Diageo PLC’s bid to buy a larger share in the maker of China’s Shui Jing Fang brand white liquor may provide the world’s largest alcoholic beverage maker with a major new influence over a leading Chinese consumer brand.

But Diageo will likely have only a minority stake, a fact that also highlights how foreign investors remain heavily constrained in one of the largest cash-generating sectors of the global drinks market.

Diageo – producer of Guiness beer, Smirnoff vodka and Johnnie Walker whisky – announced Monday it has agreed to become, indirectly, the largest single shareholder in the liquor brand Shui Jing Fang.

In the complex deal, Diageo will pay about $21 million to lift its stake to 53% from 49% in Sichuan Chengdu Quanxing Group, a holding company that owns about 40% in Shanghai-listed Sichuan Swellfun Co., which makes Shui Jing Fang.

Diageo said it will gain greater influence in China’s large market for baijiu, a white spirit that Diageo said accounts for about half the nation’s alcoholic-beverage consumption by volume.

Shui Jing Fang is the fourth-largest producer of premium baiju in China, with reported net sales of about $171 million in 2008.

A statement published by Swellfun, also know as Sichuan Shui Jing Fang Co., said the transaction reflects “wishes to further strengthen the cooperation between the joint venture partners in the Chinese white spirits industry.”

Completion of the deal is subject to approval by several Chinese agencies.  The Commerce Ministry didn’t respond to questions Tuesday.

China has permitted foreign ownership in a number of famous brands – Asahi Breweries Ltd and Anheuser-Busch InBev NV each own minority shares in brewer Tsingtao Brewery Co., for instance.

But the government has taken a dim view of full foreign takeovers of big-name consumer brands.

A year ago, Chinese authorities cited antimonopoly concerns in rejecting a $2.4 billion bid by Coca-Cola Co to buy all of a major Chinese soft drinks maker, privately owned Huiyan Juice Group Co.

The rejection was widely seen by many lawyers and analysts as a protectionist measure designed to keep a valuable Chinese brand out of foreign hands, although Chinese officials denied that.

Wall Street Journal – Feb 2010

PLA officer urges Beijing to topple US as global champion, despite hopes of peaceful rise

China should build the world’s strongest military and move swiftly to topple the US as the global “champion”, a senior officer says in a new book reflecting swelling nationalist ambitions.

The call for China to ambandon modesty about it’s global goals and “sprint to become world No. 1″ comes from Senior Colonel Liu Mingfu of the People’s Liberation Army (PLA), who also warns that his nation’s ascent will alarm Washington, risking war despite Beijing’s hopes for a “peaceful rise”.

Colonel Liu writes in his Chinese-language book, the China Dreams: “If China in the 21st Century cannot become world No. 1, cannot become the top power, then inevitably it will become a straggler that is cast aside.

His 303-page just published bookstands out for its boldness even amid a recent chorus of Strident Chinese voices demanding a hard shove back against the United States over trade, Tibet, human rights as well as arms sales to Taiwan, the self-ruled island that Beijing claims as its own.

“As long as China seeks to rise to become world No. 1… then even if China is more capitalist than the US, the US will still be determined to contain it,” writes the professor at the elite National Defence University, which trains rising officers.

Rivalry between the two powers is a “competition to be the leading country, a conflict over who rises… to dominate the world”, writes Col Liu.  “To save itself, to save the world, China must prepare to become the (world’s) helmsman.

The China Dream, however, does not represent government policy, which has been far less strident about the nation’s goals.  Even in the military, it represents only the hawkish camp.

Straits Times – 2nd March

Both China and the United States need to work hard together to ease mounting trade tension to prevent an ‘unpeaceful year’ for bilateral economic ties, Chinese Premier Wen Jiabao said yesterday.

He is the most senior Chinese leader to have commented on the issue.

“We believe that trade frictions between the two countries should be solved through negotiations conducted with equality, not through sanctions,” said Mr Wen, in a wide-ranging online chat with Chinese netizens, in which he also pledged to tamp down inflationary pressure and surging property prices in China.

