your company is kindly invited to participate in the China International ImportExpo (CIIE). This international fair will take place at the National Exhibition and Convention Center in Shanghai from 5 to 10 November 2018.

The CIIE is hosted by the Ministry of Commerce of the People’s Republic of China and the Shanghai Municipal People’s Government and supported by the World Trade Organization, United Nations Conference on Trade and Development and the United Nations Industrial Development Organization. The Fair is organised by the China International Import Expo Bureau and the China National Exhibition and Convention Center (Shanghai).

China is the second largest economy, as well as the secondlargest importer and consumer in the world. China has entered a new development stage at which consumption keeps increasing, indicating an enormous potential for the growth of consumption and import. In the next five years, China is expecting to import products and services valuing more than 10 trillion U.S. dollars, which provides a historic opportunity for enterprises across the world to enter the

large Chinese market.

The following sectors will be represented in the Fair:High-end intelligent equipment; consumer electronics & appliances; apparel, accessories & consumer goods; automobile; food & agricultural products; medical equipment & medical care products, trade in services (tourism, education, emerging technologies, culture, creative design and service outsourcing).

More information and booking details can be found at the official website of the National Exhibition and Convention Center (Shanghai): www.neccsh.com.

If you are interested in participating, contact Flanders Investment & Trade Shanghai, the contact point for Belgiumfor CIIE at shanghai@fitagency.com

We also kindly ask you to send an e-mail to gwenn.sonck@flanders-china.be.

ADVERTISEMENT ANDSPONSORSHIP

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

FOREIGN TRADE

U.S. companies banned from selling componentsto ZTE for seven years

The U.S. government has banned sales by American companies to China’s ZTE Corp for seven years to punish the Chinese telecommunications equipment maker after it allegedly made false statements during an investigation

NEWSLETTER 2 MAY 2018 4

ACTIVITIES SUPPORTED BYFCCC

China International Import Expo – November 5-10, 2018 – Shanghai

In May 2017, Chinese President Xi Jinping announced at the Belt and Road Forum for International Cooperation that China will hold the first China International Import Expo (CIIE) starting from 2018. It is a significant move for the Chinese Government to hold CIIE to firmly supporting tradeliberalization and economic globalization and actively opening the market to the world.We have the pleasure to inform you that your company is kindly invited to participate in the China International ImportExpo (CIIE). This international fair will take place at the National Exhibition and Convention Center in Shanghai from 5 to 10 November 2018.

The CIIE is hosted by the Ministry of Commerce of the People’s Republic of China and the Shanghai Municipal People’s Government and supported by the World Trade Organization, United Nations Conference on Trade and Development and the United Nations Industrial Development Organization. The Fair is organised by the China International Import Expo Bureau and the China National Exhibition and Convention Center (Shanghai).

China is the second largest economy, as well as the secondlargest importer and consumer in the world. China has entered a new development stage at which consumption keeps increasing, indicating an enormous potential for the growth of consumption and import. In the next five years, China is expecting to import products and services valuing more than 10 trillion U.S. dollars, which provides a historic opportunity for enterprises across the world to enter the

large Chinese market.

The following sectors will be represented in the Fair:High-end intelligent equipment; consumer electronics & appliances; apparel, accessories & consumer goods; automobile; food & agricultural products; medical equipment & medical care products, trade in services (tourism, education, emerging technologies, culture, creative design and service outsourcing).

More information and booking details can be found at the official website of the National Exhibition and Convention Center (Shanghai): www.neccsh.com.

If you are interested in participating, contact Flanders Investment & Trade Shanghai, the contact point for Belgiumfor CIIE at shanghai@fitagency.com

We also kindly ask you to send an e-mail to gwenn.sonck@flanders-china.be.

ADVERTISEMENT ANDSPONSORSHIP

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

FOREIGN TRADE

U.S. companies banned from selling componentsto ZTE for seven years

The U.S. government has banned sales by American companies to China’s ZTE Corp for seven years to punish the Chinese telecommunications equipment maker after it allegedly made false statements during an investigation

NEWSLETTER 2 MAY 2018 5

into sales of its equipment to Iran. The ban had already been imposed last year but suspended since March 2017 after ZTE agreed to punish those responsible for covering up its sales to Iran and pay about two-thirds of a USD1.2 billion penalty. The sales of hundreds of millions of U.S. dollars worth of routers, microprocessors and servers to Iranian entities violated the U.S. Export Administration Act of 1979, according to an order by the U.S. Department of Commerce.

“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and madefalse statements again during its probation,” Secretary of Commerce Wilbur Ross said. Follow-up requests this year for documentation that ZTE punished nearly 40 employees running a unit conducting business with Iran and covering up the deals revealed that disciplinary action had not been taken, contrary to ZTE’s earlier pledges, accordingto the U.S. Department of Commerce. Those actions are “indicative of a company incapable of being, or unwilling to be, a reliable and trustworthy recipient of U.S.-origin goods,” the Department added. The company removed Cheng Gang, Senior Vice President, from his duties as Chief Compliance Officer and Chief Legal Officer on March 8. It is unclear whether Cheng remains an employee at ZTE. ZTE had promised to dismiss four senior employees and discipline 35 others involved in the trade violation by either reducing their bonuses or reprimanding them. ZTE Chairman Yin Yimin said in an internal memo to employees that the company has set up a crisis management team and appealed for calm among its 80,000-strong staff.

The U.S. move prohibits large American companies like Qualcomm and Micron Technology from selling their chips and components to ZTE, making it more difficult for the company to become world leader in 5G technology. The Commerce Department’s reactivation of the order against ZTE also obligates the company to pay the remainder of the original penalty, or about USD300 million. Experts estimate that 25% to 30% of components used in ZTE’s products are imported from the U.S. In recent years, China has spent more than USD200 billion on imported chips annually, more than the amount spent on crude oil imports.

Founded in 1985, ZTE is one of China’s major telecoms equipment suppliers and together with Huawei Technologies is spearheading the development and commercialization of 5G-related technologies. A relatively small smartphone brand in China, ZTE is nevertheless the

fourth largest smartphone vendor in the U.S., following Apple, Samsung Electronics and LG Electronics. China’s Ministry of Commerce said it was prepared to take action to protect the interests of ZTE and other Chinese firms. ZTE has 14 offices and six research centers in the United States and supported nearly 130,000 high-tech jobs in the country.

Rival Huawei Technologies has laid off five employees at its Washington office, including Vice President of External Affairs Bill Plummer, and slashed lobbying expenditures to USD60,000 in 2017 from USD348,500 in 2016. U.S. national security experts object to equipment made by Chinese firms to be installed in the U.S. telecommunications network. The U.S. Federal Communications Commission (FCC) also voted unanimously to ban federally subsidized telecom carriers from using suppliers deemed to pose a risk to national security. The ban still needs a second FCC vote to take effect, but highlights once again that Chinese tech players are finding it increasingly hard to access the U.S. market.

In a piece of good news, Huawei’s 5G-ready products won official approval for commercial use in the European Economic Area as it obtained the first CE type examination certificate for 5G products. China has already established the world’s largest 5G test field in Beijing’s Huairou district, where domestic firms and foreign tech companies are participating in China’s third phase of 5G research and development tests. The Wall Street Journal reported however that the U.S. Justice Department is also investigating whether Huawei violated Iran sanctions, but any punitive measures will have less of an impact on Huawei than on ZTE, said Shaun Rein, Managing Director of China Market Research Group. “A ban on Huawei could hurt them, but it won’t kill the company, whereas ZTE is in survival mode,” he said.

NEWSLETTER 2 MAY 2018 5

into sales of its equipment to Iran. The ban had already been imposed last year but suspended since March 2017 after ZTE agreed to punish those responsible for covering up its sales to Iran and pay about two-thirds of a USD1.2 billion penalty. The sales of hundreds of millions of U.S. dollars worth of routers, microprocessors and servers to Iranian entities violated the U.S. Export Administration Act of 1979, according to an order by the U.S. Department of Commerce.

“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and madefalse statements again during its probation,” Secretary of Commerce Wilbur Ross said. Follow-up requests this year for documentation that ZTE punished nearly 40 employees running a unit conducting business with Iran and covering up the deals revealed that disciplinary action had not been taken, contrary to ZTE’s earlier pledges, accordingto the U.S. Department of Commerce. Those actions are “indicative of a company incapable of being, or unwilling to be, a reliable and trustworthy recipient of U.S.-origin goods,” the Department added. The company removed Cheng Gang, Senior Vice President, from his duties as Chief Compliance Officer and Chief Legal Officer on March 8. It is unclear whether Cheng remains an employee at ZTE. ZTE had promised to dismiss four senior employees and discipline 35 others involved in the trade violation by either reducing their bonuses or reprimanding them. ZTE Chairman Yin Yimin said in an internal memo to employees that the company has set up a crisis management team and appealed for calm among its 80,000-strong staff.

