Monthly Archives: August 2007

Power Shuffle

Jin Renqing, who has been shifted from finance minister to deputy director of the State Council Development Research Center, is only one of six ministers to have been moved in a shuffle ahead of the Party congress in October. Jin’s “personal reasons” for resigning may have less to do with the vague allegations of improper conduct (though there seems to be some fire to the smoke ) and more with the fact that he was aligned to former President Jiang Zemin, whose supporters are being cleared out from the highest levels of government by his successor Hu Jintao.

Jin, 63, is demoted from ministerial to vice-ministerial status. His successor as finance minister, 59-year-old Xie Xuren is firmly in the Hu camp. Xu moves from the State Administration of Taxation where he oversaw the unifying of tax rates for Chinese and foreign businesses to be phased in over five years from January. He previously worked as a vice-director and assistant minister in the finance ministry in the 1990s before spells at the Agricultural Development Bank and as vice-director of the State Economic and Trade Commission, according to the People’s Daily

So don’t expect any change in economic policy or financial system reform. This is pure politics. 

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Call In The Clones

Knock-off CDs, videos, software, medicines — and now cars? BMW and Daimler Chrysler are threatening legal action if the Chinese-made SUV CEO and Nobel, which bear a striking similarity to BMW’s X5 and DaimlerChrysler’s Smart For-two, respectively, are shown at the Frankfurt motor show, AFX reports.

And no jokes, please, about the way to tell the vehicles apart is that the Chinese ones use leaded petrol.

Update: Shuanghuan Automobile has denied that Noble is a copy of Smart Fortwo, or its CEO of BMW’s X5. “Noble and CEO cars, approved by the Chinese government, are legal products,” a spokesman said.

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Passing Lane

An piquant if no doubt passing twist in the rivalry between China and India to be Asia’s emerging economic power. Indian steel-to-consultancy conglomerate Tata Group says it is interested in buying Jaguar and Land Rover from Ford Motor. The U.S. car maker lost $12.7 billion last year and has been looking to offload its luxury-car divisions to raise cash. If the deal were to go ahead — and Tata is not the only bidder — in the storied auto marques stakes that would trump someday-to-be-merged Nanjing Automotive and Shanghai Automotive’s 2005 purchases of various bits MG and Rover.

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Toy Sense

Forget the recriminations, the U.S and China have to work out how to make toy manufacturing safer, as this from a Forbes Hong Kong correspondent, Shu-Ching Jean Chen, shows:

By combining Hong Kong toy makers’ shrewdness with China’s sprawling low-cost production base, Chinese manufacturers have won close to 80% of the world toy market. In addition, China is estimated to hold a similarly high proportion of the market for small giveaway items such as the toys in McDonald’s Happy Meals, known in the industry as “premiums.” No competing producers in Indonesia, Vietnam, Thailand or Mexico can provide a ready substitute any time soon.  

We are stuck with what we have.

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Fake Pharmacies

MarkMonitor is a consultancy that tracks online brand abuse. The article accompanying the latest quarterly revision of its Brandjacking Index (requires registration) focuses on discount online pharmacies — and paints an alarming picture of counterfeit, expired, stolen and diluted drugs being widely peddled by uncredentialled online pharmacies using spam e-mails. 

Bad timing though it is given the current food and drug product safety row, China does not come off well in this survey (though nor does anyone else mentioned come to that). Nearly one in five of the sites MarkMonitor looked at were hosted in China, second only to the U.S. with two in five. China, Russia and Eastern Europe were the main source of the 60 million spam e-mails MarkMonitor tracked. The online auction site Alibaba was cited as one of the places where this dodgy business is talking place in plain site.

The scale of online sales of counterfeit drugs–it is now a $4 billion business–is defeating the abilities of governments or companies to tackle it. With the Olympics next year, Beijing will likely try to clamp down on online sales of performance enhancing drugs and all online pharmacies will get caught up in that action. But it will only drive the business elsewhere.

