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China Retail & E-commerce Quarterly
                      Asia Distribution     Issueand    Retail
                                                  06 | May 2018

China Retail &
E-commerce
Quarterly
Issue 06 | May 2018

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China Retail & E-commerce Quarterly
                                                                                                                                           Issue 06 | May 2018

Table of Contents
I.           Market overview ......................................................................... 4

        1.        Retail sales up by 9.8% yoy in 1Q18............................................................................................................ 4
        2.        Rural retail sales growth continues to outpace urban retail sales growth in 1Q18; per capita income of
                  rural residents also grows faster than urban income ................................................................................. 5
        3.        Online retail sales rise 35.4% yoy in 1Q18 .................................................................................................. 7
        4.        Consumer confidence index remains stable in 1Q18 ................................................................................. 8
        5.        Performance of large-scale retailers picks up in 1Q18 ............................................................................... 9

II.          Latest developments ................................................................ 10

     General retail ...............................................................................................................................................10
        1.        Growth pace of the Top 100s picks up in 2017.........................................................................................10
        2.        Retailers continue to go “smart” ..............................................................................................................12
        3.        Pop-up stores increasingly become a popular channel to showcase new technologies and deliver
                  unique experience to consumers..............................................................................................................13
     Internet & E-commerce ................................................................................................................................14
        4.        Internet players continue their M&A sprees ............................................................................................14
        5.        Internet giants step up AI investments .....................................................................................................15
     Cross-border e-commerce ............................................................................................................................16
        6.        Growth of CBEC (import) market stays strong in 2017 .............................................................................16
        7.        CBEC players open offline stores ..............................................................................................................16
        8.        VIP.com takes part in overseas warehouse operation .............................................................................16
     Retail logistics ..............................................................................................................................................17
        9.        New innovations in the logistics industry .................................................................................................17
     Supermarkets and hypermarkets ..................................................................................................................17
        10.       Costco to launch membership flagship store in China .............................................................................17
        11.       Lotte withdraws completely from China ..................................................................................................17
     Department stores and shopping malls .........................................................................................................18
        12.       CCAGM, MOFCOM, Fung Business Intelligence: China’s department store sector witnesses a positive
                  rebound with some signs of stable recovery in 2017 ...............................................................................18

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     13.       Listed department store operators record sound revenues growth ........................................................18
     14.       Department store operators continue to explore merchandise direct sales model and develop private
               labels .........................................................................................................................................................19
  Convenience stores ......................................................................................................................................19
     15.       CCFA, BCG: Sales revenue of China’s convenience store chain operators amount to 130 billion yuan;
               total number of stores reaches 100,000...................................................................................................19
     16.       Smart vending machine comes on the scene ...........................................................................................20
  Apparel market ............................................................................................................................................20
     17.       Local apparel companies keen to acquire foreign peers ..........................................................................20
     18.       Apparel retailers introduce cross-sector products and services to attract customers ............................22
  Luxury market ..............................................................................................................................................22
     19.       Luxury e-commerce sees rapid development; luxury brands pair up with local e-commerce giants to
               reach digital shoppers ...............................................................................................................................22

III. Competitive landscape ............................................................ 24

     1.        Department stores and grocery players ...................................................................................................24
     2.        Internet and e-commerce companies.......................................................................................................25

IV. Regulation updates .................................................................. 26

  Market supervision ......................................................................................................................................26
     1.        China to cut tariffs on selected vehicles and auto parts ...........................................................................26
     2.        Government to upgrade online platform for dispute settlement ............................................................26
     3.        MOFCOM promotes commercialization and revitalization of rural areas ................................................26
  Cross-border e-commerce ............................................................................................................................27
     4.        GAC proposes measures to facilitate cross-border trade .........................................................................27
  Supply Chain ................................................................................................................................................27
     5.        Government maps out new path for supply chain innovations and applications ....................................27

V.        Outlook ...................................................................................... 29

     1.        NDRC to promote domestic consumption upgrade .................................................................................29
     2.        Consumption upgrade drives stronger demand for imported goods.......................................................29

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3.   CASS: China’s economic growth to slow slightly in coming quarters; consumption continues to see
     moderate growth in FY18 .........................................................................................................................30

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  I. Market overview

1. Retail sales up by 9.8% yoy in 1Q18
Total retail sales of consumer goods increased nominally by 9.8% yoy to reach 9.03 trillion yuan in 1Q18. By month,
the nominal growth in January-February and March were 9.7% yoy and 10.1% yoy respectively.

Exhibit 1: Total retail sales of consumer goods, March 2017 – March 2018

                                           7                                                                                                        12%
                                               10.9% 10.7% 10.7% 11.0%
                                                                                    10.4%           10.3%
                                                                                            10.1%           10.0% 10.2%                     10.1%
                                           6                                                                                       9.7%
                                                                                                                           9.4%                     10%
                                               10.0%                       10.0%
                                                                  9.5%              9.6%            9.3%
                                           5            9.7%                                8.9%                   8.8%                             8%
                                                                                                            8.6%                            8.6%
                                                                                                                           7.8% 8.00%
                                           4
                           Trillion yuan

                                                                                                                                                    6%
                                           3
                                                                                                                                                    4%
                                           2

                                           1                                                                                                        2%

                                               2.79 2.73 2.95 2.98 2.96 3.03 3.09 3.42 3.41 3.47 6.11 2.92
                                           0                                                                                                        0%
                                               Mar-17    Apr       May       Jun     Jul    Aug     Sep      Oct   Nov     Dec Jan-Feb Mar
                                                                                                                                2018

                                                               Total retail sales           Nominal yoy growth            Real yoy growth

Source: National Bureau of Statistics of the PRC; compiled by Fung Business Intelligence

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2. Rural retail sales growth continues to outpace urban retail sales growth in 1Q18; per capita income
   of rural residents also grows faster than urban income
Urban retail sales increased nominally by 9.7% yoy to 7.71 trillion yuan, while rural retail sales rose 10.7% yoy to
1.32 trillion yuan in the period. By month, rural retail sales amounted to 0.41 trillion yuan in March 2018, up by
10.9% yoy, while urban retail sales amounted to 2.51 trillion yuan, up by 9.9% yoy.

