Journalist China

Business news from China By Doug Young.
Doug Young, journalist, has lived and worked in China for 20 years, much of that as a journalist, writing about publicly listed Chinese companies.

He is based in Shanghai where, in addition to his role as editor of Young’s China Business Blog, he teaches financial journalism at Fudan University, one of China’s top journalism programs.
He contributes regularly to a wide range of publications in both China and the west, including Forbes, CNN, Seeking Alpha and Reuters, as well as Asia-based publications including the South China Morning Post, Global Times, Shanghai Daily and Shanghai Observer

Latest Group Buying Turmoil Shows Up at 24quan, Meituan

By on

It’s Thanksgiving day in the US, but people in China’s turbulent group buying sector have little to be thankful for, as intense competition appears to have claimed a new victim in the form of a sub-site operated by 24quan. (Chinese article) According to Chinese media reports, the sub-site, called Zhongshan Zhan, has suddenly shut down and its merchants are refusing to honor its coupons. I checked 24quan’s main website (www.24quan.com), and it appears to be still functioning normally, so this report appears a bit unclear about what’s really happening at the parent company. But regardless of the specifics, this latest report, which cites a number of irate customers, reflects the current turmoil afflicting China’s group buying space, where consumer complaints are frequent and companies are bleeding cash. Industry leader LaShou’s pending New York IPO appears to be indefinitely suspended, as the US securities regulator looks into accounting issues (previous post), and there’s no sign that 55tuan, another major player, will be able to make its intended US IPO before the end of this year. (previous post) Another new media report reflecting the current chaos says that a site called Meituan has suddenly started offering all employees who have worked there for 6 months or more stock options. (English article; Chinese article) The company apparently denied the move was related to an upcoming IPO, which doesn’t surprise me. I suspect the move instead means something entirely different, namely that Meituan is worried about its own finances and is using these options as a way to retain employees who might be worried that their company might not survive long enough to make those options worth anything. The report says the options don’t vest until 4 years — which looks like an eternity in the current market. I would honestly be surprised if more than 10 percent of the current crop of group buying companies are still in business 4 years from now, and I’m guessing that Meituan won’t be among that small set that survives the upcoming industry clean-up which should begin in earnest in the next 6 months.

Bottom line: Reports of the shut-down of a unit of one popular group buying site and option awards at another are the latest signs of turmoil, which will result in an industry shake-up very soon.

Related postings 相关文章:

◙ Latest Group Buying Confusion Shows State of Chaos

◙ LaShou Shifts Focus in IPO March 拉手网在上市准备中有意转变战略方向

◙ Lashou Files For IPO, Launching Race With 55tuan 拉手网与窝窝团打响IPO竞争战

 

News Digest: November 25, 2011

By on

The following press releases and media reports about Chinese companies were carried on November 25. To view a full article or story, click on the link next to the headline.

══════════════════════════════════════════════════════

◙ Group Buying Site 24quan Closes, Thousands of Users Refused Service (Chinese article)

◙ Alibaba (HKEx: 1688) Third-Quarter Profit 410 Million Yuan; In Line With Estimates (English article)

◙ Group Buying Site Meituan Issues Options to Employees – Source (English article)

◙ China Workers Strike at Lingerie, IBM (NYSE: IBM) Parts Factories Demanding More Pay (English article)

◙ China Telecom (HKEx: 728) Gets China Rights for iPhone 4S – Source (Chinese article)

Yum’s New China Strategy: Fill Up With Gas, Food

By on

Just weeks after getting regulatory approval for its purchase of leading hot pot chain Little Sheep (HKEx: 968), KFC parent Yum Brands (NYSE: YUM) is making headlines once again for yet another tie-up, this time with Sinopec (HKEx: 386; NYSE: SNP), China’s top oil refiner. (English article) But Yum is less interested Sinopec’s oil refining prowess, and has its eye instead of the company’s 30,000 gas stations located across China, many of which could host new outlets for Yum’s KFC and Pizza Hut stores. I have to say that this strategy looks quite intriguing, as Sinopec’s vast chain of gas stations in China would instantly complement Yum’s own 3,500 KFCs and 560 Pizza Huts throughout the country, providing real estate and other infrastructure that Yum could instantly use to quickly open lots of new stores to boost its already strong position as China’s leading fast-food operator. The strategy looks similar to rival McDonalds’ (NYSE: MCD) launch earlier this year of a major new initiative to open drive-through restaurants, catering to China’s new generation of young, affluent car owners. (previous post) I personally like Yum’s strategy a bit more, as opening outlets in Sinopec stations will give it lots of new locations to choose from, and allow it to quickly build outlets in the ones that it likes. The McDonalds strategy looks a bit more time-consuming, calling on the company to explore locations and then build new restaurants on its own. The big question, of course, is will Chinese consumers want to purchase fried chicken, pizzas and maybe even hot-pots-to-go at the same place that they fill up their car with gas? Honestly speaking I’m not sure what the answer is, as I’ve never seen this concept at gas stations outside China. In the US many gas stations house convenience stores, but it’s far less common to see actual restaurants inside them. That said, I don’t see why the concept won’t work, and would give this latest tie-up between Yum and Sinopec and strong chance of success.

