Japan satellite blasts into space to deliver artificial meteors

TOKYO (AFP) – A rocket carrying a satellite on a mission to deliver the world’s first artificial meteor shower blasted into space on Friday (Jan 18), Japanese scientists said.

A start-up based in Tokyo developed the micro-satellite for the celestial show over Hiroshima early next year as the initial experiment for what it calls a “shooting stars on demand” service.

The satellite is to release tiny balls that glow brightly as they hurtle through the atmosphere, simulating a meteor shower.

It hitched a ride on the small-size Epsilon-4 rocket that was launched from the Uchinoura space centre by the Japan Aerospace Exploration Agency (JAXA) on Friday morning.

The rocket is carrying a total of seven ultra-small satellites that will demonstrate various “innovative” technologies, JAXA spokesman Nobuyoshi Fujimoto told AFP.

By around noon on Friday, the first of the seven satellites had been successfully sent into orbit, he added, with JAXA officials waiting for signals to confirm the fate of the other six.

The company behind the artificial meteor shower plan, ALE, plans to deliver its first out-of-this-world show over Hiroshima in the spring of 2020.

The satellite launched on Friday carries 400 tiny balls whose chemical formula is a closely-guarded secret.

That should be enough for 20-30 events, as one shower will involve up to 20 stars, according to the company.

ALE’s satellite, released 500km above the Earth, will gradually descend to 400km over the coming year as it orbits the Earth.

The company plans to launch a second satellite on a private-sector rocket in mid-2019.

ALE says it is targeting “the whole world” with its products and plans to build a stockpile of shooting stars in space that can be delivered across the world.

When its two satellites are in orbit, they can be used separately or in tandem, and will be programmed to eject the balls at the right location, speed and direction to put on a show for viewers on the ground.

Tinkering with the ingredients in the balls should mean that it is possible to change the colours they glow, offering the possibility of a multi-coloured flotilla of shooting stars.

Each star is expected to shine for several seconds before being completely burned up – well before they fall low enough to pose any danger to anything on Earth.

They would glow brightly enough to be seen even over the light-polluted metropolis of Tokyo, ALE says.

If all goes well, and the skies are clear, the 2020 event could be visible to millions of people, it says.

ALE chief executive Lena Okajima has said her company chose Hiroshima for its first display because of its good weather, landscape and cultural assets.

The western Japan city rose from the ashes after the 1945 US atomic bombing and faces the Seto Inland sea where the floating gate of Itsukushima Shrine is.

ALE is working in collaboration with scientists and engineers at Japanese universities as well as local government officials and corporate sponsors.

It has not disclosed the price for an artificial meteor shower.

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China alarm over public death sentences

Chinese social media users are debating the practice in one city of publicly sentencing death row inmates and parading them in the lead-up to their deaths.

Lufeng, a city in southern Guangdong province, is increasingly publicising criminal verdicts, in what appears to be a bid to stamp out its reputation as a hotbed for synthetic drug production.

This week, a court in the city invited members of the public to watch 12 convicts be sentenced at a local sports stadium. It was attended by thousands.

Popular news website The Paper says that following their verdicts and with the approval of the court, the 10 who were given death sentences for drug offences “were escorted immediately to the place of execution and terminated”.

Lufeng’s reputation

Public sentencing is rare in contemporary China, but appears to have been gaining momentum in the coastal region of southern Guangdong.

The city of Lufeng made international headlines in June when two courts in the region publicly announced the sentences of 18 people, including eight people it said were executed immediately after their trial.

Specifically in the last couple of months, the Guangdong government has been looking to give more online visibility to its no-nonsense stance on drugs.

In November, Guangzhou Daily shared pictures of a public sentencing in the nearby city of Jieyang, which it said over 1,000 members of the public attended.

And the most recent 16 December hearing was further advertised via the popular mobile messenger WeChat. Footage of the verdict was widely circulated via influential media on the popular social network Sina Weibo and YouTube-like video site Miaopai.

