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Nissan, VW Jump on China Brand Bandwagon 日产和大众进军中国低端车市场

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A growing number of big foreign car makers are developing new low-end brands and models just for the China market, with Nissan (Tokyo: 7201) and Volkswagen (Frankfurt: VOWG) the latest to make moves in that direction. These new initiatives come as the foreign giants look to keep their growth alive in China’s slowing auto market, posing a major new challenge to domestic nameplates like Geely (HKEx: 175) and Chery, which have been rapidly losing share to their better funded, more experienced foreign rivals. These moves also follow on the phenomenal success of General Motors’ (NYSE: GM) 2010 launch of the Chevy Sail, its first low-end model developed just for China which has posted growth rates in the 50 percent range for much of the last year and is now one of the nation’s best-selling models. Let’s look at the latest news first, starting with Nissan, which last week formally began production of its Venucia line of cars developed just for the China market in its partnership with Dongfeng Motors (HKEx: 489). (English article) Nissan first announced Venucia just over a year ago, so the brand itself isn’t exactly news. But all eyes will be watching to see how quickly sales grow for the first model, the D50, which will be priced starting at around 70,000 yuan, or about $11,000, which is roughly comparable to the Sail’s starting price of about 60,000 yuan. Meantime, German media are quoting a Volkswagen executive saying the company is planning to launch its own new brand to make low-priced, high quality cars for developing markets, starting at an even lower 5,000 euros per car, or about $6,600. (English article) The reports indicate that China, already one of VW’s top global markets, would be one of the primary markets for this new initiative, and I would expect the German car maker could launch the initiative with its main Chinese partner, SAIC (Shanghai: 600104). These new initiatives follow similar ones by Honda (Tokyo: 7267), which last year launched a new brand called Everus with Chinese partner Guangzhou Auto; and GM’s launching of its own made-in-China brand, Baojun, with its China partners also last year. All of these big foreign names are hoping to capitalize on China’s auto market, now the world’s largest, to develop these new brands that will combine good quality with low prices, and then export those models and technology to other developing markets like Brazil and Russia. I would expect to see the handful of other major global automakers who haven’t joined the trend yet, including Ford (NYSE: F) and Toyoto (Tokyo: 7203), hop on this new bandwagon soon, turning up the pressure on what looks like an important new growth area for everyone. Of course that will mean a potentially difficult road ahead for Geely, Chery and other domestic names like BYD (HKEx: 1211), that have largely dominated the lower end of China’s car market to date while the foreign names focused on the higher end. Look for that competition to get hotter as these new brands start rolling out more new models, potentially sending many of the Chinese brands into the red.

Bottom line: Nissan and Volkswagen’s new forays into the low-end car space are part of a broader move by foreign automakers, putting growing pressure on domestic nameplates.

Related postings 相关文章:

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

◙ Honda, Guangzhou Auto Chase GM-SAIC 本田广汽“理念”将上市

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

China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

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My earlier forecast that spring may soon arrive for US-listed China stocks may have been premature, as the year’s first IPO by Vipshop (NYSE: VIPS), a money-losing online discount retailer, has been a resounding flop just about any way you look at it. Some might say the fact that Vipshop completed the IPO at all is an accomplishment, and perhaps that’s true since its offering is the first major one by a Chinese company in New York for more than half a year. But the results of the offering and its share trading debut are both dismal from any perspective. The company initially hoped to raise up to $117 million when it first filed for its IPO, and later set a price range of $8.50 to $10.50 per American Depositary Share. But in a relatively rare development, it couldn’t even price the offering within that previously stated range, and ended up having to offer shares at $6.50 each — 24 percent lower than the bottom of the range. (English article; Chinese article) That meant the company only raised $71 million in the process, again nearly 40 percent less than the top end of its original target. Clearly investors weren’t very interested in this money-losing web firm, as overall sentiment towards US-listed Chinese companies remained weak due to a series of accounting scandals last year. If the early signals weren’t loud enough, investors voiced their lack of interest in Vipshop one last time on its Friday trading debut, bidding the shares down 15 percent to end the day at $5.50, giving it a market capitalization of $268 million. The offering marked a decidedly worse performance than the last major US offering by a Chinese company, video sharing site Tudou (Nasdaq: TUDO), whose miserable debut last August prompted other IPO candidates to indefinitely postpone their listings until the market improved. Tudou, which was also losing money, priced its offering in the middle of its range, and then saw its shares tumble 12 percent on their first trading day. So if Tudou was a failure, then it’s probably fair to call Vipshop a disaster. Vipshop is a relatively small player in China’s e-commerce space whereas Tudou is the second largest online video site, so it may not be completely fair to compare the 2. Still, the message from this latest offering is loud and clear: investors aren’t interested in Internet companies that are losing money, and even profitable companies would need to be leaders in their categories to attract much attention. That poses an interesting challenge for the handful of other companies that are moving ahead with listings. China Auto, the earliest company to file for an IPO this year, could still do ok as it’s not an Internet company and is a leader in the auto rental space. Shanda Cloudary and LaShou could be more problematic, as they’re leaders in the online literature and group buying spaces, respectively, but both are still losing lots of money. I expect all 3 of these companies to move forward with their offerings despite this chill from the Vipshop debut, but would look for all to see similar weak pricing and drops on their trading debuts.

