Who to sue when the Chinese embassy does not pay the rent

Queen Beatrix on the road Radio Nederland Wereldomroep via Flickr
Real estate company de Van Herk Groep in The Hague has a problem. (Here is the Dutch article about the issue.)The Chinese embassy has - in their opinion - to pay 300,000 euro in rent for the former embassy. While I think the issue could be settle for less, the Dutch company first faces a problem in finding out who should be sued for the arrays, if there is anybody to sue.
They have sent a letter to the Chinese ministry of justice in Beijing and that has not even be worth the poststamp on the letter. It came back unanswered.
Of course, the Chinese ministry of justice has no issue here, but who is? Legally, the Chinese embassador in the Netherlands is here on the invitation of our head of state, queen Beatrix. They would have had a better chance to get the money when they would have sent her the letter.
Since this involves the Chinese ministry of foreign affairs, it would be a political matter. I would probably go to the Dutch ministry of foreign affairs as they are representing in this kind of cases the Dutch head of state Beatrix. Interesting issue: what would you do?

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Scottish whisky for China

The BBC has started a nice way to illustrate the globalizing economy. It is called "The Box" and a red container box will be followed a year-long over the world, delivering its cargo in different parts of the world. Very much appropriate, it starts with a load of Scottish whisky heading for booming China.
Scottish whisky is not doing that well, but China might be offering a way out. I have added them to my RSS radar screen and will be following the journey.

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Have high-end retailers created a Beijing glut?

A winner?
via Wikipedia Yes, there is nowadays too much in China anyway, says retail investigator Access Asia Director Paul French. No, says market researcher Shaun Rein of CMR, it is all a matter of having a smart strategy.
Beijing has faced a flood of high-end shopping malls with countless high-end retailers, trying to make the best out of the Beijing Olympics. That was a wrong strategy to start with, says Paul French in the International Herald Tribune.

"There's just so much of everything in China right now," said Paul French, founder of the market research firm Access Asia. "It's hard for a brand to get ahead of the pack."
Beijing's high-end retail space expanded by 89 percent in the last two years, according to a report by the real estate services agency Jones Lang LaSalle. And French said too much of that space was built in anticipation of the Games. "Who was going to come to the Olympics and buy a handbag?" he wondered aloud. "It was a dumb strategy."

In some cases, it is hard to get to the new stores, because of the traffic, making a disaster inevitable. But some have done it the right way, says Shaun Rein in the same article.

"Very few brands will do well because everyone wants to come here," said Shaun Rein, founder and managing director of China Market Research Group, based in Shanghai. But those that are doing well have a few things in common, he said - for one thing, their stores are "enormous."
Chinese consumers feel slighted if the store is cramped and not matching the brand image, Rein said.
Another key is to have a broad selection of products at a wide range of prices - for example, handbags for 30,000 yuan, or $4,400, or comparatively cheaper items like key chains for 2,000 to 3,000 yuan. Gucci and Louis Vuitton are standouts in China for these reasons, Rein said.

More at the International Herald Tribune.

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Morgan Stanley expects property 'meltdown'

via Wikipedia China's developers and banks face a 'meltdown' as home prices and sales continue to drop, according to analysts of Stanley Morgan, here in Bloomberg.
Earlier this week Shenzhen-based property developer Vanke had to face angry customers, as the housing giant slashed prices of projects under construction, without compensating people who had already bought the same property. While the housing crisis in China seems not related to the worldwide housing crunch, it is for the first time the country faces a property downturn on a national scale.
The plunge comes at an awkward moment as also the Shanghai stock exchange reached a record low, by only just not falling through the 2,000 index threshold. Finding a good way to invest their money has become rather tough for the Chinese investors.
The housing crisis is caused by government measures to cool down the economy, writes Bloomberg:

Property demand in Chinese cities has dropped by as much as half since the government last year raised minimum down payment requirements and increased rates on some mortgages to cool home prices, according to CSC Securities HK Ltd. analyst Liu Bin.

While the government has very little instruments to influence the stock market, removing curtailing measures on mortgages would also be rather difficult, since they were actually meant to have this effect. Keeping the restrictions in place might also not make the Chinese society in the larger cities more harmonious, this other major ambition of the central government, causing a huge dilemma.