Publicly paraded

The Beijing News’ footage of the hearing has been viewed more than three million times since it was posted on Saturday.

It shows convicts being surrounded by armed guards and led onto raised platforms to individually receive their sentences. Thousands of people can be seen in the background watching the spectacle.

After they have been sentenced, they are then led onto another platform on the back of a police car surrounded by armed guards and are driven away. For some of them, the journey is directly to the firing range.

Verdicts on murder, robbery and drug-related offences are read out at the hearing, but the paper only highlights that it is those found guilty of drug offences that were “immediately” executed.

‘The Cultural Revolution has come back’

The video has been criticised by human rights activists and online users alike.

Amnesty International’s William Nee said on Twitter: “The Chinese authorities have once again displayed a blatant disregard for human life and dignity”.

Many on Sina Weibo say that the video makes them think of a bygone era, saying that the method of public shaming makes them think that “the Cultural Revolution has come back”.

Some Chinese online users also voice their concerns about the apparent ease at which capital punishment rulings are seemingly handed out.

There have been a number of notorious instances where the police have forced confessions out of innocent people, who have then been subsequently executed, such as the case of Nie Shubin.

China carries out more executions than any other country in the world. There are no official statistics on how many are carried out, but it is widely believed that the number extends into the thousands.

The ‘Breaking Bad village’

Some online spectators argue that the method, although ugly, is necessary, given the city’s reputation.

Lufeng has been keen to stamp out its reputation as a hot bed for the production of ketamine and crystal methamphetamine, many of which is trafficked into areas of East Asia and Asia Pacific.

Since 2014, Lufeng has been known as “the city of ice” owing to the notorious large-scale production of synthetic drugs in the region. One of its villages, Boshe, has also been dubbed “the Breaking Bad village” by the international press.

And it has done little to shake this reputation. In March, the China National Narcotics Control Commission told media that China’s seizure of synthetic drugs including methamphetamine and ketamine has “surged by 106 per cent year on year in 2016”.

The official Xinhua News Agency said in November this year that the region is “plagued with rampant drug production and trafficking”.

“Over a third of meth consumed in China originates from Boshe and neighbouring villages”, it says, and adds that a startling “one in five families is directly involved in drug production”.

It notes that the police had solved over 13,000 drugs cases and seized 10 tonnes of drugs between January and October of this year in the region alone.

BBC Monitoring reports and analyses news from TV, radio, web and print media around the world. You can follow BBC Monitoring on Twitterand Facebook.

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Job jitters mount amid trade war as China's factories sputter ahead of Chinese New Year

DONGGUAN/HONG KONG (REUTERS) – Wang Zhishen was thrilled when Danish shipper A.P. Moller-Maersk gave him two months’ paid leave, relishing the chance to spend time with his wife and daughters in China’s remote north-western Gansu province.

But his euphoria over what he thought was an unexpected bonus quickly turned to despair when Maersk fired Wang on Jan 3, less than a month after he packed his bags in the southern Chinese manufacturing centre of Dongguan.

Wang said he was one of 2,000 workers laid off at the company’s Dongguan transport container factory which has been idle since early December, as the impact of a trade war between Washington and Beijing ripples through industries from logistics to autos and technology.

“I was sure it was a holiday,” said Wang, 35, who said he worked as a painter at Maersk for nearly six years until he was sacked two weeks ago via China’s WeChat messaging service.

Maersk, the world’s biggest container shipper, confirmed in an email to Reuters it had laid off 2,000 workers through “one-on-one” phone calls and WeChat messages.

In November, the company warned the trade war between China and the United States would hit demand for container shipping as the volume of goods shipped slides.

Two subsidiaries of China’s COSCO Shipping, in a direct response to the trade war, have reduced the number of vessels in Guangdong, causing a plunge in regional shipping freight turnover, according to Guangdong’s statistics bureau.

“I heard most container factories started letting people go on leave early this year, so I felt it was normal for us to have a few more days off as well,” said Wang, who earned a base salary of 3,900 yuan (S$780) per month.

