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Ford, Volvo Step on the China Accelerator 福特与沃尔沃拟在中国大幅扩张

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China’s auto market is showing all the signs of a rapid slowdown after a massive boom that saw it overtake the US as the world’s largest auto market in 2010, but don’t tell that to Ford (NYSE: F) or Volvo, which are happily discussing their latest expansion plans with local and international media. In a way, I have to admire both of these companies and many of their foreign rivals for focusing on the longer-term future rather than the next 1-2 years, which are likely to see China’s auto market post low- to middle-range single digit percentage growth as Beijing slams the brakes on the nation’s overheated economy to try to steer it to a soft landing. But at the same time, Volvo’s plan in particular looks fraught with risk, as it aims to build up a massive new manufacturing base and roll out a new brand with its Chinese parent, Zhejiang Geely, despite little or no name recognition among most Chinese consumers. Let’s take a look at the Volvo news first, which has executives at the Swedish firm finally mimicking its Geely parent by saying it wants to become a Chinese luxury brand and plans to spend $11 billion over the next few years to reach that goal. (English article) Geely founder Li Shufu had always promoted this vision for Volvo since his company purchased the money-losing Swedish brand 2 years ago, but Swedish executives at the company had resisted that vision, preferring to maintain the more mainstream image that Volvo had in the rest of the world. In this latest report, a Volvo executive is also saying the Swedish company will shoulder most or all new investment for its drive into China’s luxury car market. Those remarks are interesting because they seem to indicate that Geely, itself burdened by huge debt from the original Volvo purchase, is trying to add some distance from the massive Volvo expansion plan by making the Swedish company assume all the new debt that such an expansion will require. I don’t want to be too cynical, but such a move seems to imply that if the Volvo plan ultimately fails, responsibility for all its debt will be assumed by Volvo itself, meaning Geely could simply close the unit or let it file for bankruptcy reorganization if its ambitious plan doesn’t succeed — a very distinct possibility. Moving on to Ford, foreign media are reporting the company will spend $600 million to expand capacity at one of its passenger car factories by 60 percent, as it aims to grab more share in the China market from more established players. (English article) This plan seems a bit more modest than Volvo’s, and is part of more gradual approach to China by Ford, which came to the market relatively late through a joint venture with Chang’an Auto and is now attempting to catch up by taking share from both domestic nameplates and global rivals like GM (NYSE: GM) and Volkswagen (Frankfurt: VOWG), which came much earlier. At the end of the day I do like the fact that both Volvo and Ford are investing for the future, though I also think the Volvo plan may be a bit too ambitious and could easily see the company filing for bankruptcy in the next 5 years.

Bottom line: New expansions by Ford and Volvo in China auto are aimed at longer-term development, though Volvo’s plan looks overly aggressive and could end in financial collapse.

Related postings 相关文章:

◙ Geely Eyes Risky New Luxury Route 吉利欲走有风险的豪华车路线

◙ Geely Leans on Struggling Volvo 吉利依靠处于困境中的沃尔沃

◙ China Car Sales Sputter Out of the Gate 中国汽车销售龙年遭考验

Unicom: A Bureaucratic Mess 中国联通：官僚混乱

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I don’t like to admit this, but I’m rapidly losing both confidence and interest in China Unicom (HKEx: 762; NYSE: CHU), China’s second biggest telco, which seems to be struggling with a never-ending series of management shuffles that are diverting its attention from its real business. To make matters worse, the company is facing a major challenge from China Telecom (HKEx: 728; NYSE: CHA), the smallest of China’s 3 major carriers, which has just announced some new figures suggesting it will get even more aggressive in its highly effective campaign to steal market share from both Unicom and industry leader China Mobile (HKEx: 941; NYSE: CHL). Let’s look at Unicom first, which has made steady headlines over the last year for all the wrong reasons, mostly involving misjudgement of China’s 3G market and an endless series of management reshuffles. The latest reports center on the latter type of news, with some reports saying the company is now undergoing a shift that will combine its sales and marketing departments, while others simply say adjustments are continuing. (English article; Chinese article) I hope readers will excuse me if I sound too cynical, but Unicom is showing all the signs of a company living in China’s socialist past, when state-controlled work units and their employees had little or no interest in running an efficient business and instead were more interested in the names of their positions and departments, and loved to hold endless meetings that produced no particular results. If this is the kind of company that Unicom wants to become, then perhaps there are some bureaucrats in Beijing who will welcome this return to a friendlier socialist past. But if it wants to be a competitive company, this fixation on bureaucracy needs to end soon. Otherwise the company risks becoming irrelevant and losing its spot as China’s second largest telco to China Telecom. On that front, China Telecom has just announced it is aiming to sell 80 million 3G handsets this year, some costing as little as 300 yuan, or less than $50 each. (Chinese article) I was surprised earlier this year when a company executive implied China Telecom was aiming to add 50 million 3G subscribers this year, which equated to 35 percent growth rate to its total subscriber base from the beginning of this year. (previous post) This new 80 million handset figure implies even more aggressive growth targets, and if the company really added that many new 3G users this year it would translate to more than a 60 percent growth rate over its total user base from the beginning of the year. If the current trends continue, which looks likely, I would fully expect to see China Telecom pass Unicom by the end of this year in 3G subscribers, and could even see it passing Unicom in terms of total subscribers sometime next year.

Bottom line: An increasingly focused and aggressive China Telecom is likely to pass an increasingly mismanaged Unicom by the end of this year in terms of 3G subscribers.

Related postings 相关文章:

◙ China Telecom Turns Up Volume in 3G Drive 中国电信计划一鼓作气 3G市场欲再下一城

◙ Unicom Spends, But Can It Earn? 联通拟增加开支加强3G业务 效果有待观察

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

More Media IPOs From People’s Daily, Shopping Channel 电视购物，继人民日报后又一计划上市的媒体

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Liberalization of China’s media sector is marching forward, with a new IPO development from the Communist Party’s flagship People’s Daily, and another from a shopping channel named Haoxiang, as players both old and young rush to raise funds and become commercial. The news comes as global media giant Disney (NYSE: DIS) may also be exploring an animation joint venture in China (previous post), and as US home shopping giant QVC is seeking to set up its own joint venture with China’s biggest radio broadcaster, China National Radio (previous post), reflecting Beijing’s recent decision to relax its grip on this sensitive sector. Let’s look at the People’s Daily first, whose previously announced plans to make an IPO for its website, Renmin Wang, has formally been approved by the securities regulator and will now begin marketing to potential investors, according to Chinese media reports. (Chinese article) Recent months have seen plans disclosed for both the People’s Daily and Xinhua to make IPOs for their websites, in highly symbolic offerings for 2 of China’s media most closely associated with state control. With this latest development, it looks like the People’s Daily’s website will be first to market, but I would expect Xinhua’s offering for its Xinhuanet to come in the next few months also assuming there are no major obstacles. Meantime, domestic media are citing an executive from a home shopping channel called Haoxiang saying the company has undergone a recent structural reform in preparation for its own upcoming IPO. (Chinese article) I’ll be the first to admit that I don’t know anything about Haoxiang, and I expect it’s probably a regional player in the increasingly competitive e-commerce space that allows shoppers to purchase products from their home over traditional television and Internet channels. Without knowing more about the company it’s hard to say whether Haoxiang’s IPO would be attractive, but it is certainly coming on the heels of a growing number of public offerings for regional media firms. Last year saw a flurry of such listings, with regional names like Jishi Media (Shanghai: 601929), Jiangsu Phoenix Publishing (Shanghai: 601928) and China Central Land Media (Shenzhen: 000719) all going to market in their drive to raise money and become more commercial. (previous post) These kinds of companies could offer an interesting investment option, as I would expect many to become acquisition targets for a few more aggressive players that are likely to emerge as consolidators for the highly fragmented market. I seriously doubt that either Xinhua or People’s Daily will be major players driving the upcoming consolidation, as both still take their orders from Beijing and have a poor track record at commercial ventures. But major media groups in big cities like Shanghai and Guangzhou could easily play the consolidator role, making them potentially interesting bets to become China’s new media giants if and when they make their own IPOs, which could happen in the next year or 2 if Beijing’s liberalization of the sector continues at its current pace.

