By Zhao Hongyi
At the end of 2011, the National Development and Reform Commission (NDRC) and Ministry of Commerce released the draft of new guidelines for foreign direct investment (FDI).
Among the new industries mentioned as being open to FDI are advanced manufacturing, service, advanced technologies in energy conservation, renewable sources of energy, new materials and advanced-equipment manufacturing in the industries like textiles, chemicals and machinery.
The guidelines, which come into effect on January 30, also encourage foreign investment in the recycled economy, including the recycling of used electric appliances, electronics and battery.
Industries involved in new Internet technologies based on IPv6, bio-technology, high-end equipment, new-energy vehicles and components are also positioned to attract FDI.
But traditional vehicles assembly, silicon fabrication and coal power have been struck from the list to curb surplus production.
In the service industry, the guidelines added nine sectors for investment, including vehicle charging, venture capital, intellectual property rights protection, professional training and technology for cleaning oil spills.
Medical institutions and financial leasing companies were upgraded from the original limited categories to fully allowed categories, showing the authority’s determination to develop the medical service industry and financial industry to improve welfare and national vitality.
To coordinate with the country’s efforts to develop the western interior, regenerate old industrial bases in the northeast and promote the development of the central provinces, the NDRC and commerce ministry promised to release new guidelines for foreign investment in these areas later this year.
The first guidelines for foreign investors were issued in 1995 and revised five times to follow the country’s rapid development. Many industries have been removed from the list of encouraged categories to prevent saturation.
“Foreign investors are likely to take heed of the guidelines,” said Dirk Moens, secretary general of the European Union Chamber of Commerce in China.
“This will encourage foreign investors to think of coming to China,” he said.
Kong Linglong, director-general of the NDRC’s department of foreign capital and overseas investment, had similar thoughts.
“Looking at the changes in the new version, we can see how the Chinese government would like to transform its industrial structure,” Kong said. “Another message is that China is now placing more value on the quality of foreign investments rather than their scale.”
China is now the second-largest destination for foreign investment in the world and the largest among developing countries.
In 2010, the value of FDI into China hit a record high, increasing to $105.7 billion, a rise of 17.4 percent from the year before.
From January to November, the value of foreign direct investment increased by 13.15 percent from the same period the year before, reaching $103.8 billion.
By the end of 2011, total value of foreign investment in China exceeded $3 trillion, according to the latest statistics from the ministry.
By Huang Daohen
In a statement, the country’s economic planning body NDRC said the latest change would help foreign companies get better involved in the nation’s 12th Five-Year Plan.
There will be an increasing need for foreign investments in energy-saving and new-energy sources as the country updates its traditional industries, the statement said.
Wen Yijun, veteran analyst at Oriental Securities in Beijing, said the changes are within expectation as the government seeks to transform the country’s economy in a high-tech and environmentally-friendly direction.
Wen said foreign investments in the Internet sector will also see support as young people are highly involved in online activities, such as gaming and microblogging.
But not all overseas enterprises pinning their hopes in China are happy. The auto makers, for instance, feel a chill.
The new rules remove the auto industry from the list of sectors of supported industries.
Though the list still included auto parts for alternative-energy vehicles, experts say the shift means the government wants to cool foreign investment in the country’s auto industry.
“Somehow, the adjustment reflects an embarrassment in the previous policy, as the policymakers want to attract both foreign capital and their high technology,” Wen said.
But the reality is, while many foreign auto giants have set up joint ventures across the country to assemble vehicles and dominate the local market, they didn’t transfer core technologies to their Chinese counterparts.
However, Wen said foreign automakers’ joint ventures won’t be immediately affected by the shift as their current production capacity can barely meet the strong demand.
Prior to the release of the new guidelines, foreign enterprises complained that the country’s business environment was getting worse. Many said they would consider relocating their factories to other Asian countries like Vietnam.
Recent statistics from the Ministry of Commerce show that foreign direct investment (FDI) dropped for the first time last month to $8.76 billion, down 9.76 percent from a year earlier.
Wen said the rare monthly dent in FDI is subject to the sluggish global economy and won’t affect the annual growth rate.
“China is still the most vibrant market for foreign investors in the long run, and the environment for FDI is improving,” he said.
The government revised its foreign investment catalog, making the first changes since October 2007. CFP Photo
By Zhao Hongyi
At the end of 2011, the National Development and Reform Commission (NDRC) and Ministry of Commerce released the draft of new guidelines for foreign direct investment (FDI).
Among the new industries mentioned as being open to FDI are advanced manufacturing, service, advanced technologies in energy conservation, renewable sources of energy, new materials and advanced-equipment manufacturing in the industries like textiles, chemicals and machinery.
The guidelines, which come into effect on January 30, also encourage foreign investment in the recycled economy, including the recycling of used electric appliances, electronics and battery.
Industries involved in new Internet technologies based on IPv6, bio-technology, high-end equipment, new-energy vehicles and components are also positioned to attract FDI.
But traditional vehicles assembly, silicon fabrication and coal power have been struck from the list to curb surplus production.
In the service industry, the guidelines added nine sectors for investment, including vehicle charging, venture capital, intellectual property rights protection, professional training and technology for cleaning oil spills.
Medical institutions and financial leasing companies were upgraded from the original limited categories to fully allowed categories, showing the authority’s determination to develop the medical service industry and financial industry to improve welfare and national vitality.
To coordinate with the country’s efforts to develop the western interior, regenerate old industrial bases in the northeast and promote the development of the central provinces, the NDRC and commerce ministry promised to release new guidelines for foreign investment in these areas later this year.
This year’s CCTV New Year’s Gala is promising attendees a glimpse at a new 3D video game demonstration by Sony.
But that demo could cause headaches – real ones – for millions of viewers if the country gets a new 3D television channel.
The State Administration of Radio, Film and Television (SARFT) is reportedly working on the project with China Central Television, and with regional TV stations from Beijing, Shanghai and three other areas.
“The launch of a 3D TV channel will be a new milestone in the history of broadcast television in China, symbolizing that China’s broadcasting and television [sector] is closely following global development trends,” SARFT said.
