GMT EIGHT - OPPORTUNITIES IN CHINA

The probability of a 50 basis point rate cut has risen to 50%.

Encrypt "big player" MicroStrategy's largest move in three years: Spending a staggering $1.1 billion to acquire nearly 20,000 bitcoins.

CAAM: In August, the national sales of commercial vehicles were 271,900 units, a year-on-year decrease of 12.18%.

Cui Dongshu: In August, automobile consumption decreased by 7.3% to 394.3 billion yuan.

The China Association of Automobile Manufacturers, Cui Dongshu, stated that according to data from the National Bureau of Statistics, the total automotive consumption in August was 394.3 billion yuan, a decrease of 7.3%. Excluding automobiles, retail sales of consumer goods totaled 3.4783 trillion yuan, an increase of 3.3%. From January to August, the total retail sales of consumer goods reached 31.2452 trillion yuan, a year-on-year increase of 3.4%. Among them, automotive consumption was 3.068 trillion yuan, a decrease of 2.4%, while non-automotive consumer goods retail sales were 2.8177 trillion yuan, an increase of 3.9%. He stated that in 2024, there will be a stable growth in automotive production demand, continued improvement in consumer expectations, solid promotion of high-quality development, and a positive trend in the automotive industry's recovery. In 2023, the relationship between car sales and real estate sales was 37 square meters per car, which is expected to decrease to 32 square meters per car in 2024, making the sales relationship between houses and cars more reasonable. Due to debt pressure, the demand in the automotive market is relatively sluggish. As the only consumer goods that have not been widely popularized in Chinese urban and rural households, the national passenger car market has shown an overall warming trend in recent years, and passenger car consumption has gradually improved. With the decline in the low base effect of the Chinese New Year in 2024, production demand will continue to recover, employment and prices will remain stable, and high-quality development will continue to advance. However, there is still significant pressure on automotive consumption growth. Therefore, promoting car sales, implementing subsidies for scrapping and renewal of vehicles, and the policy of exchanging old vehicles for new ones are of great significance. The market-promoting effect of doubling the subsidies for scrapping and renewal is very good, with car owners expecting scrapping and renewal before the policy is implemented likely having a significant impact on sales. Expectations for the future include more improvement measures such as promoting new energy vehicles in rural areas, exempting personal income tax for car buyers, exempting car purchase tax for compliant pure electric vehicles with a range of less than 200 kilometers, and encouraging car purchases for marriage, all aimed at driving car consumption and promoting economic growth. The recovery of automotive consumption is relatively strong. In August, the total retail sales of consumer goods amounted to 3.8726 trillion yuan, an increase of 2.1% year-on-year. Among them, automotive consumption was 394.3 billion yuan, a decrease of 7.3%, while non-automotive consumer goods retail sales were 3.4783 trillion yuan, an increase of 3.3%. From January to August, the total retail sales of consumer goods reached 31.2452 trillion yuan, a year-on-year increase of 3.4%. Among them, automotive consumption was 3.068 trillion yuan, a decrease of 2.4%, while non-automotive consumer goods retail sales were 2.8177 trillion yuan, an increase of 3.9%. The opening of 2023 was relatively weak, so in 2024, automotive consumption achieved positive growth in January and February, followed by continuous negative growth of around 5%, with price factors playing a crucial role. 2. Gradual strength in automotive production By industry, in August, out of 41 major industries, 32 saw an increase in value added compared to the same period last year. By product, in August, out of 619 industrial products, 339 saw an increase in production compared to the same period last year. Among them, there were 2.511 million cars produced, a decrease of 2.3%, including 1.105 million new energy vehicles, an increase of 30.5%; power generation of 907.4 billion kilowatt-hours, an increase of 5.8%; and crude oil processing of 59.07 million tons, a decrease of 6.2%. 3. Good performance in automotive value added in 2024 In August, the value added of above-scale industry increased by 4.5% year-on-year. From January to August, the value added of above-scale industry increased by 5.8% year-on-year. In 2020, the value added of the automotive industry increased by 6.6%, in 2021 it hovered around 5.5%, and in 2022, it increased by 6.3%, showing strong growth. In 2023, the value added of the automotive industry increased by 13%, achieving strong growth. The 8.4% increase in automotive value added in the first eight months of 2024 was relatively good, but the 4.5% increase in August was weaker. 4. Stable utilization of automotive production capacity In the fourth quarter of 2023, the utilization rate of above-scale industrial production capacity nationwide was 75.9%, an increase of 0.2 percentage points compared to the same period last year and 0.3 percentage points from the previous quarter. In 2023, the industrial capacity utilization rate nationwide was 75.1%, a decrease of...Hello, how are you doing today?The booming real estate market from 2016 to 2019 had a significant impact, and the subsequent gradual cooling has had a positive effect on the car market. Currently, the real estate market is stagnating at a high base, with sales in the eastern region performing well, which is a phenomenon of the last squeezing of profits in the real estate sector. From January to August 2024, new home sales decreased by 24%, providing a good foundation for stimulating consumption in the car market. The current residents' income does not support sustained high debt levels, so the cooling of the real estate market is beneficial for the development of the car market. Currently, the ratio of 37 square meters of housing to 1 car in 2023 is considered an unreasonably high comparison between car and real estate sales. By January to August 2024, this ratio decreased to 32 square meters of housing to 1 car, reaching a relatively balanced level. Although the improvement from the peak ratio of 70 square meters per car in 2020 is evident, the pressure from the high average price per square meter in the real estate market still hampers consumption, leading to a subdued demand in the car market due to debt pressure. Significant contraction in real estate loans has resulted in real estate investment relying mainly on residents' down payments and prepayments, leading to a certain diversion of capital away from the car market. The wealth effect of the real estate market has a certain stimulating effect on the demand for luxury cars, and the recent decrease in debt pressure in the real estate market, coupled with weakening housing demand, also brings some potential benefits to improving car consumption. In August 2024, sustained policy support is needed for car consumption. There has been a slight improvement in the lackluster consumption issue currently observed, with negative growth in car consumption from January to August 2024 and failing to keep pace with the average growth rate of retail sales. High base growth pressure remains significant in the future. In August, the total retail sales of consumer goods reached 3.8726 trillion yuan, a year-on-year increase of 2.1%. Among them, automotive consumer spending was 394.3 billion yuan, a decrease of 7.3%, while non-automotive retail sales were 34.783 trillion yuan, an increase of 3.3%. From January to August, the total retail sales of consumer goods reached 31.2452 trillion yuan, a year-on-year increase of 3.4%. Automotive consumer spending was 3.068 trillion yuan, a decrease of 2.4%, while non-automotive retail sales were 28.1772 trillion yuan, an increase of 3.9%. High oil prices in recent years have contributed to the decline in automotive consumer spending. Among total retail sales, the performance of goods above quota has been weak, reflecting the significant influence of real estate on consumption and the noticeable inhibitory effect of the real estate market on overall bulk consumption.

