Highlights from the last week of China business news.

IPO safe havens
The A-share market isn’t doing so well these days, and regulators have their hands full. It wasn’t so long ago that the CSRC was encouraging mega-IPOs to soak up liquidity in the soaring A-share markets. Now, they’re saying the opposite, telling Ping An, for example, to cut back its planned share and bond offering. Investors are piling into IPOs and ditching buying on the secondary market, as China Railway Construction Group’s US$3.1 billion Shanghai listing proved - the retail tranche was 155 times oversubscribed. The chronically underpowered SEPA actually aided the CSRC by delaying 10 domestic listings last year due to non-compliance with environmental rules. Two of the companies seeking listings have yet to be approved for IPOs.

Pitching in
Everyone needs China’s help these days. US Secretary of State Condoleezza Rice came to Beijing to ask President Hu Jintao to exert more pressure on recalcitrant neighbor North Korea to get rid of its nuclear program. There’s also Sudan, China’s troublesome trading partner. The Chinese special envoy has been dispatched to the country to find a solution to its ongoing civil strife (some say genocide). If you remember, he got on the plane just days after Steven Spielberg (who did Schindler’s List - and ET) quit his advisory role with BOCOG to escape being tarred by the genocide brush. As the Sudan-Olympics-genocide pressure builds, China will be looking for ways to relieve the pain. One of those remedies is to resume bilateral human rights talks with the US: during Rice’s visit, China said it was interested in doing just that. We speculate that this announcement probably didn’t rank among the personal highlights of the meeting for President Hu.

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Highlights from the last week of China business news.

Inflated figures
China’s third-quarter macro figures came out last week. The trade surplus in October continued to surge, which for once is actually surprising. Expensive commodities worldwide meant that the value of imports was up 25.5% from a year ago, but export growth still outpaced it, leaving the month’s trade surplus at US$27.05, a record high. The central bank said GDP rose 11.5% in the first three quarters, compared to a total increase last year of 11.1%. On the other hand, inflation rose 4.1% in the first three quarters, compared to a 1.5% rise in 2006. Goldman Sachs analyst Hong Liang raised a warning about inflation again (she did this a few months ago at the height of the pork shortage too), saying that the monthly CPI could hit 7% this year. The central bank has done the only thing it can do: raise interest rates. The reserve requirement rate will go up for a ninth time this year, to 13.5%, effective November 26. Central bank governor Zhou Xiaochuan has pledged to fight inflation, but how exactly he plans to do this is anyone’s guess. Goldman predicts two more rate hikes by year’s end.

Planning a buying spree
Remember all that talk about a gush of Chinese capital outflows? Well, it’s definitely in the works. China National Offshore Oil Corp, which reduces to the rather cute acronym CNOOC, was linked to acquisitions in Australia and Nigeria this week. There was a rumor that CNOOC wanted to take over Shell’s stake in an oil project in Australia’s Northwest Shelf region for US$450 million, which was later curtly denied by the Chinese company. Now, a new story has surfaced, saying CNOOC wants to hand over US$900 million to Shell, again, but this time for almost 50% in two Nigerian offshore blocks. No comment from CNOOC.

But commodities acquisitions aren’t really news - banking buy-ins, however, are. The FT broke the news - citing anonymous sources - that China’s top three banks, Bank of China, ICBC and China Construction Bank, approached Singapore’s Temasek Holdings to buy its 17% stake in Standard Chartered. The contacts were “informal and discreet,” which could mean anything, really. In any case, no deal is on the cards - Temasek isn’t selling, and Standard Chartered isn’t keen on having its independence questioned by having the Chinese as its largest stakeholder. An ICBC official denied that any such offer to Temasek took place. Lastly, the much-ballyhooed China Investment Corp revealed that it’s a cornerstone investor in China Railway Group’s Hong Kong listing. The sovereign fund will take US$100 million, the biggest institutional stake, in the H-share offering. This is its second move after buying into Blackstone months ago.