Around the Chinese New Year holiday, this year scheduled for early February, millions of Chinese, including tens of thousands of migrant workers, travel back home for family reunions in what is the world’s largest annual human migration.

While many factories traditionally close ahead of China’s most important holiday, Reuters interviews with more than a dozen workers, business owners, labour activists and trade lawyers revealed businesses are shutting earlier than usual this year as the prolonged trade war curtails orders.

A recent Reuters visit to three once-thriving towns in Dongguan in Guangdong province showed clear signs of a slowdown. Scores of shops and restaurants were shuttered, some factories idled and many up for rent.

Danny Lau, a Hong Kong factory owner in Dongguan, said some businesses had closed around 40 days ahead of Chinese New Year.

“Dongguan used to be bursting with factory workers but now with factories gone, people are gone as well,” one taxi driver told Reuters.

“This complex used to be full of workers, eating and chatting when they got off work. Now look at this,” he said, pointing to empty dark alleys in an open air dining place one recent weekday evening.

EXPORTS FALL

The slowdown comes as data on Monday showed China’s exports unexpectedly fell the most in two years in December and imports also contracted, pointing to further weakness in the world’s second-largest economy in 2019.

Policy sources told Reuters last week China plans to set a lower economic growth target of 6-6.5 per cent this year compared with last year’s target of “around” 6.5 per cent.

A recent UBS China survey of 200 manufacturing companies with significant export business or supply to exporters revealed the trade war has had a negative impact on 63 per cent of those businesses.

A quarter of those affected have cut jobs, 37 per cent have moved production out of China in the past 12 months, while 33 per cent plan to move in the next 6-12 months.

China’s gaint manufacturing sector was already under pressure from rising labour costs, tighter regulations and a shift towards higher-end production and domestic consumption. But the risk of more and higher US tariffs on Chinese goods has seen the trend rapidly accelerate as more companies look to move supply chains away from China.

US President Donald Trump has vowed to increase tariffs on US$200 billion worth of Chinese imports on March 2 if Beijing fails to take steps to protect US intellectual property and allow more market access for US businesses, among other steps.

The two sides held face-to-face talks last week, with Trump hailing “tremendous success” and Chinese officials noting”progress”, but few details have been made public.

SLOWDOWN BUILDING

Guangdong, home to more than 100 million people, is China’s biggest provincial economy, with its US$1.3 trillion GDP comparable to that of Australia or Spain. A slowdown in Guangdong bodes ill for other export-oriented provinces along the Chinese coast, and would also drag on national growth should the trade war persist.

“As a major export province, Guangdong’s economy has been greatly affected by the trade war,” said Shenzhen-based independent economist Song Qinghui. “Many enterprises have suffered from bleak business, orders have fallen sharply, and the number of factories deciding to shut down their business is not in minority.”

Determining the scale of the slowdown through data is difficult, however, given Guangdong province recently stopped publishing a monthly economic indicator that gauges manufacturing growth momentum.

Other data shows Guangdong’s manufacturing workforce dropped more than 6 per cent in the third quarter of last year to 12.71 million from a year earlier.

In a further bearish sign, the value of export orders to the United States signed in November at China’s largest trade fair in Guangdong dropped 30.3 per cent on the year.

“If you are servicing a US brand, US market, then of course the company will be in very deep trouble,” said Sunny Tan, deputy chairman of the Federation of Hong Kong Industries, which represents more than 30,000 Hong Kong-owned factories in China’s Pearl River Delta.

While some may not be hurting badly financially right now,”they know it’s going south,” he added.

RUNAWAY BOSSES

As orders trickle in and some production lines grind to a halt, many businesses have cut hours and done away with overtime.

“Without overtime, we don’t have much salary left if you deduct social security and food. All we care about is the tangible money that we can see,” said Ye Minghua, 25, a worker at Kam Pin Industrial Ltd, which has a metal-coating factory in Dongguan.

