China Challenges

Wharton: The New Chinese Economy

Check out this set of articles from Warton about China's economy:

The Emerging Chinese Company

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1574&specialid=57&CFID=2496234&CFTOKEN=72750615

The New Chinese Consumer

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1572&specialid=57&CFID=2496234&CFTOKEN=72750615#

Quotes from Cai Wu

China's Information Minister Cai Wu recently said:

'"In China, we think that the relationship between the media, the society and the government should be characterized by coordination and cooperation, rather than by confrontation," Cai said in remarks at a Washington hotel, speaking through an interpreter.

"I can assure you that in China no journalist or any individual will be arrested or jailed due to his different opinion or (because) he expressed some opinion against the government. Maybe there are some other reasons" for arrests, he said.

To read more:

http://www.chinalyst.net/node/3096

Trade Dispute Will Head to the WTO

Bloomberg reports via the IHT:

The World Trade Organization has agreed to examine Chinese duties on imported car parts, in the first case against the Asian nation to reach arbitration. China requires that General Motors, Volkswagen, Renault and other automakers operating in the country buy a certain quantity of their components from local suppliers, and it applies a 25 percent import duty on parts, compared with a 10 percent duty on complete cars. The European Union, the United States and Canada have argued that the duties violate pledges China made when it joined the WTO in 2001

To read more:

http://www.iht.com/articles/2006/10/27/business/chinaauto.php

This is China!

I recently discovered an interesting new blog called This is China!

To take a look:

http://silkrc.typepad.com/chinablog/

China Blogs Must Use Real Names

The China Economic Review reports:

The Internet Society of China says bloggers should be required to use their real names when they register blogs, AP reported, citing state media. The society, which is affiliated with the Ministry of Information Industry, said no decision has been made but that a 'real name system' is inevitable. "A real name system will be an unavoidable choice if China wants to standardize and develop its blog industry," the Internet Society's secretary general, Huang Chengqing, told state media. Under the proposed rule, users would be required to register under their real name to open a blog but would still be allowed to write under a pseudonym.

To read more:

http://chinaeconomicreview.com/subscriber/newsdetail/8035.html

Wal-Mart Takes On China

Newsweek reports on Wal-mart's big gamble in China:

China remains an economy controlled by domestic retailers. Becoming the largest foreign retailer there will give Wal-Mart less than 9 percent of the Middle Kingdom's vast retail market. And for Wal-Mart, China is still small change. After absorbing Trust-Mart over the next three years, Wal-Mart will have fewer than 200 stores in China, generating about $2.6 billion in annual sales—a slender sliver of the $312 billion in annual sales that makes the retailer America's biggest company. In fact, Wal-Mart will build more stores in America this year—370—than it will have managed to amass in China in 13 years.

To read more:

http://www.msnbc.msn.com/id/15366760/site/newsweek/

China Climbs in Globalization Index

Foreign Policy magazine has issued a new Globalization Index and says:

Ask investment bankers about globalization’s newest frontier, and they might respond with one cryptic syllable: BRIC. The acronym, coined by the investment bank Goldman Sachs, stands for Brazil-Russia-India-China. “If things go right,” says one Goldman report, “in less than 40 years, the BRIC economies together could be larger than the G6 [Britain, France, Germany, Italy, Japan, and the United States] in US dollar terms.” But for all their prominence in predictions about globalization’s future, the BRICs have generally scored poorly on the Globalization Index, in large part because they have massive populations that are still rural and isolated from the global economy.

This year’s index shows that the isolation may finally be ending. China climbed three spots in the index, while Brazil and Russia each improved by five places. India’s ranking remained the same, but its overall performance improved in most areas. Each of these developing-world heavyweights is opening up in its own way. China’s trade volume grew to more than $1 trillion in 2004, pushing it past Japan to become the world’s third-largest trading nation (behind the United States and Germany).

