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

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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

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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

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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

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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

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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

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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

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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

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“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

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