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    Nine Commentaries on The Communist Party, the Epochtimes
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    Reporters Without Borders said in it’s 2005 special report titled “Xinhua: the world’s biggest propaganda agency”, that “Xinhua remains the voice of the sole party”, “particularly during the SARS epidemic, Xinhua has for last few months been putting out news reports embarrassing to the government, but they are designed to fool the international community, since they are not published in Chinese.”
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Archive for the ‘Investment’ Category

Plenty of reasons to be concerned about China

Posted by Author on December 3, 2010

Barry Ferguson, via Sydney Morning Herald, December 3, 2010-

We need to be aware of the broad sweep of history in the evolution of our foreign investment policy, writes Barry Ferguson.

IN THE past 18 months, concerns have been expressed about China’s increasing interest in Australia. These concerns have resulted from China’s growing involvement in our natural resources, purchases of residential real estate by Chinese nationals in a heated local market, and ultimately from Australia’s growing dependence on the Chinese economy. Read the rest of this entry »

Posted in Africa, Australia, China, Economy, Investment, News, World | Comments Off on Plenty of reasons to be concerned about China

Hong Kong Businesspeople’s Recent Published Magazine Confiscated by Authorities in South China

Posted by Author on September 22, 2010

Radio Free Asia, Sep. 21, 2010-

HONG KONG— Authorities in the southern Chinese boom town of Shenzhen have confiscated the entire first issue of a recently launched magazine which details the dangers of investing in the mainland, according to the publication’s disgruntled co-founder.

Xue Baoren, who has campaigned for the rights of investors in mainland China since a legal dispute with Shenzhen officials over a factory he leased, said the printing operations of Investments and Pitfalls magazine has been moved to his hometown of Hong Kong, where it will be distributed free of charge.

“I had the magazine printed [in May] at a factory in Shenzhen, and then I had planned to have it shipped to Hong Kong,” Xue said. “It was supposed to arrive on Aug. 27 but it was confiscated by the authorities in Shenzhen.” Read the rest of this entry »

Posted in Asia, Business, Businessman, censorship, China, Guangdong, Hong kong, Human Rights, Investment, News, People, Politics, SE China, Shenzhen, Social, Speech, World | Comments Off on Hong Kong Businesspeople’s Recent Published Magazine Confiscated by Authorities in South China

Businesses forced to hand over technology and accept Chinese partners

Posted by Author on August 22, 2010

By He Qinglian, Chinese economist, Via The Epochtimes, Aug. 21, 2010 –

Foreign businessmen in today’s China live in fear. Other businesses smugly observed and waited out the face-off between Google and the Chinese regime, assuming Google had overestimated its clout.

If Western businessmen were smirking at Google’s predicament, the publication of the Chinese regime’s “Several Opinions of the State Council on Further Doing a Good Job in the Utilization of Foreign Investment” wiped that smirk off their collective faces. The gist of the article: “The age of unconditional priority given to foreign investments in China” is now over.

Differing Opinions

Some foreign investors still dream of yesteryear’s privileges, hoping Chinese officials would listen and reconsider. This time they aired their dissatisfaction publicly instead of resorting to private lobbying.

The American Chamber of Commerce (China) and the European Union Chamber of Commerce in China have published reports. These reports show the deep concern from the American and European business community over China’s protectionist policies.

On July 7, The World Bank Group published its 2010 report “Investing Across Borders,” listing China as one of the countries with the greatest limits on foreign investment. In mid-July, a number of international companies publicly criticized China’s commercial climate in a meeting with Premier Wen Jiabao. The companies included Siemens and BASF.

The foreign companies’ chief dissatisfactions falls in three areas.

First, their intellectual property is not protected. New rules force foreign companies to hand over trade secrets and new technologies to their Chinese partners in exchange for a market share.

Second, foreign investment companies, unlike their Chinese counterparts, are treated unequally in state bids.

Third, China has many rules applying to mergers and acquisitions. Foreign companies are required to partner with Chinese businesses, and the split must be 50-50.

Chinese officials, led by Premier Wen Jiabao, have disputed these barriers. Liu Yajun, director of the Department of Foreign Investment Administration of the Chinese Ministry of Commerce, rejected the World Bank’s findings at a press conference.

Minister of Commerce Chen Deming told the U.K.-based Financial Times that China repeatedly lowered the entry barrier for foreign companies since it joined the WTO, and many international companies severely affected by the global financial crisis have found new revenue sources in China…...(more details from The Epochtimes)

Posted in Business, Businessman, China, Company, Economy, Investment, News, People, Politics, Social, World | Comments Off on Businesses forced to hand over technology and accept Chinese partners

Warren Buffett’s likely successor: Chinese Tiananmen protestor, hedge fund manager

Posted by Author on August 1, 2010

By Frank Ahrens, The Washington Post, USA|  July 30, 2010 –

Who will succeed billionaire super-investor Warren Buffett when the 79-year-old Oracle of Omaha finally retires as chairman of his Berkshire Hathaway holding company?

Perhaps no question in global finance has preoccupied investors like this one in recent years.

The answer, at least according to Friday’s Wall Street Journal, appears to be a 44-year-old Chinese hedge fund manager who participated in the deadly Tiananmen Square protests 20 years ago named Li Lu.

Li was taken from his parents in China when they were sent through Mao’s brutal Cultural Revolution re-education process, which set China back decades and was responsible for more than 1 million deaths.

He became a student activist and took part in the Tianamen Square resistance, in which as many as 7,000 Chinese were killed by their own government, according to NATO intelligence.

Afterward, Li left for France and later came to the United States, where he was hailed as a human rights hero. He gained admission to Columbia University, despite speaking little English, and earned degrees in economics, law and business.

He saw Buffett speak at Columbia in 1993 and became inspired to start trading stocks, which led to a Wall Street job. By 1997, he had set up his first hedge fund.

Li got to know Buffett via one of his human-rights contacts — Jane Olsen, wife of a Berkshire director. In 2003, Li met Charlie Munger, Buffett’s right hand man and, according to the Journal, “made an immediate impression.” Li began investing for Munger and, in 2002, discovered BYD, a Chinese maker of lithium batteries, which power everything from iPhones to the new Volt electric car.