Around a fifth of the factory’s 200 employees have already left for the holidays, while some production lines have been suspended, said King Lau, assistant to the managing director at Kam Pin.

New orders were expected to fall by 30 per cent if tariffs are increased to 25 per cent in March, he added.

More factories are likely to shutter their gates for good over the next few weeks, with industry watchers forecasting some owners, unable to bear the hefty cost of bankruptcy, will simply disappear.

“It’s tough to close down a manufacturing factory in China these days … it’s easier to bail,” said trade lawyer Sally Peng of Sandler, Travis & Rosenberg.

“After Chinese New Year, when all the workers go, they may not come back.”

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Canadian PM Justin Trudeau calls PM Lee Hsien Loong to discuss Canada-China dispute, CPTPP

Prime Minister Lee Hsien Loong was briefed by Canadian Prime Minister Justin Trudeau on the ongoing dispute between Canada and China during a phone call from Mr Trudeau on Thursday (Jan 17).

“Prime Minister Lee noted the importance of all countries following due process of the law, and being seen to be doing so, when dealing with cases involving foreign nationals,” the Prime Minister’s Office (PMO) in Singapore said in a statement released early Friday (Jan 18) morning.

“He expressed the hope that the matter would be resolved calmly and amicably, without further escalation,” the PMO added.

Mr Trudeau has been making phone calls to various leaders across the world to discuss the Canada-China dispute. In the past 10 days he has spoken with the leaders of Finland, Argentina, New Zealand, the European Council and US President Donald Trump, according to his office’s official website.

Canada and China have been locked in a diplomatic row since Huawei chief financial officer Meng Wenzhou was arrested on Dec 1 at Vancouver International Airport for extradition to the US at the request of American prosecutors.

She was charged with fraud and is out on bail, but her arrest was met with a strong response from Beijing, which called the charges baseless and summoned the Canadian and American ambassadors in protest over the incident.

The diplomatic rift deepened when China detained two Canadians – former diplomat Michael Kovrig and consultant Michael Spavor – just over a week after Ms Meng’s arrest, in what was viewed as a retaliatory move.

Tensions further escalated when Canadian national Robert Schellenberg was sentenced to death on Monday in a retrial of his drug smuggling case, a move which the US and Canada called politically motivated.

In a separate statement on Thursday’s call with Mr Lee, Mr Trudeau’s office said both leaders “discussed the detention of two Canadians in China, the application of the death penalty to a third Canadian in China, and the importance of safeguarding international norms, including diplomatic immunity, judicial independence and respect for the rule of law.”

The two leaders also discussed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the 11-nation Pacific Rim trade deal which both countries are part of and which entered into force on Dec 30.

Both Canada and Singapore are among the first to ratify the agreement, deepening trade and investment ties, and bringing economic benefits and good jobs to both countries, said the Canadian statement.

The leaders also talked about cooperation between Singapore and Canada, following Prime Minister Trudeau’s working visit to Singapore for the Asean Summit and related meetings in November last year, said Singapore’s PMO.

“Both leaders welcomed the momentum in bilateral cooperation between the two countries, including in the commercial relationship,” added Mr Trudeau’s office.

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China says proposed US legislation against Huawei and ZTE due to 'hysteria'

BEIJING (REUTERS) – China’s Foreign Ministry said on Thursday (Jan 17) that proposed US legislation targeting Huawei, ZTE and other Chinese telecommunications equipment companies was due to “hysteria”, and urged US lawmakers to stop the Bills.

Ministry spokeswoman Hua Chunying made the comments at a regular news briefing in Beijing.

On Wednesday, a bipartisan group of US lawmakers introduced Bills that would ban the sale of US chips or other components to Huawei Technologies, ZTE Corp or other Chinese firms that violate US sanctions or export control laws.

The Bills specifically cite ZTE and Huawei, both of which are viewed with suspicion in the United States because of fears that their switches and other gear could be used to spy on Americans.