Exhibit 2: Total retail sales of consumer goods, urban vs. rural areas, March 2017 – March 2018

                                                                        12.9%
                                          6                                                                                                              14%
                                                       12.6% 12.7%                                                                      0.90
                                              12.2%                              11.7% 11.5% 11.5%
                                                                                                   11.3%
                                                                                                         11.7%                                  10.9%
                                          5                                                                                                              12%
                                                                                                                                       10.7%
                                                                                                                             10.1%
                                              10.7%                     10.7%                                                                            10%
                                          4            10.4% 10.4%               10.2%
                                                                                           9.9% 10.1% 9.8%           9.9%
                                                                                                                                   9.6% 9.9%
                                                                                                                              9.3%
                                                                                                                                                         8%
                          Trillion yuan

                                                                                                            0.47     0.47      0.50
                                          3                                                       0.47
                                                                         0.43     0.41     0.42
                                               0.39
                                                       0.38
                                                                 0.41                                                                            0.41    6%
                                          2
                                                                                                                                                         4%

                                          1                                                                                                              2%
                                               2.39    2.35      2.54    2.55     2.55     2.62   2.62      2.95     2.94      2.98     5.20     2.51
                                          0                                                                                                              0%
                                              Mar-17    Apr      May      Jun      Jul      Aug   Sep        Oct      Nov      Dec Jan-Feb Mar
                                                                                                                                    2018

                                                              Total retail sales (urban areas)           Total retail sales (rural areas)
                                                              Nominal yoy growth (urban areas)           Nominal yoy growth (rural areas)

Source: National Bureau of Statistics of the PRC; compiled by Fung Business Intelligence

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The rapid increase in rural household income has contributed to the fast growth of rural retail sales. Per capita
disposable income of urban and rural households reached 10,781 yuan and 4,226 yuan in 1Q18, up 8.0% yoy and
8.9% yoy in nominal terms respectively. Rural household income grew faster than that of urban households, but
the per capita disposable income of urban households was more than double than that of their rural counterparts.

Exhibit 3: Per capita disposable income of urban and rural households, 2016 – 1Q18

                                                 Urban households                                       Rural households
                                     Absolute value       yoy growth                       Absolute value        yoy growth
                                     (yuan)                                                (yuan)
       Quarterly data
       1Q16                          9,255                         8.0%                    3,578                 9.1%
       1Q17                          9,986                         7.9%                    3,880                 8.4%
       1Q18                          10,781                        8.0%                    4,226                 8.9%
       Half-yearly data
       1H16                          16,957                        8.0%                    6,050                 8.9%
       1H17                          18,322                        8.1%                    6,562                 8.5%
       1-3Q data
       1-3Q16                        25,337                        7.8%                    8,998                 8.4%
       1-3Q17                        27,430                        8.3%                    9,778                 8.7%
       Yearly data
       FY16                          33,616                        7.8%                    12,363                8.2%
       FY17                          36,396                        6.5%                    13,432                7.3%
Source: National Bureau of Statistics of the PRC; compiled by Fung Business Intelligence

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3. Online retail sales rise 35.4% yoy in 1Q18
Total online retail sales of goods and services amounted to 1,931.8 billion yuan in 1Q18, up by 35.4% yoy. Of which,
online sales of goods amounted to 1,456.7 billion yuan, up 34.4% yoy and accounted for 16.1% of the total retail
sales of consumer goods. By month, total online retail sales of goods and services reached 1,227.1 billion yuan and
704.7 billion yuan in January-February and March 2018 respectively.

Exhibit 4: Transaction value of online retail sales of goods and services, March 2017 – March 2018

                          1,400.0
                                                                                                                         1,227.1
                          1,200.0

                          1,000.0                                                                        895.6
                                                                                                                 744.5
                  Billion yuan

                                 800.0                                                                                             704.7
                                                           641.0             627.6 656.3
                                 600.0   546.5 513.5 548.3       554.4 589.4

                                 400.0

                                 200.0

                                   0.0
                                         Mar-17   Apr   May   Jun      Jul     Aug         Sep   Oct     Nov      Dec    Jan-Feb    Mar
                                                                                                                          2018
                                                                    Online retailing transaction value

Source: National Bureau of Statistics of the PRC; compiled by Fung Business Intelligence

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4. Consumer confidence index remains stable in 1Q18
Consumer confidence index has remained fairly stable in 1Q18. Consumer confidence index was 122.3 in January,
and 124.0 and 122.3 in February and March respectively.

Exhibit 5: Consumer Confidence Index, January 2017 – March 2018

                                             130

                                             125
                                                           124.0                                                            123.9
                                             120   122.3           122.3                                                                     122.6
                                                                                                                                     121.3
                                                                                                    114.6   114.7   118.6
                                             115
                          Base index = 100

                                                                           113.4            113.3
                                             110           112.6                   112.0
                                                                   111.0
                                                   109.2
                                             105

                                             100

                                              95

                                              90
                                                   Jan     Feb     Mar     Apr     May      Jun      Jul    Aug     Sep     Oct      Nov     Dec
                                                           Consumer Confidence Index 2017              Consumer Confidence Index 2018

Source: National Bureau of Statistics of the PRC; compiled by Fung Business Intelligence

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5. Performance of large-scale retailers picks up in 1Q18
Retail sales growth of 100 key retailers rose from 2.7% yoy in 1Q17 to 3.3% yoy in 1Q18. By month, the growth in
January-February and March were 3.3% yoy and 3.4% yoy respectively.

Exhibit 6: Yoy growth of retail sales of 100 key retailers in China, March 2017 – March 2018

                            8%

                                            5.7%
                            6%                     5.3%                                         5.2%

                                    4.0%                                                 4.1%
                                                                  3.7%
                            4%                                                                                 3.3%   3.4%
                                                                          2.9%

                            2%
                                                                                 0.2%
                                                                                                       -0.4%
                                                          -0.2%
                            0%
                                   Mar-17   Apr     May    Jun     Jul    Aug     Sep    Oct    Nov    Dec Jan-Feb Mar
                                                                                                            2018
                            -2%
                                                   Yoy growth of retail sales of 100 key retailers in China

Source: China National Commercial Information Center; compiled by Fung Business Intelligence

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II. Latest developments

General retail
1. Growth pace of the Top 100s picks up in 2017
In May 2018, the China Chain Store and Franchise Association (CCFA) released its annual list of “the Top 100 Retail
Chain Operators in China” (the Top 100s). Total sales of the Top 100s in 2017 amounted to 2.2 trillion yuan, up
8.0% yoy. The growth rate for the Top 100s was slower than for the national total retail sales of consumer goods.
However, it has picked up from 3.5% yoy in 2016, showing that the performance of large retail enterprises has
improved over the past year. The Top 100s made up only 6.0% of total retail sales of consumer goods, down from
11.1% in 2008, indicating the increasingly fragmented nature of China’s retail market (Exhibit 7). Suning.com Group
Co., Ltd. ranked the top with total sales of 243.3 billion yuan, followed by Gome Retail Holdings Ltd. and China
Resources Vanguard Co., Ltd. The rankings for the top 5 enterprises are the same as the previous year (Exhibit 8).