In recent months, Beijing and Washington have been locked in a series of tit-for-tat moves slapping tariffs on each other’s products making trade a key irritant in tense bilateral ties.

Last week US senators called on Washington to hit Chinese exporters with more levies to compensate for the unfair advantage they get from an undervalued yuan.

Avoiding the prickly topic of yuan revaluation, Mr Wen reiterated Beijing’s oft-made call for the US to ease restrictions on exports of technology products as a way to narrow China’s trade surplus.

Recalling a joke he made in a speech while on a US visit, he said: “I told them, ‘The US exports two things to us: soya beans and aeroplanes…but you can’t keep having Chinese eat soya beans on aeroplanes’.”

Mr Wen’s two-hour chat with netizens – webcast live on the government’s www.giv.cn and the state news agency Xinhua’s www.xinhuanet.com – comes just days before the annual session of China’s Parliament, the National People’s Congress.

Sunday Times – Feb 28th

With his wire-rim glasses and sombre suits, Mr Zhu Min looks more like a low key academic than a hot-shot banker who has just been admitted into the inner circle of the International Monetary Fund (IMF).

In fact, a common reaction from those who meet the private unassuming Mr Zhu for the first time is: “He doesn’t look like the deputy govenor of China’s central bank at all,” according to the Oriental Morning Post, a newspaper in Shanghai, where Mr Zhu was born in 1953.

Growing up during the Cultural Revolution (1966-1976), he had to forgo his studies for a few years to work as a truck driver and mover at a sugar factory.  He enrolled in Fudan University in 1982 to study finance.  He continued a brilliant academic career at Princeton University  and later at John Hopkins University in the United States where he received a doctorate in macro-economy and international finance.

After working from 1990 to 1996 at the World Bank, he decided to return to China.  “I needed my motherland,” he once told a Shanghai TV station in an interview.

He joined Bank of China in 1996 and has now capped his career with a new appointment as a “special adviser” to the IMF – a position some say may catapult him to the No.1 or No.2 post at the Fund next year.

Mr Zhu has been lauded as “a man worth listening to” by the Britsh paper the Guardian for being a lone voice of reason at the World Economic Conference in Davos, warning about the risks of massive asset bubbles in 2007, a year before the global credit crisis errupted.

While speaking on his pet topic of international finance at a major forum in 2007, he was reminded by the moderator that his time for speaking was up.  His answer in Mandarin raised chuckles from the audience: “This is an important topic to me, please allow me to be romantic and wax lyrical for a while more!”

Mr Zhu is also a doting father, who reportedly exchanges e-mail or telephone calls at least once a day with his only daughter who is studying in Princeton University.

Sunday Times – Feb 28th

As China’s current account surplus cooled last year, did its ardour for US Treasurys?

That is the headline story from the latest data on foreign ownership of US Government debt.  Mainland China’s holding fell to $755.4 billion at the end of December from a peak of $801.5 billion last May.  The country also shifted into longer-dated Treasurys.  Japan is, on paper, again the largest foreign holder of US government debt.

Behind those bare facts, however, the picture gets murkier.  in fact, it isn’t clear that China is shifting out of Treasurys at all, while firm conclusions over its preference for short or long term US debt are hard to reach.

How so?  The key is to look at US Treasury holdings in the UK and Hong Kong.  Both have at least doubled in the past year.  At the end of December, the UK holdings totalled $302.5 billion, and Hong Kong’s were $152.9 billion.  In the Treasury International Capital data analysts suspect a large portion of the holdings from those places – perhaps as much as half – in fact originate in China.  The problem arises because Treasurys are often held on behalf of clients in financial centres like Hong Kong or London.  For the data compliers it is hard to unearth the ultimate owners of the debt.

