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China’s Microblog Crackdown Continues 中国继续加强微博管控 新浪或受冲击

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China’s displeasure at the ability of Twitter-like microblogs to quickly and efficiently spread rumors is heading into a new phase, with word that Beijing is ordering all search engines to stop including microblog posts in their results. (English article) Details are scant and there’s no official confirmation from Beijing, but the reports say an official at the Data Center of China Internet said on his own microblog that the move has been ordered by relevant government offices effective immediately, a move that would deal yet another blow to Sina (Nasdaq: SINA) as it tries to commercialize its wildly popular Weibo microblogging service. Weibo and its peers have had a difficult time these last few months, as Beijing tries to rein in this popular medium that allows anyone to say anything they want and see their messages instantly passed on to thousands of other subscribers, often leading to huge waves of protest or criticism of various social problems and government shortcomings. Late last year the government rolled out a new rule requiring all microblog users to register with their real names, in a bid to curtail rumor-mongering by people who could say anything they wanted with no fear of being identified. (previous post) More recently, the government ordered Weibo and another popular microblogging service operated by Tencent (HKEx: 700) to shut down part of their services after they helped to spread false rumors that army troops were entering Beijing amid the Communist Party’s latest internal power struggle. (previous post) This latest initiative, if it’s true, looks like just the latest step in the drive to reduce the influence of microblogs by making their messages unavailable to people using Internet search engines. While a large number of Weibo viewers get their news directly off Weibo itself, I suspect a large number of people also view Weibo posts as a result of web searches, as such posts are often indexed by the search engines. This latest initiative should have little effect on the search engines themselves, but could significantly reduce traffic to Weibo by halting all referrals from the search engines. That will come as the latest headache for Sina as it tries to commercialize Weibo, as the lower traffic volumes will make the service less attractive to advertisers that are one of the biggest potential revenue sources. If Beijing continues to impose more and more restrictions on Weibo like this, look for the service, once considered full of potential, to eventually wither and maybe even die in what would be a huge setback for Sina.

Bottom line: Beijing’s latest order banning microblog posts from search results is the latest setback for Sina’s Weibo, which is being by a growing list of government restrictions.

Related postings 相关文章:

◙ New Crackdown Spotlights Social Networking Risk 新的打压凸显社交网络风险

◙ Real Name Registration: Burden or Not for Weibo? 实名制会否成为新浪微博的负担？

◙ Microblog Clampdown: Only Chapter 1? 实名制向网络行业吹去冷风

Cars: Vancl’s Delivery Cuts & A Low-End EV Drive 汽车：凡客诚品配送服务收缩和低端电动汽车推进

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I’ll start out my musings this Friday with 2 car-related stories, one that’s seeing online clothing seller Vancl idle part of its delivery service and another that looks at a low-key type of electric vehicle that is making huge inroads in China’s rural markets. Let’s look at the Vancl story first, which has media reporting the company, which has repeatedly delayed a planned New York IPO, has closed or consolidated a number of locations for its fully-owned Rufengda delivery unit. (Chinese article) Vancl itself appears to confirm the report by calling the move an “adjustment” rather than a cost-saving measure, and is stressing the move is unrelated to the health of its broader business. Followers of Vancl will recall the company made another “adjustment” last year when it reportedly laid off about 5 percent of its workforce. (previous post) Vancl also recently lost its CFO, something that often happens when a company is facing financial difficulties. Or course, these kinds of rumors are inevitable for such a high-profile company like Vancl, as the entire e-commerce sector faces a cash crunch due to rampant competition that is already forcing limited sector consolidation. Look for more such “adjustments” from Vancl, which is likely to forge ahead with its IPO if and when market sentiment ever improves, which is unlikely before the late third or even fourth quarter. Meantime, my old employer Reuters is reporting on an interesting kind of super low-end electric vehicle that is quietly gobbling up market share even as Beijing’s plans sputter to promote larger traditional EVs. (English article) These super low-end cars appear to be gaining popularity in the countryside mostly, where farmers are buying them for around $5,000 apiece. They seem to be filling a niche somewhere in between a tractor and a real car, with limited speeds of only up to 50 kilometers per hour and running on environmentally unfriendly lead-based batteries. But they’re fast approaching the 100,000 mark for annual sales, with a company called Shifeng as the industry leader, compared to only 8,000 true EVs sold last year despite generous incentives from Beijing. This space could be one to watch, as Shifeng claims that representatives from the likes of Toyota (Tokyo: 7203) and Mitsubishi have come to check out its operations in search of similar alternatives to more costly traditional EVs. Stay tuned for some potentially interesting initiatives to come out of the segment, where China for once has the potential to become a true innovator if this space doesn’t get squashed by Beijing.