The new channel will also “bring new audio-visual enjoyment to the people,” drive television upgrades and possibly fuel local development of technology and standards for 3D TV, it said.
The new channel will begin formal operations around the time of the Chinese New Year holiday later this month.
So will 3D TV flop in China, or is it just crazy enough to work? The country’s growing class of wealthy consumers may be a receptive audience. Such TV sets are already selling faster than the dearth of 3D content would suggest.
IHS iSuppli analyst Kathleen Zhang estimates there were more than 5 million 3D TV sets shipped in China this year, and that shipments next year could reach 12 million units.
But the key may lie in how good the 3D content is, and how quickly that content expands.
So far, the people buying 3D sets aren’t making much use of the bundled glasses. They’ve been willing to buy the 3D sets because their prices are close to ordinary 2D TVs, justifying the expense for the chance to make use of the 3D function in the future, Zhang said.
But that’s a start, Zhang said.
“The market is promising and the quality of 3D content is growing,” she said.
(Agencies)
This year’s CCTV New Year’s Gala is promising attendees a glimpse at a new 3D video game demonstration by Sony.
But that demo could cause headaches – real ones – for millions of viewers if the country gets a new 3D television channel.
The State Administration of Radio, Film and Television (SARFT) is reportedly working on the project with China Central Television, and with regional TV stations from Beijing, Shanghai and three other areas.
“The launch of a 3D TV channel will be a new milestone in the history of broadcast television in China, symbolizing that China’s broadcasting and television [sector] is closely following global development trends,” SARFT said.
The new channel will also “bring new audio-visual enjoyment to the people,” drive television upgrades and possibly fuel local development of technology and standards for 3D TV, it said.
The new channel will begin formal operations around the time of the Chinese New Year holiday later this month.
So will 3D TV flop in China, or is it just crazy enough to work? The country’s growing class of wealthy consumers may be a receptive audience. Such TV sets are already selling faster than the dearth of 3D content would suggest.
IHS iSuppli analyst Kathleen Zhang estimates there were more than 5 million 3D TV sets shipped in China this year, and that shipments next year could reach 12 million units.
But the key may lie in how good the 3D content is, and how quickly that content expands.
So far, the people buying 3D sets aren’t making much use of the bundled glasses. They’ve been willing to buy the 3D sets because their prices are close to ordinary 2D TVs, justifying the expense for the chance to make use of the 3D function in the future, Zhang said.
But that’s a start, Zhang said.
“The market is promising and the quality of 3D content is growing,” she said.
(Agencies)
You could call it another year of economic success: though the country’s economy is set to slow, its GDP grew 9.4 percent during the first three quarters.
But for many overseas companies, scandals made 2011 a year of reckoning.
Unilever’s rumor mill
The National Development and Reform Commission (NDRC), the country’s top economic planner, fined consumer product giant Unilever Plc $2 million (12.6 million yuan) for its high-profile dissemination of possible price hikes in the country in May.
In March, Unilever issued price increase notices to supermarkets in China, saying the company planned to raise the prices of some of its products.
According to the NDRC, public comments by Unilever in April about possible price increased “intensified price hike expectations among consumers,” “led to panic buying” and “seriously distorted market order.”
Rotten Apples
On August 31, a report called “The Other Side of Apple II,” co-released by five non-governmental environmental organizations after a seven-month investigation, detailed claims of how Apple’s Chinese suppliers, who make iPhone and iPad parts, pollute the environment.
The report alleges that 27 suspected Apple suppliers were responsible for severe pollution problems, ranging from toxic gases to heavy metal sludge. In one case, the report said, a nearby village experienced a “phenomenal rise in cases of cancer.”
Apple responded quickly to the report, pledging that it would investigate all instances of alleged pollution.
Gucci workers complain
Employees at Gucci (China)’s Shenzhen store have to ask permission from their superior before drinking water, and they cannot take more than five minutes to use the toilet, the Guangzhou-based Xinkuaibao newspaper reported on October 8.
Another former employee said she had to stand for more than 10 hours a day when she was working for Gucci, even during her pregnancy. She also complained that the company did not allow her to eat fruits or snacks during breaks.
Another former staff member filed a formal complaint in August, alleging that the company did not pay for overtime work.
Walmart porks up labels
US retail giant Walmart stores in southwest China’s Chongqing allegedly sold 63,547 kilograms of falsely labeled pork over the past two years, generating approximately 730,000 yuan ($114,500) in illegal income.
A total of 37 people have been implicated in the scandal, with 25 detained, seven under house arrest and three released on bail, in addition to the two who were arrested, according to local police.
The CEO of Walmart’s entire Chinese operation and its head of human resources have both resigned citing personal reasons.
Siemens’ refrigerator rage
On November 20, an influential Chinese blogger and his supporters engaged in a consumer rights protest at Siemens’ Beijing headquarters by smashing their refrigerators with hammers.
Luo Yonghao, the lead smasher, said on his microblog that he was having trouble closing the door of the Siemens fridge he had bought. Luo’s comments gave rise to a heated online discussion as other consumers reported the same problem with their Siemens fridges.
Luo said Siemens refused to admit that some of their products had faults and that they had ignored consumer complaints.
Siemens China president Roland Gerke, in a statement on the company website, later apologized to customers for problems and promised to resolve the matter through a free visiting repair service.
Gaopeng watch scandal
Gaopeng, a joint venture between the world’s largest daily deal site Groupon and China’s top Internet firm Tencent Holdings, sold customers Tissot watches on its website for 690 yuan ($109).
The luxury Swiss watches have an original retail price of more than 3,000 yuan ($500), and customers who received the watches from Gaopeng concluded that they were counterfeit after finding them to be of poor quality.
“After an investigation into the Tissot watch incident, Gaopeng found the merchant had given us fake agent qualification documents,” Gaopeng said.
Li Peixuan, a lawyer at Beijing Huijing Law Firm, commented that Tissot could also instigate legal proceedings to sue Gaopeng and its suppliers for compensation.
(Agencies)
You could call it another year of economic success: though the country’s economy is set to slow, its GDP grew 9.4 percent during the first three quarters.
But for many overseas companies, scandals made 2011 a year of reckoning.
