Friday, April 24, 2015

Why dissidents matter less in China - Ian Johnson on Peter Hessler

Ian Johnson
+Ian Johnson 
Journalist Ian Johnson describes his friend and colleague Peter Hessler for The New York Review of Books and analyses his often controversial take on China. For example his take on dissidents in China. " Hessler’s four books have sold 385,000 copies in the US, a figure that easily makes him the most influential popular writer on China in decades."  

Ian Johnson:
Hessler saw the story of China in the 1990s and 2000s as driven not by nationally known personalities or dramatic news events, but by an epochal movement of hundreds of millions of people out of poverty, and out of the village life that had dominated Chinese civilization. It was the rise of individuals—people with their own aspirations and goals, which they pursued in the space granted by the post­Mao state. Hessler lived in China while people like future Nobel laureate Liu Xiaobo were publicly active, but he never wrote about them. To him, they might be noble but were marginal. That they were persecuted proved the state’s paranoia, not their larger significance for China’s future. 
During his tour, I had the chance to talk to him at some length, and he emphasized to me that he isn’t allergic to politics. In Egypt, he has written extensively about the Muslim Brotherhood and attended former president Mohamed Morsi’s trial. In China his books include an in­depth look at the Party’s operation in a village and sensitive issues such as hiring underage workers. 
But in China, he said, he felt that elite politics are less important, especially when they revolve around classic dissidents challenging the state. During his eleven years in China, Hessler said he had been entrenched in a community three times—the teachers college (two years), a village (seven years), and a company town (three years)—and could follow events there longitudinally. In each place, the same pattern emerged: the most talented people either were recruited by the Party or quietly disengaged from it. The only people who actually fought the Party were “poorly connected and often dysfunctional”—petitioners, for example, or other marginal figures. Many were interesting and he wrote about them in depth, but they were not driving events. 
“This is why I think it’s a big mistake to focus too much on the high ­profile and truly remarkable dissidents,” Hessler told me. “It gives the American reader the impression that the really smart people in China are opposed to the Party.” 
These strongly held ideas underpin his books. Many journalists in China have been turned off—I often heard them say they wished he would finally tackle a “real” topic rather than his allegorical tales from small towns. But readers seem to find something of value. According to royalty statements at the end of last June, Hessler’s four books have sold 385,000 copies in the US, a figure that easily makes him the most influential popular writer on China in decades.

Peter Hessler

You can read the whole story here:  An American Hero in China by Ian Johnson _ The New York Review of Books

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Why mostly foreign firms get fined - Sara Hsu

Sara Hsu
+Sara Hsu 
Mercedes-Benz was the latest who humbly accepted a US$56 million fine for monopolistic behavior. Economic analyst Sara Hsu looks in the Diplomat at China´s anti-monopoly laws, and why mostly foreign companies get fined.