Bottom line: Vipshop’s dismal IPO and trading debut indicate overseas investors still have little appetite for money-losing companies in China’s crowded Internet space.

Related postings 相关文章:

◙ Vipshop Takes Lead in IPO Race 维品会或成为今年首家赴美上市中国企业

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

◙ China Auto Wins 2012 Race For 1st US IPO 神州租车抢先成首个赴美IPO的中国企业

Dangdang Cuts Back in Latest Internet Distress Sign 当当网战略收缩

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I’ll close out the week with the latest trouble signs for China’s overheated Internet sector, where Dangdang (NYSE: DANG), the country’s lone major listed e-commerce company, is starting scale back some of its operations to save money. Media are reporting on the cutbacks as separate newly released data is showing just how badly bloated the sector became last year, when a flood of new money gushed in from investors buying into the hype of China’s Internet growth story. Let’s look at Dangdang first, as the company is showing all the signs of becoming the latest victim to feel the pinch of super-heated competition in the e-commerce space, where it competes with big names like 360Buy, also known as Jingdong Mall, as well as online retail sites invested and operated by other global giants like Wal-Mart (NYSE: WMT) and Amazon (Nasdaq: AMZN). The latest media reports quote Dangdang CEO Li Guoqing saying his company is initiating a “strategic pullback” in its geographic coverage, in a bid to lower its transport costs. (English article) Li added his company will put more focus in the future on its VIP customers, who obviously offer better returns than the mom-and-pop buyers in smaller cities that are far more expensive to serve. His comments come after Dangdang swung squarely into the red in its latest reporting quarter, posting a net loss of nearly $21 million after earning a $2 million profit in the year-ago period. (previous post) Hyper competition in the e-commerce space is partly the result of a massive influx of money last year that saw both domestic and foreign investors pump tens of billions of dollars into start-ups and larger companies like 360Buy, which made headlines last spring when it received more than $1 billion in new funds. New data just released by venture capital tracking firm Zero2IPO shows venture capital and private equity firms, who tend to focus on start-ups with smaller investments of $1-$10 million, pumped a record $5.8 billion into young Chinese firms last year, with Internet companies emerging as the clear favorites as 276 such companies received $3.3 billion in new funds — a 3.6-fold rise over the previous year. (English article) Those figures only reflect the smaller investments that Zero2IPO tracks, but other firms like group buying sites Dianping and 55tuan received much larger sums in the hundreds of millions of dollars, truly bloating the sector. One executive at Groupon.cn, another group buying site unrelated to US giant Groupon (Nasdaq: GRPN) summarized the current situation nicely in a recent interview, saying the investors who once fawned on all these Chinese Internet companies have suddenly lost their appetite to provide new funds due to concerns of a bubble, causing companies like his to make mass layoffs just to survive. Dangdang seems big enough to survive this bubble in the long term, but look for more short-term pain at Dangdang and just about everyone else in the e-commerce and group buying spaces for the rest of this year and possibly into 2013 until the bubble finally finishes bursting.

Bottom line: Dangdang’s business scaleback and new investment data from 2011 are the latest reflections of last year’s China Internet bubble, whose bursting is starting to accelerate.

