Monthly Archives: February 2010

Akio Toyoda’s Damage Repair

Last year, Toyota had to recall more cars from the China market than it had sold the previous year following quality problems at two of its joint ventures, Guangzhou Auto and Tianjin FAW. Last month it had to recall 75,000 RAV4 sports utility vehicles because of the same gas pedal problem that has forced similar recalls around the world and led the company’s president Akio Toyoda to making an apology to the U.S. Congress last week. Tomorrow, Toyoda will be in Beijing to try to repair the damage to Toyota’s reputation in the world’s fastest growing large car market.

The Japanese carmaker hasn’t matched the recent success in China of America’s GM among the foreign manufacturers, largely because it was late into the market and has a limited range of compacts, which has hindered it from capitalizing as much on government tax incentives for small cars. None the less, China is reckoned to be Toyota’s most profitable market now, and the difference between the company moving from being in the black and being in the red last year. As Toyota and the other Japanese carmakers are seen in China as a model for its own emerging carmakers with global ambitions, there is much reason for both sides to hang on Toyoda’s every word.

Leave a comment

Filed under China-Japan, Industry

China Still Largest Holder of U.S. Treasuries

When the U.S. Treasury announced its December numbers for net foreign holdings of U.S. Treasury bills earlier this month showing Japan had displaced China as the largest holder, we advised a watch and see approach. Having waited a couple of weeks we now see that the U.S.Treasury has revised its figures — not uncommon — and China’s holdings weren’t overtaken after all. China held $894.8 billion in Treasury securities at the end of December, more than the $755 billion previously estimated, the U.S. Treasury now says. Japan in December held $765.7 billion in Treasuries, less than the $769 billion first estimated. What hasn’t changed is that the value of Chinese holdings of  has fallen since June, when China had an estimated $915.8 billion in Treasury securities. (Full TIC report.) The revision was caused by adjustments made to account for purchases of Treasury securities made by China outside the country, such as via Hong Kong and the U.K. These are difficult to track. A further round of revisions will be announced at the end of April.

Leave a comment

Filed under China-U.S., Economy

Southwestern Drought Spreads

Drought in the southwest is spreading. Xinhua reports that 7.5 million people, mostly in Yunnan some in Guizhou, are now facing water shortages, a million and a half more than a week ago. In Guizhou emergency water supplies are being distributed to villages on horseback. Damage to crops is worsening with 85% of Yunnan’s farmland affected. The province is the country’s second largest sugar and rubber growing region. The number of forest fires is also increasing and export trade has been hit as restrictions have been put on vessels plying the upper reaches of the Mekong river where it is known as the Lancang and forms a border between Yunnan and Vietnam, Laos and Myanmar. The river is at its lowest levels in half a century, leaving nearly a couple of dozen ships grounded.

1 Comment

Filed under Economy, Environment, Politics & Society

Sichuan Tengzhong’s Hummer Bid Dies On The Vine

Sichuan Tengzhong Heavy Industrial Machinery’s $150 million bid for GM’s Hummer division has fallen through having failed to win approval from Chinese regulators. GM says it will begin winding down the iconic brand. The Commerce Ministry, as we predicted, was uncomfortable with the proposed deal and seems to have seen it off by not approving it rather than rejecting it outright. It has been an open secret that some officials weren’t keen on a Chinese company buying the poster child for American gas guzzling extravagance, while others felt uneasy about private vehicle makers expanding abroad ahead of state-owned ones.

Update: Some thoughts on Chinese investments in the U.S. that make sense at China Law Blog.

2 Comments

Filed under China-U.S., Industry

Zhu Min: A Banker On The Rise

Our man who was in Davos for the World Economic Forum brings to our attention an announcement from the International Monetary Fund that Zhu Min, a deputy governor of the People’s Bank of China, has been appointed a special advisor to the IMF’s managing director, Dominque Strauss-Kahn. The appointment reflects China’s growing influence in the global economy. We wonder if Zhu, who also worked for the World Bank for six years in the 1990s and did postgraduate work at two prestigious U.S. universities, John Hopkins and Princeton, isn’t being prepped for a top role at one of the multilateral agencies.

Leave a comment

Filed under Politics & Society

The Rotten State Of China’s Football

China should be a power in Asian football by dint of raw population size if nothing else. Yet it occupies 10th spot in FIFA’s regional rankings (and is 87th in the world). It failed to qualify for the 2010 FIFA World Cup in South Africa, where both North and South Korea will be competing; indeed, it has only qualified once, in 2002. The height of its achievement was to be losing finalist in Asian Nations Cup in 1984 and 2004, since when the national team has been on a downward trajectory.

For a country that has been putting a lot into reflecting its national pride in its emerging global power in its sporting prowess, that is a dismal, if not downright embarrassing record. Perhaps part of the reason is that players can bribe their way in to the national squad. That was one of the revelations of an anti-corruption probe into the professional game in the country that has been going on over the past year. It is uncovering what a lot of fans have long known: corruption, match-fixing and illegal gaming are endemic in Chinese professional football, and that the rot starts at the top and goes deep.

Earlier this month the head of the game’s governing body in China, Nan Yong, was removed from office along with his deputy. They were detained by authorities along with a third official from the FA. More than 20 officials, players and referees have been held for questioning during the anti-corruption probe. These include, Xu Hongtao, chairman of Super League club, Chengdu Blades, and his deputy. His club, which is owned by the English club Sheffield United, was demoted from the league for alleged match fixing. Second division Qingdao Hailifeng, found to have been the recipient of a bribe from Chengdu to throw a game in 2007 that ensured the Blades promotion to the Super League, has been thrown out of the professional sport. A third club, Guangzhou Pharmaceutical, was also demoted from the Super League for alleged match-fixing in 2006. (Full details.)