Scandals made 2011 a year of reckoning. Walmart stores in the Chongqing sold more than 63,000 kilograms of falsely labeled pork over the past two years. IC Photo
Unilever’s rumor mill
The National Development and Reform Commission (NDRC), the country’s top economic planner, fined consumer product giant Unilever Plc $2 million (12.6 million yuan) for its high-profile dissemination of possible price hikes in the country in May.
In March, Unilever issued price increase notices to supermarkets in China, saying the company planned to raise the prices of some of its products.
According to the NDRC, public comments by Unilever in April about possible price increased “intensified price hike expectations among consumers,” “led to panic buying” and “seriously distorted market order.”
Rotten Apples
On August 31, a report called “The Other Side of Apple II,” co-released by five non-governmental environmental organizations after a seven-month investigation, detailed claims of how Apple’s Chinese suppliers, who make iPhone and iPad parts, pollute the environment.
The report alleges that 27 suspected Apple suppliers were responsible for severe pollution problems, ranging from toxic gases to heavy metal sludge. In one case, the report said, a nearby village experienced a “phenomenal rise in cases of cancer.”
Apple responded quickly to the report, pledging that it would investigate all instances of alleged pollution.
By Huang Daohen
With so many business scandals and risks, how should foreign investors get involved in the China market in 2012?
Stefanie Zhu, an analyst with local consulting firm Qingxue Market Solution, said there are three megatrends of growth worthy of investors’ attention.
The first is that Chinese people are increasingly looking to travel.
According to the National Tourism Bureau, more than 50 million people traveled abroad last year. Among the $9 billion that Chinese people spent on luxury goods during 2010, more than 60 percent of that was spent abroad.
“Chinese consumers are like the Japanese in the 1980s,” Zhu said.
Investments should focus more on industries that cater to the growing travel and leisure sector, she said.
The increasing purchasing power of Chinese women is further enlarging this market, she said.
Women now account for almost half of the household income in China and have more say in daily purchasing decisions.
Zhu believes that the potential growth in China will come not from major cities like Beijing, Shanghai or Guangdong, but from smaller cities like Changsha, Chengdu and Taiyuan.
These lower-tier cities are hotbeds of growth due to decreased labor and raw material costs.
But she cautioned that global brand names that want to expand into the country’s inner land should be aware of the customers’ declining confidence in foreign brands.
According to a survey by the news portal Sina, more than half of the respondents said their impressions of foreign brands worsened in the past year.
More than 85 percent said the quality and services of global brands did not live up to their reputations.
Meanwhile, nearly 20 percent said the majority of brands do not apply the same standards to the market in the Chinese mainland as they do internationally. Only 5 percent hold the view that all foreign brands serve Chinese customers to the same level as they do around the world.
Zhu said that scandals and defects in foreign brands in the past years have hurt Chinese customers’ confidence in them.
“Better-off Chinese consumers are now demanding quality goods with better services,” Zhu said.
By Huang Daohen
With so many business scandals and risks, how should foreign investors get involved in the China market in 2012?
Stefanie Zhu, an analyst with local consulting firm Qingxue Market Solution, said there are three megatrends of growth worthy of investors’ attention.
The first is that Chinese people are increasingly looking to travel.
According to the National Tourism Bureau, more than 50 million people traveled abroad last year. Among the $9 billion that Chinese people spent on luxury goods during 2010, more than 60 percent of that was spent abroad.
“Chinese consumers are like the Japanese in the 1980s,” Zhu said.
Investments should focus more on industries that cater to the growing travel and leisure sector, she said.
The increasing purchasing power of Chinese women is further enlarging this market, she said.
Women now account for almost half of the household income in China and have more say in daily purchasing decisions.
Zhu believes that the potential growth in China will come not from major cities like Beijing, Shanghai or Guangdong, but from smaller cities like Changsha, Chengdu and Taiyuan.
These lower-tier cities are hotbeds of growth due to decreased labor and raw material costs.
But she cautioned that global brand names that want to expand into the country’s inner land should be aware of the customers’ declining confidence in foreign brands.
According to a survey by the news portal Sina, more than half of the respondents said their impressions of foreign brands worsened in the past year.
More than 85 percent said the quality and services of global brands did not live up to their reputations.
Meanwhile, nearly 20 percent said the majority of brands do not apply the same standards to the market in the Chinese mainland as they do internationally. Only 5 percent hold the view that all foreign brands serve Chinese customers to the same level as they do around the world.
Zhu said that scandals and defects in foreign brands in the past years have hurt Chinese customers’ confidence in them.
“Better-off Chinese consumers are now demanding quality goods with better services,” Zhu said.
By Huang Daohen
Business in the money-burning streaming-video market is war, and anyone who falls behind is muscled out.
The key to winning used to be rather simple: find good content that you don’t have to pay for.
This line of thinking may be behind the recent copyright feud between video giants Youku and Tudou: the country’s two top online video providers are accusing each other of copyright infringement due to the distribution of unauthorized videos.
Experts believe increasing accusations will translate into a sharp increase in the content costs. For young Internet users, this could mean an end to the free availability of their favorite TV series.
Youku-Tudou fight
Xiao Xiao, a 23-year-old office worker in Beijing, is a big fan of Kangxi is Coming, a popular Taiwanese entertainment show.
She watches a new episode every night when she gets home from work.
“It’s funny and relaxing to watch the host bantering with the guest stars,” Xiao said. “They tell personal stories and make fun of each other. It’s very different from the usual serious shows aired on the mainland.”
But recently she’s been concerned about the copyright brawl between Youku and Tudou, the nation’s two largest operators of online video sites. Tudou said Youku is illegally broadcasting Kangxi, and that it had obtained the exclusive right to broadcast the show on the mainland from Taiwan’s CTI Television.
Tudou, together with CTI TV, is preparing a lawsuit against Youku that would demand 150 million yuan ($23.6 million) as compensation for the copyright infringement.
The lawsuit could force Youku to drop the show.
And for Xiao, a VIP member of Youku, she would have to turn to Tudou for Kangxi, giving up the years’ collection of TV shows stored in her Youku account.
Youku seems prepared to contest the accusation. As of Wednesday, Xiao was still able to find new episodes of Kangxi on the site. The firm still attached its banner ads and short commercial clips to each episode.