Wall Street Journal – 18 Feb 2010

When Mei Saichun hosts visitors to his handset factory, he has a surprise for them. After a tour of the decidely low-tech assembly lines, the general manager of Shenzhen Xinghuabao Electronics returns to his office and opens a door behind his desk. On the other side is a cleanroom where workers in white protective clothing are assembling handset displays behind windows and airlocks. The high-tec lab, which opened only in December, highlights a strategy shift. After years of competing on price only, Xinghuabao is trying to move upmarket. “We are legitimate set makers now. We are building our own brand,” says Jin Hongxiang, president of SOP, Xinghuabao’s parent company. “We are expanding upstream to have more control over the quality of our components.” The company’s move is part of a broader trend. As Shenzhen’s “bandit” handset makers have started flooding the global market, they are meeting increasing regulatory and cost issues that are forcing them to adapt. Financial Times – 17 Feb 2010

A consortium including China Unicom yesterday bid $2.5 bn for a majority stake in Nitel, Nigeria’s former state telecoms monopoly, in what would be one of the largest privatisations in Africa and rank among China’s biggest investments on the continent.

Officials in one of the world’s fastest-growing telecoms markets said the consortium, which also comprises Minerva of Dubai and GiCell, understood to be a small Nigerian telecom, has 10 days to pay 30 percent of the fee and a further 50 days to secure a 75 per cent holding in Nitel.

Financial Times – 17 Feb 2010

A group of Chinese grey market handset makers is to consider manufacturing in India in an attempt to be recognised as legitimate suppliers in their most important export markets.  The decision also reflects the effects on business of India’s uneasy relationship with its eastern neighbour.

The Shenzhen Mobile Communications Association intends to take a dozen of its members to visit India this month to negotiate related ventures.

“The goal is to set up several production or assembly lines with a total capacity of up to 10m units”, Tang Rujin, executive president said.  The manufacturers hope production will help them gain political capital in the country, and comes after India last year started to crack down on Chinese-made grey market handsets.

Financial Times – Feb 17 2010

In recent months Beijing has been cracking down at home and lashing out abroad.  China watchers are perplexed about the origins and implications of the new assertiveness.  Many believe a threshold has been breached and that China is going to become more difficult to deal with.  Others see merely the 30-year pattern of fang and shou, opening and closing, in which one step back is followed by two steps forward.

Since the adoptions of a fairly progressive decision on intra-party democracy at September’s plenary session of the Chinese Communist Party Central Committee, political reforms have stalled.  The foreign business climate has also deteriorated bady, with multinationals complaining of a host of new operating constraints and protectionist measures.  Some western executives with long experience in China say it is the worst they have since 1989-92.  Meanwhile the country’s trade and currency surpluses continue to balloon.

Financial Times – Feb 17 2010

“It is harmful to apreciate the RMB.” – Zhang Ming, general secretary of the Research Centre for International Finance, the Chinese Academy of Social Science, warns against the pressure developed countries are putting on China at the G20 summit to revalue the RMB. http://zhangming1977.blog.sohu.com/

“China does not need to follow Australia and raise interest rates.” – Guo Tianyong, director of the Bank Reserach centre, Central University of Finance and Economics.” http://quotianyong.blog.sohu.com/

“The hot money starts to flow out of the Chinese mainland.” – Ye Tan National Business Daily columnist http://blog.sina.com.cn/yetan

“Our company will not reserve land on a large scale.” – Pan Shiyi, CEO of SOHO China http://pan-shiyi.blog.sohu.com

China International Business – Nov 2009

Acquistions in Australia by Chinese companies are being met by continuing setbacks, the most high-profile of which was the iron ore miner Rio Tinto’s rejection of a USD 19.5 billion capital investment from Chinalco in February 2009. In fact, out of 11 major proposed acquisitions by Chinese companies in Australia between February and September 2009 only two deals were approved under certain conditions while another nine either failed or need to be reapplied for. Australia still needs investments by China, however, as many companies in Australi lack liquid cash due to the global economic downturn. Some acquisitions have become sensitive for political reasons and Chinese companies may have to be conservative in the future regarding possible investments.

Caijing – Nov 2009

Liaoning Hi-Tech Energy Group, a private new energy company listed on NASDAQ, has acquired a 100% stake in Evatech, a solar energy company in Japan, for USD 49.9 million. The Liaoning-based company will purchase Evatech’s research and development centres in Tokyo and Kyoto. The company also plans to move Evatech’s solar cell production line from Japan to China, which will help reduce costs whilst utilising Evatech’s core technology in the solar energy sector.