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

◙  Mid-Sized Firms Suffer First In Internet Bubble Burst 中国互联网泡沫破裂

◙ Internet Investors Seek Refuge in Big Names 互联网投资者选择性支持中国市场领头羊

 

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

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Everyone is looking closely at the latest results from China Unicom (HKEx: 762; NYSE: CHU) for signs that China’s second largest mobile carrier has finally put its house in order and can start to generate some excitement, after a dismal 2011 that saw it plagued by mismanagement issues. The results from last year reflect that turmoil, which saw the company fail to gain market share and post weak growth despite being given a big opportunity by the Chinese government to boost its position against its much bigger rival China Mobile (HKEx: 941; NYSE: CHL). Unicom reported its profit rose 14 percent for the year, while revenue was up 22 percent, both below market consensus, especially the profit figure. (English article; results announcement) In fact, the company should be posting much stronger growth as its numbers are coming off a relatively small base, and its 3G network is far superior to China Mobile’s for technological reasons. But the company has failed to capitalize on that technological advantage, with the result that its market share in 3G remained relatively steady in 2011, even as China Mobile’s share declined due to steady gains by the market’s smallest player, China Telecom (HKEx: 728; NYSE: CHA), which embarked on an aggressive marketing campaign for its own 3G network. Based on all the media reports last year, Unicom seemed to suffer from management turmoil throughout many of its major markets, as it tried to fill top positions and consistently underestimated handset demand for certain 3G models, resulting in shortages and lost sales opportunities. Among all the figures and discussion in the latest results, the most interesting seems to be Unicom’s disclosure that its margins will come under continued pressure this year due to high marketing costs, as it tries to improve its 3G network and sign up more subscribers through aggressive promotions including big handset subsidies. It said it expects its 3G business to become profitable during the year, with handset subsidies rising to about 18 percent of 3G revenue. (Chinese article) I’m not opposed to rising marketing costs, as these are largely a one-time spending item that can produce long-term revenue if Unicom can attract more new subscribers and convince them to use its service for years to come. But big spending doesn’t necessarily translate to big revenue gains, and I’m certainly not convinced that Unicom can improve its market position simply by spending more. The company’s past year of poor management is the current standard that the market expects from this company, and it desperately needs to show it can change that to make its new spending binge produce results. Otherwise, 2012 could become just another lost year for Unicom, with expenses rising but little or no growth on the top and bottom lines.

Bottom line: Unicom’s spending boost to build its 3G business in 2012 has less than a 50 percent chance unless the company can clear up its management problems.

Related postings 相关文章:

◙ New Developments, Including iPhone Deal, Heat Up 3G, 4G 中国电信iPhone销售和日益升温的3G、4G最新进展

◙ 2011: China Unicom’s Lost Year 中国联通失落的一年

◙ Sputtering Unicom’s Latest Excuse: Lack of Leadership

AgBank Results: First Look at Banking Winter 中国农业银行财报：银行业的冬天

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We’re getting a first look at what could be a long-predicted chill set to take hold in China’s bloated banking sector, with Agricultural Bank of China’s (HKEx: 1288; Shanghai: 601288) annual results showing its quarterly profit fell for the first time since it went public on slower lending and a massive provision against future bad loans. Now the big question that remains is: How long will the winter last, and how cold will it get? AgBank gave the markets a preview of what’s ahead as it became the first of China’s big four lenders to announce its annual results (earnings calendar), which revealed a 14 percent drop in its fourth-quarter profit. (English article) China Construction Bank (HKEx: 939; Shanghai: 601939), the nation’s second largest lender, is set to report later today, while ICBC (HKEx: 1398; Shanghai: 601398) and Bank of China (HKEx: 3988; Shanghai: 601988) will report next week. AgBank is considered the weakest of China’s top 4 lenders, so it’s important not to take its results as too reflective of the broader industry. Still, the numbers look less than exciting, providing a hint of things to come. (results announcement) Perhaps the most telling figure — and also a bit alarming — is the 22.8 billion yuan in provisions the bank took in 2011 against future bad loans, more than double the amount from the previous year. The increase should come as a surprise to no one, as many are predicting a jump in non-performing loans after China’s banks embarked on a lending binge in 2009 and 2010 as part of Beijing’s economic stimulus program at the height of the global financial crisis. Many of the loans made during that period were of questionable quality, especially ones for infrastructure projects to local governments that may now be in danger of defaulting. Beijing has taken a number of moves to ease the situation, including allowing banks to restructure some of those loans to delay repayment (previous post) and also letting banks raise billions of dollars in fresh new capital just 2 years after a previous money-raising wave that saw them collectively tap financial markets for more than $100 billion. Bank of Communications (HKEx: 3328; Shanghai: 601328)  became the latest lender to raise fresh capital earlier this month, collecting $8.9 billion through a private placement to mostly government entities. (previous post) AgBank itself said it has no plans to raise fresh capital, thanks in part to 50 billion yuan, or nearly $8 billion, in debt that it issued last year. Issuers of such debt seldom say who the buyers are, but I suspect the Chinese government and government-backed institutional investors were also some of the major purchasers, as Beijing has shown an increasing willingness to rescue the banks since much of their troubles are the direct result of its lending directive during the financial crisis. China bank stocks have rallied at the start of the year following a dismal 2011, but look for that rally to quickly lose momentum in the months ahead when more similar financial results start to come out.