Sara Hsu:
Other foreign firms have been investigated for anti-competitive behavior, including Microsoft, Qualcomm, and GlaxoSmithKline. More than 1,000 automakers, suppliers, and dealers were caught up in the investigation. Chrysler and Audi were among the automakers under scrutiny. Fines levied on foreign firms have prompted some analysts to assert that non-Chinese firms are being unfairly targeted
So how is the anti-monopoly law enforced? Three government agencies are responsible for enforcing anti-monopoly law: the Ministry of Commerce (MOFCOM), the National Development Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC). The NDRC and SAIC, both responsible for violations, have cracked down on monopolistic behavior among American, European, and Japanese firms in recent months. While in some cases, only the foreign partner company in joint ventures have been subject to fines, China asserts that it does not discriminate between foreign and domestic firms in its enforcement of anti-trust law. 
The interpretation of China’s anti-trust law will inevitably be aligned with state interests, as state-owned enterprises (SOE) hold monopoly positions in some industries. It is notable that the Anti-Monopoly Law states that in industries vital to national economic and security interests, monopolies can be protected, supervised and controlled. While the interpretation of the clause could mean that SOE monopolies can be reined in, this has not happened. SOE-dominated sectors contribute the lion’s share of SOE profits. This is particularly so in the tobacco, oil extraction, and electricity supply sectors. 
In fact, China’s socialist-market economy is unique, and monopolization of particular sectors is a major characteristic of the nation’s industrial organization. As Duan and Saich (2013) find, Chinese laws actually effectively help to maintain China’s state monopoly in certain sectors: a monopoly in energy resources is protected by the Mineral Resources Law through the use of controlled franchises and restricted competition; a monopoly in the telecommunications industry is aided by the permit system, which lays out restrictions on foreign participation in the sector. Government pricing also sets prices on goods and services such as tobacco and railway transportation. The dominance of SOEs in certain sectors is reinforced by asset monopolies, in which the state holds company shares, and other manifestations of state control. 
We can conclude, then, that the NDRC and SAIC have not found against SOE monopolies because state monopolization, under most manifestations, is legal, even though foreign monopolization is not. This is simply a characteristic of the Chinese economy that must be accepted, and Mercedes-Benz-cum-Daimler already has. State monopoly may decline as reforms progress, although how and to what degree non-state actors will be allowed is unclear. Until then, we can expect more fines levied on large foreign firms, and perhaps on more well-heeled automakers.
More in the Diplomat.

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China´s booming investment scene - William Bao Bean

William Bao Bean
+William Bean 
Investments are flooding into China´s innovative industries. But investing in China is a completely different game from the traditional VC approach, tells William Bao Bean, Managing Director of Chinaccelerator, in VentureCon Japan, according to E27. China is providing more finance, and more competition.

(One) reason why Hong Kong is seen as a great environment to do business is its proximity to Mainland China and its often seen as a gateway to that giant market. William Bao Bean, Investment Partner of SOS Ventures ... attempted to explain what’s been happening in China in a fireside chat. ...  
Bean paints a succinct picture: “40 billion was done from VCs in the US last year in China and last year, 20 billion was done on the angel side. Most of it was late stage but now there is a huge amount of activity going on in the early stage. Chinese investors want a quick return in two to three years — they’re not willing to wait ten,” he said. 
Speed is clearly one China’s strong suites and Bean said that this is reflected in generations of successful entrepreneurs giving back to the ecosystem. “Things have gotten so competitive that second generation entrepreneurs are starting to get acquired by Alibaba and Tencent, and these entrepreneurs do not want to continue working past their earn out — so they’re funding the third generation of entrepreneurs. So you have a blossoming of the early stage and before there were hundreds of angels, but now there are tens of thousands of angels investing,” he said. 
According to Bean, China has produced a whopping 16 unicorns and he said investors have been swapping their investment strategies. While traditional Series B investors are switching to A, those doing Series C are now focusing on the super early stage — and Bean said the valuations are coming up to meet them.
More in E27.

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Thursday, April 23, 2015

What are the philanthropists giving back? - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
The Hurun 2015 Philanthropist List does not only look at who is giving, but also has a good look at what they are giving too. Founder Rupert Hoogewerf gives for Barrons an overview. China would be better off if they would invest more in socially responsible businesses, he says.