Bottom line: Vancl’s scale back of its delivery service is its latest adjustment as it tries to save money, with more moves likely before it makes its delayed IPO later this year.

Related postings 相关文章:

◙ China IPO Train Hits Bump With Vancl Resignation 中国上市事件撞上凡客诚品CFO辞职

◙ China Internet Bubble Sees Vancl Dressing Down 中国互联网泡沫见证凡客裁员

◙ Foreign Automakers Uncharged on China EVs 外国汽车商对中国电动汽车市场态度谨慎

Sinopec Still Chasing China Gas 中石化仍想收购中国燃气

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Energy major Sinopec (HKEx: 386; NYSE: SNP; Shanghai: 600028) is unaccustomed to being refused when it makes an M&A offer, though its tactics towards buying private companies are anything but conventional. That’s my conclusion as I read over the latest announcement from Sinopec and another Hong Kong-listed firm named ENN (HKEx: 2688), as they continue to chase China Gas (HKEx: 384), a privately held operator of a China-based natural gas distribution network that has previously shown little or no interest in being acquired. Let’s do a bit of backtracking and review the history of this deal, which is interesting because it marks one of the first unsolicited takeover bids by a big state-owned Chinese firm for a major private company. Sinopec and ENN made their initial bid for China Gas last December, offering about $2.2 billion for the company at a 25 percent premium to its share price at the time. It soon became clear that Sinopec and ENN had done little or nothing to discuss the deal with China Gas before making their offer, and China Gas made it clear that it wasn’t interested in being acquired. (previous post) An ENN executive said last month that his company and Sinopec were no longer chasing China Gas, only to have Sinopec quickly issue another statement saying the executive’s words were purely his own opinion, indicating that Sinopec was still interested. Now Sinopec and ENN have issued their latest statement, directly appealing to the employees of China Gas about why a takeover would be in their best interest. (HKEx announcement) I’ve reported on Chinese companies for a decade now, and this is the first time I’ve ever seen an appeal like this to the workers of an acquisition target. It’s much more common to see appeals like this made to shareholders of an acquisition target, especially during a hostile takeover, as they have the power to approve a deal even when management opposes it. But workers in most cases are usually unimportant players, as they don’t really have much power to influence managers’ decisions when it comes to M&A. Sinopec indicated in its statement that it is still trying to talk to China Gas’ management, but that China Gas managers have shown no interest. This latest statement indicates that Sinopec is determined to move forward with its bid, be it friendly or hostile, and I would fully expect it to announce a new, higher offer in the next few weeks.

Bottom line: Sinopec’s newest statement indicates it wants to move ahead with a bid to buy China Gas despite previously being rebuffed, with a new offer likely soon.

Related postings 相关文章:

◙ Sinopec Weighs New China Gas Bid 中石化似乎考虑提高对中国燃气收购价

◙ Battle Heats Up For China Gas

◙ Sinopec Balks at Rebuff to Hostile M&A Bid 中石化试水敌意收购碰壁

Facebook Keeps Calling on China Facebook继续推动进军中国市场

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Facebook may be making global headlines for its upcoming mega IPO, but the social networking giant is making much quieter headlines in China as well, where local media are saying it has been meeting with potential joint venture partners in its long-stated pursuit of entering the market. (English article) All this comes amid a broader opening up of China’s tightly controlled media space, which is also seeing the website of the People’s Daily, the official newspaper of the Communist Party, roaring towards a landmark IPO that, not surprisingly, is seeing huge investor demand. Let’s look at the latest Facebook talk first, which has media saying founder Mark Zuckerberg has made a number of low-key recent trips to China to meet with potential joint venture partners. There’s no reason to believe the reports aren’t true, as Zuckerberg has been very open about wanting to enter China and has made a number of trips to the country. Those include an official visit in late 2010 where he reportedly met with a number of partners including search leader Baidu (Nasdaq: BIDU), and another lower-profile visit just last month where he was spotted shopping in Shanghai in what was described as a personal visit. (previous post) My sources told me last year that Beijing had laid down a number of conditions that would make it difficult for Facebook to come to China, including requiring it to self-censor any China site it operated and also to make any information on the site available to the central government. (previous post) While such conditions looked like a deal killer at that time, Zuckerberg’s determination to enter the market, which includes a recent campaign to hire local Chinese engineers (previous post), seem to indicate he is willing to play by Chinese rules. I admire his determination, but should also point out that if and when Facebook ever does come to China, it will receive the same scrutiny, criticism and negative publicity that western organizations gave to Internet giants like Google (Nasdaq: GOOG) and Yahoo (Nasdaq: YHOO) when they entered the market. Facebook will also face stiff competition from established players Renren (NYSE: RENN) and Kaixin, which dominate the market but are having more difficulty finding profits there. Given Zuckerberg’s determination, I would say that China will be one of his top priorities after the IPO, and I could see the company entering the market as soon as late this year. Meantime, the People’s Daily has put out its own self-congratulatory statement in the run-up to its domestic IPO, saying it has tripled the size of the original offering due to strong demand and will sell shares that value the company at an 18 percent premium to its peers. (English article) As I’ve said before, I expect this IPO to be a huge success due to strong support from cash-rich party members and their associates. The stock could also do well in the longer term due to its party connections, but I wouldn’t look for anything too exciting in terms of growth or business initiatives due to the company’s political nature.

Bottom line: The latest reports on Facebook’s China plans indicate the company is aggressively aiming to enter the market, with a potential new joint venture possible by the end of this year.

Related postings 相关文章:

◙ Facebook, NY Times Make New China Moves Facebook和纽约时报在华新动向

◙ Despite China Rebuff, Facebook Going Back for More Facebook明知山有虎，偏向虎山行

◙ Twitter Eyeing China? Twitter想进中国？

 

Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？

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An important trial has just begun in southern Guangdong province, testing China’s young anti-monopoly law and its legal system in a case that could spell big headaches for leading Internet firm Tencent (HKEx: 700). Analysts also point out the case could have a domino effect for other areas where a single company dominates the Web, with online search leader Baidu (Nasdaq: BIDU) perhaps the most vulnerable to a similar lawsuit. But let’s look at the Tencent case first, as that’s the main point here. Perhaps appropriately, the case is being bought by Internet software company Qihoo 360 (NYSE: QIHU), a seasoned veteran with litigation in China, having been sued numerous times by others, including Tencent, and also filing numerous lawsuits of its own against rivals. This latest case has Qihoo suing Tencent for monopolistic practices in the instant messaging space, claiming Tencent’s wildly popular QQ service has a virtual lock on the market. (Chinese article) The case, which began on Wednesday morning，has Qihoo seeking 150 million yuan, or about $24 million, in damages. Chinese courts rarely award that much money due to legal restrictions, but even if they did such an award would be trivial to a company like Tencent that has a market cap of $56 billion and a huge cash pile. Of course the much bigger threat is that the court will determine that Tencent does indeed have an instant messaging monopoly, which it has used to quickly gain dominance in other Internet spaces such as online games. From my perspective, Qihoo’s case does indeed look convincing, as Tencent currently controls more than 70 percent of the instant messaging market. I personally don’t use QQ, but in my experience the only other platform that has any users at all in China is Microsoft’s (Nasdaq: MSFT) MSN, whose service is basically just a copy of its global product and is far less popular among Chinese users. A court ruling against Tencent would be interesting for a number of reasons, all of which would obviously be bad for the company. Qihoo and others are clearly interested in seeing the court order Tencent to de-link QQ from its other initiatives, as that would seriously hamper the company’s ability to take advantage of its massive instant messaging user base to quickly develop into other areas like search, online video and e-commerce. But the court, if it rules against Tencent, should also take steps to break its instant messaging monopoly, which is what the anti-monopoly rule was designed for. Of course, if the court rules against Tencent the next major target would be Baidu, which also controls more than 70 percent of China’s search market, the legal definition for a monopoly. Accordingly, China Internet watchers and investors should be paying close attention to this case, which could have big implications for both Tencent and Baidu stock.

Bottom line: Tencent will suffer a big setback if a court rules it has a monopoly in instant messaging, potentially paving the way for a similar lawsuit against Baidu.

