Tuesday, March 31, 2015

Missing audits for Tianhe and Sihuan red flags - Paul Gillis

Paul Gillis
+Paul Gillis 
Two major companies backed by Morgan Stanley, Tianhe and Sihuan, have told security regulators in Hong Kong, they cannot meet the deadlines for filing their audits, reports AP. Two red flags, causing serious problems for Morgan Stanley, says accounting professor Paul Gillis.

The twin filing delays raise uncomfortable questions for Morgan Stanley, which picked the companies from obscurity then promoted them as multibillion-dollar growth stories. "This is not something an auditing firm would do lightly," said Paul Gillis, a former Partner for PricewaterhouseCoopers LLP in China who now teaches accounting at Peking University. "There are only two reasonable explanations for being late. One is management incompetence. Two is they're fighting with the auditors. And neither one of those is good." Tianhe and Sihuan could eventually receive a clean bill of health, although announcements about earnings delays due to unfinished audits are generally regarded as portending bad news. Any material problems that led to the delay would have to be disclosed once the companies file their financials. 
As U.S. investors increasingly consider Chinese stocks, they rely on investment banks like Morgan Stanley to keep troubled Chinese companies from reaching the market... 
Tianhe was the subject of significant public scrutiny over its financials. In September, a shadowy group tied to speculators betting against Tianhe's stock published allegations that the company had overstated its business in a Morgan Stanley-led public offering just a few months earlier. 
An AP investigation corroborated many discrepancies. Tianhe said records cited by AP were outdated and disputed other findings. But the controversy drew public notice from its auditor, Deloitte Touche Tohmatsu Ltd., which Gillis said would have been expected to put extra emphasis on its next audit process. 
"The auditors have had plenty of time to look into the allegations and dismiss them," Gillis said. "In this case, everybody would have been paying attention."
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Monday, March 30, 2015

Why North-Korea failed from the start - Paul French

Paul French
Paul French
Author Paul French of North Korea: State of Paranoia reviews for the Washington Post. Blaine Harden´s latest book on North Korea The Great Leader and the Fighter Pilot: The True Story of the Tyrant Who Created North Korea and The Young Lieutenant Who Stole His Way to Freedom.

Paul French:
Harden makes some good points. Wartime antagonisms with the Chinese communists led Kim to develop a long-term, visceral dislike for Mao. The feeling was seemingly mutual. But with Moscow only remotely engaged in the Korean War (the U.S.S.R. mostly limited itself to sending supplies, political advisers and, important for this tale, MiGs), Mao felt he had to be involved. He sent his “volunteers” to bolster Kim’s flagging army in Korea, allowing the former Chinese leader Chiang Kai-shek, who had fled the mainland, the breathing space to reinforce the fledgling defenses of Taiwan against Beijing. By the end of the war in Korea, Fortress Taiwan was far better prepared to repel an invasion from the mainland, and America had moved toward supporting Taiwan militarily. 
Of course tyrants have pasts, and, as Harden points out, Kim’s was rather unexceptional. His guerrilla-fighter credentials have been overstated. Rarely a master of military tactics, he was instead a master of the Stalinist power playbook — self-elevation, rewriting history, demanding fealty and purging those slow to offer it. Like Stalin, Kim grasped his moment, swept aside his challengers, flattered his supporters and became supreme. Harden also shows that the U.S. carpet-bombing of North Korea during the war was brutal and its effectiveness questionable. Yet it gave Kim a legitimacy and a narrative of American brutality that echoes through the North’s early years of construction to the present day. Pitted against the story of the Great Leader’s ascendancy is that of No Kum Sok, an airman in the North trained to fly MiGs by Soviet pilots. His daring escape, with the prize of a Soviet MiG to deliver to the Americans, is thrilling stuff. However, it is No’s long-standing distrust of Kim and his nascent regime that is important. The official North Korean narrative admits no dissension, no opposition. No is living proof that it did exist in the early days of the regime. 
Harden describes how Kim became marginalized as the Sino-Soviet split evolved and communist fraternalism collapsed. Both Stalin and Mao came to regard Kim as a marginal figure in the communist world. From the start Kim’s kingdom faced economic challenges that it was not ideologically equipped to solve. The Stalinist self-sufficiency blueprint didn’t work. South Korea’s emergence from devastation and military rule to become a booming Asian Tiger economy and vibrant democracy took time and masked the discrepancies between the Koreas for a while. Kim was never able to build a self-sufficient nation and had to tap Beijing and Moscow for aid, soft loans and arms.
More in the Washington Post.