At least half of the top 100 philanthropists gave their riches to education, in fact, and often to their alma mater. “If you are a graduate of this university and you can go back and name a building, that’s an incredibly powerful sign of your success,” says Rupert Hoogewerf, Hurun’s chairman. 
Philanthropists also gave a lot to their home towns and provinces. About 20% or 30% of the top 100 give to build hospitals, roads and schools, and to alleviate poverty in the regions where they grew up. “There’s a powerful sense of the clan, I come from here, I want to donate back to here,” Hoogewerf says. 
Hurun started the list 12 years ago to show China’s rich do give back and to keep tabs on the emergence of the billionaire likely to emerge as China’s Andrew Carnegie, the wealthy American industrialist and philanthropist who gave away nearly his entire fortune. “We’ve been searching ever since,” Hoogewerf quips... 
China’s rich remain relatively stingy compared to global standards. But Hoogewerf says you can argue they are actually more generous than you might expect considering China’s tax system doesn’t provide incentives to give money away, in either the form of tax breaks or estate taxes, and because China’s entrepreneurs are relatively young and still building their wealth. 
The average age of philanthropists on the list is about 55. That spans Pang Shengdong of social network, at age 38, to Tao Xinbo, developer of the five-star Jinling Hotel in Nanjing, at age 99. 
Hoogewerf argues the country may actually be better off if China’s rich put their philanthropic efforts into creating more socially responsible businesses. It would be better, for instance, for a real estate developer to build green buildings than to donate US$2 million at the end of the year to some cause. 
“What’s important is making a product that’s a better product,” Hoogewerf says. “That’s where the energy needs to be focused.”
More in Barrons.

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Wednesday, April 22, 2015

Jack Ma spends most on philanthropy - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
In China, Alibaba´s executive chairman Jack Ma, is the most generous philanthropist, according to the l2015 Hurun Philanthropy List, writes Yibaba. His donations amounted to 14.5 billion yuan or 2.4 US dollar. The Hurun Philantropy List is produced by Rupert Hoogewerf´s China Rich List.

With a total donation worth 14.65 billion yuan ($2.36 billion), Ma and his family retained the top spot they had in 2014 on the new list published by Hurun Report on Sunday. 
The list is based on donations made from April 1, 2014 to March 31 this year. Ma's notable charity efforts include the establishment of a personal philanthropic trust and a HK$1-billion donation for the creation of foundation for startups in Hong Kong. 
Ma is followed by electronics chain owner Tang Lixin with 315 million yuan in donations, and Dalian Wanda chairman Wang Jianlin and his son Wang Sicong with 311 million yuan. Established in 2004, The Hurun Philanthropy List ranks the 100 most generous people on mainland China based on the value of their cash or equivalent donations on a yearly basis. For the past 12 months, the top 100 gave 20.23 billion yuan, a decline of 720 million yuan from the past year. 
Of the top 100, 46 are from the mainland, which includes Li Hejun, China's richest man and chairman of Hanergy Holding Group Ltd., with assets of $26 billion. Li ranked No. 36 with donations of $40.7 million, including $20 million allotted to forestation projects in northwest China's Gansu Province. 
Donations in the education sector were most prominent, particularly to the alma maters of donors and overseas universities. According to the list, Tang donated 300 million yuan to Chongqing University to build a new information building, while Chinese real estate tycoons Pan Shiyi and his wife Zhang Xin gave 94.7 million yuan to Harvard and Yale to put them in 19th place. 
Former Premier Zhu Rongji also came in at No. 88 with a 15.2-million-yuan donation to the Practical Education Foundation, an organization he established in 2013 to benefit students from poor families in China's less developed regions.
More at Yibaba.

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Tuesday, April 21, 2015

Reasons Chinese firms fail and succeed abroad - Joel Backaler

Joel Backaler
+Joel Backaler 
Chinese companies are increasingly going abroad, for a large variety of reasons, and with an even larger variety of success and failure, says Joel Backaler in Knowledge CKGSB. The author of China Goes West: Everything You Need to Know About Chinese Companies Going Global looks at Huawei, Lenovo, Baidu, Xiaomi and TCL.