Related postings 相关文章:

◙ Tencent Search: Baidu Beware? 腾讯搜搜成功关键依赖创新

◙ Search Wars Heat Up With Latest Anti-Baidu Moves 中国网络搜索战升温

◙ Baidu’s Strong Growth Underwhelms 百度业绩持续强劲增长将投资者期望抬升过高

Starbucks to the Rescue? 星巴克出手救助？

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I’m sitting at my local Starbucks (Nasdaq: SBUX) having a morning coffee as I write this, so it seems only appropriate that I begin today with a look at this coffee juggernaut which is turning up its China PR campaign as it seeks to triple its size here over the next 3 years. This latest campaign comes at an interesting time, as other media are reporting separately that China’s coffee growers are coming under growing pressure due to a plunge in prices that have left many with big volumes of unsold coffee beans, a fact Starbucks would probably rather people didn’t know. But let’s look at the upbeat news first, which has Starbucks saying it will launch a virtual Starbucks China University and set up a modest fund totaling 1 million yuan, or about $160,000, to assist its local partners in their times of need. (company announcement) Starbucks puts most of its emphasis on the university initiative, saying it is part of its drive to become an employer of choice in China. It has plenty of reason for wanting to be a good employer, as it has recently embarked on a campaign that will see it sharply boost its China store count from around 570 at present to 1,500 stores by 2015, a number that would make the market its second largest after the United States. But as a cynical former journalist, I was more interested in the second part of the announcement, namely the part focused on the fund for helping its partners in need. Perhaps not coincidentally, Starbucks announcement comes just a day after the China Daily ran another coffee-related news item, though this one was decidedly more downbeat about suffering coffee growers in southwestern Yunnan province, China’s main coffee-growing region. (English article) The article notes that a 50 percent plunge in coffee prices over the last year has left many farmers in with beans they now can’t sell due to a global supply glut, and adds that one of the biggest buyers, food giant Nestle (Switzerland: NESN), has already completed its purchase plan for the entire year. Starbucks made headlines a couple of years ago when it announced a major initiative to promote coffee growing in China, and reiterated that commitment last July by announcing the formation of a joint venture to buy Chinese coffee beans for use both at home and abroad. (previous post) The China Daily article doesn’t mention Starbucks, but I suspect that if Nestle has already completed most of its buying for the year, then Starbucks has also probably done the same and may be quietly slowing or halting operations at this new joint venture, adding to the woes of local farmers. Of course none of this will really affect Starbucks China business, as a new class of Chinese yuppies in major cities have already shown they are quite willing to wait in long lines and pay big money for a chance to sip a latte with their friends at their local Starbucks. But the last thing this company needs as it embarks on its aggressive expansion is negative PR to tarnish its image, which is exactly what could happen if word emerges that it’s abandoning the coffee farmers it used in its previous PR campaign.

Bottom line: Starbucks’ latest PR campaign showing its commitment to China looks at least partly designed to divert attention from woes being suffered by Chinese coffee growers.

Related postings 相关文章:

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

◙ Starbucks Goes Downmarket in China Drive 星巴克在华开拓低端市场

◙ Starbucks Raises Prices, But Who Cares? 没人会在意星巴克提价

Albaba Hires Big Gun in US Image Drive 阿里巴巴重金聘请美国前高官 启动形象改善工程

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If you’re going to seek a New York listing, it seems only appropriate you might want to get your name removed from a major business blacklist before doing so, or at least that’s what e-commerce leader Alibaba seems intent on doing with its latest big-name hire. Foreign media are reporting the company has put up big bucks in the US to hire James Mendenhall, a Washingtonian with strong government ties, with a mandate to improve the company’s image in intellectual property protection. (English article) Of course that looks like a thinly disguised way of saying the company is giving Mendenhall the big paycheck to get Alibaba removed from the annual US list of notorious companies that fail to protect intellectual property by engaging in or facilitating piracy. China’s leading online search site Baidu (Nasdaq: BIDU) trumpeted its removal from the notorious list last year, after being included on it for years, and now uses that removal as a major plank in its public relations campaign to show the world it’s serious about playing in the same leagues as its big western rivals. (previous post) Alibaba’s Taobao sites, which engage in consumer-to-consumer (C2C) e-commerce and business-to-consumer (B2C) until recently, weren’t so lucky, and were once again included on last year’s notorious list. A quick look at Mendenhall’s resume shows he clearly has the connections to help Alibaba tackle the issue. A Harvard law school graduate who now works in a private law firm, Mendenhall has extensive past experience in the US Trade Representative’s Office, and also served as an adviser to the 2008 presidential campaign of Republican John McCain. That will give him good access to many of the key players he will need to convince that Alibaba should be removed from the notorious list, which is compiled by the Trade Representative’s Office. Of course, hiring big name executives doesn’t always work, at least not immediately, as telecoms equipment giant Huawei Technologies has discovered. Despite hiring a string of well-connected political insiders in the US, Britain and Australia over the last 2 years, Huawei has been repeatedly thwarted in all those markets, most recently being denied permission to bid on contracts to build a state-of-the-art new high-speed network in Australia. This latest move by Alibaba is clearly designed to clean up its image in the west, and seems like part of a longer-term plan for an eventual listing of the entire company in New York, which could come in the next few years. In the shorter term, all eyes will be on the next notorious list due to come out at the end of this year, with Mendenhall and his team coming under pressure to show some results for their big paychecks.

