China finds Mercedes-Benz guilty of price fixing: Xinhua

#GNN China - #Germany's Mercedes-Benz has been found guilty of manipulating prices for after-sales services in China, the official Xinhua news agency reported, adding to pressure on foreign carmakers in the world's largest auto market.

Brands including Volkswagen AG's (VOWG_p.DE) Audi, BMW (BMWG.DE) and Mercedes-Benz are cutting prices for new cars and spare parts in an effort to appease Chinese regulators which have accused some of them of anti-competitive behavior.

Daimler, the parent company which makes the luxury Mercedes-Benz cars, said on Monday it was cooperating with authorities and declined to comment further.

An array of industries, from milk powder makers to electronics firms, has come under the Chinese regulatory spotlight in recent years as the government intensifies its efforts to make foreign companies comply with 2008 anti-monopoly legislation.

Anti-trust regulator, the National Development and Reform Commission (NDRC), launched an investigation into the auto industry following domestic media complaints that foreign carmakers were overcharging Chinese customers for vehicles and spare parts.

The Xinhua report, which cited regulators, made no mention of possible penalties for Mercedes. The regulator can impose fines of up to 10 percent of a company's China revenues for the previous year.

Analysts at JP Morgan said the willingness of the German manufacturers to lower prices in China reduces the possibility of high fines but in the longer term could hit profitability.

Mercedes-Benz recently announced that it would reduce prices on some spare parts by an average of 15 percent and BMW said it would cut prices by an average of 20 percent, JP Morgan said. Audi has also said it will cut prices but did not specify by how much.

In the longer run, forcing European carmakers to lower the price of spare parts and imported vehicles could see margins in China normalize to levels currently seen in Europe, JP Morgan said in a note earlier this month.

"We believe that this might happen gradually over the next five years or more," the brokerage said, adding it sees an impact on earnings per share of around 3 percent for German carmakers.

They said that if the price of spare parts and services fell 20 percent in China, Daimler and BMW's pretax profit would take a hit of around 1 percent in 2015, and Volkswagen's pretax profit would fall by just under 3 percent.

ANTI-COMPETITIVE PRACTICES
The Jiangsu Province Price Bureau found evidence of anti-competitive practices after raiding Mercedes-Benz dealerships in the eastern coastal province and an office in neighboring Shanghai, Xinhua said in its report on Sunday.

The European Chamber of Commerce in China has expressed concern that European companies were being unfairly targeted and were discouraged from appealing against fines.

"The European Chamber has received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings," it said last week.

Critics however say automakers have too much leverage over car dealers and auto part suppliers in China, enabling them to control prices.

The Xinhua report said the cost of replacing all the spare parts in a Mercedes-Benz C-Class could be 12 times more than buying a new vehicle, citing a report from the China Automotive Maintenance and Repair Trade Association.

Earlier this month the NDRC said it would punish Audi and Fiat SpA's (FIA.MI) Chrysler for monopoly practices. Executives at Toyota Motor Corp (7203.T) said the government was looking into the auto parts policies of its premium brand, Lexus.

Chinese media reported last week that Audi, the best selling foreign premium car brand in China, would be fined around 250 million yuan ($40.7 million).

Foreign car brands, all of whom operate in China through joint ventures with a local partner, have been fiercely competing to up their share in the world's largest car market.

Daimler has said that it wants to boost China sales of Mercedes-Benz cars to more than 300,000 cars a year by 2015, while Audi expects China to make up 40 percent of its sales by 2020.

(GNN)(Reuters)(Additional reporting by Edward Taylor and Andreas Cremer; Editing by Erica Billingham)

Related articles

• China finds Mercedes-Benz guilty of price manipulation: Xinhua (news.yahoo.com)
• China 'to punish' Audi and Chrysler (bbc.co.uk)
• China Says Mercedes Guilty of Price Abuses (abcnews.go.com)
• China car probe spreads to Toyota (bbc.co.uk)
• China to punish Audi, Chrysler for monopoly behaviour (irishtimes.com)

#GNN - #Apple to store some user data in #China: Weighing the pros and cons

#Summary: Apple's move to store some of its Chinese users' data in the country has benefits — and drawbacks — for its customers.

