French retail giant retreats from China

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1. Carrefour retreats from China  

Reuters reports that French supermarket chain Carrefour, which opened its first store in China in Beijing in 1995, is selling a majority stake of its Chinese operations to Suning.com, the electronics and white goods retailer that has been trying to transform itself into a hybrid ecommerce and bricks-and-mortar supershop. 

For 620 million euros ($705 million) in cash, Carrefour will sell 80 percent of its China entity to Suning. The deal includes options to sell the remaining 20 percent stake, two Carrefour seats on the board, and the continued use of the Carrefour brand for at least 4.5 years after completion of the deal.

Why did Carrefour sell? Reuters attributes it to the French company’s need to focus on competition with Amazon.com in Europe, and “Carrefour’s falling sales and operating losses in China.” Investors reacted positively: Carrefour shares were up 1.1 percent at 17.19 euros, after opening up 2.5 percent.” Reuters also notes that “Carrefour follows other big-name Western retailers such as Tesco Plc and Walmart Inc, which have sold stakes to domestic partners, and Amazon, which plans to shut its online store in China next month.”

Why did Suning buy? Suning has a convoluted history with Alibaba, but whereas the ecommerce giant was once an ally in Suning’s quest to sell online, it is now “a potential competitor in the omnichannel commerce space,” according to TechCrunch:

The Carrefour deal is tipped to up the arms race as Carrefour China’s retail presence could boost Suning’s offline reach. Carrefour numbers 210 hypermarkets and 24 convenience stores and generated 28.5 billion yuan or $4.09 billion — in sales last year. Suning, meanwhile, has over 8,880 stores across 700-plus cities in China.

2. Unmanned stores are not dead yet 

On June 17, Nikkei Asian Review published a story titled China’s unmanned store boom ends as quickly as it began (porous paywall). Examples of store closures mentioned: 

• In “Shenzhen’s electronics shop district, a Buy-Fresh Go store that had been held up by the media as a model of automated retail closed after only about a year.”

• In Guangzhou, “i-Store, the first local unmanned convenience chain,” closed six of its nine stores. 

• In December 2018, JD.com, China’s second-largest ecommerce company, announced the suspension of its “smart shelf business — small unmanned shops the size of train station kiosks.”

Nikkei cited the difficulty of selling fresh groceries and boxed ready-to-eat food in stores without staff as one major factor in the closures. Another factor not mentioned by Nikkei is that if the shops are to be truly without staff, the customers have to be honest enough not to take stuff and make a run for it.

The capitalist’s dream of a shop with no pesky human labor is too appealing for the likes of Alibaba to be dissuaded by petty problems such as the perishability of food and the need for customers to be trustworthy. Research firm Trivium reports that Alibaba’s “marketing machine released a video” comparing an experiment four years ago in which only 62 percent of shoppers actually paid for their goods at unmanned stores with a study run last week, involving on-demand rental kiosks, in which 95 percent of customers who rented stuff returned it. Alibaba says the difference in the results is because of Sesame Credit, its affiliate social credit system (SCS).

So are China’s social credit systems making people more honest? Perhaps not. From Trivium:

In terms of single-handedly propping up national social ethics, Ali’s self-congratulation is overblown: the two trials were too dissimilar — shopping and borrowing are not the same thing — and run on too small a scale to form the basis of any solid science, and it’s unlikely that social goodwill shot up 30-plus percentage points over the course of four years.

It’s not surprising that Alibaba is puffing up data as a public relations strategy: Fake it until you make it has long been one of the company’s ways of doing business. Nor is it far-fetched that Sesame Credit will change people’s behavior: Click through to the Trivium article to read about “The gamification of social values: Alibaba experiments with behavior modification.”

But even if this experiment is really just a promotional campaign, it is an indication that unmanned stores, whether for on-demand rentals or for grocery shopping, have a place in China’s retail future. 

