Sinobravo policy newsletter (July, 2022)

In the face of multiple pressures, China's GDP grew by 2.5% year-on-year in H1 of 2022. The Russia-Ukraine conflict pushed up global commodity prices for energy, food and other commodities, causing shocks to logistics and supply chains, and posing new challenges to China’s economic development.

From the current situation, the economy in H2 is still facing great uncertainty and instability, The impact of the domestic epidemic is still lingering. The demand contraction and supply shocks are intertwined, with structural contradictions and cyclical problems overlapping. Business and merchants are still running difficultly. People lack confidence and unemployment rate is still high.  

The Political Bureau of the Central Committee of the Communist Party of China (CPC) has deployed H2’s economic work. China will adhere to seek progress in a stable manner, focus on stabilizing employment and prices, promote high-quality development and introduce technology and foreign investment.

Premier Li Keqiang said that China would not introduce large-scale stimulus measures or distribute currency excessively. The government will continue to press ahead with reform of government functions, expand opening up, implement policies to stabilize foreign trade and foreign investment, and support enterprises to carry out extensive international cooperation.

The executive meeting of the State Council deployed policy initiatives to continuously expand effective demand, determined to further regulate administrative discretion, and decided to cancel and adjust a number of penalty matters.

Top-level strategic planning for the digital economy was carried out in an orderly manner. Twenty departments have established an inter-ministerial joint meeting system for the development of the digital economy to coordinate the formulation of planning and policies in key areas of the digital economy, and promote major projects and pilot demonstrations in the digital economy. Shanghai issued the 14th Five-Year Plan for the development of Shanghai's digital economy. With a massive introduction of policies and plans for the development of digital economy around the world, China's digital economy is entering a new stage of rapid development. In terms of international cooperation, China has been promoting economic and trade cooperation with ASEAN, BRICS countries and Kyrgyzstan, etc.

Economic Performance

China's gross domestic product grew by 2.5% year-on-year in H1 and 0.4% in the second quarter. The latest statistics for June showed a gradual stabilization and recovery of key economic indicators -

- Industrial added value above designated size increased by 3.9% year-on-year.
-Total retail sales of consumer goods increased by 3.1% year-on-year.
-Total imports and exports increased by 14.3% year-on-year, with exports up 22%.
-CPI rose by 2.5% year-on-year, unchanged month-on-month.
-Value added in the services sector increased by 1.8% year-on-year in H1.
- Fixed asset investment grew by 6.1% year-on-year, with a faster growth in high technology industries and social sectors in H1.
-The urban unemployment rate averaged 5.7% in H1 and 5.8% in the second quarter. 

Policy Environment

【Foreign Direct Investment】

The Central Committee of CPC: We should inspire the initiative of enterprises and entrepreneurs and create a good policy and institutional environment so that state-owned enterprises dare to work, private enterprises dare to venture and foreign enterprises dare to invest.

Premier Li Keqiang: We must guarantee foreign enterprises equal access to opening-up areas in accordance with the law, and we must support state-owned enterprises, private enterprises and foreign enterprises to relieve their difficulties and help them to develop with no discrimination.

Central Bank and State Administration of Foreign Exchange: Pilot projects will be carried out in Shanghai, Guangdong, Shaanxi, Beijing, Zhejiang, Shenzhen, Qingdao and Ningbo to allow multinational companies to handle local and foreign currency receipts and payment operations from overseas companies within the territory of China.

【TAX】

Ministry of Finance, State Taxation Administration and China Securities Regulatory Commission: After Exchange Traded Funds (ETFs) are included in Hong Kong-China Stock Connect, the current taxation policies relating to mutual recognition of Mainland and Hong Kong funds will apply. China Securities Depository and Clearing Corporation Limited is responsible for withholding and paying on behalf of Mainland investors the personal income tax on income derived from Hong Kong fund distributions.

State Administration of Taxation: The Guidelines on Tax Preferential Policies to Support Green Development was released, containing 56 tax preferential policies to support environmental protection, energy conservation, comprehensive use of resources and the development of low-carbon industries.

Trends of Industries

【The Internet Industry】

Key words of the month: outbound data transfer security assessment; heavy fines for DIDI; China national cloud; dual primary listing.

