Author: Cao Zhongxiong, Executive Director, New Economy Research Department

Editor’s note: Despite fierce industrial competition, various funds are still scrambling to occupy the sharing bike market, indicating the industry still has considerable potential for development. But in the future, the platforms will inevitably face reshuffle. Mobike and ofo might be left as the final two major competitors.

As capitals swarm into the sharing bike market, an ideal gateway to the Internet economy, the industry still has plenty of room for development. But there is no doubt that competition will be more and more intense.

Every bike sharing platform is implanted with more business models in an attempt to boost industry value; however, this move is unlikely to achieve great success. Sharing bike is a transport tool by nature, and it is unrealistic to let it stack more commercial values.

At the same time, sharing bikes are increasingly closely related to the Internet of Things. For example, Mobike and ofo are working to expand the application of Internet of Things technology. In fact, sharing bike itself is the Internet of Things. But it can only be a terminal. If new Internet of Things technologies are implanted in the future, more emphasis will be put on user experience.

With the entry of various capitals, competition of sharing bike platform is becoming more and more intense. Among them, ofo and Mobike are most favored by capital, topping the industry in market share and development scale. To some extent, the market capacity of sharing bikes is close to saturation in the first-tier cities. The number of bikes put to the market by various platforms has actually exceeded market demand. There is little chance for the emergence of new platforms. In the second- and third-tier cities on the Chinese mainland, the market space for sharing bikes will not be too large. In the process of fierce competition, there will be great possibility for merger and acquisitions. Small businesses will be phased out, and the final game will be held between Mobike and ofo.

Author: Guo Wanda, Executive Vice President, CDI

Editor’s Note: The Belt and Road Initiative has marched from a concept to the phase of accelerated implementation. The key of Belt and Road construction is policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bond. It is a major international project involving land, technology, funds, talents, information and many other factors. Hong Kong has unique economic, social and cultural functions, which enable to promote the joint consultation, construction and shared benefits under the Belt and Road Initiative.

Hong Kong is an international metropolis, gathering international high-end resources. It stands extremely high in the level of opening-up, enjoying rich experiences in cultural and people-to-people exchanges. It hence can play an important role not only in the Belt and Road construction, but also in the global economic and social exchanges.

Hong Kong's internationally advanced professional services cover the financial, legal, operational risk assessment, human resources, and international arbitration and mediation sectors. It boasts better understanding of the development strategy of governments as well as the rules of the market system. Therefore, it can play a professional intermediary function to realize the connectivity of development strategies, and play an important role in policy coordination between the Chinese government and the countries along the routes.

Hong Kong, with leading international certification monitoring technology and standards in the field of infrastructure construction, can help Chinese mainland enterprises to establish authoritative standards in this field, and promote it widely in the Belt and Road countries. The implementation of the "China standard" as an international standard is a crucial step in the internationalization of Chinese technologies and facilitating Chinese enterprises to "go global". In infrastructure construction projects in Belt and Road countries, we may adopt the mainland and Hong Kong “1+1"package service cooperation model, to assist mainland enterprises in achieving communication and coordination with those in the host countries.

Hong Kong can take advantage of its position as an international trade center and international shipping hub to support and serve the Belt and Road construction with developed international trade network and efficient international high-end logistics service. In addition, Hong Kong itself is the world's leading free trade port, separate customs territory, with perfect free market legal system. If China is to promote the construction of a free trade zone network or sign RCEP, Hong Kong can give play to its advantages in software, hardware and geographical position, paving the way for unimpeded trade along Belt and Road routes.

Hong Kong is the world's fourth largest foreign exchange market, the eighth largest securities market and an offshore centre for the RMB. It plays an important role in promoting the use of RMB in Belt and Road countries and the internationalization of RMB. Enterprises can be listed in Hong Kong, issue a variety of bonds, including RMB, for financial integration. Investment institutions can jointly set up funds for the development of the Belt and Road, as a supplement to the Silk Road Fund, to provide convenience for the Belt and Road financial integration.

