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US-China Market Watch: Trade, Alibaba, and “Wolf Warrior 2”

Sept. 4, 2017
Young woman using a smartphone while waiting to get into the cinema for a movie
(Photo credit): by Tang Ming Tung

Roundup of the latest U.S.-China business and industry news.

Trump launches probe into Chinese trade practices

The U.S. has officially launched a formal investigation into China’s trade practices, citing intellectual property theft that’s estimated to cost the U.S. economy $600 billion.

The probe, headed by U.S. Trade Representative Robert Lighthizer, likely serves as retaliation for Beijing’s perceived lack of action regarding North Korea’s nuclear missile program, according to Reuters, and will likely further complicate already tense trade relations between the U.S. and China.

In response, China has criticized the move, calling it “irresponsible” and labeling it as “protectionism.”

China establishes new rules restricting overseas investment

After Chinese outbound investment hit a record high in 2016, the Chinese government has formally made official restrictions to limit the flow of money overseas.

Chinese overseas investment had already dropped over 44 percent in the first half of 2017, and with regulators ordering banks to block Dalian Wanda from making further acquisitions, this news should come as no surprise. The reasoning behind the decision is to curb “irrational” overseas investment in some industries, while encouraging investment in industries that will promote China’s Belt and Road initiatives.

The restrictions are divided into three categories: “banned,” “restricted” and “encouraged.” Affected industries include real estate, entertainment and agriculture; real estate and entertainment fall under “restricted,” while investments in agriculture are “encouraged.” Areas like gambling and military technology—or anything that involves national security—are “banned.”

“Wolf Warrior 2” revives sluggish Chinese box office, marks new era

Despite concerns over last year’s lackluster box office growth, “Wolf Warrior 2” has surpassed all expectations to become China’s highest-grossing film ever (over $760 million to-date), shattering the previous record held by the romantic comedy “The Mermaid.”

Although the government placed many limitations on foreign films, Hollywood films (particularly summertime blockbusters) still made up the bulk of Chinese box office receipts. However, with “Wolf Warrior 2,” it seems like Chinese studios have hit their stride, melding Hollywood-quality action with the right level of nationalism.

Coupled with the new restrictions on entertainment, Hollywood rightfully has concerns about where its profits are going to come from in the future if China focuses more on its homegrown films. However, Variety writes that executives should see this as an opportunity to create a more genuine relationship between Hollywood and China—one that’s based on quality over quantity.

Alibaba loading up on partnerships and acquisitions

E-commerce giant Alibaba Group Holding has made strides to expand its offerings, both in China and overseas.

In the beginning of August, Alibaba announced that it has entered a joint venture with U.S. hospitality company Marriott International. According to the company’s press release, Alibaba will manage Marriott’s storefront on its own travel app, Fliggy, to attract more Chinese consumers traveling abroad. Users will be able to book rooms from any of Marriott’s hotel brands and use Alipay, Alibaba’s mobile payments service, to pay for purchases at the hotels.

The partnership with Marriott fits into Alibaba’s plan to expand Alipay overseas. With stiff domestic competition coming from Tencent Holdings Ltd.’s own mobile payments service Tenpay, Alibaba is hoping to leverage its big e-commerce presence to attract Chinese tourists traveling overseas or new foreign users.

On the domestic side, Alibaba has recently acquired Waimai, Baidu Inc.’s food delivery service, via, another online food delivery service that Alibaba backs. The acquisition is part of Alibaba’s ongoing battle with Tencent to promote Alipay and increase its share of the online-to-offline market.

Ford enters joint venture with Chinese automaker

Ford Motors is the latest American automaker to enter the Chinese electric vehicle (EV) market. Ford announced that it will enter its third joint venture with a local Chinese automaker. This time, Ford has partnered with Anhui Zotye Automobile to create affordable electric passenger vehicles under a new brand.

Zotye was one of the first automakers in China to produce fully electric vehicles in its domestic market and has so far sold 16,000 EVs in 2017. Considering Ford’s China sales were down 7 percent, the partnership likely serves to boost Ford’s sales, as well as advance Ford’s plans to have 70 percent of all cars sold in China be EVs by 2025. Zotye’s chairman and president, Jin Zheyong, states that the partnership between the two automakers allows both sides to leverage the strengths in a “win-win situation.”

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