protest - FT reports on Shanghai housing anger

Already for four days about one hundred people are protesting against the eviction of their homes, writes the Financial Times. They do this at a hig-profile place and none of the blogs I'm following has mentioned it protest.

In a city where demonstrations are usually swiftly stamped out by the police, the group of largely older demonstrators was allowed to carry on its protests throughout the week, shouting slogans and calling on party leaders to stand down. The protest took place outside the Shanghai Exhibition Centre, where the Shanghai People's Congress Standing Committee was meeting during the week.

Some people think that weblogs might replace traditional media. They have been missing this one in a big way, or am I missing something?

internet - The epic struggle between Ebay and Taobao II

A few months ago the fight between Ebay and Alibaba for China's auction market was already getting in place, with a clear advantage for Alibaba's Taobao. Now Yahoo has purchased a 40 percent stake in the operation for one billions US dollar, pushing ahead Alibaba's initial advantage.
The unlinkable Wall Street Journal is documenting both parties, quoting an increasingly confident Jack Ma.

He boasts that Alibaba now has the financial muscle and local expertise to deal a significant defeat to eBay and Meg Whitman, its high-profile CEO. "I know the Chinese user market and users better than Meg Whitman," says Mr. Ma, clad in a lime-green shirt and sipping a cup of tea. "Once we start to charge, we can be profitable in 18 months."

One of the things I have not figures out is why the former Eachnet, Ebay's originally China's partner, has lost its grip on the Chinese market. I have been betting on Alibaba for some time, and I would agree with Duncan Clark in this second quote from the WSJ:
Word-of-mouth promotion is thought to be the best approach by many marketers in China.

Relying on TV illustrates eBay's "weakness" in the face of competition from Alibaba's TaoBao, argues Duncan Clark, managing director of BDA China Ltd., a consulting and market-research firm that has worked with Alibaba in the past. TaoBao has done only a small amount of television advertising.
The competitors differ in corporate style. EBay's EachNet, is based on the 12th floor of a sleek, air-conditioned high-rise office tower in Shanghai, surrounded by other skyscrapers, malls and retail stores. Its sparsely decorated offices are hard to distinguish from other eBay locations around the world.
Alibaba operates from an industrial section of Hangzhou, two hours southwest of
Shanghai. Its five floors of offices are festooned with flags and cartoon posters of the company's ant mascot. Hundreds of young employees sit with phones and computers in cramped cubicles decorated with pillows, stuffed animals and plants. Street noise filters in through open windows.

economy - Who is causing the stapede at US stock markets?

Richard D'Amato, the chairman of a committee reviewing efforts of Chinese companies to get listed in the US warned in the Financial Times that the interest of US investors might be at risk. He expects listings of up to US dollar 15 bn might cause a problem.

"I am concerned that US investors may not have sufficient information to make informed decisions about the risks of these investments," said Richard D'Amato, chairman of the US-China Economic and Security Review Commission.

Main problem I see at the side of those too eager US investors themselves, as we have seen in the case of Baidu. They shoud scrutinize Chinese companies better, and not invest if their are unclear about the background of those companies.

protest - Two more crackdowns in China

As regular readers of this weblog know, I suffer from a kind of reversed Pavlov-reactions when the word 'crackdown' is being used in articles about China. Yes, when de China Digital Times signalled two major pieces on a recent crackdown in China, I was still a bit worried I might have missed something. Both David J. Lynch and Willy Wo Lap Lam signalled the country was yes again suffering from the heavy hand of their president.
In both cases, yet again, I found the qualification 'crackdown' very much a concept that reflected more the state-of-mind of both gentlemen than reality. In USA Today Lynch noted a crackdown on domestic dissent based on the arrest of New York Times assistant Zhao Yan, a registration campaign of websites and a comment on developments in Uzbekistan. While especially the arrest of Zhao Yan is worrying enough, with that quality of argumentation it would be even easier to prove that the USA has already matched Hitler's regime in cruelty. Just picking a few incidents and assuming a trend that is valid for the whole country is a very easy way to produce a juicy article.
When Willy Wo Lap Lam used in his article for the Jamestown Foundation one of his famous sentences ("Beijing sources close to the security apparatus said") I found it very hard to even countinue reading. Based on equally flimsy proof he entertained us in the 1990s - mostly in the South China Morning Post - with similar conspiracies that were a good read but were mostly way out of line with reality. While he uses the arrest of the academics Lu Jianhua and Chen Hui as a proof for the crackdown, it is slightly confusing Lu is also presented as a firm supporter of the current leadership. Pretty hard to construct a decent straightforward crackdown in China.

internet - Alibaba's Jack Ma speaking at CEIBS

Jack Ma, the CEO of Hangzhou based Alibaba is speaking coming week at CEIBS in Shanghai. (Tipped by Seen Not Heard). When you have an opportunity to hear teacher turned internet entrepreneur Jack Ma, you should always go. Now he got one billion US dollar investment from Yahoo for his already successful enterprise, that adds a bit to this event.
Ma is a gifted speaker who has been able to add a bit of normality in the often hyped internet deals that took off during the first internet bubble, when he started off too. I expect some reality checks again next week at CEIBS.