Li, Buffett and Berkshire bought into BYD, and Berkshire’s $230 million investment is now worth $1.5 billion.

That said, the Journal points out, BYD is Li’s one big home run, which sort of makes him the Alan Dershowitz/Bucky Dent of investing. The rest of Li’s ideas have been singles and doubles.

But Li thinks like Buffett: Buy stocks in companies you believe in and understand, and hold onto them. Berkshire Hathaway/Buffett own or own stakes in Geico, Coca-Cola, Burlington Northern Santa Fe railroad, Dairy Queen, Mars candy, and others.

Picking a Chinese investor makes perfect sense for Buffett, who knows where the future is and who is, for all his pro-America proselytizing, intensely pragmatic. Even though Li does not have unlimited travel in communist China, he knows China; Buffett knows China is key to the world’s economic future; and the Chinese government may change.

Disclosure: Buffett is a director of The Washington Post Co.

The Washington Post

Posted in Beijing, Business, China, Economy, Incident, Investment, News, Overseas Chinese, People, Politics, Social, Tiananmen, World | 1 Comment »

Legislative reports confirm ECFA with China risks for Taiwan

Posted by Author on July 29, 2010

The Taiwan News, July 29, 2010 –

The substantive risks to Taiwan’s national security, economic autonomy and democratic health posed by the controversial “Cross-Strait Economic Cooperation Framework Agreement” with the authoritarian People’s Republic of China have been confirmed by reports drafted by the legal affairs and budget research departments of the Legislative Yuan.

Although the drafts have not yet been finalized, the nine reports are based on substantive research and investigation tours in both Hong Kong and Macau to examine the impact of the “closer economic partnership agreements” (CEPA) signed between the two PRC “special administrative regions” and the Beijing central government.

The preliminary results of the Legislative studies conflict sharply with the incessant attempts by President Ma Ying-jeou and numerous senior officials of his rightist Chinese Nationalist Party (Kuomintang) government to paint opposition to ECFA as “alarmist” or “ideological.”

Among the topics reviewed are the impact of the CEPA on social equity and employment, the economic impact of the revaluation of the renminbi, PRC economic policy toward Taiwan in the wake of the ECFA signing, the termination and conflict resolution mechanisms in ECFA, the economic impact of regional trade agreements focused on the ECFA, issues concerning the FTA between the PRC and the Association of Southeast Asian Nations, the question of rules of original production in regional trade agreements, the experience of Hong Kong and Macau in permitting Chinese students to study in the two SARs and the influence of the CEPAs on news freedom.

The existence of this study indicates that the leadership of the Legislative Yuan was preparing for a detailed and substantive review of the ECFA and was not planning to simply immediately refer the draft pact and four associated sets of legal revisions for immediate second reading, a decision that excluded article by article review and discussion in legislative committee.

The release of this report before July 9 could well have raised sufficient public concern to stymie the ramming of the referral of the ECFA package to a second reading over the physical objections of opposition Democratic Progressive Party lawmakers, especially since its contents confirm that the issues raised by DPP Chairwoman Tsai Ing-wen and numerous economists were valid.

Warnings for the future

For example, unlike the Ma government, the Legislative Yuan report clearly warned that PRC leaders have historically displayed strategic “consistency” and “continuity” and acknowledged that Beijing defines the ECFA as a pact signed “under the one-China principle” and that the touted benefits in “international space” and “economic cooperation” are offered “under the precondition of the ‘one China principle.”‘

Moreover, the Legislative report cautioned that the PRC could adopt a negotiating strategy of “initially making concessions and then using such “benefits” to compel Taiwan to accept political negotiations” and use a possible “peace agreement” as an “peaceful unification framework agreement.”

However, unlike the Ma government, the Legislative report acknowledged that there were grave risks for Taiwan of falling into a ‘one China’ trap”‘ as political factors manifest an “invisible catalyst effect” and consolidate the PRC’s leadership advantage in promoting a substantive “one country, two systems” and creating the international impression that “Taiwan and the mainland have indivisible sovereignty.”

Ironically, PRC officials have already fulfilled the prediction by the Legislative Yuan report that Beijing would “uphold the one China principle” even with “more flexibility in interpretation” as shown by the affirmation by PRC Deputy Commerce Minister Gao Hucheng Monday that the ECFA was signed under the “one China principle” and that the PRC government continued to oppose any FTAs between Taiwan and any other country.

In sum, the reports by the legal affairs and budget offices of the Legislative Yuan confirm that concerns over the negotiation and structuring of the ECFA and its future economic, social, political and cultural implications and potential impact on Taiwan’s national security, sovereignty and democratic system (including news freedom) are absolutely not “alarmist” but should have been earmarked for consideration in the process of the negotiating strategy and the structuring of the ECFA…….(more details from The Taiwan News)

Posted in Asia, Business, China, Economy, Investment, News, Politics, Social, Taiwan, Trade, World | Comments Off on Legislative reports confirm ECFA with China risks for Taiwan

A week after US’ announcement of trade sanctions, North Korea Sign Agreement with China for Economic, Technological Cooperation

Posted by Author on July 29, 2010

Bloomberg News – Jul 29, 2010 –

North Korea signed an economic and technical cooperation agreement with China today, a week after U.S. Secretary of State Hillary Clinton announced further trade sanctions to halt the regime’s nuclear-weapons program.

Liu Hongcai, the Chinese ambassador to North Korea, and Ri Ryong Nam, the nation’s Minister of Foreign Trade, signed the agreement during a ceremony held in Pyongyang, according to the state-run Korean Central News Agency. It didn’t elaborate.

Clinton announced sanctions that target government officials and the foreign banks that help sustain the North’s weapons industry during a visit to Seoul last week. The U.S. has backed South Korean claims that the North torpedoed one of its ships and has been pressing for an international effort to put more pressure on Kim Jong Il’s regime.

