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

Amazon Name Shift Signals China Ramp-Up 亚马逊改名背后折射中国野心

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It’s difficult to read too much into a simple name change, but US e-commerce leader Amazon’s (Nasdaq: AMZN) decision to rebrand its China operation as Amazon China, combined with the opening of a major new facility, appears to signal a major ramp-up in its Chinese business. If true, that could mean bad news for established players like Dangdang (NYSE: DANG), 360Buy and Alibaba’s Taobao Mall, as Amazon has far more resources than most of these Chinese companies and, unlike most of them, is quite profitable. But let’s look at the news first. Domestic media are reporting that more than 5 years after purchasing Chinese online merchant Joyo.com, Amazon has finally decided to rebrand the company as Amazon China, from its previous name of Joyo Amazon. (English article) Amazon is making the change as it opens its 10th China facility, a massive 120,000-square-meter warehouse in the city of Kunshan, near Shanghai and within easy driving distance of hundreds of millions of consumers in the affluent Yangtze River Delta area. The new facility increases Amazon’s warehouse space in China by almost 50 percent, and quadruples its space in the Yangzte River Delta area. That kind of rapid ramp-up, combined with the name change, strongly indicate the company is planning a major boost in its China operations, just as the market appears to be getting overheated with rampant competition from a big field of young start-ups like 360Buy, which wants to make a multibillion-dollar IPO to recoup some of the $1 billion-plus in investor dollars it has received to date. (previous post) Amazon’s timing also looks good with regard to Taobao Mall, one of the few profitable companies in the space, which is going through a credibility crisis after many of its smaller merchants rebelled following a steep fee hike. (previous post) All that said, look for Amazon, riding high on the popularity of its Kindle e-readers and newly launched tablet PCs, to become an increasingly hot name in the China e-commerce space over the next 2 years at the expense of existing players.

Bottom line: Amazon’s rebranding of its China business and opening of a major new facility indicate a coming ramp-up of its Chinese business, further heating up the ultra-competitive market.

Related postings 相关文章:

◙ More Stumbles for Saab Rescue, 360Buy IPO 搭救萨博和京东商城IPO两计划注定命运多舛

◙ Albaba Faces New Assaults From Merchants, 360Buy 阿里巴巴受到中小商户和京东商城的双重夹攻

◙  More Internet Froth in Alibaba Valuation, Dangdang Price War 阿里巴巴估值奇高凸显网络泡沫

BYD True Test Begins With EV Consumer Roll-Out 比亚迪电动车上市 真正的考验刚刚开始

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After about a year of pilot tests with government-backed bus and taxi fleets, struggling car maker BYD (HKEx: 1211; Shenzhen: 002594) is finally launching its electric vehicles (EV) for the consumer market, in a pivotal move as it tries to reverse its rapid decline. The company, backed by billionaire investor Warren Buffett, has certainly prepared well for this launch, using the past year to address many of the problems its EVs are likely to face by testing them out in programs backed by the government in its hometown of Shenzhen, which has been highly supportive of the drive. BYD says it will start selling the cars in Shenzhen first, which also looks like a good move as the local government will continue to provide support in the forms of subsidies towards the purchase price and, in a more unusual move, will help buyers install charging stations in their homes. (company announcement) But even after generous subsidies of about $18,000 per vehicle, BYD still estimates that new electric cars will cost consumers about $38,400 each — a relatively hefty price for an untested technology when the same amount of money could buy a very nice new gasoline-powered car. The high price tag and all the lingering questions associated with a new technology like this mean the consumer market for these vehicles will probably be very limited at first, and I would expect BYD to sell no more than 2,000 EVs to consumers per month in the first 6 months of this launch. That kind of slow start will hardly help BYD’s current situation, which has seen its profits shrink almost to zero as it grapples with a sharp decline for its traditional gasoline-burning cars. Still, this consumer launch is a step in the right direction, as the company’s big bet on electric vehicles will only succeed if those EVs get good response from consumers. That said, BYD has done about everything it can to give its EV program a strong chance of success, and the next few months will be critical to see if consumers can accept this pricey but potentially interesting new technology.

