This week’s news update, from our ChinaBlogTweets Twitter feed, continues with some familiar themes…

...But we are experimenting with a different format – in order to expand on the issues, and improve the key-word searchability of the blog, we are using this post as a summary of our top 10 news items, and will include separate posts on selected issues, along with additional links and our own comments. Let us know how you like it.

Some more posts may follow, if time allows…

FDI 9Foreign Direct Investment) is so yesterday…today is all about Chinese ODI (Overseas Direct Investment).

• ODI US$60bn in 2010? RT @China_Daily: Overseas direct investment may soar http://tinyurl.com/yklgb26 7:32 AM Feb 27th

China Daily suggests rapid growth in 2010:

“There is little doubt that the nation’s ODI in 2010 will climb up to $60 billion,” said [Liu Zuozhang, director general of the Investment Promotion Agency of MOFCOM] adding the year-on-year growth could range from 15 to 39 percent.

During the first half of 2009, China’s ODI slumped nearly 52 percent as the world economy was still in limbo and domestic enterprises shied away from investment. However, things started to change in the third quarter of last year after ODI rebounded nearly 190 percent year-on-year to $20.5 billion.”

There are many reasons for China’s increased ODI activity, but one of the key ones has been access to strategic resources:

• The why of ODI? RT @chinahearsay: Is China trying to “lock up” the world’s natural resources? http://goo.gl/tMkt 7:10 AM Feb 27th

Of course, natural resources are not the only drivers. While they do form the base, China has invested in a variety of sectors and markets, as shown by this map of China’s ODI, and a case study of China’s investments in Italy:

• ODI mapped RT @tomredtape: No surprises: Australia is China biggest outbound investment… http://tinyurl.com/yhgkwg7 tks @shanghaiist 6:17 AM Feb 26th

• ODI analysis RT @andrewbatson: ‘Marco Polo Effect’: Chatham House paper on Chinese investment in Italy http://tr.im/Qcoq 7:52 AM Mar 1st

The Italy example (like in the wider EU) shows that:

• Chinese ODI starts “...with small-scale operations in trade-related activities” evolves into “acquisition of tangible and intangible resources deemed necessary to increase the Chinese presence in international markets and, more generally, to upgrade its technological and production capacities”

• “Chinese investments in Italy are increasingly targeting the acquisition of design and brands in key Italian sectors of specialization, and technological capabilities in sectors such as metalworking.”

• “Chinese multinational enterprises also are investing in Italy to get access to local competitive advantages in sectors such as automotive and home appliances. This location choice is clearly linked to the intention to tap local competences available at the cluster level.”

Much of the recent ODI news has been around the proposed purchase of Hummer by the Sichuan-based company Tengzhong. As most will have noted by now that plan failed. However, some saw that failure coming from the start, as the plan did not fit with China’s ODI strategy (selected state auto firms first, please), or its newfound commitment to sustainability (gas-guzzling Hummers? No thank you!).

• M&A & Policy: Simple. It was “not in line with the government’s intention” RT @China_Daily: Analysts: Hummer deal fated to fail http://tinyurl.com/ybk7uau 8:04 AM Mar 1st

• With excellent @DanHarris quote too, of course! RT @DanHarris: Excellent Forbes article on the failed Hummer sale: http://is.gd/9fTdV 6:14 PM Feb 26th

• M&A meddling RT @westlawchina: Beijing plays potent dealmaker, blocker in China M&A http://bit.ly/ashU5h #M&A 6:05 PM Feb 26th

RT @GE_Anderson: New China auto policy expected in 2010. Will emphasize consolidation and overseas investment. http://is.gd/8U550 8:09 AM Feb 22nd

For ODI, or M&A, ignore Chinese government policy at your peril! And expect to see more (of the “right” sort of) activity.

We have often written about the (over) abundance of (questionable and re-stated) data in China, and this continues to be an issue. One that seems to be causing the National Bureau of Statistics (NBS) some stress.

