Highlights from the last week of China business news: Billionaires galore in two rich lists released this week; new major military postings, apparently with a conflict in Taiwan in mind.
The guys at 2point6billion.com have a long post on an industry close to the heart of China-watchers: telecoms. (more…)
According to news from the China Securities Regulatory Commission (CSRC), China is now willing to allow foreign bourses to establish Representative Offices in China. Not just limited to Indian exchanges, a global scramble is expected as some of the worlds biggest exchanges are expected to want a piece of the action, as China antipates some US$100 million being placed by Chinese companies in overseas markets.
There are qualifying procedures. Other regulatory regimes are expected to sign an MOU with the CSRC which includes the sharing of cross-border investment data and transactions, and that such Representative Office must be from respected exchanges “with sound operational and financial conditions existing for ten years or more.”
Likewise, the Chief Representatives of such offices must have a “minimum of three years experience in handling matters related to China within the past five years” and “possess knowledge of China’s financial laws and regulations,” although exactly how this is deemed a qualification is not clear. Tipsters from your local barfly would appear to enable him to fall into the melting pot for qualified personnel.
A typical lack of clarification and implementing rules from China’s regulatory bodies aside, it does mean that India’s Stock Exchanges are poised to open up Representation in China. Indeed, the Securities and Exchange Board of India has signed off on a CSRC MOU, and the National Stock Exchange and main Bombay Stock Exchange, as well as the smaller bourses in Delhi and Kolkota are expected to apply.
Such offices are to be restricted to marketing, and only to focus their promotional activities to business enterprises and not Chinese individuals. Public advertising will also be banned.
July’s China Economic Review is now out. Read it online or peruse your physical, dead-tree copy in style and at your leisure.
This month’s cover story is on Hong Kong’s handover, 10 years on. Check out this piece on mainland companies listing in Hong Kong, and this long Q&A with Pearl River Delta expert Michael Enright on Hong Kong and the region’s future. We’ve also got bits on India in our ongoing series.
Some good ones this month from our stable of columnists (yes, we keep them right here on Huaihai Road, and we give them fresh hay daily). There’s Tom Doctoroff, marketing man-about-town, (see him hosting a web TV show here!) confirming our deepest suspicions — luxury brands in China are propped up by marketing dollars to stake-out market share, not to serve any real customer base. The Beijing Calling column discusses Blackstone, Bates Gill (you read that right), looks at US and Chinese pols and making dialog work, while Graeme Johnston dissects the anti-monopoly law.
There’s plenty more besides, including our MBA supplement, until the next issue.
A quite fascinating post from the folks at 2point6billion.com by Josh Gartner of China Expat magazine on the ancient trade route, through Tibet, between China and India:
The western media has meticulously documented China’s recent economic explosion. Yet for a long time many wondered why India, the world’s second most populous country, lagged so far behind. Some surmised it had something to do with cultural differences, while other postulated that the problem was political. In the last few years, this debate has disappeared as quickly as India’s record of slow growth has. But a new question has emerged: will China and India be able to move past their rivalry and become partners once again?
The two countries share long borders, primarily along the edge of Tibet, and have coexisted in one form or another for thousands of years. Tea and Buddhism have flowed across their mountainous boundaries and defined their cultures since before Mohammed was born. Yet in the modern era, bilateral trade has remained surprisingly minimal until quite recently. As of 2000, it amounted to only US$2.9 billion, or slightly more than 1980 levels of Sino-US trade, well before China had liberalized its economy.
In the last six years, though, things have changed considerably. China and India’s once precarious relationship, while still somewhat fragile, is gaining strength quickly. Trade has gone up nearly nine-fold since the turn of the millennium, and Beijing is now India’s second most important trading partner by volume (after the US). While specific political differences contributed to the late start of modern economic cooperation, trade has been difficult, yet critical, throughout their shared history.
Danone’s strategy of pursuing high growth through joint ventures with local partners is looking increasingly foolhardy. Even as it is in the midst of vicious legal battles with its Chinese local partner, Wahaha, its relationship in India is crumbling.