NaaS Technology, Inc. Sponsored ADR (NAAS.US) CEO Wang Yang: Focusing on self-driving car technology, AI algorithms help accurately match traffic energy supply and demand.

On September 13th, at the 2024 China Service Corporation International Trade Fair (referred to as SERV) in China, the "UAE-Beijing Economic Forum" was co-hosted by the UAE Embassy in China, Beijing Council for the Promotion of International Trade, and Chaoyang District Government. Founder and CEO of NaaS Technology, Inc. Sponsored ADR (NAAS.US), Wang Yang attended and delivered a speech. She stated that China's 3 trillion yuan transportation energy consumption market is accelerating its shift from oil to electricity, with fuel vehicle ownership expected to peak by 2025 and the number of electric vehicles surpassing fuel vehicles by 2035, with the two overlapping. This is the most certain opportunity in the next ten years. Currently, China is the world's largest country in terms of automobile ownership, as well as the largest in automobile sales, with automobile export volume just recently surpassing the global rankings. In 2023, the total retail sales of consumer goods in China exceeded 47 trillion yuan, and the transportation energy consumption market, which includes refueling and charging, is an easily overlooked hidden giant, second only to automobiles in terms of volume, exceeding categories such as catering, clothing, electronics, etc. Transitioning from fuel vehicles to electric vehicles, the new energy transformation of transportation energy is irreversible, reducing the external dependence on energy consumption on one hand, and with transport carbon emissions in China exceeding 10%, this proportion is expected to continue growing. Green development is an inevitable trend. Wang Yang stated that the traditional energy industry in China, especially the digitalization level of gas stations, is low and the efficiency of the entire industry chain is not high. In 2016, Nenglian entered the energy digital field, starting with services such as city distribution of logistics vehicles and supply services for commercial vehicles such as taxis, accumulating over 400 million registered users by the end of 2023, with over 100 million trading users and an annual order volume exceeding 500 million transactions. Nenglian has pre-installed refueling and charging services in the onboard systems of 80% of domestic OEMs such as BYD Company Limited, GAC, FAW-Volkswagen, Chang'an, Expression, Great Wall, Hyundai, Geely, Extreme, Nezha, Zhiji, etc., creating a nationwide integrated digital network of oil and electricity. Currently, the monthly new car sales penetration rate of electric vehicles in China has exceeded 50%, but the overall inventory percentage has just crossed the 7% mark, and compared to fuel vehicles, the pressure of future matching of supply and demand in transportation energy will become increasingly greater. In the first half of this year, the proportion of charging from electric vehicles in the total national electricity consumption for the first time exceeded 1.1%, posing a certain impact on the power grid. Considering the instability of upstream new energy generation from sources such as photovoltaics and wind energy, as well as the distribution characteristics of storage charging, micro-grid configuration, vehicle-grid interaction, etc., how to use AI algorithms to guide the matching of the entire energy system has become a topic of global attention. "Since 2016, focusing on the matching of transportation energy supply and demand, efficiency improvement, and the smartization of energy supply experiences, Nenglian has conducted a large amount of AI algorithm research and development. Last year, NaaS Technology, Inc. Sponsored ADR launched the NEF (NAAS Energy Fintech) system, which, based on artificial intelligence algorithms, achieved a comprehensive intelligent approach in selecting charging station locations, revenue evaluation, operational scheduling, and maintenance." In terms of the value brought by AI, Wang Yang also gave some more vivid examples, such as which scenarios and locations are suitable for building charging stations, intelligent matching between vehicles and charging stations or gas stations, whether charging stations are suitable for integrated energy storage devices, formulation of operational strategies for light storage charging, etc., where the answers are provided by AI algorithms. Looking further ahead, with the advent of the era of autonomous driving, the evolution of charging infrastructure will move towards the phase of Auto Power smart replenishment. Wang Yang revealed that Nenglian will continue to focus on energy supply for autonomous driving, expand the cooperation ecosystem in the new energy industry, and embed refueling and charging services into the central screens of smart cars, allowing owners to automatically and intelligently match with gas stations and charging stations, truly achieving higher efficiency and lower delivery costs.

The review of Nippon Steel's acquisition of United States Steel Corporation (X.US) will end on September 23rd and may be further delayed or postponed until after the election.