“I felt shocked at first, then became worried. Since no big change occurred yet, now I feel confused,” Xiao said.
Following Tudou’s accusations, Youku announced this week it will sue Tudou for pirating its own copyrighted content.
Tudou has violated Youku’s broadcast rights to more than 60 TV serials, said Jean Shao, Youku’s spokeswoman.
But Yu Bin, vice president of finance at Tudou, said at a recent press conference that Tudou “completely denies” the infringement claims.
Shao said that Tudou’s claims were “unfair and misleading.”
All about business
This is certainly not the first time that copyright disputes have occurred in the country’s online-video industry.
In recent years, entertainment websites and video streaming sites have been the subject of many lawsuits.
But to Steven Kang, an industrial analyst at Oriental Securities in Beijing, the Tudou-Youku fight is less about copyright enforcement than it is about business rivalry.
“It’s not because these firms suddenly found a new appreciation for intellectual property rights. As listed enterprises in the US, they have to compete with each other by licensing quality content to win viewers,” Kang said.
Shanghai-based Tudou made its initial public offering (IPO) on the Nasdaq this August, raising about $174 million. The IPO by Beijing-based Youku raised $233 million last December.
But online video is a money-burning business due to the high costs of bandwidth and content acquisition. Tudou reportedly paid about 10 million yuan for one year of Kangxi.
Neither Tudou nor Youku has turned a profit in the last three years, according to Bloomberg News.
The country’s two leading online-video sites started out with business models similar to YouTube, which hosts a large amount of user-generated content. Tudou said as many as 50,000 video clips are uploaded to the site every day, and it has about 40 million users.
But Kang said the problem is that many users uploaded unauthorized video content, including US TV shows.
TV series like Lost, The Big Bang Theory and The Vampire Diaries are wildly popular among young Chinese. Kang said those TV shows were usually recorded by overseas Chinese who sent them back to the mainland using BitTorrent or other video-sharing websites.
The process has even become a profitable business, as some went further by translating the script and creating subtitles, Kang said.
But both Tudou and Youku realized that widespread copyright infringement and public listing overseas were not a good mix.
“It is time to clean up the content,” Kang said.
Content is the key
Tudou said it would continue to focus on improving its video content and promises no less than 100 million yuan to be spent on acquiring new copyrighted content each year.
Youku also teamed up with some popular content owners and started to create its own original videos.
Kang, however, said Sohu, the country’s major news portal, leads the pack for copyrighted video content. Sohu Video has become the largest online video site offering legally licensed content.
“Obviously, the Internet giant Sohu has much more money for buying copyrights,” Kang said.
Kang said the battle is just beginning. “When other portals such as Sina, Tencent and Baidu join the war, the battlefield will become even more intense,” he said.
The country has about 394 million online video users, and this number is expected to hit 445 million next year, according to a Nielsen report.
Online advertising spending will grow between 30 to 40 percent year on year in 2010 as brand-name multinationals such as KFC, Nike and Coca-Cola are already advertising on video websites, the report said.
Kang said 2012 will be not be quiet for the country’s streaming video market as independents, portals and state-run TV stations pour into the industry.
“Though there is no way the battle will be won simply by providing the best copyrighted content,” he said.
Kang forecast a sharp increase in the cost of content purchased by online-video firms.
“In the long term, this means the free lunch of streaming video may be at an end,” Kang said.
By Huang Daohen
Business in the money-burning streaming-video market is war, and anyone who falls behind is muscled out.
The key to winning used to be rather simple: find good content that you don’t have to pay for.
This line of thinking may be behind the recent copyright feud between video giants Youku and Tudou: the country’s two top online video providers are accusing each other of copyright infringement due to the distribution of unauthorized videos.
Experts believe increasing accusations will translate into a sharp increase in the content costs. For young Internet users, this could mean an end to the free availability of their favorite TV series.
Youku, Tudou and Sohu are the top three providers of streaming videos and advertisements. CFP Photos
Youku-Tudou fight
Xiao Xiao, a 23-year-old office worker in Beijing, is a big fan of Kangxi is Coming, a popular Taiwanese entertainment show.
She watches a new episode every night when she gets home from work.
“It’s funny and relaxing to watch the host bantering with the guest stars,” Xiao said. “They tell personal stories and make fun of each other. It’s very different from the usual serious shows aired on the mainland.”
But recently she’s been concerned about the copyright brawl between Youku and Tudou, the nation’s two largest operators of online video sites. Tudou said Youku is illegally broadcasting Kangxi, and that it had obtained the exclusive right to broadcast the show on the mainland from Taiwan’s CTI Television.
Tudou, together with CTI TV, is preparing a lawsuit against Youku that would demand 150 million yuan ($23.6 million) as compensation for the copyright infringement.
The lawsuit could force Youku to drop the show.
And for Xiao, a VIP member of Youku, she would have to turn to Tudou for Kangxi, giving up the years’ collection of TV shows stored in her Youku account.
Youku seems prepared to contest the accusation. As of Wednesday, Xiao was still able to find new episodes of Kangxi on the site. The firm still attached its banner ads and short commercial clips to each episode.
“I felt shocked at first, then became worried. Since no big change occurred yet, now I feel confused,” Xiao said.
Following Tudou’s accusations, Youku announced this week it will sue Tudou for pirating its own copyrighted content.
Tudou has violated Youku’s broadcast rights to more than 60 TV serials, said Jean Shao, Youku’s spokeswoman.
But Yu Bin, vice president of finance at Tudou, said at a recent press conference that Tudou “completely denies” the infringement claims.
Shao said that Tudou’s claims were “unfair and misleading.”
By Huang Daohen
Apple’s upcoming iPad3 may have to find a new name before it can be sold on the Chinese mainland market, based on a recent court ruling.
Last Tuesday, Shenzhen Municipal Intermediate Court rejected a long-ongoing lawsuit by Apple, which has attempted to arrest ownership of the iPad trademark in China.
The trademark currently belongs to Proview Technology Shenzhen, a struggling subsidiary of Hong Kong-headquartered Proview.