The U.S. move prohibits large American companies like Qualcomm and Micron Technology from selling their chips and components to ZTE, making it more difficult for the company to become world leader in 5G technology. The Commerce Department’s reactivation of the order against ZTE also obligates the company to pay the remainder of the original penalty, or about USD300 million. Experts estimate that 25% to 30% of components used in ZTE’s products are imported from the U.S. In recent years, China has spent more than USD200 billion on imported chips annually, more than the amount spent on crude oil imports.

Founded in 1985, ZTE is one of China’s major telecoms equipment suppliers and together with Huawei Technologies is spearheading the development and commercialization of 5G-related technologies. A relatively small smartphone brand in China, ZTE is nevertheless the

fourth largest smartphone vendor in the U.S., following Apple, Samsung Electronics and LG Electronics. China’s Ministry of Commerce said it was prepared to take action to protect the interests of ZTE and other Chinese firms. ZTE has 14 offices and six research centers in the United States and supported nearly 130,000 high-tech jobs in the country.

Rival Huawei Technologies has laid off five employees at its Washington office, including Vice President of External Affairs Bill Plummer, and slashed lobbying expenditures to USD60,000 in 2017 from USD348,500 in 2016. U.S. national security experts object to equipment made by Chinese firms to be installed in the U.S. telecommunications network. The U.S. Federal Communications Commission (FCC) also voted unanimously to ban federally subsidized telecom carriers from using suppliers deemed to pose a risk to national security. The ban still needs a second FCC vote to take effect, but highlights once again that Chinese tech players are finding it increasingly hard to access the U.S. market.

In a piece of good news, Huawei’s 5G-ready products won official approval for commercial use in the European Economic Area as it obtained the first CE type examination certificate for 5G products. China has already established the world’s largest 5G test field in Beijing’s Huairou district, where domestic firms and foreign tech companies are participating in China’s third phase of 5G research and development tests. The Wall Street Journal reported however that the U.S. Justice Department is also investigating whether Huawei violated Iran sanctions, but any punitive measures will have less of an impact on Huawei than on ZTE, said Shaun Rein, Managing Director of China Market Research Group. “A ban on Huawei could hurt them, but it won’t kill the company, whereas ZTE is in survival mode,” he said.

NEWSLETTER 2 MAY 2018 6

EU Ambassadors in Beijing criticize Belt & RoadInitiative

(EU Ambassadors on a visit to the headquarters of theShanghai Cooperation Organization (SCO) in Beijing in

September 2017)

The European Union has criticized China’s Belt and Road Initiative as 27 out of the 28 EU ambassadors to China signed a document denouncing the project for hampering free trade and giving an advantage to Chinese companies. Only the Hungarian Ambassador refused to sign the document. The Europeans’ concerns may overshadow an upcoming summit between China and the EU, scheduled for July. The document said China was attempting to shape globalization to suit its own interests, and the Belt and Road Initiative is “pursuing domestic political goals like the reduction of surplus capacity, the creation of new export markets and safeguarding access to raw materials.”

“Whether originally intended by China or emerging as a, no doubt, welcome side-effect, China has been putting a wedge between some EU states, or between member states and the union,” said Jyrki Kallio, Senior Researcher at the Finnish Institute of International Affairs. Cui Hongjian,European Affairs Expert at the China Institute of International Studies (CIIS), said the document was meant to show the EU has a common stance on China. “There has been a lot of discussion that the EU does not have a common policy towards China, and in particular the Belt and Road,” he said. “It is clear that EU countries are dividedon Belt and Road, but I don’t think that this division is something we need to worry about. It’s a question of who wants to participate, and how deeply.”

Jan Weidenfeld, head of the European China Policy Unit at the Mercator Institute for China Studies, said the document reflected “a set of concerns that people have been

expressing in various parts of Europe” after heavy Chinese investment had increased Beijing’s influence over some of the smaller and poorer countries. Much of China’s investment in southern and eastern parts of Europe has been in utilities and energy, or involves existing infrastructure projects, such as the Port of Piraeus in Greece, where Chinese state-owned firm COSCO Shippinghad acquired a 51% stake, the South China Morning Post reports.

European Union and Italian authorities are investigating suspected wide-scale tax fraud by Chinese criminal gangs importing goods via Greece’s largest port, a trade gateway between China and Europe, officials said. The investigationat Piraeus port came as its majority stakeholder, COSCO Shipping, faced mounting concerns over a multibillion takeover bid that could see it acquire a container terminal inthe U.S. The European Anti-Fraud Office (OLAF) confirmedit was working with Italy on the investigation into the suspected tax scams, but declined to give details. COSCO said it has “in its global operations consistently and strictly followed local and international laws, and persevered to operate legally and compliantly”.

AUTOMOTIVE

China pledges to remove investment caps onforeign car companies by 2022

The Chinese government announced it will scrap foreign ownership limits on local auto firms by 2022, boosting companies such as Tesla which may wish to have a wholly-owned subsidiary in the world’s largest auto market. The timetable of wider market access for foreign auto markers was published after President Xi Jinping told the Boao Forum that China would cut import tariffs and relax foreign ownership restrictions. Currently, foreign carmakers are required to set up a joint venture with a local firm in which there is a 50% investment cap. The cap will be scrapped

NEWSLETTER 2 MAY 2018 6

EU Ambassadors in Beijing criticize Belt & RoadInitiative

(EU Ambassadors on a visit to the headquarters of theShanghai Cooperation Organization (SCO) in Beijing in

September 2017)

The European Union has criticized China’s Belt and Road Initiative as 27 out of the 28 EU ambassadors to China signed a document denouncing the project for hampering free trade and giving an advantage to Chinese companies. Only the Hungarian Ambassador refused to sign the document. The Europeans’ concerns may overshadow an upcoming summit between China and the EU, scheduled for July. The document said China was attempting to shape globalization to suit its own interests, and the Belt and Road Initiative is “pursuing domestic political goals like the reduction of surplus capacity, the creation of new export markets and safeguarding access to raw materials.”

“Whether originally intended by China or emerging as a, no doubt, welcome side-effect, China has been putting a wedge between some EU states, or between member states and the union,” said Jyrki Kallio, Senior Researcher at the Finnish Institute of International Affairs. Cui Hongjian,European Affairs Expert at the China Institute of International Studies (CIIS), said the document was meant to show the EU has a common stance on China. “There has been a lot of discussion that the EU does not have a common policy towards China, and in particular the Belt and Road,” he said. “It is clear that EU countries are dividedon Belt and Road, but I don’t think that this division is something we need to worry about. It’s a question of who wants to participate, and how deeply.”

Jan Weidenfeld, head of the European China Policy Unit at the Mercator Institute for China Studies, said the document reflected “a set of concerns that people have been

expressing in various parts of Europe” after heavy Chinese investment had increased Beijing’s influence over some of the smaller and poorer countries. Much of China’s investment in southern and eastern parts of Europe has been in utilities and energy, or involves existing infrastructure projects, such as the Port of Piraeus in Greece, where Chinese state-owned firm COSCO Shippinghad acquired a 51% stake, the South China Morning Post reports.

European Union and Italian authorities are investigating suspected wide-scale tax fraud by Chinese criminal gangs importing goods via Greece’s largest port, a trade gateway between China and Europe, officials said. The investigationat Piraeus port came as its majority stakeholder, COSCO Shipping, faced mounting concerns over a multibillion takeover bid that could see it acquire a container terminal inthe U.S. The European Anti-Fraud Office (OLAF) confirmedit was working with Italy on the investigation into the suspected tax scams, but declined to give details. COSCO said it has “in its global operations consistently and strictly followed local and international laws, and persevered to operate legally and compliantly”.

AUTOMOTIVE

China pledges to remove investment caps onforeign car companies by 2022

The Chinese government announced it will scrap foreign ownership limits on local auto firms by 2022, boosting companies such as Tesla which may wish to have a wholly-owned subsidiary in the world’s largest auto market. The timetable of wider market access for foreign auto markers was published after President Xi Jinping told the Boao Forum that China would cut import tariffs and relax foreign ownership restrictions. Currently, foreign carmakers are required to set up a joint venture with a local firm in which there is a 50% investment cap. The cap will be scrapped

NEWSLETTER 2 MAY 2018 7

for new energy vehicle manufacturers this year, for commercial car producers in 2020, and for passenger car producers starting from 2022. Foreign carmakers will be allowed to have more than two Chinese joint ventures as well in 2022. Passenger cars are the largest automotive segment, accounting for around 85% of the 28.9 million new vehicles sold in China last year.