The Committee on Foreign Investment in the United States (CFIUS) is currently reviewing the transaction of Nippon Steel Corporation acquiring United States Steel Corporation for $14.9 billion, and must decide by September 23 whether to recommend the White House to block the transaction. This is the second 90-day review conducted by CFIUS since Nippon Steel announced the acquisition in February 2021. If officials decide to extend the review period, this politically sensitive decision may be postponed until after the November 5 election. This deal has sparked high-profile opposition from political figures including current U.S. President Joe Biden, Democratic Vice President Kamala Harris, and former President Donald Trump. They generally oppose foreign ownership of United States Steel Corporation because the steel produced by the company is a key commodity used in the construction of ships, trains, and infrastructure. White House advisor Saloni Sharma stated that President Biden's position is that United States Steel Corporation must continue to be a company owned and operated domestically in the United States. Headquartered in Pennsylvania, a crucial swing state in presidential elections, United States Steel Corporation's workers union also supports Harris and opposes this deal. As the September 23 deadline approaches, the political factors and uncertainties surrounding the transaction have become the focus. In a letter on August 31, the committee indicated that the deal could jeopardize the security of United States Steel Corporation's supply, but both companies rebutted in a 100-page letter, claiming that the agreement would increase the output of United States Steel Corporation and requested an extension to address concerns. CFIUS and Nippon Steel declined to comment, and United States Steel Corporation did not respond to requests for comment. According to senior government officials, a decision is not expected to be made in the coming days. Furthermore, reports suggest that the decision may be delayed until after the election. Both companies hope that recent support for the deal can turn the tide, including a letter from business groups expressing concerns about the political pressure affecting the deal. CFIUS's strict reviews typically take 90 days, but companies often withdraw applications and resubmit them to have more time to address the committee's concerns, resetting the 90-day review period. Nippon Steel and United States Steel Corporation submitted their review application in March, and CFIUS allowed them to resubmit in June, starting the second 90-day review period with a deadline of September 23. Previously, executives from Nippon Steel met with the CEO of United States Steel Corporation on Wednesday to salvage the $14.9 billion acquisition plan. In response, the United States Steel Corporation Workers Union submitted a memo on Thursday to "stakeholders," including the White House, stating that they will not succumb to coercion and will resist Nippon Steel's final efforts to acquire United States Steel Corporation. The union also stated that the near $15 billion acquisition is a "doomed deal" and pledged to oppose any foreign ownership of the company. Union President Dave McCall expressed in the memo that union members and retirees continue to strongly oppose the deal.

The probability of a 50 basis point rate cut has risen to 50%.

Former New York Fed Chair Dudley said there is "sufficient reason" to cut interest rates by 50 basis points next week, supported by recent comments from well-known financial journalists like Nick Timiraos from "Fedwire" Boosted, the market bet on the Fed cutting rates next week has risen to "fifty-fifty." The latest data from Fedwatch shows that traders in the swaps market now expect a 50% probability of the Fed choosing to cut interest rates significantly this month, up from 15% on Thursday. Market reaction was strong Earlier, the expectations for a rate cut on Friday had already risen significantly, and this positive news led to a strong rally in the US stock market, pushing the S&P 500 and Nasdaq Composite indexes to their largest weekly gains so far this year, up 4% and 6% respectively. The Nasdaq index had just experienced a sharp drop the previous week. Mark Dowding, Chief Investment Officer at RBC BlueBay Asset Management, also stated that with a 50 basis point rate cut now "very likely" after having been "almost fully priced in" on Thursday. Currently, the market still expects a 50% chance of a 25 basis point rate cut, but this market expectation has significantly decreased compared to Thursday's. Former New York Fed President Bill Dudley said on Friday that there is "sufficient reason" for a 50 basis point rate cut next week, emphasizing the restrictive impact of the current 5.25%-5.5% rate on economic growth, the highest level in 23 years. Historically, the Fed has typically adjusted rates by 25 basis points, but if officials believe there is a risk of the economy slowing too quickly, a 50 basis point rate cut may be taken as a precautionary measure. Tim Duy, Chief US Economist at SGH Macro Advisors, said, "For the Fed, the least regrettable path is to cut rates by 50 basis points first. This is the only logical policy choice." Gabriele Fo, fund manager at Algebris Investments, also said that the Fed "best... cuts rates in advance" rather than risk "lagging behind the curve" in a recession. Former New York Fed Chair William Dudley and economists like Michael Feroli of JPMorgan have also suggested that the Fed should cut rates further to avoid falling behind the curve. "We think the Fed should do clearly next week: cut the policy rate by 50 basis points to adjust to the changing risk balance." Uncertainty remains However, some analysts still remain cautious. Goldman Sachs believes that despite the growing expectations of a 50 basis point rate cut, the Fed is likely to cut rates by 25 basis points next week. Wednesday's Fed meeting is the last meeting before the November presidential election, with officials attempting to guide the US to a "soft landing" and suppress inflation without causing a recession. It is worth noting that this week gold prices hit historic highs and the yield on 10-year US treasuries reached a 15-month low, both of which can be seen as signals of economic deterioration. Some Fed officials have expressed concerns, believing that if a 50 basis point rate cut is implemented from the start, it could easily trigger market panic and not be conducive to managing market expectations and controlling inflation. In addition, the latest data shows that the overall inflation rate in the US has dropped to 2.5%, close to the Fed's target of 2%, but the core inflation rate, influenced by factors such as housing market pressure, has risen by 0.3%. Wylie Tollette, Chief Investment Officer of Franklin Templeton Investment Solutions, said, If inflation in the housing and related sectors continues to rise, a 50 basis point rate cut may accelerate or amplify this trend, and I expect the rate cut to be 25 basis points. Salman Ahmed, Global Macro Head at Fidelity International, believes that there is still a lot of uncertainty about the rate cut, "This is a cat-and-mouse game... We have started the rate cut cycle, but there are still many unknowns."