In 2000, the company registered a trademark for the term “iPad” in several countries, including the European Union, Mexico, South Korea, Singapore, Indonesia, Thailand, Vietnam and China.
Apple encountered the trademark problems when preparing for its launch of the initial iPad tablet in 2006. At the time, it attempted to purchase the global trademark for iPad from Proview Electronics (Taiwan) for $55,100.
However, Proview Technology Shenzhen said that deal didn’t include the mainland trademark.
Shelly Wen, a researcher at Renmin University of China, said the wording of the 2006 deal is the heart of the issue.
The court found that because Proview’s Taiwan subsidiary wasn’t the actual unit to register the trademark, its contract is invalid, Wen said. Apple’s only other way to acquire the iPad trademark in China would be to appeal for trademark cancellation.
“But that also looks hopeless, unless they can provide sufficient evidence that Proview knew about the iPad at the time it registered the mark (in 2000),” she said.
Market analysts said Apple will have to be prepared to pay through the nose for continued use of the mark as the company prepares to open more stores.
Proview Shenzhen is seeking 10 billion yuan ($1.5 billion) in damages for use of the mark to date.
Wen called the trademark dispute a rookie error. “If foreign investors want to purchase the rights to Chinese trademarks, there are basic steps they need to take,” he said.
The first one, and possibly most obvious, is to make sure the entity selling the rights to a trademark is actually the owner of the mark. This can be confusing with companies such as Proview International, which has many subsidiaries.
The buyer should also ensure that the trademark and the transfer of its related certificates is listed in the agreement, Wen said.
“Apple should never have signed that 2006 agreement since it didn’t include the transfer of any of the necessary documents.”
By Huang Daohen
Apple’s upcoming iPad3 may have to find a new name before it can be sold on the Chinese mainland market, based on a recent court ruling.
Last Tuesday, Shenzhen Municipal Intermediate Court rejected a long-ongoing lawsuit by Apple, which has attempted to arrest ownership of the iPad trademark in China.
The trademark currently belongs to Proview Technology Shenzhen, a struggling subsidiary of Hong Kong-headquartered Proview.
In 2000, the company registered a trademark for the term “iPad” in several countries, including the European Union, Mexico, South Korea, Singapore, Indonesia, Thailand, Vietnam and China.
Apple encountered the trademark problems when preparing for its launch of the initial iPad tablet in 2006. At the time, it attempted to purchase the global trademark for iPad from Proview Electronics (Taiwan) for $55,100.
However, Proview Technology Shenzhen said that deal didn’t include the mainland trademark.
Shelly Wen, a researcher at Renmin University of China, said the wording of the 2006 deal is the heart of the issue.
The court found that because Proview’s Taiwan subsidiary wasn’t the actual unit to register the trademark, its contract is invalid, Wen said. Apple’s only other way to acquire the iPad trademark in China would be to appeal for trademark cancellation.
“But that also looks hopeless, unless they can provide sufficient evidence that Proview knew about the iPad at the time it registered the mark (in 2000),” she said.
Market analysts said Apple will have to be prepared to pay through the nose for continued use of the mark as the company prepares to open more stores.
Proview Shenzhen is seeking 10 billion yuan ($1.5 billion) in damages for use of the mark to date.
Wen called the trademark dispute a rookie error. “If foreign investors want to purchase the rights to Chinese trademarks, there are basic steps they need to take,” he said.
The first one, and possibly most obvious, is to make sure the entity selling the rights to a trademark is actually the owner of the mark. This can be confusing with companies such as Proview International, which has many subsidiaries.
The buyer should also ensure that the trademark and the transfer of its related certificates is listed in the agreement, Wen said.
“Apple should never have signed that 2006 agreement since it didn’t include the transfer of any of the necessary documents.”
By Huang Daohen
Advice kills: just ask Focus Media.
The Shanghai-based advertising firm saw its shares shed half their value after the US research firm Muddy Waters advised investors to sell.
Muddy Waters’ advice was capitalism at its finest. By shorting US-listed Chinese companies, the firm is raking in big money.
Trapped
Ancient Chinese wisdom claims that muddy and turbid water makes for better fishing.
Centuries later, no one understands this better than Carson Block. However, the American investment adviser isn’t catching fish – he’s catching ailing Chinese firms.
On his company’s official site, Block, 34, founder of Muddy Waters, said he has a knack for recognizing a Chinese company’s true worth that may be hidden behind botched books and shady domestic mergers.
The Hong Kong-registered firm, which has a branch in Shanghai with no fixed office or workers, has destroyed the stock market value of numerous Chinese companies listed overseas. It publishes extensive research reports on Chinese firms, often advising investors to dump and run.
Those reports are making it big money.
The New York-listed Focus Media was Muddy Waters’ most recent target.
In a report published November 29, the firm declared that Focus Media had lied about the reach of its LCD advertising devices and accused the firm of insider trading and inflated acquisition deals.
Shares of the Chinese advertiser tumbled 66 percent on the Nasdaq, closing at $15.43 (98.09 yuan) a share – a one-day drop of 39 percent.
The plunge wiped out $1.3 billion in value, sending the company’s share prices to their lowest in 52 weeks, Xinhua reported.
Jason Jiang, Focus Media’s founder, said on his microblog that the company is in good shape and that it would pursue legal action.
Credit crisis
Focus Media was not Block’s first victim.
In June 2010, Block released his first investment research report after registering Muddy Waters as a firm.
The report, targeting Nasdaq-listed Oriental Paper, urged investors to sell their stock in the Hebei-based company. Block said he had visited the company’s factory and that its intent to go public in the US was hooey.
The paper maker has been struggling ever since. Oriental Paper closed at $8.33 that day before the report came out, and fell 13.2 percent to $7.23 the next day.
As of Wednesday, its value had fallen to $3.67.
Emboldened by its triumph, Muddy Waters decided to seek out more Chinese firms whose affairs it considered “murky” – especially those listed in the US.
It later released reports on Douyuan Global Water, Yurun Foods and Sino-Forest.
The June report about Sino-Forest made Muddy Waters famous, as many big institutional investors on Wall Street had put their money in the environmental protection firm.