*Policy Environment*

The Cyberspace Administration of China 1) issued Measures for the Security Assessment of Outbound Data Transfer; 2) imposed a fine of 8.03 billion yuan on DIDI Chuxing Technology Co. Ltd; 3) kicked off a two-month campaign to clean up websites aimed at users under the age of 18. 

The China Academy of Information and Communications Technology announced the first batch of companies that have passed the face information privacy protection assessment. 

State-owned Asset Supervision and Administrative Commission announced that China Telecom has introduced a number of strategic investors from state-owned enterprises to build a China national cloud company to coordinate scientific and technological innovation, facility construction and security protection system deployment, and accelerate the construction of an original cloud technology ecology.

*Company News*

Alibaba applies for a "dual primary listing" in Hong Kong and New York.
Ant Group management staff ceased to be a partner of Alibaba. Both parties agreed to terminate the Data Sharing Agreement.
Ebay will close on 12 August.
Bytedance will downsize recruitment from 2022 to 2023.
IQIYI and TikTok announced a partnership to explore secondary creation and promotion of videos.
Kingsoft Cloud formally submits application for dual primary listing in Hong Kong.

【Automotive Industry】

Keywords of the month: Policies encourage car purchases; Shanghai targets intelligent connected vehicle industry.

*Policy Environment*

The executive meeting of the State Council clarified the policies to increase support for car consumption, including encouraging the elimination and renewal of old vehicles and supporting the construction of charging facilities.

The Ministry of Commerce, together with 17 departments, issued the Notice on Several Measures to Stimulate Auto Circulation and Expand Auto Consumption, which supports the purchase of new energy vehicles and the activation the second-hand car market.

The Beijing Municipal Bureau of Commerce encourages district governments, industry associations and auto retail companies to carry out various types of promotions. Financial support of up to RMB 500,000 per quarter will be given to eligible auto retailers.

Shanghai has agreed to the Implementation Plan for Accelerating the Innovative Development of Intelligent Connected Vehicles in Shanghai. The city will make every effort to become a superpower of intelligent connected vehicles and hydrogen energy industry.

*Company News*

Huawei starts ride-hailing service and has tested its service platform Petal Travel in Beijing, Shenzhen and Nanjing.
Pony AI and SANY Group set up a joint venture to develop, produce and sell L4 self-driving heavy truck products and build a high-end brand.
Neta Auto completed the D3 round of funding of several hundred million RMB from Dayone Capital.
Geely Auto's electric vehicle sales increased 343% year-on-year in June.

Baidu's self-driving service platform Radish Run begins a commercial pilot in Wuhan, offering paid services.

Tesla's Shanghai plant exports 97,182 vehicles in H1, accounting for half of China's total electric vehicle exports. 

BMW's global sales fell 19.8% in the second quarter, and its electric car sales increased 110% in H1.

Ford and GM applied to deploy steering wheel-less self-driving cars in the US.

【Semiconductor Industry】

Key words of the month: Bytedance enters semiconductor industry.

*Company News*

Due to global inflation and rising costs, Intel will raise the prices of a variety of semiconductor chips in H2, with some prices increasing by 10 to 20 percent.

Sources say Bytedance is hiring a large number of chip engineers and may be preparing to develop its own chips.

Xiaomi Corporation has invested in Yinglefei Semiconductor. Xiaomi Industrial Investment has invested in a total of 110 chip semiconductor and electronics related companies.

Samsung plans to invest 1.4 trillion yuan in the US and set up 11 new chip plants. 

The initial public offering of shares of Anhui Anxin Electronic Technology Co., Ltd. was approved by the Science and Technology Innovation Board at its Listing Committee meeting.

【Medical Industry】

Key words of the month: listing. 

*Company News*

Lepu Medical received conditional approval from the Swiss Stock Exchange Supervisory Authority for the issuance of GDRs and listing on the Swiss Stock Exchange.

MicroPort was listed on the Main Board of the Stock Exchange of Hong Kong, raising total proceeds of approximately HK$338 million.

Bright Eye Hospital was listed on the Growth Enterprise Market of the Shenzhen Stock Exchange.

Minova Pharma has completed a series A financing of over 100 million yuan.

Fermion Technology has raised over 100 million yuan in Series B funding, which will be used for clinical research and upgrades to its AI drug development platform.