To read more:

http://www.foreignpolicy.com/story/cms.php?story_id=3603&page=2

The New Entrepreneurs

Harvard Business School has a new report about China's next generation of business leaders: The New Entrepreneurs.  To read more:

http://hbswk.hbs.edu/item/5523.html

China Worries about North Korean Refugees

Anne Applebaum writes at Slate:

Instead of closing the 800-mile Chinese-North Korean border to goods, the Chinese could open it to people. According to U.S. government estimates, between 10,000 and 30,000 North Korean refugees have slipped across the border in recent years and now live illegally in China.

According to some independent estimates, that number is closer to 300,000. Whatever the correct figure, it's clear that a lot more would join them if the Chinese weren't so vigilant about sending North Korean refugees back to face torture and imprisonment.

Just this past week, while no one was paying much attention, China increased that vigilance, adding new barbed-wire fences and even deporting some local residents from the border region. One Chinese official apparently told a Hong Kong newspaper that the regime is girding itself to repulse a possible influx of 500,000 refugees. Were such a number really to flee, it could provoke the collapse of the regime.

To read more:

http://www.slate.com/id/2151635/

Wal-Mart buys Taiwan's Trustmart

The NY Times reports:

Wal-Mart Stores, the largest retailer in the United States, is laying the groundwork to become the biggest foreign chain in China with the $1 billion purchase of a major retailer here, according to people briefed on the deal.

To read more:

http://www.nytimes.com/2006/10/17/business/worldbusiness/17walmart.html?_r=1&th&emc=th&oref=slogin

The Global Patent Rankings

The China Economic Review reports:

China has overtaken Germany in the global ranking of patent applications to become the fifth largest source of filings, the Financial Times reported. In its first comprehensive report on patent activity, published Monday, the World Intellectual Property Organisation (WIPO) found China had a sevenfold increase in patent filings in 10 years, underscoring the increasing prominence of Asian industrial powers in intellectual property.

The UN agency ranked Japan top of the patent league, followed by the US, the European Patent Office, South Korea and China. Together, they accounted for three-quarters of all patents filed in 2004, the latest year for which comprehensive figures are available. In China half the patent filings in 2004 were by foreign companies, while most filings in Japan and South Korea are still by local inventors.

To read more:

www.chinaeconomicreview.com

How Hard Will China Push North Korea?

Melanie Kirkpatrick  in the Wall Street Journal writes:

If China is to assume what it considers to be its rightful place as a great power, now is the moment. The world is looking to Beijing as the only government with a measure of influence over its lunatic nuclear ward in the Hermit Kingdom. The question is, will it use it?

She goes on to note:

The numbers it reports are newsworthy--and staggering: "To date, almost 400,000 North Korean illegal immigrants have entered China and large numbers continue to cross the border illegally." And, "As of the end of December 2004, 133,009 North Korean illegal immigrants have been deported." While Chinese authorities obviously know how many refugees they have deported, by definition they can't know how many are in hiding. The estimate of 400,000 is sure to be low.

To read more:

http://www.opinionjournal.com/editorial/feature.html?id=110009092

China's New Leftist

The NY Times reports:

One day earlier this year I met Wang Hui at the Thinker's Cafe near Tsinghua University in Bejing, where he teaches. A small, compact man with streaks of gray in his short hair and a pleasant face that always seems ready to break into a smile, he arrived, as he would to all our subsequent meetings, on an old-fashioned bicycle, dressed in dark corduroys, a suede jacket and a black turtleneck that would not be amiss on an American campus.

To read more:

http://www.nytimes.com/2006/10/15/magazine/15leftist.html?_r=1&th&emc=th&oref=slogin

China Ranks 110th in Per Capita GDP

The PanAsianBiz blog notes:

According to China's national bureau of statistics China's per capita GDP was only $1,703 or 110th in the world. China's national GDP ranked 4th in the world after the US, Japan and Germany.