Bottom line: The People’s Daily website  and a regional shopping channel have become the latest media players to move ahead with IPOs as Beijing loosens its grip on the sector.

Related postings 相关文章:

◙ Xinhuanet IPO Sets Stage For Media Listings 新华网IPO或将开启媒体上市热潮

◙ Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

◙ QVC Opens Shop in China QVC与中央人民广播电台合作运营电视购物频道

Disney-Tencent Talks: China Looking Animated 迪士尼与腾讯沟通动漫合作

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China may finally be opening up its animation market to foreign investment, with the latest word that none other than Disney (NYSE: DIS), arguably the world’s most famous brand in the field, is in talks with Internet leader Tencent (HKEx: 700) for a tie-up in the lucrative but largely undeveloped space. The media reports are rather vague, saying only that Tencent, China’s largest Internet company, is “communicating” with Disney about a potential animation development tie-up. (Chinese article) But any such partnership would look extremely interesting, especially as Tencent is looking to build up its online video business (previous post) in a bid to compete with industry leaders Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO), which are in the process of merging. (previous post) From Disney’s perspective, any such deal would mark a major breakthrough, following its last big advance a couple of years ago when it finally reached an agreement to build its first mainland Chinese Disneyland in Shanghai. The Shanghai Disneyland agreement was a long and torturous process, marked by nearly a decade of on-again-off-again talks that finally resulted in the big deal. Disney has a number of other smaller China initiatives, including its Disney-branded English language schools and numerous merchandise licensing agreements. But the big piece missing from Disney’s China picture to date is filmed entertainment, with the company lacking any major presence on Chinese TV and in its movie theaters apart from products imported under a strict quota system. An animation tie-up with Tencent — or any other video channel — could quickly change that situation, allowing Disney to set up a China-based animation studio that could distribute programs through its own Disney-branded TV or Internet channel, or sell content to other channel operators. DreamWorks Animation (NYSE: DWA), creator of the popular “Shrek” animated franchise, scored a major breakthrough on the China animation front early this year when it formally signed a deal to create a Chinese animation joint venture with Shanghai Media Group (SMG), China’s second largest media company. (previous post) I said at the time that the DreamWorks deal, along with a number of other smaller signals from Beijing, indicated that China might be preparing to open up its animation market to western investment, after a previous attempt to open the market about 5 years ago failed. I have to assume that Disney would only enter into talks with Tencent or any other potential partner after receiving a nod from Beijing that any eventual new venture in the sensitive media space would receive government approval. Given the current climate of opening up the media space and the recent DreamWorks deal, I would have to believe that Disney is definitely looking around for an animation partner, and is probably talking to Tencent as well as others at this early stage. If that’s the case, look for Disney to sign its own China animation joint venture in the not-too-distant future, probably by the end of this year.

Bottom line: Reports that Disney is talking to Tencent for a Chinese animation joint venture could very well be true, with Disney likely to form such a venture by the end of this year.

Related postings 相关文章:

◙ Facebook, DreamWorks in Latest China Moves Facebook、梦工厂在华最新动向

◙ Disney Bets on China Thirst for Luxury 迪士尼押注中国名品市场

◙ Tencent Sends Out Mixed Video Signals 腾讯若持股优酷 有助进军视频业

 