Muddy Waters said the Canada-listed Sino-Forest used fraudulent accounting to overstate the value of its assets. The accusation caused an 80 percent drop in the company’s share price.
Others foreign research firms also joined in. In November, Citron Research released two reports accusing Chinese Internet company Qihoo 360 of accounting fraud.
Listed Chinese companies are now facing a credibility crisis overseas after an increasing number of similar reports, said Jason Chen, an analyst with Galaxy Securities in Beijing.
Forty-six Chinese companies have been suspended or delisted in the US market this year.
Mandarin advantage
But with so many prestigious investment researchers like Goldman Sachs and Morgan Stanley watching over Chinese companies, how has the tiny Muddy Waters managed to cause so much trouble?
Block attributed his advantage to a Bloomberg interview. He said knowing China was the biggest advantage in his research assessments.
Block came to Shanghai in 2005 and studied Chinese at a local university. He worked at a US law firm in Shanghai before starting a private storage house in 2007.
The work experience in Shanghai helped him learn how to gauge the secrets of business in China, Block said.
Still, there are plenty of foreign entrepreneurs in China with Chinese analysts and Harvard MBA degrees.
Galaxy’s Chen said Block’s father is the missing piece to the puzzle. Block’s father is a PR magnate in Los Angeles with close ties with short sellers and who is interested in Chinese companies.
Among the companies Bill was looking at was Orient Paper.
“He needed someone to investigate the paper firm, so his son took the task to go inspect Orient Paper’s factory in Baoding,” Chen said.
When Carson Block saw abandoned gates and a row of dilapidated storage rooms and dormitories when he arrived at the site, he suggested to his father that they should short the company.
Investors who sold the shares of the paper firm were quoted later as saying that they were told Muddy Waters had very strong connections on the Chinese mainland, including domestic auditors, financial professionals and local officials.
“After you convince a few investors, it becomes easy,” Chen said. The hedge funds short stocks after receiving the doomsday reports and help drag down the price as much as possible.
Business culture
What research firms like Muddy Waters are doing – compiling reports for profit – is not illegal. Though it may be unethical.
“But everyone is playing ball, and that’s how the game of the current capital market works,” Chen said.
In 2009, the US Securities and Exchange Commission passed a rule that allows financial firms to sell stocks directly to investors interested in shorted stocks, which has opened up huge opportunities for short-sellers.
Chen said US investors know less about private business in China, and Chinese enterprises have little understanding of how the US capital markets work. Stocks, therefore, are easily manipulated by media reports.
“The regulatory loopholes in the financial market allow weak and even fake information to bring down a stock,” Chen said.
The better way to secure an investment overseas is to understand the different business culture and how people think, he said.
Chen said private firms, like their US counterparts, exist to provide value to shareholders. However, most are family businesses designed to serve a few top interests and are very hierarchical.
State-owned enterprises, for their part, take a passive attitude toward expansion, viewing themselves as the country’s strategic tools, Chen said.
For foreign investors who want to buy Chinese concept stocks, Chen said they need to focus on whether the companies are creating valued products – something rarely reflected by short reports.
By Huang Daohen
Advice kills: just ask Focus Media.
The Shanghai-based advertising firm saw its shares shed half their value after the US research firm Muddy Waters advised investors to sell.
Muddy Waters’ advice was capitalism at its finest. By shorting US-listed Chinese companies, the firm is raking in big money.
The Muddy Water's report wiped out Focus Media's $1.3 billion in market value. CFP Photo
Trapped
Ancient Chinese wisdom claims that muddy and turbid water makes for better fishing.
Centuries later, no one understands this better than Carson Block. However, the American investment adviser isn’t catching fish – he’s catching ailing Chinese firms.
On his company’s official site, Block, 34, founder of Muddy Waters, said he has a knack for recognizing a Chinese company’s true worth that may be hidden behind botched books and shady domestic mergers.
The Hong Kong-registered firm, which has a branch in Shanghai with no fixed office or workers, has destroyed the stock market value of numerous Chinese companies listed overseas. It publishes extensive research reports on Chinese firms, often advising investors to dump and run.
Those reports are making it big money.
The New York-listed Focus Media was Muddy Waters’ most recent target.
In a report published November 29, the firm declared that Focus Media had lied about the reach of its LCD advertising devices and accused the firm of insider trading and inflated acquisition deals.
Shares of the Chinese advertiser tumbled 66 percent on the Nasdaq, closing at $15.43 (98.09 yuan) a share – a one-day drop of 39 percent.
The plunge wiped out $1.3 billion in value, sending the company’s share prices to their lowest in 52 weeks, Xinhua reported.
Jason Jiang, Focus Media’s founder, said on his microblog that the company is in good shape and that it would pursue legal action.
By Huang Daohen
In a rare move to give the sluggish economy a boost, the People’s Bank of China announced last Wednesday it has cut the required reserve ratio (RRR) by 50 points, or half a percent, to 21 percent, for the first time in 35 months.
The cut, which took effect Monday, came apparently earlier than expected. Analysts said it may be a sign that the central government hopes to replenish economic growth after easing the country’s inflationary pressures.
Statistics from the National Bureau of Statistics show that in the third quarter of this year, the nation’s GDP growth slowed to a two-year low of 9.1 percent, a drop from 9.5 percent in the second quarter and 9.7 percent in the first quarter.
Zhao Xiao, economics professor at University of Science and Technology Beijing, called the cut a timely move.
“It is in line with market expectations as funds are strained at end of the year,” he said.
The latest cut is expected to release about 396 billion yuan ($62.38 billion) into the banking system, Xinhua reported.
Zhao said the increased liquidity would spur medium and small banks to lend funds to small businesses.
But Zhao said real estate developers who are experiencing hard times should not count on the cuts to ease their funding shortages.
The RRR cut is not strong enough to combat the current decline in real estate prices, Zhao said. “Major banks are still unwilling to lend to property developers until a comprehensive relaxation on monetary policy comes.”
But will the cut end the bearish stock market?
At the news of the RRR cut, the Shanghai Composite rose 3.5 percent and Hong Kong’s Hang Seng increased 5.8 percent.