The legislation is the latest in a long list of actions taken to fight what some in the Trump administration call China’s cheating through intellectual property theft, illegal corporate subsidies and rules hampering US corporations that want to sell their goods in China.

In November, the US Department of Justice unveiled an initiative to investigate China’s trade practices with a goal of bringing trade secret theft cases.

At that time, Washington had announced an indictment against Chinese chipmaker Fujian Jinhua Integrated Circuit for stealing trade secrets from US semiconductor company Micron Technology relating to research and development of memory storage devices. Jinhua, which has denied any wrongdoing, was put on a list of entities that cannot buy goods from US firms.

On Capitol Hill, Senator Tom Cotton and Representative Mike Gallagher, both Republicans, along with Senator Chris Van Hollen and Representative Ruben Gallego, both Democrats, introduced the Bills that would require the president to ban the export of US components to any Chinese telecommunications company that violates US sanctions or export control laws.

“Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party whose founder and CEO was an engineer for the People’s Liberation Army,” Cotton wrote in a statement.

“If Chinese telecom companies like Huawei violate our sanctions or export control laws, they should receive nothing less than the death penalty – which this denial order would provide.”

The proposed law and investigation are two of several challenges that Huawei, the world’s biggest telecommunications equipment maker, faces in the US market.

In addition to allegations of sanctions-busting and intellectual property theft, Washington has been pressing allies to refrain from buying Huawei’s switches and other gear because of fears they will be used by Beijing for espionage.

Huawei’s founder, Ren Zhengfei, denied this week that his company was used by the Chinese government to spy.

Canada detained Ren’s daughter, Meng Wanzhou, who is Huawei’s chief financial officer, in December at the request of US authorities investigating an alleged scheme to use the global banking system to evade US sanctions against Iran.

For its part, ZTE agreed last year to pay a US$1 billion (S$1.3 billion) fine to the United States that had been imposed because the company breached a US embargo on trade with Iran. As part of the agreement, the US lifted a ban in place since April that had prevented ZTE from buying the US components it relies on heavily to make smartphones and other devices.

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Indonesia mob kills nearly 300 crocodiles

A mob of villagers has killed nearly 300 crocodiles at a sanctuary for the animals in the Indonesian province of West Papua.

The slaughter was in retaliation for a local man thought to have been killed by one animal from the site.

Officials and police said they were not able to stop the attack and may now press charges.

The killing of a protected species is a crime that carries a fine or imprisonment in Indonesia.

The local villager was killed on Friday morning while gathering vegetables on the crocodile farm’s breeding sanctuary.

“An employee heard someone screaming for help, quickly went there and saw a crocodile attacking someone,” the head of Indonesia’s Natural Resources Conservation Agency in West Papua said.

After the funeral on Saturday, several hundred angry locals went to the sanctuary, armed with knives, shovels, hammers and clubs.

Local media cite officials saying the mob first attacked the office of the crocodile farm and then went on to slaughter all 292 reptiles at the sanctuary.

The farm was operating on a licence to breed protected saltwater and New Guinea crocodiles both for preservation and to harvest some of the animals.

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Taiwan objects to Britain's post-Brexit WTO services trade arrangement

GENEVA (REUTERS) – Taiwan objects to Britain’s proposed rules for managing its trade in services after it leaves the European Union and has requested negotiations at the World Trade Organisation, according to a document seen by Reuters on Wednesday (Jan 16).

Britain voted in a referendum in 2016 to leave the EU, which has spoken for Britain on trade matters ever since the WTO was founded in 1995. As part of the Brexit divorce, Britain needs its own WTO membership texts, known as schedules, to set out how it will treat its trading partners in goods and services.

Last month, Britain formally submitted its proposed new services schedule to the WTO. Trade Minister Liam Fox said the process would replicate existing arrangements as far as possible and was “only a technical exercise”.

In a document circulated to other WTO members on Wednesday, Taiwan raised objections, saying the new text made more than purely technical changes.

Taipei looked forward to “entering into consultations expeditiously with the United Kingdom in order to reach a satisfactory resolution to this matter”.