Bottom line: The next 6-12 months will be critical for BYD’s EV campaign, as it waits to see if ordinary buyers accept its electric cars following their consumer launch.

Related postings 相关文章:

◙ Foreign Spending Spree Augers Woes for China Car Makers 外国车企大举投资中国 本土车企倍感压力

◙ Two Generals Team Up in Latest EV Drive

◙ Hertz, GE Give Jolt to BYD Electric Cars 赫兹新项目为比亚迪“加油

Baidu, ZTE Earnings: More of the Same 百度和中兴财报：看上去没变化

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Chinese firms are flooding the market with third-quarter results, with industry bellwethers Baidu (Nasdaq: BIDU) and ZTE (HKEx: 763; Shenzhen: 000063) both reporting figures that show continuation of recent trends. First Baidu, which reported a healthy rise of around 80 percent in both revenue and profit, as it banked on strong demand for ads on its search site, China’s dominant player with more than two-thirds of the market. (company announcement) Baidu further predicted that revenue will continue to grow at similar rates in the fourth quarter, as healthy demand continues. I previously predicted a sharp slowdown in ad spending could be looming as a much-needed correction looms for China’s overinflated Internet bubble, but clearly Baidu is seeing no signs of that yet. I still think such a correction is coming, and will hit Baidu’s top and bottom lines when it does; but despite signs of trouble from the group buying sector and some e-commerce firms, we won’t see the first real signs of a downturn until the first or most likely the second quarter of next year. As to ZTE, the company also reported third-quarter revenue grew at a healthy 37 percent, accelerating from the first half of the year as it focused on building up its cellphone business, which was up more than 50 percent in the first 9 months of 2011. (Chinese article) But while revenue rose, its third quarter profit fell by nearly 40 percent, also accelerating from the first half of the year, as it continued its risky strategy of grabbing global market share for its handset business by selling its low-end smartphones at prices near or perhaps even below its costs. This strategy could work in the end if ZTE can raise its prices after it gains market share. But it could also backfire if consumers come to associate the company with cheap products and aren’t willing to pay a premium for its cellphones. The company’s heavy reliance on Google’s (Nasdaq: GOOG) Android smartphone operating system also puts it at risk of potential lawsuits from Apple (Nasdaq: AAPL), which has already files similar suits against some other major cellphone makers.

Bottom line: The latest Baidu and ZTE results show continuation of recent trends, though the former remains at risk due to a possible Internet bubble, and the latter from a risky expansion strategy.

Related postings 相关文章:

◙ Baidu Mobile OS, Homepage Revamp Look Like Dicey Bets 百度新举措旨在冒险一搏

◙ Low-Cost Apple iPhone to Bite ZTE, Lenovo 苹果推低端iPhone 冲击中兴和联想

◙ ZTE Gambles With Smartphone Share Grab 中兴通讯押注智能手机业务

Little Sheep Left Waiting at Regulator’s Door 小肥羊仍在监管机构大门外苦等

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More than half a year after announcing its plan to purchase top Chinese hot pot chain Little Sheep (HKEx: 968), Yum Brands (NYSE: YUM), owner of the KFC and Pizza Hut chains, has learned it will have to wait just a bit longer for the anti-monopoly regulator’s decision on the deal — an potentially ominous sign for a regulator that has shown a past tendency to consider nationalistic elements alongside commercial ones in such deals. But at the end of the day, the fact that the regulator hasn’t vetoed this deal yet indicates some debate is probably taking place in the organization, and I still think the chances of an approval are greater than 50 percent, especially as China tries to show its commitment to fair trade in light of US Congress legislation that would punish Beijing for manipulating its currency. According to a new statement filed by Little Sheep to the Hong Kong Stock Exchange, the initial 30 day period for China’s Commerce Ministry to consider Yum’s purchase, worth some $500 million, ended on July 27. (company announcement) The ministry elected to extend that period by another 60 days, which again ended on September 27. Still lacking a final determination, the regulator again exercised its final option for another 60 day extension, meaning a final decision should come by late November. So what does all of this mean? Shareholders clearly don’t think it bodes well, bidding down Little Sheep stock by 12 percent to HK$5.39, or 17 percent below Yum’s offer price of HK$6.50 after the announcement. From a monopolistic standpoint, Yum is clearly China’s largest restaurant operator and would add to that position, but only slightly, by buying Little Sheep. But based on past behavior, I suspect nationalistic concerns are more at play here, as Little Sheep is China’s biggest hot pot chain and a promising home grown brand. Still, I think that at the end of the day fair trade advocates at the Commerce Ministry will win out to their nationalistic peers in this decision, as China seeks to show the world it is willing to play by global rules, and we should see an approval of this deal just before the late November deadline.

Bottom line: Delays in government clearance for Yum’s pending purchase of Little Sheep indicate internal debate at the anti-monopoly regulator, but the deal should finally get a green light next month as China tries to show its commitment to fair trade.

Related postings 相关文章:

◙ Yum China: Little Sheep Getting Tangled in Trade Friction? 百盛收购小肥羊案卷入中美贸易摩擦？

◙ Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊

◙ China’s Heavy Hand Leaves Investors Wary on YUM’s Little Sheep Buy 百胜难吞小肥羊

Kaixin Raises Profile in Renewed IPO March 开心网一改低调有意再次赴美上市

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The normally low-key Kaixin, China’s second largest social networking system (SNS), has suddenly raised its profile with a stream of headline-making announcements, in what looks like a bid to drum up publicity in the run-up to a revival for its US listing plan that got shelved earlier this year. In two separate pieces of news, domestic media are citing unnamed sources saying that Kaixin has agreed to form a social gaming joint venture with Shanda (Nasdaq: GAME), one of China’s leading leading online game operators (English article); and the company itself has made a relatively ho-hum announcement of another tie-up with a US company called Message Systems to strengthen the messaging platforms on its site. (company announcement) Those two news bits come just a week after media reported, and the company partially confirmed, that leading Internet firm Tencent (HKEx: 700) had taken a stake in Kaixin, joining a group of previous investors that included Sina (Nasdaq: SINA). (previous post) The recent flurry of news also follows a rare press conference led by media-shy Kaixin founder Cheng Binghao in August, where he addressed reports that the company’s business was slowing. (previous post) The company had previously been in a race with Renren (NYSE: RENN), China’s biggest SNS operator, to make an IPO earlier this year, but lost out in that contest. Reports indicated Kaixin was ready to finally go public during the summer, but may have temporarily shelved the plan amid a broader wave of negative sentiment towards China stocks due to concerns over accounting practices. Now that the negative sentiment seems to have faded and is more neutral, this recent flurry of activity mentioning big-name players like Shanda and Tencent, looks like Kaixin is trying to drum up excitement in preparation to relaunch its IPO bid. Pending any unforeseen changes in the market, the timing actually looks quite good, and an offering in the next month would probably do well. It certainly couldn’t do worse than money-losing Renren, whose shares initially after their May debut, but are now down nearly 60 percent from their offer price, caught up in the negative China sentiment.

Bottom line: A recent flurry of activity indicates Kaixin is gearing up to relaunch its delayed IPO, which should do well as negative sentiment towards China stocks subsides.

