In the news: Kuaidi Dache raises US$600 million, J&J and Tesla's China businesses get a closer look and more SOE reform moves are made

Kuaidi Dache gets US$600 million financing from SoftBank

Japanese telecom company SoftBank led a US$600 million financing round for Kuaidi Dache, one of China's biggest providers of mobile taxi-hailing apps. Alibaba and Tiger Global Management participated in the financing. Kuaidi's main rival Didi Dache is largely backed by Tencent and Russian investment firm DST Global and raised over US$700 million in December. San Francisco's Uber is a much smaller competitor in China, but forged an alliance with Baidu which could help it catch up. This deal comes at a pretty challenging time, with Chinese cities including Beijing and Chongqing cracking down on taxi-hailing apps on the grounds that the services use unauthorised vehicles. That said, Kuaidi already has 100 million subscribers of the 500 million people in China who use cellphones to access the internet for services and entertainment. Where this goes is anybody's guess.

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Johnson & Johnson's China business analysed

An interview with the J&J China executive Jesse Wu showed how the company expanded its business in the country despite complex challenges regarding economic developments and changes in consumer behaviour. Changes that have affected J&J's strategy include young mothers seeking quality over price and an increasing desire for specific brands, natural products and transparency in ingredients. The key to the Chinese market lies in building close connections with consumers and constant innovation, said Wu. The US company was one of the first set of MNCs to enter China and is now a household name. It has increased its R&D capabilities in Asia and focus on innovation in China. Keeping abreast of consumer patterns remains integral to survival, especially in a market as large and dynamic as this.

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SOE reform pushed with strengthened audits and inspections

China's anti-graft authorities will enhance inspections of all major SOEs this year, especially of directors and managers in key positions. They will also strengthen SOE audits and establish a mechanism to oversee assets and enhance supervision. 70 senior directors of SOEs were investigated last year on suspicion of corruption, an increase of 59% from the previous year. Directors were accused of having made decisions that caused large losses of state-owned assets, arranging for their spouses and children to operate businesses or accepting bribes. The anti-graft campaign has made some sweeping moves to clear up corruption within the party and SOE decentralisation is slowly but surely progressing. Improving corporate governance is vital for a sustainable economy, and it's good to see moves are being made.

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Tesla sees great potential in China… but has yet to harness it

China's strong interest in new energy vehicles has encouraged Tesla Motors to continue expanding in the market. The carmaker saw great potential for electric vehicles in China due to constructive policies and promising market prospects. The new Foreign Investment Industrial Guidance Catalogue has pushed for clean energy and a national plan is underway to prioritise electric car development. But despite these seemingly favourable conditions, how will Tesla fare given that China is pushing for the domestic car industry? But it has other things to worry about – its Q4 sales in China were weaker than expected. A few explanations: Chinese customers do not buy Teslas for being “green” but instead for being high-tech and luxurious, and the brand's cool factor will be short lived. Also, the company's management in China has been unsteady with three presidents in just two years. It looks like the company actually needs to understand the market better.

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Startup investment fund set up

A State Council meeting last Wednesday decided to set up an investment fund of Rmb40 billion (US$6.45 billion) to support startups in emerging industries. The government-led capital will take existing funds for infrastructure construction and development for emerging industries and will also incorporate contributions from large companies and financial institutions. Fund management companies will be selected through public bidding and they will be the sole decision-makers in the investment. Foreign investors will also be granted wider access to the finance, education, culture and medical care industries. This is a clear attempt to jumpstart growth in specific sectors of the economy, but to what extent can international fund managers get involved in this opportunity? And what does “wider access” mean? We will have to wait for the draft to find out.

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