Exhibit 7: The Top 100s’ share in national retail sales, 2008-2017

                  45,000
                  40,000
                  35,000
                  30,000
   Billion yuan

                  25,000
                  20,000
                  15,000
                  10,000
                   5,000   11.1%   10.9%   11.0%      9.1%      9.0%        8.6%       8.0%     6.9%   6.4%     6.0%
                       0
                           2008    2009    2010       2011      2012        2013       2014     2015   2016     2017

                                           Top 100s      Total retail sales of consumer goods

Source: China Chain Store and Franchise Association, compiled by Fung Business Intelligence

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Exhibit 8: Top 10 chain retailers, 2017 (Ranked by retail sales)

Rank in    Rank in     Name of company                                       Sales,      yoy          Number        yoy
2017       2016                                                              pre-tax     growth       of stores     growth
                                                                             (million    (%)                         (%)
                                                                             yuan)
1          1           Suning.com Group Co., Ltd.                            243,343        29.2%          3,799         10.9
2          2           Gome Retail Holdings Ltd.                             153,691        -6.7%          1,604         -1.5
3          3           China Resources Vanguard Co., Ltd. ①                  103,646         0.1%          3,162         -1.9
4          4           Sun Art Retail Group Ltd. ②                            95,400         2.3%            383          4.6
5          5           Wal-Mart (China) Investment Co., Ltd.                  80,278         4.7%            441          0.5
6          10          Yonghui Superstores Co., Ltd.                          65,400        20.2%            806         65.5
7          8           Chongqing General Trading (Group) Co., Ltd.            58,281         3.9%            322         -0.6
8          7           Lianhua Supermarket Holdings Co., Ltd. ③               56,460        -5.6%          3,451         -5.4
9          14          Sinopec Group                                          51,950        48.0%         25,775          0.7
10         11          Carrefour China Inc. ④                                 49,796        -1.3%            321          0.6
Source: China Chain Store and Franchise Association, compiled by Fung Business Intelligence

①    Sales of China Resources Vanguard Co. Ltd. included sales of Suguo Supermarket. The pre-tax sales for Suguo Supermarket were 28,000 million yuan in
     2017.
②    Sales of Sun Art Retail Group Ltd. excluded sales of its e-commerce platform feiniu.com.
③    Sales of Lianhua Supermarket Holdings Co., Ltd. included sales of Carrefour in Shanghai.
④    Sales and store number of Carrefour China Inc. included stores in the Greater China region.

21 enterprises out of the Top 100s recorded negative sales growth in 2017, compared with 34 enterprises in 2016;
in general, the Top 100s saw better performance in 2017. Gross profit margin was 16.5% in 2017, up from 15.6% in
2016. That said, rising labour and rental costs continued to exert pressure on the Top 100s. Labour costs increased
8.0% yoy, while rental costs and electricity costs increased 5.6% yoy and 4.6% yoy.

Smaller-sized store format, particularly convenience stores, continued to gain traction. Among all retail formats, in
2017, convenience stores recorded the highest sales growth at 16.9% yoy, while the growth rate for store numbers
was 18.1% yoy. Meiyijia Convenience Store (Rank #54) continued to be the market leader in the convenience store
segment (exclude forecourt convenience store players), with sales revenue amounting to 12,240.8 million yuan in
2017, up 30% yoy and its store number reaching 11,659, up 25.4% yoy. Apart from convenience stores, the growth
of other small-format stores was also rapid. In 2017, the Top 100s together opened a total of 9,197 new stores, of
which over 80% of them were small-format stores, while only 3.7% were hypermarkets and 1.0% were
supermarkets. Meanwhile, in terms of same-store sales, convenience stores also saw the highest growth at 6.0%
yoy, followed by community supermarkets (3.8% yoy), department stores (4.5% yoy), and shopping malls (3.4%
yoy). Hypermarkets recorded negative same-store sales growth at -2.3% yoy.

Online sales growth of the Top 100s increased from 69.0% yoy in 2016 to 78.9% yoy in 2017, much higher than the
national online retail sales growth of 32.2% yoy and offline sales growth of 8.0% yoy. Despite the fast growth,
online sales of the Top 100s accounted for a small proportion of total sales (10.3%); 27.2% of the total transaction
value were generated from mobile payment tools. Most of the Top 100s have partnered with third-party platform
players such as JD Daojia, Meituan and Dmall to offer online solutions and delivery services.

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Embracing O2O strategies is a key focus of the Top 100s; however, some real challenges remain in this process.
Rising costs of e-commerce, particularly delivery costs and costs of acquiring new customers; limited funds;
insufficient e-commerce expertise; inefficient supply chain to support O2O business are some of the major
challenges cited by the Top 100s.

2. Retailers continue to go “smart”
Technologies are developing at an unprecedented pace. In this quarter, many brands and retailers have actively
embraced technologies in different aspects of their operations. In the apparel sector, both local and international
apparel retailers have stepped up efforts in their digitalization transformation process. For instance, Uniqlo opened
a digitalized experiential store in Shenzhen in March. With an area of approximately 2,600 sqm, the store
integrates online and offline experience by connecting real world and virtual experience via the smart screens as
well as the posters on the wall. Customers can scan the QR codes on the posters via QQ mobile app to view the
Lifewear product line and other apparel products1. And in May, Uniqlo launched a new smart AI shopping guide
“Xiaoyou” to its WeChat official account. Users can interact with “Xiaoyou” by scanning the QR codes on the
product tags, or through voice search and text search2. Another fast fashion brand Zara launched an AR marketing
campaign in April. Customers can download the mobile app to view the models pose, move around and even speak
while dressed in the SS18 Zara Studio collection. Local childrenswear brand Kidswant also rolled out three smart
stores in the quarter. Customers can use Kidswant’s mobile app to scan product bar codes in-store to purchase
products, or they can make purchase at home and enjoy fast delivery as the online orders will be shipped directly
from the store3.

In the supermarket sector, in April, Better Life opened its first smart flagship store at Changsha’s Meixi Lake,
signifying the 1.0 version of smart retail cooperation between Tencent and Better Life. It is reported that the store
will focus on smart payment, navigation, and precision marketing, etc. Specifically, it will leverage WeChat Pay to
gather customer data including transaction and payment details, purchase history, etc. Better Life hopes to re-
iterate the importance of physical store with the aid of advanced technologies and algorithms4.