Bottom line: Alibaba’s latest hiring of a well-connected Washington insider to lobby for removal from a piracy list is part of its drive to clean up its image in the run-up to an eventual New York IPO.

Related postings 相关文章:

◙ 2011: A Breakthrough Year in Copyright Protection 2011年：中国版权保护取得突破的一年

◙ Alibaba, Yahoo: The Never-Ending Story 阿里巴巴股份回购“马拉松”再现曙光

◙ Alibaba Tests Waters for Group Listing 阿里巴巴试水集团整体上市

China Alternate Energy Invests Overseas 中国替代能源企业海外投资一石两鸟

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Having diffused a potential trade war with the US over unfair subsidies, China’s alternate energy firms are moving quickly to show they can be important investors in the markets where they do business rather than simply selling their products there, as evidenced by 2 newly announced deals in the wind and solar sector. Interestingly, both deals are in Canada rather than the US, with the first seeing solar panel maker Canadian Solar (Nasdaq: CSIQ) announcing a relatively major new solar power plant joint venture with local partner SkyPower. (company announcement) The second deal is seeing alternate power plant operator Longyuan Power (HKEx: 916) building a major new wind farm, with General Electric (NYSE: GE) announcing it will sell about 50 turbines to the project. (company announcement) Both announcements are relatively straightforward, with each seeing the Chinese company put up investment dollars to build and operate locally-based power generation projects that will help develop the alternate power market. In Canadian Solar’s case, the company is essentially buying a big stake in a number of solar power projects already begun by SkyPower, essentially giving SkyPower some cash to develop additional projects. In Longyuan’s case, this alternate energy arm of one of China’s top power producers is not only putting up  money to develop this major new wind farm, but is also showing its commitment to buying equipment for not only from Chinese but also other foreign equipment producers like GE. These latest 2 announcements come just a week after another major solar panel producer, Suntech (NYSE: STP), announced another US solar project at Edwards Air Force Base in California, underscoring it would supply the project with panels manufactured at its US-based factory in the state of Arizona. (previous post) The Chinese firms have embarked on their public relations campaign, most likely with encouragement from Beijing, following the latest developments in an ongoing dispute with the US and Europe over what the western nations believe are unfair subsidies from Beijing. That dispute saw the US open an investigation last summer that could have resulted in large punitive tariffs. But in the most recent development, tariffs recommended by the Obama administration were small and appear to be largely symbolic, indicating Washington wants to avoid a trade war in the important alternate energy space. (previous post) So now it’s China turn to show some good will, and this recent string of announcements appears to be part of that campaign. What’s interesting is that these latest moves by Canadian Solar and Longyuan could actually be not only good for PR, but could also be smart longer term investments if they can eventually be sold to professional alternate power plant operators. Billionaire investor Warren Buffett made it clear last year that he sees potential in the area, investing $2 billion last year for a solar plant in California. (previous post)

Bottom line: A new Chinese wave of investment in western alternate energy projects is largely a PR exercise to diffuse a recent trade dispute, but could also be a good longer-term investment.