The first to benefit from the relaxation are expected to be new energy carmakers that wish to expand in China. “The growth of traditional carmakers has been pretty stable under the mixed ownership model,” said Toliver Ma, Auto Analyst at Guotai Junan Securities in Hong Kong, adding that the fast growing electric vehicle market will become more competitive as a result of the relaxation. But it will still be some time before a wholly-owned foreign auto manufacturer is set up in China regardless of the implementation time frame by the government, according toPeter Chen, Shanghai-based Engineer with U.S. component maker TRW.

“Nearly all the major global brands have set up their joint-ventures with Chinese partners and it will be unreasonable for them to add many new production lines in the market,” Chen said. General Motors said it would continue to work with existing Chinese partners, suggesting it is in no hurry to set up fully-owned plants in the near future. In November,Tesla’s Chief Executive Elon Musk said the company was three years away from making cars in China. But the ownership structure has proven to be a stumbling block, with Chinese authorities insisting that the plant be set up through a joint venture with local partners, while Musk wanted it to be fully owned by Tesla. China imported 17,000Tesla vehicles in 2017, up 51.6% from a year earlier, according to the China Automobile Dealers Association (CADA). Passenger cars from Chinese brands accounted for around 44% of the total sold in the country in 2017.China is now the world’s biggest electric vehicles (EV) market, outselling both the U.S. and Europe.

China will also lift shareholding limits in the shipbuilding andaircraft manufacturing industries for foreign investors this year.

MACRO-ECONOMY

President Xi Jinping calls for development of theYangtze River Economic Belt

Chinese President Xi Jinping called for achieving high-quality economic growth through developing the Yangtze River economic belt. He made the remarks at a symposium in Wuhan, where he held a summit meeting with Indian Prime Minister Narendra Modi. He stressed the importance of enhancing reform and innovation, strategic coordination and planning in developing the economic belt.

During his visit to Wuhan, Xi also urged stronger independent innovation capacity for China, saying the country must master the core technology of high-end equipment. China must rely on its own efforts, Xi said at theThree Gorges Dam. China would not have its leading abilityif it had relied on others to build the dam, said Xi. The great rejuvenation of the Chinese nation can only be achieved through untiring struggle, he added. During an inspection ofa new material industrial park on the Yangtze River, Xi stressed coordination in ecological protection and economicdevelopment. The Yangtze river must be protected, and any exploitation that is destructive to the environment must be forbidden, the President said. Environmental recovery must be the project’s top priority, Xi Jinping said. While inspecting a port at Yueyang, Hunan, Xi said those illegally discharging pollutants must face strong punishment.

The President spent two days visiting cities along the Yangzte river in Hubei and Hunan provinces. The economicbelt covers 11 provinces and municipalities, including Hubei, Hunan, Shanghai and Chongqing, and is home to about 40% of the country’s population and GDP.

NEWSLETTER 2 MAY 2018 7

for new energy vehicle manufacturers this year, for commercial car producers in 2020, and for passenger car producers starting from 2022. Foreign carmakers will be allowed to have more than two Chinese joint ventures as well in 2022. Passenger cars are the largest automotive segment, accounting for around 85% of the 28.9 million new vehicles sold in China last year.

The first to benefit from the relaxation are expected to be new energy carmakers that wish to expand in China. “The growth of traditional carmakers has been pretty stable under the mixed ownership model,” said Toliver Ma, Auto Analyst at Guotai Junan Securities in Hong Kong, adding that the fast growing electric vehicle market will become more competitive as a result of the relaxation. But it will still be some time before a wholly-owned foreign auto manufacturer is set up in China regardless of the implementation time frame by the government, according toPeter Chen, Shanghai-based Engineer with U.S. component maker TRW.

“Nearly all the major global brands have set up their joint-ventures with Chinese partners and it will be unreasonable for them to add many new production lines in the market,” Chen said. General Motors said it would continue to work with existing Chinese partners, suggesting it is in no hurry to set up fully-owned plants in the near future. In November,Tesla’s Chief Executive Elon Musk said the company was three years away from making cars in China. But the ownership structure has proven to be a stumbling block, with Chinese authorities insisting that the plant be set up through a joint venture with local partners, while Musk wanted it to be fully owned by Tesla. China imported 17,000Tesla vehicles in 2017, up 51.6% from a year earlier, according to the China Automobile Dealers Association (CADA). Passenger cars from Chinese brands accounted for around 44% of the total sold in the country in 2017.China is now the world’s biggest electric vehicles (EV) market, outselling both the U.S. and Europe.

China will also lift shareholding limits in the shipbuilding andaircraft manufacturing industries for foreign investors this year.

MACRO-ECONOMY

President Xi Jinping calls for development of theYangtze River Economic Belt

Chinese President Xi Jinping called for achieving high-quality economic growth through developing the Yangtze River economic belt. He made the remarks at a symposium in Wuhan, where he held a summit meeting with Indian Prime Minister Narendra Modi. He stressed the importance of enhancing reform and innovation, strategic coordination and planning in developing the economic belt.

During his visit to Wuhan, Xi also urged stronger independent innovation capacity for China, saying the country must master the core technology of high-end equipment. China must rely on its own efforts, Xi said at theThree Gorges Dam. China would not have its leading abilityif it had relied on others to build the dam, said Xi. The great rejuvenation of the Chinese nation can only be achieved through untiring struggle, he added. During an inspection ofa new material industrial park on the Yangtze River, Xi stressed coordination in ecological protection and economicdevelopment. The Yangtze river must be protected, and any exploitation that is destructive to the environment must be forbidden, the President said. Environmental recovery must be the project’s top priority, Xi Jinping said. While inspecting a port at Yueyang, Hunan, Xi said those illegally discharging pollutants must face strong punishment.

The President spent two days visiting cities along the Yangzte river in Hubei and Hunan provinces. The economicbelt covers 11 provinces and municipalities, including Hubei, Hunan, Shanghai and Chongqing, and is home to about 40% of the country’s population and GDP.

NEWSLETTER 2 MAY 2018 8

LOGISTICS

Tangshan-Antwerp cargo rail line inaugurated

A train carrying 41 containers departed from Tangshan in Hebei Province on April 26 with destination Antwerp, traveling 11.000 kilometers through Kazakhstan, Russia, Belarus, Poland and Germany. The train service will cut transport time from the usual 45 days by sea, to just 16 days. Tangshan has two port districts: Jingtang and Caofeidian. They handled 573 million tons of freight last year. The freight service offers a new way not only for the freight of Beijing, Tianjin, and Hebei to Europe, but also for that of Japan and the Republic of Korea to Europe via China, said Xu Fengyi, Director of Tangshan Customs.

Tangshan, about 150 km from Beijing, is known for its coal resources and steel industry. In 1881, a 9.7-km railway line from Tangshan to Xugezhuang opened for coal transport. Designed by English engineer Claude Kinder, it was the first line with a global standard track gauge of 1,435 mm in China, the Shanghai Daily reports. The line was later extended to Mukden, now called Shenyang in Liaoning province, transporting both cargo and passengers. During the extension project, Zhan Tianyou, a Yale graduate and designer of a railway bridge along the line, Luanhe Bridge, drew the attention of the government. Zhan was later appointed Chief Designer of the Beijing-Zhangjiakou line, the first railway designed and built by China in the early 20 th

century, which is still in use. “Although the design and construction were done by Chinese people, all parts, including every single nail, were imported from abroad,” said Gu Lin, Manager at Tangshan South Station, the starting point of the Tangshan-Xugezhuang line.

By March, freight trains were operating between 43 Chinese cities and 41 cities in 13 European countries.

CHINA NEWS ROUND-UP

China determined to build up semiconductorindustry

Chinese internet firms Alibaba and Tencent are calling for the country’s enterprises to own “core technology” after the U.S. government banned American firms from doing business with Chinese telecommunications equipment maker ZTE Corp. China needs more companies to play amajor role in key technology developments to solve future problems and keep the country competitive amid global competition, Jack Ma, Founder and Executive Chairman of Alibaba Group Holdings, said. “A real companyis not determined by its market value or market share, but how much responsibility it takes and whether it has mastered core and key technologies,” he said. Tencent Holdings Chairman Pony Ma also said it is becoming increasingly urgent for Chinese enterprises to make breakthroughs in the ownership of core technology. Core technology is an important tool for the nation, Chinese President Xi Jinping said during a national conference on network security and information. “We must keep persevering, focus on the key points, and accelerate core technology breakthrough in the information field,” Xi said.

