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.

You can also get the weekly news by e-mail. Just subscribe here.

Highlights from the last week of China business news: Hu Jintao has a few aces up his sleeve in the run-up to the party congress; the world’s largest standing army, the PLA, gets in on this whole ‘internet’ thing.

(more…)

Highlights from the last week of China business news: Lenovo is badly outmaneuvered by rival Acer; German Chancellor Angela Merkel beats the human rights drum on a visit to China.

(more…)

Highlights from the last week of China business news: Paulson’s latest visit (no prizes for guessing what he talked about. Starts with an R and ends with a ‘enminbi’); state-owned steel and auto giants get leaner, but not without dieting problems.

(more…)

The newly revitalized Shanghai Foreign Correspondents’ Club (facebook link) has been organizing some interesting and useful events lately, thanks to a new board.

It invited Kerry Brown, a scholar (now a fellow at the think tank Chatham House in the UK, though he has even lectured at Inner Mongolia University), former diplomat and now author of a new book on our favorite subject, for a talk at Arch on Changshu Lu. It’s called Struggling Giant: China in the 21st Century, and it’s published by Anthem Press.

The venue was rather cramped, but the talk went well - Brown made a few very good points about China from an outside observer’s point of view. We’ll be running an interview with him soon about his ideas on China. Here are some key points from his Shanghai FCC talk:

-China’s strategy of inviting foreign investment was primarily to facilitate technology and knowledge transfer; this has failed, so FDI is now no longer the yardstick the central government uses for provinces

-Foreigners tend to look at China in an ahistorical way, despite the country’s long history and attendant baggage

-NGOs are increasingly tolerated by the government as a way to help plug holes in a tattered social safety net

-Beijing’s control over the provinces is brittle – it can snap quickly and “the whole thing could fall apart tomorrow,” he said

-There’s no clear candidate for the top job when the Party Congress convenes this autumn, unlike previous leadership transitions

-What keeps Hu Jintao up at night? Not economic stability; not human rights and foreign government criticism. He’s worried about income disparities, including the great underclass of 200 million migrant workers, who are disenfranchised in almost every way. And since there’s no democracy, no one really knows what in the world they are thinking.

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.

American intelligence agencies knew about China’s anti-satellite missile test before it took place, according to a report in the New York Times. However, the Bush administration chose not to say anything until the test was completed.

“I think it is fair to say that nobody knows whether the Chinese would have deferred or canceled the test. The principals’ best judgment, including the leadership of the intelligence community, was that they were committed to testing the anti-satellite weapon,” an administration official is quoted as saying.

This can be justified by all kinds of “we didn’t want them to know that we know what they know” arguments. There is also merit in the official’s explanation that China would have proceeded with the test regardless of any word from Washington.

But these revelations do throw into a new light China’s post-test protestations that it is against the militarization of space.

Had the US approached China before the test, offering talks on a space weapons ban in exchange for a stand down, what would have happened?

Had it gone ahead with the test, Beijing probably wouldn’t have got away with a two-week wait before offering official confirmation. And its claims of peaceful intent would have faced even more skepticism if news leaked that it had rejected talks in order to proceed with the test.

But would China ever have considered calling the whole thing off? Probably not. Beijing may have talked about a treaty banning weapons in space but this didn’t hinder the development of its anti-satellite program - which is supposedly there to enable the obstruction of US military operations in the event of a confrontation over Taiwan.

The world, knowing that China had proceeded despite requests that it desist, would simply have created a slightly worse international PR crisis than the one that emerged.

Some 30 years ago, a politician in Paraguay whose name has disappeared in the waters of history made himself the laughing stock of the local community shortly after proposing to build hospitals, schools and bridges.

“But sir,” one of the locals corrected, “we don’t have any rivers.”

“No problem,” said the erstwhile leader, “we will build those too.”

The story stayed around for years, long enough to wonder at its accuracy, but it highlights the penchant of Latin American leaders to rely on promises with only limited veracity. This makes it very difficult to do business.