Update:  No solution here in the financial magazine Caijing, but it confirms that in Shanghai investments in real estate have dropped dramatically. People are now putting their money on the bank, that cannot be a long-term solution.

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Competition moves to curtail Baidu - Paul Denlinger

Paul Denlinger

China's domestic online powerhouses have started a shoot-out, but Paul Denlinger says the official privacy argument to stop leading search engine Baidu is plain nonsense.
A range of leading social network sites and internet portals, including Sohu.com, 51.com and Xiaonei have stopped Baidu from conducting searches on their sites, reports the Media Magazine, citing privacy concerns.

“I find this excuse a real stretch. Since when has anybody worried about user privacy in China before? What guidelines do they use for protecting user privacy?” asked Paul Denlinger, owner of China Business Strategy. “This sounds much more like a desire to dial back the power of Baidu and its search.”

Baidu who claims a market share of 60 percent of the search market is moving into e-commerce, triggering off this tough reaction by the competitors.

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China to relax visa politicies in October

via Wikipedia The China Briefing reports that the visa-regulations will only be relaxed after China's national holiday in October.

Beginning in the second week of October, China will start issuing one year multi-entry F visas, making it far more convenient for those traveling to China on business to enter the country. The new measures will assist with the various trade shows, such as the Canton Trade Fair, that China traditionally holds during the Autumn.
This new policy will redress the restrictions on visa issuance that were put in place prior to the Olympics, and will come as welcome news to China-bound business people visiting the country.

Reports from the ground suggest that the execution of the visa-restrictions have been very different. Beijing, where now the Paralympics take place, is reported to be still very empty, while people in Shanghai report almost no difference.

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Chicken for the masses - KFC in China

via Wikipedia Former Vice President of Business Development for Greater China of Tricon Global Restaurants, KFC's parent company (now known as YUM! Brands) and author of the new book 'KFC in China: Secret Recipe for Success' Warren Liu will hold a book presentation on Wednesday 17 September for the Foreign Correspondents Club in Shanghai.
He will discuss the company's strategies in China, including its use of franchising and emphasis on localization (KFC has not only used pastiches of Chinese revolutionary posters in its advertising, but runs a campaign proclaiming that it's 'changing for China'), as well as its pioneering use of humour in its Chinese marketing – and will give an insight into how far the company's previous experience in Taiwan was transferable to the mainland.
Introducing a major international brand into China is a high-risk business, especially when you're selling a food – chicken - which is virtually the country's national dish in the first place. But since its pioneering entry into the Chinese market, with a single store in Beijing's Qianmen in 1987, KFC has grown at a startling pace to become the nation's largest foreign fast-food chain. It currently has more than 2,200 branches in 450 Chinese cities, far outstripping its biggest rival, McDonald's.

Venue details: 3/F, Sasha's, 11 Dongping Lu, near Hengshan Lu(6474 6628)
Admission: Members free; Non-members 50 RMB RSVP: fcc.sfcc@gmail.com by Monday September 15th.

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Tudou license needed for online business - Shaun Rein

Shaun Rein

The license China's largest video hosting firm Tudou received today was paramount for getting seriously into the advertising business, Shaun Rein says today. After a two-month wait Tudou got its license from the regulatory body SARFT, two months after everybody else got their permission. Brand Republic Asia:

According to managing director China Market Research Group Shaun Rein, receiving a broadcast licence is imperative to any video site’s welfare because, without one, it would be impossible to attract advertising revenue, making survival in a sector that has not produced any profitable company even more challenging.
“Getting the licence from Sarft is key for Tudou to be able to sign deals with advertisers and solidifies their position along with Youkou as the online video site to beat,” he said. “It is difficult for marketers to launch ad advertising campaign with an online video site if it does not have the proper licensing because it runs the risk of getting shut down as was the case with 56.com.”