China has so far refused to condemn North Korea for the attack on the Cheonan, which killed 46 South Korean sailors. China accounted for 79 percent of the North’s 2009 international trade, according to the Seoul-based Korea Trade-Investment Promotion Agency. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a July 2009 report by the New York-based Council on Foreign Relations.

China’s Foreign Ministry had no knowledge of the agreement and the Commerce Ministry didn’t immediately respond to a fax seeking comments.

The Bloomberg

Posted in Asia, China, Economy, Investment, News, Politics, Social, Trade, USA, World | 1 Comment »

Wealthy Chinese flock to the West

Posted by Author on July 27, 2010

By Chris Hogg, BBC Shanghai Correspondent, July 27, 2010 –

Growing numbers of rich Chinese are applying for permanent residency in western countries under programmes that allow investors with a high net worth to “buy” citizenship.

The number of Chinese investors granted permanent residency in Canada has doubled in two years.

Ottowa has now halted all applications to its federal immigrant investor programme while it consults on plans to double the funds needed to obtain a visa.

Applicants are still allowed to apply to a scheme run by the province of Quebec, however.

And at seminars run by visa consultancy firms in China, advisors are encouraging people to apply for the scheme before Quebec also doubles its minimum requirements to match the federal government’s proposals.

Cash and experience

On a rainy Saturday afternoon, in a conference room at a five star Shanghai hotel, more than 30 potential “investor applicants” arrive to hear how they might be able to exchange their cash for a foreign passport.

Many are in their 30s. There are several young couples. Most are professionals. Few are dressed smartly. They appear to be a pretty average cross-section of Shanghai’s moneyed middle class.

They are shown a video that the visa company has made to promote Canada, and the country’s visa application service.

“You don’t have to worry about integrating,” the video’s commentary declares. “You don’t even need to speak English.”

Then the advisors go through the detail.

The Quebec scheme requires applicants to show they have a net worth of C$800,000 (US$776,000; £502,000) and they must invest up to C$400,000.

They also need to show they have had two years experience in management.

Different requirements
That’s considerably cheaper, they point out, than the UK, which requires investors to invest £1m ($1.5m) for five years.

There are pros and cons of each of the countries’ schemes.

Canada’s applications currently take about two and a half years, but the financial requirements are the lowest in the world.

The United States requires applicants to invest up to $1million (£646,000) in a business that creates at least 10 new jobs. Applications take up to one and a half years.

The UK’s application process is the quickest. It can be completed in just three months, according to the visa consultants at the seminar, and there is no interview.

But it is also the most costly.

“Usually, the applicants are business owners or senior managers,” explains Vincent Chen, senior consultant for the Visa Consulting Group.

“The average age is 40 to 45, but it’s getting younger.”…… (more details from BBC News)

Posted in Business, Businessman, China, Economy, Investment, Life, News, People, Social, World | Comments Off on Wealthy Chinese flock to the West

Foreign Companies Shy Away From China

Posted by Author on July 27, 2010

Oxford Analytica, 07.27.10 –

Foreign companies are becoming more concerned by what they see as barriers to market entry and unfair treatment in China. Furthermore, in a departure from past practice, prominent corporate figures have been making their criticisms known publicly. In the Financial Times China’s Minister of Commerce Chen Deming characterized China as a market that has become increasingly open, remains attractive to foreign investors, and is responsive to foreign concerns and good for the global economy.

Domestic markets. As the era of manufacturing in China for export by multinational companies is coming to a close, and manufacturing in China for Chinese consumers is the growing incentive to be there. However, corporate executives are becoming increasingly concerned by what they say are barriers preventing their entry into the market.

Outspoken critics. General Electric (GE) CEO Jeffrey Immelt reportedly expressed concerns about China and uncertainty as to whether China wanted companies to be successful earlier this month. Immelt later expressed doubts about whether he had spoken as bluntly as reported, thereby triggering a media flurry within and outside China. Indeed, foreign businesses usually avoid talking openly about problems they have in China; backroom negotiation is preferred and press attention typically not welcome. However, Jurgen Hambrecht, chairman of BASF, and Peter Loescher, chief executive of Siemens, went further in breaking the unspoken rule when they met Premier Wen Jiabao, alongside German Chancellor Angela Merkel, on July 19. It is highly unusual for foreign visitors to criticize Beijing’s policies in front of senior Chinese leaders on a public occasion, yet both complained about the need to transfer technology to Chinese partners for deals to go ahead, obstructions put up against them in getting access to the Chinese domestic market, and intellectual property violations.

Response. China’s official news service, Xinhua, was quick to respond. On July 20 it highlighted that, contrary to negative assessments about China’s business environment, foreign direct investment (FDI) in China had jumped by 19.6% year-on-year in the first half. It noted how much promise Chinese companies saw in the ‘consumption boom’ China offered.

Less favorable regime. Part of the issue is that China has slowly reduced its favorable treatment for FDI, with tax breaks and other perks now largely phased out. While they still want foreign investment, provinces are becoming much more picky about the kind of investment on offer, and they have fewer policy tools to encourage investors to come.

Changed game. Furthermore, the game is changing. Investment has transformed regions such as Guangdong and Fujian into the world’s largest suppliers of items such as microwaves, electronic goods and toys. Labor disputes this year are the latest reminder of pressures that are pushing costs up, and there no longer appears to be the limitless pool of cheap labor that there once was. This has had a knock-on effect on prices.

Foreign manufacturers have also had to deal with the tougher employment regulations in the Contract Law of early 2008. Companies are caught in a quandary:

–China is no longer the cheap manufacturing base it used to be; but

–there is no easy alternative destination boasting factories on such a scale and good links to the international supply chain.

(By the Forbes)

Posted in Business, China, Company, Economy, Investment, News, Politics, Social, World | Comments Off on Foreign Companies Shy Away From China

Two German Business Chiefs Criticize China

Posted by Author on July 20, 2010

By Andrew Willis, via The Business Week, July 19, 2010 –

Two of Germany’s leading industrialists publicly attacked China’s business environment during a meeting with the country’s premier, Wen Jiabao, over the weekend (17 July).