Bottom line: Yum’s new tie-up with Sinopec will allow it to expand its KFC and Pizza Hut business to thousands of Chinese gas stations, tapping China’s new generation of car owners.

Related postings 相关文章:

◙ McDonald’s Revs Up for China Drive-Thru 麦当劳寄望“得来速”汽车餐厅拓宽中国市场

◙ 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

◙ Starbucks Wide Open for China Business with New JV 星巴克在云南建合资厂

Govt’s Microblog Shift Looks Good for Weibo 政府口风转变或有利於新浪微博

By on

It seems like barely a day goes by lately without state media singing the latest praises of microblogging, a development which could bode well for dominant player Weibo but which could also hold risks if Beijing decides this popular form of social networking is too important to leave to organic development in the hands of private developers. Followers of Weibo, often called the Twitter of China, will recall that the platform was the source of criticism by state media for much of the first half of the year, which blamed it for spreading rumors from users who could hide behind cloaks of anonymity. One official even came out as recently as last month and suggested that all microblog users might have to register with their real names, a development that would have sent a huge chill through networks like Weibo and other services operated by names like NetEase (Nasdaq: NTES). (previous post) Fast forward to now, when the tone in the debate has changed quite a bit, following Beijing’s latest  decision that microblogging was a great tool for the government to communicate with the people. Following that shift, major state media gush almost daily about the latest government agencies that have opened accounts on Weibo, and have also taken to reporting the other positive effects of microblogging sites. The lead story on page 1 of today’s China Daily is headlined “Micro blogs open a world of communication”, and a search on the subject on its web page reveals positive stories praising everything from microblogging’s role in fighting organized crime to helping people to find love. No mention seems to be made anymore of rumor mongering and the medium’s ability to create social unrest. Of course all that should be good for Weibo and its struggling parent, Sina (Nasdaq: SINA), whose shares have lost about half their value since June as many of its investments outside its core web portal business have stumbled. All this latest praise from Beijing seems to indicate Weibo won’t be shut down or reined in anytime soon, which should be a relief to Sina. Now it just has to find a way to make money off the platform, and also take care to keep Beijing happy by convincing it of Weibo’s important role in developing a harmonious society.

Bottom line: Beijing’s recent shift in tone marks a positive development for microblogging services like Weibo, which are now being called important communicators rather than rumor mongers.

Related postings 相关文章:

◙ Sina Results: Not So Diversified After All 新浪仍依赖广告,突围遇阻

◙ Weibo Still Faces Crackdown Despite Govt Tie-Up 新浪微博难改“被监管”命运

◙ Sina’s Weibo: Growth Engine or Growing Burden? 新浪微博：动力or负担？

Stumbling CNOOC Replaces Chief Executive 中海油换将李凡荣接棒CEO

By on

Just months after losing its top executive to a rival in one of the period shuffles at the top of China’s major state-run industries, CNOOC (HKEx: 883; NYSE: CEO) is replacing its CEO after two major setbacks that have proven not only embarrassing but also hurt the company’s bottom line. The shuffle, which will see executive director Li Fanrong take over from Yang Hua (English article), comes just a half year after CNOOC saw its former top executive Fu Chengyu, leave the company to take over at the top of Sinopec (HKEx: 386; NYSE: SNP), another of China’s top 3 energy producers. (previous article) This latest move does seem to indicate that top executives at China’s biggest state-run firms, while all clearly appointed by the Communist Party, are being held more accountable for their performance, regardless of their credentials as loyal party members and seasoned bureaucrats. No explanation was given for the change, but industry observers will note that it comes after CNOOC has seen 2 major setbacks in the last few months that have undermined its stock, which is down nearly 30 percent since early June. The first of those, which has been widely reported in the Chinese media, has been a recurrent series of leaks at an oil drilling operation owned by CNOOC and US firm ConocoPhillips (NYSE: COP) in north China’s Bohai Bay, which forced several halts to production and will likely result in a costly clean-up, not to mention huge negative publicity. (previous post) The second more recent setback saw the collapse of CNOOC’s deal to purchase a major asset in Argentina from BP (London: BP) as part of Beijing’s directive for its oil companies to purchase overseas assets to help fuel China’s hungry economy. (English article) I don’t know enough about the people involved in this new shuffle at the top of CNOOC, but the move looks like punishment for Yang for failing to strongly execute corporate strategy, costing the state, as CNOOC’s largest shareholder, lots of money as the company lost nearly a third of its value. Perhaps this move marks the beginning of a more active role by Beijing in switching top executives at the top of its less well-performing state-run giants — a change in approach that would also undoubtedly be welcome by minority shareholders.