Qihoo: The Next Accounting Victim? 奇虎360：下一个会计丑闻受害者？

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Just when the confidence crisis that has hit US-listed Chinese stocks for nearly a year looked like it was waning, a new accounting scandal could now be brewing, this time involving security software maker Qihoo 360 (NYSE: QIHU). Readers of this space will recall that Qihoo came under attack last year by a small brokerage named Citron, which questioned the company’s user figures and said Qihoo’s stock was probably worth around $5 per share rather than the $20 range where it was trading at that time. (previous post) Now Forbes magazine has come out with a much broader report questioning many of Qihoo’s operational figures, including its advertising revenues. (Chinese article) Qihoo responded by issuing a statement “strongly rejecting” the allegations, and also threatening legal action. (Qihoo statement) As a veteran reporter, I know it’s one thing when a small brokerage questions a company’s data, as many observers will suspect that brokerage is making such allegations to make some quick profits by short selling the company’s stock. But it’s quite another thing when a big publication like Forbes makes similar or even bigger allegations, as such publications understand the risks of printing material that might be considered defamatory and are much more careful about what they publish. Such publications also strictly forbid their reporters to trade in the stocks that they write about. In this case, I’ve had a look at the Forbes article and it does indeed appear that the author, Richard Pearson, has done quite a bit of research, including trying to contact the people who sell ads that are a main revenue source for Qihoo. Nothing in his research allows him to directly accuse Qihoo of falsifying data, but many of his arguments do seem convincing about why he believes the company may be engaged in questionable accounting. I’m quite confident that Deloitte, which is Qihoo’s accountant, will feel compelled to investigate some or all of the issues pointed out in the Forbes article, and wouldn’t be surprised at all to see it resign the Qihoo account if it doesn’t like what it finds. What surprises me quite a bit is how resilient Qihoo’s stock has been despite all this controversy. Its shares were trading around $20 when the initial Citron report came out last year and went down a bit afterwards. But they have rebounded sharply since then and were even above $25 before this latest Forbes story came out. And yet despite the strong arguments in the Forbes report, Qihoo shares have only fallen a relatively modest 11 percent since the article came out, indicating investors aren’t completely convinced that there are any problems. I previously said “let the buyer beware” when Qihoo made its initial public offering last year, as the company had a history of lawsuits being filed against it as a result of some of its dubious business practices. (previous post) I would take this opportunity to reiterate that message, and would be willing to bet this latest controversy involving Qihoo is far from over.

Bottom line: An attack on Qihoo 360 by Forbes magazine marks the beginning of a new controversy for the company, in the latest of a string of accounting scandals for US-listed Chinese firms.

Related postings 相关文章:

◙ Qihoo 360 At Center of New Scandal 奇虎360陷入新的丑闻

◙ Citron Keeps Up Qihoo Assault 香橼继续攻击奇虎

◙ Inflated Qihoo Bounces Back on Hot Air

 

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

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The arrival of spring is bringing a sudden surge in new partnerships for China’s overheated tech space, as companies seek any competitive advantage they can find to stay in business. Online video sites Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) led off the parade with announcement of their $1 billion marriage last month (previous post), followed by a strengthening of ties last week between Apple (Nasdaq: AAPL) and Foxconn International (HKEx: 2038), one of its main iPhone producing partners. Now struggling online retailer Dangdang (NYSE: DANG) and equally embattled real-world electronics retailer Gome (HKEx: 493) have formally cemented a relationship that will see the pair merge their online electronics retailing business. (company announcement) This new tie-up has been rumored for a while now so it isn’t really news (previous post), though it should help both partners better compete with 360Buy, the online retailer that started out as an electronics seller, as well as Suning (Shenzhen: 002024), Gome’s main real-world retailing rival that has also pushed aggressively into the online space. But I suspect what really has investors excited, and myself intrigued as well, is the possibility that this alliance could eventually develop into an outright marriage between these 2 companies, each of which could greatly benefit from the other’s traditional strengths. Investors in New York bid up Dangdang shares as much as 15 percent in Monday trade to levels not seen since last September, with the stock closing up nearly 10 percent. Still, its shares are trading at just a third of their level from a year ago — testimony to a bloody price war with 360Buy and other players backed by the likes of Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) in China’s ultra-competitive e-commerce space. That price war pushed Dangdang itself deeply into the loss column in its latest reporting quarter, with the company posting a $21 million loss for the fourth quarter of 2011. (previous post) While Dangdang’s troubles have mostly appeared over the last year, Gome’s date back a bit longer, starting a few years back after its charismatic founder Huang Guangyu was arrested on insider trading allegations. Since then Gome has been involved in an endless series of internal power struggles, which has undermined its ability to function effectively. This new partnership won’t immediately address Gome’s internal problems, but it could give both companies a nice boost by allowing each to draw on its traditional strengths to help the other if the partnership runs smoothly. Of course there’s no guarantee that will happen, as Huang may still try to interfere with the new partnership from his prison cell and Dangdang’s husband and wife founders, Peggy Yu and Li Guoqing, are also quite opinionated and may not easily want to give up any control of their company. But if both sides realize that a strong partnership is in everyone’s own interest, I could see this relationship deepen and eventually result in a real-world merger in the next 2-3 years.