Bottom line: AgBank’s results, including a rare drop in quarterly profit, are setting the stage for a long-awaited banking downturn, which will kill a nascent rally in China banking stocks.

Related postings 相关文章:

◙ Bocom Recapitalizes, Govt Pays the Bill 交行再融资或掀起新一轮银行再融资热潮

◙ More Banking Bad News From Minsheng 民生银行融资揭示银行业困境

◙ Beijing’s Latest Mixed Signal Bodes Poorly for Banks 中央政府最新政策预示对银行不利

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

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I hate to be overly pessimistic, but I have serious doubts about the future of a newly announced joint venture between fading domestic auto giant Chery and luxury car maker Jaguar Land Rover. More specifically, I am quite skeptical that this new tie-up will ever get the necessary approvals from Chinese regulators, which must approve all such major new investments. (English article) Let’s take a quick look at this deal, which was rumored for months before Chery and Jaguar Land Rover, owned by India’s Tata Motors (Mumbai: TTMT), made a formal announcement after finalizing details. The partnership will see the 2 sides invest up to $3 billion to build a manufacturing base in China and develop a specific brand for the market, according to media reports. Previous reports and Jaguar’s own background, coupled with a fondness for high-end cars among China’s new wealthy, all indicate the new venture will produce luxury cars, a sharp break with Chery’s own brand which is distinctly lower market though is also known for reasonably good quality. Chery desperately needs some good news in terms of new domestic initiatives, as the company’s sales have plunged in recent months as foreign joint ventures have stolen market share from domestic rivals amid a broader slowdown in China’s auto market. One of Chery’s few bright spots has been its exports, which have grown sharply in recent months to partly offset the slowdown in domestic sales. Still, the company is at a distinctive disadvantage to many of China’s other major automakers due to its lack of a strong foreign partner. So, the question becomes: is Jaguar Land Rover the partner Chery needs to revive its fortunes? There are a number of good points and bad points to such a tie-up, but in the end I’m betting the NDRC, China’s state planner which must approve the deal, will decide the bad points outweighthe good ones and veto the joint venture. The NDRC will certainly like the idea of developing a new luxury brand for the China market, and it also probably realizes that Chery really needs a foreign partner to compete with many of its rivals. But in terms of choice of partner, Jaguar Land Rover looks like a poor pick due to its small size and highly focused niche market selling very high-end cars with much more limited demand than more mainstream luxury brands like Audi (Frankfurt: VOWG), BMW (Frankfurt: BMW) and Mercedes Benz (Frankfurt: DAI). I do like the idea that Chery is trying hard to improve its outlook and bring in some new ideas from outside to boost its longer term prospects both in China and abroad. But if it’s smart, it will keep talking to other potential partners while it awaits for the final NDRC decision on this deal, which is more than 75 percent likely to be a veto.

Bottom line: China’s state planner is likely to veto a new joint venture between automakers Chery and Jaguar due to limited benefits from Jaguar due to its small size.