Jürgen Hambrecht, chairman of giant chemical company BASF (BASFY), and Peter Löscher, chief executive of industrial conglomerate Siemens (SI), added their voices to a growing clamour of criticism against Chinese rules that are seen as disadvantaging foreign firms.

Mr Hambrecht said foreign companies are frequently forced to transfer business and technological “know-how” to Chinese companies in exchange for market access.

“That does not exactly correspond to our views of a partnership,” he told Mr Wen at the roundtable discussion in the northwestern Chinese city of Xian, according to German journalists who attended the meeting.

The strong statements are particularly noteworthy due to their public nature and delivery during a meeting also attended by German Chancellor Angela Merkel, in China as part of a four-day state visit.

Mr Löscher voiced widespread complaints about draft Chinese public procurement rules which are intended to support “indigenous innovation,” a policy foreign companies fear could shut them out of lucrative government contracts.

The Siemens boss also called on China to remove investment restrictions in certain sectors, reported German daily Handelsblatt. At present, foreign companies can be required to form joint ventures with Chinese companies when setting up shop in China, as exemplified by the Shanghai Volkswagen Automotive company.

Mr Wen reportedly responded to the criticism by telling Mr Hambrecht to calm down, insisting that China remained committed to opening its economy. “Currently there is an allegation that China’s investment environment is worsening. I think it is untrue,” Mr Wen said.

But the comments from two of Europe’s leading industrialists come on top of a recent survey by the EU’s chamber of commerce in China which showed that foreign executives hold an increasingly gloomy outlook regarding China’s regulatory setup.

The increasing fears of discrimination led the EU chamber’s president Jacques de Boisseson to suggest firms may even consider pulling out of China altogether.

“Nobody should take for granted that European companies will continue investing whatever the business environment,” said Mr De Boisseson.

The Business Week

Posted in Business, Businessman, China, Company, Europe, Germany, Investment, News, People, Politics, products, Social, Trade, World | Comments Off on Two German Business Chiefs Criticize China

Investors Run Into Trouble With China Deals

Posted by Author on July 13, 2010

By Ellen Sheng, Via The Wall Street Journal, July 12, 2010-

Investors are posting losses on a number of private investments in Chinese companies, as projections that seemed like sure winners three or four years ago run into trouble.

These investors purchased bonds and bonds convertible into stock ahead of expected initial public offerings and rich stock-market valuations.

The market for private offerings of high-risk, high-yield debt and convertible bonds in Asia took off in 2006 and 2007, backed by strong demand from hedge funds. Deal watchers say the reasons behind the stumbles vary, but together they show that investments in China and other parts of Asia might be riskier than default figures suggest.

Losses can be tough to track because many such deals aren’t reported and involve investors that generally keep their cards close to their vests, such as hedge funds and private-equity firms.

Liquidator firm Borrelli Walsh says more than half of 11 Chinese companies listed in Singapore that sold convertible bonds from 2005 to 2008 are now unable to repay their debts. Their ranks include China Milk Products Group, Delong Holdings and Celestial NutriFoods, which have all disclosed their problems to Singapore Exchange officials.

The troubled companies together issued at least $700 million in convertible debt, according to Dealogic.

Investors aren’t willing to convert bonds into stock because the current share price is below the conversion price for the bonds and would saddle them with a loss. Some of those companies are involved in payment talks with bondholders.

Another example is China Sun Bio-Chem Technology Group, which was delisted by the Singapore Exchange this year after PricewaterhouseCoopers couldn’t verify the existence of bank and trade-receivable balances totaling 929 million yuan (about $137 million at current exchange rates). The company has since been trying to repay investors in its $100 million convertible bond, which was handled by J.P. Morgan Chase in 2006…….(more details from The Wall Street Journal)

Posted in Business, China, Economy, Investment, News, Stock, World | 1 Comment »

China’s stimulus spending created infrastructure projects– that may not be needed

Posted by Author on June 23, 2010

By Keith B. Richburg, Washington Post Staff Writer, Friday, June 18, 2010 –

— In late 2008, with the financial crisis rippling through the global economy, China’s leaders embarked on a two-year, $586 billion spending program to try to stave off a recession and keep the Chinese economy growing.

Unlike in the United States — where President Obama’s large stimulus plan became the subject of protracted congressional wrangling and was shaped to include tax cuts and aid to states — Chinese leaders followed a simple mandate: Spend and build.

Forget the tax cuts; in China, it was infrastructure, infrastructure and more infrastructure.

China was already awash in big-ticket construction projects. The stimulus allowed China to speed up some projects, begin digging on others and extend the building boom to less-developed areas in the country’s west and north. The result, 18 months after the stimulus was introduced, is an astonishing frenzy of building — highways, subways, airports, bridges, high-speed rail lines and even new cities constructed, literally, in the middle of nowhere.

China is building tens of thousands of miles of expressways at a pace unseen since the U.S. interstate boom in the 1950s, and it is on track to pass the United States in total highways in the next decade. Among other infrastructure projects — which now amount to 15 percent of China’s gross domestic product — are nearly 100 new airports, some serving isolated cities few outsiders have heard of, and dozens of subways.

“They basically got started about three months earlier than we did, and it was bigger,” said Nicholas R. Lardy, an expert on the Chinese economy with the Peterson Institute for International Economics.

Now a year and a half into the spending spree, and with the stimulus set to end in just six months, many economists and others here are asking pointed questions: Does China really need all this infrastructure? And what’s going to happen when the bills come due?

“In China, we have an old saying: ‘If it’s medicine, it will have some poison inside,’ ” said Guo Tianyong, director of research for the Central University of Finance and Economics. “So the stimulus must have some bad effects.”

“You see little counties building airports — how many people will fly there?” Guo said. “Small cities — why do they need a subway? Maybe there’s no market for all this infrastructure.”

Several economists said it was difficult to determine the worth of all the spending because there is no official, centralized list of projects — making it difficult to untangle whether projects are funded from stimulus loans, from local governments floating bonds or from some combination of the two.

