In the news: China fights online music piracy, property tax is added to the agenda and the Alibaba-Suning deal stirs the market

China fights online music piracy

China's National Copyright Administration has said 2.2 million songs from online platforms have been removed after it ordered service providers to take down unlicensed music by the end of July. The country's largest internet companies – Alibaba, Tencent and Baidu, which all operate online streaming businesses – are working with the government and cleaning up the online music market themselves. The goal is to create a landscape in which the only free music available online is provided by licensed platforms, where users pay for some services. This is similar to the Spotify model, where it's free to listen but there's a fee for a premium subscription. Music piracy is a global issue as few pay for music when there are so many free alternatives online. But the challenges of enforcement are greater in China because, while there is a thriving internet community, regulators may not yet have the infrastructure or the expertise to monitor activity as closely as in developed markets. China's crackdown may lead to consolidation in the industry. As large internet companies with deep pockets expand their libraries of licensed music, many smaller firms will get squeezed out. Consumers may win in the end, though, if the big players launch a price war, as is often the case in China.

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Property tax coming soon

The Standing Committee of the National People's Congress has included a property tax law in its legislation plan. Although progress has been extremely slow, this signals the legislators' determination to push ahead with the reform. China introduced a pilot property tax programme in Chongqing and Shanghai in 2010 to cool the real-estate market, but the national property tax proposal had been put on hold to focus on growth. The law is expected to be passed by the end of 2017. But implementation will take time. Streamlining relevant clauses and rules may delay putting it into full effect, and since the property registration system isn't complete either, it's unlikely that the property tax can be enforced in the short term. The overall direction is positive, as it boosts ownership transparency and price stability, but it depends on whether the NPC will be able to reach a consensus. Many aspects need to be considered, such as coverage, tax rates and exemptions.

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Suning's deal with Alibaba raises rival Gome's shares

Gome Electrical Appliances shares surged 16% as Alibaba's purchase of a fifth of Suning Commerce Group (its biggest deal ever at US$4.6 billion) raised investors' hopes that other internet companies may be interested in partnering up with the electronics chain. The Alibaba-Suning deal confirmed the importance of logistics and store chains to online sales and may prompt other e-commerce platforms like JD.com to seek similar alliances with Gome. Gome started an O2O (online-to-offline) model last year that allows customers to purchase goods on its website and pick them up at convenient store locations. The Alibaba-Suning deal shows that this model works, and the fact that Alibaba spent so much on the deal shows that, despite the convenience of e-commerce, it is holding on to the importance of interacting with customers in real life, and not just through screens.

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