3. U.S.-China trade and tech war grinds on

The fickle, feckless, foolish American stock markets have surged after the “U.S. and China said their presidents will meet in Japan next week to relaunch trade talks after a month-long stalemate,” reports Bloomberg (porous paywall). Otherwise, the U.S.-China trade and tech war grinds on, 354 days after it started by our count:

• Huawei filed a lawsuit against the U.S. Commerce Department on Friday challenging the legality of an American seizure of “telecommunications equipment it sent from China to the United States, and then back to China,” reports the South China Morning Post. Meanwhile, the company is “girding itself for a future in which the United States is more bitter rival than friend,” and prepared for a long fight, according to the Washington Post. 

• “FedEx Corp has apologized for another Huawei delivery ‘mistake,’ reigniting Chinese ire and drawing the fire of state media which suggested the U.S. delivery firm could end up on China’s upcoming list of companies that harm national interests,” says Reuters. 

• Merchants who sell on Amazon are hurting as they scramble “to navigate an unpredictable trade war that’s upending their proven business model of buying inexpensive goods in China and selling them at a markup in the U.S.,” reports Bloomberg via Yahoo.

• U.S. Senator Marco Rubio, the panda slugger’s panda slugger, “is using the trade impasse between Washington and Beijing to open a new front of potential friction between the two nations, by questioning why [MSCI Stock Indexes] a major player in global stock benchmarks is including Chinese shares in its stock indexes — years after that process has been under way,” reports the South China Morning Post.

• New export restrictions: If you missed Friday’s news about China’s largest supercomputing companies being added to the U.S. “entity list,” these will catch you up:

  • U.S. blacklists more Chinese tech companies over national security concerns / NYT (porous paywall)

  • US expands tech battle with China, barring more technology sales / SCMP

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—Jeremy Goldkorn, Editor-in-Chief

BUSINESS AND TECHNOLOGY:

• Taiwan: A campaign to bring investment home
  Another four firms pledge to invest over NT$10 billion in Taiwan / Focus Taiwan
  Four new companies have “received approval from the government incentive program to encourage overseas Taiwanese firms to return home” after pledging to invest more than NT$10 billion ($321 million) in Taiwan. The companies are “contact lens brand Pegavision Corp., probe card maker MPI Corp., hydrolyzed soya peptide supplier DaBomb Protein Corp., and an auto parts maker which asked not to be named.”

• Used-car market slowdown 
  China’s used car platform Renrenche looks to slash jobs by 60%, source says / Reuters
  It’s not just the market for new cars that is in a (year-long) slump: “China’s online used car trading platform Renrenche aims to cut as much as 60 percent of staff as it battles tight funding and fierce competition… Used car sales in China have also declined amid a contraction in overall car sales, which dropped 3.29 percent in May.”

• Shock-prone Chinese financial markets ‘too big to ignore’
  China’s money-markets strains ease, but system is still vulnerable to shocks / WSJ (paywall)
  “Signs of funding stress in China’s money markets have abated after the country’s financial regulators urged banks and brokerages to restore calm, but the recent disruptions showed the financial system’s vulnerability to even small shocks,” writes Shen Hong, pointing to “mistrust between borrowers and lenders in the repo market.”
  Big brokerages tapped to cool interbank market jitters after Baoshang takeover / Caixin (paywall)
  “China’s central bank increased the total outstanding quota of short-term commercial paper for five major brokerages to nearly 200 billion yuan in a bid to inject more liquidity into the interbank market.”
  China is now ‘too big to ignore,’ says FTSE analyst / CNBC
  A researcher from index and benchmarking provider FTSE Russell told CNBC that the “growing internationalization of Chinese equities and bonds means China is now ‘too big to ignore.’” FTSE Russell today began including “1,000 small, medium and large cap Chinese companies” on the A-share market in its Emerging Index. 

• Banana boom for Philippines, Mexico, and Cambodia
  China bananas imports surge to record / Bloomberg (porous paywall)

Chinese consumers are buying more bananas from abroad than ever before as an increasingly health conscious middle class helps propel the fruit’s popularity. [However,] restrained by limited farmland and a destructive banana fungus known as the Panama disease, China has been increasing its reliance on supplies from Southeast Asia and South America.