In the department store sector, in March, Liqun Commercial Group Co., Ltd. announced the signing of a strategic
cooperation agreement with Tencent Cloud Computing (Beijing) Co., Ltd. and Shenzhen based Morning-Star Co.,
Ltd. to create a safe smart retail Internet platform5. At the same time, Liqun Commercial Group Co., Ltd. signed a
cooperation agreement with IBM to jointly work on the company's smart supply chain information management
upgrading project. This cooperation is the extension of the collaboration agreement signed between Liqun and
Tencent in March in the area of smart retailing6. In April, Rainbow Department Store Co. Ltd. and Tencent signed a
strategic cooperation agreement in Shenzhen. Both parties aimed at leveraging their advantages in their respective
industries, focusing on in-depth cooperation in areas including digital and smart retail. The first cooperation project
between the two companies, the “Rainbow & Tencent Smart Retail Laboratory” will focus on innovative technology
applications and sustainable development models in technology, channels, big data, supply chain, business
management, etc., providing technical support and demonstration experience for both companies7.

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In the convenience store sector, Carrefour and Tencent jointly launched their first smart store “Le Marche” in
Shanghai Tianshan West Road in May. This is Carrefour’s first new store format in the world that focuses on
catering, fresh food, imported goods and private labels. With a store size of 4,000 sqm, the store offers around
25,000 SKUs and is linked with WeChat Pay. Le Marche offers free delivery service for online orders, and features
an open kitchen where customers can get the fresh food prepared and consumed on the spot. According to
Carrefour, it plans to open two such stores in Shenzhen8.

3. Pop-up stores increasingly become a popular channel to showcase new technologies and deliver
   unique experience to consumers
Pop-up store is increasingly becoming a popular channel for brands and retailers to deliver a memorable and
unique experience to consumers as well as showcase their new technologies; moreover, it also provides a good
avenue for consumers to learn more about the brands and their products.

Starting from end-March, JD.com has launched several automated pop-up stores named “Joy Space” as a move to
promote its digitalized initiatives. Each Joy Space store exists in different formats and sells different products.
During 30 March – 6 April, JD.com launched a Joy Space pop-up supermarket in China Plaza Shopping Center in
Guangzhou; it also partnered with L’Oreal to set up a pop-up store in Shanghai’s Nanjing West Road from 14 April –
20 April selling products of L’Oreal; in 21 – 27 April, it launched a pop-up store in Shenzhen OCT Harbour selling
mobile devices; and in 11 – 13 May, JD.com opened a pop-up store in the JD Chic League Elite in Beijing Sanlitun
featuring various fashion brands. These pop-up stores are all equipped with interactive devices, including AR
mirrors, smart speakers, face recognition technology and unmanned shelves. After choosing the products,
customers can walk through the “check-out aisle” with a screen equipped with RFID technology, which can
automatically identify the goods chosen and the amount to pay. The door will automatically open once the
payment is settled. JD.com treats "Joy Space" as a long-term sustainable project9.

Moreover, increasing numbers of apparel and footwear brands are leveraging pop-up stores to promote their new
collections. For example, U.S. fast-fashion brand GAP partnered with U.S. color cosmetics brand POP KIT to set up a
makeup pop-up store in Shanghai in March to sell makeup products in China for the first time. Italian luxury brand
Miu Miu launched a new Miu Miu Disco pop-up store in Nanjing in the same month10. Staccato, a footwear brand
under Belle Group, opened a pop-up store in Shenzhen in April and partnered with video social networking app
“Tik Tok” to launch themed activities related to the pop-up store during the period11. In May, apparel e-tailer
Handu launched a pop-up store in Hangzhou in collaboration with the popular Korean cartoon “Spookiz”. The pop-
up store featured a number of black technologies, including motion-sensing games and VR games.

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Internet & E-commerce

4. Internet players continue their M&A sprees
In this quarter, Internet giants especially Alibaba have continued their efforts to invest in companies in other
industries, or in other countries in a bid to expand their ecosystem and provide better shopping experience for
consumers. Selected merger and acquisition (M&A) initiatives and strategic investments of Alibaba include:

Alibaba, Cainiao make strategic investment in ZTO Express

On 29 May, Alibaba announced that it has led a consortium of investors, including its logistics arm Cainiao to buy
about 10% stake in Chinese courier ZTO Express for US$1.38 billion, as part of the company’s push into offline
services. The deal, expected to close in early June, is a strategic investment aimed at deepening collaboration
between Cainiao and ZTO in the “New Retail” era. Specifically, the investment is expected to bolster Cainiao’s and
ZTO’s focus on first- and last-mile pickup and delivery capabilities, warehouse management, cross-border logistics
and technology-driven smart solutions.

Alibaba fully acquires Ele.me in a US$9.5 billion deal

On 2 April, Alibaba Group, Ant Financial Services Group and Ele.me jointly announced that Alibaba has signed an
agreement to fully acquire Ele.me for US$9.5 billion. Going forward, Ele.me can leverage Alibaba’s infrastructure in
commerce and find new synergies with Alibaba’s diverse businesses to add further momentum to Alibaba’s New
Retail initiatives. Alibaba emphasized that Ele.me will continue to operate under its brand and that Alibaba will
offer full technical support and expertise to further digitize the operation12.

Alibaba acquires Pakistan e-commerce company DARAZ

According to media report, Alibaba.com has acquired DARAZ, the Pakistan e-commerce website owned by the
European Internet incubator company Rocket Internet. The terms of the transaction have not been disclosed. This
transaction allows Alibaba to gain a foothold in the rapidly growing South Asian consumer market and further its
overseas expansion. Alibaba said that after the completion of the acquisition, Daraz will continue to maintain the
operation with its original brand name. Daraz was established in 2012 and has now become Pakistan's most
popular online shopping platform13.

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Alibaba injects a further US$2 billion into Lazada

In March, Alibaba Group said it will inject a further US$2 billion into Lazada as part of the group’s ongoing effort to
accelerate Southeast Asia’s e-commerce development and to deepen Lazada’s integration into the Alibaba
ecosystem. This will bring Alibaba’s total investment in Lazada to US$4 billion in total. In 2016, Alibaba acquired
control of Lazada with an investment of US$1 billion; it further boosted its stake to 83% in 2017 with another
investment of US$1 billion. Lazada is a Southeast Asian online shopping giant which operates in Indonesia,
Malaysia, the Philippines, Singapore, Thailand and Vietnam14.