Encrypt "big player" MicroStrategy's largest move in three years: Spending a staggering $1.1 billion to acquire nearly 20,000 bitcoins.

MicroStrategy (MSTR.US) recently purchased approximately 18,300 bitcoins at a price of around $1.1 billion, marking the company's largest single investment in digital assets in over three years. According to a filing submitted to the U.S. Securities and Exchange Commission (SEC) last Friday, the enterprise software manufacturer completed this purchase between August 6 and September 12. It is worth noting that this is the largest bitcoin purchase made by MicroStrategy since the company announced the purchase of 19,452 bitcoins in February 2021. As of now, MicroStrategy's bitcoin holdings have reached approximately 244,800 bitcoins, with a total value of around $14 billion, accounting for nearly 1% of the total historical bitcoin issuance. In comparison, BlackRock, Inc.'s iShares Bitcoin Trust, the world's largest bitcoin fund, has assets totaling around $20 billion. With an $1.1 billion investment, bitcoin "whale" MicroStrategy has made its largest bitcoin acquisition in three years. The filing shows that the average purchase cost of MicroStrategy's bitcoins is around $38,585, with a total investment of approximately $9.45 billion. On Friday, the price of bitcoin remained relatively stable at around $57,880, and rose further after the U.S. stock market closed, breaking the $60,000 mark for the first time since the end of August, with gains of over 10% in the past 24 hours. At the time of writing, bitcoin is up 3.86% last week, trading at $60,079. Since 2020, MicroStrategy has been purchasing bitcoin as part of its capital allocation strategy, with the company's co-founder and chairman Michael Saylor stating that this move is to hedge against inflation risks. While Saylor has garnered support within the bitcoin community, few U.S. publicly traded companies, apart from a few such as Tesla, Inc., choose to hold such volatile cryptocurrencies on their balance sheets. To fund its recent bitcoin purchases, MicroStrategy raised funds through issuing and selling common stock. In August of this year, the company implemented a 1:10 stock split to make its stock more accessible to investors and employees. This year, MicroStrategy's stock price has more than doubled, outperforming the approximately 40% increase in bitcoin prices during the same period.

CAAM: In August, the national sales of commercial vehicles were 271,900 units, a year-on-year decrease of 12.18%.

On September 14, the China Association of Automobile Manufacturers released an overview of the overall sales of commercial vehicles in China for August 2024. According to statistics, the overall sales of commercial vehicles (wholesale) in August 2024 were 271,900 units, a year-on-year decrease of 12.18% and a month-on-month increase of 1.38%. Among them, truck sales were 231,900 units, a year-on-year decrease of 14.16% and a month-on-month decrease of 0.24%; bus sales were 40,000 units, a year-on-year increase of 1.33% and a month-on-month increase of 11.90%. From January to August 2024, the cumulative sales of commercial vehicles nationwide (wholesale) were 2.6086 million units, an increase of 1.61% year-on-year. Among them, cumulative truck sales were 2.2786 million units, an increase of 0.40% year-on-year; cumulative bus sales were 330,100 units, an increase of 10.86% year-on-year.

The chip industry will once again fall into difficulties.

Future Horizons' latest market update states that the European semiconductor market is currently in a state of decline and is particularly vulnerable. Malcolm Penn, Chairman and CEO of market research firm Future Horizons, stated in the quarterly semiconductor market update, "There is a great deal of uncertainty this year." He forecasts that the semiconductor market will grow by 15% in 2024 and by 8% in 2025 as the economy begins to decline. "Every warning light is at least flashing amber, if not red," he said. He said, "The initial forecast for 2024 was 16%, but things have taken a turn for the worse since January. It's been a very dramatic shift, a turbulent period." "The situation in Europe is not very good. Historically, when the market has been in recession, Europe's industrial and automotive sectors have remained strong. But things are not the same now. Europe entered a recession about a year later than the rest of the world, and now we are seeing negative growth there." Although spending is slowing down, the surge in semiconductor capacity spending remains a significant risk. "46.5% of total capital expenditure goes to China, which produces only 10% of the units. There are several areas of concern because the capital expenditure is going into more mature technologies, analog, and microcontrollers. The most affected regions are Europe and Japan, not the US. "All of China's investments are focused on 300mm technology, while most countries in the world focus on 200mm technology. Competing with the cost structure of 300 mm will be very difficult. This may force traditional companies to upgrade, meaning building new factories because the ceilings aren't high enough to accommodate 300 mm equipment, which may lead to more consolidation or more surplus equipment," he said. It is expected that before the semiconductor market in Europe recovers, an economic downturn will occur in early 2025. "A death cross will signal another industry downturn," he said. "It's unlikely to happen this year, but likely in the first quarter of 2025. We are facing some dangers. Optoelectronics and discrete devices are performing poorly, every electronic product has discrete devices, and the microcontroller market is contracting and showing negative growth. The analog market has also experienced 17 months of negative growth, which is a key indicator for the industry." "It takes six months to control inventory, and it takes a long time to absorb 20% of excess capacity, but we are increasing capacity, so our excess capacity may continue into 2025 and even longer." He said that although Intel will continue to struggle, Moore's Law will continue to drive the industry forward. "Moore's Law has been killed more times than Dracula, but it is not dead, not even ill. Dennard scaling has ended, that's for sure, but that was never Moore's Law. We are now building many 3D structures, both vertical and horizontal, and these roadmaps are very secure in the next 10 to 15 years," he said. "Intel faces significant challenges," he said. "They are struggling, losing money, and laying off employees, which is not a good sign." "When you fall behind, it takes ten years to catch up. In my semiconductor heart, I hope they succeed because they have lost their way. Technically, if they can recruit talent, they should be able to do it, but engineers also want to work for successful companies facing technological challenges." But in the chip manufacturing sector, TSMC and Samsung need to have fierce competition. "What we need is not just competition between two companies, which is not good for the industry," he said. This article is excerpted from "Observation of the Semiconductor Industry"; GMTEight Editor: He Yucheng.