Singapore boosts its guanxi
China and Singapore indulged in a week of cozy relationship-building, with top officials of both countries meeting here and in the land of the Merlion. Singapore’s Lee Kuan Yew told Singapore’s newspaper, the Straits Times, that the man tipped to be Hu Jintao’s successor, Xi Jinping, belonged to the “Nelson Mandela class of persons,” upon meeting him for the first time in China. Meanwhile, Premier Wen Jiabao spoke candidly at a conference in Singapore, saying that illegal money flows threatened China’s stability and that his government would have difficulty reaching the environmental targets they set for themselves. This culminated in the announcement that China and Singapore would build an “eco-city” together in Tianjin, that hot economic development zone the central government is now so keen to promote. It brings to mind another Singapore-China project, the Suzhou Industrial Park, which was started when China was still trying to encourage industry in the Yangtze River Delta. More eco-cities are a good idea, because hopefully it will mean hearing less disturbing news, like the report this week about China’s increasing appetite for nuclear energy, and how it has just signed a landmark deal with Kazakhstan to buy the uranium it needs to build 40 new nuclear power plants by 2020.

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We overlooked the Christian Science Monitor’s excellent series of articles from a couple weeks ago titled “Is China Good for Africa?”, which you can read here. More than the typical hand-wringing stories about how China’s all-time high in trade with Africa (US$55 billion last year and counting) is propping up corrupt and evil regimes and unfair to locals (though there’s a fair share of that as well), the series also looks at the more mutually beneficial outcomes and China’s experimentation with internationalism and soft power through things like its own version of the Peace Corps. Definitely worth a read if you missed it the first time. A few excerpts: (more…)

As an American living abroad, it has been quite pleasant being isolated from so much of the empty noise that emanates from my home country’s news media during election years. I was grateful for the filter of distance in 2004, as well as last year, and am even more so now that it seems there are no more “off years” in American political campaigning. Still, when the issue of China is broached I can’t help my ears from pricking up.

Continuing with the “boycott the Olympics” meme that we haven’t been able to quite shake in this space lately, shrewd PR observer and friend of CER Imagethief has a good post up today on Democratic presidential candidates’ comments on Sudan and the Beijing Games during the recent debate in Manchester, New Hampshire. Several comments were of the “get tough on China” variety (though only John Edwards and Bill Richardson advocated an actual boycott), and Imagethief points out just how empty the rhetoric is since, after all, the election won’t even be held until after the Olympics.

If you’re interested in the candidates’ official stances on China, look no further than the website of the Council on Foreign Relations (thanks to Andy Scott on the China Briefing blog), which has information on the positions of nearly all the candidates from the two major parties towards China, though those of no-hopes Joe Cox and John Gilmore are “unknown” (as is just about everything else about them). A few sample entries:

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I wrote before about an open letter to the Chinese government, written by an obscure but politically conscientious basketball player, circulating in the locker room of the NBA’s Cleveland Cavaliers, who are now about to enter the Finals. You will recall that the letter, which condemns China’s investment in Sudan given the crisis in Darfur, was signed by all players on the team save superstar Lebron James (right), who is a member of the 2008 Olympic team and enthusiastic enough about his support from Chinese fans to be taking Mandarin lessons, and role player Damon Jones, who, it must be noted, has an endorsement contract with Chinese shoe brand Li Ning.

For James, it appears that leaving his John Hancock off the letter has landed him in hot water with certain members of the media in the US. Jonathan Zimmerman of the Christian Science Monitor took him to task (calling him “cowardly”), and Charles P. Pierce of Slate has followed suit, comparing his unwillingness to take a stand with that of Michael Jordan:

Of course, Jordan wrote the book on how to become a wildly popular and successful athlete without demonstrating even the sliver of a public conscience. More to the point, he created a new template for risk-free stardom, whereby involvement in the unruly hurly-burly of the real world is something that a star is not expected to do. Do the public-service ads for the safe issues, but go no deeper into the forces that create those issues in the first place.

