In the news: Germany reconsiders Grand Chip-Aixtron, two bicycle-sharing startups go head-to-head, Amazon competes with Alibaba, and China supports SMEs and tightens food safety

Bicycle startups race for market share

Two startups are going head to head in the new online bicycle-sharing market: Beijing Bikelock Technology Co., known as Ofo and backed by Didi Chuxing Technology Co. Ltd., and Beijing Mobike Technology Co., backed by a group including Tencent Holdings Ltd. (which is also an investor in Didi). Mobike, which targets high-end branding, offers expensive bikes with bright orange wheels and GPS. Ofo aims its services at students, with its yellow-framed bikes with no GPS and for rent at just Rmb1 per hour. Beijing's public bikes are free for the first hour and Rmb1 for every subsequent hour. This is the early phase of an all too familiar trend in China's internet landscape, where startups supported by the country's largest tech companies bleed billions offering freebies to get customers, only to merge months later to take on the next up-and-coming rival. Mike Huang, a Shanghai-based entrepreneur with a women's health app, pointed out that “The brutality of competition is even worse than Silicon Valley.” During this stage, expanding is more important than defending, Ofo's owner said, echoing his mentor and Didi founder Cheng Wei, adding that while Didi has yet to turn a profit, Ofo is already making money. The strategy did work—Didi beat off more than 30 rivals, including Uber. Meanwhile Mobike has also found a powerful ally. Tencent's WeChat app, with more than 800 million users, has already integrated services like Didi's ride-sharing and JD.com's online shopping. This is a race worth watching.

Amazon starts Prime service in China

Amazon.com Inc. has started offering its Prime free-shipping service in China, ramping up efforts to compete with Alibaba Group Holding Ltd. for the rising number of shoppers seeking foreign goods. From Friday Oct. 28, Chinese Prime subscribers get free shipping on orders exceeding Rmb200 ($29.50) on millions of eligible overseas goods, with domestic goods being delivered free and a membership costing Rmb388 per year—less than the fee of $99 in U.S., where the service was launched in 2005 and has more than 65 million members. Amazon—let alone any foreign e-commerce company in China—has made little headway against Alibaba, and its introduction of Prime also comes as Wal-Mart Stores Inc. intensifies its battle with its recent partnership with Alibaba rival JD.com.

China mulls revising law to support SMEs

A revised draft law supporting small- and medium-sized enterprises (SMEs) has been submitted to the National People's Congress Standing Committee (NPC). A statement released by the NPC Financial and Economic Affairs Committee pointed out that the current law—which hasn't been amended since its adoption in 2003—is difficult to implement and lacks specific details on supporting policies, and that the legal environment must be improved to aid SMEs facing economic pressures in recent years. The PRC government has been making efforts to support SMEs and companies suffering from the slowing economy in general. Corporate social insurance premium requirements were reduced this year, and cross-border financing rules released in April were aimed at increasing funding opportunities from abroad. This is particularly important because Chinese banks have historically been relatively reluctant to lend loans to the private sector, especially to SMEs. Startups need to heavily rely on financial backing by industry giants to gain any sort of momentum. The draft's proposal to enhance both local policies and the legal environment for emerging businesses would have a positive impact on GDP.

China publishes draft Food Safety Law amendment

The State Council's Legislative Affairs Office has published a draft revision to the country's food safety regulation, providing liabilities for producers and operators of online sales platforms for safety violations. If any producer has been punished for food safety problems, online sales platforms must immediately cease providing services to the offender, and all food safety regulations must be applied to imports and exports through e-commerce, according to the draft. It is soliciting comments until November 19. This analysis explains the significance of enhancing liabilities for online platforms and food producers and traders. The new rules regarding online food safety violations that went into effect on October 1 took regulatory compliance in, and supervision over, the food e-commerce sector to a whole new level. They require platforms to conduct inspections and reviews, designate staff for handling food safety issues, record seller information and establish safety mechanisms open to the public. Violating the requirements to present accurate information and notices on food can result in a fine of up to Rmb30,000.