Former advertising executive at Facebook reveals insider secrets of Alphabet Inc. Class C (GOOGL.US) advertising market, adding another witness to the anti-monopoly investigation!

In the antitrust lawsuit filed by the Department of Justice against Alphabet Inc. Class C (GOOGL.US) in the United States, testimony from a former Facebook advertising executive revealed a secret agreement between Meta Platforms Inc. (Facebook's parent company) and Alphabet Inc. Class C. The executive, Brian Boland, who served as Facebook's ad tech chief from 2009 to 2019, disclosed to a federal court in Virginia that Facebook initially tried to challenge Alphabet Inc. Class C's dominant position in the display advertising market but ultimately found it difficult to compete due to Alphabet Inc. Class C's market monopoly. Facebook's Audience Network project aimed to allow advertisers to not only place ads on Facebook and Instagram but also to buy ad space on other websites and apps. However, by 2017, Facebook realized that due to the advantage Alphabet Inc. Class C gave itself in its ad tools, Facebook had difficulty effectively competing with Alphabet Inc. Class C. A 2017 strategic memo stated that Alphabet Inc. Class C's strategy was like putting up a barrier between advertisers and Facebook, allowing Alphabet Inc. Class C to prioritize the best ad resources. Boland explained to Judge Leonie Brinkema that Facebook was concerned that this barrier would affect its ad business. Judge Brinkema will rule on the Department of Justice's charges of Alphabet Inc. Class C illegally monopolizing the advertising technology market. Alphabet Inc. Class C's ad exchange platform allows it to conduct a "last look" after ad auctions to decide whether to purchase ad space. Boland likened Alphabet Inc. Class C's technological advantage to being able to pick the best 30 Apples Inc. from a box of Apple Inc. before anyone else can buy, leaving other participants to choose from the remaining Apples Inc. Under Boland's supervision, Facebook conducted six months of negotiations with Alphabet Inc. Class C, ultimately reaching an agreement in 2018 internally referred to as the "Blue of Jedi" agreement. This agreement provided favorable terms for Facebook when bidding on ads in its Audience Network through Alphabet Inc. Class C's ad exchange platform. The agreement was approved by the top leadership of both companies, including Facebook CEO Mark Zuckerberg and Alphabet Inc. Class C CEO Sundar Pichai. Although Alphabet Inc. Class C and Facebook are respectively the first and second largest participants in the online advertising market, the details of this transaction known as the "Ad Auction Agreement" were not disclosed in court testimony. However, court documents indicate that Alphabet Inc. Class C wanted Facebook to pay 15% of media costs in exchange for giving up the advantage of the "last look". In 2020, a group of state attorneys general sued Alphabet Inc. Class C, accusing it of monopolizing the advertising technology market and alleging that the agreement between the two companies violated antitrust laws. They claimed that Alphabet Inc. Class C proposed this deal in exchange for Facebook abandoning a new technology called "header bidding" that could weaken Alphabet Inc. Class C's market position. However, a judge in New York dismissed these charges, finding no impropriety in the agreement reached by the two companies. Antitrust enforcement authorities in Europe also investigated this deal and concluded the investigation in March 2022 without taking any action. Last year, the Department of Justice in the United States filed a lawsuit against Alphabet Inc. Class C for monopolizing the advertising technology market, but did not allege that the agreement was anti-competitive, instead emphasizing that even tech giants like Meta could not compete against it. Boland left Facebook in 2020, expressing internal concerns about Facebook's lack of growth in the display advertising sector. Eventually, the project stopped buying display ads online and instead focused entirely on mobile ads. In addition to Boland, several other executives testified in the antitrust investigation against Alphabet Inc. Class C. Among them, former News Corporation executive Stephanie Layser pointed out that in 2017, News Corporation estimated that if it stopped working with Alphabet Inc. Class C's ad agency and no longer followed Alphabet Inc. Class C's guidelines, News Corporation would lose at least $9 million in ad revenue that year. She believed that Alphabet Inc. Class C's ad business benefited them more but harmed the interests of publishers. Almost no one in the industry uses other products because Alphabet Inc. Class C's publisher ad server is tied to its ad exchange platform. Layser emphasized that by the time she left her job, efforts to change this setup were still ongoing, with publishers seeking more autonomy and control over their ad revenues.About 70-80% of advertising transactions for News Corporation are conducted through the advertising platform of Alphabet Inc. Class C. However, Alphabet Inc. Class C argues that this data is outdated, as large publishers now typically have six different platforms for selling advertisements, with over 80 related services available.The advertising executive of Gannett, the largest newspaper group in the United States, Tim Wolfe, also testified that Gannett has been using Alphabet Inc. Class C advertising servers for about 13 years and has not been able to find any other viable alternative. In addition to executives from Gannett and News Corp, employees from companies such as Trade Desk, Comcast Corporation Class A, and PubMatic are also on the list of potential witnesses, along with over twenty current or former employees of Alphabet Inc. Class C waiting to be "summoned". The U.S. Department of Justice is proving that Alphabet Inc. Class C is using its dominant position in the advertising technology field to illegally monopolize, preventing publishers and advertisers from using other tools and unfairly harming their competitors' bids.