5. Internet giants step up AI investments
In this quarter, Internet giants such as JD.com, Alibaba and Tencent have sought to speed up artificial intelligence
(AI) innovations and applications by launching several AI-related projects.

To support start-up companies in the fields of AI and blockchain technology, JD.com launched an Artificial
Intelligence Accelerator project in Beijing in March. According to JD.com, start-up companies that join the
Accelerator Program have the opportunity to cooperate with JD.com’s operational teams to jointly run the last-
mile logistics network in China15. It also released an AI open platform "NeuHub" (http://neuhub.jd.com/) in April.
The newly released platform focuses mainly on the use of natural language processing, voice interaction, and
computer vision, etc.; it aims to help build the AI retail infrastructure, and equip industry players with an open,
easy-to-use AI infrastructure. JD.com’s AI ecosystem reportedly includes three components, namely AI research
institute, the AI Platforms, and the AI+ business-model innovation department16.

On the other hand, Alibaba Group set up a joint research institute in collaboration with Singapore’s Nanyang
Technological University (NTU) in March. The institute is dedicated to the development of AI applications in areas
such as healthcare, smart home and urban transportation. The Institute is the group's first joint research center
located outside China and is headquartered in the University. AI applications developed by the research institute
would be tested on NTU's campus, within Singapore and across the Southeast Asian region17. To put AI applications
in business operations, Alibaba unveiled a real-time translation function for its cross-border e-commerce business
in May with a hope to solve the problem of language barriers between sellers and buyers18.

In March, Tencent announced its three core AI initiatives in 2018, namely, to make AI usage and applications
common to everyone; to set up “Robotics X”, an AI robotics lab, connecting the virtual world and the real world;
and to continue its focus on “AI + medical initiative”, i.e. application of AI technology in the medical sector19.

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Cross-border e-commerce

6. Growth of CBEC (import) market stays strong in 2017
In May, iResearch released the “Report on China’s Cross-border E-commerce (CBEC) (import) Market”. According
to iResearch, transaction value of CBEC (import) market reached 111.34 trillion yuan in 2017, up 49.6% yoy. Driven
by government’s positive regulatory support, it is expected that the transaction value of CBEC (import) market will
exceed 300 trillion yuan by 2021. Post-80s and post-90s generations are the major CBEC (import) shoppers, of
which the post-80s generation accounts for 56.3% of the total number of CBEC shoppers and the post-90s
generation accounts for 21.7% of the total. By region, 19.0% of the shoppers are from Guangdong, while 13.2% are
from Beijing and 10.1% are from Shanghai20.

7. CBEC players open offline stores
CBEC players are extending their reach offline by opening physical stores to sell CBEC products. For instance, Tmall
Global opened its first offline store for CBEC on 20 April in West Lake Intime City in Hangzhou. The store has an
operating area of around 300 sqm; all of the products sold in the store are bonded imported products sourced
directly by Tmall Global; the products are selected according to the big data of consumer profile within 5 km of
West Lake Intime City. 3,700 SKUs from over 70 countries are offered including cosmetics and personal care
products, kids products, toys, healthcare products, wines, and bags and accessories. All products carry an
electronic tag to ensure the price is the same online and offline. Customers can simply scan the QR code and
purchase via their Taobao mobile app21. Later on 28 April, Netease’s CBEC arm Kaola.com also opened its first long-
term offline store in Hangzhou. Earlier in January, Kaola.com launched an offline pop-up store in Hangzhou. With a
store size of 300 sqm, the new store offers around 1,000 SKUs, covering cosmetics, healthcare products, baby and
maternity products, affordable luxury products, digital products, as well as sportswear. The products sold in the
store are all popular products selected from Kaola.com; the products will be changed regularly22.

8. VIP.com takes part in overseas warehouse operation
On 11 May, VIP.com announced that its CBEC arm VIP International will cooperate with JD Worldwide in operating
CBEC supply chain and overseas warehouses. VIP.com will provide overseas warehousing and logistics services to
JD Worldwide, including 12 overseas warehouses (of which eight of them are self-operated by VIP.com). Both
companies can share resources in sourcing, marketing, logistics and services along the supply chain to lower
operating costs, and enhance brand influence and user experience. In particular, the cooperation can also increase
the utilization rates of VIP.com’s overseas warehouses as well as its shipping services so as to reduce costs and
improve logistics efficiency23.

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Retail logistics

9. New innovations in the logistics industry
To cater to customers’ heightened expectation for fast delivery, logistics companies are offering new delivery
services that can speed up the delivery process. For instance, on 15 March, Cainiao announced that its “ship-from-
store” service for retailers has expanded to 30 cities nationwide; more than 400 stores have connected to the
service and become “store as warehouse” locations. Watsons is also a case in point. After customers order online,
they can choose to have the goods delivered from the nearest physical store. Delivery can be completed as fast as
within two hours after customer placing the order24.

At the same time, logistics players are continuing to invest in smart logistics. On 1 April, Cainiao announced to
launch its first smart delivery system globally in a community in Yuhang District in Hangzhou. The smart delivery
system features four major elements – facial recognition system, “smart pipes”, smart lockers, and an app to
control the locker. Authorized courier staff can scan their face to verify their identity and deliver parcels into the
smart delivery system. After passing through the Cainiao Security System, parcels would be distributed to
respective smart lockers inside each apartment. The smart delivery system also supports reverse logistics. Users
can also adjust the temperature inside the smart locker for the storage of fresh food25.

Supermarkets and hypermarkets

10. Costco to launch membership flagship store in China
China is an attractive market for many overseas supermarket chains. Recently, Costco (China) Investment Co., Ltd.
and Shanghai Pudong Kangqiao (Group) Co., Ltd. have formally signed an investment agreement. Costco will set up
an investment headquarters in Kangqiao, Pudong, and build a joint venture with its partner, Galaxy Holdings Group
to launch a membership retail flagship store. This flagship store is reportedly the first Costco physical store in China,
and the company hopes to expand its business in China through the establishment of a Costco warehouse-format
retail store in Shanghai26.

11. Lotte withdraws completely from China
South Korea's Lotte Shopping confirmed to exit the China market due to political friction. It has agreed to sell one
of its six operators of hypermarket and supermarket stores in China to Wumei Holdings Inc. for about 248.5 billion
won (1.502 billion yuan)27. It will also sell Lotte Mart’s 50-plus stores in Eastern China, including Shanghai and
Jiangsu to Liqun Group at a price of 280 billion to 290 billion won (approximately 1.67 billion to 1.72 billion yuan).
Lotte Mart will completely exit the China market after operating in the market for 11 years28.

