Pfizer to invest $350 million in China biotech hub, first in Asia

Pfizer to invest $350 million in China biotech hub, first in Asia

Pfizer Inc (PFE.N) will invest $350 million to build a biotech center in China, the latest in a series of moves by pharma industry giants to set up shop in the world’s no. 2 drugs market with the aim of securing faster approvals for their products.

The facility in eastern Hangzhou region – Pfizer’s first biotech center in Asia – is expected to be completed by 2018, the firm said in a statement on Tuesday.

Global “Big Pharma” is increasingly looking for smart ways to tap China’s healthcare market, estimated by consultancy IMS Health to be worth around $185 billion by 2018. From investing in China facilities to acquisitions, licensing deals and joint ventures, the aim is to seek an edge in dealings with domestic regulators and government.

John Young, group president for Pfizer’s essential health division, said in the statement that the Hangzhou facility should “help support China’s aim to increase the complexity and value of its manufacturing sector by 2025”.

Pfizer said it would “work closely” with local regulators to bring the drugs “to market as soon as possible”. The center will mostly on biologic drugs – made from living micro-organisms rather than chemically synthesized – and lower-cost ‘biosimilars’, of generic versions of biologics.

Pharmaceutical executives have long complained about the slow process of getting drugs to market in China, while others have run up against regulatory roadblocks. Pfizer had to close its vaccine business in the country last year after a license for its top-selling vaccine Prevenar was not renewed.

China’s overall healthcare spending is set to hit $1.3 trillion by 2020…

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Mark Schlarbaum Irvine California

China tech powerhouse Tsinghua bets $7.5 billion

China tech powerhouse Tsinghua bets $7.5 billion on R&D, urges faster reforms

State-backed Chinese technology group Tsinghua Holdings plans to spend $7.5 billion on research and development over the next five years, accelerating China’s drive to build a high-value semiconductor industry to challenge global chipmaking rivals.

As the firm that controls acquisitive chip supplier Tsinghua Unigroup outlined the target, its chairman, Xu Jinghong, also said China has been too slow to reform its economy, and must move faster to promote high-margin tech operations rather than cheap manufacturing.

In the chip development drive – a strategic priority for Beijing – Tsinghua Unigroup aims to become the world’s No. 3 chipmaker after Intel Corp and Samsung Electronics Co. The firm has proposed buying stakes worth nearly $1 billion in two Taiwanese chip firms – deals now under review by a new Taipei government that is less friendly toward China.

Speaking to Reuters on the sidelines of a World Economic Forum gathering in Tianjin on Sunday, Xu said the pace of progress in China in broad economic terms was too slow. The old investment-led growth model produces diminishing returns and ever-larger amounts of debt, Xu said.

“This is a key time for China’s economy. We must restructure, but it will be very painful. Industries facing over-production must be restructured, while new industries need support,” Xu said.

Controlled by Tsinghua University in Beijing, Tsinghua says it operates on market principles but is still a state-owned behemoth: revenue topped 70 billion yuan ($10.5 billion) last year.

As well as pledging 50 billion yuan in research and development spending over the next five years, Tsinghua will set up a 10 billion yuan fund to support commercialization of new technology.

Xu said Tsinghua had also kicked off a plan to open 1,000 startup incubation centers in 100 cities in China.

Officials in Beijing acknowledge the urgent need to pursue more productive new technologies, and ensure a level playing field for private firms.

China could add $5.6 trillion to gross domestic product, and $5.1 trillion of new income for households, by 2030, if it can switch to a productivity-led growth model, the McKinsey Global Institute said earlier this month.

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China could benefit from Britain-EU divorce

China could benefit from Britain-EU divorce

China is a potential winner if Britain and the European Union rework trade deals and look for investors after a British exit.

Beijing faces a blow from weaker European demand for its exports and pressure to hold its yuan steady in turbulent currency markets. But economists and political analysts say if Britain and the EU split, both sides will look to cash-rich Chinese companies that are expanding abroad — with the possible bonus for Beijing of closer political ties.