China International Business – Nov 2009

Germany’s leading automaker, Volkswagen, plans to invest EUR 4 billion in China between 2009 and 2011, with the aim of posting high sales growth across the country. The investment will be used to expand output at its two factories in Nanjing and Chengdu, which will be increased to 300,000 and 350,000 units per year by 2012 respectively. The funds will also enable production of three new models for the German auto giant. China has become one of the most important markets for Volkswagen, which sold 1.06 million vehicles in the country in the first nine months, up by 37% compared to the same period last year.

China International Business – Nov 2009

US private equity fund Goldman Sachs Capital Partners (GSCP) invested HKD 2.586 billion (USD 330 million) in convertible bonds and warrants from Geely Automotive Holdings, a top auto carmaker in China, eyeing the country’s booming auto market, GSCP will become the second largest shareholder in Geely. holding a 15.1% stake in the Chinese company. The money will be used to expand the output of Geely’s production base in Hunan, as well as to purchase three factories in Jinan, Chengdu and Lanzhou from its parent Zhejiang Geely Holding Group. The money will also assist its parent in acquiring Volvo Grand from US automaker Ford.

China International Business – Nov 2009

Korea’s LG Display, the second largest LCD manufacturer in the world, has signed a memorandum of understanding with the Guangzhou Municipal Government to create a LCD production line in the Guangzhou Economic Technical Development District, with investments totalling USD 4 billion. The JV project will focus on manufacturing 8.5-inch LCD screens, with initial output of 60,000 units each month by 2012. The project is only LG Display’s second manufacturing line of this product type worldwide, and will become the largest LCD project in China, with a production value of RMB 300 billion (USD 43.97) by 2010.

China International Business Nov 2009

China-Russia Energy Investment, a subsidiary of Hong Kong-based Rus Energy Investment Group, announced the purchase of a 51% stake in a Russian oil company. The deal, which is the first acquisition of a Russian oil company by the Chinese-Russian joint venture, will provide exploration and development rights for two natural gas fields with total reserves of 60 billion cubic metres. The JV will invest USD 300 million in exploring the two fields, which will produce natural gas for the Chinese, Japanese, Korean and Singaporean markets.

China International Business Nov 2009

US private equity giant The Carlyle Group and Shanghai Fosun High Technology, China’s largest privately-owned investment group, made a joint investment of around USD 100 million in the Guangdong-based milk powder maker Yashili Group last month, eyeing a recovery by the industry which was last year recked by large-scale production contamination. Carlysle and Fosun will become the second and third-largest shareholder of Yashili, holding a 17.3% stake and a 6% stake respectively. Yashili, founded in 1983, is a leading milk powder producer in China with a production value of RMB 3.8 billion (USD 556.7 million) last year and projecting value of RMB 4 billion (USD 586 million) this year.

China International Business Nov 2009

China Investment Corporation, the state-owned investment firm, has paid USD 850 million for a 14.9% stake in Nobel Group, a Hong Kong-headquartered agricultural company, as part of its plan to diversify overseas investments. The deal is the first acquisition in the agricultural sector by CIC. Nobel Group is a Singapore-listed company which saw revenues of over USD 36 billion in 2008. CIC has increased its investments abroad, buying USD 1.9 billion of debt from Indonesia’s largest coal producer, PT Bumi Resources, and 11% of the Global Depositary Receipts of the London-listed JSC KazMunaiGas Exploration Production for USD 939 million through its subsidiary Fullbloom Investment.

China International Business Nov 2009

China’s top agrochemicals producer Sinochem, a subsidiary of state-owned Sinochem Group, has signed a framework agreement with Australia’s Nufarm, one of the largest agriculture chemical manufacturers in the world, to pay AUD 2.83 billion (USD 2.44 billion) for a total of 218 million shares in the latter. Nufarm, which produces agriculture chemicals like glyphosphate and sells to over 100 countries around the world, holds huge shares in the agriculture chemical markets of Australia, South America, Europe, Asia and the US. The purchase is expected to help Sinochem  further extend its overseas network.