It cited eight sections where it had objections, mainly clauses that were no longer relevant or necessary.

But in financial services and aircraft leasing and rental, Taiwan said the new schedule would leave it with less market access than it had previously.

“Current European Union commitments require European Union Member States to allow airlines to lease aircraft registered anywhere in the European Union. However, the United Kingdom has changed this obligation to require United Kingdom airlines to lease aircraft registered in the United Kingdom,” it said.

“This appears to reduce market access, as the scope of where aircraft may be registered has been reduced. The United Kingdom should delete this limitation.”

Similarly, in financial services, there were several areas where the EU schedule included a requirement for establishment in the EU, Taiwan said.

“The United Kingdom changed ‘EU’ to ‘UK’ for these entries in its draft schedule. This would appear to reduce market access, as it reduces the geographical scope of establishment.”

If Taiwan and potentially other WTO members press Britain for improvements to the text, Fox may need to offer them compensation by opening up trade in other areas, although any such liberalisation would apply across the WTO.

Britain is facing similar objections to its goods schedule, with widespread dissatisfaction among agricultural suppliers.

Failing to reach rapid agreement may be a bureaucratic headache and add to criticism of the Brexit process, but it will not affect the Brexit timetable; many WTO members trade without finalised schedules, on the understanding that they are trying in good faith to reach an agreement in the meantime.

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Former Nissan chief Carlos Ghosn appeals against Japan bail rejection

TOKYO (AFP) – Lawyers for former Nissan boss Carlos Ghosn on Thursday (Jan 17) appealed against a decision by a Tokyo court to refuse him bail, as he faces charges on three counts of financial misconduct.

Since his stunning arrest on November 19 the auto tycoon has languished in a Tokyo detention centre, facing questioning over allegations he under-reported his salary and tried to shift personal losses onto the company.

On January 11 he was formally charged on two of the counts and his request for bail refused again. Even his own lawyer has admitted he is likely to be kept behind bars until a trial – which could take six months.

The court has previously refused to release the 64-year-old Franco-Lebanese-Brazilian businessman on the grounds that he could present a flight risk and destroy evidence.

The appeal came as the French government called for him to be replaced at the head of Renault, the only one of the three companies he used to head that has retained him.

Japanese firms Nissan and Mitsubishi Motors jettisoned him as boss almost immediately after his arrest, but Renault was more cautious and appointed an interim leader while Ghosn fought the charges.

If the bail appeal is turned down he faces at least a two-month period in pre-trial detention. This can be extended almost automatically by one month at a time.

His wife Carole has appealed to Human Rights Watch over his detention, saying he was being held in “harsh” conditions and subjected to round-the-clock interrogations in an attempt to extract a confession.

Ghosn has been seen only once in public since his detention, in a dramatic court appearance.

He had clearly lost a lot of weight but seemed otherwise in good health. He passionately proclaimed his innocence and his love for Nissan, a company he is widely credited with saving from the brink of bankruptcy.

“I have been wrongly accused and unfairly detained based on meritless and unsubstantiated accusations,” Ghosn told a packed courtroom.

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China's Luckin Coffee is pouring millions into overtaking Starbucks

BEIJING (BLOOMBERG) – Luckin Coffee, a Chinese startup that’s banking on selling cappuccinos to on-the-go office workers, is spending millions of dollars a year opening outlets to unseat Starbucks Corp. as the top java seller in the country.

Launched about a year ago, the local challenger is confident it’s got a winning model: small coffee outlets that will outnumber Starbucks cafes by year’s end, an app that rushes out deliveries in about 18 minutes and lots of steep discounts. Chasing the entrenched rival, it’s burning through US$130 million a year, according to the Xiamen-based company on China’s southeast coast.

“China is Starbucks’ best and most profitable market now, but it took them nine years of making huge losses,” said Chief Strategy Officer Reinout Schakel in an interview in Beijing this week. “We will be faster than that.”

