I have to admit that perhaps I was wrong in my initial skepticism about Beijing's motivations in repeatedly delaying approval for Google's (Nasdaq: GOOG) purchase of Motorola Mobility (NYSE: MMI), speculating that its foot-dragging might have been motivated by political factors. (previous post) But now that the anti-monopoly regulator has finally approved the deal, I feel like I should actually congratulate it for addressing an important concern that was probably the real source of the delays, namely the potential that Google might give Motorola phones preferential treatment for its Android smartphone operating system at the expense of other major handset makers who also rely heavily on the popular OS. The long-awaited approval, which was delaying closure of a $12.5 billion deal first announced last August, finally came after Google agreed to conditions required by the Chinese regulator aimed at making sure that Android remains open and free to everyone, and that Google treats all cellphone makers who chose to use the operating system equally. (English article) I'll be the first to admit that my first reaction to most actions by China's anti-monopoly regulator is one of skepticism, since it has a history of allowing political considerations into its decisions that are largely unrelated to its main mission of ensuring that major M&A deals don't harm market competition. The regulator's bias was on glaring display in 2009, when it vetoed Coca Cola's (NYSE: KU) plan to buy leading domestic juice maker Huiyuan (HKEx: 1886), citing monopolistic concerns even though most observers believed that Beijing simply didn't want to see the promising domestic brand swallowed up by a foreign company. The regulator seemed to be changing its ways last year when it approved the purchase of another promising Chinese brand by a foreign name, in this case allowing Yum Brands (NYSE: YUM), operator of the KFC and Pizza Hut chains, to buy Little Sheep, operator of China's largest hot pot restaurant chain. (previous post) The delays behind this latest approval of Google's purchase of Motorola look like a smart move to me, aimed at addressing the very real concern by many of Android's users that they might lose access to the OS if Google gives preferential treatment to Motorola. The major regulators in the US and Europe were unlikely to focus on this particular concern, since most of the major cellphone makers that use Android are based in Asia, such as Taiwan's HTC (Taipei: 2498) and Korea's Samsung (Seoul: 005930). A growing number of Android users are also in China, most notably Huawei and ZTE (HKEx: 763; Shenzhen: 000063), which are 2 of the world's fastest growing players in the smartphone space. Thus the regulator was clearly addressing very real concerns from these and other domestic smartphone makers about becoming second-class Android citizens after a Google-Motorola merger, hence the regulator's decision to impose its conditions. At the end of the day I'm quite encouraged by this action, and increasingly confident that we'll see more decisions from the regulator based on market concerns rather than political considerations.

Bottom line: China's long-delayed approval of Google's Motorola purchase was due to real anti-competitive concerns, and reflects growing maturity at the Chinese regulator.

Related postings 相关文章:

◙ Huawei-Motorola Rumors Look Logical 华为收购摩托罗拉手机业务传言看似合情合理

◙ Google Tussles With China on Motorola 延迟批准摩托罗拉移动交易 中国政府对谷歌仍心存芥蒂

◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢

Beijing issued a predictably defiant statement late last week after the US announced unusually tough punitive tariffs in an ongoing dispute over what it considers unfair government support for China’s solar panel industry. (English article) Rather than sit back and wait to react in this and other similar disputes, China needs to adopt a more proactive approach by taking steps to address its trading partners’ concerns, which usually involve generous levels of state support for Chinese companies. The latest development in the US-China trade dispute over solar panels came late last week, when the US Department of Commerce recommended punitive tariffs of between 30-250 percent for imported Chinese panels. (previous post) That recommendation surprised many, as just two months earlier the Obama administration had recommended much milder punitive tariffs of 3-5 percent. (previous post) While Beijing remained relatively mute after the March decision, it was quite vocal after higher figures were announced, saying it was displeased by a decision that it said lacked fairness. This kind of reaction is typical of Beijing, which is always happy to issue angry comments whenever someone does something it considers unfair or runs counter to its goals. But this solar dispute didn’t happen overnight, and Beijing has had plenty of time to see last week’s decision coming and take steps to prevent it. The actual spat started almost a year ago, when US politicians opened a hearing into unfair trade after several US panel makers complained that Beijing unfairly subsidized its industry, which now supplies more than half the world’s solar cells, through a wide range of state-support policies, from export rebates to low-interest bank loans. A formal complaint soon followed, with an actual investigation by the US Commerce Department beginning in October – now a full seven months ago. The low punitive tariffs announced in March could be interpreted as a sign that the US was willing to compromise on the matter if China took steps to address some of its concerns. If that was the case, Beijing’s lack of response to that signal perhaps prompted the US to take a harder line. Regardless of US motivations with its tougher tariffs, the fact remains that China’s reactive approach to its trade disputes may have been suitable for its previously closed society but is much less practical as it tries to assume a place on the global stage. If it wants to become a serious player in world politics and the global economy, it needs to take a more proactive approach to settling disagreements, and do so in an open way that lets others know it is taking their concerns seriously.