“One of the benefits China can gain from ‘Brexit’ is a stronger and closer economic relationship with the U.K. and even with the EU,” said Zhang Lihua, director of the Center for China Europe Relations at Tsinghua University in Beijing. “Both the U.K. and the EU need that kind of co-operation with China under the current circumstances.”

Chinese leaders urged Britain to stay in the 28-nation EU and have avoided mentioning possible benefits of a split.

On Monday, Premier Li Keqiang, the country’s top economic official, said Beijing wants to see a “united and stable” EU and a “stable and prosperous” Britain — a possible reference to concern the vote might inspire separatist sentiment in other EU members or parts of the United Kingdom.

“We are seeing increasing uncertainties in the world economy,” Li said in a speech at the World Economic Forum in the eastern city of Tianjin. “We need to jointly handle challenges, strengthen confidence and create a stable international environment.”

Europe is China’s biggest trading partner, and Chinese investors already see the region as more welcoming than the United States, where some acquisitions have been stymied by security concerns.

Chinese companies own France’s Club Med, the makers of Pirelli tires, Volvo cars and Weetabix cereal and football teams Inter Milan of Italy and Aston Villa of Britain. London is the second-biggest centre outside mainland China for settling transactions valued in Beijing’s yuan.

Britain has technology China needs as the ruling Communist Party tries to evolve beyond low-skilled manufacturing, said Lu Zhengwei, chief economist for Industrial Bank in Shanghai.

“China will benefit from industrial development experience in the U.K.,” said Lu. “I do recommend seizing the opportunity to establish China-U.K. free trade to enhance bilateral co-operation between the two countries.”

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Tesla signs $9 billion agreement to build factory in China

Tesla signs $9 billion agreement to build factory in China

Tesla Motors has reportedly signed a non-binding agreement with Chinese government-owned company Jinqiao Group to construct a Tesla production plant in the city of Shanghai.

All told, the investment could cost $9 billion, a person close to the matter told Bloomberg.

This report comes six months after company CEO Elon Musk revealed that Tesla intended to choose a production facility site in China by the middle of 2016.

Both companies would invest $4.5 billion toward the project, according to the report. Bloomberg points out, this would be substantially larger than Walt Disney Co.’s Shanghai theme park, which cost $5.5 billion.

That said, it’s unlikely the assembly plant would include a theme park attraction (Tesla Land, anyone?). Then again, it is Elon Musk we’re talking about, so I won’t mark it as out of the question.

What we know a Chinese Tesla factory will do for the company, however, is allow it to avoid the 25% import tax it currently pays for each electric vehicle it ships to the country.

Since there’s been no public announcement of the deal, there is no timeline for the rumored project. However, two other Chinese cities, Suzhou and Hefei, are currently courting the upstart electric vehicle maker to be the location of its assembly plant in Asia, according to the report.

Given those factors, the deal might not yet be set in stone, so to speak.

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KraneShares Offers Smart Beta ETF With “All China” Exposure to the “New China” Economy

The newly revamped KraneShares Zacks New China ETF (ticker: KFYP) is a smart beta strategy that offers exposure to the sectors targeted for growth by China’s 13th Five Year Plan. KFYP holds companies listed in Mainland China, Hong Kong and the United States.

Krane Funds Advisors, LLC, the investment advisor for KraneShares ETFs (KraneShares), announced its partnership with Zacks Index Services. Zacks provides the index for KraneShares’ newly renamed KraneShares Zacks New China ETF (ticker : KFYP), formerly the KraneShares CSI New China ETF.

“We believe KFYP’s new index has truly transformed the fund into a smart beta access point to the most dynamic companies in China.” said Jonathan Krane, CEO of KraneShares.

Smart beta is an investment style where a manager passively follows an index designed to take advantage of perceived systematic biases or inefficiencies in the market. Smart beta funds typically offer the low cost of a passive ETF, while potentially enhancing returns compared to the performance of a target general market (beta).