Bottom line: The new partnership between Gome and Dangdang could evolve into a true merger within the next 2-3 years if the 2 sides can work well together.

Related postings 相关文章:

◙ Dangdang, GOME In New Alliance, More to Come 国美携手当当网 或开启类似合作序幕

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

◙ 360Buy Heats Up E-Books, People’s Daily Goes to Market 京东商城高调进军电子书,人民网开启上市进程

Apple’s Hon Hai Investment Talk: Why Not? 苹果投资入股鸿海：为什么不？

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I’m going to do something today I don’t usually do and comment on an interesting report that appeared on a Chinese website that has since been removed regarding a potential massive investment by Apple (Nasdaq: AAPL) in Taiwanese electronics giant Hon Hai (Taipei: 2317), one of its biggest iPhone manufacturing partners. The reason for my exception is that the deal sounds extremely intriguing and makes lots of sense in the current climate, even though removal of the article and lack of similar reports in western media make me suspicious of whether anything is really happening. But let’s move past all this discussion and look at the report itself, which said that Apple was preparing to make a massive $9.76 billion investment in Hon Hai, which was going to issue new shares in the form of global depositary receipts (GDRs) to make Apple its second largest shareholder. Hon Hai currently has a market capitalization of about $40 billion, meaning an investment that size, presuming it was new shares, would make Apple the owner of about 20 percent of Hon Hai’s shares. Again, I want to emphasize I have serious doubts about whether such a deal is actually being discussed for the reasons I previously mentioned. But at the same time, I really do believe that such a deal makes lots of sense for both Apple and Hon Hai for many reasons. From a cash standpoint, the investment would represent a minor amount of money for Apple, which has so much cash at this point, around $100 billion to be exact, that it took the unusual step last month of restoring a dividend for shareholders after a 17 year gap, and also said it would buy back another $10 billion worth of its stock. (English article) From a strategic standpoint, it makes perfect sense for Apple to make such a large investment in one of its biggest manufacturing partners, which shows not only its commitment to the health of that partner but also to the efficient and ethical running of its operations. The focus on not only efficiency but also ethical treatment of employees has become an extremely relevant issue over the past year, as Hon Hai’s Foxconn International (HKEx: 2038) unit, which manufactures iPhones for Apple, has come under intense scrutiny during that period for working conditions that some consider harsh, including pressure for its young employees to work lots of overtime and in isolated conditions on production lines to discourage socializing. That issue has become so big that Apple’s Tim Cook made a special trip to a Foxconn factory in the central city of Zhengzhou during his inaugural trip to China last week since taking over as CEO of the company in 2011 shortly before the death of Steve Jobs. (previous post) Last but not least, Hon Hai shares are quite attractively priced right now, down about 34 percent from where they were a year ago on all the negative publicity as well as rising costs, even as the rest of the market has rallied. So, on the whole, even if Apple isn’t considering this deal, I think it should as it makes lots of sense from so many angles, with the potential to benefit both Apple and Hon Hai.

Bottom line: A report citing Apple in talks to make a major investment in manufacturing partner Hon Hai looks like a smart move that Apple should strongly consider, even if the rumor isn’t true.