Chinese semiconductor makers still cannot match their U.S.counterparts. Intel, Broadcom and Qualcomm have at least 10 times the market value of China’s biggest chip maker Shenzhen Huiding Technology, according to Bloomberg. While U.S. semiconductors are used in most smartphones, China-made ones are mainly used for low-end products such as bank cards and USB-keys. “The gap is still huge and the semiconductor industry is capital- and labor-intensive,” said Dai Ming, Manager at Hengsheng Asset Management. “It requires massive investment and technology accumulation. It’s difficult for China to catch up with the U.S. in the short term.”

But China is determined to change the situation. It has created a CNY140 billion China Integrated Circuit Industry Investment Fund, which has already invested in about 20 listed companies including SMIC, Sanan Optoelectronics and Jiangsu Changjiang Electronics Technology. The Fund will now take foreign money, Chen Yin, Chief Engineer of the Ministry of Industry and Information Technology (MIIT) said. The integrated circuit fund, founded in 2014, which had raised CNY140 billion in the first round, is aiming to raise between CNY150 billion

NEWSLETTER 2 MAY 2018 8

LOGISTICS

Tangshan-Antwerp cargo rail line inaugurated

A train carrying 41 containers departed from Tangshan in Hebei Province on April 26 with destination Antwerp, traveling 11.000 kilometers through Kazakhstan, Russia, Belarus, Poland and Germany. The train service will cut transport time from the usual 45 days by sea, to just 16 days. Tangshan has two port districts: Jingtang and Caofeidian. They handled 573 million tons of freight last year. The freight service offers a new way not only for the freight of Beijing, Tianjin, and Hebei to Europe, but also for that of Japan and the Republic of Korea to Europe via China, said Xu Fengyi, Director of Tangshan Customs.

Tangshan, about 150 km from Beijing, is known for its coal resources and steel industry. In 1881, a 9.7-km railway line from Tangshan to Xugezhuang opened for coal transport. Designed by English engineer Claude Kinder, it was the first line with a global standard track gauge of 1,435 mm in China, the Shanghai Daily reports. The line was later extended to Mukden, now called Shenyang in Liaoning province, transporting both cargo and passengers. During the extension project, Zhan Tianyou, a Yale graduate and designer of a railway bridge along the line, Luanhe Bridge, drew the attention of the government. Zhan was later appointed Chief Designer of the Beijing-Zhangjiakou line, the first railway designed and built by China in the early 20 th

century, which is still in use. “Although the design and construction were done by Chinese people, all parts, including every single nail, were imported from abroad,” said Gu Lin, Manager at Tangshan South Station, the starting point of the Tangshan-Xugezhuang line.

By March, freight trains were operating between 43 Chinese cities and 41 cities in 13 European countries.

CHINA NEWS ROUND-UP

China determined to build up semiconductorindustry

Chinese internet firms Alibaba and Tencent are calling for the country’s enterprises to own “core technology” after the U.S. government banned American firms from doing business with Chinese telecommunications equipment maker ZTE Corp. China needs more companies to play amajor role in key technology developments to solve future problems and keep the country competitive amid global competition, Jack Ma, Founder and Executive Chairman of Alibaba Group Holdings, said. “A real companyis not determined by its market value or market share, but how much responsibility it takes and whether it has mastered core and key technologies,” he said. Tencent Holdings Chairman Pony Ma also said it is becoming increasingly urgent for Chinese enterprises to make breakthroughs in the ownership of core technology. Core technology is an important tool for the nation, Chinese President Xi Jinping said during a national conference on network security and information. “We must keep persevering, focus on the key points, and accelerate core technology breakthrough in the information field,” Xi said.

Chinese semiconductor makers still cannot match their U.S.counterparts. Intel, Broadcom and Qualcomm have at least 10 times the market value of China’s biggest chip maker Shenzhen Huiding Technology, according to Bloomberg. While U.S. semiconductors are used in most smartphones, China-made ones are mainly used for low-end products such as bank cards and USB-keys. “The gap is still huge and the semiconductor industry is capital- and labor-intensive,” said Dai Ming, Manager at Hengsheng Asset Management. “It requires massive investment and technology accumulation. It’s difficult for China to catch up with the U.S. in the short term.”

But China is determined to change the situation. It has created a CNY140 billion China Integrated Circuit Industry Investment Fund, which has already invested in about 20 listed companies including SMIC, Sanan Optoelectronics and Jiangsu Changjiang Electronics Technology. The Fund will now take foreign money, Chen Yin, Chief Engineer of the Ministry of Industry and Information Technology (MIIT) said. The integrated circuit fund, founded in 2014, which had raised CNY140 billion in the first round, is aiming to raise between CNY150 billion

NEWSLETTER 2 MAY 2018 9

and CNY200 billion in the second round to help China secure a leading position in IC design and manufacturing.

According to the government’s blueprint, Chinese semiconductor companies will need to supply 40% of the nation’s chips by 2020 and the proportion will rise to 50% in2025. China has remained heavily dependent on the importof semiconductors, accounting for more than 60% of annualglobal chip sales, according to PwC. Semiconductors represent one of the top exports of the U..S, along with aircraft, refined oil and cars. No Chinese semiconductor company has been able to crack the world’s top 20 ranking in terms of sales. Three Taiwanese firms – Taiwan Semiconductor Manufacturing Company, MediaTek and United Microelectronics Corp – were among those in the top 20, according to IC Insights. China’s Huawei Technologies is applauded for producing Kirin, its own chipsets for smartphones. Alibaba Group is also entering the semiconductor sector after acquiring chipmaker Hangzhou C-Sky Microsystems.

President Xi calls to build a digital China atFuzhou Summit

Chinese President Xi Jinping called for the promotion of informatization and the building of a digital China in a congratulatory letter sent to the first Digital China Summit, which ran from April 21 till 24 in Fuzhou, capitalof Fujian province. Digitalization, networking and the application of intelligent technologies are playing more important roles in promoting social and economic development, modernizing China’s governance system andcapacity, and meeting the people’s ever-growing needs for a better life, Xi Jinping said in the letter.

The summit showcased China’s latest achievements in developing e-governance and the digital economy. Huang Kunming, Director of the Publicity Department of theCommunist Party of China (CPC), addressed the opening ceremony, urging implementing Xi’s strategic thought and instructions on building China into an internet power. He also urged achieving breakthroughs in core technologies. Tencent Chairman Pony Ma and Alibaba Group Founder Jack Ma also spoke at the Summit. Jack Ma said a law on the digital economy is urgently needed to guide the development of internet companies in China. The country isthe world’s largest e-commerce market, accounting for over40% of the value of worldwide transactions, according to the McKinsey Global Institute.

Xi’s words were also seen as encouraging companies to incorporate advanced technologies including big data, artificial intelligence (AI), virtual reality (VR) and augmentedreality into their products, according to Xiong Li, CEO of NetDragon Websoft, China’s leading online gaming and education developer.

Comprehensive master plan for the XionganNew Area published

A master plan for the development of the Xiongan New Area in Hebei province was published last week. Xiongan isanother new area of “national significance” following the Shenzhen Special Economic Zone and Shanghai Pudong New Area, which has the highest backing of the Communist Party and of the Chinese government. The plancharts the development of the Xiongan New Area, mappingout the area’s future by 2035 and looking ahead into the mid-21st century, according to the document.

It has 10 chapters covering general requirements, developing a scientific and reasonable layout, shaping the city landscape for a new era, building a beautiful natural ecology and environment, developing high-end and high-tech industries, offering quality shared public services, constructing a fast and highly-efficient transport network, building a green and smart new city, fostering a modernizedcity security system, and ensuring orderly and effective implementation of the plan. The document sets 38 key targets for the building of Xiongan. The key targets include the ratio of research and development (R&D) expenditure inthe local GDP, the number of patents registered by every 10,000 people, big data’s contribution to urban and emergency management, and air quality improvement. Bidding on transport projects, including railways and highways, will start soon. The new plan will spur huge amounts of investment, up to at least CNY10 trillion. This year, 13 projects will be started in Xiongan, with investment of more than CNY60 billion.

In April 2017, China announced the establishment of Xiongan New Area, spanning three counties in Hebei province about 100 kilometers southwest of Beijing. Xiongan will be the location for Beijing’s non-capital functions. The area will become a new home for Beijing’s colleges, hospitals, business headquarters, and financial and public institutions that meet the requirement of Xiongan’s status and development. This means that polluting industires will not be allowed to be set up in the area. By 2035, Xiongan will basically develop into a moderncity that is green, intelligent, and livable, with relatively

NEWSLETTER 2 MAY 2018 9

and CNY200 billion in the second round to help China secure a leading position in IC design and manufacturing.