First the powerful National Development & Reform Commission seeks to take away the responsibility for GDP calculations. Then the China Daily has a go at them for releasing some questionable and confusing data on house prices.

• Statistics…: Data accuracy RT @China_Daily: China mulls unified GDP calculation: NDRC http://tinyurl.com/yc2mmb7 8:32 AM Feb 28th

• NBS-bashing- China Daily is on a mission this week! RT @China_Daily: Confusing statistics http://tinyurl.com/ya4xdqn 7:16 AM Feb 27th

We will have to wait and see what impact all this has on NBS and on economic data. But, hopefully, it will get better…just don’t count on it (and continue to monitor, seek out multiple sources, and get informed analysis of what it all means in context).

Oh dear…it is not the first time Apple has been bruised by accusations of poor controls over its China contractors, and it seems unlikely it will be the last.

• RT @fonstuinstra: China: Apple admits using child labour to build iPods and iPhones in Chinese factories | Mail Online http://ow.ly/1bZDi 11:43 PM Feb 27th

CSR has become a big issue in China, not least as it touches on political issues such as the “harmonious society”, the environment, increasing unionization, labour law, and anti-corruption campaigns. Of course big foreign investors, like the proverbial tall tree, attract the wind (or, in this case, media storm).

While Apple battles its demons, other firms are taking note, and promoting their own CSR plans. Among them is Wal-Mart (China’s 7th largest trading partner - if it was a nation!). But a policy alone is not enough, especially for a high-profile company. Some have questioned teh firm’s sincerity:

• CSR: Another bad Apple? RT @niubi: How Sincere is Wal-Mart’s Demand that Chinese Suppliers Meet Labor & Enviro Standards? http://bit.ly/a6Qe4Z 8:13 AM Feb 28th

Whatever the truth, it is clear that CSR is an issue in China, and that foreign firms are likely to attract attention. So, whether for pure – or purely practical reasons – it seems CSR will increasingly be on the agenda, along with the associated due diligence, factory audits, inspections, environmental impact analysis, and community engagement…

Need more information? Check out our list of China CSR Twitterers here, or come and talk to us.

Excuse the (stretched) Monty Python paraphrase, overcome your shock that there could be a shortage of people in a country of 1.3 billion, and remember that things are rarely simple in China.

While there is no shortage of people in China overall, there is a growing shortage (?) in some areas, such as the manufacturing hubs of the Pearl River Delta in south China. How could this be?

There are a number of reasons, including the mobility and preferences of the mobile (migrant) workers. The southern factories are suffering from rising costs and compliance, as well as a fall-off in exports last year and, for those reasons, many have closed. But there is also competition from inland cities that are seeing a construction and manufacturing boom. And those cities are closer to home for many migrants. Why drive all the way to Dongguan, when you can be near home in Hunan?

• Employment: Countryside competition RT @fonstuinstra: China: Labor shortages driving up wages – China.org.cn http://ow.ly/1bSDp 10:08 AM Feb 27th

• More on less labour RT @China_Daily: Zhejiang facing worst labor shortage in 7 yrs http://tinyurl.com/ykxlctq 10:11 AM Feb 27th

• Back to work? RT @MalcolmMoore: RT @mdh47: Southern China seeing labor shortage of 2 million, says paper http://j.mp/aVJ9Hv 8:02 AM Feb 22nd

• RT @PerrineB: Mystery of China’s Labor Shortage – China Real Time Report – WSJ http://bit.ly/bCSTpP Another dilemma of China’s development 6:20 AM Feb 26th

•RT @GE_Anderson: reason 10K guangdong factories closed? Not the fin crisis, but RMB appreciation and new employment law. @shaunrein 6:28 PM Feb 26th

Anecdotal evidence suggests that higher wages, bonuses for introducing new workers, more benefits and better conditions are all on offer.

Another week flies by – with the help of a post Chinese New Year surge – and it is already the end of February! So without further delay, here is our ChinaBlogTweets roundup of China business news from last week.