Related postings 相关文章:

◙ Apple Bytes: Labor, a State Visit and Baidu 库克中国行猜想：他在下一盘很大的棋

◙ Apple CEO Cook Stirs Up Guessing Firestorm 苹果CEO库克低调访华意欲何为？

◙ China Telecom iPhone Debut Looks Strong 中国电信iPhone初次发售，势头强劲

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

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It’s a beautiful spring day here in Shanghai, and if you’re an avid microblogger you’re probably getting up and perusing the latest news and gossip on Sina’s (Nasdaq: SINA) popular Weibo service to read and pass on to your friends the latest news about your favorite celebrity or social issue. But a quick attempt to pass on someone else’s posts with your own insightful comments attached is suddenly impossible — blocked by Weibo itself as punishment from Beijing for spreading rumors, underscoring again the perils big companies face when setting up shop in China’s social networking realm. (English article) The news that Sina’s Weibo and another popular microblogging service from Tencent (HKEx: 700) are both being punished for spreading rumors should come as a surprise to no one, though enthusiastic investors who purchased stock of both companies on big hopes for their microblogging services might decide that Monday is a good time to sell some of their shares. The reports on what happened are actually quite detailed, saying both Sina and Tencent angered Beijing by allowing rumors to spread on their services that troops had moved into the nation’s capital as part of a coup attempt that never happened. Beijing has always been sensitive about any kind of rumor that could foment social unrest, and those sensitivities will only increase this year as the nation prepares for a major handover of power from the current leaders following the end of their official 10-year term in office. What’s interesting in this situation is the very public way in which the matter is being handled, with news of the false rumors and unspecified punishment both appearing in a report from Xinhua, the central news agency considered the voice of the Communist Party itself. No specifics of the punishment have been disclosed, and I suspect both Sina and Tencent will face limits on their microblogging operations and perhaps some small fines over the short term. But the longer term implications could be much more worrisome, with both companies facing big consequences — including even a possible shut-down — if they commit any similar transgressions in the year ahead during the sensitive power handover. That could pose a big risk to both companies, as well as other microblogging services, as all have now officially been warned that Beijing won’t tolerate any political rumors in the months ahead. That means all these services will undoubtedly delete any political postings on their services that are even remotely political for fear of offending Beijing, which could easily anger many of their millions of users who will no longer be able to post many of their thoughts online. Advertisers will also undoubtedly think twice about wanting to play in such a dangerous space, where their ads could not only suddenly become in accessible but they could also risk angering Beijing by doing business with companies accused of spreading rumors. This latest development comes only months after Beijing announced its “real name” policy for all microblogging sites, requiring them to register all their users by their real names, again as a measure to try and curb rumor mongering and other unsavory activities such as scams. (previous post) Sina, Tencent, NetEase (Nasdaq: NTES) and other microblog site operators aren’t the only ones at risk, as other social networking site operators like Renren (NYSE: RENN) and Kaixin, whose services are more similar to Facebook, could just as easily be accused of spreading rumors and also be punished. To anyone considering buying shares of any of these companies, I would just reiterate that they may have good great growth potential due to the size of China’s Internet market — which recently passed 500 million users — but they also come with huge risk. Especially in the coming year with the leadership change, these companies will have to be especially careful about what they allow on their sites, and can risk punishment or closure at any time. At the same time they face the risk of punishment by their own users, who might become frustrated with all the new restrictions and could easily end up abandoning their accounts.

Bottom line: The latest punishment for Sina and Tencent microblogging services for spreading rumors  underscores the big risks China Internet companies face due to political considerations.

Related postings 相关文章:

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

◙ Sina Gets Serious on Weibo 新浪开始严肃对待微博

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

ICBC, Huawei: It’s Cold Out There 工商银行、华为：国外市场冷清

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As today officially marks the end of the latest quarterly earnings season, I thought I’d take a quick look at 2 of China’s leaders in their fields, banking giant ICBC (HKEx: 1398; Shanghai: 601398) and telecoms equipment leader Huawei Technologies, which are discovering the world outside their protected home market can be lucrative but is also quite competitive and fraught with other challenges. ICBC saw its profit last year rise 25.6 percent, but its pretax profits from overseas operations rose a more modest 18 percent. (results announcement; English article) The overseas growth was down sharply from the previous year’s 37.2 percent rise, as ICBC expanded aggressively in Africa, South America and Southeast Asia. Meantime, Huawei saw its revenue grow just 11.7 percent last year, according to a company executive quoted by Chinese media, a relatively disappointing result for a company whose sales the previous year rose 24 percent and was used to seeing even higher rates in previous years. (Chinese article) Obviously many complex issues are behind these relatively modest growth figures, but the biggest one is certainly the fact that global markets are much more competitive than China’s domestic one, where local players have a home-field advantage that includes strong direct and indirect support from Beijing. Still, as China comes under pressure to wean its companies off state support and as these companies themselves try to become serious global players, they will have to take such international steps and prove to the world that they can compete with other top world players. ICBC has been the most aggressive of China’s big banks in its international drive, buying banks in Southeast Asia and Latin America, and expanding its partnership with Standard Bank, Africa’s biggest lender, to boost its Africa business. (previous post) Bank of China (HKEx: 3988; Shanghai: 601988) has also been active in currency services, its traditional strength, signing a series of landmark deals in recent months to enter the global commodities trading business. (previous post) Huawei, meantime, was one of China’s biggest exporting success stories for years, but has run into another roadblock in the last year, namely distrust by western governments who fear the company is just a spying arm of Beijing. Those fears have killed a number of Huawei’s initiatives in western markets over the last year, including one setback this week when the company was banned from bidding on contracts to help build a new high-speed data network in Australia (previous post) This kind of protectionist obstacle is something that all Chinese companies will have to deal with as they expand abroad, and other global giants must frequently deal with such issues from local governments as well. Both Huawei and ICBC seem like quick learners, and I fully expect both to overcome the various obstacles they run into and eventually become respected competitors on the global stage. But in the meantime, they will have to deal with many new issues, and will also have to be satisfied with much lower growth rates than they traditional got from their home market.

Bottom line: The latest results from ICBC and Huawei show that Chinese firms can compete globally, but will get much slower growth from international operations than domestic ones.

Related postings 相关文章:

◙ Huawei, ZTE Suffer More Setbacks 华为、中兴料将在西方市场遭遇更多挫折

◙ Bank of China Sees Gold in Global Commodities Trade 中行赴全球商品市场淘金

◙ ICBC Discovers China’s Latest Low-Cost Export: Currency 工行将从非洲人民币结算业务中获益

CITIC on Global Buying Hunt 中信集团加入全球收购行列

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CITIC Group, one of China’s oldest private investors, is joining a growing number of Chinese investors looking for bargains being sold off as a result of the global financial crisis, with media reporting the company’s brokerage arm is seeking to buy a major brokerage asset from France’s Credit Agricole (Paris: CAGR). (English article) The deal, which would see CITIC Securities (HKEx: 6030; Shanghai: 600030) buy Credit Agricole’s CLSA brokerage brand, would mark the second major attempt to purchase of a global asset by CITIC this year, following news last month that another of the company’s units, CITIC Capital, was making a bid  for AsiaInfo-Linkage (Nasdaq: ASIA), one of the oldest US-listed Chinese companies. (previous post) In fact, the Credit Agricole talks aren’t completely new, as CITIC was previously in discussions to buy a smaller stake in the CLSA brokerage unit along with another related asset from the French bank, which was trying to raise cash after taking a hit during the global financial crisis. But what’s new is that CITIC is now looking to buy the CLSA brokerage unit outright, rather than just a 19 percent stake that was being discussed earlier. That seems to indicate that Credit Agricole wants to reach a deal soon and is willing to give a good price, as talks have dragged on for a while now. Likewise, the AsiaInfo deal also looks like a relative bargain as the company’s shares have taken a beating over the past year, down more than 50 percent in 2010, amid a broader sell-off for US-listed Chinese stocks following a series of accounting scandals at several major listed players. Both deals look like they would be in the $1 billion range, which looks like a good comfort level for a group like CITIC, which has plenty of cash, including $1.7 billion raised by CITIC Securities in a Hong Kong IPO last year. CITIC is just the latest in a growing field of cash-rich private Chinese investment groups looking for bargains on the global stage in the wake of the global financial crisis, as most suffered little or no damage themselves during the crisis. Earlier this year, Fosun International (HKEx: 565) said it is eying potential investment oportunties in Europe, where many companies are looking to sell off assets as the continent grapples with its ongoing debt crisis. (previous post) Another aggressive player, HNA Group said last fall it has embarked on a 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. (previous post) Look for even more of these deals in the year ahead, probably mostly focused in the $1 billion range or less, as Chinese investors get more aggressive on the global stage.