The bullish rally, however, depends on whether the central bank’s cut is a one-off measure, Zhao said. “We still need to see more conviction about the easing monetary policy,” he said.
“The government needs to make sure that liquidity is reaching the right places,” he said.
By Huang Daohen
In a rare move to give the sluggish economy a boost, the People’s Bank of China announced last Wednesday it has cut the required reserve ratio (RRR) by 50 points, or half a percent, to 21 percent, for the first time in 35 months.
The cut, which took effect Monday, came apparently earlier than expected. Analysts said it may be a sign that the central government hopes to replenish economic growth after easing the country’s inflationary pressures.
Statistics from the National Bureau of Statistics show that in the third quarter of this year, the nation’s GDP growth slowed to a two-year low of 9.1 percent, a drop from 9.5 percent in the second quarter and 9.7 percent in the first quarter.
Zhao Xiao, economics professor at University of Science and Technology Beijing, called the cut a timely move.
“It is in line with market expectations as funds are strained at end of the year,” he said.
The latest cut is expected to release about 396 billion yuan ($62.38 billion) into the banking system, Xinhua reported.
Zhao said the increased liquidity would spur medium and small banks to lend funds to small businesses.
But Zhao said real estate developers who are experiencing hard times should not count on the cuts to ease their funding shortages.
The RRR cut is not strong enough to combat the current decline in real estate prices, Zhao said. “Major banks are still unwilling to lend to property developers until a comprehensive relaxation on monetary policy comes.”
But will the cut end the bearish stock market?
At the news of the RRR cut, the Shanghai Composite rose 3.5 percent and Hong Kong’s Hang Seng increased 5.8 percent.
The bullish rally, however, depends on whether the central bank’s cut is a one-off measure, Zhao said. “We still need to see more conviction about the easing monetary policy,” he said.
“The government needs to make sure that liquidity is reaching the right places,” he said.
By Huang Daohen
Accounting doesn’t have to be about endless calculation and stodgy figures. As the demand for CPAs (certified public accounts) runs high, the industry is trying to make the profession attractive to new recruits.
The Hong Kong Institute of CPA (HK CPA) recently hosted a Qualification Program (QP) case analysis competition at the Westin Hotel in Beijing, giving up-and-coming students some hands -on experience.
As many as 312 universities from across the country applied to send teams to the event, which was launched in Hong Kong in 2002. After months of competition, eight teams were selected. Students were asked to investigate and analyze a specific business case for a corporation.
The winner last Sunday was Peking University. Central University of Finance came in second, and North China Electric Power University and Shenzhen University tied for third place.
This was the third QP competition sponsored on the Chinese mainland by the HK ICPA.
Susanna Chiu, a council member of HK ICPA and head of the judging panel, called the event the Oscars of accounting. By participating in the competition, students developed business skills and professional judgment, she said.
“It was a chance to prepare for their future careers,” Chiu said.
The demand for talented accountants has exploded on the mainland as massive foreign direct investment (FDI) pours in and domestic companies rush out.
But poor training and different accounting and auditing standards have left a shortage of qualified CPAs, Chiu said.
That has led to a market dominated by the Big Four: KPMG, PricewaterhouseCoopers, Ernest & Young and Deloitte & Touche.
Chiu said HK ICPA has worked out multiple training plans with mainland authorities.
In 2006, the HK ICPA announced it opened an office in Beijing, its first on the mainland, and signed an agreement to cooperate with the Chinese Institute of CPA to help 1,500 mainland accountants obtain Hong Kong qualifications by 2016.
Hou Jiayi, from the Peking University team, said the competition was a good opportunity for students like him to get real world experience.
He said one only gains technical knowledge from books and that what’s needed is training in how to apply that knowledge.
By Huang Daohen
Accounting doesn’t have to be about endless calculation and stodgy figures. As the demand for CPAs (certified public accounts) runs high, the industry is trying to make the profession attractive to new recruits.
The Hong Kong Institute of CPA (HK CPA) recently hosted a Qualification Program (QP) case analysis competition at the Westin Hotel in Beijing, giving up-and-coming students some hands -on experience.
As many as 312 universities from across the country applied to send teams to the event, which was launched in Hong Kong in 2002. After months of competition, eight teams were selected. Students were asked to investigate and analyze a specific business case for a corporation.
The winner last Sunday was Peking University. Central University of Finance came in second, and North China Electric Power University and Shenzhen University tied for third place.
This was the third QP competition sponsored on the Chinese mainland by the HK ICPA.
Susanna Chiu, a council member of HK ICPA and head of the judging panel, called the event the Oscars of accounting. By participating in the competition, students developed business skills and professional judgment, she said.
“It was a chance to prepare for their future careers,” Chiu said.
The demand for talented accountants has exploded on the mainland as massive foreign direct investment (FDI) pours in and domestic companies rush out.
But poor training and different accounting and auditing standards have left a shortage of qualified CPAs, Chiu said.
That has led to a market dominated by the Big Four: KPMG, PricewaterhouseCoopers, Ernest & Young and Deloitte & Touche.
Chiu said HK ICPA has worked out multiple training plans with mainland authorities.
In 2006, the HK ICPA announced it opened an office in Beijing, its first on the mainland, and signed an agreement to cooperate with the Chinese Institute of CPA to help 1,500 mainland accountants obtain Hong Kong qualifications by 2016.
Hou Jiayi, from the Peking University team, said the competition was a good opportunity for students like him to get real world experience.
He said one only gains technical knowledge from books and that what’s needed is training in how to apply that knowledge.
By Huang Daohen
Many foreign investors were worried when the central government passed its first Anti-Monopoly Law in late 2007. At the time, it seemed like a club to beat back the success of private firms.
Today that law is being used to break up a state-owned enterprise.
The country’s top economic planner said it is investigating telecom giants China Unicom and China Telecom for a potential antitrust violation. The unusual move may be a sign that the government plans to open up industries that have long been dominated by such state-owned firms.
Internet annoyance
Getting online can be easy in the capital.
Hop into a Starbucks and grab a 25-yuan drink for an afternoon of free Wi-Fi. If that doesn’t work, the neighborhood Internet cafe sells access for 3 to 5 yuan per hour.