Related postings 相关文章:

◙ Chery Finds Foreign Partner in Jaguar 奇瑞与捷豹路虎联姻前景堪忧

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

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

NetEase: Still a Gamer With WoW Renewal　　网易续签《魔兽世界》运营权

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Just a week after commending NetEase (Nasdaq: NTES) for being one of China’s few successful developers of popular online games, we’re seeing what investors really think of the company as they bid up its shares to new all-time highs after the company reaffirmed it will continue to offer its popular World of Warcraft title for at least the next 3 years. (company announcement; Chinese article) But avid gamers will quickly realize that far from being a self-developed title for NetEase, WoW is actually property of US game developer Activision Blizzard (Nasdaq: ATVI), which has just extended NetEase’s licensing deal for the wildly popular title by 3 years. The announcement sparked a rally for NetEase shares, which rose 3 percent to reach a new all-time high — a rarity for most US-listed Chinese firms whose shares all now trade well below such high points following a series of accounting scandals last year. While the renewal is certainly good news for NetEase, the Wall Street reaction highlights the fact that the company is perhaps still more dependent on games licensed from outside companies than I had  suggested in my previous posting. Investors realize that such dependence is ok when you have a hot title and a fresh licensing agreement, but can be quite dangerous when that same title fades in popularity or a licensing agreement expires. The9 (Nasdaq: NCTY) knows that lesson all too well, as it was a previous hiigh-flyer whose success was largely based on its own previous licensing agreement for World of Warcraft. Industry watchers will recall that the company lost its rights to the game to NetEase when its license expired 3 years ago, setting the company’s shares on a downward slide that have seen them lose about half their value since that major development. This new licensing deal means that NetEase looks safe as an online gaming bet, at least for the next 3 years. In the meantime, I do have to commend the company for continuing to develop its own games, even though such an approach is much riskier since it takes lots of time and money, and there’s no guarantee of success. At the same time, the company is also looking to diversify a bit beyond its dependence on games by taking steps to reinvigorate its well-known but neglected Internet portal business. (previous post) Clearly investors like the broader NetEase story, which indeed does seem to paint a picture of a company taking a small number of focused steps to keep its business growing. Now the key will be execution by continuing to develop popular new games and getting some new value out of its portal business. If it fails to do either of those well, shareholders could equally punish the company stock the same way they are rewarding it now.

Bottom line: NetEase’s new licensing deal for a popular game title will give it a 3-year cushion as it works to develop its own new game titles and relaunch its Internet portal business.

Related postings 相关文章:

◙ NetEase Name Change: Spin-Off Coming 网易更名：预示业务分拆

◙ Online Games: Where’s the Excitement? 中国网游企业增长有限

◙ SouFun, NetEase: Slowing Growth Stories 搜房网、网易：增长放缓

China Mobile Starts New Era as Wang Leaves 王建宙退休，中国移动开启新时代

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I have just one word in reaction to the news that Wang Jianzhou will formally step down from China Mobile (HKEx: 941; NYSE: CHL) from the helm of China’s dominant mobile carrier either today or tomorrow: Finally! I hate to sound so negative about Wang, as he has certainly done a lot of good things at China Mobile since taking over as chairman nearly 8 years ago. In fact, he did help the company consolidate its place as China’s dominant telco, at one point grabbing over 70 percent of the mobile market as it used its strong position to trample China Unicom (HKEx: 762; NYSE: CHU), its smaller unfocused rival. But like many chief executives, Wang was guilty of overstaying his welcome at the company he led, causing China Mobile to lose its own focus and become a stumbling giant that has recorded little or no profit growth in the last few years. According to media reports, Wang’s retirement will be formally announced either today or tomorrow, and he will be replaced by Xi Guohua, who last year was named vice chairman of China Mobile’s parent company. (Chinese article; previous post) Of course, now that Wang is finally leaving the tributes will start pouring in commending him for his fine work. One report points out that when he took over at the top of China Mobile, the company’s annual revenue was 192 billion yuan, and its net profit was 42 billion yuan. The revenue figure more than doubled to 528 billion last year, while profit nearly tripled to 125.9 billion yuan. Of course it didn’t hurt that China Mobile, as the nation’s former mobile phone monopoly, was already China’s clear leader when Wang took over, nor that the country’s market was still relatively untapped with just a quarter of the nation’s 1.3 billion people owning mobile phones at that time. Wang took advantage of those factors to aggressively consolidate China Mobile’s position during his first 5 years on the job. But as happens with many corporate leaders, he seemed to lose his focus in his last 3 years, fixating on a global expansion policy that resulted in a number of attempted overseas acquisitions that nearly all ultimately failed. As recently as earlier this month, Wang was still talking about such acquisitions — even though they have contributed nothing to the company during his tenure. (previous post) Furthermore, Wang has lost valuable ground to Unicom and smaller rival China Telecom (HKEx: 728; NYSE: CHA) by dragging his feet in developing China Mobile’s 3G service that will be critical to its future, after being ordered to build its network using an untested China-developed technology. As a result, it now only controls about 40 percent of the 3G market, far less than its two-thirds share for China’s overall mobile market. With Wang finally gone, look for Xi and Li Yue, the company’s other recently installed top leader, to start taking some interesting risks and getting more aggressive with 3G. We’ve already seen what the future could look like, following recent reports of an interesting tie-up between China Mobile and a national cable TV operator now being formed through consolidation of China’s various regional networks. Look for more of that in the year ahead, as these new leaders try and breathe some new life into China Mobile after Wang’s departure.

