2023 Calendar Week 52

1.Thailand’s Luckin Coffee is suing China’s Luckin Coffee and seeking 10 billion baht in damages.

Several Thai media outlets reported that on the morning of December 19th, the Royal 50R Group filed a lawsuit against Luckin Coffee in court, seeking compensation for economic losses of 10 billion baht(290mn USD)

Left: China’s Luckin Coffee; Right: 50R’s Luckin Coffee

The Central Court of Intellectual Property and International Trade of Thailand recently announced its judgment on the final trial of the case between China’s Luckin Coffee Company and Thailand’s 50R Group for trademark copyright infringement. The court ruled in favor of Thailand’s 50R Group, and China’s Luckin Coffee lost the case.

According to Thailand’s 50R, Luckin Coffee from China repeatedly compelled the plaintiff to cease using the trademark and forcibly seized their property on multiple occasions before the court had made a final judgment. This caused the plaintiff to suffer significant financial losses. Additionally, 50R Group incurred substantial costs in fighting the lawsuit. The court was asked to award damages totaling 10 billion bahtagainst Luckin Coffee from China.

Thailand’s 50R Group has a long history of acquiring trademarks, including TikTok, Lianjia, Chow Tai Fook, Nongfu Spring, and others, which are all under their ownership.

According to legal experts, Luckin Coffee lost the case mainly because the Thai version of the brand was the first to register and use the trademark locally. In 2018, Thai 50R registered the Luckin Coffee trademark in Thailand and subsequently opened multiple stores over the past two years.

As there is no trademark cooperation agreement between China and Thailand, section 63 of the Thai Trademark Act states that if the Thai version of Luckin Coffee is the first to register the use of this trademark with the Thai Trademark Office, then it has the right to engage in business in Thailand. Enterprises that have a global intention should take intellectual property into consideration before it is too late.

2.Chinese New Year Becomes UN Holiday

On December 22, the United Nations General Assembly unanimously passed a resolution officially recognizing the Chinese New Year (Lunar New Year) as an official UN holiday. In 2023, the United Nations will observe a total of nine official holidays, including globally recognized public holidays like New Year’s Day, official federal holidays within the host country (the United States), and significant religious holidays such as Christmas, Eid al-Fitr, and Eid al-Adha

As outlined in the General Assembly resolution, numerous member states of the United Nations celebrate the Chinese New Year as a holiday of great significance. The Chinese New Year is a significant holiday celebrated in many countries and regions worldwide, coinciding with the recovery of nature and the renewal of grass and trees. Countries and regions such as Vietnam, South Korea, North Korea, Indonesia, and Malaysia have formally recognized the Chinese New Year as an official holiday, each developing unique and extensive local traditions for its celebration.

This designation underscores the expanding influence of Chinese civilization and Oriental culture, contributing to enhanced global exchanges and mutual understanding among diverse civilizations.

3.In just one day, Gree’s market value plummeted by over RMB 13 billion

On December 20, an announcement from Gree Electric stating their acceptance of Gree Titanium New Energy Company Limited caused a significant drop in stock price. The market value decreased by over CNY 13 billion in a single day. However, in the early hours of December 21, Gree Electric released its 2023 earnings forecast, revealing that this year’s net profit will increase by more than 10%, to more than CNY 27 billion. Due to exceeding performance expectations, Gree Electric shares rose in early trading on the 21st, resulting in a total market capitalization of CNY 177.3 billion.

Over the past five years, Gree’s President, Dong Mingzhu, has recognized the pressing need for diversification in Gree Electric, whether it involves venturing into the mobile phone or automobile business. However, the diversification process has encountered various challenges. Consequently, Dong Mingzhu initiated channel reform in 2022.

During the channel reform initiative, Dong Mingzhu acknowledged the potential of live streaming and increased turnover through this channel. The nearly 10% growth in net profit in the first three quarters further underscores the significance of Dong Mingzhu’s channel reform efforts. Nonetheless, while channel reform may offer a temporary solution to the immediate challenges, it does not address the overarching issue of product diversification. According to the financial report, Gree Electric’s air conditioning business constitutes over 70% of its revenue. This revenue concentration appears disproportionately high and is a potential risk for Gree.