• Movie business
  China box office: ‘Spirited Away’ ghosts ‘Toy Story 4’ / Hollywood Reporter
  “Disney and Pixar’s animation firepower proved no match for a rerelease of Ghibli’s anime classic, which is screening in China nearly 20 years after its original release.”

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• Recycling in Hong Kong
  Opinion: China is waging war on waste and Hong Kong needs to think bigger about how to manage its rubbish / by Christine Loh in SCMP
  “China is banning imports of trash and starting a zero-waste program for cities. In Hong Kong, the authorities should consider passing a waste separation law if an economic deterrent is not enough to increase recycling rates.”

• Healthcare system reform
  Reforming public hospital financing in China: progress and challenges / BMJ
  The BMJ, formerly known as the British Medical Journal, has published a package of articles on the Chinese public health care system and its difficult reforms in areas as diverse as funding and the “rational use of antibiotics.”
  See also on The China Project: What ails China’s healthcare system? Roberta Lipson has a detailed diagnosis.

• Yunnan earthquake
  M5.9 quake leaves 28 injured as it jolts through SW China / CGTN

POLITICS AND CURRENT AFFAIRS:

• Hong Kong protests
  How Hong Kong’s leaderless protests are organized / Inkstone 

Protesters organize their actions through Facebook, Telegram groups and a Reddit-like online forum where young people debate strategies and share proposals with distinctive emoji and Cantonese internet slang.

On the online forum LIHKG, anonymous users have already planned out the next few days of protests. That will include a march to foreign consulates, as well as sit-in at the city’s Justice Department…

“I think it’s good that we don’t have any leader this time,” said Vivian, a 25-year-old LIHKG member and protester, who declined to give her full name for fear of punishment.

• China will not allow Hong Kong to be brought up at G20, Beijing says / CNN
  “A top Chinese Foreign Ministry official said Beijing would ‘not allow’ the Hong Kong protests to be brought up at the G20 meeting in Osaka beginning on Thursday.”
  How Hong Kong-China tensions spread to U.S. / BBC
  The protests have “deepened unease many thousands of miles away — on U.S. campuses.”
  Hong Kong police, once called ‘Asia’s Finest,’ are now a focus of anger / NYT (porous paywall)
  In Pictures: Hong Kong police slam ‘illegal, irrational’ protest at HQ, as crowds disperse peacefully overnight / HKFP 

• New propaganda technology
  China’s Communist Party is making its own (virtual) reality / Foreign Policy (porous paywall)
  In Zhongshan, a city of 3.1 million people in the Pearl River Delta, the local Communist Party branch has entered into a “multimillion-yuan agreement with Xijian (also called Seengene in English), China’s leading augmented reality start-up,” and is rolling out virtual reality (VR) propaganda. Eduardo Baptista writes on cutting-edge technologies the Party hopes to use for more effective brainwashing: 

After a cadre dons the RoboCop-like headset and opens the bright-red “Guidelines of the Chinese Communist Party,” select passages of text come alive—commands such as “the party rules all” burst out, with flowery backgrounds and moving animations to match.

• Philippines: Anger at China growing
  ‘Duterte coward’: Filipinos’ opinions of president and Beijing government sour after South China Sea sinking / SCMP

Philippine public opinion is on a slow boil over recent Chinese actions and Manila’s seeming rush to defend Beijing. Two incidents have seen many Filipinos expressing outrage on social media. One is the ramming and sinking of a Philippine fishing boat by a larger Chinese vessel on June 9. The other is the temporary detention and rejection on June 21 of former foreign secretary and known China critic Albert del Rosario by immigration officials at Hong Kong’s airport.

• Cambodia: Simmering resentment at shoddy construction
  Cambodia building collapse: residents of Sihanoukville describe long-held fears over ‘quality of Chinese buildings’ / SCMP
  “Residents of a Cambodian town that is undergoing a Chinese-bankrolled development boom have spoken of long-held concerns over the quality of Chinese-owned buildings, as the death toll on Monday rose to 28.”