Comment: We have been reading (and writing) about China climbing the value chain, Chinese companies doing more R&D, China doing more to protect IP etc., for a long time. Now we are seeing more innovative Chinese companies (another of our favourites is Broad Air Conditioning, from Changsha). More to come.

Comment: Many global companies are seeking the holy grail of “the Chinese consumer”. Of course there are fantastic opportunities, but it is a bit more complicated http://www.chinabusinessservices.com/blog/?p=915 than is often expected – across regions, segments and demographics. Would love to have been at Berkeley to join in the debate.

Comment: Chinese companies are not only becoming more innovative, they are also looking further afield. Interestingly they make a lot of the same mistakes western firms made (and still do) when going into China. But they are quick learners, and can be very competitive (but also, in some cases, cooperative).

Comment: China, the US and the EU are all involved in trade disputes (and the odd protectionist thought). One suspects political as well as economic drivers. But let’s hope it does not run off the rails and end in another nasty crash…Read our protectionist post here.

Comment: Google’s sorry China saga continues, and the plot continues to thicken with the trail of the hackers getting hot. Data security / strategy review, anyone?

Comment: Dan Harris of China Law Blog has highlighted the importance of non-disclosure agreements (NDAs), and the importance of making them relevant and enforceable in China. We will write more on this later.

Comment: There is no doubt that China has a lot of laws, law firms and lawyers, but how about advances in the rule of law (versus the rule of the people interpreting it). The statistics tell one side of the story, the other side is still catching up and, like most things in China it is not a black-and-white situation. See the stats in our post, here.

Comment: So much China overtaking Japan as the world’s second largest economy…a late Japanese surge kept them just ahead. But not for long. More news on this will likely come very soon, and China will be number two. It is only a matter of time, as is suggested by the latest growth estimates for 2010 (@CDT China’s Growth May Top 11% Even as Officials Rein in Lending: From Bloomberg: China’s economy, the world’s third … http://bit.ly/9Bwwqx 5:05 AM Feb 15th).

And if that leaves you wanting more, check out our Twitter feed on the right of this page, or set up a feed to / follow us on ChinaBlogTweets.

We have not had a review of China’s legal eagles on this blog since October 2004!

Thanks to China Daily, we can now provide an overdue and updated snapshot of the legal sector in China.

China Law, By Numbers

• Lawyers: Over 166,000 (up from 110,000 in 2004)

• Law Firms: Over 15,000 (up from 10,000)

• Foreign Law Firms: 224 representatives offices, plus 65 offices from Hong Kong firms (up from 160)

• Lawsuits: Around 2 million

• Billings: RMB30.09 billion (US$4.54 billion)

There is no doubt that China has a lot of laws (and 2 million lawsuits a year), law firms (over 15,000) and lawyers (over 166,000, billing some RMB30.9 billion), but how about advances in the rule of law (versus the rule of the people interpreting it)? The statistics tell one side of the story, the other side is still catching up and, like most things in China it is not a black-and-white situation.

News Source: Xinhua h/t @leonacraig

China, the US and the EU are all involved in trade disputes (and the odd protectionist thought). One suspects political as well as economic drivers. But let’s hope it does not run off the rails and end in another nasty crash…

While they are nothing new (see here), protectionist tensions are never far below the surface in these days of economic crisis (or recovery), and recent news has been highlighting the problems in relation to China’s trade and currency and its major trading partners (and, interestingly, in relation to Germany’s position within Europe, but that is for coverage elsewhere…).