According to the government’s blueprint, Chinese semiconductor companies will need to supply 40% of the nation’s chips by 2020 and the proportion will rise to 50% in2025. China has remained heavily dependent on the importof semiconductors, accounting for more than 60% of annualglobal chip sales, according to PwC. Semiconductors represent one of the top exports of the U..S, along with aircraft, refined oil and cars. No Chinese semiconductor company has been able to crack the world’s top 20 ranking in terms of sales. Three Taiwanese firms – Taiwan Semiconductor Manufacturing Company, MediaTek and United Microelectronics Corp – were among those in the top 20, according to IC Insights. China’s Huawei Technologies is applauded for producing Kirin, its own chipsets for smartphones. Alibaba Group is also entering the semiconductor sector after acquiring chipmaker Hangzhou C-Sky Microsystems.

President Xi calls to build a digital China atFuzhou Summit

Chinese President Xi Jinping called for the promotion of informatization and the building of a digital China in a congratulatory letter sent to the first Digital China Summit, which ran from April 21 till 24 in Fuzhou, capitalof Fujian province. Digitalization, networking and the application of intelligent technologies are playing more important roles in promoting social and economic development, modernizing China’s governance system andcapacity, and meeting the people’s ever-growing needs for a better life, Xi Jinping said in the letter.

The summit showcased China’s latest achievements in developing e-governance and the digital economy. Huang Kunming, Director of the Publicity Department of theCommunist Party of China (CPC), addressed the opening ceremony, urging implementing Xi’s strategic thought and instructions on building China into an internet power. He also urged achieving breakthroughs in core technologies. Tencent Chairman Pony Ma and Alibaba Group Founder Jack Ma also spoke at the Summit. Jack Ma said a law on the digital economy is urgently needed to guide the development of internet companies in China. The country isthe world’s largest e-commerce market, accounting for over40% of the value of worldwide transactions, according to the McKinsey Global Institute.

Xi’s words were also seen as encouraging companies to incorporate advanced technologies including big data, artificial intelligence (AI), virtual reality (VR) and augmentedreality into their products, according to Xiong Li, CEO of NetDragon Websoft, China’s leading online gaming and education developer.

Comprehensive master plan for the XionganNew Area published

A master plan for the development of the Xiongan New Area in Hebei province was published last week. Xiongan isanother new area of “national significance” following the Shenzhen Special Economic Zone and Shanghai Pudong New Area, which has the highest backing of the Communist Party and of the Chinese government. The plancharts the development of the Xiongan New Area, mappingout the area’s future by 2035 and looking ahead into the mid-21st century, according to the document.

It has 10 chapters covering general requirements, developing a scientific and reasonable layout, shaping the city landscape for a new era, building a beautiful natural ecology and environment, developing high-end and high-tech industries, offering quality shared public services, constructing a fast and highly-efficient transport network, building a green and smart new city, fostering a modernizedcity security system, and ensuring orderly and effective implementation of the plan. The document sets 38 key targets for the building of Xiongan. The key targets include the ratio of research and development (R&D) expenditure inthe local GDP, the number of patents registered by every 10,000 people, big data’s contribution to urban and emergency management, and air quality improvement. Bidding on transport projects, including railways and highways, will start soon. The new plan will spur huge amounts of investment, up to at least CNY10 trillion. This year, 13 projects will be started in Xiongan, with investment of more than CNY60 billion.

In April 2017, China announced the establishment of Xiongan New Area, spanning three counties in Hebei province about 100 kilometers southwest of Beijing. Xiongan will be the location for Beijing’s non-capital functions. The area will become a new home for Beijing’s colleges, hospitals, business headquarters, and financial and public institutions that meet the requirement of Xiongan’s status and development. This means that polluting industires will not be allowed to be set up in the area. By 2035, Xiongan will basically develop into a moderncity that is green, intelligent, and livable, with relatively

NEWSLETTER 2 MAY 2018 10

strong competitiveness and harmonious human-environment interaction. By the middle of the century, it will become a significant part of the Beijing-Tianjin-Hebei city cluster, the Shanghai Daily reports.

PBOC Governor pledges opening up of financialsector

Recently appointed Governor of the People’s Bank of China(PBOC) Yi Gang attended the three-day spring meetings of the International Monetary Fund (IMF) and the World Bank in Washington. In a statement to the International Monetary and Financial Committee, Yi said China would “vigorously” push forward the reform and opening of its financial sector, significantly relax market access restrictions, create a more attractive investment environment, strengthen the protection of intellectual property, and actively expand imports. Yi told a seminar in Washington that the U.S. should also look at bilateral trade in the service industry, reiterating the pledge that China would continue to open its financial sector. “China will continue its fundamental strategy of opening up its financialmarkets – and that will not be affected by the current trade friction with the U.S.,” Yi said. He added that as the sector opened further, the U.S. would see growth in its services trade with China.

China’s economic fundamentals are strong and it has sufficient policy tools to guard against systemic risks, Governor Yi Gang said. The Chinese government has prioritized containing financial risks, after years of debt-fueled growth put China’s economy on what the IMF previously called a “dangerous and unsustainable” trend.

U.S. Treasury Secretary Steven Mnuchin announced that a trip to China was under consideration to discuss the trade dispute between the two countries, but no date has yet been announced. Moreover, experts do not expect a breakthrough if such a trip materializes. “The larger threatis posed by increasing trade tensions and the possibility that we enter a sequence of unilateral, tit-for-tat measures, all of which generate uncertainties for global trade and GDPgrowth,” Roberto Azevedo, Director General of the World Trade Organization (WTO), told the IMF’s Policy Committee.

China’s ODI up 24% in Q1 despite stringentcontrols

China’s non-financial outbound direct investment (ODI) surged 24.1% year-on-year in the first quarter ofthis year, as stringent controls have reined in domestic companies’ irrational buying spree, the Ministry of Commerce (MOFCOM) said. Chinese investors made USD25.5 billion of non-financial ODI in 2,023 foreign enterprises across 140 economies in this year’s first quarter. “The structure of ODI has been optimized, as stringent controls have effectively reined in irrational outbound investment,” the Ministry said. Most investment flowed into sectors such as leasing, mining, manufacturing and information technology services. ODI in the leasing andbusiness service sectors accounted for approximately one- fourth of the total.

In comparison, no new investments were made in the property, sports and entertainment sectors in the same period. China’s outbound direct investment, after peaking in2016, saw a drastic reduction in 2017 amid the government’s efforts to curb irrational investment overseas that has brought potential risks to overall financial security. China’s ODI in economies participating in the Belt and Road Initiative climbed 22.4% year-on-year to USD3.61 billion in the first three months this year.

Foreign direct investment (FDI) into China registered steady growth, increasing 0.5% year-on-year to CNY227.54billion in the first quarter this year. FDI in the high-tech sector accounted for nearly one-fifth of total FDI in the period.

China International Import Expo launches onlinetrading platform

The China International Import Expo, which will be held in Shanghai from November 5 to 10, has launched its one-stop online trading platform to give the six-day event an extended life online throughout the year. Companies participating in the CIIE will be able to display their productson the e-platform. They can seek potential partners, and complete online trading using digital payment systems.Donghao Lansheng, the expo’s operator, and the Council for the Promotion of International Trade (CCPIT) Shanghai, will be responsible for the design and management of the online platform. Some 30 companies have already created a presence on the e-platform. Thanks to the online

NEWSLETTER 2 MAY 2018 10

strong competitiveness and harmonious human-environment interaction. By the middle of the century, it will become a significant part of the Beijing-Tianjin-Hebei city cluster, the Shanghai Daily reports.

PBOC Governor pledges opening up of financialsector

Recently appointed Governor of the People’s Bank of China(PBOC) Yi Gang attended the three-day spring meetings of the International Monetary Fund (IMF) and the World Bank in Washington. In a statement to the International Monetary and Financial Committee, Yi said China would “vigorously” push forward the reform and opening of its financial sector, significantly relax market access restrictions, create a more attractive investment environment, strengthen the protection of intellectual property, and actively expand imports. Yi told a seminar in Washington that the U.S. should also look at bilateral trade in the service industry, reiterating the pledge that China would continue to open its financial sector. “China will continue its fundamental strategy of opening up its financialmarkets – and that will not be affected by the current trade friction with the U.S.,” Yi said. He added that as the sector opened further, the U.S. would see growth in its services trade with China.