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Sea-plane might support China´s territorial claims - Wendell Minnick

Wendell Minnick
Wendell Minnick
A new sea-plane might fit nicely into China´s territorial claims in the South China Sea, writes defense analyst Wendell Minnick in Defense News. Up to now, China did not have airplanes able to go to the disputed islands.

Wendell Minnick:
The Jiaolong (Water Dragon) AG600, under construction by China Aviation Industry General Aircraft (CAIGA), will be China's largest operational seaplane. CAIGA did not respond to inquiries after the company's announcement on March 17 that it had completed the front fuselage assembly for the prototype. 
According to brochures obtained at the 2014 Airshow China in Zhuhai, the aircraft is powered by four turboprop WJ-6 engines and has a range of 5,500 kilometers, which would provide substantial movement within the SCS. In the Spratly Islands, China is currently constructing artificial islands on Hughes Reef, Johnson South Reef and Gaven Reef
Despite the lack of direct mainland access to Beijing's strategic claims in the SCS, the aircraft are seen as a boon to solidifying control of the area by China's military and maritime enforcement agencies for island hopping within the crowded clusters of the 750 reefs, islets, atolls and islands in the Spratly Islands archipelago.
More in Defense News.

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Friday, March 27, 2015

Why ´60 Minutes´does a poor job on Africa - Howard French

Howard French
+Howard French 
Author Howard French of China's Second Continent: How a Million Migrants Are Building a New Empire in Africa is leading a campaign against the famous US news program ´60 Minutes´ and how they cover Africa. From the Humanosphere. One major problem: they mainly ignore local people.

The Humanosphere:
Not a single Liberian was quoted in the 15-minute segment. The report managed to reduce the people affected by the crisis “to the role of silent victims,” said French. In reality, the experience of Liberians and people living in Guinea and Sierra Leone was much more than Ebola victims. 
“Liberians not only died from Ebola, but many of them contributed bravely to the fight against the disease, including doctors, nurses and other caregivers, some of whom gave their lives in this effort. Despite this, the only people heard from on the air were white foreigners who had come to Liberia to contribute to the fight against the disease,” according to the letter. 
The other two reports cited were about wildlife in South Africa and Gabon. French says that people of black African descent “make no substantial appearance in either of these reports.” Taken together, the three reports are viewed as evidence that Africans are marginalized to people who have things done to them, rather than do things themselves. This disempowering style is inaccurate and tells an entirely incomplete story, the letter argues. 
French has an extensive history of reporting from the African continent. He led the bureaus for the New York Timesin China, Japan, West and Central Africa, Central America and the Caribbean. His books and reporting have garnered awards and high praise. And he is a vocal critic of reporting on Africa.
More in the Humanosphere.

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Wednesday, March 25, 2015

Why Chinese keep moving to Africa - Howard French

Howard French
+Howard French 
The Chinese restaurant owner in Nairobi with a ´No Africans´ policy raised many questions, got arrested and focused the attention on the between one and two million Chinese in Africa. Author Howard French of China's Second Continent: How a Million Migrants Are Building a New Empire in Africa explains in PRI some of their reasons.

“These are people from all walks of life, but mostly people from working classes to the lower middle classes of China,” says Howard French, author of the book, “China’s Second Continent.” 
For the most part, French says these newcomers are, “people who have very little previous knowledge of, and certainly no previous experience of, Africa. And they come to Africa bringing a lot of … baggage of prejudice and stereotypes about the African continent.” Chinese people living and working in Africa have a whole range of attitudes about the people and place, French points out. But there is also a sense of entitlement among many Chinese business people who have come to Africa. 
“There’s a special irony here,” French says. China’s sense of its own history has placed great emphasis on the impact of Western imperialism on the Chinese motherland. It may be apocryphal, French says, but there is a well-known image from the era of high European colonial influence in China that began in the mid-19th century and lasted roughly a century. The image that has been played up in Chinese propaganda is that of a sign reading, ‘No Chinese or dogs allowed.’ 
“So, now you have the Chinese arriving in an African setting replicating to some extent the same sort of behavior, the same sort of attitudes,” French says. 
For many Chinese business people, French says the allure of Africa is still strong. “There’s a whole lore in China, where Africa has attained this image of this El Dorado: a place [that] with very little experience and little capital, you can start up your own companies, you can attain land, you can engage very profitably in trade, you can strike it rich quickly.”
More in PRI.