Update: Oops, in September. So, more time to register. Thanks for the correction.

economy - Governor 'discloses' currency basket deal

China's central bank has told more about the basket of foreign currency it uses to balance the value of China's Renminbi, many media including Reuters report. The bank's governor:

"The currencies in the basket depend on the amount of foreign trade we conduct. The U.S., euro zone, Japan and South Korea are our biggest trading partners now," Zhou said in Shanghai. "Hence, their currencies are naturally the main ones in the basket."

And if that was not enough, according to AP:

The currencies of Singapore, Britain, Malaysia, Russia, Australia, Canada and Thailand are also considered in setting the yuan's foreign exchange rate, Zhou Xiaochuan, the central bank governor, said during a speech to launch a new operations center for the People's Bank of China in Shanghai.

He did not say anything about the relation between the currencies. A fine example of Chinese disclosures that do not mean anything.

internet - Reuters joins the blog-number game

Now news wire Reuters joins the efforts in trying to find out what is happening in the Chinese bloghosphere. While they offer a rather ignorant view on what is happening:

The growing stable of e-scribes, still small by global standards, has attracted homegrown firms and foreign giants like Microsoft (MSFT.O: Quote, Profile, esearch), Google (GOOG.O: Quote, Profile, Research) and Yahoo Inc. (YHOO.O: Quote, Profile, Research) offering blogging Web pages to outspoken Chinese Internet users.

Not that many outspoken users, in my opinion. On the numbers they offer different perspectives I noted estimations between one and 15 million, Reuters first says there are 14.2 weblogs, then six. Whatever the real number is, the argumentation for the six million makes most sense:
Microsoft says over 1 million users in China have joined its "MSN Spaces" service so far, which is operated out of China and was launched in the country just three months ago.
That number is growing an average rate of 30 percent a month, said Sally Ip, MSN Asia's regional trade marketing manager.

Bokee, which was set up in 2002, claims the biggest share of China's blogging market with about 2 million registered users, and said it is adding 6,000-10,000 daily.

When you consider Bokee to be a weblog hosting service, that is.

Update: The less than coherent Reuters' article on blogging in China now also made it into the International Herald Tribune.

economy - New textile quota hurt trade

In Europe trade barriers are perceived as boring technicalities, but four million Chinese sweaters waiting in Dutch warehouses to enter the EU tell another story. It is only the start of a major clash between free trade and bureaucratic quota's. The decade-old quota system was abolished at the beginning of this year and a part of China's accession into the WTO. Traders started to order new products in China, but were surprised when China and the EU agreed on new quota in a transition phase to protect textile industries in Southern Europe.
Sweaters are the first in line, while up to ten products will face new restrictions. But products have been made, transported and often paid before the new system came into place. Now there is a problem.

Update I: More European media find the textile retailers sweating.
Update II: EU trade chief negotiator Peter Mandelson has said there would be a solution for the textile that has already been shipped, according to today online:

"We will not know the full extent of the problem until data has been collected after the middle of this month," he continued, adding that shipments sent between the signing of the agreement and July 11 would be allowed entry into the EU.

internet - How to combine Baidu and Google?

Danwei points at a nice way to combine the search engines Baidu and Google in BaiGoo.

media - 'New' restraints means business as usual

I just went over the new media regulations, provided by Chinabiz, issued by the State Council on Monday. I find it very hard to notice anything new here. Of course, many exciting dreams of would-be or real media moguls are smashed but you can hard blame the State Council for the dreams outside their Beijing offices.
All sections of the media are included, except the distribution of print media. In the past decade much private money, more than foreign money, has flooded into the media sector although that was technically illegal. Government departments lower in the food chain reiterated the existing bans. The only really new about the latest regulation is that now the highest administrative body has re-issued that ban on non-public capital entering the media.
Keeping foreign money out will be relatively easy and at this stage it seems wise to make a quiet exit, trying to secure invested money. Getting rid of private money from domestic sources seems harder to deal with; I do not expect more than a temporary halt although new listings might be tough at this stage. Sticking to the current restrictions on the media seems odd, now it is almost the last sector that is not open for non-public money while its needs it more than ever.