Related postings 相关文章:

◙ Kaxin Buys Time With Tencent Tie-Up 开心网与腾讯合作堪称一箭双雕

◙ Renren Discovers Microblogging Too Late

◙ Gaopeng, Kaixin Spotlight China Internet Turmoil 高朋网、开心网凸显中国互联网混乱现状

Nokia Looks For Fresh China Start With New Country Chief 诺基亚中国区新官欲扭颓势

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The struggling Nokia (Helsinki: NOK1V), which once dominated China’s cellphone market, is looking to rekindle excitement there not only with new smartphones using Microsoft’s (Nasdaq: MSFT) Mango operating system, but also a brand new China chief to repair its badly damaged reputation among domestic handset sellers. The company has announced that Gustavo Eichelmann, a 7-year company veteran, will take over at the helm of Nokia’s China operations to try and halt a recent skid in its largest global market. (Chinese article) Not coincidentally, the announcement comes as Nokia made a highly-anticipated unveiling of its first new smartphones using Microsoft’s Mango (English article) — a huge bet for the company as it seeks to regain share in the lucrative smartphone segment where it has become a relative bit player to the likes of Apple (Nasdaq: AAPL), HTC (Taipei: 2498) and Samsung (Seoul: 005930). Eichelmann’s past includes a number of high profile spots, including top management positions in the company’s global sales and channel divisions and head of global customers relations for Vodafone (London: VOD), the world’s biggest mobile carrier. His solid credentials will be sorely needed in China, where Nokia took a beating earlier this year after many of its domestic vendors found themselves with big piles of unsold unpopular handsets forced upon them after years of bullying by the world’s largest cellphone maker. (previous post) The group rebelled at the time, refusing to accept more phones for fear that Nokia’s increasingly unpopular models wouldn’t sell, leaving them with even more inventory. Eichelmann’s strong background in vendor relations should help him to repair his company’s damaged reputation with vendors, especially if the new Mango models are well received and demand is strong. But the company will also have to improve its middle- and lower-end models as well to compete in China’s fiercely competitive market, limiting Eichelmann’s chances for success.

Bottom line: Nokia’s naming of a new China chief with a strong vendor relations skills could help fix  its damaged reputation if can get back in the business of developing popular cellphones.

Related postings 相关文章:

◙ Nokia Facing China Backlash After Years of Dominance 诺基亚手机在华“失宠”

◙ Apple on a China Roll, Ambushing Nokia, Lenovo 苹果伏击诺基亚和联想 在华发展势如破竹

◙ Guest Post: Move Over Nokia and RIM, Here Comes HTC

 

News Digest: October 26, 2011

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The following press releases and media reports about Chinese companies were carried on October 26. To view a full article or story, click on the link next to the headline.

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

◙ Little Sheep: (HKEx: 968) Regulator Extended Yum Takeover Review By 60 Days (English article)

◙ CNOOC (HKEx: 883) Limited Announces Third Quarter Results (PRNewswire)

◙ Shanda (Nasdaq: SNDA), Kaixin001 Establish Social Game JV – Source (English article)

◙ Chinese Authorities Ban Online Prescription Drug Sales (English article)

◙ Starbucks (Nasdaq: SBUX) Celebrates Its 500th Store Opening in Mainland China (Businesswire)

HNA: China’s Next Big Global Investor? 海航集团：中国下一个大型全球投资者？

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China’s HNA Group is taking an unusually high-profile approach to global M&A, seeking out assets at bargain prices as it attempts to become one of China’s  first major private investors on the worldwide stage. HNA, controlled by tropical Hainan province, is perhaps best known for its ownership of Hainan Airlines (Shanghai: 600221), a flagship asset long considered one of China’s best run airlines and whose investors also include billionaire George Soros. Now the company is talking about a recent global buying spree that has seen it snap up assets in a range of industries, including shipping and hotels, and boasting it has an additional war chest of more than $6 billion for more purchases. (English article) This company already caught my attention last year when its name popped up as a serious bidder for struggling US film studio Metro-Goldwyn-Mayer, better known as MGM. In August it teamed up with a private equity firm to buy GE’s (NYSE: GE) SeaCo container leasing unit for $1 billion, and its top executive said it’s sniffing around for other major deals as well. Despite its government ties, this company is quite interesting as it behaves much more like a private firm than other big Chinese global investors, whose moves are often motivated as much by politics as by commercial factors. As such, HNA looks strikingly similar to CITIC, the sprawling, quasi-private Chinese investment group that became a pioneer in the 1980s and ’90s by buying up assets outside China, many of those in Hong Kong, as the country began opening to the West. It’s still far from clear that HNA can become a serious new Chinese investor on the global stage, as the major transactions it is trying to pursue are often expensive, complex and could potentially run into political issues. But HNA certainly seems determined to become a player, and its strong connections and limited successes so far could mark the beginning of its longer-term emergence as a big new player on the global investment scene.