Insead Knowledge has analysis, from The Beijing Axis, which shows how trade complaints have been on the increase:

“Evidence of an increasing protectionist trend can also be found in the World Bank-sponsored Global Antidumping Database. In a report published in October, it reported that in Q3 2009, WTO-member governments had initiated 44 new product-level investigations for the imposition of import restrictions such as antidumping and global safeguards. The number for Q3 represented a 52.6 per cent increase compared to the same period a year earlier. The cumulative number of such new requests for protection throughout the first three quarters of 2009 rose 30.3 per cent compared to the same period in 2008, which in turn was 36.4 per cent higher than in 2007. While the targeting of imports from China in this regard is not a new phenomenon, industry demand for new import restrictions against China nonetheless increased by 22.7 per cent in 2008, and by an estimated 7.8 per cent in 2009.”

The latest developments for China revolve around an EU anti-dumping probe into paper, a US probe into drill pipe, and a problematic “Buy China” policy (see links below from our Twitter feed):

• Protectionism: RT @China_Daily: EU launches anti-dumping probe into Chinese coated fine paper http://tinyurl.com/yc336xs 10:16 AM Feb 20th

• And another… RT @China_Daily: US panel OKs trade probe against China drill pipe http://tinyurl.com/yj6evdy 11:13 AM Feb 20th

• Uncertainty & market access RT @ChinaBizWatch: ‘Buy China’ Policy Alarms Trade Partners http://bit.ly/aJ51Dv Forbes 8:18 AM Feb 17th

It is one thing to probe, and prove points, around specific trade issues, it is another to provoke a politically-motivated protectionist trade war. No doubt these pressures are felt on all sides. No doubt there are market access / dumping issues that need to be resolved. But, of course, China says it is the victim, and also – something we get reminded of all the time – that it would import lots of high-tech goods if current restrictions on exports were lifted.

In the context of Google’s China problems, associated accusations of Chinese hacking, the “state secrets” arrest of the “Rio Four”, and China’s regulatory blocking of Hummer’s purchase by Tengzhong (something that China knows all about from its US / Unocal experience), the air around trade talks is far from clear, and some companies are getting nervous.

Hopefully rational solutions will prevail and, at a time when China is expanding trade links with partners in Asia, the fall-out will not result in a wider, negative impact on US and EU trade with China.

We may see the results of all this soon, as the Insead piece notes, “Because it takes 12 months to prepare a case alleging dumping, China is due for a protectionist backlash in 2010”. Luckily the EU approach seems pretty pragmatic:

“Serge Abou, the Ambassador for the EU Delegation of the European Commission to China, reassured his Chinese audience that trade conflicts are only normal. He compared them to stones on a road. When you walk on a road, he said, the thing you care about should be the destination, not the stones on it.”

Let’s hope that China, the EU and US manage, as the Chinese say, to “cross the river by touching the stones”. And that all those officials do their duty to protect trade. Better than throwing around more of those damaging protectionsit duties…

Comment: And, while on the subject of IP, it is worth mentioning that protection of it is largely driven by local needs, not foreign pressure. Just look at the growth in Chinese patent applications…IP. Up. RT @GCBRANDS: RT @Holaba Chinese Patent Office issued more than 580,000 patents in 2009, up 41%... http://tr.im/O2kH 3:06 PM Feb 13th

Comment: The clash of cultures came this Chinese New Year, which fell on Valentine’s day. We suspect the local generally won over the foreign tradition. 210m rail travelers heading home on the mainland may support our thesis…

Comment: Google still seems to be searching for solutions. “Quite committed”? Very convoluted!

Comment: The Chinese government is keen to improve food safety…and social harmony. The milk contamination scandal is long-running and depressing (similar issues have been seen in other areas before, e.g. Sudan Red in spices). The fact it is still not fixed (@danwei: 170 tons of tainted milk recalled: The China Daily reports on…nationwide crackdown http://bit.ly/czHVPo 7:12 AM Feb 8th) means the Commission will have its work cut out Let’s hope it has real power.

Comment: Foreign businesses going to China need to make a real effort to localize their business for the local consumer. David Wolf does a nice job highlighting some of the common failures of big western internet businesses, including Google.