“It’s a black box financed by black laws,” said Xu Xiaonian, an economics professor with the China Europe International Business School. “There’s not enough information to make any sensible judgment.”

But enough is known for economists to point to a crucial difference between the Chinese and American stimulus plans.

In the United States, the $787 billion stimulus was financed by the federal government running large deficits. In China — where the size of the stimulus as a percentage of the economy is several times that of the U.S. package — most of the spending came from the country’s state-run banks making loans to local government entities. The provincial and municipal governments are largely restricted from borrowing money, so most set up quasi-independent “investment companies” that took out huge loans to build subways, airports and office towers…….(more details from The Washington Post)

Posted in China, Economy, GDP, Investment, News, Politics, Social, World | Comments Off on China’s stimulus spending created infrastructure projects– that may not be needed

Foxconn symbolizes China economy’s wider structural problems and industrial unrest (2)

Posted by Author on June 2, 2010

By Craig Stephen, The Market Watch, May 31, 2010 –

<< Previous

(China’s wider problems)

While Shenzhen was set up as China’s first Special Economic Zone thirty years ago, media reports describe Foxconn’s operations there as operating something like an independent kingdom with officialdom rarely regulating it. Given that the company reportedly provides more than 10 billion yuan ($1.46 billion) in taxes annually to the city’s coffers, it’s understandable if there is a hands-off approach.

Arguably Foxconn symbolizes wider structural problems in China’s economy: It’s unbalanced and overly focused on exports and investment spending, and lacks domestic-led consumption.

At the root of weak consumption is low wages. According to a survey released by the All China Federation of Trade Unionists (ACFTU) last week, almost one-quarter of Chinese employees had not seen a salary rise in the past five years. The workers at Foxconn got a base monthly salary of 950 yuan, which is in line with the minimum wage set by Guangdong government — although a 20% pay rise was announced on Friday.

The low level of wages is also borne out by looking at the make-up of China’s gross domestic product, where the share of company profits is rising and wages shrinking.

According to the ACFTU the proportion of China’s GDP that goes towards wages and salaries has continued to shrink since 1983, having dropped from 65.5% in 1983 to 36.7% in 2005. Meanwhile the proportion of returns on capital in GDP had risen by 20% in the 27 years through 2005.

This may be good news for equity investors in the short run, but it hardly looks like a sustainable model of development.

The Foxconn controversy also came in a week when workers in Honda’s (HMC 30.40, +0.36, +1.21%) (JP:7267 2,764, -6.00, -0.22%) four mainland factories were shut after parts makers went on strike seeking a pay rise, paralyzing the Japanese auto maker’s production.

The risk is that Foxconn is just the tip of the iceberg, and China could be entering a new phase of industrial unrest. Other imbalances in China’s economy, such as feel-bad rising prices of food and housing, are exacerbating tensions.

We should acknowledge not all factories are bad stories. Huawei, China’s largest telecom equipment vendor, is also based in Shenzhen, and is held up as model operator with its impressive, campus-like facilities. Making modern telecom equipment is more sophisticated than assembling mobile phones, of course.

The mainland authorities, manufacturing companies and international brands face a difficult challenge to quell labor unrest and better share the spoils of China’s growth.

Dealing with the cause — better pay and conditions — looks to be a better start than simply asking workers not to jump. (END)

The Market Watch

Foxconn symbolizes China economy’s wider structural problems and industrial unrest (1)

Posted in Business, China, Commentary, Company, Economy, GDP, Investment, News, Opinion, Politics, products, Social, Trade, World | 1 Comment »

Foxconn symbolizes China economy’s wider structural problems and industrial unrest (1)

Posted by Author on June 2, 2010

By Craig Stephen, The Market Watch, May 31, 2010 –

HONG KONG (MarketWatch)When employees are asked to sign a pledge not to kill themselves (later retracted) and safety nets outside dormitories are erected to prevent suicide jumpers, something is badly wrong.

And this is not a Second World War concentration camp we’re talking about — rather, it’s a factory making some of the coolest brand-name gadgets in the twenty-first century.

The spate of suicides at Foxconn’s  (HK:2038 5.77, -0.08, -1.37%) mammoth industrial complex in Shenzhen, China has everyone looking to attribute blame, from the Taiwanese owner Hon Hai Precision Industry (HNHPF 8.39, -0.11, -1.26%) to the global brands such as Dell (DELL 13.11, +0.02, +0.15%) , Apple (AAPL 261.80, +0.97, +0.37%) and Nokia (NOK 10.10, +0.08, +0.80%) , which outsource their assembly there.

There is plenty of shame to go round. All have gone along with China’s economic model proscribed by the one-party state and the apparent productivity miracle. Economists generally like to describe the unbalanced growth or structural imbalances in China’s economy. Could it be much worse, and is the world’s factory workshop rotten at its core?

When I first visited Shenzhen a good sixteen years ago it was grey and drab with a few cars on the streets. Begging children clamped themselves to my legs to stop me walking.

Today, its population has soared to 17 million and its downtown roads are packed with cars and sport utility vehicles, while its hotels and shopping malls can match anything in Hong Kong.

But if you are a migrant factory worker living in a cramped dormitory, you are likely to have missed this progress. Migrants are locked out from enjoying health, education and housing benefits available to Shenzhen residents.

Foxconn stands out as the largest factory complex, with over 300,000 living and working in a city within a city. I doubt Mercer ranked this destination on its global quality of life index.

China’s wider problems

The dozen worker suicides this year have become a public relations nightmare not just for Foxconn and its clients, but also for the mainland government which sets the rules. Beijing would much rather see the spectacle of its glitzy Shanghai expo in the headlines instead of the international media focusing on the ugly underbelly of its economy.

When former Paramount leader Deng Xiaoping opened up socialist China to capitalism, he tried to juggle the contradictions with a new path, famously saying, “Poverty is not socialism. To be rich is glorious.” He also added: “Let some people get rich first.”

