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United Airlines cuts some China flights as demand falls amid coronavirus

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United Airlines on Tuesday said it would suspend dozens of China flights next month because of a “significant decline in demand” to the country as it battles the growing number of coronavirus cases.

United has the most service to China of the U.S. airlines.

The flight cancellations take effect Feb. 1 and last through Feb. 8. It wasn’t immediately clear if United would cancel more flights.

We will continue to monitor the situation as it develops and will adjust our schedule as needed,” United said in a statement.

This is breaking news. Check back for updates.

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First U.S. presidential debate was an ’embarrassment’

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Baidu DuerOS voice assistant, smart devices unit valued at $2.9 billion

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A security personnel stands guard at the opening session of Baidu’s annual AI developers conference Baidu Create 2019 in Beijing, China, July 3, 2019.

Jason Lee | Reuters

GUANGZHOU, China — Chinese internet giant Baidu has raised an undisclosed sum of money for its business division focused on voice assistants and smart devices. 

The new funding for Baidu’s “Smart Living Group” (SLG) values that business at 20 billion yuan or $2.9 billion. CPE, Baidu Capital and IDG Capital participated in the investment round. 

Baidu runs a platform called DuerOS which it calls a conversational artificial intelligence system. DuerOS allows devices to use Baidu’s voice assistant so users can communicate with hardware by speaking to it. For example, Baidu has its own range of smart devices under a brand called Xiaodu which includes speakers and wireless earphones all equipped with its voice assistant. 

But DuerOS is also an open platform, meaning other hardware makers can also install it on their devices. 

The outside funding will give a cash injection to one of Baidu’s divisions that could be key to its long-term growth as it faces stiff competition in its core business. Baidu is China’s biggest search engine and makes money from advertising.

China’s advertising market has been hit by the coronavirus pandemic. Pre-pandemic, digital ad spending in China was forecast to rise 13% in 2020, according to eMarketer. The research firm now estimates it will rise only 5%, to $75.33 billion.

Over the past couple of years, Baidu has faced rising competition in search as Chinese internet users continue to move away from web browsers to so-called “super apps” like Tencent’s WeChat. These sorts of apps lets users access services and search all within one platform. 

Baidu has its own super app called the Baidu App which continues to grow. Daily active users reached 204 million in June. 

But part of Baidu’s strategy has been to try to diversify its revenue stream, putting an emphasis on areas from artificial intelligence to driverless cars and healthcare. Its Smart Living Group is involved in that effort with voice assistants playing a key role. 

And analysts see potential here for monetization. 

“We believe Baidu remains on-track for double-digit revenue growth over the longer-term,” Mizhuo analysts said in a note earlier this month.

Mizhuo said they “feel comfortable with that goal” as the company has yet to monetize investments such as voice search “which makes up roughly 20% of the search volume and its mini-program platform.” 

Mini-programs refer to apps within the Baidu App. It means users don’t need to go to a separate app store to use certain services. 

Baidu said the investment into the Smart Living Group is expected to be completed in the fourth quarter of 2020. The Chinese company will hold “super voting rights” in the business group and is expected to continue to consolidate the financial results of SLG, as a majority shareholder.

Meanwhile, Baidu is in talks with investors to raise up to $2 billion over three years for a new biotech company, CNBC earlier this month reported. It will be a standalone entity that would focus on using artificial intelligence to create new drugs and make early-stage diagnoses of diseases. 

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China’s plan for responding to uncertainty is strengthening its market

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Xi Jinping, China’s president, speaks during the United Nations General Assembly on September 22, 2020.

Tiffany Hagler-Geard | Bloomberg | Getty Images

BEIJING — As China’s leaders get ready to release their national development plan for the next five years, some government advisors emphasize the priority is building up China’s domestic strength. 

Chinese authorities have stepped up their efforts to shift the economy from one reliant on exports to one driven by domestic consumption. The country faces the shock of the coronavirus pandemic to global growth this year as well as tensions with the U.S. The U.S. has been China’s top trade partner.

“China’s economy needs to continue to develop. If exports decline (as a result of shrinking global demand), then they will be consumed domestically,” Justin Yifu Lin, a counsellor to China’s top executive body, the State Council, said at a briefing with reporters Tuesday. That’s according to a CNBC translation of his Mandarin-language remarks. 

In the same way, U.S. pressure on Chinese companies such as Huawei mean these businesses must also look more at the Chinese market, Lin said. He is also honorary dean of the National School of Development at Peking University, and formerly the chief economist of the World Bank.

The greater emphasis on the domestic Chinese market is part of a new term — “dual circulation” — that has emerged as leaders deliberate on the next five-year development plan set to kick off in 2021. The economic plan will be the 14th such roadmap for national priorities.

On Monday, state media announced that the Communist Party Central Committee will hold a key meeting in Beijing on the plan from Oct. 26 to 29.

That means the session will end just days before the U.S. presidential election, set for Nov. 3. 

Tensions between China and the U.S. have escalated in the last two years, beginning with trade and spilling over into technology and, to some extent, finance. Many economists predict China will surpass the U.S. as the world’s largest economy in the next several years, when the 14th five-year plan will be in place.

New economic policy terms

The exact definition of “dual circulation” remains vague, but in public discussions it is generally tied to two other terms: “internal circulation” which focuses on boosting China’s domestic market, and “external circulation” which refers to trade with other countries.

Lin and two other government advisors speaking to reporters on Tuesday emphasized how dual circulation and related policies are not a reaction to the shock of short-term factors like the coronavirus, but rather are part of China’s trajectory toward resembling developed countries that rely more on their domestic markets.

Lin said he expects that in the future, China will export more capital and tech-intensive products, versus labor-intensive factory goods, and that the countries which buy these products will benefit more than China.  

The biggest challenge is uncertainty caused by uncontrollable external factors, ranging from natural disasters to protectionism, he said.

China’s response to elevated unknowns

China also faces many challenges at home. The services sector, which the advisors on Tuesday said they expect will account for a greater portion of the economy in the future, remains among the hardest hit by the coronavirus pandemic. 

The Chinese government also made a rare decision not to announce an annual growth target for its economy this year at the National People’s Congress, which was delayed by about two months until May due to the outbreak of Covid-19.

The world’s second-largest economy grew 6.1% in 2019, the slowest pace in nearly three decades. That’s according to official data, whose accuracy is frequently doubted.

On Tuesday, Qiu Baoxing, counsellor of the State Council and a former vice minister of Housing and Urban-Rural Development, cited Nassim Taleb’s books “Black Swan” and “Antifragile” in describing the heightened uncertainty of modern times.

When the world faces more unexpected “black swan” events, China can play an important role in supporting the world, Qiu said, according to a CNBC translation of his Mandarin-language remarks. He pointed to how China’s exports have risen as a result of overseas demand for Chinese medical goods in the wake of the coronavirus pandemic. 

“(Promoting) ‘internal circulation’,” Qiu said, “is for the purpose of building up our own tenacity to respond to the challenges we might encounter.”

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