China’s economic fundamentals are strong and it has sufficient policy tools to guard against systemic risks, Governor Yi Gang said. The Chinese government has prioritized containing financial risks, after years of debt-fueled growth put China’s economy on what the IMF previously called a “dangerous and unsustainable” trend.

U.S. Treasury Secretary Steven Mnuchin announced that a trip to China was under consideration to discuss the trade dispute between the two countries, but no date has yet been announced. Moreover, experts do not expect a breakthrough if such a trip materializes. “The larger threatis posed by increasing trade tensions and the possibility that we enter a sequence of unilateral, tit-for-tat measures, all of which generate uncertainties for global trade and GDPgrowth,” Roberto Azevedo, Director General of the World Trade Organization (WTO), told the IMF’s Policy Committee.

China’s ODI up 24% in Q1 despite stringentcontrols

China’s non-financial outbound direct investment (ODI) surged 24.1% year-on-year in the first quarter ofthis year, as stringent controls have reined in domestic companies’ irrational buying spree, the Ministry of Commerce (MOFCOM) said. Chinese investors made USD25.5 billion of non-financial ODI in 2,023 foreign enterprises across 140 economies in this year’s first quarter. “The structure of ODI has been optimized, as stringent controls have effectively reined in irrational outbound investment,” the Ministry said. Most investment flowed into sectors such as leasing, mining, manufacturing and information technology services. ODI in the leasing andbusiness service sectors accounted for approximately one- fourth of the total.

In comparison, no new investments were made in the property, sports and entertainment sectors in the same period. China’s outbound direct investment, after peaking in2016, saw a drastic reduction in 2017 amid the government’s efforts to curb irrational investment overseas that has brought potential risks to overall financial security. China’s ODI in economies participating in the Belt and Road Initiative climbed 22.4% year-on-year to USD3.61 billion in the first three months this year.

Foreign direct investment (FDI) into China registered steady growth, increasing 0.5% year-on-year to CNY227.54billion in the first quarter this year. FDI in the high-tech sector accounted for nearly one-fifth of total FDI in the period.

China International Import Expo launches onlinetrading platform

The China International Import Expo, which will be held in Shanghai from November 5 to 10, has launched its one-stop online trading platform to give the six-day event an extended life online throughout the year. Companies participating in the CIIE will be able to display their productson the e-platform. They can seek potential partners, and complete online trading using digital payment systems.Donghao Lansheng, the expo’s operator, and the Council for the Promotion of International Trade (CCPIT) Shanghai, will be responsible for the design and management of the online platform. Some 30 companies have already created a presence on the e-platform. Thanks to the online

NEWSLETTER 2 MAY 2018 11

platform, the CIIE will become “an exhibition that never ends”.

Cao Wei, Vice President of the expo operator, said the purpose of launching the online platform is to ensurethe success of all participants of the CIIE and create an ecosystem that connects the internet, the expo and trade services. “We would like to build the expo into one of the best examples of China’s opening-up policy,” he said. So far, nearly 2,000 companies have committed to attend the CIIE, the majority from overseas. “Foreign companies will have to fly a lot of stuff all the way from their home country to Shanghai for the expo. Given all the efforts they have to make, we would like to extend our services online so that these overseas companies can demonstrate their latest achievements on the platform and make the most of the expo,” she said. The expo organizer is also developing a mobile app to reach a global audience. Shanghai’s Party Secretary Li Qiang said at a meeting to mark the 200-day countdown to the expo that the CIIE is the first national-level exhibition focussed on imports, the China Daily reports.

According to the General Administration of Customs, China’s first-quarter imports were worth CNY3.21 trillion, up11.7% year-on-year. The CCPIT said it will help about 100 countries and regions to promote up to 10,000 commoditiesin China, especially the imports of advanced technical equipment, key components and high-quality consumer goods. Meanwhile, the Council will organize delegations to go abroad to make collective purchases and hold meetings for entrepreneurs from both home and abroad. Shanghai also announced the establishment of the Shanghai International Import Trading Services Co.

Sorghum and steel wheels focus of continuingU.S.-China trade war

China has decided to impose provisional anti-dumping measures on sorghum imported from the United States, theMinistry of Commerce (MOFCOM) said in a preliminary anti-dumping ruling. It said that U.S. companies had dumped sorghum on the Chinese market, and such importshad caused substantial damage to the domestic industry. Starting on April 18, sorghum importers were required to pay deposits with Chinese customs of 178.6%. China is a major buyer of U.S. sorghum, which is used in the Chinese liquor baijiu. U.S. sorghum exports to China surged from 317,000 metric tons in 2013 to 4.76 million tons in 2017, while export prices have slumped 31% during the period, which led to a fall in domestic prices that hurt

local industries. Twenty ships carrying over 1.2 million tons of U.S. sorghum valued at more than USD216 are on the way to China, according the U.S. Department of Agriculture. At least five ships changed course within hours of China’s announcing the tariff. They would be liable for a hefty deposit to be paid on the value of their shipments, which could make the loads unprofitable to deliver.

In addition to sorghum, China also started an anti-dumping investigation into imported phenol from the United States, the European Union, South Korea, Japan and Thailand latelast month. Separately, China’s Ministry of Commerce announced a preliminary anti-dumping ruling on halogenated butyl rubber – used for making tires – originating from the U.S., the European Union and Singapore is being dumped into China. Importers representing such firms as ExxonMobil and Arlanxeo were told to pay import duty deposits ranging from 26% to 66.5%to China Customs. MOFCOM said that it had started an anti-trust inquiry into U.S. smartphone chip maker Qualcomm’s takeover of Dutch chip maker NXP Semiconductors on the basis that the deal could harm market competition. It said it would take “a large amount of time” to conduct the investigation.

“If China really does start slapping tariffs on everything, like soybeans and corn, things could get really ugly, really fast,” said Bill Densmore, Senior Director of Corporate Ratings at Fitch Ratings. The U.S. Commerce Department announcedit was starting new investigations to determine if certain steel wheels from China are dumped in the U.S. and whether manufacturers in China are receiving subsidies. The U.S. government also made a preliminary determination that aluminum sheet imports from China are being subsidized.

The U.S. has initiated five investigations on anti-dumping and countervailing measures against Chinese products so far this year. The number of cases has increased significantly year-on-year. Three of the five products involved are steel products.

Xiaomi expected to launch the biggest IPO of2018

Chinese smartphone maker Xiaomi is expected to launchthe biggest initial public offering (IPO) of 2018 as Founder Lei Jun is pondering where to list his USD100 billion company, being wooed by stock exchange officials from New York to Hong Kong, Shanghai and Singapore. It wouldbe the biggest IPO in 2018 and the largest global one in

NEWSLETTER 2 MAY 2018 11

platform, the CIIE will become “an exhibition that never ends”.

Cao Wei, Vice President of the expo operator, said the purpose of launching the online platform is to ensurethe success of all participants of the CIIE and create an ecosystem that connects the internet, the expo and trade services. “We would like to build the expo into one of the best examples of China’s opening-up policy,” he said. So far, nearly 2,000 companies have committed to attend the CIIE, the majority from overseas. “Foreign companies will have to fly a lot of stuff all the way from their home country to Shanghai for the expo. Given all the efforts they have to make, we would like to extend our services online so that these overseas companies can demonstrate their latest achievements on the platform and make the most of the expo,” she said. The expo organizer is also developing a mobile app to reach a global audience. Shanghai’s Party Secretary Li Qiang said at a meeting to mark the 200-day countdown to the expo that the CIIE is the first national-level exhibition focussed on imports, the China Daily reports.

According to the General Administration of Customs, China’s first-quarter imports were worth CNY3.21 trillion, up11.7% year-on-year. The CCPIT said it will help about 100 countries and regions to promote up to 10,000 commoditiesin China, especially the imports of advanced technical equipment, key components and high-quality consumer goods. Meanwhile, the Council will organize delegations to go abroad to make collective purchases and hold meetings for entrepreneurs from both home and abroad. Shanghai also announced the establishment of the Shanghai International Import Trading Services Co.