economy - VW slashes car prices over 10 percent

Earlier this year car manufacturers said the prices cuts in China were over and they would compete for new customers on quality. Of course we all new this would be a lie.
Now Shanghai Volkswagen slashes its prices over ten percent, said Reuters, for four of its most popular sedans in an effort to see its market share slip to 15 percent from over 80 percent ten years ago. It will have a marginal effect: potential car buyers know the prices will come down even further.

life - Not yet missing Shanghai

Receiving picture and reports from people who were hit by the typhoon passing by this weekend in Shanghai. Marc van der Chijs even reports the subway has been flooded.
I have seen some heavy weather in Shanghai, but this beats all. Got reports that my apartment in Xujiahui was also flooded, water entering through a less-than-waterproof window and the upstairs' neighbor who had some problems in managing the water flows after he renovated his apartment. Will lay low a bit until everything has dried up.

internet - Has Baidu cheated on market share figures?

Doubts are rising on the questions whether the Chinese search engine Baidu has presented a fair picture of its market share in China, a commentor on this weblog claims. That is of course an interesting discussion. Keep in mind that all market share figures should be treated with caution, since none are really considered to reflex the truth. Further, market share of a company like Baidu is relative, more important is the way they make money. That is not like Google by selling adds on their service, but by sending SMS-messages and that has been a very volatile business now the relevant authorities have decided to curtail revenue streams to content providers and related services.

Going global: a triple disaster - the WTO column

Brussels - What have the Chinese companies Huawei, CNOOC and Baidu in common? All three embarked into a global endeavor that triggered off disaster, underlining my gloomy assessment of the global aspirations of Chinese companies just over a week ago.

First signal that not all was fine was indicated in a devastating article in the Wall Street Journal on the US operation of China’s telecom equipment producer Huawei. While the company has been pretty successful in selling telecom equipment at discounted prices in a few developing countries, its efforts to enter the US market has been close to a scenario for a very bad movie. The article is littered with examples that illustrate its inability to sell its products in a more sophisticated market. There is the US-engineer who discovered his job interview at the Huawei headquarters in Shenzhen turned out to be a debriefing session on the latest technological development in the US with 25 Huawei employees taking notes in front of him. There was US Huawei employee who never got a security clearance and had to move around accompanied by a security guard at his daily work place because he did not get any security pass.
Second example was the dreadful end of the 8-month 18.4 billion US dollar bid for oil company Unocal by CNOOC. While American opponents saw in the deal the invisible hand of its political enemy in Beijing, the truth was sadder. CNOOC has, according to an article in the Financial Times, operated on itself and even never asked for support of the central government in Beijing. By not securing help or even advice of their government – something they said they did not need as a listed company – they maneuvered themselves in a no-win position. Their opponents saw them anyway as an extension of the Chinese government. “Diplomatic contact between Beijing and Washington might have helped CNOOC's offer weather political opposition on Capitol Hill or at least given the Chinese group confidence a takeover would not be blocked on national security grounds, according to people familiar with the matter,” rightfully writes the FT. It illustrated profound naivety on the part of CNOOC.
The third example is still celebrated as a big success: the listing of internet search engine Baidu, whose value quadrupled last week after its IPO, flabbergasting even those analysts who earn their money by frying air to pump up the value of listed companies. It reminded me of the talk I had with the CEO of another Nasdaq-listed IT-company from China after he returned from one of his compulsory trips to the US where he talked to the US investors. He was very cynical. “It is much better to find a listing much closer at home where the investors know your market,” he said. In the US he had to meet many ignorant people who ask me what part of Japan he is from.
Main losers will be those US-based investors who will see their just-gained profits evaporate in a few years time. Baidu will just be saved from being kicked off the Nasdaq as an underperforming entity and perhaps cling on to life, potentially offering a nice deal for Google in a few years time.

Let’s see this all in management clichés: in the best case we here see a stiff learning curve. Business schools in and outside China should have a look at these gruesome examples. Lessons to be learned should reach a larger audience than only the top-management of the companies involved who are licking their wounds now.

Fons Tuinstra

economy - Analysts panic on Baidu

The China Net Investor (proxy needed in China) gives a nice overview of the reactions among analysts who watched the share price of China's search engine Baidu quadrupple. A very quick sounding of the alarm this time.

"Even with increased revenue and net income results for Q2 (around $8 million), this deal has got to have Benjamin Grahm rolling in his grave. Consider that CBS Marketwatch cited a IDC report as saying the entire China online ad market was $130 million in 2004. Now I think Baidu may surpass a $1.3 billion market cap by the end of first day of trading (China Net Investor: Baidu now has a market capitalization of $3.92 billion!), and if that happens, then I must say that I don't know of that many other companies that trade at 10x INDUSTRY revenues, even if the industry happens to be growing real fast."Philip Lin, former executive at private equity firm, Kluge & Company; entrepreneur-in-residence at Kleiner Perkins.