• Israel and ties to China
  Opinion: Israel may live to regret its warming ties with China / by Daniel Samet in Haaretz
  “As recent anger over the deal between Israel and China on the Haifa Port shows, U.S. support for Israel may not be unconditional after all.”

• Uyghur internment camps
  Chinese student responses to the mass internment of Turkic Muslims / Art of Life in Chinese Central Asia
  Darren Byler writes: 

Over the past two years I have spoken at dozens of universities and high schools about the internment of what is now an estimated 1.5 million Uyghurs and other Turkic Muslims… The students that lean hardest into my guest lectures are those from China… Yet, despite this atmosphere of nationalist confrontation, after my talks many come up to me in the spirit of discussion.

• See also this new tweet from a scholar of Islam in China, Rian Thum: 

In one week in June of 2017, a total of 15,683 people were sent to interment camps from four prefectures in Xinjiang (Khotan, Kashgar, Kizilsu, Aqsu), according to what appears to be a leaked internal document.  

• And a tweet from China scholar Timothy Grose:

Elderly residents in Qaraqash Country (Hotan Prefecture) vow to “wear new styles and never again take the old road” in their sartorial choices (穿新衣不再走老路 chuān xī yī bù zài zǒu lǎolù). Their t-shirts read: “I love the Chinese Nation” Notice, also, the clean-shaven faces and lack of headscarves.

• New Chinese chief of UN Food Agency
  UN food agency elects first Chinese national to lead organization / SCMP
  “Qū Dōngyù 屈冬玉 on Sunday became the first Chinese national to be elected to head the UN’s Food and Agriculture Organization, clinching the post in the first round of voting.”

• Indian students in China
  Indian students’ arrests puts focus on underbelly of China medical colleges / Hindustan Times
  “The recent arrest, expulsion, and deportation of Indian students studying in medical colleges in China for drug abuse has raised dual concerns about the quality of campus life here and the lack of information available to foreign students about Chinese law.”

• Xi in North Korea
  Opinion: Why Xi Jinping is courting Kim Jong-un by John Delury / NYT (porous paywall)
  “It’s not about nuclear weapons, leverage with President Trump or the trade war… China is losing its grip over North Korea, its partner who would not be a vassal.”

• Iran
  Opinion: Who would win a US-Iran war? A strong and peaceful China / SCMP
  “China and Persia — the latter an old name for Iran derived from the southern Pars region once used by ancient Greek travelers — are old friends and even occasional strategic partners. And in today’s delicate climate of East vs. West rivalry, we may yet see this ancient alliance return.”

• State media on Politburo meeting
  CPC reviews work rules on staffing of institutions, rural areas / Xinhua
  The Political Bureau of the Communist Party of China (CPC) Central Committee reviewed two sets of regulations on the Party’s work related to the staffing of institutions, and rural areas, at a meeting Monday. Xí Jìnpíng习近平, general secretary of the CPC Central Committee, presided over the meeting.

SOCIETY AND CULTURE:

• Creative nonfiction
  Diary of a 63-year-old transvestite / Chinarrative 
  A new translation from this regular newsletter of Chinese nonfiction and autobiography: “Liu Peilin got his first white dress from a trash can. Since then, flowery berets, thick makeup and flamboyant attire have become his trademark…”

• Smoking in movies
  Dying to Survive, Hidden Man recipients of Dirty Ashtray Award / China Daily 
  “One of the most popular movies shown in cinemas last year has received a Dirty Ashtray Award from the Chinese Association on Tobacco Control for its rampant smoking scenes.”

• Celebrity misbehavior
  The Yico Zeng controversy: Chinese singer falls from grace after Beijing airport misconduct / What’s on Weibo
  “Chinese singer Yico Zeng (曾轶可 Zēng Yìkě) seems to have fallen out of favor with Chinese netizens after refusing to comply with Beijing airport security rules and exposing the personal details of an officer on her Weibo account.”

• Delivery by bungee jump
  Chinese woman drops in on work colleagues from a height of 300 meters / SCMP
  “A woman working at a mountainous beauty spot in southwest China has started delivering hot meals to her colleagues by bungee jumping 300 meters (985 ft) every lunch time.”

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