Apple has started to store some of its Chinese users' data on servers in mainland China, becoming one of the very few technology giants to store information on Chinese soil.

It's a step away from its rivals, like Google and Microsoft, which tend to shy away from storing data in the country due to its policies on censorship and past accusations of state-sponsored hacking and spying.

Apple said it made the move in order to speed up its iCloud service to users in the country, and increase reliability across the board, according to the Reuters news agency.

China remains increasingly important to the company's bottom line, as it continues to drive the company's strong quarterly revenue. The iPhone and iPad maker's fiscal third-quarter results showed China accounted for about 16 percent of the company's global revenue, thanks to a bump in iPhone sales — its predominant profit driver — in the country.

But skeptics are already questioning whether or not the data-storing approach may harm its business, in light of the nation state's past (and ongoing) practices.

Here's what you need to know:

1. The data will be held by China Telecom, the country's third-largest wireless carrier — though, the data will be encrypted. The carrier will not have access to the data, Apple said.
2. Encryption keys for iCloud, which lets users store their music, photos, documents, and other data from their iPhone, iPad, or Mac, will be stored offshore by Apple.
3. China Telecom is state-owned, but remains a strong partner for Apple. It was a key partner in getting the iPhone to market in the country, which at the time was stalling its iPhone profit growth.

Apple will remain the custodian of the encryption keys. But because Apple conducts business in China, it still has to abide by data requests by law enforcement and intelligence agencies.
Reports suggest that the move was twofold: to make iCloud faster and more reliable for its users, but also because the company was facing a crackdown by the Chinese authorities that may have seen it penalized for failing to store data within grabbing-reach of the state.

It follows Russia's recent steps to force companies to store Russian data on its soil, which would make it significantly easier for Moscow to conduct surveillance on its citizens.

Russia and China, two of the last remaining communist states, remain at arms length from the rest of the G7 and the United Nations due to these practices.

But it may not alleviate concerns that China may be able to grab data when it wants, for any given reason.

China's policies and practices on state surveillance, government censorship, and extraterritorial hacking have been widely criticized by Western nations. Google refuses to store data in China after it was hacked by Beijing in 2011, leading to the search giant pulling out of the country altogether.

Apple has in recent months become one of the pinnacles of user privacy, particularly in the wake of the Edward Snowden disclosures. Although Apple denied any knowledge of the PRISM surveillance system during a time in which its transparency levels were at an all-time low, many remain skeptical of how much access the US government has to Apple's networks.

In the wake of the disclosures, Apple issued its first transparency report with a "warrant canary," to show before-the-fact if a wide-ranging warrant for its customers' data had been received.

Apple also devises its messaging systems to be encrypted to the point where, according to reports, even the company cannot access the data — making it impossible to hand over that data to the US government and other nation states. Search warrants can still be served on the company. It's not clear if there are master encryption keys to allow Apple's general counsel or custodian of the records to hand over data in a law enforcement or national security emergency.

That said, trust in the wider Silicon Valley technology scene has been shaken by the scope of state surveillance.

For now, it seems like the fairest compromise. Though the data may be stored in China, it's said to be unreadable by its carrier partner — and therefore also unreadable by Beijing. With Apple storing the encryption keys, it may be the best-case scenario for everyone.

Bombardier says firmer economy to boost industry jet deliveries

(GNN) - Bombardier Inc (BBDb.TO) on Sunday said it expects the aircraft industry to deliver 22,000 business jets from 2014 to 2033 in segments in which the Canadian planemaker competes, worth about $617 billion in industry revenue.

Industry deliveries are expected to increase slightly this year, compared with 2013, Bombardier said, helped by "stable to positive" trends for the global economy.

Demand for business aircraft should improve in 2015, the company said, helped by demand in emerging markets.

North America will receive the greatest number of new business jet deliveries between 2014 and 2033, followed by Europe, which remains the second largest market, according to Bombarier's latest long-range industry forecast. It said China is to become the third largest region in terms of deliveries over the next 20 years, with 950 deliveries.