During the downturn in the industry, the results of "practicing internal skills diligently" have become apparent, and the fundamentals of DouYu International Holdings Ltd. Sponsored ADR (DOYU.US) have improved.

On September 12th, Douyu released its unaudited financial report for the second quarter of 2024. The data shows that the company's revenue for the reporting period was 1.032 billion yuan, with a gross profit of 842 million yuan and a gross profit margin of 8.2%. The adjusted net loss was 45.5 million yuan, a significant decrease compared to the previous period. The significant narrowing of the loss has two important implications. It not only indicates that Douyu has strong business resilience when facing macroeconomic and industry fluctuations, but also represents that Douyu has achieved further improvement in operational efficiency after deepening its commercial transformation, driving the growth of the company's intrinsic value. Analyzing Douyu's financial report in depth can provide a clearer understanding of the true value of Douyu, which has been "practicing internal strength" during the industry downturn, and the key information reflected in the financial report that Douyu's fundamentals may have bottomed out is worth investors' attention. Diversified revenue was the keyword for Q2, and Douyu's commercial transformation continued to accelerate The analysis of an enterprise's operation cannot be viewed in isolation from its internal operational conditions, but must be placed in the broader context of industry development and macroeconomic environment in order to arrive at a more comprehensive and accurate answer. In the context of the game live streaming industry, the development of this industry has faced multiple operational challenges in the past two years. On one hand, the peak of the internet industry's traffic dividend has passed, and the entry of short video platforms has led to ongoing industry competition intensification. On the other hand, the sustained economic downturn has led to a decrease in disposable income for users, resulting in an overall decline in purchasing power and a corresponding reduction in entertainment consumption. Under the dual pressure of industry development and macroeconomic conditions, although Douyu is a leading live streaming platform in China, it has inevitably been affected. However, in the second quarter of 2024, Douyu handed in an operational answer sheet indicating that the company's fundamentals may have bottomed out. Looking at the revenue structure, during the reporting period, Douyu's innovative business, advertising, and other business revenue reached 242 million yuan, which was 1.8 times higher than the same period last year. Its revenue contribution accounted for 23.4%, a significant increase from 9.6% in the same period of 2023. The growth in innovative business was mainly due to the increase in game membership revenue based on the sale of game props. By continuing to use mature community and commercial tools, Douyu effectively increased business revenue by enriching the variety of game props, increasing platform equity, and marketing frequency. In the Tianya Mingyue Dao division, Douyu updated its product forms, optimized the payment experience, and users could directly order through the prop store. In the second quarter, the average prop consumption level was higher than other channels. In the Peace Elite division, Douyu increased the promotion frequency of game membership services based on the rare props provided by game manufacturers and external promotions, effectively increasing business revenue. As a new growth curve incubated by Douyu outside of live streaming revenue, the significant increase in the proportion of revenue from innovative business, advertising, and other business means that Douyu's commercial transformation has achieved a critical breakthrough. With the company's continued cultivation in this business, innovative business, advertising, and other business will become the core driver of Douyu's revenue growth. Secondly, in terms of profitability, while revenue remained flat compared to the previous quarter, Douyu's adjusted net loss for the reporting period achieved a significantly narrower margin to 45.5 million yuan. The clearer signal of the bottom in profitability compared to revenue indicates the continuous improvement in Douyu's operational efficiency. This improvement in operational efficiency is mainly attributed to two factors: first, Douyu gradually refined a more efficient management system under multiple operational challenges; second, Douyu achieved an improvement in operating efficiency through fine-tuning the content ecosystem. Specifically, during the reporting period, Douyu continued to improve operational efficiency around anchor resources, stimulating the content density of top anchors and increasing the broadcasting frequency of medium and long-tail anchors to enrich the content supply on the platform. Building on this foundation, high-quality anchor resources were further integrated with platform advantages in different divisions, leading to a series of divisional operational activities and platform ecosystem building. For example, targeting the return of the Blizzard National Service, Douyu's Blizzard game division, centered on top anchors, integrated division resources to create a star anchor 12-hour relay livestream, where top anchors like Huang Xudong gathered offline, followed by a popular anchor group competition event, covering multiple game products under Blizzard, significantly increasing the activity of the division. By deepening the advantages of each division, Douyu's user fine-tuning operations have been enhanced, which further promotes the continuous improvement in operational efficiency. At the user level, under multiple operational challenges, Douyu's user data has shown a certain degree of decline in the past two years, but this trend has now shown a clear signal of stabilization. During the reporting period, Douyu's quarterly average MAU on mobile reached 44.1 million, with a total of 3.4 million paying users in the