Its Indian partner, Britannia Industries, controlled by the Wadia family, are understandably unhappy that Danone wants to sell its own products in the country, which would break the terms of their agreement.
According to the Wall Street Journal on June 22:
Now, Danone and the Wadias are in talks that could lead to an exit by Danone from the venture, according to people familiar with the situation. One of those people says an agreement could be reached within a month. A possibility is that Danone will pay the Wadias a fee to leave the venture.
Another Journal article, by James Areddy, outlines the hits and misses of Danone’s piggybacking strategy:
But the case is a blow to Danone’s strategy of piggybacking into new markets. Partnering with a local business promises a foreign entrant like Danone a quicker and less costly way to penetrate a market. With Wahaha, Danone claimed 23% of China’s bottled-water market last year and was the biggest beverage maker by volume overall in the country, beating out competitors like Coca-Cola Co. Rival consumer-product companies have traditionally employed the slower, more expensive go-it-alone route.
For more background and commentary on the ever deepening Danone-Wahaha case, check out China Law Blog, which is doing an excellent job of tracking the case.
A post from 2point6billion.com that touches on the same theme as a recent dispatch from us:
With Shanghai Having a Market Cap Four Times The Size of Bombay - Why Is It Indian Companies Are Taking The Lead In Global M&A?
An examination of the roles and responsibilities of the stock exchanges of Shanghai and Mumbai leads to some interesting potential implications for the development of companies listed on the respective bourses – and some pointers as to why it is currently Indian – and not Chinese – companies that are currently expanding globally.
Firstly, lets look at some comparisons and history.
The Bombay Stock Exchange (BSE) – is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai’s Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as ‘The Native Share & Stock Brokers Association’. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.
The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE’s trading platform.
Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition.
The Exchange is known for tough listing regulations and a strict adherence to transparency, giving it an well deserved reputation internationally. This is demonstrated in it’s recent history and stability – over the past 15 years there have been only 22 changes of it’s top 100 listed companies. In total, the BSC has a market capitalization of USD900 million spread around 3,500 listed companies. (more…)
A brief look at China’s involvement in Africa over at 2point6billion.com:
The theme at hand is extremely controversial in terms of what the world thinks about a country that is ‘going global’ to a different place; a not-so-convenient place where nothing, yet everthing is as it seems… China’s works in continential Africa regardless of intentions (and unexpected consequences) are certainly a phenomenon to be watched closely. A history in the making?
The link brings us to perceptions - a bit negative (but which may represent the world’s thoughts on what China is doing in Africa. At large). Have a peek: http://www.spiegel.de/international/world/0,1518,484603,00.html
But more interestingly, I’m curious to hear what you all have to say about what India is doing in Africa, that is, in parallel to the scale of China’s influence there…
It is always interesting to see pictures of Hu Jintao and Manmohan Singh shaking hands.
This week, the Chinese president and the India prime minister, met in Germany during the annual gathering of the G8. The focus was on the environment and both India and China seemed to be reading from the same sheet.
Their argument was, to paraphrase, that climate issues are important, that they are willing to help, but that it’s up to the developed world to take the (smoke-free) torch and run with it. After all, they say, they cause the problem.
Both China and India, despite the hoopla about their emerging economies, have a lot of problems of their own. They are home to most of the poor people on the planet. Infrastructure is an issue (particularly in India). Legal frameworks are lacking (particularly in China). Corruption is endemic.
If the two countries have one thing in common, is that development is the priority and will remain so for quite some time.
However, both countries have a golden opportunity to do it better than the folks at the G8. After all, the whole point of history is to learn from it.
Doing the same thing others did wrong and claiming there is no other choice may sound fair but it is not responsible.
A recent post from 2point6billion.com with comparing free trade zones in China and India — read on:
The free trade zones that China so cleverly used to kick start the entire reconstruction of the country have now arrived in India.
With low tax rates and high investment into their local infrastructure, they remain a proven way in which a large country can suddenly offer world class facilities - for the world’s multinationals - without breaking the bank in doing so, and without disenfranchising much of the rural population.
Read the rest of the article at Shanghai Daily