Bottom line: HNA Group could become China’s next big major global investor if it can extend its short but relatively successful strategy for global M&A.

Related postings 相关文章:

◙ Watch Out China Energy Majors, Here Comes India 能源公司注意：印度来了

◙ 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

◙ Shenhua Takes Smart Step Into Mongolia 中国神华走入蒙古

Albaba Faces New Assaults From Merchants, 360Buy 阿里巴巴受到中小商户和京东商城的双重夹攻

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Embattled Chinese e-commerce leader Alibaba is looking more and more like a fortress under attack these days, facing assaults on two fronts in the latest chapter of its ongoing spats with the rest of the online world. The first and more serious of those spats has seen smaller online merchants, upset over huge fee hikes at Taobao Mall, Alibaba’s main B2C site, launch an assault on Alibaba’s Alipay electronic payments site, according to domestic media reports. (English article; Chinese article) The reports are quite colorful, with enraged small- and medium-sized merchants, who have complained the fee hikes are designed to weed them out, withdrawing massive amounts of money from Alipay one day late last week, and then blocking access to the service completely. This mass movement comes after the same group of merchants wreaked havoc on Taobao Mall itself a couple of weeks ago by making mass bogus purchases from large merchants on the site, only to cancel their transactions hours later. (previous post) Beijing has reportedly stepped in to try to mediate the dispute and Alibaba itself has made some conciliatory gestures, but obviously the merchants aren’t happy with progress so far and the damage to Taobao Mall looks set to drag on for at least a couple of months, if not longer. In the second development, media are reporting that 360Buy, one of China’s largest e-commerce sites, is hinting it may soon block its pages from searches on Etao, Alibaba’s site that specializes in e-commerce related searches. (Chinese article) Such a break would be a major blow to Etao, and would follow 360Buy’s cut off of ties with Alipay back in August, reflecting a broader feud. (previous post) Many in the online world already blame Alibaba founder Jack Ma for the negative overseas sentiment towards China Internet stocks due to his high profile dispute with Yahoo (Nasdaq: YHOO) earlier this year over ownership of Alipay. These latest disputes will hardly help his company’s damaged reputation, and could mark the latest chapter in a longer decline for the company.

Bottom line: Alibaba’s latest disputes with smaller merchants on its Taobao platform and e-commerce giant 360Buy mark the latest chapter in what could become a long-term decline for the firm.

Related postings 相关文章:

◙ Taobao Mall’s IPO March Collides With Merchant Uprising 淘宝商城IPO或因商户“起义”被推迟

◙ Alibaba Sharpens Focus in Yahoo Buy-Out, Taobao Mall 阿里巴巴回购雅虎所持股权有望

◙ Alibaba.com Blows Smoke With HiChina Spin-Off Plan 阿里巴巴网络分拆万网放烟幕弹

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

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The last few days have seen an overwhelming flood of new chatter in the war of words between Chinese and Western solar cell makers, with China’s commerce ministry also voicing its views on this case that looks set to become a major battleground in the free trade debate. After US solar firms filed a formal anti-dumping complaint in the US last week against their Chinese rivals, China’s commerce ministry quickly and predictably fired back that the complaint was groundless, and warned that any punitive action could result in a damaging trade war that could hurt the global economy. (English article) At the same time, 3 top Chinese players, Suntech (NYSE: STP), Yingli (NYSE: YGE) and Trina (NYSE: TSL), all chimed in with various guarded statements saying it was too early to worry just yet. Meantime, the group leveling the accusations, led by the US arm of German solar cell maker SolarWorld (Frankfurt: SWV), replied to China’s tough talk with its own scathing statement accusing the Chinese of not only rampant illegal subsidies for its players, but also of allowing them to wreak havoc on the Chinese environment through irresponsible waste disposal practices. (official statement) I said last week that the speed of this conflict’s rapid evolution has surprised me, as China’s generous subsidies have been going on for years. Now I’ll add that the volume of the rhetoric is also surprising me, showing that both sides are taking this case very seriously and could take some equally strong actions if either doesn’t like the final ruling by the US International Trade Commission. The timing of this dispute is clearly very much in favor of the US solar companies, as no US politician, including the Obama administration, will want to look soft on China as the US economy continues to struggle just a year before the 2012 presidential elections. If Beijing is smart, it will quickly tone down its rhetoric and move discussions to back-room channels if it really wants to try to avoid punitive tariffs that now seem almost inevitable. Beijing’s actions in the next few weeks will be critical: a quieter, more conciliatory approach could result in less aggressive action by the US, which in turn would cause China’s solar companies to suffer less. But if China continues its loud rhetoric, this dispute could well turn into a drawn-out war that would seriously harm the long-term prospects of the Chinese players.

Bottom line: The outburst of accusations by China and US solar makers in their dispute over unfair trade could deal a long-term blow to Chinese solar makers unless Beijing moderates its rhetoric.

Related postings 相关文章:

◙ 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

◙ US Congress Turns Up Heat in China Solar Debate

◙ China Brushes Off Western Protest With New Ming Yang Support 明阳获巨额融资 表明中国不理会西方反对

Huawei: Fight Them With Innovation 华为欲借创新论低调进军美国市场

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Huawei Technologies has given some of its first formal remarks since the latest rejection in its drive to enter the US, saying it will rely on innovation to finally break into this difficult market. The remarks, which came from one of the company’s top US officials late last week, sound neutral enough in theory, but really doesn’t do anything to address the main US concerns over security that have thwarted Huawei in the market so far. (English article; Chinese article) I do have to credit the official, a man named John Roese, with at least modifying Huawei’s previous style that was more direct and even slightly confrontational. A couple of weeks ago, the company was informed by the US telecoms regulator that it wouldn’t be allowed to bid for contracts to build government-operated emergency broadband networks, an outcome that surprised no one, and then made the situation worse by asking for an explanation. (previous post)  At least the company finally is letting someone who appears to be an American citizen be its spokesman, and it’s clear that he’s avoiding the sensitive topic of national security, which is the main reason for Huawei’s lack of progress in the market today. But for the company to ultimately succeed in the US, it will have to tackle this tough issue of security by demonstrating that it’s not an arm of the Chinese government, and that its products won’t be used for spying by Beijing. Roese’s “innovation” argument won’t do anything to address any of these concerns, but at least he’s showing that the company will probably take a more low-key approach to the situation in the future, which is needed in such a highly sensitive matter. I would look for the volume of behind-the-scenes communication between Huawei and US government officials to pick up considerably as part of this effort, though the company is unlikely to make any significant progress until after next year’s presidential elections in November.

Bottom line: Huawei is making a smart move by toning down its high-profile approach to enter the US, but is unlikely to gain access to the market until 2013 at the earliest.

Related postings 相关文章:

◙ Huawei Undermines US Push With Foolish Request 华为讨要说法很不明智唯有阻碍进军美国市场

◙ Huawei, Lenovo Look to Foreign Advisors in Westward Drive

◙ Rongyao’s US Lawsuit Spotlights China’s Lack of PR Savy *荣耀高调起诉辉瑞 彰显公司缺乏公关意识