KFYP’s new index, the Zack’s New China Index, holds the sectors that the Chinese government has targeted for growth within its newly launched 13th Five Year Plan. These sectors include technology, clean energy, consumer staples, consumer discretionary, and health care.

“As the portfolio manager for KFYP, it has been rewarding for me to pioneer new ground especially in regard to using the Shanghai Hong Kong Stock Connect to access the onshore markets,” said Mark Schlarbaum, Managing Partner at KraneShares. According to Bloomberg as of the end of May 2016, upon switching to the new Zacks index, KFYP became the first U.S.-listed ETF to physically hold Chinese stocks across the Mainland, Hong Kong and U.S. markets.

“Beyond opening up our index to the entire available China investment universe, we took a sector weighted approach to ensure an even exposure to the areas targeted for growth by the government,” said Mitch Zacks, Principal and Senior Portfolio Manager at Zacks Investment Management. “We also limited the index to forty stocks, chosen based off our proprietary methodology that weighs fundamentals, momentum, and market capitalization, which drives the ‘smart beta’ component of KFYP”.

“China’s economy continues to experience tremendous growth even as it shifts focus from manufacturing to domestic consumption,” said Brendan Ahern, Chief Investment Officer of KraneShares. “KFYP aims to provide investors an “all China” exposure to the “new China” sectors of the economy, while at the same time limiting exposure to manufacturing, financials, industrials and heavy materials that defined China’s past economic plans.”

The KraneShares Zacks New China ETF (ticker : KFYP) trades on the New York Stock Exchange and is available for purchase through your brokerage account or financial advisor. For more information visit kraneshares.com/kfyp.

About Krane Funds Advisors, LLC
Krane Funds Advisors is the investment manager for KraneShares ETFs. The firm is focused on providing investors with strategies to capture China’s importance as an essential element of a well-designed investment portfolio. KraneShares ETFs represent innovative, first to market strategies that have been developed based on the firm’s deep knowledge of investing. These strategies allow investors to stay ahead of global market trends and capitalize on current inefficiencies.

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China’s ‘Land Kings’ Return as Housing Prices Rise

Housing prices are once again rising rapidly across China—and bids for land are going up, too

SHANGHAI—The “land kings” are back.

That had been a nickname for Chinese developers paying sky-high prices for land parcels during China’s property boom earlier this decade, which left so-called ghost cities of unsold housing across China.

Now, with housing prices in China’s larger cities again rising rapidly, frothy bids for land parcels are back.

On June 8, Logan Property Holdings Co. agreed to pay 14.1 billion yuan ($2.14 billion) for a piece of land in Shenzhen’s Guangming district, the largest-ever price tag in the southern Chinese city.

Logan says it didn’t overpay, calling the price “relatively favorable” in a hot market.

Earlier in June, a joint venture between two firms, one of which is backed by state-owned Power Construction Corp. of China, outbid 17 rivals with an 8.3 billion yuan offer for a plot in Shenzhen’s Longhua district.

The soaring land prices show the challenges facing the government as it tries to prevent property bubbles. Moves to stimulate China’s slowing economy and to trim excess housing in smaller cities across the country—such as interest-rate cuts and eased mortgage rules—have fed into speculative demand for homes in top-tier cities that are now scrambling to cool prices.

Average housing prices in 70 Chinese cities were about 5% higher in May than a year earlier, the fifth straight month of increases. In top-tier cities, prices were up 19% to 53%.

But land prices are shooting up not just in Shenzhen, Shanghai and Beijing, but also in lower-profile cities such as Hangzhou, Hefei and Zhengzhou.

Officials face a dilemma in trying to tame land prices: Land is commonly used as debt collateral; a sharp drop in valuation could trigger defaults and produce a wave of bad loans, hurting the economy. On the other hand, runaway land prices make it harder for ordinary Chinese to afford apartments.

In Suzhou and Nanjing, bidding wars at land auctions have compelled the authorities to cap land prices. To find another way in, bidders now compete on the volume of affordable housing they are willing to commit to.