Knowledge CKGSB:
Chinese technology companies are looking for a variety of things in their investments and acquisitions abroad. They may take controlling stakes or minority stakes in foreign companies to access new markets, to acquire useful technologies, capabilities or talented personnel, or just to diversify their investment portfolios.
Of all these goals, accessing new markets typically offers both the highest risks and highest returns. As Joel Backaler, the author of China Goes West and a director at Frontier Strategy Group, says, “There [are] some very real business reasons why these Chinese companies, particularly tech companies, are going out. The market [especially for smartphones or consumer electronics] is highly competitive within China. Therefore if you can take that kind of product and adapt it for other markets, it can be a good way to diversify your business and maintain your margins.”
Chinese companies have tried their hands at both developed and developing countries. Companies operating in the former, such as Huawei, the telecoms manufacturer, and Wanxiang, an automotive parts maker, have had success focusing on hardware. While Baidu and Xiaomi, a company best known for its smartphones, have targeted the latter, with Baidu focusing on Southeast Asia, the Middle East, North Africa and Latin America....
Backaler points out that many of China’s early failed acquisitions were the result of Chinese companies with plenty of money going after assets that were failing for complex reasons. Chinese companies like TCL Corporation “weren’t necessarily in a position to go overseas, let alone to bring a company facing tough times back to life,” he says. He also cites Huawei as another Chinese company that failed to listen to the market, made mistakes in managing its image, and now is essentially barred from doing some types of business in the US.
On the positive side, Backaler says that Lenovo has done a great job of managing its US-based acquisitions. By retaining the acquired company’s management and staff, and only gradually making changes to the business model, Lenovo has convinced its American employees at IBM and Motorola Mobility that it was ready to learn from their experiences and dedicated to managing the company for the long haul.
There are other obstacles to Chinese outbound investments: hurdles to financing and approvals within China, or potential security threats with high-tech investments. However, the biggest obstacle to Chinese outbound investment appears to be connecting interested Chinese companies with potential targets. Very often, investors and investees just don’t know how to find each other.
“I think it’s challenging, because on one hand there is tremendous interest on the Chinese side to go out, and then if you’re looking from the American perspective there’s a strong desire for that investment, however there’s a really big gap in between,” says Backaler. Typically, interested Chinese investors go on tours or attend conferences where they can meet investment targets, and foreign states, cities and other local governments set up organizations inside China to recruit investment. However, both methods fall short of connecting all the interested parties.

Reasons for Baidu to look abroad - Kaiser Kuo

Kaiser Kuo
Kaiser Kuo
China´s internet giants are looking increasingly abroad, not only to find new markets, but also to find new technology and good engineers, says Kaiser Kuo, director international communication at China´s largest search engine Baidu. In Knowledge CKGSB.

Knowledge CKGSB:
Some of Baidu’s recent acquisitions suggest the company is also interested in “studying abroad”—for example, its purchase of a minority stake in the Finnish company IndoorAtlas in September. IndoorAtlas makes a cutting-edge mobile product that allows users to map and navigate indoor spaces. Its President Wibe Wagemans explains how it could enable people to “find a friend indoors. You could find a booth or a product at a conference. You could search for shoes in the mall and it would take you all the way to the actual shelf.”
The technology could have big potential for Baidu, which controls roughly 80% of the mobile search market in China and a little more than half of the market for mobile maps. “We’re looking to introduce that technology into our existing product line,” Kaiser Kuo, Baidu’s Director of International Communications, says of IndoorAtlas...
In other cases, Chinese firms may also seek to tap the talent base and management experience of companies abroad, for example in Baidu’s high-profile investment in an R&D center and artificial intelligence lab in Silicon Valley in 2014. “We want to go where the talent is,” says Kuo. Not every great engineer happens to be located in China. Talent is distributed globally, and R&D should be too.”
More in Knowledge CKGSB.

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Monday, April 20, 2015

How to break the lock-down mode - Shaun Rein

Shaun Rein
+Shaun Rein 
China´s much needed anti-corruption drive has now put the country into a lock-down mode, and new projects have halted, tells business analyst Shaun Rein at CNBC. The cut in the reserve ratio ratio (RRR) this weekend is one way for a kickstart, although nobody know what will really work.