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Monday, March 23, 2015

Apple watch: a winner among luxury buyers - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
Apple´s watch got a lackluster welcome worldwide, but luxury industry watchers in China expect the new device will make a blast in the China market. China Rich List founder Rupert Hoogewerf explains in the International Business Times why the watch is so attractive.

The International Business Times:
Apple is well-placed to capitalize on Chinese urban consumers’ interest in new technology, thanks to its reputation for innovation and reliability, said Rupert Hoogewerf, founder and CEO of Hurun Report, which tracks trends among luxury buyers in the country. For the first time, Apple this year topped Hurun’s list of wealthy Chinese consumers’ favorite brands for giving as gifts, overtaking fashion brands such as Hermes and Louis Vuitton, as well as luxury-watch makers. To an extent, this may reflect the impact of China’s current anti-corruption campaign, which has cooled sales of more ostentatious luxury brands, Hoogewerf said. 
However, Hoogewerf indicated Apple has succeeded in catching the imagination of Chinese shoppers. “People like new products, and the fact that Apple constantly updates its product range means you can always find something new to give as a gift,” he said. “It’s beating the luxury brands at their own game.” 
Hoogewerf also argued that even if some younger consumers are less used to wearing watches, there remains “an inherent appreciation of watches in China” among a slightly older generation, who see famous Western brands both as status symbols and as objects to be collected.
More in the International Business Times. 

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The rising tide of women´activists - Zhang Lijia

Zhang Lijia
+Lijia Zhang 
Five feminists are still in jail. While the position of women has deteriorated over the past decades, author Zhang Lijia sees a rising number of activists, trying to improve the position of women, despite opposition, she write in a contribution to the debate in ChinaFile.

Zhang Lijia:

Women’s representation in all social activities has decreased in the reform era as state support and intervention has dwindled. In the face of growing problems Chinese women have started to take the matter into their own hands and are putting up a fight. 
Before The Fourth Women’s Conference was held in Beijing in 1995, there were no autonomous NGOs in China. There was only All-China Women’s Federation, an umbrella organization with a nationwide network. It is supposedly responsible for promoting the government policies for women and protecting women’s interests and rights. Inspired by the conference, self-organized women’s NGOs started to emerge, providing legal aid, helping sex workers, or dealing with issues such as domestic violence. 
I first met Li Maizi, one of the five detained women, on a bitterly cold day in February 2013, outside the Chaoyang District Court where we both waited anxiously for the verdict of American Kim Lee, who had filed for a divorce against her abusive Chinese husband. Shortly after arrival, Li put on a blood-stained wedding gown. I realized Li was one of the three young activists who had gone out in the Beijing street to protest against domestic violence one year earlier on Valentine’s Day. 
In recent years, I’ve noticed increased activism. In 2012, a dozen women in Guangzhou queued in front of a toilet to protest against the lack of public toilets for women. In November 2013, ten university students, wearing giant paper pants over their winter coats, staged a demonstration in front of a local government building in Wuhan, to protest against an invasive gynecological exams imposed on women applying for civil service jobs. Earlier in that year, 20 women across the country shaved their heads, silently expressing their anger against the discrimination in admissions standards at universities. Some universities set higher standards for entrance examination scores for female students. In 2014, I marched for a week in central China with a young feminist friend. She walked all the way from Beijing to Guangzhou, in protest against child sex abuse. 
I do believe that such activism has made a difference. Child sex abuse has gained plenty of attention in the media; Guangzhou authorities have promised to build toilets for women and a new comprehensive law against domestic violence will be enacted in August this year, partly thanks to the push by activists such as Li Maizi. 
Activism is a sensitive word in China, like any activity that is not sanctioned by the government. More than once, due to her daring acts, Li has been “invited for tea” by authorities. Such intimidation hads’t stopped her. 
The latest detention of five activists probably was the reaction of some officials lower in the hierarchy responding to the general political tightening up and lessening tolerance towards dissent in any form. But will these women’s fate put off activism by others? No. Never! More and more young savvy Chinese women have realized that rights will not be bestowed upon them. They’ll have to fight to get them instead.
More in ChinaFile.

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Friday, March 20, 2015

AIIB can improve governance of projects - Sara Hsu

Sara Hsu
+Sara Hsu 
The China-led Asia Infrastructure Investment Bank (AIIB) caused much controversy, even before it took off. Such a bank can improve the governance of projects, writes financial analyst Sara Hsu in the Diplomat, although there is no guarantee that will happen.