Luckin’s success so far is putting pressure on Starbucks, which until now had no meaningful challenger and dominated the market with more than 50 per cent share.

The companies are employing vastly different approaches in their claims to the US$3.2 billion retail coffee market that is Starbucks’ fastest-growing and second-biggest. That competition is likely to heat up with China’s economic slowdown.

Questions abound whether Luckin can parlay customer discounts and media hype into as powerful a brand as its rival. The Seattle-based behemoth has lately dialled down its ambition in China, even as it still targets a tripling of revenue by 2022. Starbucks reported last month that comparable sales growth could be as low as 1 percent over the long term, sparking concern that competition and cannibalization are taking their toll.

Currently valued at US$2.2 billion and backed by investors including Singapore’s sovereign wealth fund GIC and China International Capital Corp., Luckin has emphasised convenience in its business model, betting that Chinese office workers would rather have ease of access over premium frills – and pay about a third less for a cup of Luckin joe.

While the global rival prides itself on warmth and service embodied in cafes styled as a “third space” between home and office, Luckin is about efficiency: its outlets are cashless and customers are meant to be able to get their coffee without ever speaking to anyone.

The outlets, in or near office buildings, are designed for fast pick-up and delivery – and exploits a competitive edge where Starbucks has been late to the game. Despite Chinese consumers’ reliance on food delivery, Starbucks only launched delivery in partnership with Alibaba Group Holding in August.

“If I was an investor in Starbucks, I would also invest in Luckin to hedge my bets,” said Schakel, who is also chief financial officer.

Luckin has made headlines for setting a target of 4,500 stores this year, most no larger than a studio apartment rather than sit down cafes. Still, they would outstrip Starbucks’ count of about 3,600.

For its part, Starbucks is also setting up small, delivery-focused kitchens in Alibaba’s Freshippo supermarkets and more than 2,000 of its stores are now equipped for delivery.

Luckin, also known by its Chinese name Ruixing, faces an uphill race against a global competitor who’s clocked 20 years in the world’s second-biggest market. The local upstart is reliant on discounts and promotions to lure customers, which may create an unsustainable spike in demand. China’s landscape is littered with start-ups whose cash-burn models and flashy press never translated to profitability.

Added to that, the brand association, taste preference and research and development capabilities that Starbucks brings to the table are much higher barriers for Luckin to overcome, said OC&C Strategy Consultants partner Jack Chuang.

“Luckin is applying an Internet mindset where if they become large enough then they become a ‘habit’ for consumers, but the challenge is that for food and beverages, it’s very hard to create a habit on a heavily subsidised proposition,” Chuang said.

Schakel said that the company is well-funded and “not immediately focused on capital raising” despite reports that it’s preparing for an initial public offering in Hong Kong. He said that more partnerships, like the one with internet giant Tencent Holdings Ltd. as well as foreign food and beverage chains in China, are on the cards.

Seeking to shift focus from its competition with Starbucks, Schakel said that China has enough potential to sustain more than one chain. Chinese consumers currently drink just 4 to 5 cups per capita, compared to about 300 cups in countries like Taiwan, Hong Kong and South Korea, he said.

Even as it mounts its challenge, Luckin still looks to Starbucks to lead the way with its considerably larger resources in promoting coffee consumption in China, a traditionally tea-drinking country. Luckin will focus on expanding in tier 1 and 2 cities, while waiting to see how Starbucks fares deeper in rural China, he said.

“Of course we are competitors, but ultimately we both want the market to grow,” he said.

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How Chinese sellers of fake Dior are evading a crackdown online

SHANGHAI (BLOOMBERG) – China has come down hard on its world-renowned counterfeit industry. Bazaars lined with fake watches, shoes and bags have been demolished in recent years. A new law effective since Jan 1 promises to slap online retailers with up to two million yuan (S$401,100) in fines for bogus goods sold on their platforms.

But Chinese counterfeiters – still the most prolific in the world – have already reshaped their businesses by retreating to even more private spaces online.