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

◙ LDK Cuts, Suntech Waits As Solar Winter Nears End 太阳能行业冬季将结束：赛维裁员，尚德等待

◙ Buffett Brightens Solar Prospects 巴菲特进军太阳能 行业美好前景可期

New China Mobile Chief Sends Bad Signals 中国移动新任领导传递糟糕迹象

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China Mobile (HKEx: 941; NYSE: CHL) marked a major milestone last month when Wang Jianzhou stepped down as its long-serving chairman, leaving a mixed legacy at the world’s largest mobile carrier that included the start of what could easily become a long-term decline. Now it is up to the company’s new leaders to try to halt that downward trend, or risk seeing a company that pioneered mobile service in China slowly slide into the realm of second-tier player. One of the first major signals from the company’s new leaders since Wang’s departure a month ago wasn’t very encouraging. That sign came at a recent press conference, where new Chairman Xi Guohua said China Mobile would launch a commercial fourth-generation network in the tech-savvy former British colony by year-end that could support its own homegrown 4G technology standard, called TD-LTE. That announcement — Xi’s first as chairman — continued Wang’s legacy of strongly promoting 4G as the answer to his company’s sputtering fortunes, even though China’s telecoms regulator has indicated it won’t issue commercial 4G licenses for at least a couple of years – the equivalent of an eternity for a fast-moving business like mobile service. Instead of fixating on 4G, Xi and his new leadership team need to turn their focus to China Mobile’s neglected 3G network, based on another homegrown standard called TD-SCDMA. Despite spending billions of dollars to build a TD-SCDMA network, which is already technologically inferior to products from its rivals, China Mobile has done little to promote or develop its 3G service and is rapidly losing position in the space as a result. In his 8 years at China Mobile, Wang built the company into one of the world’s most profitable and cash-rich mobile carriers, increasing its share to a dominant 72 percent of the market by late 2008 from 65 percent when he arrived. But then he hit a roadblock in early 2009 when China formally awarded licenses for 3G. Unlike rivals China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA), whose licenses allowed them to build networks based on globally developed technologies, China Mobile was ordered to build its network using the homegrown and problem-plagued TD-SCDMA standard. Rather than use China Mobile’s huge cash pile and dominant market position to aggressively develop 3G, the company under Wang spent billions of dollars to build a patchy 3G network and did little to attract new subscribers. It then proceeded to tell the market it was placing its bets on next-generation 4G technology that looked like it wouldn’t be ready for commercial service for at least 2 to 3 years. As the company did this, its share of the 3G market rapidly deteriorated, from around 45 percent a year ago to a current 39 percent. The recent Hong Kong initiative seems to signal 4G will remain the company’s main focus under Xi’s new leadership, continuing Wang’s policy. The only problem is, if the current trends continue, China Mobile could easily see its share of the 3G market – whose users will be the first to make the switch to 4G – rapidly erode to the point where it falls to second or even third place by the time 4G licenses are awarded. By then, China Mobile could well discover that many of its former subscribers who defected to its rivals’ better 3G networks are happy where they are, meaning it will be too late to win them back to the 4G network that is now receiving so much of its energy and resources.

Bottom line: China Mobile’s new leaders need to end the company’s fixation on 4G and focus on the present or risk seeing their company become a second-tier player.

Related postings 相关文章:

◙ China Mobile: Improvement Ahead Under New Leaders 新领导有望助中国移动复苏

◙ China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

E-Commerce: Dangdang CFO Goes, Suning’s New Trip 当当网首席财务官请辞 苏宁进军在线旅游业

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There are a couple of interesting news bits from the e-commerce space, one from e-commerce giant Dangdang (NYSE: DANG) whose CFO has just resigned, and the other on an interesting new move by an increasingly aggressive Suning (Shenzhen: 002024) into online travel services. I was originally planning to start with Suning, as that news looks the most interesting in terms of broader strategy. But then I had a look at Dangdang’s stock, and was a bit surprised to see it plunged more than 15 percent after news of the CFO resignation came out, indicating investors are clearly concerned about this development. Dangdang itself wasn’t saying much, except that CFO Conor Yang, who joined the company 2 years ago and saw it through its IPO in late 2010, tendered his resignation for personal reasons. (company announcement; Chinese article) Yang helped Dangdang raise more than $300 million in the successful IPO, with Dangdang shares initially soaring in their trading debut. But since then they have tumbled due to fierce competition in China’s e-commerce space that has led Dangdang and most of its peers deeply into the red, and now they trade at about half of their IPO level. It’s never good to lose a CFO, and it’s especially bad when your CFO leaves when the company is so deeply in the red. Such departures often imply the CFO, who is traditionally more conservative about financial matters, may believe his bosses are pressuring him to understate the nature of bad news like big losses. If that’s the case, look for more turbulence for this already-battered stock as its accounting comes under increasing scrutiny. Meantime, Suning, which has aggressively moved into e-commerce over the past year and is now the country’s fourth-biggest player, announced it is getting into the online travel business by selling airplane tickets and hotel reservation services. (English article) This move looks interesting as the online travel space is already quite crowded, dominated by established players like Ctrip (Nasdaq: CTRP) and eLong (Nasdaq: LONG) and recent entries to the space by e-commerce rival 360Buy and search giant Baidu (Nasdaq: BIDU). (previous post) Suning seems to be quite good at executing its new business strategies, and thus could offer a serious product in the space in a relatively short time. If that happens, along with all these other new initiatives, look for the online travel sector to see a serious jump in competition — and profit erosion — in the next 2 years.