China International Business Nov 2009

Xi’an Aircraft International Corp, a subsidiary of the Aviation Industry Corporation of China (AVIC), has agreed to buy a 91.25% stake in FACC, the largest aircraft parts maker in Austria, for around EUR 91 million (USD 134 million). The deal will help AVIC compete with Boeing and Airbus in the production of jumbo jets. FACC, established in 1989, is the main supplier to the world’s top aircraft makers.

China International Business Nov 2009

“China has become the world’s largest energy producer.” – Zhang Guobao director of the Energy Bureau

“The financial crisis didn’t happen in China.” – Long Yongtu general secretary of Boao Forum for Asia

“Chongging could become the Chinese ‘Seattle.’” – Zhang Yaqin chairman of Microsoft (China)

“China’s voting right will be largely increased.” – International Monetary Fund (IMF) managing director Dominique Strauss-Kahn

“The present iron ore price negotiation is out of date.” – Wu Xichun honorary chairman of China Iron & Steel Association (CISA)

China International Business - Nov 2009

China’s largest bank . the Industrial and Commercial Bank of China, plans to acquire a 19.26% stake in Thailand’s ACL Bank from Bangkok Bank, the biggest commercial Thai bank, for THB 3.52 billion (USD 105 million), or about THB 11.5 per share. ICBC is making a bid for ACL’s remaining shares at the same price – including a 30.6% stake owned by the Thai Ministry of Finance, the largest shareholder of ACL – which would bring the total cost of the bank to THB 18.29 billion. The deal, while ICBC’s first purchase in Thailand, is one of many acquisitions the bank has recently made in Southeast Asia.

China International Business Nov 2009

25.5km – Total length of the new Shanghai Yangtze River tunnel and bridge, which will be the longest tunnel in the world.

RMB 100.7 billion – (UDS14.75 billion) China’s tourist revenue for the Golden Holiday Oct 1-8.

USD 5 billion – China’s luxury goods consumption this year, according to a report by Goldman Sachs.

16 – Number of Chinese companies listed among the top 50 Forbes Asia Enterprise 2009.

USD 113.8 billion – Capital raised by 154 Chinese mainland companies listed on overseas stock markets by the end of July 2009, according to the China Securities Regulatory Commission.

China International Business Nov 2009

While the West remains bogged down in the worst recession in decades, China’s economy has sprung back to life with remarkable speed. But is Asia’s giant strong enough to lead a global recovery?

On a steamy Saturday afternoon just outside Shanghai, Zhang Yi is in a blessedly cool General Motors showroom, kicking the tyres of the company’s newer models. He’s not there to beat the heat. He drives a small Volkswagen now and wants to upgrade. A middle manager at a state-owned steel company, Zhang has no worries about his job or China’s economy. “Things are still pretty good,” he says. “I have no problem now affording one of those,” nodding toward the array of gleaming new Buicks nearby.

There aren’t a lot of places in the world these days where consumers speak with all that kind of confidence. With the US, Japan and all of Europe mired in the worst global recession in 30 years, China has shown a restorative strength that six months ago many doubted it had. A devastating slump in exports crippled growth late last year, but on the back of a $586 billion government stimulus programme – about 13% of GDP spread over two years – China has snapped back. The economy grew 7.9% in the second quarter and will now probably expand 8% or more this year. Evidence of increasing momentum appears almost every day. Factory production has begun to edge up, in part because Chinese consumers continue to spend money at a healthy pace. Auto sales, helped significantly by government subsidies for small-car purchases, hit an all-time record in April, and will easily surpass those in the US this year. Overall, retail sales in China this year are up 16%.

The US, the unquestioned leader of the global economy, is now in the midst of a disorienting shift in economic policy, away from the let-it-rip form of capitalism that guided it for almost 30 years and toward more overt government control and regulation of huge swathes of the economy. No one yet can safely say whether this is wise. No such doubts are evident in China, where the government reacted to the crisis with alacrity and the economy is now responding in kind.