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Department stores and shopping malls

12. CCAGM, MOFCOM, Fung Business Intelligence: China’s department store sector witnesses a
    positive rebound with some signs of stable recovery in 2017
In March, Fung Business Intelligence, together with China Commerce Association for General Merchandise (CCAGM)
and the Department of Circulation Industry Development, Ministry of Commerce of the PRC jointly released the
“China’s Department Stores Report 2017-18”. According to the report, total sales proceeds of the 85 sampled
department store operators increased 9.10% yoy to 715.5 billion yuan in 2017 and core operating profits up 2.32%
to 19.2 billion yuan. The report also highlights some key trends and developments of China’s department store
sector, including: pursuing omni-channel retailing, diversifying retail formats and tapping into other business
sectors to achieve synergy, enriching and expanding self-operated business to enhance product uniqueness and
gross profit margins, improving supply chain management and focusing on the basics of retailing, and promoting
cooperation with all stakeholders along the supply chain.
For more information, please refer to our publication China’s Department Stores Report 2017-18.

13. Listed department store operators record sound revenues growth
A report by Linkshop shows that the department store sector as a whole has started to reap the benefits of
business upgrading and transformation. Sales of some leading players improved significantly in 2017, while the
emergence of new retail formats have been welcomed by customers. Linkshop’s study, based on the 2017 financial
statements of 56 listed department store operators in China, shows that the listed department store operators
achieved an operating income of 484.655 billion yuan in 2017, and the total net profit attributable to shareholders
of the listed companies was 15.838 billion yuan. Overall, 36 out of the 56 listed companies saw rising revenues; 33
companies recorded an increase in net profit, of which 24 companies recorded increase in both revenues and net
profit, and 10 companies recorded decline in both revenues and net profit. As shown in Exhibit 9, eight out of the
top 10 best performing department store operators experienced different degrees of positive operating income
growth29.

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Exhibit 9: Top 10 best performing department store operators in terms of operating income in 2017

 Department store operators                   Operating income in         Growth rate (yoy)
                                              2017 (billion yuan)
 Bailian Group                                47.181                      0.22%
 Chongqing Department Store                   32.915                      -2.75%
 CCOOP Group                                  27.790                      91.52%
 Dashang Group                                26.744                      -4.79%
 Wangfujing Department Store                  26.085                      11.09%
 Rainbow Group                                18.536                      7.31%
 Wuhan Department Store Group                 18.122                      2.44%
 Nanjing Xinjiekou Department Store Co.       17.960                      5.68%
 Golden Eagle Group                           17.232                      5.10%
 Shanghai Yuyuan Group                        17.111                      9.39%
Source: Linkshop; compiled by Fung Business Intelligence

14. Department store operators continue to explore merchandise direct sales model and develop
    private labels
An increasing number of department store operators have further increased the proportion of merchandise direct
sales and developed private labels. In May, New World Department Store launched the private label “N+ Youpin”
(grocery category) at its Beijing Chongwenmen branch. This is another attempt for New World Department Store
to expand its private label brands, following the lifestyle brand, LOL, and thematic shopping street New Territories
88. "N+ Youpin" has an area of 200 sqm, selling creative home products, lifestyle groceries, health and beauty,
cultural gifts, casual snacks, floral and plants, digital accessories, stylish accessories, etc30. In March, Beijing SKP
introduced the “SKP HOME Select” home products buyer shop on the 5th floor. The SKP HOME Select buyer shop is
Beijing SKP's latest addition to its merchandise direct sales business. The shop offers household products from
well-known European and Italian brands, all of which are sourced by Beijing SKP's buyer team from different
countries31.

Convenience stores
15. CCFA, BCG: Sales revenue of China’s convenience store chain operators amount to 130 billion yuan;
    total number of stores reaches 100,000
Recently, the China Chain Store and Franchise Association (CCFA) and Boston Consulting Group (BCG) jointly
released the “China Convenience Store Report, 2017”. According to the report, China’s convenience store (CVS)
chain operators achieved sales revenue of 130 billion yuan in 2016, up 13% yoy, while the total number of stores
reached 100,000.

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The report also highlights eight features:

    (1)    Higher growth in tier-1 and tier-2 cities.
    (2)    Most leading players in China’s CVS sector are regionally based; there is no national leader in the sector.
    (3)    Same-store sales and margins are significantly lower than overseas counterparts, though they have been
           improving over past years.
    (4)    Rental and labour costs increased fast in 2016.
    (5)    Share of private label products, fresh food and semi-processed food is still low.
    (6)    Franchise operation is not mature. 30% of the operators have not established franchise operations.
           Control of franchisees is rather loose.
    (7)    50% of the operators have started online operation; sales from online business accounted for around
           11% of the total sales. Mobile payment is widely available in-store but the usage rate is low.
    (8)    Only 55% of the CVS operators have established membership system. For those that have membership
           system, sales from members have increased steadily32.

16. Smart vending machine comes on the scene
In the quarter, some CVS players have installed smart vending machines as a way to enhance consumer experience.
In May, JD Convenience Store launched a new type of vending machine in its stores across the country. All JD
Convenience Store owners can put the vending machine somewhere near their stores, such as outdoor sports
ground and on the street. The vending machine sells mainly beverages and snacks, as well as other daily necessities,
and mobile phone accessories such as power banks, screen protectors, etc. Customers can scan the QR code on the
product to complete payment. JD Convenience Store owners can replenish stocks directly from relevant Taobao
stores. Launching this type of vending machine is another major attempt for JD Convenience Store to implement its
“Borderless Retail” strategy – extending the retail scenes and improving user experience. According to introduction,
JD Convenience Store will continue to promote the vending machine nationwide33.

At the same time, domestic CVS operator Ccoop launched its first AI smart vending machine in May at Hainan
Mansion, Beijing. The new vending machine is reportedly the first smart unmanned freezer that makes use of
activity recognition technology. With the use of Convolutional Neural Network algorithm and visual tracking
technology, the vending machine can identify and detect which products have been taken out and also being put
back on the rack. According to introduction, the vending machine’s product identification accuracy rate is as high
as 99%. Ccoop mentioned that they plan to roll out this smart vending machine to other cities in China34.