Bottom line: Dangdang’s CFO resignation could point to accounting issues, while Suning’s entry to online travel services will further heat up this increasingly crowded space.

Related postings 相关文章:

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

◙ Dangdang and Gome: Marriage Ahead? 当当和国美：联姻前夕？

◙ Baidu’s Qunar: Going Places 百度投资的去哪儿网：前途无量

Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票

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Everyone is buzzing over word that Goldman Sachs (NYSE: GS) will sell down nearly half of its remaining stake in ICBC (HKEx: 1398; Shanghai: 601398), the world’s largest bank by market cap, with analysts saying Goldman will net a tidy return on this investment made over six years ago before ICBC’s mega-IPO. (English article) But in my view they’re missing the point, as this sale is less a sign of satisfaction and more one of concern, as China’s banks stand on the cusp of a meltdown that could see their bad assets balloon and their share prices tumble in the next 2 years. That concern could easily snowball in the months ahead if China’s big banks really start to see their bad loans jump, leading Goldman to offload its entire remaining stake and perhaps even prompting American Express (NYSE: AXP), one of the banks’ last remaining major western investors, to dump its own ICBC holdings as well. Let’s take a look at the news first, which has western media reporting that Goldman is raising $2.5 billion by selling about 40 percent of its current ICBC holdings to Temasek, the Singaporean sovereign wealth fund. Goldman is selling the stake for about 3 percent less than its publicly traded price before the news broke, representing a fairly modest discount all things considered. This latest sale comes just 5 months after Goldman sold down another $1.5 billion worth of ICBC stock late last year. At around the same time, Bank of America (NYSE: BAC) also sold a its remaining stake in China Construction Bank (HKEx: 939; Shanghai: 601939), as it completely unloaded its 10 percent of the Hong Kong-listed shares of China’s second largest lender over the course of last year. Citigroup (NYSE: C) joined the exodus last month, when it also sold off its long-held stake in a smaller lender, Pudong Development Bank (Shanghai: 600000). Other major western banks that previously unloaded similar major investments in Chinese banks have included Royal Bank of Scotland (London: RBS) and UBS. While analysts have been pointing out that Goldman and Bank of America both need to raise their capital to meet stricter requirements imposed after the global financial crisis, the recent sales by these 2 US giants were undoubtedly also driven by fear that their China investments could rapidly plunge in value if a looming crisis for China’s banks ever materializes. China’s major lenders all survived the global financial crisis with little or no damage, mostly because all were prohibited from investing in the toxic global assets that caused the crisis in the first place. But Beijing sowed the seeds of its own financial meltdown in 2009 by ordering its banks to embark on their own lending binge as part of its 4 trillion yuan stimulus plan to prop up the Chinese economy at the height of the global turmoil. Now many of those loans — especially ones to local governments for dubious infrastructure projects — are showing signs of souring, prompting Beijing to consider a steady stream of measures to delay the inevitable wave of defaults. Worries about a looming crisis weighed heavily last year, with shares of most Chinese lenders falling during even as major global indexes rose. A rally for Chinese bank stocks early this year was most likely behind Goldman’s decision to sell now, as it sought to lock in some gains before the sector starts to sink again. Such a new sell-off has indeed   already started to happen, and could accelerate in the weeks ahead as the Chinese banks start to release their first-quarter earnings results and outlook by the end of this month. If the reports show any signs of weakness, which seems likely, look for the downward share pressure to accelerate, and for Goldman and possibly even American Express to quickly consider selling the remainder of their ICBC holdings to lock in gains while they can.

Bottom line: Goldman’s latest reduction in its ICBC stake reflects growing concern about a looming China bank crisis, with more similar sales likely in the next 6 months.

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