Over the same period, Montreal-based Bombardier forecast 13,100 industry deliveries in the 20- to 149-seat segment, valued at $658 million.

(Reuters)(AIP)(Reporting by Ransdell Pierson; Editing by Bernard Orr)

RPT-China aviation boom brings first aircraft lessor IPO in Asia

(Repeats story published on Friday, no changes in text)

* CALG to spend $100 mln IPO proceeds on new aircraft

* China plane leasing market seen growing 50 pct by 2018

* Profitability may wilt as competition heats up

By Anshuman Daga and Fang Yan

SINGAPORE/BEIJING, July 11 (GNN) - As China's aviation market booms, local aircraft leasing companies are raising funds in finance hubs like Hong Kong and Singapore in a bet they can win market share from the international players that dominate the industry.

With the country's growing middle class fueling a surge in travel, Boeing Co estimates Chinese airlines will need nearly 6,000 new jets over the next 20 years, valued at $780 billion. Many of those aircraft will be leased rather than bought as carriers seek to cap long-term commitments: China's 800-plane leasing market is set to grow 50 percent by 2018, according to consultancy Ascend.

Friday's market debut in Hong Kong of Asia's first listed plane lessor, China Aircraft Leasing Group Holdings Ltd (CALG) , is the clearest example so far of local players chasing expansion. CALG said the nearly $100 million it raised in its initial public offering will be mostly spent on acquiring aircraft to try to expand its 3 percent share of the market.

More IPOs are possible, but a more common tack for the leasing arms of big Chinese banks, such as Industrial and Commercial Bank of China (ICBC), Bank of Communications and Bank of China, is to set up subsidiaries in the aircraft financing hubs of Singapore and Dublin to raise funds.

"A lot of the local companies are arms of the big Chinese banks and they are taking leverage of the connections. The relationships the parents have helped them to get business," said Ilya Ivashkov, a New York-based senior director at Fitch Ratings.

Chinese lessors are expected to corner 55 percent of the local market by 2018, up from 38 percent last year, CALG said in its IPO prospectus, quoting consultancy Ascend.

To do that, though, they'll face stiff competition in the world's fastest-growing aviation market from the biggest global aircraft lessors, International Lease Finance Corp, now part of AerCap, and GECAS, a unit of General Electric.

PRICING PRESSURE

"Major foreign leasing companies have been speeding up their expansion in China. As such, the competition will become more and more fierce down the road," said Mark Jiang, managing director of aviation finance at ICBC Financial Leasing.

The presence of deep-pocketed players in the aircraft leasing sector means smaller players will find it hard to make money, analysts said, even if they do grab market share. Lessors book revenue from renting out their planes.

"The one issue with having a lot of capital flow into the sector at once is that it's going to result in more competitive pricing and more competitive lease terms," said Fitch's Ivashkov.

He said that with new plane leases extending to 10-15 years, the jury is still out on whether the smaller players would be profitable. "It will ultimately be organic growth or consolidation," he said.

CALG, whose shares rose as much as 3 percent on their market debut, is partly owned by a subsidiary of state-backed financial conglomerate China Everbright Group.

The lessor counts China Southern Airlines Co. Ltd and China Eastern Airlines Corp Ltd among its customers, and plans to double its fleet to 64 before the end of 2016. The aircraft operated by China's airlines are generally younger than that of the world.

CICC, China Everbright International and CCB International were joint bookrunners on CALG's IPO. (Reuters)(AIP)(Editing by Miyoung Kim and Kenneth Maxwell)

U.S., Iran say disputes remain in nuclear talks as deadline looms

(GNN) - U.S. Secretary of State John Kerry said on Sunday major differences persist between Iran and six world powers negotiating on Tehran's nuclear program, with a week to go before a deadline for a deal.

The United States, Britain, France, Germany, Russia and China want Iran to reduce its nuclear fuel-making capacity to deny it any means of quickly producing atom bombs. In exchange, international sanctions that have crippled the large OPEC member's oil-dependent economy would gradually be lifted.