Germany withdraws approval of Aixtron takeover

Germany's economics ministry has withdrawn its clearance of a €670 million ($740 million) acquisition of Aixtron SE by Grand Chip Investment GmbH, the German unit of China's Fujian Grand Chip Investment Fund LP. The planned purchase was to be part of a raft of Chinese acquisitions of German technology firms that has stirred concern over national security. German law allows the economics ministry to halt an inbound takeover only if it poses a threat to public order or security. The deal in question follows Midea Group's $5 billion bid for German robotics maker Kuka AG, after which the economics ministry actually proposed putting together a European consortium to make a counterbid. But the plan never materialized and Midea completed its acquisition this summer. Chancellor Angela Merkel said during a June visit to China that an asymmetrical situation allows China to buy high-tech expertise in Germany's open market and use it to build protected champions at home. Her deputy and economy minister Sigmar Gabriel, who reopened the Aixtron case, said at an industry lobby meeting that “The EU has to take a clear position toward China.” China shouldn't be surprised if the deal doesn't go through—the U.S. has no trouble blocking transactions that don't suit its interests, and investment with China has largely been seen as a one-way street after all, as most foreign groups need to form local joint ventures and transfer IP to operate in the country.

Bicycle startups race for market share

Two startups are going head to head in the new online bicycle-sharing market: Beijing Bikelock Technology Co., known as Ofo and backed by Didi Chuxing Technology Co. Ltd., and Beijing Mobike Technology Co., backed by a group including Tencent Holdings Ltd. (which is also an investor in Didi). Mobike, which targets high-end branding, offers expensive bikes with bright orange wheels and GPS. Ofo aims its services at students, with its yellow-framed bikes with no GPS and for rent at just Rmb1 per hour. Beijing's public bikes are free for the first hour and Rmb1 for every subsequent hour. This is the early phase of an all too familiar trend in China's internet landscape, where startups supported by the country's largest tech companies bleed billions offering freebies to get customers, only to merge months later to take on the next up-and-coming rival. Mike Huang, a Shanghai-based entrepreneur with a women's health app, pointed out that “The brutality of competition is even worse than Silicon Valley.” During this stage, expanding is more important than defending, Ofo's owner said, echoing his mentor and Didi founder Cheng Wei, adding that while Didi has yet to turn a profit, Ofo is already making money. The strategy did work—Didi beat off more than 30 rivals, including Uber. Meanwhile Mobike has also found a powerful ally. Tencent's WeChat app, with more than 800 million users, has already integrated services like Didi's ride-sharing and JD.com's online shopping. This is a race worth watching.

Amazon starts Prime service in China

Amazon.com Inc. has started offering its Prime free-shipping service in China, ramping up efforts to compete with Alibaba Group Holding Ltd. for the rising number of shoppers seeking foreign goods. From Friday Oct. 28, Chinese Prime subscribers get free shipping on orders exceeding Rmb200 ($29.50) on millions of eligible overseas goods, with domestic goods being delivered free and a membership costing Rmb388 per year—less than the fee of $99 in U.S., where the service was launched in 2005 and has more than 65 million members. Amazon—let alone any foreign e-commerce company in China—has made little headway against Alibaba, and its introduction of Prime also comes as Wal-Mart Stores Inc. intensifies its battle with its recent partnership with Alibaba rival JD.com.

China mulls revising law to support SMEs

A revised draft law supporting small- and medium-sized enterprises (SMEs) has been submitted to the National People's Congress Standing Committee (NPC). A statement released by the NPC Financial and Economic Affairs Committee pointed out that the current law—which hasn't been amended since its adoption in 2003—is difficult to implement and lacks specific details on supporting policies, and that the legal environment must be improved to aid SMEs facing economic pressures in recent years. The PRC government has been making efforts to support SMEs and companies suffering from the slowing economy in general. Corporate social insurance premium requirements were reduced this year, and cross-border financing rules released in April were aimed at increasing funding opportunities from abroad. This is particularly important because Chinese banks have historically been relatively reluctant to lend loans to the private sector, especially to SMEs. Startups need to heavily rely on financial backing by industry giants to gain any sort of momentum. The draft's proposal to enhance both local policies and the legal environment for emerging businesses would have a positive impact on GDP.

China publishes draft Food Safety Law amendment

The State Council's Legislative Affairs Office has published a draft revision to the country's food safety regulation, providing liabilities for producers and operators of online sales platforms for safety violations. If any producer has been punished for food safety problems, online sales platforms must immediately cease providing services to the offender, and all food safety regulations must be applied to imports and exports through e-commerce, according to the draft. It is soliciting comments until November 19. This analysis explains the significance of enhancing liabilities for online platforms and food producers and traders. The new rules regarding online food safety violations that went into effect on October 1 took regulatory compliance in, and supervision over, the food e-commerce sector to a whole new level. They require platforms to conduct inspections and reviews, designate staff for handling food safety issues, record seller information and establish safety mechanisms open to the public. Violating the requirements to present accurate information and notices on food can result in a fine of up to Rmb30,000.

In the news: Germany reconsiders Grand Chip-Aixtron, two bicycle-sharing startups go head-to-head, Amazon competes with Alibaba, and China supports SMEs and tightens food safety

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