The Vice Minister of the National Development and Reform Commission is predicting that China's per capita GDP will grow by 50% over the next 4 years = $2,400 per capita or $3.2 trillion total.  Other statistics cited at the 14th World Productivity Congress in Shenyang:

1.  China contributes just 5% to the world GDP but comsumes 25-40% of the world's crude coal, iron ore, steel, alumina and cement.

2.  Only 3 in 10,000 Chinese companies have intellectual property rights for their core technologies.

3.  99% of Chinese firms have no patents

4.  60% of Chinese firms do not have their own brands!

To read more:

http://www.chinalyst.net/node/2287

Shanghai's Auto Dreams

My new article about China's auto industry is posted at Asia Times Online.  I write:

In its quest to make this city China's auto-manufacturing capital, the municipal government is increasing investment in the Shanghai International Automobile City, according to local media reports.
Analysts say Shanghai has a competitive edge over rival Chinese cities in automobile manufacturing.

To read more:

http://www.atimes.com/atimes/China_Business/HJ12Cb01.html

Harvard Says China is Slipping

The Harvard Business School e-newsletter says:

The United States and Germany remain atop the latest Business Competitiveness Index, with China continuing to slip in the rankings while India ascends, according to a report released from Harvard Business School's Institute for Strategy and Competitiveness.

China, which has retreated in the rankings since 2002, fell nine spots to 64, according to the ISC. "This year's decline was driven especially by higher levels of corruption, weaker assessment of buyer sophistication, and concerns about labor relations," the study found. Also contributing were weak property rights, poor board governance, and low quality of management education. "Overall it is clear that euphoria about China is moderating as the realities of its competitiveness become more apparent," the report concludes.

To read more:

http://hbswk.hbs.edu/item/5454.html

China's New Labor Law

China's proposed labor law is raising concerns.  The NY Times reports:

Some of the world’s big companies have expressed concern that the new rules would revive some aspects of socialism and borrow too heavily from labor laws in union-friendly countries like France and Germany.

The Chinese government proposal, for example, would make it more difficult to lay off workers, a condition that some companies contend would be so onerous that they might slow their investments in China.

“This is really two steps backward after three steps forward,” said Kenneth Tung, Asia-Pacific director of legal affairs at the Goodyear Tire and Rubber Company in Hong Kong and a legal adviser to the American Chamber of Commerce here.

The proposed law is being debated after Wal-Mart Stores, the world’s biggest retailer, was forced to accept unions in its Chinese outlets.

State-controlled unions here have not wielded much power in the past, but after years of reports of worker abuse, the government seems determined to give its union new powers to negotiate worker contracts, safety protection and workplace ground rules.

Hoping to head off some of the rules, representatives of some American companies are waging an intense lobbying campaign to persuade the Chinese government to revise or abandon the proposed law.

To read more:

http://www.nytimes.com/2006/10/13/business/worldbusiness/13sweat.html?_r=1&th&emc=th&oref=slogin

Insight: RFID Technology in China

My coverstory about fake drugs and RFID technonolgy for the American Chamber of Commerce magazine Insight was just published.  Along with Vennessa Wong, I write:

Just one year after worry sprung up throughout China over a potential large-scale outbreak of avian influenza (H5N1) – which led to the slaughter of millions of ducks and chickens around the country – PRC residents now face another hazard: counterfeit bird flu medication. In late August, Shanghai police broke up a piracy ring that had sold over RMB4.6 million worth of fake Tamiflu, one of two medications found to be effective against the virus.  The counterfeiters were selling via the internet to customers in Heilongjiang, Liaoning, Jiangsu and Guangdong provinces and several Southeast Asian countries.

But this was not the first discovery of fake Tamiflu. Last year, U.S. Customs seized 51 shipments of the counterfeit medication suspected to originate from China.