Bottom line: Beijing needs to become more proactive and make gestures to ease US concerns about unfair subsidies in order to avoid a trade war in the solar panel sector.

Related postings 相关文章:

◙ Solar War Reignites With Big US Tariffs 美国拟对中国太阳能电池高征税

◙ Suntech, Canadian Solar in Latest PR Moves 尚德电力和Canadian Solar就西方倾销顾虑作出回应

◙ Solar Tariffs: US Takes Middle Road 太阳能关税：美国采取折中路线

The following press releases and media reports about Chinese companies were carried on May 19-21. To view a full article or story, click on the link next to the headline.

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◙ Yahoo (Nasdaq: YHOO) Finally Set to Strike Alibaba Share Deal (English article)

◙ Tencent (HKEx: 700) Reorganizes Into 6 Units, Splits Off E-Commerce (Chinese article)

◙ China Cries Foul After US Sets Tariffs on Solar Imports (English article)

◙ NetEase (Nasdaq: NTES) Upgrades Youdao Search Engine (English article)

◙ China Unicom (HKEx: 762) Announces April Subscribers Data (HKEx announcement)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

The latest signs of trouble for China's sputtering car industry are coming from some lower-end auto dealers, who are reporting a rapid build-up in their inventories even as manufacturers keep adding new capacity planned when the sector was booming 2 years ago. The current cycle looks like a classic case of looming oversupply, caused by a sharp jump in demand around 2009 that led manufacturers to invest billions of dollars in new production facilities that are only now coming on stream. Unfortunately for the automakers, the demand that helped to push China past the US to become the world's biggest auto market has now started to stumble as Beijing takes steps to cool the nation's overheated economy. The latest warning sign is coming from China's largest car dealer group, the China Automobile Dealers Association, which is saying that dealers for 3 or China's top domestic auto brands, Geely (HKEx: 175), Chery and BYD (HKEx: 1211), now have more than 45 days worth of inventory in their showrooms. (English article) In addition, Honda's (Tokyo: 7267) China dealerships are reporting similar inventory levels, prompting the Japanese automaker to take the unusual step of closing its China joint venture for 15 days during the recent May Day holiday. The 45-day inventory mark is important because that's the point at which dealers start to worry that they are not selling cars quickly enough, and thus may start to offer vehicles at big discounts in order to reduce their levels. That could potentially spark a round of price wars with other dealers, who will risk seeing their own inventories rise to dangerous levels unless they start selling their cars for big discounts as well. I've previously said that the big domestic auto brands are likely to suffer first in the current slowdown, as they don't have the resources or variety of new models to compete with better-funded joint ventures backed by global heavyweights like Volkswagen (Frankfurt: VOWG) and General Motors (NYSE: GM). The domestic brands also traditionally sell to the very low end of the market, and thus don't really compete with the big global names that tend to focus on the higher end. But recent moves into the lower end of the market by names like GM and Volkswagen could make the pain even worse for the domestic brands, and indeed Geely, BYD and Chery all reported sales declines in the first 3 months of the year. Right now the higher end of the market seems to be more stable than the lower end, meaning the big foreign car makers won't feel the same pain as the domestics for perhaps another year. But look for most of China's big domestic brands to slip into the red in the next 12 months, and perhaps for even 1 or 2 to close or combine with rivals as the industry embarks on a needed consolidation.

Bottom line: Inventory build-ups at car dealerships for BYD, Chery and Geely indicate a price war may soon break out at the lower end of China's car market, pushing many companies into the red.

Related postings 相关文章:

◙ Car Sales: Domestics Down, But Not Out 汽车销量：国产车下降，接近拐点

◙ Jaguar-Chery: Veto Ahead 奇瑞联手捷豹路虎建合资厂料难获批

◙ China Slams the Brakes on Automakers 中国为汽车行业踩刹车

Just when it looked like a trade war had been averted in the important solar energy sector earlier this year, the US Commerce Department has surprised everyone by recommending high punitive tariffs for China's solar panel makers, casting a huge new cloud over this important industry. Chinese solar shares all tanked on the news, with industry leaders Suntech (NYSE: STP), Trina (NYSE: TSL) and Yingli (NYSE: YGE) all tumbling by 5 percent or more after the news came out, re-approaching all-time lows reached late last year at the height of the sector's current downturn due a global supply glut. I have no doubt that this isn't the end of this story, and we're likely to soon hear an angry response from Beijing, which has taken some steps in recent months to try and show it is weaning its solar cell makers from the kinds of government-sponsored subsidies that were the source of the US complaint against a group that now supplies more than half of the world's solar cells. In the latest development in this case, the US Commerce Department has announced that all China-produced solar cells will be subject to punitive tariffs ranging from 31 to 250 percent. (English article) That figure was sharply higher than an earlier indicator, which saw the Obama administration recommend relatively light tariffs of up to 4.7 percent after the Commerce Department first ruled earlier this year that Chinese panel makers did indeed receive unfair subsidies in the form of measures like low-interest loans from state-owned banks and export rebates. (previous post) Based on statements from Suntech and Trina it appears that these newest tariffs are both still preliminary and not final, and that most companies will be subject to the lower end of the range, or about 31 percent. But clearly this story is still not finished. It's hard to say what is going on behind the scenes, as the earlier low tariffs and this latest round of much higher recommendations send clearly different signals. I suspect the earlier lower numbers were designed to send a signal to Beijing that a trade war could be averted if China took steps to reduce its government support for the sector. If that's the case, then perhaps this latest round of recommendations is designed to show Beijing that it needs to move more quickly in weaning its solar companies from state support or risk seeing its companies subjected to these higher tariffs that could seriously hurt development of the global industry. Without access to more information it's difficult to guess intelligently what's really happening here. But having followed this conflict for nearly a year now since it first broke out, I still predict it will eventually be settled in a way that makes everyone somewhat happy, but also forces both sides to make sacrifices. In China's case, the country needs to move more quickly with new high-profile steps to show it is ending its unfair subsidies. If it does that, I could still see the US imposing the previously discussed lower tariffs when it announces its final decision.

Bottom line: The latest twist in the US trade war with China over support for its solar panel makers may be a pressure tactic to make Beijing move more quickly to end unfair subsidies.

Related postings 相关文章:

◙ Suntech, Canadian Solar in Latest PR Moves 尚德电力和Canadian Solar就西方倾销顾虑作出回应

◙ Solar Tariffs: US Takes Middle Road 太阳能关税：美国采取折中路线

◙ New Solar Storm Brews in Europe 欧盟或发起反倾销调查 中国光伏业再蒙阴影

Two of China's money-losing Internet companies to make New York IPOs at the height of an investor frenzy for their shares in 2010 have posted more losses, though e-commerce firm Dangdang (NYSE: DANG) and online video leader Youku (NYSE: YOKU) appear to be moving in different directions in their quest for profits. Let's look at Dangdang first, which was profitable when it first went public, but slipped deeply into the red last year as competition intensified with other names like Jingdong Mall in China's crowded e-commerce market. Dangdang posted its third consecutive quarterly loss in its latest reporting period, losing $15.8 million to be exact. (results announcement) Investors certainly didn't seem to like the news, bidding down Dangdang shares by 16 percent after the numbers came out. But from my perspective, the numbers actually do appear to show that Dangdang may have turned the corner and its situation may be improving, which is good not only for the company but also for the broader e-commerce space where most players are now losing money as they fight for market share. In terms of actual numbers, Dangdang's first-quarter loss was actually an improvement from the previous quarter, when it lost $21 million. Furthermore, the company's gross margins also improved to 14.2 percent from a low of 10.5 percent in the previous quarter, though the figure is still well below the nearly 20 percent figure from a year earlier. It's too early to say if Dangdang is back on the road to profitability, but if it can sustain this latest trend into the current quarter it could actually have a chance of returning to the black by the end of the year. That situation contrasts sharply with Youku, which reported its net loss more than tripled in its latest reporting quarter, even as revenue more than doubled for the period. (results announcement) The cause for the big jump in net loss appears to be ballooning costs, with operating costs up 140 percent while administrative expenses tripled. Rapidly rising costs isn't necessarily a bad thing for a company at Youku's stage of development, but only if that rate of increase is roughly comparable to the revenue growth rate. Ideally, costs should grow more slowly than revenue, showing a company is achieving better margins as it gains bigger scale. But in this case the opposite seems to be true for Youku, with costs growing much more rapidly than revenue. Further clouding the issue, Youku forecast revenue in the current quarter would only rise 90-100 percent, a slowdown from the 111 percent growth rate in the first quarter. Investors also punished Youku stock, which fell 10 percent before the results came out though its shares rebounded slightly in after-hours trading. Youku's problems are only likely to grow as it prepares to merge with rival Tudou (Nasdaq: TUDO), which will bring together 2 very different corporate cultures. All that said, if I were an investor in these companies, I would say the outlook definitely looks much brighter for Dangdang than Youku over the next 12 months.

Bottom line: Dangdang could return to the profit column by the end of this year as e-commerce competition eases, while Youku may have to wait a year or more for its first profits.

Related postings 相关文章:

◙ Rumored Tie-Up to Challenge Youku-Tudou 腾讯、搜狐和百度或结盟 挑战优酷-土豆联姻

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

◙ Tudou, Youku: Stormy Marriage Ahead 优酷土豆“联姻”：想说爱你不容易