That’s why, for global companies like General Motors, China is no longer the future.  It’s the present. Of the world’s 10 biggest economies, China is the only one that is growing, and it could soon surpass Japan’s to become the world’s second largest. The Shanghai exchange has soared more than 80% this year, by far the best performance among major markets.

TRADING PLACES

A few years ago that question – and the notion that China could drive global growth – would have seemed absurd. After all, China’s economy was dependent upon manufacturing, which was in turn dependent upon demand from the US, the world’s undisputed economic locomotive. But that engine remaines sidetracked. The IMF predicts the US economy will contract 2.6% this year. American home prices continue to fall in some cities, while the unemployment rate has soared to 9.5%, the highest since 1983.

NOT SO FAST

Even if China’s economy continues to power ahead, it will probably not on its own, be enough to drag the rest of the world into recovery. Size matters. The US has a $14 trillion economy; China’s is $4.4 trillion. The US accounted for nearly 21% of total global GDP last year; China just 6.4%. Chinese consumption in other words, is growing – but is still insufficient to lift the world’s largest economies out of recession. Consumer spending drives less than 40% of China’s GDP; in the US before the burst, the consumer accounted for almost 70%.

China can help, but it remains a relatively poor country, with an annual per capita income of $6,000, compared to $39,000 in the US and $33,400 in the EU. To be solidly middle class in China’s big cities is to have an income of about $12,000. Brisk though auto sales may be, most Chinese still can’t afford a Volkswagen or a Buick, let alone a BMW.

Last year China’s consumption was about the equivalent of France. No one is calling on France to save the world.

As the rest of the world falters it is truer than ever, China is not yet the leader of the global economy but it is getting there.

Time magazine – Aug 10 2009

The economic crisis has reschaped the global lndscape. But one of the less observed events took place earlier this year when China overtook the United States as the world’s largest exporter to the Middle East. Its exports to the region have soared to $60bn (£37bn) from just $4bn a decade ago.

Chinese manufacturers are turning to the Middle East as their established buyers in Europe and the US cut their spending.

Yuan Chun is ilustrative of the change. He has a shop in one of Dubai’s retail malls. He used to sell mainly blue porcelain to European clients. But he recently switched his stock for red porcelein. His European clients have dried up. His Arab and African clients are still buying, but prefer brighter colours..

It is not only Chinese traders driving the change. The Chinese city of Yiwu, a short drive from Shanghai, is a virtual Arab market town. There are more than a dozen Arabic restaurants in its main street and the city receives 200,000 Arab visitors annually. It is a Mecca for Arab traders searching for low-cost goods for consumers back home.

The relationship has also grown beyond trade. Chinese construction companies are building offices for the Algerian and Yemeni foreign ministries in Algiers and Sana’a, not to mention airports, roads and apartment buildings. They are even building a light-rail system in the Holy City of Mecca, in Saudi Arabia. The companies can build fast and at the right price for developing countries.

Daily Telegraph – 28 August 2009

In some ways David Wei is exactly the type of boss you would expect to find at an internet company: he is young at 39, a football fan and a beer drinker.

But, looking at him behind his desk at Alibaba.com’s headquarters in the eastern Chinese city of Hangzhou, it quickly becomes clear that Mr Wei is no scruffy web pioneer.

He has the impeccably combed hair of a senior Comunist Party cadre and the sleek but-fashionable gold spectacles of the investment banker he once was.

His English is perfect, thanks to a stint working for Coopers & Lybrand in London, and happily free of the “buzzwords” and jargon of Web 2.0.

He first made contact with Alibaba.com in 2000, but only decided to join the company after six years of deliberation, during which he ran B&Q, the DIY chain, in China.

Founded with $60,000 (£37,000) of investment in a Hangzhou by Jack Ma, a former English teacher, Alibaba.com raised $1.5 bn and was priced at more than 100 times its earnings when it made its debut on the Hong Kong Stock Exchange in 2007 – a higher valuation than Google achieved.