Many of the country’s best fakers are now hawking their wares via social messaging networks like Tencent Holdings’s WeChat.

First, they market their offerings at home and globally on platforms like Instagram or ByteDance’s Tik Tok. Buyers then order and pay through private messaging apps. Such transactions are arguably “friend-to-friend” and not e-commerce as defined by the new law.

These days, a knock-off black Dior saddle bag can go for about US$255 (S$345) on a Chinese social media network.

That’s one tenth the US$3,250 price tag on the real thing, but still pricier than the average high-street bag. It looks and feels real – a smooth, buttery leather with the heft of a true luxury bag. And it arrives in just a day or two, with what are purportedly Dior’s engraved box, red ribbon and certificate of authenticity.

The skill of the counterfeiters and their growing ability to leverage global social networks has left Beijing playing whack-a-mole as it attempts to stamp out fake luxury goods.

Even as China’s rich become ever more important to marquee fashion houses, the bulk of its consumers remain on the outside: Bombarded by marketing for items they can never afford, and hungry for more affordable knockoffs.

“The income disparity across China’s diverse population – coastal versus inland, urban elites versus migrant workers – means that lower-priced goods, including those accused of being fake, will unlikely lose their market in China any time soon,” said Mr Fan Yang, an assistant professor at the University of Maryland, who has written a book on Chinese counterfeits.

China’s Ministry of Commerce, Dior, ByteDance and Tencent didn’t respond to requests for comment.

TRADE WAR

The difficulties in stamping out counterfeiting in luxury goods shows the challenges Beijing faces in ongoing trade war negotiations as it attempts to assure the US that it can address intellectual property theft – a key grievance of foreign companies.

The global trade in counterfeits will balloon to US$991 billion by 2022 from US$461 billion in 2013, according to research firm Frontier Economics, which includes luxury goods, consumer products and several other categories like pharmaceuticals. China and Hong Kong are by far the biggest source of exported counterfeits, according to the Organisation for Economic Cooperation and Development.

On Instagram, counterfeiters often put up a picture of the bag they are hawking without specifying if it is fake or real. They include contact details for Chinese or international messaging services where buyers can follow up to actually make the purchase.

The hashtag used is often that of a real brand – say a #Hermes or a #Birkin.

An Instagram spokesman said the company uses sophisticated spam detection and blocking systems to fight counterfeiting, and has devoted more resources to the issue over the past year. The company also has tools where buyers can report purchases they are unhappy with.

LUXURY DEMAND

Chinese consumers account for a third of the US$1 trillion in global luxury demand. In recent years, global brands have gone from being enraged at Chinese Internet platforms to being willing to working with them, especially as they rely on the portals to reach China’s shoppers.

In 2015, Kering, which owns Gucci and Saint Laurent, sued Alibaba for counterfeits it said were being sold on Alibaba’s platform. Kering dropped the suit two years later for a “joint taskforce” to fight fakes with the Internet giant.

Alibaba, meanwhile, says it has made a serious effort to rid Taobao, its flagship e-commerce platform of fakes.

COMPLAINTS PORTAL

In 2017, Alibaba launched an Intellectual Property Protection platform where brands can file complaints and receive a response within 24 hours. It has also put resources into identifying and proactively taking down listings, a company spokesman said.

It is now rare to find sellers openly hawking counterfeits on its platforms. But some may occasionally appear by listing unbranded bags and encouraging buyers to contact them privately to complete the transaction.

Its Xianyu platform – a digital “flea market” where consumers can sell used goods – turns up scores of such listings.

Mr Eugene Low, a Hong Kong-based partner at law firm Hogan Lovells, expects China’s new legislation will further motivate e-commerce firms to step up their efforts. “They won’t want to be the first target of enforcement,” he said.

Even so, the grey areas in the new legislation could leave counterfeiters continuing to exploit the loopholes. “How the law would be enforced would be unclear at this time,” said Mr Pedro Yip, a partner at consultancy Oliver Wyman.

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