Shaun Rein at CNBC:
A: I have been saying for the last three months, its much more bearish than the rest of the market, the economy is lot weaker than a lot of people think. First, the government has been very serious about pollution reduction, which has impacted some of the capacity of the large manufacturing, steel, cement and like that as well as the corruption crackdown and that is one of the big concern that I have right now. The correction crackdown is serious, it is widespread and it is needed. There is way too much corruption, but what happened is the whole country sort of in lockdown mode, nobody is willing at the government level to approve new projects, procurement department and state owned enterprises are nervous about buying things because they are worried about being fingered as being corrupt. So even with this reduction in the reserve requirement ratio (RRR) I am not concerned it is going to have as big effect on stimulating economy as people think because people won’t loan out money and people won’t borrow money if they are scared to do business right now. 
Sonia: What does the Chinese market need to stimulate the economy and if this growth continues to disappoint then would you expect an additional benchmark rate cut in the next couple of quarters, something that many experts are now talking about? 
A: I think what we need to look at is not gross domestic product (GDP) growth but we need to take a look at unemployment and the second reason why I am more concerned about the economy is in the last month urban unemployment has been hovering around 5 percent – that’s really a problem. So the unemployment rate in areas of manufacturing are still fairly strong and you can easily stimulate that by forcing state owned enterprises to do heavy investment; train construction, airport construction and you can get jobs there but the issue is urban unemployment is weak and there aren’t a lot of easy remedies. The government is trying to switch from manufacturing oriented economy more towards one of technology and innovation as I outlined in my new book ‘The End of Copycat China’ but it is not easy to do that. You cannot get companies that are producing things all a sudden to become innovators, so there is definitely going to be some weakness, some problems in the economy over the next three-four months and frankly there are no easy answers on how they stimulate the economy.
More at CNBC.(including audio)

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S-400 extends China´s air defense - Wendell Minnick

Wendell Minnick
Wendell Minnick
A recent purchase of the S-400 air defense system by China from Russia has extended its air defense, writes defense analyst Wendell Minnick in Defense News, although it does not allow it to dominate the region.

Wendell Minnick:
A deal between Russia and China for procurement of the new S-400 air defense system will serve as a force multiplier for Beijing in its quest to dominate the skies along its borders, experts said. 
The 400-kilometer-range system will, for the first time, allow China to strike any aerial target on the island of Taiwan, in addition to reaching air targets as far as New Delhi, Calcutta, Hanoi and Seoul. 
The Yellow Sea and China's new air defense identification zone (ADIZ) in the East China Sea will also be protected. The system will permit China, if need be, to strike any air target within North Korea. 
The S-400 will also allow China to extend, but not dominate, the air defense space closer to the disputed Japanese-controlled Senkaku Islands in the East China Sea, said Vasiliy Kashin, a China defense specialist at the Centre for Analysis of Strategies and Technologies, Moscow. China refers to the islands as the Diaoyu, and tensions between Beijing and Japan have been increasing for several years as China continues to claim the islands.
More in Defense News.

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Friday, April 17, 2015

China´s stock markets: heading for a correction - Paul Gillis

Paul Gillis
+Paul Gillis 
China´s capital streams have been turning to the stock markets, even when the economy is slowing down. A major correction seems inevitable, tells Beida accounting professor Paul Gillis at VOA. And while China´s stock markets are used to rough times, for the many newcomers it might be a nasty awakening.

“A bubble has been formed, and there might be a major correction anytime.  It is a little frightening to see the situation developing because a lot of investors are uneducated people, who might suffer,” said Paul Gillis, co-executive director of the MBA program at Peking University's Guanghua School of Management. 
Unsophisticated retail investors, particularly, are at risk because they often put all of their savings into stock markets, so a market slump leaves them with nothing for retirement, education for their children or other major needs. 
There are several reasons behind the frenzied investments that have drive up stock prices, including low overall interest rates in banks.  Another important reason is the government’s decision to cut interest rates on investment products aimed at wealthier people, Gillis said. Falling property prices have also led many people to divert their savings to stocks, which has never been the mainstay for Chinese investors.  There has been a rise in the number of active stock accounts in China, which grew to 111 million, up from around 95 million a year ago.
More at the Voice Of America.

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