The Belt and Road is not only economic and trade cooperation, but also cultural exchanges and communication. Hong Kong is one of the cities with the highest degree of globalization. It is well developed in information service, and the media is in line with international standards. Its humanistic exchanges and cultural interaction are diversified, inclusive and global. Therefore, Hong Kong has gradually become an important window for the world to learn about the Chinese mainland, Chinese culture and the Chinese nation.

From July 25 to 26, Dr. Qu Jian, Vice President of CDI, attended the Sri Lanka Economic Summit 2017 held by Ceylon Chamber of Commerce in Colombo. Themed on Execute-Transform-Realize, the summit discussed how to achieve the economic transformation in Sri Lanka through transforming the policy implementation model, accelerating the reform and renewing the business mode. Dr. Qu Jian gave a keynote speech on the session of Realizing the Potential of Mega Development Projects.

Dr. Qu Jian shared the developing mode and successful experience of Chinese Special Economic Zones. Besides, he put emphasis on the planning phase before the industrial park construction, and further illustrated the preliminary planning process including the establishment of Special Economic Zones Law, the planning of industries and space, and the research of investment feasibility, financing, and operation management. 

From June 7 to 14, CDI delegates from Department of Regional Development Planning paid a visit to Bangladesh and India for a field-trip research on international production capacity and industry transfer cooperation on processing trade. The delegation was led by Ms. Zhu Yong, the Deputy Director of the Department of Foreign Trade of the Ministry of Commerce and also included delegates from the MOFCOM.

The delegation had a sound discussion on joint construction of industrial parks and international production capacity cooperation with local foreign-funded enterprises and foreign trade departments. Besides, the delegation carried out filed research on four local industrial parks and more than 20 enterprises funded by Chinese mainland and Hong Kong investors and also had in-depth exchanges with economic and commercial representatives from Chinese embassies and consulates. 

GDP rose 6.9% y/y in H1, up only 0.1 pps from Q4 2016. Industrial output rose 6.9% y/y, up 0.8 pps, and fixed asset investment rose 8.6%. But fixed asset investment’s real growth rate was just 3.8% y/y, down 5 pps from last year. Negatively affected by weak investment growth, we expect H2 growth to experience downward pressure. National household consumption spending rose 6.1% y/y, down 0.5 pps from H1 2016, reaching its lowest level since the creation of this measure in 2014. Retail sales of consumption goods rose 9.1% y/y in real terms, down 0.6 pps. Exports and imports are recovering, rising 8.5% and 18.9% y/y respectively, though both are still lower than in 2013 and 2014, and have much room for recovery.

The ex-factory price index of industrial goods peaked in February, with a growth rate of 7.8% y/y, and then declined, to 5.5% y/y in June. Similarly, PPI topped out in March, with growth of 10% y/y, falling to 7.3% y/y in June. We expect prices to be low in H2, based on the current non-loosening monetary policy.

In H1, negatively affected by financial deleveraging policies, the main financial indicators point mostly to persistent falling growth. At the end of June, M2 rose 9.4% y/y, down 1.9 pps from the end of 2016, reaching a historical low. M1 rose 15% y/y, down dramatically from recent high levels, and down 6.4 pps from the end of 2016.

National government revenue and expenditure rose 9.8% and 15.8% y/y respectively, generating a fiscal deficit of 918 billion CNY, 2.5 times that of H1 2016, constraining further fiscal expansion.

China’s top leaders have gathered every five years since 1997 for a National Financial Work Conference. On July 16th, during this meeting, financial risk was the main topic. The most concrete decision to emerge from the meeting so far has been President Xi Jinping’s announcement of the creation of a cabinet-level committee to coordinate financial oversight. We consider China’s financial or debt risk containable. Compared with the United States before the 2008 financial crisis, the Chinese government has at least recognized its debt risk. High debt, in contrast to other countries, mostly concentrates on the corporate sector – on state-owned enterprises in particular. The Chinese government has a large direct say in SOE debt restructuring. The centralization of financial oversight agencies can help avoid regulators’ coordination failure, and regulatory capture. China’s relative high economic growth also promises to contain its debt over the medium term.