Eighteen years after Deng’s famous South China inspection tour, if he were alive today, he would surely recognize something has gone wrong. (to be cont’d)

Posted in Business, China, Commentary, Company, Economy, GDP, Investment, News, Opinion, Politics, products, Trade, World | 1 Comment »

9-day strike at all 4 Honda China factories– Labor Unrest May Signal New Phase in China Economy

Posted by Author on June 1, 2010

By KEITH BRADSHER, The New York Times, May 29, 2010 –

FOSHAN, China — Add another entry to the list of worries for the global economy and financial markets: labor unrest in China.

Rapidly rising industrial wages are beginning to allow China’s workers to share in their country’s rising prosperity. The question is whether these gains can be maintained and even increased without disrupting supply lines to companies around the world, and without discouraging much future investment by Chinese and global companies alike.

The biggest eye-opener for multinationals in China recently has been a nine-day-old strike at a sprawling Honda transmission factory here in Foshan, about 100 miles northwest of Hong Kong.

The strike, which has forced Honda to suspend production at all four of its joint venture assembly plants in China, has shown that Chinese authorities are willing to tolerate work stoppages at least temporarily, even at high-tech operations on which many other factories depend.

Chinese policy makers are trying to let wages rise to create the foundations of an economy driven by domestic demand, without derailing the export machine that has produced the world’s strongest economic growth over the last three decades.

Even before the strike, manufacturers and buyers of low-cost products were already actively seeking alternatives to China, like Vietnam and Cambodia, said Richard Vuylsteke, the president of the American Chamber of Commerce in Hong Kong.

“They’re looking very seriously, and we’re seeing that in apparel and footwear,” he said. “A lot of our members are seeing appreciating wages.”

Honda has been making increasingly generous offers — or perhaps desperate offers — to settle the strike. The company has already offered increases in total compensation of close to 50 percent, according to crumpled-up copies of the offer provided by striking workers.

Roughly half of the 1,900 workers are recent hires from high schools and vocational schools who are paid training rates of just 900 renminbi, or $132, a month, pay slips showed. More experienced workers at the three-year-old factory earn up to 1,500 renminbi, or $220, a month.

Honda’s offer would raise total compensation for trainees to $202 a month, including benefits like a new food allowance; older workers would get slightly smaller raises. The strikers rejected the offer because nearly half of the raises consisted of increases in benefits that might be revoked later. The strikers are demanding an extra 800 renminbi a month, or $117, all in cash.

Takayuki Fujii, a Beijing-based spokesman for Honda, said Saturday evening that negotiations were continuing, but he declined to provide details……. (more detals from The New York Times)

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Australians fear of China’s military threat, prompting record support for the US alliance: survey

Posted by Author on May 31, 2010

By Ian McPhedran, The Courier-Mail, Australia, May 31, 2010 –

ALMOST half of Australians believe that China will become a military threat to Australia within 20 years, prompting record support for the US alliance.

According to the 2010 Lowy Institute foreign policy poll, 46 per cent of people think China will be a threat, with 19 per cent of them rating the possibility as “very likely”.

And 55 per cent of the 1001 people surveyed named China as the world’s top economic power, compared with 32 per cent for the United States.

The reality is that China is Australia’s number one trading partner, but its economy rates number four, behind the EU, US and Japan.

While 73 per cent of people regard China’s growth as good for Australia, 57 per cent said the Government had allowed too much investment from China, and 69 per cent said China’s aim was to dominate Asia.

Of those surveyed, 55 per cent wanted Australia to join with other countries to limit China’s influence.

While Australians saw America’s economic power as waning, they were still strongly supportive (86 per cent) of the Anzus Treaty and a military alliance with Uncle Sam. That was up from 63 per cent just three years ago.

Lowy Poll Project director Fergus Hanson said the results showed people were positive about China’s economic growth but fearful of its military aims.

“The two sides of the China relationship play in to the rising support for the US alliance that is evident in the poll,” Mr Hanson said……. (more details from The Courier-Mail)

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Brutal reminder of the risks faced by foreign equity firms that invest in China

Posted by Author on May 12, 2010

By Sundeep Tucker in Hong Kong, The Financial Times, May 12 2010 –

Foreign private equity firms
salivate at the prospects offered by the Chinese growth story. But restrictive regulations and unwilling sellers mean the country has largely resisted the buy-out kings, forcing them to focus on minority investments instead.

However, the disclosure on Wednesday of another corporate spat within Gome, the country’s biggest electrical appliances retailer, will serve as a brutal reminder of the risks faced by foreign groups that invest in China.

Gome was founded by Huang Guangyu, once China’s richest man, who was arrested and detained in 2008 for alleged corporate crimes and has been held incommunicado ever since.

Mr Huang remains its largest shareholder with a 34 per cent stake and his disappearance rocked the company, sending its Hong Kong-listed shares tumbling. Gome searched for an outside investor to help steady the ship, and last summer Bain Capital agreed a $418m strategic investment, in the form of convertible bonds, which gave it three board seats.

The US private equity firm was convinced it could turn round sales and saw it as a rare opportunity to buy an attractive strategic stake in one of China’s leading consumer companies.

The investment was fraught with risk, given that nobody could ascertain whether Mr Huang was happy with Bain’s involvement. Jonathan Zhu, head of China for Bain, brushed aside fears. “There are always risks in investing, and we are reasonably satisfied that the risk/reward outlook in the current scenario justifies this investment,” he said.

Mr Zhu has this week seen Mr Huang, seemingly through affiliates, use his shareholding to vote against the re-election of Bain’s three board directors. But the company re-appointed them immediately.

“This is exactly why several other private equity firms walked away from this [Gome] deal,” said one Hong Kong investment banker familiar with the sale discussions.

“How can you commit to a company where the major shareholder might be against you?”

Many of China’s fastest-growing companies are privately-owned, and founder entrepreneurs are often reluctant to share power with overseas investors. The ability of foreign private equity to exert influence on corporate strategy can be severely limited……. (more details from The Financial Times)

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The devil is in the details – long-term consequences of China’s investment in Taiwan

Posted by Author on April 2, 2010

EDITORIAL, The Taipei Times, Apr. 2, 2010-

As Taiwan and China engage in the second round of negotiations on a proposed economic cooperation framework agreement (ECFA), it might be worthwhile to look at the long-term consequences of increasing Chinese investment in Taiwan.