But if you are planning to stay a little bit longer and want to get broadband Internet in your home, you might be incredibly disappointed with the results.
Mickey Chen was.
Chen, a 26-year-old PR consultant, moved into her new apartment in September. Like most young people, the first thing on her list after moving in was to get Internet access.
She called up Broad Netcom, one of the city’s major Internet service providers, and chose a 4Mbps package that cost 1,880 yuan annually.
The company later sent a man on bike, and within one or two hours, the broadband connection was installed. “The speed of the Internet was very good the first couple weeks. Chinese sites load quickly, though the access to foreign websites was problematic,” Chen said.
Chen’s enthusiasm for broadband was quickly dampened when she realized the high speed came only in the daytime. From 8 to 11 pm, her data rate crashed to around 10 kilobits per second.
“It takes almost five minutes to load one webpage,” Chen said. Worse still, the connection often failed.
Chen wasn’t the only user to complain about expensive and unstable Internet service.
Many Internet providers throw around big numbers like 8Mbps and 10Mbps, but they fail to provide the practical infrastructure needed to support the connections they are selling, said a staff member surnamed Wang at the Shifoying outlet of the Great Wall Broadband Network, another Internet provider.
Wang said the company also received a huge number of telephone complaints.
“Operators are only interested in signing more contracts with clients, but are unable to offer satisfying service,” he said.
Antitrust probe
Market analysts say bad Internet access can be blamed on a state monopoly.
The country’s top economic planning body, the National Development and Reform Commission (NDRC), agreed.
Last week, the commission said it has launched an antitrust investigation into the Internet services of China Telecom and China Unicom.
China Central Television first reported the investigation. On November 11, two newspapers operating under Industry and Information Technology Ministry published follow-ups on the news.
The CCTV report said the investigation started in May after many enterprises and Web users complained about the two companies. With their market dominance, the two companies were blocking other corporations from entering the broadband market, an enterprise said.
Last year, China Telecom and China Unicom controlled 85 percent of the nation’s Internet use.
Li Qing, deputy director of the NDRC and leader of the investigation, told Xinhua that the probe has found that the two have taken advantage of their dominance by charging high prices to market rivals while offering discounts to those who do not threaten their businesses.
Li called that price discrimination, an illegal practice.
If found guilty, the two companies may face fines of between 1 and 10 percent of their gross revenue, Xinhua reported.
Last year, China Telecom’s revenue from the Internet access business was 50 billion yuan, while China Unicom’s was close to 30 billion yuan.
China Unicom said in a statement last week that it is cooperating with the investigation and the company has always provided broadband services strictly “in accordance with the relevant laws and regulations.”
As of press time, China Telecom could not be reached for comment.
Opening the market
Market analysts say the investigation is rare and unusual.
It marks the first time that a state-owned enterprise has been invested for suspected violation of the country’s Anti-monopoly Law, said Wu Yong, an expert in the telecom field and a lawyer at a Beijing law office.
It is also the first probe launched by the NDRC, Wu said. He believes it is a sign the country will pursue more antitrust probes as it opens state-controlled industries.
Wu said there has long been discussions over whether the country’s oversized state monopolies threaten its economy.
Last year, among the Global 500 enterprises filed by Fortune Magazine, 21 companies from the Chinese mainland were listed. All were hulking state-owned enterprises, dominating the fields of finance, construction and telecommunications.
That’s not something to be proud about, Wu said.
Instead it exposed serious problems in the country’s economy structure.
State control can mean stability, but it prevents free competition. In the case of telecoms, more operators would naturally result in fewer complaints and faster Internet speeds, he said.
But the opening up of monopolized industries is a sure thing. Premier Wen Jiabao said in his government work report that the country will accelerate the reform of these areas.
“We will create a market environment that ensures fair competition among economic entities under diverse forms of ownership, and that facilitates stronger growth of the non-public sector,” Wen said.
The government pledged to loosen its grip and invite private companies to compete, he said.
And that is what Wu expects to see.
“The private firms are more comparable with their counterparts in Europe and the US. Only when those companies are among the Fortune 500 will China have something to feel proud about,” he said.
By Huang Daohen
Many foreign investors were worried when the central government passed its first Anti-Monopoly Law in late 2007. At the time, it seemed like a club to beat back the success of private firms.
Today that law is being used to break up a state-owned enterprise.
The country’s top economic planner said it is investigating telecom giants China Unicom and China Telecom for a potential antitrust violation. The unusual move may be a sign that the government plans to open up industries that have long been dominated by such state-owned firms.
Two of the largest mobile operators are being investigated on suspicion of violating antitrust laws in their Internet business. CFP Photo
Internet annoyance
Getting online can be easy in the capital.
Hop into a Starbucks and grab a 25-yuan drink for an afternoon of free Wi-Fi. If that doesn’t work, the neighborhood Internet cafe sells access for 3 to 5 yuan per hour.
But if you are planning to stay a little bit longer and want to get broadband Internet in your home, you might be incredibly disappointed with the results.
Mickey Chen was.
Chen, a 26-year-old PR consultant, moved into her new apartment in September. Like most young people, the first thing on her list after moving in was to get Internet access.
She called up Broad Netcom, one of the city’s major Internet service providers, and chose a 4Mbps package that cost 1,880 yuan annually.
The company later sent a man on bike, and within one or two hours, the broadband connection was installed. “The speed of the Internet was very good the first couple weeks. Chinese sites load quickly, though the access to foreign websites was problematic,” Chen said.
Chen’s enthusiasm for broadband was quickly dampened when she realized the high speed came only in the daytime. From 8 to 11 pm, her data rate crashed to around 10 kilobits per second.
“It takes almost five minutes to load one webpage,” Chen said. Worse still, the connection often failed.
Chen wasn’t the only user to complain about expensive and unstable Internet service.
Many Internet providers throw around big numbers like 8Mbps and 10Mbps, but they fail to provide the practical infrastructure needed to support the connections they are selling, said a staff member surnamed Wang at the Shifoying outlet of the Great Wall Broadband Network, another Internet provider.
Wang said the company also received a huge number of telephone complaints.
“Operators are only interested in signing more contracts with clients, but are unable to offer satisfying service,” he said.