Bottom line: A change of CEO at the top of CNOOC may be in response to recent stumbles at the company, and could signal a more activist approach by Beijing in the future.

Related postings 相关文章:

◙ Bohai Spill: A Slippery Mess for CNOOC 中海油的漏油危机

◙ CNOOC’s Latest M&A: A Shaky Oil Sand Castle 中海油收购加国油砂生产商或招来更多麻烦

◙ China’s Oil Shuffle: Not So Fast, Naysayers 石油巨头高管轮换：先别急着唱衰

News Digest: November 24, 2011

By on

The following press releases and media reports about Chinese companies were carried on November 24. To view a full article or story, click on the link next to the headline.

══════════════════════════════════════════════════════

◙ Yum Brands (NYSE: YUM) Signs Deal With Sinopec (HKEx: 386) (English article)

◙ CNOOC (HKEx: 883) Appoints Executive Director Li as Chief Executive as Growth Slows (English article)

◙ Fosun Buys $10.35 Mln Worth of Focus Media (Nasdaq: FMCN) Shares in Open Market (Chinese article)

◙ Yingli Green Energy (NYSE: YGE) Reports Q3 Results (PRNewswire)

◙ ReneSola (NYSE: SOL) Announces Q3 Results (PRNewswire)

Solar Slips Squarely Into the Red 太阳能行业陷入全线亏损

By on

The negative news just keeps coming from the solar sector, where industry leader Suntech (NYSE: STP) reported its second consecutive quarterly loss and Canadian Solar (Nasdaq: CSIQ), one of the few firms that had managed to stay profitable, finally slipped into the loss column as inventories swelled and their margins continued a downward slide. (Suntech announcement; Canadian Solar announcement) It goes without saying that industry laggard LDK Solar (NYSE: LDK) also reported a massive third-quarter loss (company announcement), and all 3 companies predicted more turbulence ahead. The one potential bright spot is plummeting prices for polysilicon, the main raw material used to make their solar cells, which, ironically could someday push solar cell prices down to the point where they become competitive with traditional power sources like coal and oil. Unfortunately, by the time that happens many of these solar cell makers could be out of business. In addition to huge oversupply in the market, the Chinese firms face potential punitive tariffs from the US — one of the solar industry’s top markets — if an ongoing investigation determines they are selling their products at below-market prices. (previous post) The Chinese companies have said they may request their own anti-dumping investigation against Western makers of polysilicon, in a clear tit-for-tat move that certainly won’t help the industry if China implements its own retaliatory punitive tariffs against polysilicon makers. Foreign media are reporting that Chinese solar cell manufacturers are quietly making plans to move some of their production to the United States and other Western markets to avoid potential punitive tariffs, and are also stepping up their efforts to improve technology to make their products more efficient at converting sunlight into electricity. (English article) I still see at least 1 and possibly 2 more painful years ahead for this sector, with at least 2-3 major players likely to either close or be purchased by other companies before the crisis ends. In the meantime, look for the bad news to continue in the fourth quarter and into 2012.

Bottom line: Latest results show the entire solar cell sector has now slipped solidly into the red, with losses likely to continue through most or all of next year.