Sorghum and steel wheels focus of continuingU.S.-China trade war

China has decided to impose provisional anti-dumping measures on sorghum imported from the United States, theMinistry of Commerce (MOFCOM) said in a preliminary anti-dumping ruling. It said that U.S. companies had dumped sorghum on the Chinese market, and such importshad caused substantial damage to the domestic industry. Starting on April 18, sorghum importers were required to pay deposits with Chinese customs of 178.6%. China is a major buyer of U.S. sorghum, which is used in the Chinese liquor baijiu. U.S. sorghum exports to China surged from 317,000 metric tons in 2013 to 4.76 million tons in 2017, while export prices have slumped 31% during the period, which led to a fall in domestic prices that hurt

local industries. Twenty ships carrying over 1.2 million tons of U.S. sorghum valued at more than USD216 are on the way to China, according the U.S. Department of Agriculture. At least five ships changed course within hours of China’s announcing the tariff. They would be liable for a hefty deposit to be paid on the value of their shipments, which could make the loads unprofitable to deliver.

In addition to sorghum, China also started an anti-dumping investigation into imported phenol from the United States, the European Union, South Korea, Japan and Thailand latelast month. Separately, China’s Ministry of Commerce announced a preliminary anti-dumping ruling on halogenated butyl rubber – used for making tires – originating from the U.S., the European Union and Singapore is being dumped into China. Importers representing such firms as ExxonMobil and Arlanxeo were told to pay import duty deposits ranging from 26% to 66.5%to China Customs. MOFCOM said that it had started an anti-trust inquiry into U.S. smartphone chip maker Qualcomm’s takeover of Dutch chip maker NXP Semiconductors on the basis that the deal could harm market competition. It said it would take “a large amount of time” to conduct the investigation.

“If China really does start slapping tariffs on everything, like soybeans and corn, things could get really ugly, really fast,” said Bill Densmore, Senior Director of Corporate Ratings at Fitch Ratings. The U.S. Commerce Department announcedit was starting new investigations to determine if certain steel wheels from China are dumped in the U.S. and whether manufacturers in China are receiving subsidies. The U.S. government also made a preliminary determination that aluminum sheet imports from China are being subsidized.

The U.S. has initiated five investigations on anti-dumping and countervailing measures against Chinese products so far this year. The number of cases has increased significantly year-on-year. Three of the five products involved are steel products.

Xiaomi expected to launch the biggest IPO of2018

Chinese smartphone maker Xiaomi is expected to launchthe biggest initial public offering (IPO) of 2018 as Founder Lei Jun is pondering where to list his USD100 billion company, being wooed by stock exchange officials from New York to Hong Kong, Shanghai and Singapore. It wouldbe the biggest IPO in 2018 and the largest global one in

NEWSLETTER 2 MAY 2018 12

four years. It could also make 49-year old Lei Jun China’s wealthiest individual. He has built Xiaomi from a start-up into a company with 15,000 employees and CNY100 billion in sales in seven years, producing more than 70 products under the Mi brand, including smartphones, tablets, other electronic devices and household products. The company is even considering to manufacture cars in India, and nurturing 100 start-ups in the country in five years. The company’s valuation has more than doubled from its most recent 2014 fundraising when it was valued at USD45 billion, with Lei’s stake estimated at 77.8%.

“I started Xiaomi after turning 40, and had figured out 90% of the business model before starting the project,” Lei said. He founded Xiaomi in 2010 with seven engineers, includingalumni of Google, Motorola and Kingsoft. Lei Jun is motivated by the belief that Chinese manufacturers can cast off the stigma as makers of cheap, low-quality bootleg products, although it started selling its smartphones throughits website only at less than half the price of its competitors.But Xiaomi’s first smartphone, the Mi 1, featured Qualcomm’s top-of-the-line Snapdragon S3 Dual Core processor, with front and back cameras, and received morethan 300,000 pre-orders in the first 34 hours when it went on sale in 2010.

“We created this business model that we call “tipping”, which is to sell our hardware at zero-or-low profit margin, but monetize our complementary services. I call it the triathlete of the New Economy, where Xiaomi makes hardware and devices, sells its products through e-commerce and offers services on the internet,” Lei said. Xiaomi, which means millet in Chinese, sells its products at cost, or with a profit margin of 1% or 2%. “We sell our smartphones at affordable prices, but if you use our browser, watch streaming video on our phones, or use our online services, we earn a profit,” he said. The strategy made Xiaomi the top smartphone brand in India with a 27%marketshare.

In its Chinese home market, Xiaomi lags behind Huawei, Oppo and Vivo in smartphone sales, but the company aims to retake the No 1 spot, as it was the fastest growing seller among China’s four home-grown smartphone makers in the fourth quarter of 2017, increasing shipments by almost 58% for a 13.9% marketshare, ahead of Apple. Lei Jun has now become the elder statesman of Chinese tech investments, with both Xiaomi and his venture fund Shunwei Capital investing in an estimated 450 companies in China and overseas, the South China Morning Post reports.

China’s electric car market is growing twice asfast as the U.S.

China might be gaining the upper hand in electric vehicles (EVs), with domestic carmakers showcasing seven out of 10 new energy vehicles at this year’s eight-day Beijing Auto Show. A total of 1,022 models are on display at this year’s event. Of that number, 174 are new energy vehicles, including 124 made by Chinese companies. Tesla displayed a white Model S, a blue Model X and a red Model3. Shanghai-based NIO showcased its first production model, ES8, a high-performance sports utility vehicle (SUV)with a base price of CNY448,000 before subsidies, half the price of a Tesla Model X after import duties are added.

Last year, 777,000 EVs were sold in China, up 53% compared to 2016, about 2.7% of overall sales of 28,879,000 units sold in 2017, according to the China Association Of Automobile Manufacturers (CAAM).

As a result of the strong growth in EVs, China, which is nowthe largest EV market in the world, has also seen a surge ofstart-ups focusing on building new energy cars. Singulato Motor announced at the Beijing Auto Show that it has received a new round of funding worth CNY3 billion and has established a CNY10 billion fund for EVs with the Suzhou municipal government for investing in related areassuch as batteries, engineering, motors and artificial intelligence. The Chinese government has been pushing the new energy vehicles’ industry, and it also wants to lead and dominate the EV market. The government wants EVs to account for 12% of overall sales by 2020. On the other hand, EVs still remain a niche market in the U.S. and growth declined last year. In 2017, nearly 200,000 electric cars were sold in the U.S., or about 1.2% of the 17 million vehicles sold. The growth rate slowed down to 24% in 2017from 37% the previous year.

The Chinese government has been offering subsidies to buyers of EVs of up to CNY110,000 per unit, although subsidies were discontinued for vehicles with a driving range of under 150 kilometers. The State Grid Corporation of China has planned to build 120,000 public charging stations for electric cars by 2020. China’s domestic EV makers have been able to keep their costs low and prices competitive compared to petrol driven cars. The most popular range of EVs sold in China is priced between CNY80,000 to CNY100,000, making it appealing to the country’s cost conscious buyers, the South China Morning Post reports.

NEWSLETTER 2 MAY 2018 12

four years. It could also make 49-year old Lei Jun China’s wealthiest individual. He has built Xiaomi from a start-up into a company with 15,000 employees and CNY100 billion in sales in seven years, producing more than 70 products under the Mi brand, including smartphones, tablets, other electronic devices and household products. The company is even considering to manufacture cars in India, and nurturing 100 start-ups in the country in five years. The company’s valuation has more than doubled from its most recent 2014 fundraising when it was valued at USD45 billion, with Lei’s stake estimated at 77.8%.

“I started Xiaomi after turning 40, and had figured out 90% of the business model before starting the project,” Lei said. He founded Xiaomi in 2010 with seven engineers, includingalumni of Google, Motorola and Kingsoft. Lei Jun is motivated by the belief that Chinese manufacturers can cast off the stigma as makers of cheap, low-quality bootleg products, although it started selling its smartphones throughits website only at less than half the price of its competitors.But Xiaomi’s first smartphone, the Mi 1, featured Qualcomm’s top-of-the-line Snapdragon S3 Dual Core processor, with front and back cameras, and received morethan 300,000 pre-orders in the first 34 hours when it went on sale in 2010.

“We created this business model that we call “tipping”, which is to sell our hardware at zero-or-low profit margin, but monetize our complementary services. I call it the triathlete of the New Economy, where Xiaomi makes hardware and devices, sells its products through e-commerce and offers services on the internet,” Lei said. Xiaomi, which means millet in Chinese, sells its products at cost, or with a profit margin of 1% or 2%. “We sell our smartphones at affordable prices, but if you use our browser, watch streaming video on our phones, or use our online services, we earn a profit,” he said. The strategy made Xiaomi the top smartphone brand in India with a 27%marketshare.

