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China: Facebook Mania Hits China, While Apple Adds a New Chinese Operator

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Sina and News Corp. also make the news.

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MINYANVILLE ORIGINAL Facebook (FB) mania hit Wall Street and the rest of the world today, and even China did not escape the hype of the biggest ever Internet IPO, with news outlets like Sina (SINA) and Sohu (SOHU) all breathlessly reporting on Facebook and CEO Mark Zuckerberg.

One obvious question many are asking with regards to the social (and now, public) network's future, is when it will ever enter the enormous Chinese market, where local social media companies like Renren (RENN), Sina Weibo and Tencent Weibo have each staked out a claim in the market.

Besides the fact that Chinese competitors have entrenched themselves in the domestic market, another obvious obstacle is the regulatory hoops Zuckerberg and Co. will to jump through to be able to operate in China.

The way forward for Facebook would be to partner with a local company, as Amazon (AMZN) and eBay (EBAY) have done to varying degrees of success. At TechCrunch, Henry Fong opines that a way for Facebook to penetrate China would be to target the smart phone services market.

"Facebook's recent acquisition of Instagram provides an opportunity to leverage the app's popularity among Chinese users as a potential route for a broader Facebook market entry in a way that is relatively non-threatening to Instagram's Chinese partners such as Sina, whose social features are well integrated into the Chinese version of the app," Fong writes.

Meanwhile, the Chinese economy reported more disappointing news, while Foxconn refuted claims that it was preparing to make the Apple TV (AAPL).
  • Chinese economy: It's more bad news for China, as the country saw foreign direct investment, or FDI, fall 0.74% from a year earlier to $8.4 billion in April. This was the sixth consecutive month FDI has fallen in the mainland, with the dismal economic conditions in Europe undoubtedly playing a big part.
According to a report released by the State Information Center, a Chinese government think-tank, second quarter GDP is expected to fall to 7.5%, which would be the slowest rate of growth in a quarter since the first three months of 2009, when the global financial crisis was at its zenith.

To boost the slumping economy, China will cut banks' reserve-ratio requirement by 0.5% to 20%, starting today, in the hopes that its banks will start lending more freely. Chinese banks, however, likely will not, since they already have plenty of credit. Interbank lending rates fell to 3.2% last Friday, compared to a high of 5.4% on Feburary.
  • Apple: Last week, a China Daily news report indicated that Foxconn CEO Terry Gou had said that his company was preparing to manufacture the much-anticipated Apple TV. It turns out, however, that the report was not entirely accurate. The company released a statement on Monday to The Next Web downplaying the story, saying that "[a]ny reports that Foxconn confirmed that it is preparing to produce a specific product for any customer are not accurate."
Meanwhile, Chinese iPhone fans may soon get a new choice of carrier, as China Mobile is negotiating with the Cupertino-based company to carry the popular phone. Because its 3G technology is not compatible with the chips used in current iPhone models, China Mobile is the remaining Chinese operator that does not officially carry the iPhone. With analysts predicting that next-generation iPhones will switch to Qualcomm (QCOM) chips, which China Mobile's network supports, the telephone company can thus work out a deal with Apple.

"I can't give you too many details, but I'd like to repeat that both sides do hope to boost our cooperation," China Mobile Chairman Xi Guohua told Reuters.
  • News Corp (NWS): The steady integration of the American and ever-growing Chinese movie industry continues. Last week, it was announced that Chinese exhibitor Wanda Group will acquire US cinema chain, AMC. This week, it was a transaction in the opposite direction, with News Corp, the parent company of 20th Century Fox, having purchased a 19.9% stake in Chinese movie company, Bona Film Group (BONA).
Back in February, DreamWorks Animation (DWA), the studio behind films such as Kung Fu Panda, announced that it would be setting up a new studio in Shanghai, in collaboration with three Chinese companies, that would focus on movies aimed at families. The new studio is called Oriental Dreamworks and it expects to release its first movie in 2016.
  • Sina: Sina, owner of China's largest microblog site, Weibo, announced a first-quarter net loss of $13.7 million, or $0.21 per year. A year ago, it netted a profit of $15 million. The number did beat analysts' expectations of a $19.3 million loss. Thanks to stronger than expected advertising sales, total revenue in the first quarter rose 6% to $106.2 million.
Looking ahead to second quarter results, Sina, whose competitors include Baidu (BIDU) and Sohu, offered a bearish prognostication, saying it expects to incur another quarter of losses. The company explained that it will increase its spending on Weibo from last year's $110-$120 million to $160 million, mostly to upgrade the microblog's infrastructure and to hire new personnel.

"It is essential for us to build a more dominant scale in order for us to be successful in the long term," explained CEO Charles Chao on a conference call.
  • US-China economic relationship: US-Chinese trade relations took its latest hit when the US announced punitive tariffs on solar panel imports from China. The US Commerce Department decided on tariffs of 30% on Thursday, after reviewing a complaint filed by local companies who alleged that Chinese exporters were undercutting them by dumping cut-price solar panels onto the US market.
China was unsurprisingly furious at the tariff, describing it as protectionism.

"The US decision lacks fairness, and China expresses its strong displeasure," read a statement posted on the Chinese Ministry of Commerce's website. "By deliberately provoking trade friction in the clean energy sector, the US is sending the world a negative signal about trade protectionism."

Twitter: @sterlingwong
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No positions in stocks mentioned.
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