Bottom line: CITIC is the latest private Chinese investment firm to step up its activity on the global stage, looking for bargains being sold by cash-hungry western firms.

Related postings 相关文章:

◙ Investors to AsiaInfo: Let’s See Some Numbers 投资者对亚信创联并购案减失耐心

◙ Gree, Bright Food, Fosun in New Global Moves 格力电器、光明食品和复星集团全球新动向

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

Apple Bytes: Labor, a State Visit and Baidu 库克中国行猜想：他在下一盘很大的棋

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As Tim Cook’s inaugural visit as Apple’s (Nasdaq: AAPL) new CEO wraps up, I thought I’d take a quick look back at what he’s done on the trip since my previous post earlier this week, which should indicate not only where his China priorities, but also his global ones, will lie in the years ahead. After writing my first post, which included calls on China’s major telcos, an Apple store and Beijing’s mayor, Cook has gone on to visit China’s premier-in-waiting, Li Keqiang, as well as a central China iPhone-producing factory. There are also interesting new rumors on a tie-up between Apple and Baidu (Nasdaq: BIDU), though it’s unclear if Cook actually met with any executives from China’s dominant search engine during his visit. The bigger picture emerging  from all these stops is that Cook is quite serious about developing the China market, and wants to strengthen not only his company’s relations with China’s top 3 telcos, but also improve its broader distribution and sales channels in a market that could easily become its largest globally in the next 5 years. Secondarily, he also seems to be more interested in his company’s image as a good corporate citizen than his predecessor Steve Jobs, whose death last year came just months after Cook officially assumed the CEO title. The visit to the Beijing Apple store underscores Cook’s determination to raise his company’s profile and sales channels in China. The company already enjoys a strong reputation in the nation’s major cities like Beijing and Shanghai, but is less well known in smaller cities that are home to the vast majority of China’s 1.3 billion people and could provide a huge new business opportunity. To cultivate this market, I wouldn’t be at all surprised to see Apple roll out some lower-end iPhones and iPads in the next 1-2 years, and in fact such initiatives have been rumored in the past. Cook’s visit with Li Keqiang also marked a rare state visit for a corporate executive with a top Chinese leader, indicating that both China and Apple want to see this relationship thrive, as China surely realizes it needs companies like Apple to push its own companies away from lower-end manufacturing and up the value chain. By visiting with both Li and Beijing’s mayor, Cook also showed he wants to have a more elevated profile compared with the lower-key Jobs as he tries to cultivate the company’s image as a good global corporate citizen in the many markets where it operates. The visit to one of the central China factories that makes iPhones also underscores this priority, as the facility operated by Taiwan’s Foxconn (HKEx: 2038) has come under scrutiny in the last 2 years for its high-pressure workplace tactics that some consider abusive. Following those ongoing criticisms, Apple said after Cook’s visit that it would work with Foxconn to improve that situation. (English article) Lastly there’s the Baidu tie-up, though that one is only rumored and would reportedly see Apple make Baidu’s search site the default for all of its iPhones sold in China. (English article) Such a move certainly seems to make sense as Baidu controls the overwhelming majority of China’s search market, and I wouldn’t be surprised to see a deal on that front in the next few months.

Bottom line: Tim Cooks’ weeklong China trip underscores that the market will become a top priority for Apple during his tenure as CEO, as will improving his company’s corporate image.

Related postings 相关文章:

◙ Apple CEO Cook Stirs Up Guessing Firestorm 苹果CEO库克低调访华意欲何为？

◙ China Telecom iPhone Debut Looks Strong 中国电信iPhone初次发售，势头强劲

◙ Apple Wins iPad Round in Shanghai: New Justice? 苹果在iPad商标侵权案中扳回一局