Earlier this week, this paper referred to a recent report about possible People’s Republic of China (PRC) funding and involvement in the consortium of Hong Kong-based firms that has sought to acquire Nan Shan Financial Life Insurance Co. Earlier this month, financial regulators said they still had more than 40 unanswered questions about the application by one of the principal investors, China Strategic.

Nan Shan is the nation’s second-largest life insurer, with more than 4 million customers. If the Investment Commission approved the acquisition, this would be the largest takeover of a local financial group by foreign buyers in the nation’s history, which explains why regulators and the media have paid special attention to the case. However, Nan Shan is only one among many Taiwanese corporations from numerous sectors that are — or soon will be — coveted by Chinese and/or Hong Kong-based investors.

In the immediate term, attempted investments are already proving problematic. Nan Shan is one example; China Mobile’s attempt to acquire part of Far EasTone Telecommunications Co is another. What hasn’t been explored, however, are the long-term consequences of those acquisitions, even if, in the eyes of financial regulators, the investments are legal. Deals that involve murky and ill-defined consortiums, such as the one for Nan Shan, are especially troublesome. The reason for this stems from the fact that cross-strait investment — and by extension an ECFA — are all based on vague assurances by Beijing that, in the short term, may actually be implemented.

But what happens five, 10 years down the road after those companies have been acquired? What would Taiwan do if, say, the Hong Kong investors involved in the Nan Shan bid were exposed as having been controlled and financed by the PRC, or if Chinese firms, or the government, suddenly took over those Hong Kong investors? It is difficult to imagine that Nan Shan, or Taiwanese authorities, would decide to annul the investment, and next thing you know, Nan Shan would be controlled by Chinese investors and the personal information of more than 4 million Taiwanese made available to Chinese authorities.

What we must bear in mind is that despite laws that limit the share that Chinese investors can own in the Taiwanese financial sector — which prompted Chinese firms to turn to Hong Kong as an investment springboard — it will be next to impossible to ensure that the shareholder structure of those investing firms does not change in China’s favor at some point. In other words, the Chinese government could be using legitimate Hong Kong investors as Trojan Horses — legitimate on paper, but used as a means to an end — to penetrate the Taiwanese market.

Ironically, it is Hong Kong that provides the clearest warning to Taiwanese. In the years prior to handover in 1997, Beijing made a number of vague promises that the rights and welfare of the people of Hong Kong would be preserved. As Hong Kong academic and former legislator Christine Loh (陸恭蕙) wrote recently in her history of the Chinese Communist Party (CCP) in Hong Kong, however, the devil is in the details. Little by little, the people in the special administrative region found that those vague promises foundered on the shores of the core interests of the CCP. Universal suffrage was delayed time and again. Harsh security laws were implemented. Certain liberties were curtailed — all in the name of Beijing’s core interests: stability and one-party rule.

If Taiwanese are not careful, it could happen here.

The Taipei Times

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China New Rules Hurt U.S. Companies: survey

Posted by Author on March 23, 2010

March 22 (Bloomberg) — China’s new rules to encourage home-grown technology are eroding sales at U.S. companies and raising concern these losses may multiply, according to an American Chamber of Commerce survey released today in Beijing.

Twenty-eight percent of 203 members responding to the survey said they are losing business because of the policy. Among technology companies, 37 percent said they are already being hurt and 57 percent predicted they would be disadvantaged in the future.

Foreign companies with operations in China are concerned the rules are discriminatory and may extend beyond the 599 billion yuan ($87.8 billion) government-procurement market to orders from state-owned enterprises, which last year had combined revenue of 22.5 trillion yuan. The chamber represents companies including Microsoft Corp., JPMorgan Chase & Co. and United Technologies Corp.

“Many foreign companies are starting to believe that the future China business opportunity is shrinking,” said James McGregor, a senior counselor in Beijing at APCO Worldwide, a public affairs company. “This indigenous innovation policy seems clearly aimed at forcing foreign technology here so that Chinese companies can tweak it and call it their own.”

The report comes as Mountain View, California-based Google Inc., the owner of the world’s most popular Internet search engine, considers withdrawing from China because of censorship restrictions……. (more details from Bloomberg Via

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China “is a bubble waiting to burst”, Rickards Says

Posted by Author on March 18, 2010

By Bei Hu, Bloomberg via Business Week, Mar. 17, 2010-

March 17 (Bloomberg) — China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP.

The Chinese central bank’s balance sheet resembles that of a hedge fund buying dollars and short-selling the yuan, said Rickards, now the senior managing director for market intelligence at McLean, Virginia-based consulting firm Omnis Inc.

“As I see it, it is the greatest bubble in history with the most massive misallocation of wealth,” Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China “is a bubble waiting to burst.”

Rickards joins hedge fund manager Jim Chanos, Gloom, Boom & Doom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China’s economy. The government has raised banks’ reserve requirements twice this year after economic growth accelerated and property prices rallied.

China has pegged the yuan to the dollar since July 2008 to help exporters weather the global recession. The central bank buys dollars and sells its own currency to prevent the yuan strengthening, driving foreign-exchange reserves to a world- record $2.4 trillion as of December.

The Shanghai Composite Index of stocks jumped 80 percent last year and property prices rose at the fastest pace in almost two years in February, helped by a record 9.59 trillion yuan ($1.4 trillion) of new loans in 2009.

‘Massive Stimulus’

The World Bank indicated today that China should raise interest rates to help contain the risk of a property bubble and allow a stronger yuan to help damp inflation expectations. The nation’s “massive monetary stimulus” risks triggering large asset-price increases, a housing bubble, and bad debts from the financing of local-government projects, Washington-based World Bank said in a quarterly report on China released in Beijing……. (more from BusinessWeek)

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Google says China’s web censorship is a ‘trade issue’

Posted by Author on March 3, 2010

BBC news, Mar. 3, 2010-

Google says state censorship in countries like China should be put on the United States’ trade agenda.