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More comparison on China's managerial salaries

Financially more attractive
Wikipedia Earlier today I compared the salaries in the health care for China's mainland with the global benchmarks, mostly based on my own intelligence and data provided by hr-company Hudson. My basic finding: just like three, four years ago experienced managers in China earn much less compared to what their colleagues are earning in the US and Europe; even Hong Kong, Japan and Singapore are doing much better in that industry, compared to China's mainland.
I took the health care industry as an example because I'm more familiar with them, but Hudson is offering such great material, it made sense to compare different industries too. What did I discover? A few industries in mainland China are paying their senior managers wages similar to the global market, notably in advertisement and banking. Those industries seem to be competing on a global market.
The same goes for lawyers in international firms: they command about the same salaries. But when you are a legal secretary, a paralegal or working for a local Chinese firms, salaries are much lower. That might not come as a surprise.
Other industries are not yet competing for experienced senior managers outside China. Senior managers in human resources (Hudson!), manufacturing, sales and marketing are earning less in Beijing and Shanghai compared to Hong Kong and Tokyo. Also in IT, where you would expect more exchange on a global level, salaries tend to be rather local for the senior managers.
Now, all these data are averages and sometimes I got the impression the number of data, especially for the very senior jobs, were depending on maybe a few people. But it supports my basic argument: you can only get experienced managers when you are paying them a competitive salary.

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• Managerial salaries for the Mainland: still a long way to go

Managerial salaries for the Mainland: still a long way to go

Angie Eagan

Today I listened to the interview Christine Lu of the China Business Network had with Angie Eagan of the HR-company Hudson, but who has a long career of China-related ventures. Really great stuff that give a good introduction to China and Shanghai, for companies and individuals thinking of entering the market. "Many companies entering the China market do not understand the competitive market and do not do enough due diligence," is one of Angie's one-liners that cannot be repeated too often.
Unfortunately, there was only little time to cover a wide range of issues, so, not surprisingly, I missed a few. The HR-market is very competitive, where - compared to ten years ago - competition is really killing and it would have been interesting to hear Angie's views on how her company is surviving itself in the killing fields of China's hr-industry.
In the past I have been investigating and writing much about this market; I'm still involved in the Wage Indicator project, and a few years ago I talked to many Chinese MBA-students and their motives for not returning to China. For the same job, they would earn much more in the US and in Europe, was their argument for not returning. Career perspectives were not that great.
Angie's companies offers really decent material on the managerial wages in China, and despite all the sweet words of Angie, the reality does not seem to have changed fundamentally over the past few years. Have a look for example at the salaries in the health care and life sciences for 2008. I'm most familiar with them, but estimate they illustrate the trend.
When you look at the first salary of VP or business development manager the salary ends up in the same region for both Japan and Hong Kong, a 150,00o euro. That would be comparable to the salaries in the US and Europe, although still a bit on the low end. Singapore is doing slight worse with 125,000 euro, but China only scores 80,000.
Of course, these are only averages, but why would somebody come back to China to earn only half of what they can earn elsewhere, especially now taxes and living expenditures in China's larger cities are also getting mature? As long as salaries are not comparable, complaining about a lack of experienced managers does not make that much sense.

Tudou gets its SARFT-license

Tudou via Wikipedia China's largest video hosting firm Tudou announced today it got its license from the State-Administration of Radio, Film and TV (SARFT) after a prolonged delay, so that is well worth a congratulation!
A short summary of what happened to this rather new industry that has been able to survive in the rather difficult media-landscape where private companies and the country's regulator have been at odds for a rather long time. More details you can find here.
Tudou was the last party in this market to get a license, after SARFT first wanted to turn the whole industry into a state-owned one. That intention failed and then the regulator started to issue license and industry, it could not turn around. First all but the largest three firms got their license. Only after lengthy discussion, for example on how these private companies would deal with the internal censorship that is pretty common in the traditional media, also the larger players would get their license.
I would say, this is a rather fundamental change, compared to the way the traditional media where despite many changes the ownership of the media itself is in one way or the other still in the hands of the state. While the video hosting companies are still Chinese owned - and I could not image a foreign company setting up such a media company in China at this stage - the larger and more successful ones are privately owned with a large participation of foreign VC's. While censoring the videos will remain in place, we do see here a profound change in the media industry.
SARFT, the regulatory body, wanted to have a state-owned industry and the private owners of the larger successful firm have resisted. Those larger players have won, although they have most certainly compromised on some censorship issues. But in terms of media ownership relations we see that the state acknowledges private companies can do this business better than the government itself.