Iran says it is enriching uranium for peaceful energy purposes only and wants the sanctions removed swiftly. But a history of hiding sensitive nuclear work from U.N. inspectors raised international suspicions and the risk of a new Middle East war if diplomacy fails to yield a long-term settlement.

"Obviously we have some very significant gaps still, so we need to see if we can make some progress," Kerry said ahead of meetings with foreign ministers who flew into the Austrian capital at the weekend to breathe new life into the talks.

Iranian Deputy Foreign Minister Abbas Araqchi delivered a similar message. He was quoted by Iran's Arabic language al-Alam television as saying that "disputes over all major and important issues still remain. We have not been able to narrow the gaps on major issues and it is not clear whether we can do it."

Kerry arrived in Vienna in the early hours after clinching a deal in Kabul with Afghanistan's presidential candidates to end the country's election crisis.

"It is vital to make certain that Iran is not going to develop a nuclear weapon and that their program is peaceful and that's what we're here to try and achieve and I hope we can make some progress," Kerry said in Vienna.

German Foreign Minister Frank-Walter Steinmeier told reporters that Germany and the other members of the six-power group have tried to persuade Iran of the urgency of a deal.

"This may be the last chance for a long time to peacefully resolve the dispute over Iran’s nuclear program," he told reporters. "It's now up to Iran to decide whether it wants cooperation with the international community or to remain in isolation. ... The ball is in Iran's court."

British Foreign Secretary William Hague said it was crucial for Tehran "to be more realistic about what is necessary" to reach a nuclear deal, adding that no breakthroughs had been achieved and there was "no major change in the state of play in these negotiations as of this moment".

Kerry also met Iranian Foreign Minister Mohammad Javad Zarif, though no readout was immediately available. On Saturday, a senior U.S. official said Iran was sticking to "unworkable and inadequate" positions.

NEITHER PESSIMISTIC NOR OPTIMISTIC

Another of Kerry's meetings on Sunday was with Germany's Steinmeier, who raised new accusations of U.S. spying on Berlin.

Steinmeier told reporters that in the meeting with Kerry he called for "reviving this (U.S.-German) relationship, on a foundation of trust and mutual respect." Kerry referred to the United States and Germany as "great friends."

Germany asked the CIA station chief in Berlin last week to leave the country following fresh charges of U.S. spying on Berlin. Kerry and Steinmeier were expected to hold a joint news conference later on Sunday.

Kerry, Steinmeier and their British and French counterparts also discussed the escalation of hostilities between Israel and Palestinian militants in the Gaza Strip.

Araqchi said that he was "not pessimistic but also not very optimistic" about the chances for an agreement with the sextet ahead of the self-imposed deadline of July 20. "No proposal has been accepted yet. We have not reached any agreement over the enrichment (program of Iran) and its capacity."

He added that if the talks collapsed, Iran would resume higher-level enrichment that it suspended on Jan. 20 when a preliminary accord the sides struck two months before took effect. Iran won limited relief from sanctions in return.

The Nov. 24 deal included a provision for lengthening talks on a permanent agreement by up to six months if all sides agree. Araqchi said "there is a possibility of extending the talks for a few days or a few weeks if progress is made."

A senior U.S. official said on Saturday that an extension would be difficult to consider without first seeing "significant progress on key issues".

French Foreign Minister Laurent Fabius also raised the possibility of extending the talks.

"If we can reach a deal by July 20, bravo, if it's serious," he told reporters. "If we can't, there are two possibilities. One, we either extend ... or we will have to say that unfortunately there is no prospect for a deal."

Failure to seal a deal would mean the limited sanctions relief currently in place for Iran would end and Tehran could expect tougher sanctions, above all from the United States.

Iran says it is refining uranium to low levels of fissile purity to fuel a planned network of nuclear power stations. It earlier described its higher-level - or 20 percent purity - enrichment as material to fuel a medical research reactor. High-enriched uranium - or 90 percent - is for nuclear weapons.