The punishments have to be confirmed by the sports ministry, the General Administration of Sport of China, but that seems a formality. While the clubs can appeal, “the mountain of evidence unearthed during the nationwide crackdown on gambling means they have little chance of succeeding,” according to Xinhua.

Whether those punishments, the most severe imposed on the sport, are sufficiently exemplary to clean up the sport this Bystander frankly doubts so endemic is the corruption within the game. The new head of the FA, Wei Di, says it will take five years to set the sport to rights, so we expect there to be more punishments to come, including imprisonments such as the three year sentence imposed on a former player for illegal online betting. The confluence of corruption and sporting standing is of too great importance to the Party leadership (and football isn’t the only scandal-tainted sport). Last October, Liu Yandong, a Politburo member whose previous job was to keep non-Party organizations in line with Party policy, publicly said that President Hu Jintao was  “very concerned” about the state of the game.  There is much for him to be concerned about — and for professional football to be concerned about if the President is concerned.

2 Comments

Filed under Politics & Society

China-U.S. Relations Wobble Further

Over the almost two decades the Dalai Lama has been calling on American presidents at the White House, this Bystander can’t recall even once when Beijing had a good word to say about the visit. Equally we can’t recall a condemnation as strong as the one following the exiled Tibetan leader’s meeting with President Barack Obama. The White House choreographed the visit as artfully as it could to keep it low key (Map Room not Oval Office, for example) and Obama was deliberate in acknowledging Tibet as part of China. But to no avail. Foreign Ministry spokesman Ma Zhaoxu:

“The U.S. act grossly interfered in China’s internal affairs, gravely hurt the Chinese people’s national sentiments and seriously damaged the Sino-U.S. ties.”

What is as interesting is commentary in state media. This presents the meeting in a context of a combination of Obama’s need to deflect attention from his domestic political and economic problems and America’s discomfort with the erosion of its power in the face of China’s rise. The several references to the U.S.’s “Cold War” mentality towards the U.S.-China relationship caught our eye, not so much because it subtly casts the U.S. as part of the past but because it implicitly suggests that China is writing  new rules of international relations. Those, to borrow the jargon of the business world, will be for a world comprised of ‘frenemies’, for a new Great Game in which China will do much better than one in which its given role is to play the part of the old Soviet Union.

Leave a comment

Filed under China-U.S.

Drought Worsens In Southwest China

Up to 6 million people have been affected by drought in south and southwestern China. Conditions are said to be the most arid in more than half a century, echoing the situation on the similarly drought-stricken North China Plain before the winter snows.

In Yunnan, more than 5 million people are facing water shortages and four fifths of all farmland has been affected, according to provincial governor Qin Guangrong. The economic cost is being put at near $1 billion. The dry conditions allied to strong winds are causing an exceptionally high number of forest fires. In neighboring Guizhou to the northwest, about a quarter of a million people are short of water.

Some areas of Guangxi, which like Yunnan borders Vietnam, haven’t seen rainfall since last August. Rivers are drying up. Drinking water is being trucked into villages, where Xinhua reports, more than a quarter of a million people are short of water. Prime Minister Wen Jiabao visited affected areas last week to inspect relief efforts. Guangxi produces 60% of the country’s sugar. Production is estimated to have fallen 5% in 2009 because of the drought. Sugarcane prices have hit a three-year high.

Weather forecasters see no rain in the immediate future going into spring planting. Cloud seeding operations to force rainfall have had only spotty success. The rainy season in the region doesn’t usually start until May.

1 Comment

Filed under Environment, Politics & Society

China Cuts Holdings Of U.S. Debt. So What?

This Bystander always cautions against reading too much into any one month’s economic statistics, though, of course, trends have to start somewhere.  So we suggest no more than keeping a weather eye on foreign holdings of U.S. Treasury bills at this point, following the U.S. Treasury’s announcement that net foreign holdings of its bills fell by a record $53 billion in December. China is no longer the largest foreign holder of Treasury debt, having cut its holdings by $34.2 billion to 755.4 billion. Japan, with holdings of $768.8 billion, has reassumed the top spot it yielded to China in September 2008.

The fact that foreign holdings of longer-term Treasury debt rose in December b $70 billion suggests to us a rebalancing of portfolios and more confidence in global economic recovery, more than a waning appetite for American paper, and Beijing did say last year that it would pare back its holdings. We’ll watch and see, but much as Beijing might fret about U.S. deficits and the dollar, none of euro-, sterling- and yen-denominated debt looks a great deal more attractive alternative right now.

1 Comment

Filed under China-U.S., Economy

China’s Domestic Leadership

A Kim Jong Il birthday day discussion about how the isolation of North Korea’s leaders shape their country’s reactions to the rest of the world in what often appears an irrational way turned to China’s worldview and how it presents itself to the world. It was pointed out to this Bystander that in most countries to be foreign minister is to hold one of the Great Offices of State, yet in China the official with the greatest responsibility for foreign affairs, Dai Bingguo, is a State Councillor who ranks below 50th in the Party’s hierarchy while the foreign minister, Yang Jiechi, ranks around 250th. A little subsequent research reveals that at the apex of that hierarchy, the nine-man Politburo Standing Committee (and it is all men), there is a paucity of foreign experience. None of the nine has lived, worked or studied abroad for any significant time if at all. None, as far as we could find out, speaks fluently or has studied a foreign language, though we understand there is some ability to read in English. All built their careers as domestic politicians in jobs that had no involvement with the rest of the world until being promoted to their current posts. All politics is local to some extent, but the experiential distance of China’ leaders from the rest of the world may amplify the roughness of relations with the U.S. and the E.U. in particular at times when, as now, they are going through a rough patch.

1 Comment

Filed under China-E.U., China-U.S., Politics & Society