Comment: We have been following the Rio Tinto case (and arrests) in China with interest, as it has important implications for foreign businesses (and business people) . The latest news suggests that the “Rio Four” accepted bribes as well as commercial secrets from Chinese steel mills. These two charges do not seem to sit comfortably together…so it will be interesting to see what happens next. (Other than the inevitable propaganda battle around the new ore negotiations (They = “monopolistic”; We = “unified” RT @chinaimport: China CISA Defends Role In Tough Iron Ore Price Talks… http://ff.im/-fE9i8 1:05 PM Feb 9th).

Comment: “To get rich is glorious”, but it might not make you popular. It is perhaps no surprise that there is a high concentration of wealth among a small elite in China (or elsewhere). Many people obviously resent it, and the political class know it. An ongoing corruption crack-down in Chongqing, a high-profile insider-dealing case, and other issues suggest this is an increasingly political issue. But as long as everyone get to benefit from economic growth, the worst may be avoided.

Comment: We have looked at corruption many times on this blog, nad visit the issue again here. This is a great article that looks below the surface, and at the inner workings of “guanxi” and “grey zone” income.

Comment: Anyone who has not yet got the message that businesses need to get out beyond the Tier 1 and 2 Chinese cities should read the article. And this post of ours.

While China may not (just yet) have become the second largest economy in the world, there is plenty of action to report. Here we provide an update on recent news, including links from our ChinaBlogTweets Twitter stream.

Last year’s lending boom helped China to a rapid recovery, but now the brakes are being applied in order to manage the risk of asset bubbles and non-performing loans:

• RT @CDT: China Raises Bank Reserve Level to Cool Credit: The Associated Press… http://bit.ly/cc29bY 6:37 PM Feb 13th
• More stimu-less RT @chinaeconreview: PBoC points to gradual exit from monetary stimulus policies http://dlvr.it/1lGV 6:59 AM Feb 12th

• Or Bumpy? RT @NiuB: China: Boom Or Bust? @GadyEpstein http://bit.ly/a88wmd 7:12 AM Feb 12th

Despite that, estimates of 9.5-10% GDP growth are coming in for 2010, but with it is risk of inflation:

• CCB projections RT @ChinaDaily: China’s GDP to grow 9.5% in 2010 http://tinyurl.com/yjupnj4 9:17 AM Feb 10th

• RT @newschina: CASS’s Estimates for China’s 2010 Macroeconomic Indicators: China’s economy will grow 10% in 2010… http://bit.ly/atDPBu 8:04 AM Feb 9th (sub)
• RT @ChinaDaily: China’s Jan CPI up 1.5%, PPI up 4.3% http://tinyurl.com/yfwh76b 8:06 AM Feb 11th

This inflationary issue is of real concern for the government, but many observers feel they have the levers needed to control it. However there is some debate as to whether that is a good or bad thing, with the suggestion that wage inflation might have a positive impact:

• Wage-driven RT @ftchina: Call for Beijing to tolerate some inflation http://bit.ly/9pCxFM
• RT @fonstuinstra: RT @WageIndicator: China May Choose Wages Over Yuan Gains to Narrow Trade Surplus – BusinessWeek http://ow.ly/15NIA 4:12 PM Feb 10th

On the trade side, a surge in imports is positive, but is probably not representative, due to the impact of Chinese New Year last year:

• RT @BullishChina: China’s trade surplus narrows as imports surge – MarketWatch http://ow.ly/16xCqy 9:26 AM Feb 10th

While, talk about RMB appreciation continues. China’s approach has been firmly “gradualist”, but Goldman Sachs and others suspect a more dramatic move may be on the cards.

• RMB, more changes to come? RT @chinaeconreview: Hong Kong widens scope of renminbi business http://dlvr.it/1lbN 6:49 AM Feb 12th

• Restless RMB? RT @stinson: RT @imadnaffa: China May Let Yuan Gain 5% After Rate Increase, Nomura http://bit.ly/d1YOBI via @ChinaBizWatch 7:08 AM Feb 8th

We will see…