And that’s the real pity. The Darfur letter was, you should pardon the expression, a slam dunk. Had James signed it, nothing would have happened to him. Were Coke and Microsoft going to cancel his contracts while he was putting up a transcendent playoff performance? Not bloody likely, and that goes double for Nike, which is as heavily invested in China as it is in James himself. The NBA wouldn’t have dared say anything, not with the league slow-dancing with the Chinese government itself. And does any person with the moral compass that God gave the common gopher really care what the International Olympic Committee says about anything any more?

So now that a new cycle of discussion on the subject has begun - this time including a public rebuke of a highly visible star - my wonder is whether the Chinese internet will pick up on the story (the press certainly won’t), and what posters on message boards and blogs will have to say about it. If you find anything, please do let us know.

In Chinese: LeBron James = 勒布朗-詹姆斯; Sudan = 苏丹

Related: Imagethief: Did the “Genocide Olympics” influence China?

Many readers may be blissfully unaware of the ongoing NBA playoffs in the US, but I suspect many more in China are watching them along with me, and now I have an excuse to write something on a somewhat related note, so bear with me.

We’ve written before in this space about calls to boycott the 2008 Olympics for reasons tied to either human rights in China or involvement with unsavory regimes like that of Sudan. At the time, it was since-defeated French presidential candidate Francois Bayrou proposing a boycott of the Games. Now, an article in the New York Times’ sports section (reached through the always interesting Freakonomics Blog) tells us of Ira Newble, a basketball player previously known to me only as an obscure bench-warmer (read: not a very good player) for the NBA’s Cleveland Cavaliers. Newble is trying to enlist support from his fellow pro athletes to talk up ditching Beijing next summer. Like Bayrou, Newble was moved by the Darfur situation, and the perception that “China holds the key” to improving it. From the article:

The result is a letter, signed by Newble and most of his teammates and released last week, that takes aim at China, which supplies the Sudanese government with money and weapons. China, in turn, is a major importer of Sudan’s oil.

The letter reads in part, “We, as basketball players in the N.B.A. and as potential athletes in the 2008 Summer Olympic Games in Beijing, cannot look on with indifference to the massive human suffering and destruction that continue in the Darfur region of Sudan.” It concludes with a plea to the Chinese government “to use all available diplomatic resources and economic pressure to end the agony of Darfur, and to secure access for U.N. peace support personnel.”

Predictably, “most of his teammates” does not include star Cavalier LeBron James, who is a marketing phenomenon in China and is said to be learning Mandarin in his spare time (scroll down). I’d be interested to see if this attracts the attention of Sudan-born Chicago Bull Luol Deng (who, by the way, has been a breakout star in these playoffs).

But as we’ve said before, the chances of any movement to boycott Beijing 2008’s success are fat indeed. What interests me, though, is how far word of this spreads, given the NBA’s popularity in China, and whether anything gets mentioned about it on a Chinese blog or fan site. If you see anything at all about this on the Chinese internet, let us know! (For easy searching, Newble’s Chinese name is 艾拉-纽贝.)

The decision by Fidelity Investments to cut its PetroChina holdings by 91%, supposedly in response to pressure from human rights groups, is a brave move. Not least because since Fidelity’s latest regulatory filing on March 31 - which showed its holdings of PetroChina American Depository Receipts had fallen to 420,916 from 4.5 million on December 31 - PetroChina has made one of the largest oil strikes in recent history.

In the March issue of China Economic Review, we ran an article which looked at the possibility of legal action being taken against the likes of PetroChina for its involvement in oil exploration in Sudan. It is claimed that genocidal activities perpetrated by the Sudan government in Darfur have cost 200,000 lives and left 2.5 million people homeless.