The website forms a bridge between China’s myriad factories and their customers in the US and Europe. Almost 500,000 factories pay a fee to Alibaba.com to display their wares and put them in touch with the outside world.

The site is not flashy – it looks like a hybrid of Amazon and eBay – but it is simple to use. A few clicks brings up the makers of everything from chrome oxide pigment to tennis rackets to diamond jewellery.

For anyone who wants to import goods from China, Alibaba.com is the first port of call.

Daily Telegraph – 28 August 2009

In China one doesn’t have to look far to see the country’s commitment to renewable energy. In cities such as Beijing and Shanghai, rooftops are now covered with solar water heaters. On the grasslands of Inner Mongolia, towering white wind turbines are popping up where only cattle, sheep and herders on horseback once roamed. While coal consumption is expected to climb more than 3% annually for the next two decades, the government has also required that electricity companies add a significant amount of alternative energy to their portfolios. With the global economy languishing, China-which is not only the world’s most populous country, but also the most polluted-offers the promise that its green-energy drive can become a major source of demand for international wind and solar companies.

That expectation was given a boost last September when First Solar, the Arizona-based solar-module manufacturing giant , announced that it had landed a deal to build a solar field bigger than Manhattan near the city of Ordos, Inner Mongolia. The project will dwarf the largest solar plants to date, and eventually generate enough electricity to power the equivilent of 3 million Chinese homes. To fulfill the huge demands, First Solar says it’s considering building a solar module facility in the city to support the project. While financial details were not released, news of the deal caused First Solar’s stock to jump 11% on the day of the announcement.

“This major commitment to solar power is a direct result of the progressive policies being adopted in China to create sustainable long-term market for solar and a low-carbon future for China,” First Solar CEO Mike Ahearn said in a statement.

The fast-growing country’s huge appetite for electricity is behind the push. While China’s total power capacity will nearly double by 2020, the amount that could come from wind and solar is expected to jump more than fivefold, aided by significant government assistance. Beijing announced last March it will subsidise 50% of costs for certain solar-panel projects, and 70% in remote regions.

But as often happens in China, this potential bonanza could prove to be mirage for foreign companies. The country’s policymakers are nurturing a domestic alternative-energy industry on a massive scale. China is home to more than 100 wind-turbine manufacturers and some 400 solar-panel companies. yet more than 95% of PV cells produced by China in 2008 were exported, indicating the country’s output far exceeds domestic demand.

The European Union Chamber of Commerce in China complained China has erected alterntive-energy trade barriers, focussing specifically on the treatment of wind-turbine makers.

Paulo Fernando Soares , China chief executive for Indian wind-turbine Suzlon Energy, says his company has successfully bid for provincial-level projects, but Suzlon and all other foreign firms have been shut out of national-level wind-base projects in Gansu, Hebei and Inner Mongolia.

China’s Ministry of Commerce rejected the European chamber’s complaints of protectionism, saying the country tries to offer a level playing field for all foreign and domestic businesses.

Adding insult to injury, Chinese firms are proving to be tough competitors in markets outside China’s borders. In Germany where government subsidies helped stimulate global solar-panel production, an industry association is investigating claims that Chinese panelmakers are dumping their products.

Shi Zhengrong, founder and CEO of Suntech Power, China’s biggest solar-panel maker, says his company doesn’t sell panels below cost anywhere in the world.  And he points to First Solar’s Ordos deal as evidence that foreign firms can suceed on the mainland. “As long as companies have a competitive renewable-energy technology and product offering.” he says, “there will definitely be opportunities in the Chinese market.”

Time Magazine 2 November 2009

US president in 3-hour Beijing talks with Hu

Tensions over trade and exchange rates

President Barack Obama yesterday urged China to strengthen its currency as tensions over exchange rates and trade broke through a carefully orchestrated show of co-operation between Washington and Beijing.

Mr Obama made his comments after a three-hour meeting in Beijing with President Hu Jintao, during which both leaders pledged to work together on pressing international issues.

However the US president also joined in the growing chorus of international voices calling on China to allow the renminbi to appreciate.