To read more:

http://www.amcham-shanghai.org/AmChamPortal/MCMS/Presentation/Publication/Insight/InsightDetail.aspx?Guid={9D628132-7DEA-432E-B18B-C0E27AC73E37}

The Challenges Involving Chinese Staff

At CBiz.cn, Bill Fischer writes:

The results of a recent survey of 141 multinational corporate HR managers and 312 [Chinese] candidates for employment in these same firms, in Shanghai, Beijing and Guangzhou, that was recently reproduced in Business Week [September 18, 2006 issue]. What was so astonishing about these survey results was the profoundly different view of the same world that was expressed by the HR managers and the potential employees that they would, presumably, oversee.

According to Business Week's reporting of the survey, originally conducted by Manpower, Inc., 70% of the HR professionals believed that Chinese employees quit mainly to seek better pay. On the other hand, 68% of the Chinese employees said that it was the lack of career opportunities that were the key region that they left their jobs. Well, which is it? Clearly, someone is very wrong here, and my suspicion is that it is not the employees; since they are probably much more likely than the HR managers, to know why they stay or why they leave. At the very least, however, the survey results suggest a huge difference in understanding the dynamics of attracting and retaining Chinese talent.

To read more:

http://www.cbiz.cn/news/showarticle.asp?id=2432

China and Japan: Seeing Eye to Eye

Melinda Liu at Newsweek writes:

North Korea's apparently successful nuclear test has sent shock waves through international capitals and promises to alter the security landscape of North Asia in alarming ways. But it creates an especially difficult diplomatic challenge to China and Chinese leader Hu Jintao.

Long seen as Pyongyang's most important ally and the only country with enough leverage to influence Kim Jong Il's behavior, the Chinese President had engaged in an extraordinary flurry of diplomacy since Pyongyang announced its intention to go nuclear a week ago.

On Sunday Beijing took the unusual step of hosting Japan's new Prime Minister, Shinzo Abe, on an official visit to Beijing. Hu met Abe for a top-level summit that thawed a half-decade of chilly Sino-Japanese relations. And the rapprochement took place amidst surprisingly positive atmospherics, with both Chinese and Japanese officials heralding a turning point for the better in their ties. Clearly, the urgency of the North Korean threat had been a catalyst for the summit's remarkably positive tone. A Japanese official traveling with Abe called it the first step in a new personal relationship of trust.

To read more:

http://www.msnbc.msn.com/id/15192514/site/newsweek/?nav=slate

EuroBiz: Economic Patriotism

Also in the October issue of EuroBiz, Mr. James Black writes:

After nearly six years of negotiations, the World Trade Organisation's Doha Round of trade talks collapsed in late July amid accusations of political leaders placing the views of a well-connected and influential interest group above the greater good of the global community. While politically-sensitive issues like agricultural subsidies to European and American farmers make the headlines, experts are warning that a new era of "economic patriotism" is starting to emerge around the world and in China in particular.

A series of new rules and regulations in Beijing has caused growing anxiety inside corporate boardrooms and prompted warnings from EU and American officials. On June 24, Beijing announced that it will set up a commission to combat monopolies, which could hurt overseas companies that have dominant market share. It's also considering new rules that would limit foreign participation in several industrial sectors that are deemed critical to the country's future development.

To read more:

http://www.sinomedia.net/eurobiz/v200610/feature0610.html

EuroBiz: China's Hidden Weaknesses

My new article about China's Savings and Pension Problems is posted at the EuroBiz website.  I write:

Western think tanks and consulting groups like to issue reports that analyse global economic environment decades in the future. Projecting China's future growth rates, researchers at Goldman Sachs last year, for instance, claimed that China's economy could overtake the United States by 2041. In March, PricewaterhouseCoopers (PwC) reached a similar conclusion in a report called "The World in 2050" when it predicted that in the next 44 years China will likely overtake Japan and Germany and rank alongside America as the most powerful country in the world.

While such predictions may prove to be true, it is important for foreign politicians and business leaders dig a little bit deeper into these reports and try to separate the myth from the reality. With soaring GDP growth rates in the past three decades and a huge population, China has generated its share of oft-repeated myths involving its massive labour market and high national savings rate. A complex new reality is starting to emerge.