Related postings 相关文章:

◙ Beijing, Yingli Send Mixed Solar Signals 英利和中国政府似乎“背道而驰”

◙ New Solar Signals: Slowdown Easing Amid Writedowns 太阳能企业减计库存 行业或将开始摆脱危机

◙ Solar Fight Sees Accusations Flying 中美太阳能纠纷引发口水大战

 

Shanda Moves Ahead With Privatization 投资者对盛大私有化仍持保留态度

By on

It seems I may have been wrong when I questioned the sincerity of Chen Tianqiao after he announced a potential bid to privatize his company, Shanda Interactive (Nasdaq: SNDA), as Chen has now gone ahead and actually launched the buyout. (company announcement; Chinese article) Chen put forth the plan last month to buy back his company’s shares for $41.35 each (previous post), and is now keeping his word with this latest offer. Interestingly, Shanda’s shares rose to only $40.28 in Tuesday trading after the announcement, representing a 2.6 percent discount to the offer price, indicating investors still aren’t totally convinced that this privatization will be completed. In fact, Chen has no real intention of keeping his company private for long, as he wants to list it on one of China’s domestic stock exchanges, according to Chinese media reports. I have to admit that this kind of a strategy does seem to make sense, as Shanda is quite well known in China, where it is considered a leader in online games. Furthermore, Shanda’s online game unit, Shanda Games (Nasdaq: GAME) is still listed on the Nasdaq, and the company is also planning a US listing for its online literature unit, Cloudary. (previous post) The only problem with his latest plan is that Chen may have to wait a long time to list his company at home, as China has shown a strong bias against privately-funded firms in choosing IPO candidates for its two main boards in Shanghai and Shenzhen, preferring to list companies with strong government ties, mostly former state-run enterprises. Chen could opt for the 2-year-old Nasdaq-style ChiNext board in Shenzhen targeting smaller, high-growth companies. But that board has turned out to be hugely speculative, with firms that trade there subject to huge swings in their share prices. All that said, if Chen really completes this privatization, it could be a while before we see Shanda Interactive shares publicly traded again. Perhaps in the meantime, Chen could focus on trying to better run his various businesses, including struggling Ku6 Media (Nasdaq: KUTV), and temporarily put aside the deal making that he seems to love so much.

Bottom line: Shanda Interactive appears intent to go through with a privatization bid, but will face a long wait before it can re-list in its home China market.

Related postings 相关文章:

◙ Grentech Follows Shanda in Privatization Ploy 国人通信赴盛大网络後尘宣布私有化

◙ Shanda’s Private Ploy: For Real or Market Manipulation? 盛大拟退市：是动真格还是虚晃一枪？

◙ Boring Games, Video Drain Drag Down Shanda

Short Sellers Target China in Year End Assault 做空抛盘年底将矛头对准在美上市中国企业

By on

The US Thanksgiving holiday is just around the corner, but some top US-listed China firms have little to be thankful for these days, following a round of short-seller attacks against them that have claimed Focus Media (Nasadaq: FMCN) as their latest victim. I do find it a bit strange that the attacks, which seemed to reach a peak during the summer at the height of the confidence crisis against US-listed China firms, have returned now, leading me to suspect that these short sellers are trying to earn some quick bucks before the year ends. This latest round of attacks began 3 weeks ago, when a report by a small brokerage named Citron questioned claims by Internet security firm Qihoo (NYSE: QIHU) about the size of its user base, saying the stock should be valued at about a quarter of its current level at that time. (previous post) Last week, another report took aim at education services firm New Oriental (NYSE: EDU), this time questioning some of the firm’s accounting. (previous post) The latest attack aimed at Focus Media  came from the notorious short selling specialist Muddy Waters, again calling into question some of the company’s claims about the size of its market. (English article)  Focus share plunged 40 percent the day the report came out, while Qihoo and New Oriental shares are both down around 20 percent since the reports attacking them came out. Knowing what I do about Chinese companies, it appears that the short sellers are taking aim at companies that have engaged in somewhat questionable business practices in the past and don’t enjoy the most stellar reputations among their peers, perhaps calling into question their broader credibility and making them more vulnerable to this kind of attack. I won’t get into specifics, but suffice it to say that some of the companies in this latest round of attacks have mounted their own guerrilla-style attacks in the past, and are also known for their fondness for exaggeration. Given that this new wave of attacks does seem to be aimed at making some fast profits at the end of the year, I’d say to look for a few more before 2011 ends, with companies with less-than-stellar reputations especially vulnerable.

Bottom line: The latest round of short selling aimed at US-listed Chinese firms seems to be taking aim at companies with spotty reputations, with more similar attacks likely to come.