quarter, remaining stable compared to the first quarter of 2024, indicating that the number of paying users in the quarter has stabilized relatively. During the industry downturn, "practicing internal strength," Douyu continues to build a distinctive platform event ecosystem. Based on the analysis of Douyu's financial report, it is not difficult to see that whether from the performance side of revenue, profitability level, or the user data side of the business, it all reveals signals of Douyu's fundamentals rebounding. The reason why it could achieve a "soft landing" in business operations under the dual impact of industry development and macroeconomics is due to Douyu's solid promotion of the development strategy of "a diversified content ecosystem platform with games as the core," continuously consolidating the company's core competitiveness. Compared to short video platforms like Douyin and Kuaishou, Douyu's vertical advantages lie in its deep vertical and specialization in the gaming industry. Douyu not only has high-quality anchors and content ecosystems but also provides superior and diversified services to game users through real-time interaction, fine operations and technological innovation, extensive cooperation and resource integration to create a user base of high-quality users with high monetization potential. Understanding the key to building its own core competitiveness, Douyu fully leverages its strong anchor resources, quality content, and other advantages to deepen cooperation with game manufacturers, continuously creating a platform ecosystem with distinctive features through "official events + self-made events + cross-platform cooperation." In terms of official events, during the reporting period, several professional esports events spring tournaments were launched, and Douyu fully released its reserve of copyright events, combined with the platform's abundant anchor resources and other advantages, to continuously provide a high-quality content experience. This quarter, Douyu introduced a star anchor 12-hour relay livestream centered on top anchors in the Blizzard game division, integrating division resources and hosting a popular anchor group competition event, covering a variety of Blizzard game products and greatly enhancing division activity. By deepening divisional advantages, Douyu's user fine-tuning operations have been further upgraded, pushing the continuous improvement in operational efficiency. Through the analysis of Douyu's financial report, investors can gain a clearer understanding of the company's value and future prospects. The multiple strategies implemented by Douyu have positioned the company well in the face of industry challenges and economic headwinds, indicating a strong potential for growth and sustainability in the long term. Broadcast nearly 30 official major esports events, including League of Legends LPL Spring Split and MSI Mid-Season Invitational, Honor of Kings KPL Spring Split, Peace Elite PEL Spring Split, CSGO BLAST, and other official major esports events. Exclusively broadcasted the fighting game tournament EVO, providing high-quality optional event content for different gaming audiences.Based on official events, Douyu continues the event content operation strategy of the first quarter, continuing to provide professional and interesting dual commentary, one-stop viewing services at the platform event center, etc., to improve the quality of event derivative content and viewing experience. In terms of self-made events, Douyu has launched a total of more than 50 platform esports events this quarter, including Thunder Honor Cup, Douyu Super Dream Cup, Douyu Heroes Cup S5, Douyu Autumn Mountain Cup S1, Kawah Cup S4, covering games such as "King of Glory," "DOTA2," "Teamfight Tactics," "Peacekeeper Elite," "Fearless Agreement," and many more competitive games. Among them, the Douyu Super Dream Cup has upgraded the production standards of online events in the past seasons of DOTA2, forming diverse teams composed of platform anchors, Asian Games champions, current professional players, and retired players. The event broadcast has added a TeamVideo segment to showcase real-time communication between team members, providing viewers with a deeper event experience. The team and event theme songs created by Douyu anchors and community members have resonated with the player community, further enhancing the event's influence and engagement. In terms of cross-platform content sharing cooperation, Douyu has created exciting cooperative events in games like "King of Glory," "DOTA2," and "Fearless Agreement." The Thunder Honor Cup, as the largest cross-platform self-organized event during the King of Glory official break, features top resources from both platforms, with 4 contracted professional teams from Douyu competing alongside 12 top KPL teams, engaging in top-tier matches. With innovative elements like Swiss rounds, KOF format, professional team exhibition matches, anchor battles, etc., the event added more entertainment value to the professional competition, showcasing the unique charm of platform self-organized events. Thanks to Douyu's multi-dimensional layout of creating a distinctive platform event ecosystem, Douyu has accumulated a group of high-quality, deep users, maintaining stability in core user data, proving the effectiveness of its development strategy. This also laid a solid foundation for Douyu's diversified commercial expansion. In addition to focusing on business development, Douyu strives to reward shareholders' trust and support. Apart from announcing a $20 million share repurchase plan in December 2023, the company also announced a special cash dividend of $3 billion in early July this year, further increasing its shareholder returns. From a valuation perspective, Douyu's current value is still significantly undervalued by the market. As of September 12th closing, Douyu's PB valuation was only 0.26 times, far below its net assets. Based on the company's bottoming out fundamentals and clear expectations for future growth, Douyu is expected to see valuation recovery in the medium to long term.