In its Chinese home market, Xiaomi lags behind Huawei, Oppo and Vivo in smartphone sales, but the company aims to retake the No 1 spot, as it was the fastest growing seller among China’s four home-grown smartphone makers in the fourth quarter of 2017, increasing shipments by almost 58% for a 13.9% marketshare, ahead of Apple. Lei Jun has now become the elder statesman of Chinese tech investments, with both Xiaomi and his venture fund Shunwei Capital investing in an estimated 450 companies in China and overseas, the South China Morning Post reports.

China’s electric car market is growing twice asfast as the U.S.

China might be gaining the upper hand in electric vehicles (EVs), with domestic carmakers showcasing seven out of 10 new energy vehicles at this year’s eight-day Beijing Auto Show. A total of 1,022 models are on display at this year’s event. Of that number, 174 are new energy vehicles, including 124 made by Chinese companies. Tesla displayed a white Model S, a blue Model X and a red Model3. Shanghai-based NIO showcased its first production model, ES8, a high-performance sports utility vehicle (SUV)with a base price of CNY448,000 before subsidies, half the price of a Tesla Model X after import duties are added.

Last year, 777,000 EVs were sold in China, up 53% compared to 2016, about 2.7% of overall sales of 28,879,000 units sold in 2017, according to the China Association Of Automobile Manufacturers (CAAM).

As a result of the strong growth in EVs, China, which is nowthe largest EV market in the world, has also seen a surge ofstart-ups focusing on building new energy cars. Singulato Motor announced at the Beijing Auto Show that it has received a new round of funding worth CNY3 billion and has established a CNY10 billion fund for EVs with the Suzhou municipal government for investing in related areassuch as batteries, engineering, motors and artificial intelligence. The Chinese government has been pushing the new energy vehicles’ industry, and it also wants to lead and dominate the EV market. The government wants EVs to account for 12% of overall sales by 2020. On the other hand, EVs still remain a niche market in the U.S. and growth declined last year. In 2017, nearly 200,000 electric cars were sold in the U.S., or about 1.2% of the 17 million vehicles sold. The growth rate slowed down to 24% in 2017from 37% the previous year.

The Chinese government has been offering subsidies to buyers of EVs of up to CNY110,000 per unit, although subsidies were discontinued for vehicles with a driving range of under 150 kilometers. The State Grid Corporation of China has planned to build 120,000 public charging stations for electric cars by 2020. China’s domestic EV makers have been able to keep their costs low and prices competitive compared to petrol driven cars. The most popular range of EVs sold in China is priced between CNY80,000 to CNY100,000, making it appealing to the country’s cost conscious buyers, the South China Morning Post reports.

NEWSLETTER 2 MAY 2018 13

USTR keeping China on IPR watchlist

The Office of the U.S. Trade Representative (USTR) is keeping China on a “priority watch list” of 12 countries with problematic or deteriorating environments for IP in its annual global violations report. Other countries include Canada, which was given the designation for the first time, as well as India, Indonesia, Russia and Venezuela. “China continues to take steps backward as it requires U.S. and other foreign firms wishing to do business in China to transfer IT to domestic firms as a precondition,” said a USTR official. “These unfair requirements in pursuit of China’s industrial policy goals place a great strain on our trade relationship.”

The U.S. Congress instructed the Trade Representative’s Office to produce the annual 301 report because “IP-intensive industries support 45.5 million American jobs and contribute 30% of U.S. gross domestic product,” the USTR official said. “As noted in this latest report, there are severalareas of ongoing concern in the global innovation marketplace. China remains a major challenge for innovators,” Patrick Kilbride, Senior Vice President of the Chamber of Commerce’s Global Innovation Policy Center, said. The USTR noted signs that China is considering remedies for some of the concerns raised in the report, but cautioned that execution is a question mark. “China’s expansion of specialized IT courts and tribunals may be positive if it leads to greater expertise and decision-making,but it is critical that China’s decision making is free of political or other influence,” the USTR official said.

U.S. Trade Representative Robert Lighthizer and other high-ranking Trump administration officials are scheduled tovisit Beijing this week to try to avert an all-out trade war. White House Trade Adviser Peter Navarro, Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow will join Lighthizer when he meets Chinese officials, including President Xi Jinping and Vice President Wang Qishan, on May 3 and 4, the South China Morning Post reports.

Air Belgium cancels start of operations afterfailing to get permission to fly over Russia

Air Belgium, which had planned to launch flights between Brussels South (Charleroi) and Hong Kong on April 30 has cancelled flights until June 3. The low-cost long-haul carrier said it had failed to secure permission to fly over Russia. The company had started selling tickets in

April despite not having secured all relevant permits. A totalof 38 flights set to run between Brussels and Hong Kong will be axed until June 3 at the earliest, when the airline hopes it will be granted access to Russian airspace.

CEO Niky Terzakis said passengers who had booked Air Belgium tickets could still fly to Hong Kong on different airlines, receive a full refund, or defer travel with “financial compensation”. “Everything will be done to find a solution for each passenger,” he added. Passengers who opt to delay their trip could receive extra compensation as the cost of a new flight may be lower than the potential compensation of €600, the maximum payout set by the European Union to protect consumer rights. According to the South China Morning Post, Air Belgium’s cheapest tickets, which do not include a baggage allowance, were in some instances more expensive than those of competitors. Cathay Pacific was offering promotional fares of HKD4,192,compared with Air Belgium’s basic fare of HKD4,498.

Hong Kong investor Peter Yip owns a 49% stake in Air Belgium.

Your banner at the FCCC website or newsletter

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

NEWSLETTER 2 MAY 2018 13

USTR keeping China on IPR watchlist

The Office of the U.S. Trade Representative (USTR) is keeping China on a “priority watch list” of 12 countries with problematic or deteriorating environments for IP in its annual global violations report. Other countries include Canada, which was given the designation for the first time, as well as India, Indonesia, Russia and Venezuela. “China continues to take steps backward as it requires U.S. and other foreign firms wishing to do business in China to transfer IT to domestic firms as a precondition,” said a USTR official. “These unfair requirements in pursuit of China’s industrial policy goals place a great strain on our trade relationship.”

The U.S. Congress instructed the Trade Representative’s Office to produce the annual 301 report because “IP-intensive industries support 45.5 million American jobs and contribute 30% of U.S. gross domestic product,” the USTR official said. “As noted in this latest report, there are severalareas of ongoing concern in the global innovation marketplace. China remains a major challenge for innovators,” Patrick Kilbride, Senior Vice President of the Chamber of Commerce’s Global Innovation Policy Center, said. The USTR noted signs that China is considering remedies for some of the concerns raised in the report, but cautioned that execution is a question mark. “China’s expansion of specialized IT courts and tribunals may be positive if it leads to greater expertise and decision-making,but it is critical that China’s decision making is free of political or other influence,” the USTR official said.

U.S. Trade Representative Robert Lighthizer and other high-ranking Trump administration officials are scheduled tovisit Beijing this week to try to avert an all-out trade war. White House Trade Adviser Peter Navarro, Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow will join Lighthizer when he meets Chinese officials, including President Xi Jinping and Vice President Wang Qishan, on May 3 and 4, the South China Morning Post reports.

Air Belgium cancels start of operations afterfailing to get permission to fly over Russia

Air Belgium, which had planned to launch flights between Brussels South (Charleroi) and Hong Kong on April 30 has cancelled flights until June 3. The low-cost long-haul carrier said it had failed to secure permission to fly over Russia. The company had started selling tickets in

April despite not having secured all relevant permits. A totalof 38 flights set to run between Brussels and Hong Kong will be axed until June 3 at the earliest, when the airline hopes it will be granted access to Russian airspace.

CEO Niky Terzakis said passengers who had booked Air Belgium tickets could still fly to Hong Kong on different airlines, receive a full refund, or defer travel with “financial compensation”. “Everything will be done to find a solution for each passenger,” he added. Passengers who opt to delay their trip could receive extra compensation as the cost of a new flight may be lower than the potential compensation of €600, the maximum payout set by the European Union to protect consumer rights. According to the South China Morning Post, Air Belgium’s cheapest tickets, which do not include a baggage allowance, were in some instances more expensive than those of competitors. Cathay Pacific was offering promotional fares of HKD4,192,compared with Air Belgium’s basic fare of HKD4,498.

Hong Kong investor Peter Yip owns a 49% stake in Air Belgium.

Your banner at the FCCC website or newsletter

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

NEWSLETTER 2 MAY 2018 14

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 SonckMembers 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 SA

Mr. Philippe Van der Donckt, Director Government Affairs Asia, NV UMICORE SA

Membership rates for 2018 (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 MAY 2018 14

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 SonckMembers 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 SA

Mr. Philippe Van der Donckt, Director Government Affairs Asia, NV UMICORE SA

Membership rates for 2018 (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.