Related postings 相关文章:

◙ Report Takes Wind Out of Inflated Qihoo 奇虎遭遇Citron釜底抽薪

◙ Spreadtrum On Cusp of Putting Out Short-Seller Fire 展讯力抗卖空方

◙ Education Getting Lesson in Competition

 

Beijing, Yingli Send Mixed Solar Signals 英利和中国政府似乎“背道而驰”

By on

China’s solar sector is sending mixed signals as it faces a potentially crippling anti-dumping investigation in the US, with major player Yingli (NYSE: YGE) sending out what looks like a conciliatory message even as China itself puts forth a plan that looks more defiant. First Yingli, which announced a new tie-up with CIT Group (NYSE: CIT), a US-based financial services firm, aimed at providing financing for sale of Yingli’s solar cells in the US. (company announcement) This announcement looks like Yingli’s way of trying to refute allegations by foreign solar cell makers that Chinese firms enjoy a wide array of unfair subsidies from Beijing, including below-market financing from China’s big state banks to help them sell their products overseas. Yingli’s new agreement may carry some public relations value, but is unlikely to sway public opinion in the US very much without some major conciliatory moves from Beijing. Meantime, Chinese leaders seem to be doing just the opposite of that with an official’s new announcement that China will launch a new campaign to help developing countries build new solar plants. It’s unclear to me if the new remarks by Xie Zhenhua, vice chairman of the National Development and Reform Commission, China’s powerful state planner, are related to the ongoing trade spat with the US or not. (English article) My guess is that these comments, made during a climate change training seminar attended by officials from 26 small island states on Monday, were just the result of poor timing and weren’t aimed at provoking the US or showing Chinese defiance in the face of potential US action against Chinese solar cell makers. But either way, Xie’s remarks show that China has no immediate plans to halt its strong support for its solar cell makers, as any solar energy plants that China builds in developing nations are almost guaranteed to be supplied with solar cells that are 100 percent made in China. I’ve said before that punitive tariffs by the US look likely in this case of trade friction, and announcements like Xie’s — while they may be good intentioned — won’t do anything to help diffuse the situation.

Bottom line: Chinese solar cell makers are trying to diffuse an anti-dumping investigation by the US, but aren’t getting much help from Beijing, making punitive tariffs more likely.

Related postings 相关文章:

◙ New Solar Signals: Slowdown Easing Amid Writedowns 太阳能企业减计库存 行业或将开始摆脱危机

◙ Solar Fight Sees Accusations Flying 中美太阳能纠纷引发口水大战

◙ China Solars Brace for Icy 2012 With US Trade Complaint 中国太阳能产业需直面美欧关税壁垒

Expedia Boosts China Ties, Watch Out Ctrip Expedia增持艺龙股份携程要小心了

By on

There’s  been some interesting movement in the lucrative online travel space, where US online giant Expedia (Nasdaq: EXPE) has just boosted its ownership eLong (Nasdaq: LONG) for a hefty premium, boosting its stake in China’s number-two online travel agent to more than 60 percent. (company announcement; Chinese article) Not surprisingly, eLong shares jumped 10 percent after the purchase, though at $15.41 per share were still well below Expedia’s purchase price of $23. That indicates the market realizes that Expedia, which has owned more than 50 percent of eLong for a while now, was more interested in boosting its stake than in getting a good price. From my perspective, the more interesting element here is that this purchase may indicate that Expedia, after years of taking a mostly hands-off approach to eLong’s operations, may finally be feeling confident enough to try and bring some of its background and expertise to the Chinese company, including integrating it more with Expedia’s own very successful global network. If it indeed makes such a move, that could spell more headaches for China’s industry leader Ctrip (Nasdaq: CTRP), whose own recent third-quarter results showed slowing growth, sparking a 25 percent decline in its shares over the last week. (previous post) If Expedia does indeed take a more hands-on approach to eLong, it would mirror a more recent trend that has seen foreign Internet giants coming back to China for a new attempt to be more active in the world’s biggest Internet market by users, after their previous attempts mostly failed. Amazon (Nasdaq: AMZN) appeared to be leading the charge on the China market with the recent launch of a massive new warehouse near Shanghai for Joyo.com, the online merchant it bought several years ago. Amazon had also taken a low-key approach to Joyo for the first few years of its ownership, though that looks set to change. (previous post) The next few months will be interesting to see what, if anything, changes at eLong following Expedia’s latest move, with Ctrip no doubt watching the situation very closely.

Bottom line: Expedia’s increase of its share in eLong could presage a more active partnership between the 2 companies, posing a major challenge to industry leader Ctrip.

Related postings 相关文章:

◙ China Lodging: Rebound Ahead 中国经济型酒店业绩回升在望

◙ China Hotels: Is the Holiday Over?

◙ Ctrip’s Latest Initiative: Insurance 携程新举动：保险