Briefly…Top Ten Tweets (From Pegs, Pay & Chinese Walls, To Soft Power, Penthouses & IP)

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Last week ended with a rush of Renminbi / RMB / Yuan headlines, following the decision by the People’s Bank of China to end the peg to the US dollar. Before anyone gets too excited, that means a return to the pre-crisis situation (so is not so very new). It does not mean a dramatic appreciation of the Chinese currency. Relative to the (poor old) Euro, it could even lead to some depreciation – and it was noted that moves could be “in both directions”). This is a story that will continue to run. And the RMBs moves will continue to be gradual. The de-pegging was closely followed by a decision to expand pilot settlement scheme for cross-border trade, reminding us that not all RMB moves related to valuation…

While international consumers may now get a little less iPad for their pound, they are not the only ones with an interest in the RMB. As many millions of Chinese factory workers are aiming for higher pay, and more spending power, the wave of recent strikes – and negotiations – has continued. According to the New York Times: Honda offered “about $44 a month in wages and benefits, less than half what the workers had been seeking when they walked off the job. Workers at the factory currently earn a base salary of $117 plus a housing allowance and bonuses”. Carlsberg and Toyota, among others, were also hit by strikes.

A stronger RMB will of course hurt some exporters (many of whom are foreign-invested). The impact of that has yet to be seen, but pressure on costs has been with us for some time, and corners have been cut in many supply chains already. One recent and well-reported example is the “Chinese dry-wall case” in the US. Shoddy, dangerous product ends up in the supply chain because companies (international as well as Chinese) either don’t care or (more often) ignore the risks. At times like this risk management, testing, and procurement audits are increasingly important. Don’t take it on trust.

Speaking of trust, this is something that has been tested (even) in Hong Kong recently – with the “sale” of the most expensive apartment in the world, the 68th-floor (actually the 40th floor, if all the unlucky numbers are added back in) penthouse, and others, at 39 Conduit Road falling through. The Wall Street Journal notes that “Henderson Land Development Co. said Tuesday it will book a loss of HK$734 million (US$94.2 million) in the first half ending June 30 from the cancellation of sales at its luxury residential project…”. Corporate governance has been called into question, and the case is reminder that risk can extend all the way up to the high end.

While financial “innovation” is obviously alive and well, the ability of Chinese companies to innovate, has often been called into question. There are, of course some good examples of innovative Chinese companies, and Haier is among them. Not only has it had some success internationally, it has managed to take a leading share of the mass, rural market in China by using customer feedback, and adapting to the reality of rural life – you want to clean vegetables in the washing machine? Why not! Want to clean up in China? Watch, and learn.

Innovative business models in China do, sadly, sometimes involve “innovative” use of intellectual property (Shanzhai “frugal” innovation), and it is important that businesses operate with knowledge of the risks and how to minimize them. The newly revamped China Law Blog provides some pointers in a post entitled: “Top Seven Intellectual Property Mistakes By Foreign Companies Doing Business In Or With China”. See the link below, and check the list…

Luckily, for all companies – innovative or not – China still has growth. Various estimates have put this at 9-10% for the year. The latest estimate is 9.5% from the World Bank. The risk of inflation remains though, and not just in relation to wages. This is a politically, as well as economically, sensitive issue – and will continue to be a focus.

China’s growth, unluckily, is also putting pressure on the environment, and the policy to improve efficiency continues. But efficiency is not the sole consideration – energy security is also an important factor in China’s thinking (remember the food security debate in the 90s?). Renewable sources, including solar and hydro power are therefore attractive on two fronts. And dirty coal on just one. The environment is important, but so is China’s security and self-reliance. Never ignore the latter when developing a strategy in China.

So much for generating power. How about peddling some around the world? Enter China’s “soft power” (along with its peaceful rise”) and reports of a Chinese bid for Newsweek. The bid failed, but it is an interesting, and controversial, thought given the state of Chinese media and perceptions of China internationally.

It is not only international news that China has an eye on. Also “internal” news. As can be seen in these weekly news reviews, there are many important, strategic, and risky issues constantly raising their heads in China. It is hard for the leaders in Beijing to know what is really going on – especially with an undeveloped media in place, and as some news is considered too “sensitive” to be reported to the general public. So it is no surprise that the leadership has its own “secret” media (a bit of an open secret actually) that operates in parallel with the public press. It is useful to know how these things that lie below the surface work…

See all the tweets and links below:

1. Word of the day: gradualism (“in both directions”) RT @WSJAsiaBiz: PBOC: No One-Off Adjustment of Yuan #RMB ( see also: RT @niubi: China PBOC Suggests De Facto Peg Has Ended But No Big Moves | RMB “being depegged…)

2. Another day of strikes & pay RT @fonstuinstra: Honda Strikers in China Offered Smaller Raise Than Sought – (see also: They think it’s all over… RT @InfoseekChina: Carlsberg Says China Brewery Strike Ends; RT @chinaeconreview: Toyota partially closed by strike

3. Human nature & Chinese (dry) walls RT @chinadivide: RT: American Companies Poisoned Homeowners With Chinese Drywall

4. Est 9.5% for the year RT @chinaimport: China Economy Slowing – World Bank –

5. Reported Hong Kong sales fell through RT @WSJAsiaBiz: Henderson Land Books Loss on Cancellations (See also: Reading FT on failed sale of $57m HK penthouse. 39 Conduit Rd’s “68” floors, actually (& ironically) 40. All unlucky 4s (& all 50s) skipped!)

6. Cleaning up RT @chinahearsay: Forbes China Tracker: Haier: A Chinese Company That Innovates / by @joelbackaler

7. IPR RT @TCBN: Top 7 Intellectual Property Mistakes By Foreign Co’s Doing Business In Or With China; by @danharris (As see here for some of the risks in practise: Adventures in IP RT @chinahearsay: Latest China Hearsay: U.S. Tech Startups: China Is Coming For You

8. Made-in-China power policy RT @NiuB: China’s Energy Plan: Renewable, Nuclear–And Coal? – @raykwong: (See also: RT @BeyondBrics: Chinese government to further curb energy consumption

9. ODI & soft (print) power RT @shaunrein: China bids on Newsweek unsuccessful

10. RT @jarmiles: #Economist on China’s secret media:

See more of the latest China business news on our twitter feed at @ChinaBlogTweets

2 Responses to “Briefly…Top Ten Tweets (From Pegs, Pay & Chinese Walls, To Soft Power, Penthouses & IP)”

  1. Tweets that mention -- Says:

    […] This post was mentioned on Twitter by . said: […]

  2. Archive » Briefly…Top Ten Tweets (From Market Access & Level Playing Fields, To R&D, SOEs & Taxes) | China Business Blog Says:

    […] the RMB, and associated trade imbalances. The currency’s value constantly under pressure, and recent moves to de-peg from the dollar were a step towards more flexibility. Another development has been the […]

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