Several of those interviewed suggested that pressure groups would have the greatest impact if they focused their efforts on petitioning institutional investors to abandon PetroChina stock.

After all, it was bad PR over human rights that led to the ditching of the company’s first attempt to offer shares in 1999. Of course, the PR pressure was placed on the US parties involved in the deal - notably the New York Stock Exchange, which found its moral integrity brought into question for allowing a company to raise money that could, allegedly, be used to hold up political regimes accused of human rights abuses.

Taking direct action against PetroChina itself would be much more difficult.

In its report on the Fidelity sell-off, Bloomberg noted that PetroChina’s head of investor relations said earlier in May that the company has no energy exploration or production facilities, investments or employees in Sudan.

This is probably true. If the 1999 IPO debacle taught PetroChina anything it was that sensitive overseas operations must be kept well away from the books of the company’s listed subsidiaries. The sizable stake in the Greater Nile Petroleum Operating Company, which controls Sudan’s oil fields, is held by PetroChina’s state-owned parent, China National Petroleum Corp.

Untangling relations between parent and subsidiary would be a long and perhaps never-ending road for even the most driven of human rights lawyers.

Attacks in Ethiopia last week that left nine Chinese people dead have opened up a bloodthirsty streak among many Chinese people. Some, probably not the ones making huge profits from overseas projects, are beginning to wonder what the point is of going overseas if the dangers are so high.

Seven Chinese people were taken hostage after the Ogaden National Liberation Front, a group from Somalia, attacked the oil plant on neighbouring Ethiopian soil. Interestingly, as often happens when there are attacks on American or European operations, the number of local people killed got a distant second billing on most of the international press. A total of 74 people were killed in the attacks.

As has happened before, a few voices in China have risen, clamoring for the country to put up the shutters and let the world fend for itself. Bloggers have been particularly active on this score and Global Voices has registered some of their comments.

Others, however, have taken a different view and want China to use its military might to deal with the threat. The question is: how loud will these voices get? As China continues to go out into the world, it will inevitably be the subject of increased attacks, just like any other country. How the government – and its military – will react is still an open question.

More than a century ago, an illiterate teenager left his home in Guangzhou and went to Zimbabwe (it was called Rhodesia then) to make a living. His illiterate wife joined him 18 years later.

The family stayed in the African country and their granddaughter, Fay King Chung, is a Zimbabwe minister and the first director of the UNESCO Institute for Capacity Building.

The story appeared in Beijing Review a couple of weeks ago and has made its way through a number of blogs.

It is a good example of the growing links between countries, the fading influence of national borders and the growing emergence of a global culture that goes beyond Disney, McDonald’s and Hollywood movies.

The Economist has a great article (for free) about Chinese actions in Africa. Well known among China watchers is the country’s courting of African leaders in an attempt to lock up energy supplies. Not as talked-about is the pointing to China of African strongmen in justifying their often brutal and oppresive regimes. If China can succeed and grow while keeping state control of nearly the entire economy and denying its people political rights, then why shouldn’t African countries follow their lead?

Obviously, this is a flawed argument and leads to awful situations such as Chinese support for Sudan, which is currently undermining UN efforts to stop the genocide in that country. Robert Mugabe, ruler of Zimbabwe for 26 years, can also count on Beijing to defend him in the Security Council. China is simply not going to chastise other countries over their human rights efforts (except the US, of course).

This unscrupulousness gives the US a convenient reason to criticize China’s efforts in Africa. Uncle Sam can attack the Chinese for ignoring human rights rather than voicing their real complaints about China’s buying so many African resources - namely, that it wants them for itself, or at least doesn’t want rival China to have them. If China were to pay attention to the behavior of certain African governments, it would remove the grounds for US criticism. Of course, it might lose its access to those precious raw materials as well. And worst of all - for Beijing, that is - it might have to actually pay attention to its treatment of its own citizens. Don’t hold your breath.