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Yihaodian Consolidates Under Shanghai FTZ Company

Sina Tech, 12/11/13

Chinese B2C online retailer Yihaodian has announced that it has consolidated operation of its open platform B2C e-commerce platform 1Mall into a new company, Niuhai E-Commerce, based in Shanghai's new free trade zone. Niuhai E-Commerce will operate both Yihaodian's 1Mall.com open platform site and its Yihaodian.com self-operated platform. 1Mall accounts will be merged into Yihaodian, and the platforms will be merged under Yihaodian's Yhd.com, the previously announced new domain name for the Yihaodian site. Users visiting 1Mall.com will now be instructed to use Yhd.com.

In August 2012, China's Ministry of Commerce (MOFCOM) approved a transaction by US retail giant Walmart to increase its holdings in Yihaodian from 17.7% to a 51.3% majority stake. Walmart's acquisition had the following stipulations: Yihaodian holding company Niuhai Holdings may not launch a third-party open platform, while Walmart may not pursue telecom value-added services through a variable interest entity (VIE) structure. Following the announcement, Yihaodian split off its existing third-party platform business as 1Mall.com, for operation by Shanghai-based Chuanji E-Commerce. Although Yihaodian.com has featured a link to 1Mall.com, the shopping carts and order systems on the two sites have operated independently of each other.

According to registered company information released by MOFCOM, Niuhai E-Commerce was founded on November 14 in Shanghai's new Free Trade Zone, with RMB 10 mln in registered capital. The company's shareholders are Chuanji E-Commerce and Niuhai Holdings subsidiary Xin Gang Ling, while its main operations include telecom value-added services, online data processing, and online transactions. The equity split between the shareholders is unclear, as is Walmart's role in relation to the new company.

According to an Yihaodian employee, Niuhai E-Commerce will operate the merged Yhd.com and 1Mall platforms. A spokesperson from Yihaodian has announced that Walmart is still the company's major shareholder. Yihaodian has not responded to speculation that the move is intended to allow Walmart to operate the company's platform business, stating only that the recent reshuffling was completed within legal boundaries.

Editor's Note: The Shanghai Municipal Government has stipulated that e-commerce companies operated within the Shanghai Free Trade Zone may not be more than 55% foreign-owned. Within mainland China, MOFCOM has specified that e-commerce websites must apply for ICP licenses, eligibility for which requires that the site operator not be more than 50% foreign-owned.

For more information on this topic, please see "Ministry of Commerce Approves Wal-Mart's Yihaodian Acquisition," MD 8/14/12 and "Update: Wal-Mart Completes Investment in Yihaodian," MD 10/26/12 and "Yihaodian Spins Off 1Mall to Independent Domain," MD 10/01/12 issues.

Keywords: Niuhai E-Commerce e-commerce Internet B2C Ministry of Commerce Wal-Mart Yihaodian open platform Niuhai Chuanji E-Commerce 1Mall corporate restructuring Shanghai Free-Trade Zone

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The information contained in this newsletter is based upon sources that Marbridge Consulting believes to be reliable, and we have made every effort to translate the original articles or article excerpts as faithfully as possible. However, Marbridge Consulting makes no warranty of and assumes no legal responsibility for the accuracy of either the original source material or the English language translations.

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