Nicole Wong from Google told the Senate Judiciary Committee that web censorship could favour local companies.

The US is considering to raise China’s censorship with the World Trade Organization, according to Bloomberg.

Google is reviewing its operations in China following hacking attacks that targeted the Google accounts of political activists.

At the start of this year Google said it was no longer willing to censor the Chinese language version of its search engine.

When Google launched in 2006, it agreed to censor some search results – such as the 1989 Tiananmen Square protests, Tibetan independence or religious group Falun Gong – as required by the Chinese government……. (more from BBC News)

Posted in Business, censorship, China, Company, Economy, Google, Internet, Investment, News, Politics, Technology, Trade, USA, World | 1 Comment »

China to put billions of dollars to North Korea to keep Influence

Posted by Author on February 25, 2010

Radio Free Asia, Feb. 25, 2010-

SEOUL— China’s reported plans to invest billions of dollars in North Korea reflect Beijing’s bid to prop up the regime and keep a dominant role in the region rather than to lure Pyongyang back to multilateral talks, analysts say.

A number of state-owned Chinese banks and other companies are close to a deal to invest nearly U.S. $10 billion in North Korean infrastructure, after talks with the official Pyongyang-based Taepung International Investment Group, Seoul’s Yonhap news agency has reported.

The report couldn’t be immediately confirmed.

The investment earmarks funds to build railroads, harbors, and homes in North Korea, the report said, adding that more than 60 percent of the investment would be put up by Chinese banks.

The deal, with North Korea’s State Development Bank, is expected to be signed next month, Yonhap said.

Winston Yang, a China analyst and professor emeritus from Seton Hall University, gave three reasons for the injection of Chinese funds into North Korea.

“The first is that it will increase [Beijing’s] control over North Korea and its influence there. The second is that Beijing fears that Kim Jong Il will fall from power,” Yang said, adding that North Korea’s current economic woes have left millions hungry.

“The third reason is, I believe, that there is a sense in which it goes against the wishes of the United States,” he said.

Yang cited strains in U.S.-China ties stemming from U.S. arms sales to Beijing’s arch-rival Taiwan, a threat from Google to withdraw from China, and a meeting between U.S. President Barack Obama and Tibet’s exiled leader, the Dalai Lama……. (Radio Free Asia)

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10 China Myths for the New Decade- Myth #10: Conclusion

Posted by Author on February 10, 2010

Derek Scissors, Ph.D., Research Fellow in Asia Economic Policy in the Asian Studies Center at The Heritage Foundation, via, January 28, 2010 –

<< Previous

What the U.S. Should Do

* The foundation of the American economy is more conducive to sustained growth than is the foundation of the Chinese economy. To maintain U.S. international leadership, policy must focus on fundamental human, natural, and technological advantages, not supposed benefits of government intervention.[23]
* The Obama Administration has dramatically failed to adopt clear, comprehensive, and open bilateral and multilateral trade policies. These are the best way to help the U.S. economy and secure American influence, especially influence over China.
* Negotiations for market-oriented reform will be extremely difficult with present Chinese leadership. Such negotiations should not focus principally on the exchange rate, which is a secondary concern. The most pressing matter at the moment is cutting into growing Chinese overcapacity.
* Chinese bond purchases are forced by Beijing’s own system and now almost irrelevant to U.S. interest rates. The level of bond purchases should not restrict American policy choices in the slightest.
* Without enforced limits on Chinese emissions, costly American action to limit greenhouse-gas emission will accomplish nothing. To the extent that a policy response to climate change is desirable, Chinese emissions are by a large margin the first priority.


Myths concerning China encourage bad U.S. policy. Exaggerating Chinese prowess and focusing on secondary issues leads to mistakes in general American economic and foreign policy and an incoherent strategy with respect to the PRC. A better-informed view is only the first step in meeting the real challenges, but it is a necessary first step. (END)

Original from The Heritage Foundation

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10 China Myths for the New Decade- Myth #10: carbon emissions

Posted by Author on February 8, 2010

Derek Scissors, Ph.D., Research Fellow in Asia Economic Policy in the Asian Studies Center at The Heritage Foundation, via, January 28, 2010 –

<< Previous

Myth #10: China has an official program to substantially cut its carbon emissions.

Truth: The goal is to cut carbon emissions intensity. Actual emissions will soar in the next decade.

China has not vowed to cut emissions but rather emissions intensity, in this case measured in emissions per unit of GDP. That is, the commitment is to reduce emissions only relative to the size of the economy; if China’s economy continues to grow, so will total emissions. And GDP comes in multiple flavors, with different kinds of inflation adjustments plus adjustments for the currency being used. This leaves a great deal of room to maneuver.

China’s 2005 carbon dioxide emissions, for instance, were approximately 5.43 billion tons, or approximately 2.95 tons of carbon dioxide for every 10,000 yuan of GDP.[22] The pledge is to cut carbon emissions intensity by 40 percent to 45 percent from the 2005 level, which would put emissions intensity near 1.75 tons carbon dioxide per 10,000 yuan of GDP.

From 2000 to 2009, simple GDP in yuan increased about 3.7 times. If that rate of nominal growth continues for the next decade, simple GDP will approach 135 trillion yuan in 2019. Using the target emissions intensity, carbon emissions in 2019 would more than quadruple over 2005, past 23 billion tons.

This is a numerical worst case and it is far more likely that China’s pledge refers to some adjusted version, not simple GDP. But which adjustment?

The difference between the arithmetic change of GDP from year to year and real GDP growth is called the deflator. It is all but impossible to make sense of China’s GDP deflator over time. With 10 years to play with, the Communist Party can announce whatever adjusted GDP it wants. Carbon dioxide emissions are unlikely to quadruple, but they very possibly will double, and Beijing will still be able to claim success in its intensity program.

Amid all the uncertainty, the best bet for the next decade is that the PRC rejects international estimates of its emissions the way it rejects international monitoring now. Beijing will substitute its own measurements, which will have some familiar magical properties. (to be cont’d)

Original from The Heritage Foundation

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