Sara Hsu:
The AIIB, along with the New Silk Road initiative, which is also led by China, is designed to improve infrastructure throughout Asia. China’s pockets are bursting with foreign exchange, which the nation intends to use in part for these endeavors. Chinese companies have also proven their ability to build infrastructure (albeit excessively in recent years) through construction of the world’s largest dam (although controversially displacing millions of citizens), the longest bridge, and the largest express road network. Employment of Chinese construction companies in these multilaterally funded projects would boost China’s gross national product. 
Good governance of the AIIB would help to ensure that infrastructure projects maximize their humanitarian impact and are carried out efficiently. Some of China’s infrastructure projects remain controversial, including construction of the Three Gorges Dam and the South to North Water Transfer Project. The Three Gorges Dam has come under fire for its displacement of local residents, extremely negative impact on the environment and climate, and adverse impact on water availability in surrounding areas; the South to North Water Transfer Project has been viewed by some as unnecessary, wasteful, and environmentally damaging. Infrastructure companies have also been accused of corruption, funneling money away from construction of these projects. In recent years, local governments have been increasingly wasteful in building up so-called “ghost towns,” entire urban areas devoid of residents. 
If Germany and other European nations are to help oversee governance of the AIIB, better planning may occur, but this is not guaranteed. German federal transportation projects are notorious for their long delays and inefficiencies. Italy is only just improving its infrastructure, from relatively low levels. However, while European nations may not boast exemplary efficiency in the construction of infrastructure projects, certainly their human rights record is better than that of many nations in the AIIB, including China, Laos, Uzbekistan, and Myanmar. Hence active participation by European nations may prove essential in ensuring proper governance. 
Washington’s negative stance on European enthusiasm for the AIIB has been rightly criticized by Robert Zoellick, former president of the World Bank. Zoellick faulted the Obama administration for taking an unfavorable position on the AIIB in advance of knowing the details of its governance. Strangely, this relatively uncontroversial institution has become a point of contention between the U.S. and Europe, even before the rules of the organization have been established.
More in the Diplomat.

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Thursday, March 19, 2015

The growing sophistication of Chinese art collectors - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
A slowdown of art sales in China is not only caused by the anti-graft campaign or the economic slowdown, but also by a growing sophistication of the art collectors, says China Rich List founder Rupert Hoogewerf in Barrons. They are not only going for big-ticket super-stars, but develop their own appreciation.

The 7% drop to US$1.1 billion also reflects growing maturity and sophistication among Chinese art collectors who are broadening their tastes beyond big-ticket super-stars, and gaining an appreciation for owning art for art’s sake, says Rupert Hoogewerf, founder of Hurun Report, which published its annual art list on Wednesday. 
“I’ve met collectors who said to me they were getting great pleasure from an artist they bought for 100,000 kuai (yuan) five or six years ago that is worth 1 million kuai now, but they don’t want to sell,” Hoogewerf says. “I’m getting that message more and more.” Zeng Fanzhi, a 51-year old Beijing artist perhaps best known for his “Mask” portraits, was toppled from first place in the Hurun Art List by Cui Ruzhuo, a 71-year-old Chinese ink artist, whose auction sales soared 121% last year to $76 million. 
Zeng’s sales, known in the past to snag record prices at auction, sank 42% to US$48 million. In October 2013, one of Fanzhi’s works– a nearly 13-foot wide painting titled “The Last Supper” – sold at a Sotheby’s auction in Hong Kong for more than US$23 million, almost half his total sales for last year... 
The popularity of ink ark was evident throughout Hong Kong’s art week, although only a few were reported as sold at Art Basel Hong Kong. 
The 39 artists on the Hurun’s list who have held a top 100 rank for five of the last eight years should be considered China’s blue-chip artists, and the ones China’s rich should take comfort in collecting, Hoogewerf adds. Cui Ruzhuo, Liu Dawei and Shi Guoliang from this year’s top 10 are among the blue chips. 
Many of China’s most affluent don’t have time to research the art market, and “that’s why this list is important,” he says. 
Hurun Art List includes statistics compiled by China’s Artron from about 30 auction houses within China (the ones Hoogewerf says they can trust) as well as major global auction houses. By this measure, China has a 37% share of global art sales volume, ahead of the U.S. with 32% and the U.K. with nearly 19%.
More in Barrons.

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