Bottom line: China Mobile will become a more dynamic, risk-taking company in the year ahead after the imminent departure of long-serving Chairman Wang Jianzhou.

Related postings 相关文章:

◙ Advice to China Mobile: Stay Home 建议中国移动呆在国内

◙ China Mobile Steps Up 4G Drive 中移动4G网络建设提速 年底或推商用试点

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

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

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It seemed like a long time since we last heard any updates on Alibaba’s never-ending quest to buy back the 40 percent stake of itself held by faded US search company Yahoo (Nasdaq: YHOO), and now we finally know why: apparently the talks broke down a month ago over a number of issues. But in a show of its determination to dump Yahoo once and for all, Alibaba’s CFO has reportedly flown to the US to meet with Yahoo’s CEO to see if a deal can still be worked out. (English article; Chinese article) Alibaba has been very vocal about its desire to buy back the Yahoo stake for the last 2-3 years, especially during the tenure of Yahoo CEO Carol Bartz, who had a stormy relationship with Alibaba founder Jack Ma before she was fired last year for unrelated reasons. Yahoo had indicated it was also willing to sell the stake as it hired a new CEO with a mandate to return the company’s core search business to health. So the talks were progressing with updates appearing in the media regularly until about a month ago when the issue disappeared. I attributed that disappearance to media fatigue, and assumed a deal would be announced whenever both sides finalized the agreement. But now it turns out the 2 sides couldn’t agree on a number of issues, including breakup fees and price. Another sticky issue reportedly was Yahoo’s insistence in structuring the deal in such a way that would allow it to avoid paying taxes on the huge gain in the value of its Alibaba stake, which it paid $1 billion for originally in 2005 but now is likely to be worth more than 10 times that amount. With so many sticking points, I’m not exactly sure how new talks between the 2 sides are likely to produce any real results unless both are willing to make some big compromises. The fact that they are indeed talking again does seem to indicate that perhaps we will see some such compromises, as this issue is one that both companies would clearly like to put behind them. From Yahoo’s perspective, the Alibaba issue remains a major distraction at a time when new CEO Scott Thompson wants to focus on fixing its core search and web portal businesses. For Alibaba, the company wants to find investors who will give its stock the respect it thinks it deserves and provide support and connections in the run-up to a potential IPO for the group that could come as soon as the next 2-3 years. At the end of the day, both companies want to see this issue settled once and for all so they can move on to more important matters. That said, look for each side to make some big compromises in the weeks ahead, with a 50 percent chance they may finally reach a deal by mid-year to bring this long and frustrating saga to an end.

Bottom line: The restarting of collapsed talks between Alibaba and Yahoo indicate both sides are ready to make major compromises in finally bringing an end to their equity relationship.

Related postings 相关文章:

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

◙ Alibaba.com Privatization: Parent IPO Coming? 阿里巴巴网私有化：母公司或将上市？

◙ Alibaba: Let’s Get This Show Finished 阿里巴巴和雅虎赶紧“离婚”吧

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

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Watch out Chinese shoppers, a new big player is coming to town in the form of QVC, an American name synonymous with TV and online shopping. In a twist that looks interesting, the US shopping giant has chosen neither a TV operator or an e-commerce specialist as its Chinese partner, but rather a major radio station operator, China National Radio. (English article) The deal marks the latest in a string of new Sino-foreign tie-ups in the sensitive Chinese media market, which Beijing seems to finally be opening to foreign investment after years of keeping the sector largely closed to outsiders. It should also provide some interesting competition to existing players in both the TV and online shopping space, including shopping channels operated by the likes of Shanghai Media Group, the nation’s second largest media company, and Tianmao, the hugely successful online mall previously known as Taobao Mall, which is operated by Alibaba Group, China’s leading e-commerce company. Let’s have a quick look at the deal itself, which will see QVC take its show to China by teaming up with China National Radio to operate its CNR Mall TV channel, which also has an associated web site, in a joint venture called CNR Home Shopping Company. I’ll be the first to admit I’ve never heard of CNR’s shopping channels, and suspect they are tiny players in both the TV and online shopping markets. The entry of this well-known US partner into the equation could quickly change that, however, as QVC is hugely popular in the US, where it pioneered the home shopping concept and has exported the idea to places like Britain, Germany and Japan. Of course, the entry of a strong foreign partner is far from a guarantee for success, as other big media names like Viacom (NYSE: VIAb) have joined forces with major Chinese media groups in the past only to see those ventures fail, often due to lack of critical government support. The big difference this time is that China has shown a recent desire to finally open up the media space to foreign investment, and thus may be less likely to try to undermine such tie-ups like it did in the past through onerous regulations and other regulatory obstacles. The new openness to foreign investment has been on display over the last few months, with DreamWorks Animation (NYSE: DWA) announcing a landmark animation-producing joint venture in Shanghai (previous post), and the New York Times (NYSE: NYT) also launching a China-based science magazine (previous post), both in February. At the same time, a growing stream of Chinese media companies have also made or announced plans for IPOs, again indicating Beijing wants these companies to become more commercially oriented and competitive. Following this early string of deals, I would look for more Sino-foreign tie-ups to come in the media sector this year, potentially involving some major global names as they take a new look at the China market.

Bottom line: QVC’s new China joint venture marks the latest recent entry by a major foreign firm into China’s media market, with more likely this year as Beijing opens up the sector.

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

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After months of haggling and suspense, the US has finally made its decision in the contentious anti-dumping case against Chinese solar cell makers and found a middle ground in the form of a relatively light punishment accompanied by signals that Beijing needs to ease its unfair support for this industry. In the end, the Obama administration probably realized that it needed to take some kind of punitive action to satisfy critics of China’s strong support for its solar sector, especially in an election year. But at the same time, he also probably realized it’s in no one’s interest to deal a fresh blow to this already struggling sector developing sustainable energy alternatives to replace the world’s current dependence on fossil fuels. According to media reports, after a months-long investigation dating back to last summer, the Obama administration has finally decided to levy punitive tariffs of up to 4.7 percent — a relatively modest amount — on Chinese panels exported to the US. (English article) I suspect this relatively modest figure was probably the result of behind-the-scenes talks with Beijing, which has probably quietly agreed to scale back some of the indirect subsidies, such as cheap bank loans and tax rebates, that were the source of the complaint. Reaction from actual companies has been guarded so far, but looks cautiously optimistic that a crisis has been averted for now. Industry leader Suntech (NYSE: STP) indicated that the relatively benign tariff of 2.9 percent imposed on its products vindicated its assertion that it wasn’t receiving unfair government subsidies. (company announcement) It also pointed out that it has manufacturing facilities in the US, pointing to a trend that may see many of China’s solar panel makers set up production bases in the western markets that are their biggest customers to show they can also help to contribute to those local economies. Another solar company, Yingli (NYSE: YGE) was similarly cautious in its reaction, simply thanking its customers and reiterating that it is not unfairly subsidized and that punitive tariffs are bad for the entire industry. (company announcement) Investors were certainly cheered by the decision, with Suntech and Yingli shares both up around 13 percent on Tuesday. I should emphasize that this decision is just preliminary, but there’s no reason it shouldn’t become final if everyone finds it agreeable. That said, I would expect to see Beijing make some face-saving moves in the next couple of months to show it is quietly scaling back many of the practices that led to this complaint in the first place, which could include ending export tax rebates and pushing companies to seek new financing from true commercial banks rather than state-controlled Chinese lenders. If that happens, look for this conflict to quietly fade, letting the industry focus its sights on returning to profitability and improving its technology.

Bottom line: Preliminary US anti-dumping tariffs against Chinese solar panel makers look largely symbolic, and are likely to be followed by similar conciliatory moves by Beijing.

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