Apparel market

17. Local apparel companies keen to acquire foreign peers
In this quarter, some domestic apparel retailers have become active in acquiring overseas apparel brands in order
to extend their product lines and increase market share.Examples of such M&A activities include:

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Semir Group signs an exclusive licensing agreement with U.S. kidswear brand THE CHILDREN’S PLACE for the
Greater China for 20 years

On 20 March, domestic apparel brand Semir announced that it had signed an exclusive licensing agreement with
The Children’s Place, Inc. the largest pure-play children’s specialty apparel retailer in North America. The
agreement is divided into three phases: the first phase of five years, the second phase of five years, and the third
phase of 10 years. During the period, The Children’s Place will authorize Semir to use its trademarks, intellectual
property and know-how in Mainland China, Hong Kong and Taiwan. Semir can distribute products of The Children’s
Place as well as conduct independent design and development, production and sales to meet the needs of the
China market. In the first five years, Semir will execute omni-channel strategies and open at least 300 Children’s
Place retail locations, stocking a mix of apparel, footwear and accessories in Greater China, as well as operate the
brand’s e-commerce business. The partnership is projected to generate between US$125 million and US$150
million in sales by 2022. The Children’s Place is the largest kidswear retailer of all ages in North America, operating
1,200 direct and franchised distribution points in 22 countries, including the U.S35.

Semir acquires French childrenswear group Kidiliz Group for 110 million euros

On 2 May, Semir announced its plan to acquire 100% equity of French company Sofiza SAS. According to the
announcement, Semir intends to acquire 100% equity and debt of Sofiza SAS with approximately 110 million euros
(approximately 844 million yuan) through its wholly-owned subsidiary Semir International Group (Hong Kong) Co.,
Ltd., thereby achieving the goal of acquiring all assets of Kidiliz Group, which is 100% owned by Sofiza SAS. Upon
completion of the transaction, Semir Group will acquire the entire Kidiliz Group with the support of its
management. Founded in Southern France’s Saint-Chamond in 1962, Kidiliz mainly sells mid-to-high-end
childrenswear, including private labels and authorized brands. Currently, Kidiliz has a total of eight subsidiaries
with 11,000 sales outlets and 829 stores. In 2017, Kidiliz’s sales reached 427 million euros36.

La Chapelle acquires 40% equity stake of French clothing brand Naf Naf

On 11 April, Shanghai-based fashion company La Chapelle & Co. announced that it will acquire a 40% stake in Naf
Naf SAS, a subsidiary of French fashion apparel group Vivarte SAS, for EUR20.8 million (about 160 million yuan).
Apart from the 40% of shares of Naf Naf which are sold to La Chapelle & Co., the remaining 60% of the shares are
sold to Star Platinum Fund, LP and East Links International. The acquisition marked La Chapelle’s first overseas
investment. According to Vivarte, La Chapelle will open 50 Naf Naf stores in China in the next five years and
another 30 in Europe37.

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Fosun acquires luxury lingerie brand Wolford

According to the latest announcement from Fosun International on 1 March, the Group recently proposed a total
offer of 55 million euros (about 430 million yuan) to Austrian luxury lingerie brand Wolford, agreeing to acquire
2,543,700 shares at a price of 12.8 euros per share, which is equivalent to the total share capital of about 50.87%
at a cost of about 32.56 million euros and provide up to 22 million euros as part of a capital increase. Fosun has
also issued a compulsory tender offer to other shareholders of Wolford at the same time, at an average price over
the past six months at a price of 13.67 euros per offer. Wolford said the deal will be completed in May this year.
Founded in 1950, Wolford was listed on the Vienna Stock Exchange in 1995, and mainly produces and sells high-
end underwear, jumpsuits, women's clothing and accessories38.

18. Apparel retailers introduce cross-sector products and services to attract customers
Recently, both local and international apparel brands have diversified their product offerings by introducing cross-
sector products. Local brand Peacebird Fashion is a case in point. It tapped into the home furnishing market by
investing 23.25 million yuan in Ningbo Pacific Nest Art and Culture Communication Co., Ltd.; Peacebird will hold a
51% stake in the company after the investment39; whereas HLA launched its furniture and lifestyle brand “HLA
Premium Select Lifestyle Store” in Wanda Plaza in Minhang district, Shanghai in March40.

For international brands, GAP partnered with U.S. color cosmetics brand POP KIT to set up a makeup pop-up store
“POP KIT” at its Nanjing West Road branch and Hong Kong Plaza branch in Shanghai in March. This is GAP's first
attempt to sell makeup products in China41.

Luxury market

19. Luxury e-commerce sees rapid development; luxury brands pair up with local e-commerce giants to
    reach digital shoppers
Chinese luxury shoppers have become more accustomed to purchasing luxury goods online. The big data of
Alibaba’s Tmall shows that more than 100 million consumers have either browsed, bookmarked, or purchased
luxury goods over the past year – this huge potential customer pool is four to five times the number of the current
luxury goods’ customers in China. On the other hand, Luxury Pavilion, Tmall’s luxury platform which has been
launched for more than six months, has partnered with 50 top luxury brands and recruited nearly 100,000
members with more than 1 million yuan spending so far. In addition, according to the “2018 New Generation of
Luxury Consumers Report” released by Tmall Fashion & Luxury in April, the post-90s generation accounted for
nearly 50% of the luxury shoppers on the Tmall platform, which is equivalent to 45% of all the transactions related
to luxury goods42.

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Meanwhile, the drastic increase in online luxury shopping has prompted luxury brands to embrace sales online in
tie-up with local e-commerce giants. For instance, Italian luxury brand Valentino opened a Candystud pop-up store
in Beijing Sanlitun as well as a virtual pop-up store at Tmall Luxury Pavilion simultaneously on 27 April. With the
adoption of Tmall’s advanced VR technology, the online pop-up store allows consumers to enjoy online shopping
just like shopping at real physical store, which is indeed the online version of Valentino’s physical pop-up store at
Sanlitun. Besides, the luxury brand will launch two limited edition handbags from the Candystud collection to
celebrate the cooperation with Tmall Luxury Pavilion43.

Swiss premium watch maker Audemars Piguet is also a case in point. The brand has partnered with JD.com to
launch its first pop-up e-store in China, marking the brand’s first foray into local e-commerce market. Under the
partnership, all the brand’s products will be delivered by JD.com’s premium delivery service “Jingzunda”. Apart
from Audemars Piguet, JD.com has also collaborated with other luxury watch makers including TAG HEUER, Zenith,
Chopard, MOVADO, and H. Moser & Cie44. Another example is Italian menswear brand Canali. The brand has
officially opened its first official online flagship store in China on JD.com’s luxury goods platform Toplife, which is
the first online flagship platform for luxury goods in China. It is reported that all of the products sold at Canali’s
flagship store on Toplife are authentic products directly sourced from Italy45.