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Developer Vanke unites home buyers in anger

Nanjing
Wikipedia Hundreds of angry home buyers have been ransacking the offices of the famous real estate developer Vanke in Hangzhou, reports Danwei, quoting Chinese media. Similar incidents have been reported from Shanghai and Nanjing, where home buyers saw the prices of their pre-paid houses melt away, after Vanke slashed prices. The quoted China Business Review:

In response, on September 8, Vanke said that "although the company sympathizes with the early buyers for their loss, as a listed company, it is responsible to shareholders and must conduct business in the spirit of the contract." The newspaper also quoted an expert saying that the home buyers should be aware of the responsibilities and risks involved in their purchase instead of targeting the developer, which did nothing illegal.

Some apartments dropped in some cases from 180,000 Rmb (corrected: 18,000) per square meter to 14,000. Mostly the real estate business, like almost any business in China, is local business where figures on a national level are just useless data for media and policy makers. In many ways, China is more divided than for example Europe. Now, in this case it looks that Vanke has been able to get home buyers all over China on the same page.

Zhang Lijia's happy story of the 1980s

Zhang Lijia

Jeremy Goldkorn interviews Zhang Lijia for Danwei-tv about her autobiography Socialism is great!, about her life as a worker in a missile factory. Lijia explains she wanted to make another book, compared with the flood of bitter and suffering tales from the time of the Cultural revolution (1966-1976).
She made a happy story about the 1980's, sitting as a "frog in the well" in her danwei, moving towards the freedom people in China are having nowadays. "The 1980s were the beginning of change after Deng Xiaoping opened the country. It is an upbeat story about pursuing dreams."

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How much is China getting back from Freddie and Fannie?

Wikipedia This weekend financial authorities in the United States are coming up with their plan to bail out their key mortgage lenders Freddie and Fannie, writes Market Watch. For sure some people in Beijing are also having sleepless nights.
China's four major banks decided already earlier to cut their losses in August, rather than wait for the official end of both financial giants. Unclear is who was nice enough by then to actually buy the worthless paper from Freddie and Fannie. Even more unclear is the question how many other Chinese financial institutions still hold possessions in those US institutions and how much they might get back.
The package that is put together is weekend is worth an estimated USD 5 trillion, so even the total Chinese part in US-denominated papers of about USD one trillion is only a minor percentage of the total damage. But Chinese institutions will need alternatives for the foreign debt they are building up, and that might mean a boost for other economies like Europe and Japan.

Update: See also this interesting entry on how the US have screwed China. 

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Only 37 Chinese tourists visit Taiwan per day

Tainan, Taiwan
via Wikipedia The expectations were high when direct flights between Taiwan and the Chinese mainland resumed earlier this year, as especially Taiwan hoped for larger numbers of tourists from China, spending more money to stimulate its economy.
Claudia Jean (h/t Global Voices) did a nice job in finding out the reality behind those high expectations. At the time, the Taiwan government hoped for 3,000 tourists extra per day, spending close to USD 2,000 per head. The reality about the number of tourists:

Dr. Pan dug out some detailed figures from Taiwan’s Tourism Bureau and worked out that the number of Chinese tourists in July 2008 reported in the press (N=5,389) included those from Hong Kong and Macau. Without those, direct flights from China only brought in 1,002 Chinese tourists in July and the vast majority of passengers on those flights were Taiwanese people working or living in China. This leaves the daily average of Chinese tourists brought in by direct flights a stunning 37.

What those tourists are spending might not be a surprise for those who are familiar with Chinese tourists in for example Europe. Apart from high-end valuables as for example diamonds, Chinese tourist try to spend on average as little as possible. Taiwan shows the same pattern:

The current direct flights everyone seems so excited about certainly don’t increase the number of Chinese tourists and their actual average spending has been $195 per person per visit.We can also see in the statistics that the number of Taiwan’s biggest visitor group, Japan, has decreased since Ma vowed to bring in lots of Chinese tourists.

The story is not untypical. Foreign investors in China tend initially to focus on the 1.3 billion Chinese consumers as their customers, but tend to discover the hard way that their consumer base it a bit less than that. When you are able to successfully tap into the financial resources of the top-end spenders in China, you're much better off, but that would need a bit of a different strategy to attract that group of customers.

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