For developers, it is also a tricky game, as land could end up being more expensive than any housing that can be erected on it.

“In some cases, the price of flour is more expensive than the price of bread,” said Chen Sheng, a Shanghai-based analyst who heads the government-backed China Real Estate Data Academy.

There is also concern that financial firms with little experience as builders are viewing land as an opportunity for arbitrage. After winning an auction, financial firms with access to cheap funding can apply for a loan with the land as collateral, and use that to extend a construction loan at a higher rate to a partner, which is typically a property developer.

The Ministry of Land and Resources is seeking to rein in the bidding wars. The message is, “Don’t blindly drive up land prices,” said a property executive with knowledge of the matter.

But it is a challenging task.

“There’s not much that can be done to cool the land market even if there is some sort of madness that developers are engaging in,” said Nicole Wong, a property analyst at CLSA.

Analysts say the higher land prices are eroding property developers’ profit margins, but the firms say they have no choice but to replenish their land banks in cities that are showing signs of growth.

Cinda Real Estate Co., the Shanghai-listed arm of China Cinda Asset Management, has gobbled up five land parcels in Shanghai, Hangzhou and Shenzhen since November, ringing up a bill as high as 31.8 billion yuan, according to stock-exchange filings.

Within a span of five days recently, Cinda defeated more than 20 rivals to win two land auctions in Hangzhou and Shanghai, submitting bids totaling 18.1 billion yuan. Cinda says it has a 50% stake in the Hangzhou project, without naming its joint-venture partner.

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Richest son spends 3.4 billion on Shanghai’s 7-star hotel

Wang Sicong, China’s richest son, spends 3.4 billion RMB to build Shanghai’s first ‘7-star hotel’

Would you like to live in a 7-star hotel without traveling all the way to Dubai? Well, you’re in luck because this Saturday the brand-new Wanda Reign on the Bund is opening in Shanghai.

The designer of the ominously-named Wanda Reign is the well-known British architect Norman Robert Foster, responsible for many of the UK’s landmark office buildings.

Meanwhile, the owner is none other than Wang Sicong, aka China’s richest son. We guess when you blow 200,000 yuan in one night at a club and then 2.5 million at a KTV, forking over 3.4 billion yuan for an ultra-luxurious hotel is no big deal.

So, just what does a “7-star hotel” look like? Well, let’s check out the fancy rooms: Click to see.

If you do like to eat out, the hotel will feature Marc, a French fine-dining restaurant by two-star Michelin chef Marc Meneau, as well as another food joint run by top Japanese chef Kaiseki Yoshiyuki.

To work off all those calories, there is a full set of fitness rooms.

And meeting halls to serve all your needs.

There’s even a lavish private club that’s accessible to VIPs only.

Located right on the Bund, the Wanda Reign has picturesque views of the Bund, Huangpu River and the Pudong skyline. If you’re lucky, you might even be able to catch a glimpse of something else.

While the Burj Al Arab hotel in Dubai has often been described as the world’s only “7-star hotel,” that hasn’t stopped China from building some of its own. In 2009, construction began on what is now the Beauty Crown 7-Star Hotel in Sanya. In fact, this isn’t even the first “7-star” Wanda Reign in China. The company completed its first out in Wuhan in 2014.

Look at the incredible pictures here.

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Mark Schlarbaum on Self-Driving Car

Inside China’s Plan to Beat America to the Self-Driving Car

DRIVING IN CHINA sucks. Getting anywhere in a city like Beijing means slogging through colossal traffic jams and chaotic, bewildering intersections. Crashes kill 500 people daily, and everyone views the rules of the road as advisory at best. “Many drivers and pedestrians think that traffic signals are just for reference,” says Jing Wang.

He’s teasing—kinda. But Wang is entirely serious when he says Beijing and Shanghai are a perfect laboratory for self-driving cars. He leads the autonomous vehicles program at Baidu (China’s version of Google), and he’s confident China will be the first country to embrace autonomy.