“I was pleased to note the Chinese commitment made in past statements to move toward a more market-orientted exchange rate over time,” he said at a joint appearance with Mr Hu. Such a move would “make an essential contribution to the global rebalancing effort”.

The reference to “past statements” could imply that China did not make any new commitments yesterday.  Mr Hu did not mention the currency issue in his statement, although he did call on both governments to refrain from protectionism, a criticism of recent US measures on Chinese steel pipes and tyres.

Coming at a moment when Chinese prestige is growing and the US is facing enormous difficulties, Mr Obama’s trip has symbolised the advent of a more multi-polar world where US leadership has to co-exist with several rising powers - most notably China.

Financial Times Asia 18 November 2009

A Chinese court has ruled that Microsoft infringed a Chinese software maker’s intellectual property rights in a surprise decision that has renewed worries among foreign patent experts about China’s management of IPR disputes.

Microsoft’s use of two Chinese fonts developed by Zhingyi Electronics, a Beijing-based software company, was not covered by a licence agreement between the two, the Beijing No 1 Intermediary People’s Court said in a verdict, and therefore infringed Zhongyi’s intellectual property rights.

Once the ruling takes effect, Microsoft must stop selling all PC operating systems that use the fonts including the Chinese language editions of the second edition of Windows 98, Windows 2000, Windows XP and Windows Server 2003.

Microsoft said it believed its licence agreements with the plaintiff covered its use of the fonts in question and it would appeal against the verdict: “Microsoft respects intellectual property rights. We use third party IPs only when we have a legitimate right to do so.”

Zhongyi said the verdict had highlighted that every Chinese language Windows operating system included Chinese intellectual property rights because the Chinese character database and Chinese language input system were developed by locals.

“It can be said that the support from the Chinese character database and input system are a pillar for the windfall profits Microsoft is extracting from China,” Zhongyi said.

Microsoft has a long history of fighting for the protection of its own intellectual property rights in China as a lion’s share of the operating systems used on the country’s computers are pirated versions.

Financial Times Asia November 18 2009

International trade has been an engine of growth for many Asian countries, enabling them to create jobs and raise living standards faster than other countries that were not yet ready to take advantage of surging trade opportunities.

In pragmatic Asia, a nation’s standing is judged not only in terms of military power and diplomatic skill but also how it shapes up as a source of trade, investment and technology. By this yardstick, how does the United States measure up against in particular Asia’s rising giant, China?

Unfortunately the Obama administration has been hobbled in one key area where it should be showing leadership: trade policy. Beset by critics in Congress and the trade unions who claim trade agreements cause job losses and weaken the economy, the US is reviewing policy. The pace has been glacial.

As Mr Michael Green, a former National Security Council official in the Bush administration, wrote recently: “The complete lack of a trade strategy leaves the United States without any tools to counter the growth of exclusive regional economic arrangements within Asia.”

At the end of 2008, just over 400 bilateral and regional trade agreements had been notified to the World Trade Organisation.  Another 400 or so are scheduled to be notified by the end of 2010.  Of the total, 326 are in the Asia-Pacific area.

By far the biggest, the China-Asean Free Trade Area (Cafta) will take full effect in January 2010. With a combined GDP of US$6 trillion and a merchandise trade volume of US$4.5 trillion, Cafta will be the world’s third largest traing bloc after the European Union and Nafta (the North American Free Trade Area linking US, Canada and Mexico).

China says that despite the global slowdown, Cafta trade in the first nine months of 2009 approached US$150 billion, while China/South-east Asia investment reached US$60 billion. Meanwhile, US trade with the region has fallen, its investments have slowed, and it has become a small-time player in determining the future trade architechture in the region.

The US is party to just 20 of the 800-plus trade agreements registered with the WTO. Fifteen are in force and three – including a deal with South Korea – are stuck in Congress.

In March, a group of leading US-based organisations and businesses wrote to Mr Obama and top US trade negotiator Ron Kirk urging them to re-energise America’s leadership role in trade by proceeding with talks on US membership in the Trans-Pacific Strategic Economic Partnership Agreement (TPP).

Strait Times – Michael Richardson – 9th November 2009