The Russian and Chinese foreign minister were not in Vienna on Sunday due to a meeting in Brazil of the BRICS developing countries. Moscow and Beijing sent senior diplomats to Vienna instead.

(Reuters)(AIP)(Additional reporting by Parisa Hafezi, Fredrik Dahl and Louis Charbonneau; Writing by Louis Charbonneau; Editing by Rosalind Russell and Kevin Liffey)

The Prodigal Sony Returns To China

The PS4 is headed to China.

After China dropped a decade-long ban on gaming consoles, Sony is making plans to bring its latest gaming console to the massive Chinese market. The last time a Sony gaming system was available through official channels in China was 2004.

China previously tightly regulated gaming consoles with strict sales restrictions that were aimed at countering youth exposure to online games as the WSJ reports.

Under the latest local restrictions, foreign companies can sell consoles and games only if done in Shanghai’s free-trade zones. Sony has partnered with the state-run Shanghai Oriental Pearl Group to make and sell PlayStation consoles and software in China.

Microsoft recently announced a similar plan that would bring the Xbox One to the Chinese market as well.

This effort should bolster Sony’s struggling finances. Gaming is one of the company’s three areas of focus and so far the PS4 is outselling the Xbox One worldwide. Sony expects sales to improve, too, with a forecast of 17 million units for the year ahead, up from 14.6 million in the prior year.

Sony’s success in China is not guaranteed. It faces tough competition from an established black market and a populace which turned to PC and mobile gaming after Sony and Microsoft withdrew their market offerings.

Twitter User Growth Will Come From Asia-Pacific – Region Accounting For 40% Of Users By 2018

Figures out this morning from eMarketer estimate Twitter’s growth to continue in the double-digits through 2018, with the Asia-Pacific region playing a large part in that growth trend. Today, Twitter users in Asia-Pacific already outnumber those in North America and Western Europe, accounting for 32.8% of all Twitter users, compared with just 23.7% in North America, the report says. By 2018, the Asia-Pacific region will account for over a 40% share of Twitter’s user base, while the North American region drops to just 19%.

Also notable is that eMarketer’s report doesn’t include China in its estimates, because the network is currently blocked there, even though many users still access it by way of virtual private networks. If that situation changes, the report notes somewhat obviously, the growth in the Asia-Pacific region would be “significantly higher.”

Instead, the forecast estimates that Indonesia and India will end up impacting Twitter’s user base growth most heavily going forward, with both countries experiencing increases of over 50% in 2014 – the former with 61.7% user growth and the latter with 56.9% growth. More importantly, perhaps, is that while large growth numbers tend to indicate a relatively small installed base, that’s not the case with these two countries – India and Indonesia will become the third and fourth-largest regional Twitter user bases this year, at 18.1 million and 15.3 million users, respectively.

That means this year they will both also surpass the U.K. for the first time, in terms of user numbers.

Meanwhile, in Twitter’s home base in the U.S., the market is more mature, with growth tapering off into the single digits in 2015 and beyond. It will, however, remain the largest country in terms of user accounts throughout the forecasting period. In addition, the U.S. user base is today where most of Twitter’s revenue comes from – in fact, the U.S. accounted for nearly three-quarters of Twitter’s total ad dollars last year.

But this (fairly bullish) report indicates that Twitter still has room to grow its ad business outside the U.S. where the service takes hold in these expanding, emerging markets.

In 2018, eMarketer says it estimates that Twitter will growth 10.7% to reach close to 400 million users worldwide.

One big caveat: this estimate and the forecast itself relies on different data sources than Twitter’s own reported figures (255 million monthly actives, currently) because eMarketer uses instead some 90-plus data sources including Twitter press releases, survey and traffic data from other research firms and regulatory agencies, historical trends, internet and mobile adoption trends, country-specific demographic and socioeconomic factors in its analysis.

From this collection of roughly 400 data points, the firm leans heavily on consumer survey data to eliminate business accounts, multiple accounts for individual users and other sources for double-counting to reach its numbers. This is also eMarketer’s first-ever forecast of Twitter users worldwide, so the company still needs to prove that its estimates on this particular subject do well.