That’s entirely possible, but Chinese cities don’t seem like a great place to start. Self-driving cars work best in an environment of limited variables where everyone follows set rules. You’d think cities where traffic jams span 50 lanes and intersections resemble parking lots would be a horrible proving ground. So far, most of the automakers and tech firms around the world racing to develop this tech have tested it on highways or quiet suburbs, although Google recently sent its cars into Austin, Texas.

Google’s cars have racked up more than 1.5 million miles and caused just one crash since the program started in 2009, and Google expects to see customers in cars by 2020. Wang is betting that Baidu beats them. That’s not crazy, says Larry Burns, who once led R&D at General Motors and advises automakers on such things. He sees robo-cars rolling out in some parts of the US in two or three years. “Could China move faster than that? Absolutely,” he says.

Baidu launched its program three and a half years ago, and announced in December that a prototype drove 18.6 miles through Beijing. The company Mark Schlarbaum China Self Driving Carsrefuses to reveal the scope of its program, nor will it say how many miles its cars have driven or how many crashes they’ve had. Despite its relatively late start, Baidu plans to have fully autonomous cars in commercial applications by 2019 and ramp up to mass production and widespread distribution by 2021.

Of course, building the cars is easy once you’ve mastered the underlying technology. But programming machines to navigate public roads is hard enough when human drivers bend rules by speeding, rolling through stop signs and doing all the other things human drivers do. How is a robo-car to cope when almost everyone ignores the rules?

“It’s all about artificial intelligence” says Wang. Baidu puts deep learning and AI at the center of everything it does, an investment the company made just as it started contemplating autonomous cars, he says. The same technology that’s learning to spot malware is learning to spot pedestrians. The US National Highway Traffic Safety Administration rates vehicle autonomy from level zero (bag-of-flesh does everything) to level four (bag-of-flesh is obsolete). Given the challenge of China’s traffic, Baidu coined a new term for its system: Level 4+.

Of course, handling China’s roads and being welcome on China’s roads are two different things. Wang is confident that the country is the right place to debut autonomous tech. He cites three factors in its favor: a population prone to embracing new tech, a vast auto industry, and a national appetite for big, bold projects.

Far fewer people own cars in China than in the US, and high adoption rates for new technologies indicate the Chinese would embrace cars without drivers, Wang says. A 2015 World Economic Forum study backs this up. It found that 75 percent of Chinese respondents are inclined to ride in an autonomous taxi, compared to 52 percent of Americans.

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Mark Schlarbaum on Albania

Albania Becomes Latest China Magnet

China Claus is coming to town! For better or for worse, Chinese companies are replacing traditional European investing partners — namely Italy and Turkey — and helping to develop a country in dire need of modernization, particularly if it wants to move from its European Union candidacy status to a full blown member in the foreseeable future.

But, like everything involving China, when the world’s No. 2 economy comes knockin’, they are trying to bring a few hundred Chinese personnel waiting to be let inside. Moreover, the companies investing in strategic assets are often government owned, which should raises eyebrows in the halls of power throughout Europe, particularly in Brussels.

There is concern among some leading Albanian politicians that when China invests, it does so to export its own labor into the foreign market. This is particularly worrisome in the case of Albania that has a 17.1% unemployment rate, and where jobs are badly needed.

For now, China has become a leading trading partner for Albania, a small, mountainous Balkan state on the Adriatic Sea. Chinese investments are relatively new there, so for companies like Geo-Jade Petroleum, this is a whole new world.

“China is an important economic partner to Albania, but we need to ensure we are getting a fair deal that generates economic growth…and creates more jobs here in Albania, for Albanians,” says Ilir Meta, the country’s former Prime Minister and now Speaker of Parliament since 2013. Meta has been involved in Balkan politics since the implosion of Yugoslavia in the 1990s and remains a popular and influential figure in the country decades later.

What is China up to in this small lower-middle income nation of over 3 million including a large diaspora? The second poorest in Europe after Moldova, it has an economy that’s smaller than many Chinese companies.

