CHINA BRIEFING: Tencent Rival NetEase Music Partners With Universal Music Group; Mask-Maker Kingfa Cancels Contract With U.S. Buyer

Tencent Rival NetEase Music Partners Universal Music Group

NetEase Cloud Music, a freemium music streaming service developed and owned by NetEase, Inc., has announced a multi-year strategic partnership with Universal Music Group (UMG). Meanwhile, its rival, Tencent Music Entertainment (TME) said it would renew its multi-year licensing agreement with UMG, continuing distribution of UMG content on its various platforms including QQ Music, Kugou Music and Kuwo Music, Shanghai Securities News reported. 

The new deal comes as NetEase Cloud Music prepares for an upcoming IPO announced early this month, with no date confirmed publicly. This partnership with UMG will make the service a more international music platform while promoting the development of the domestic music market, said NetEase CEO Ding Lei. 

In advance of the planned IPO, NetEase raised US$700 million in December 2019 with investments from Alibaba and Yunfeng Capital, and raised US$600 million in November 2018 with investments from Baidu Inc. and General Atlantic. 

The agreement will not only allow NetEase Cloud Music users to listen to the UMG catalog, but also extends to Mlog, a music-based blogging community that the company claims enhances the user experience.

Listed on the Nasdaq in 2000, NetEase is one of the largest Internet and video games companies in the world, owning games including the Westward Journey series as well as Heroes of Tang Dynasty Zero and Ghost II. The company's first-quarter fiscal report shows RMB17.06 billion (US$2.45 billion) in net profits, a rise of 18% year-on-year. It is set to report second-quarter 2020 results on Aug 13.

UMG previously had an exclusive agreement with TME. Some industry pundits see the move UMG is making with NetEase Cloud Music as a shake-up in international labels' approach to the Chinese market. Previously, UMG, Warner Music and Sony Music Entertainment had each signed a single, exclusive licensing deal in China with TME, which then sub-licensed the catalogs to its rivals, including NetEase, according to Variety.

Such practices provoked an antitrust investigation into Tencent by Chinese authorities last year. Rival Chinese firms were sub-licensing music from TME at costs double or triple licensing from the those labels directly, according to Bloomberg.

Mask-Maker Cancels Contract With U.S. Buyer

A domesticaly listed company specializing in manufacturing modified, biodegradable, and specially engineered plastics said it had to cancel a purchase order for 7 billion KN95 masks after its U.S.-based customer failed to pay a 40% deposit, China Business Network reported.  

The company, Kingfa Sci. & Tech. Co., Ltd., which expanded its production of melt-blown polypropylene, a product essential to medical PPE and critical during the COVID-19 pandemic, has reported high profits. The company has already sold a total of up to 392 million masks worldwide.

Kingfa first announced the contract with the U.S. customer, worth RMB975 million, on May 17, without disclosing the customer. The announcement immediately led to Kingfa's stock skyrocketing.  

From May 15 to August 10, Kingfa's stock rose from RMB12.03 per share to RMB16.74 per share, or a gain of 39.15%. During the first half of the year, the company made RMB2.412 billion in net profits, a rise of 373.27% year-on-year. 

As of May 23, Kingfa stated that the company had approved a request made by the U.S. buyer to delay the 40% deposit due to procedures required for such a large payment.

Some investors suspect that the company manipulated the stock price by releasing fraudulent contract news. A Kingfa spokesman said they are still exploring legal actions against contract violations by the U.S. buyer.

Inflation Continues in July  

China's Consumer Price Index (CPI) rose by 2.7% in July, slightly higher than the inflation rate of 2.6% projected by analysts. The inflation mostly was driven by high food costs, as the CPI for food products rose by 13.2%, up from the 11.1% in June, according to China International Capital Corporation (CICC). 

The unusually high number of rainstorms and unprecedented flood disasters in the southern regions in July negatively impacted food production and transportation of produce, while African Swine Flu has decimated herds and reduced pork supplies. 

The price of pork increased by 10.3% in July compared with the previous month, according to the National Bureau of Statistics.

Authorities hold a positive outlook for the remainder of the year. CICC said that with the Producer Price Index (PPI) suggesting continual growth, the CPI in the third quarter would likely ease up and have an apparent drop in the fourth quarter. 

Beidou Navigation Goes To School

A technology company in Fujian recently developed a Beidou navigation-enhanced schoolbag featuring the positioning service apps FindNow and FindM Pro, helping parents of primary school children keep track of their kids, Fujian Daily reported.

Users can check the schoolbag's real-time positioning data through a phone app that keeps a record of tracking positioning for six months. 

Beidou, a rival to the U.S.-owned GPS, Russia's GLONASS and the European Union's Galileo networks, announced on July 29 the completion of its network, successfully bringing online its 55th and final geostationary satellite, which was launched on June 23.

Analysts estimated that the total output value of China's satellite navigation and location services industry will reach RMB400 billion this year.

Employment Market Stabilizes In Q2 

There were about 3.33 million people across China seeking employment in the second quarter, an incremental increase of 91,000 people compared with the more severely impacted first quarter, the state-run People's Daily reported.

Meanwhile, recruiters sought 4.412 million employees during this quarter. Delivery staff, restaurant staff, packaging workers and marketing specialists are in high demand, the report said.

The CIER exponential, a barometer for China's job market, in the second quarter slightly declined to 1.35 from 1.43 of the first quarter, according to a report released by China Institute for Employment Research of People's University of China associated with zhilian.com, one of China's job recruitment sites. The higher the CIER exponential is, the more jobs are provided to the market than the number of the people seeking jobs.

Additionally, the report indicated that employment opportunities are starkly different in different industries. Service industries in the sectors of entertainment, education, insurance, consulting and integrated circuits saw a rise in recruitment demand. But sectors including resources, mining, ore-smelting and packaging experienced a slump in job recruitment. 

The report projects the CIER exponential in the following quarter will be slightly higher than the second quarter but lower than one year earlier.