Notice on the Public Solicitation of Opinions on the "Method for Identifying Artificial Intelligence Generated Synthetic Content (Draft for Soliciting Opinions)" by the Cyberspace Administration of China

In order to standardize the labeling of artificially intelligent generated synthetic content, maintain national security and public interests, protect the legitimate rights and interests of citizens, legal persons, and other organizations, and in accordance with the "People's Republic of China Network Security Law", "Regulations on the Management of Algorithm Recommendations for Internet Information Services", "Regulations on the Management of Deep Synthetic Internet Information Services", and "Interim Measures for the Management of Generative Artificial Intelligence Services", the State Internet Information Office has drafted the "Artificial Intelligence Generated Synthetic Content Labeling Measures (Draft for Comments)" and is now soliciting public feedback. The public can provide feedback through the following methods: 1. Send feedback via email to: biaoshi@cac.gov.cn. 2. Send feedback via mail to: Network Management Technical Bureau of the State Internet Information Office, No. 11 Chegongzhuang Street, Xicheng District, Beijing 100044, and indicate "Draft for Comments on the Labeling of Artificial Intelligence Generated Synthetic Content" on the envelope. The deadline for feedback is October 14, 2024. State Internet Information Office September 14, 2024 Artificial Intelligence Generated Synthetic Content Labeling Measures (Draft for Comments) Article 1 In order to promote the healthy development of artificial intelligence, standardize the labeling of artificially intelligent generated synthetic content, protect the legitimate rights and interests of citizens, legal persons, and other organizations, and uphold social public interests, these measures are formulated in accordance with the "People's Republic of China Network Security Law", "Regulations on the Management of Algorithm Recommendations for Internet Information Services", "Regulations on the Management of Deep Synthetic Internet Information Services", "Interim Measures for the Management of Generative Artificial Intelligence Services" and other laws, administrative regulations, and departmental rules. Article 2 These measures apply to network information service providers (hereinafter referred to as "service providers") who engage in the labeling of artificially intelligent generated synthetic content in accordance with the provisions of the "Regulations on the Management of Algorithm Recommendations for Internet Information Services", "Regulations on the Management of Deep Synthetic Internet Information Services", and "Interim Measures for the Management of Generative Artificial Intelligence Services". Industry organizations, enterprises, educational and research institutions, public cultural institutions, and other professional institutions engaged in the research and application of generative artificial intelligence technologies, but not providing services to the domestic public, are not subject to the provisions of these measures. Article 3 Artificially intelligent generated synthetic content refers to text, images, audio, video, and other information created, generated, or synthesized using artificial intelligence technology. The labeling of artificial intelligence-generated synthetic content includes explicit labeling and implicit labeling. Explicit labeling refers to labels added in the generated synthetic content or interactive interface in a way that is clearly perceivable by users, such as through text, sound, graphics, etc. Implicit labeling refers to labels added to the file data of generated synthetic content using technical measures that are not easily perceived by users. Article 4 If the services provided by service providers fall under the circumstances specified in Article 1 of the "Regulations on the Management of Deep Synthetic Internet Information Services", they should add explicit labels to the generated synthetic content in accordance with the following requirements: (1) Add text prompts or universal symbol prompts at appropriate positions at the beginning, end, or middle of the text, or place prominent prompts in the interactive interface or around the text. (2) Add voice prompts or audio rhythm prompts at appropriate positions at the beginning, end, or middle of the audio, or place prominent prompts in the interactive interface. (3) Add prominent prompts at appropriate positions in the image. (4) Add prominent prompts at appropriate positions at the beginning of the video and around the video playback, and add prominent prompts at the end and middle positions of the video when necessary. (5) When presenting virtual scenes, add prominent prompts at appropriate positions at the beginning of the scene, and add prominent prompts at appropriate positions during the ongoing service in the virtual scene. (6) In other scenarios of generative synthetic services, add explicit labels with significant prompt effects according to the characteristics of the application. When providing download, copy, export, and other ways of accessing generated synthetic content, service providers should ensure that the files contain the required explicit labels. Article 5 Service providers should add implicit labels to the metadata of the generated synthetic content in accordance with Article 16 of the "Regulations on the Management of Deep Synthetic Internet Information Services". The implicit labels should include information about the attributes of the generated synthetic content, the name or code of the service provider, content numbers, and other production elements. Service providers are encouraged to add forms of implicit labeling such as digital watermarks to the generated synthetic content. Metadata refers to descriptive information embedded in the header of a file according to a specific encoding format, used to record information about the source, attributes, purpose, copyright, and other content of the file. Article 6 Service providers that provide network information content distribution platform services should take measures to regulate the dissemination of generated synthetic content. (1) They should verify whether there are implicit labels in the file metadata, and if so, they should add prominent prompts around the published content to clearly alert users that the content is generated synthetic content. (2) If no implicit labels are found in the file metadata, but the user declares it as generated synthetic content, appropriate prompts should be added around the published content to remind users that the content may be generated synthetic content. (3) If no implicit labels are found in the file metadata and the user does not declare it as generated synthetic content, but the service provider distributing the network information content detects explicit labels or other traces of generated synthetic content, it can be identified as suspected generated synthetic content, and appropriate prompts should be added around the published content to remind users that the content is suspected to be generated synthetic content. (4) For content that is verified, possibly, or suspected to be generated synthetic content, information such as the attributes of the generated synthetic content, the name or code of the distribution platform, content numbers, etc., should be added to the file metadata. (5) Provide necessary labeling functions and remind users to actively declare whether the published content contains generated synthetic content. Article 7 Internet application distribution platforms should verify whether service providers have provided the necessary labeling functions for generated synthetic content when reviewing applications for release or online distribution. Article 8Service providers should clearly specify in the user service agreement the methods, styles, and other specifications for generating synthetic content identifiers, and remind users to carefully read and understand the relevant requirements for managing identifiers.Article 9 If users need the service provider to provide generated synthetic content without explicit identification, they can provide generated synthetic content without explicit identification and keep related logs for no less than six months after clarifying the user's identification obligations and usage responsibilities through the user agreement. Article 10 When users upload generated synthetic content to the service provider's platform for disseminating network information content services, they should proactively declare and use the identification function provided by the platform for identification. No organization or individual shall maliciously delete, tamper with, forge, or conceal the identification of generated synthetic content stipulated in these measures, provide tools or services for others to carry out the aforementioned malicious acts, or damage the legitimate rights and interests of others through improper identification methods. Article 11 Service providers should identify in accordance with the requirements of relevant mandatory national standards. Article 12 When service providers perform procedures such as algorithm filing and security assessments, they should provide materials related to identifying generated synthetic content according to these measures, strengthen the sharing of identification information, and provide support and assistance to prevent and combat related illegal criminal activities. Article 13 For violations of these measures that result in serious consequences due to the lack of identification of generated synthetic content, the relevant competent authorities such as the Cyberspace Administration of China shall impose penalties in accordance with relevant laws, administrative regulations, and departmental rules. Article 14 These measures shall be implemented from the date of MM/YY. This article is from the WeChat official account "Cyberspace China"

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