On Monday, Venezuela’s president Hugo Chavez announced a deal to supply China with crude petroleum and oil to the tune of 300,000 barrels per day. This is double the 150,000 bpd the country supplied in 2006 but less than the 500,000 bpd Chavez had committed to providing during a speech last year.

Spokespeople for the president said he misspoke himself. He has so many numbers in his head that he made a mistake. But then, this is a president that wants to build a coalition to oppose the US among countries he sees as potential counterpoints to the one existing superpower.

It is not altogether unlikely that the president saw more than was there. Venezuela’s non-privatized oil industry is famously inefficient and unreliable. China needs the oil and it is willing to invest to get it, which is not to say it is eager to form any kind of coalition with Chavez.

Speaking to his country’s media, Chavez said that Venezuela and China would launch a series of joint ventures in both countries “in the next two or three years” with a view to supply China with 1 million barrels of oil per day by 2012.

These deals, he said, will make Venezuela one of China’s main strategic partners. Trade between the two countries doubled last year to US$4 billion, which makes it about 2% of the trade surplus China has with the US and less than a fifth of India-China trade. So, other than its ability to supply oil, Venezuela is far from being one of China’s major partners.

Assuming the Chavez government doesn’t squander the money building rivers, it should help shore up an important industry in that country and fill up China’s oil reserves a little more.

The trick will be for Venezuela to stick to its part and avoid the tendency of many a Latin American government of the last fifty years to replace agreements with empty words that offer much and deliver little.

Apparently US Assistant Secretary of State Christopher Hill, in Beijing for the latest round of six-party talks, is something of a hit with the ladies in the capital.

Either that, or it was a very quiet day down at AP’s Beijing office yesterday.

If we were to be uncouth, we might suggest that Hill’s newfound fan club was drawn by tales of his legendary stamina - after all, this is a man who can keep going (at the negotiating table) for 16 hours straight.

The AP article is more realistic. What (reasonably media-friendly) man would fail to experience a PR boost when placed beside Kim Kye Gwan, the generally taciturn North Korean negotiator?

As Premier Wen travels around Asia these days trying to assuage fears about his country’s seemingly unstoppable rise to eminent world power, one wonders whether the other regional powers recognize China’s emergence as a threat or an opportunity. Probably they see it as a bit of both - and the ratios differ depending on who we’re talking about.

Japan is likely leaning toward the “threat” side. Though relations between the two are stable and getting warmer (after the end of the Koizumi era and the many Chinese protestations at his visiting the Yasukuni shrine), Prime Minister Shinzo Abe over the weekend nixed the idea of having an annual China-Japan-Korea powwow. On the plus side, the Chinese premier said he would visit Japan soon - something that hasn’t happened for a while. Japan has a more hardline approach to the North Korean problem than the Chinese, who are the closest thing the DPRK has to an ally; Abe’s suggestion of tying the issue of Japanese abductees to the 6-party nuclear talks has drawn calls of “that’s your problem” from not only China, but the rest of the region.

Nations around the world bristle at the continuing buildup of China’s military capabilities, which has sometimes run into dubious legal territory. But economic and military power go hand in hand with being a world power, and China will undoubtedly become a world power.

But China’s new clout offers much to other Asian countries. For one thing, all the foreign investment that has poured into the Middle Kingdom for the last decade is creating a bit of a risk for multinational corporations. Many are starting to diversify operations to countries like Vietnam and Indonesia to offset the chance of protective tariffs on Chinese goods and the rising price of Chinese labor. Of course, the upward trajectory of the RMB doesn’t help the country’s image as the world’s factory.

Another problem, commonly cited, is China’s chronic lack of talented workers, especially at the management level. Even though MBA programs are popping up in every city - many with foreign participation - the stark absence of creativity in the national public school curriculum means the biggest companies will continue to poach the best employees from one another in desperation.

Despite its shortcomings, China will not lack for foreign investment for some time. But its rise can also provide a boost up the global economic chain for its poorer neighbors.