On June 6, the Albanian government said that it was ready to ink a deal with China State Construction (CSC) to build a 200 million euro, 16-mile stretch of road to neighboring Macedonia. The so-called Arber Road project has been partially built by the Albanians, but parts of it are still a cobbled stoned street that dates back to the Roman Empire, while most of the road is a two lane pothole riddled, slow moving, road that hinders efficient transportation and needs to be turned into a modern highway. The Chinese will pave the way into the 21st Century, creating an important transportation route for Albanian commerce.

In March, China’s Geo-Jade Petroleum, a publicly traded oil company listed in Shanghai, bought controlling rights in two Albanian oil fields then controlled by Canada-based Banker’s Petroleum for a cool $442.3 million. Albania’s Patos-Marinza is the largest onshore oil field in Europe and several international companies have signed exploration contracts with the government, including Royal Dutch Shell in 2012. Those two China deals alone account for nearly 5% of the country’s 2015 nominal GDP.

In April, state-owned asset manager China Everbright and Hong-Kong based Friedman Pacific Asset Management announced they were buying Tirana International Airport in a concession deal that has the Chinese co-owning Albania’s only commercial airport for the next 10 years. The move is consistent with China’s strategy of buying stakes in major transportation hubs along the Mediterranean, including Cosco’s April purchase of Greece’s Piraeus port and Shanghai International’s March 2015 successful bid to operate the new Haifa port in Israel for 25 years.

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Mark Schlarbaum China Cars

China Car-Sales Growth Reaches Five-Month High

Car makers deliver 1.79 million passenger vehicles to dealers in may

SHANGHAI—Growth for car sales in China reached a five-month high in May as auto makers launched new models and dealers continued to offer significant discounts.

Car makers delivered a total of 1.79 million passenger vehicles—sedans, sport-utility vehicles and minivans—to dealers in the world’s largest auto market last month, up 11% from a year earlier, the government-backed China Association of Automobile Manufacturers said on Monday.

The performance compared with a 6.5% year-over-year gain in April, and a 6.8% year-over-year increase in the first quarter.

May is traditionally one of the year’s big sales seasons, as new car models start to arrive at dealerships following the country’s biggest motor show, which this year took place in Beijing in April.

According to Ways Consulting Co., a Chinese consulting firm focused on the automotive industry, dealers offered an average 10% discount on cars in May, which was largely unchanged from April.

Also, some macroeconomic factors that had been a drag on sales seem to be fading. Property sales growth has started to moderate after a spurt in the first quarter and trade volumes on stocks fell for a second month in May. Rising stock and housing markets had diverted cash from car purchases. Meanwhile, gasoline prices remain relatively low.

While the sales uptick is a positive sign for the global auto makers that depend on China for growth, companies remain cautious about a prolonged economic slowdown. While shipments to dealers gained 11% last month, auto makers produced 5.5% more cars in China compared with the year-earlier period.

This is being reflected in dealer inventories. The latest survey of China’s more than 20,000 dealers by the China Automobile Dealers Association, a government-backed trade group, showed that at the end of April, dealers on average had inventories equal to 1.54 months of sales, down slightly from 1.55 months in March. In China, analysts say 1.5 months of sales on lots is the level at which dealers should begin to be concerned about high inventory.

The overall pace of sales has been slowing after a decade of extraordinary gains for auto makers. In a bid to support the industry, Beijing has introduced a series of support measures. A halving of the 10% purchase tax on small-engine cars, coupled with favorable credit policies, has helped increase sales since the fourth quarter of last year.

Analysts have cautioned that the policy could have pulled demand forward, threatening a stall in growth after it expires at the end of this year.

In total, China’s combined sales of passenger and commercial vehicles reached 2.1 million units in May, up 9.8% from a year earlier, the auto manufacturers’ group said.

SUVs continued to be the brightest spot in the market, with a year-over-year sales increase of 36% with 627,000 units sold, according to the auto association.

General Motors Co. and its joint ventures delivered about 295,000 vehicles to Chinese consumers last month, up 17% from a year earlier, citing strong demand for SUVs.

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