On the stock market, Gree Electric’s dynamic price-earnings ratio stands at a mere 6.47 times, signaling that it is substantially undervalued by the market. However, despite being undervalued, investors remain cautious. Consequently, the stock price continues to decline, erasing most of the gains made throughout the year.

4.China limits high spending on games, causing major gaming companies(eg. NetEase, Tencent) shares plunge

On December 22nd 2023, the State Press and Publication Administration issued the “Measures for the Administration of Online Games (Draft for Solicitation of Comments)”, which is hereby open to the public for comments. It mentions that online games are not allowed to set inducing rewards such as daily login, and first in-game purchase. Online game publishing business units must not provide or condone high-priced transactions of virtual props through methods such as speculation or auctions. All online games must set user recharge limits and publicize them in their service rules, and pop-up warnings should be given to users’ irrational consumption behaviors.

Chinese regulators will curb excessive spending and incentives that encourage online gaming, enacting the latest tightening measures for the world’s largest mobile gaming market. Immediately, Tencent and NetEase’s stock prices plummeted. Tencent and NetEase are the two largest developers and operators of popular online games in the world’s largest online game market.

Tencent Holdings’ shares plunged nearly 15.7% before recovering losses, falling about 12.7% in afternoon trading and remaining at their lowest level since late November 2023. Shares of smaller rival NetEase fell as much as 28%, briefly falling below the key technical support level of around HK$120.70 at a February low. In afternoon trading, NetEase’s share price pared its losses, falling about 20% to HK$129

Tecent Performance in the Stock Market on December 22nd, 2023
NetEase Performance in the Stock Market on December 22nd, 2023

During the peak of the crackdown on the tech industry, the Chinese government froze approvals for new games and launched several investigations into content, forcing developers to modify certain games.On December 25, the State Press and Publication Administration (SPPA) released the newly approved version numbers for 105 domestic games. This is the first time that the number of single approvals has exceeded 100, and the range of game companies covered is also broader.

5.NIO Secures Crucial Investment, CEO Lin Bin Loses Top Shareholder status

On December 18th, NIO Inc. announced its intention to issue approximately $2.2 billion worth of shares to CYVN Holdings through a private placement. The transaction is expected to be completed during the final week of this year. While NIO secures another critical strategic investment to alleviate short-term cash flow pressures, CEO William Li loses his position as the company’s largest single shareholder. CYVN Holdings, an investment entity from Abu Dhabi, will also have the right to nominate two directors to NIO’s board.

At a time when domestic private capital is cautious about investing in new energy vehicle manufacturers. Additionally, due to various factors including geopolitical issues, it has become increasingly difficult for domestic new energy vehicle companies to attract large US dollar funds or private equity funds, which used to be their primary source of financing.

Zhang Junyi, a partner at Avicenna Partners, pointed out that the ability of companies like NIO to secure financing from Middle East sovereign wealth funds is deeply rooted in the strong international cooperation between China and the Middle East. Zhang Junyi stated that while this financing will greatly alleviate NIO’s short-term financial pressure, the long-term success of the company still requires internal improvements.

NIO is currently operating at a loss, with a net loss of CNY 4.56 billion in the third quarter of this year, an increase of 10.8% compared to the same period last year. Financial data shows that as of the end of the third quarter, NIO held CNY 45.2 billion in cash and cash equivalents, an increase of CNY 13.7 billion from the previous quarter. Considering accounts payable, short-term debt, and long-term loans in the third quarter, NIO’s asset-liability ratio was 80.78%, an increase of nearly two percentage points from the second quarter, and higher than Li Auto and XPeng Motors.

For emerging automotive companies, cash flow remains a critical factor.NIO also requires substantial cash for its battery swapping collaboration projects with multiple automaker (e.g. Geely, Changan Motors)

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