To read more:

http://www.sinomedia.net/eurobiz/v200610/economy0610.html

The China CEO

The Asia Times has a positive review of the new book China CEO.  Gary LaMoshi writes:

Based on interviews with executives from 20 leading multinational companies in China, plus bonus insights from eight consultants on the ground, China CEO is a straightforward guidebook. It maps  out China's business landscape, marking the hot spots for danger and opportunity in China. Its advice - from business etiquette to government relations to expatriate lifestyle options - is comprehensive and up to date.

To read more:

http://www.atimes.com/atimes/China_Business/HJ07Cb01.html

China's Shipping Industry

Fobes has a special report on China's shipping industry.  Read it here:

http://www.forbes.com/logistics/2006/09/29/china-shipping-fedex-ups-dhl-biz-logistics_lander.html

Abe, Like Nixon, Goes to China

Shinzo Abe's trip to China is drawing comparisions with Richard Nixon in 1972.  Via AsiaOne, AP reports:

Japanese Prime Minister Shinzo Abe's right wing leanings could doom a summit with Chinese leaders on Sunday - or they could be the key to a rapprochement between the feuding Asian giants, analysts say.

"Two years from now, we might look back on this and say 'Look, he did a Nixon,'" said Dutch Sinologist Willem van Kemenade, referring to former U.S. President Richard Nixon's historic 1972 visit to Beijing, which led seven years later to the opening of diplomatic relations.

Nixon, like Abe, was a conservative whose credentials let him take the politically risky step of engaging Beijing without drawing fire from anti-communists at home.

To read more:

http://hosted.ap.org/dynamic/stories/A/AS_GEN_CHINA_JAPAN_SUMMIT_ASOL-?SITE=ASIAONE

The China Perspective

I would like to encourage the readers of China Challenges to check out a relatively new website called The China Perspective.  Take a look here:

http://www.thechinaperspective.com/index.html

The Global Bribery Index

Transparency International has issued its Bribery Index with China and India as the worst offenders.  The Christian Science Monitor reports:

It found that Indian companies were more likely to give bribes while conducting business abroad than were companies from any of the world's other top 30 exporters, according to a survey of 11,000 businesspeople in 125 countries.

Switzerland was given the highest grade by the global anticorruption group, although it had among the lowest percentages of international trade for 2005, at just 1.2 percent. The US tied for the ninth most honest broker along with Belgium.

Keeping India company as countries where bribery is a nagging problem, according to the TI list, are China, Russia, and Turkey, who, respectively, placed above India.

To read more:

http://www.csmonitor.com/2006/1006/p01s02-wosc.html?s=hns

China's WTO Progress Report

The US-China Business Council has issued a report on China's implementation of its WTO commitments.  Via the Chinese Law Professor blog, read the report here:

http://lawprofessors.typepad.com/china_law_prof_blog/2006/10/uschina_busines.html

Office of the United States Trade Representative: Download uscbc-wto-testimony.pdf

Abe to Visit China Soon

Channel News Asia reports:

Japan's new Prime Minister Shinzo Abe will head next week to China and South Korea in a bid to ease tense relations, officials from the three countries announced Wednesday.

China said that Abe would pay the first bilateral visit by a Japanese premier in five years after "overcoming the political obstacle to bilateral relations".

The statement by foreign ministry spokesman Liu Jianchao did not specify the "obstacle". But previously it has been viewed as a codeword for visits to the controversial Yasukuni shrine.

To read more:

http://www.channelnewsasia.com/stories/afp_asiapacific/view/233905/1/.html

40 Million Chinese SMEs

China News reports:

The number of medium and small businesses in China has exceeded 40 million, taking up 99.8% of the enterprises in the country, to become a main force boosting the Chinese economy.

To read more:

http://www.chinanews.cn//news/2005/2006-09-27/28205.html