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Safe Hands

Vice-Premier Wu Yi is to head up the top-level crisis team dealing with product quality and food safety. That such a senior troubleshooter as Wu has been appointed is a sign of how seriously this is being taken in Beijing as an external issue. Wu is  one of China’s internationally best known officials, heading the Chinese side of the strategic economic dialogue with the U.S. In the 1990s she helped negotiate China’s entry to the World Trade Organization and in 2003 was drafted into lead the SARS team after the initial ham-fisted attempt to deal with the outbreak. But she will be under pressure to show more quick and tangible results in both tightening manufacturing standards and in reassuring China’s trading partners than she has achieved in the strategic economic dialogue.

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Corporate Bonds

China is kick-starting its moribund corporate bond market. New rules let companies listed on domestic and overseas markets issue bonds up to 40% of their net assets. 

The funds can be used for any purpose approved by shareholders “but must conform with the government’s macroeconomic policies”, according to the China Securities Regulatory Commission, which has wrested control of bond issuance approvals from the National Development and Reform Commission. the top economic planning agency.

The NDRC steered companies towards using bank debt in order to support the state owned banks. The NDRC required a bank guarantee for each bond and had a quota that kept new issuance at less than Rmb100bn ($13.2bn) last year. 

Qualified companies are likely to be queuing up to replace their bank debt with bond proceeds as bond rates are 2-3 percentage points lower than bank loan rates.

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Citius, Altius, Fortius

I’ve steered clear of the Olympics so far — there”s hardly a shortage of coverage — but the call by Dick Pound, head of the World Anti-Doping Agency for China to step up its drugs testing of athletes and to crack down on internet sales of performance enhancing drugs stuck me as yet one more way that China echos America.

China has seen several doping scandals in recent years. Pound pushed the national pride hot button by telling the games’ organizers that if China has “1,000 athletes that nobody has ever seen before and you win all the medals, it is not going to be a successful games — it’s going to be a disaster.”

He wants China to step up the number of tests it does, and to do so well ahead of the start of the games. “We’ve tried to persuade them they should make this effort because they do have a record which is not generally known or acknowledged in China. But everybody outside of China knows it,” Pound said.

That is where I hear the echo with the U.S. At the highest level, China and the U.S. would like their sport to be drug-free but it is not. Among some coaches and competitors the will to win by any means becomes overwhelming. If getting “swifter, higher, stronger” can come from a vial, so be it. As Pound put it: “There are pockets in sports, teams, clubs that are actively involved in doping and have no real intention of changing unless they get caught.”

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Falling Apart

The fatal collapse of a footbridge under construction in Fenghuang in Hunan province follows the collapse of a road bridge in Minneapolis. The Communications Ministry says more than 6,000 unsafe bridges will be fixed or rebuilt by 2010. The American Society of Cvil Engineers says  nearly 30% of the bridges in the U.S. are structurally deficient or functionally obsolete. 

Whereas in the U.S. the debate is over the failure to maintain old infrastructure, the focus in China remains squarely on the quality of new products.  A possible second made-in-China-toys recall for Mattel and the suicide of the chief executive of of the factory involved in the first has put product safety back on the front pages of U.S. and European newspapers — some of those same U.S. papers carrying full page ads from Mattel assuring consumers it is on top of product safety issues (oh, ye cruel, cruel gods of PR). 

The Ministry of Public Security says that there were 1,247 reported crimes involving fraudulent and shoddy products in the first half of this year, up 24.3% on the same period a year earlier (economic crimes at 36,000 were up 10% overall).

Take those numbers with the usual pinch of Chinese statistical salt and stick your finger in the air to calculate the percentage of all fake and shoddy products accounted for by reported instances. But it all makes brings to mind the refrain in the old Tom Lehrer song about pollution, Don’t drink the water and don’t breathe the air. What a glum day. 

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Powering Up, er Shortly, Perhaps

An update on the two proposed third-generation pressurized water reactors to be built in Guangdong: Areva, the French company that is the world’s leading nuclear power plant builder, and China Guangdong Nuclear Power Corp. were expected to sign a letter of intent at the end of July. But no chop to paper yet. The Financial Times reports that a similar plant that Areva is building in Finland is 18 months and $958 million behind schedule. Areva says that isn’t affecting the negotiations over the two Chinese reactors, but the talks are clearly taking a lot longer than expected.

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