On 15 May, French luxury brand Givenchy officially launched its online boutique on WeChat. The WeChat Store
was created as an extension of Givenchy’s premium offline service, aiming to offer a convenient yet immersive
shopping experience for wealthy Chinese consumers. WeChat followers can place orders directly on the app46.

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III. Competitive landscape
Financial and operating performance of selected listed retailers, Internet and e-commerce companies:

1. Department stores and grocery players

Company                  Parkson               Sun Art         Wangfujing      Bailian Group    Dashang
Financial period         FY2017*               FY2017*         FY2017*         FY2017*          FY2017*
Total gross sales        13,763.6              98,775.0        26,085.2        47,181.1         26,744.0
proceeds (million        (-3.8%)               (+1.7%)         (+11.1%)        (+0.2%)          (-4.8%)
yuan)
Net profit               (135.9)               2,793.0         909.8           634.4            877
attributable to          (-192.3%)             (+8.6%)         (+18.6%)        (-7.4%)          (+24.7%)
shareholders of
the company
(million yuan)
Operating profit         83.6                  4,487.0         1,343           847.0            1,347
(million yuan)           (+141.4%)             (+14.0%)        (13.1%)         (-5.9%)          (+23.6%)

SSS growth               1.3%                  -1.0%           NA              NA               NA

Merchandise              16.1%                 NA              NA              NA               NA
gross margin
Current operating        45                    461             54 department   6,000            300
stores in China                                hypermarkets    stores and
(Approx.)                                                      outlets
                                                               Approx. 120
                                                               convenience
                                                               stores
* For the 12 month period ended 31 December, 2017
Source: Company data; compiled by Fung Business Intelligence

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2. Internet and e-commerce companies

Alibaba Group Holding Ltd. – Financial results for the fiscal year ended 31 March, 2018

         Revenue was 250,266 million yuan (US$39,898 million), an increase of 58% yoy.
               o Revenue from core commerce increased 60% yoy to 214,020 million yuan (US$34,120
                   million).
               o Revenue from cloud computing increased 101% yoy to 13,390 million yuan (US$2,135
                   million).
               o Revenue from digital media and entertainment increased 33% yoy to 19,564 million yuan
                   (US$3,119 million).
               o Revenue from innovation initiatives and others increased 10% yoy to 3,292 million yuan
                   (US$524 million).
         Annual active consumers reached 552 million, an increase of 98 million over 31 March, 2017.
         Mobile MAUs reached 617 million in March 2018, an increase of 110 million over March 2017.
         GMV transacted was 4,820 billion yuan (US$768 billion), representing an accelerated yoy growth
          rate of 28% (compared to an annual growth rate of 22% in FY 2017). Tmall physical goods GMV
          increased 45% yoy.
         Income from operations was 69,314 million yuan (US$11,050 million) and adjusted EBITA
          increased 40% yoy to 97,003 million yuan (US$15,465 million); adjusted EBITA for core commerce
          was 114,100 million yuan (US$18,190 million), an increase of 38% yoy.
         Adjusted EBITA margin for core commerce was 53%.

Tencent Holdings Ltd. – Financial results for the fiscal year ended 31 December, 2017

         Total revenues were 237,760 million yuan (US$36,387 million), an increase of 56% yoy.
         Operating profit was 90,302 million yuan (US$13,820 million), an increase of 61% yoy. Operating
          margin was 38%, up from 37% last year.
         Profit for the year was 72,471 million yuan (US$11,091 million), an increase of 75% yoy. Net
          margin increased to 30% from 27% last year.
         Profit attributable to equity holders of the company for the year was 71,510 million yuan
          (US$10,944 million), an increase of 74% yoy.
         Combined MAU of Weixin and WeChat were 989 million, an increase of 11.2% yoy.
         Monthly active user accounts of QQ was 783 million, a decrease of 9.8% yoy.

JD.com, Inc. – Financial results for the fiscal year ended 31 December, 2017

         Net revenues were 362.3 billion yuan (US$55.7 billion), an increase of 40.3% yoy.
         Operating loss from continuing operations for the FY17 was 835.5 million yuan (US$128.4 million),
          compared to 1,251.7 million yuan for FY16.
         Non-GAAP operating margin of JD Mall for FY17 was 1.4%, compared to 0.9% for FY16.
         Annual active customer accounts increased by 29.1% to 292.5 million from 226.6 million over 31
          December, 2016.

Source: Company data, compiled by Fung Business Intelligence

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IV. Regulation updates

Market supervision
1. China to cut tariffs on selected vehicles and auto parts

On 22 May, the Customs Tariff Commission of the State Council issued an announcement on the reduction of
import tariffs on vehicles and auto parts. According to the announcement, starting from July 1, 2018, the tariffs for
whole vehicles with tax rates of 25% and 20% (135 items) will all be reduced to 15%. Meanwhile, tax rates for auto
parts (79 items), which are 8%, 10%, 15%, 20% and 25% respectively, will be reduced to 6%, with the average tax
reduction rate of 46%47.

Details can be accessed at http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201805/t20180522_2903728.html (in
Chinese only) (Source: 22 May 2018. Ministry of Commerce.)

2. Government to upgrade online platform for dispute settlement
On 15 March, the State Administration for Industry and Commerce (SAIC) announced to upgrade “The National
Consumer Dispute Resolution Online Platform” (aka “12315 Platform”), which incorporates new technologies from
five tech companies including Alibaba and AutoNavi. Consumers can file a complaint conveniently around the clock
and settle disputes online via the platform. Besides the official website and app, consumers can access the
platform via the official mini program on Alipay48.

Details can be accessed at http://www.gov.cn/fuwu/2018-03/16/content_5274615.htm (in Chinese only) (Source:
16 March 2018. The State Council of the PRC.)

3. MOFCOM promotes commercialization and revitalization of rural areas

On 24 May, the Ministry of Commerce (MOFCOM) issued the "Circular on Promoting Commercialization and
Revitalization of Rural Areas", targeting to strengthen the relationship between farmers and merchants, promote
the modernization of agriculture, integrate urban and rural development, increase farmers' income, and speed up
the upgrading of agricultural products. Major tasks of the Circular include: to establish a long-term and stable
production-retail supply chain; to nurture modern agricultural enterprises; to foster the development of
agricultural brands; to establish standards along the agricultural supply chain; to support the production and selling
of agricultural products in impoverished areas; and to support the construction of agricultural product circulation
infrastructure49.

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