China might not be playing in the World Cup, but you cannot escape mention of it, even here in our weekly China business review – for an enterprising Chinese company, Yingli Solar, is taking part…as a sponsor. It is the first time that a Chinese company has taken this step, but it is unlikely to be the last. So blow your (Chinese-made) vuvuzela now!
In addition to being the top vuvuzela manufacturer (of course), China is now said to be the fourth largest source of millionaires. Jing Daily notes reports that the “number of dollar millionaires in China numbered 477,000 last year, a 31% leap over 2008″. No wonder then that luxury goods companies are piling deeper and deeper into the consumer market – Rolls Royce has opened its 8th showroom in China in the tier-two city Ningbo.
The focus on the Renminbi (RMB) continued last week – as did the gradual, ever-so-slightly-political moves in the currency itself. And (with a nudge to our good friends over the pond) it should be remembered that the debate is not just about the RMB and the US dollar. The RMB’s appreciation against the (forlorn) Euro is key, as Europe is China’s top trading partner. Note also that the context of the move went beyond de-pegging from the dollar – China also announced the expansion of the RMB cross-border trade settlement pilot. Expect more expansion.
Last week also brought more news on Chinese overseas direct investment (ODI), including (major online business) Alibaba’s first overseas acquisition (of Vendio in the US). This deal is refreshing as it represents a newer sort of private sector, entrepreneurial, service sector, deal. Big, strategic resource deals by big, state-owned groups will continue, but the ODI mix is getting more interesting.
While on the subject of online business, make note of the new Chinese Internationalized Domain Names (IDN) approval. Time to get some more registrations perhaps?
Speaking of registrations…IP remains one of the key concerns we hear from companies about doing business in China, but on what is that fear based? Usually it is a mixture of anecdotes and statistics – often peddled by those with an agenda to push, or a headline to spice up. The China Law Blog explains why “the value of China’s stolen IP has been grossly exaggerated” and goes on to say that “the woman who pays 70 RMB (approximately USD$10) for a badly made fake Gucci purse is not the same person who contemplates paying USD$1,750 for the real thing.” Of course there are IP problems in China, and of course protection strategies need to be put in place, but the situation is improving, and is anyway better than (some of) the statistics might suggest.
IP is not the only concern people come to us with…corruption, fraud and theft crop up a lot too, even in well-set-up multinationals. The latest example of an international company finding the rot had set in is IBM, who, according to China Tech News, had an ”anti-corruption campaign [that] reportedly resulted in the resignation or downgrading of more than 120 employees” in China. A reminder that rules don’t always get followed, and that risk can be significant. Proactive risk management is essential and, sometimes, surprising.
There are some other problems that should come as no surprise, especially when they are designed into the business. The Kro’s Nest restaurant story has been well recorded before, but Newsweek carried a good reminder, from China consultant Shaun Rein, of the impact that bad business practices can have on commercial outcomes. Take legal advice, and the right legal steps. And don’t get overblown ideas about relationships across a table becoming “guanxi” over night.
Strikes and wage rises have continued to have an impact, and many people are now considering the long-term implications of labour shortages in south China, and of rising costs generally. For most this does not mean leaving behind China’s infrastructure and supply chain benefits – just pushing them further inland. Reuters reported that “Consumer goods exporter Li & Fung Ltd said the low-cost era in China was likely over but expected no radical change in sourcing in the country, adding that it would aim to switch its sourcing focus to the interior from coastal areas”. Where Li & Fung leads, many usually follow.
And finally…with July already upon us, it may be time to think about some summer reading. Thankfully the thought process has already been done by Forbes China Tracker (some of our own earlier picks are here ). Their list includes some great titles (not just business ones). Those at the top of our wish list are:
• Leslie Chang – Factory Girls: From Village to City in a Changing China
• Richard McGregor – The Party: The Secret World of China’s Communist Rulers (the author is speaking in London, at Asia House, on 6 July)
Not holiday reading perhaps, but should be interesting nonetheless….
See the original tweets and links below:
1. Yingli Solar – on the ball, going global RT @KillianOSull: China solar company ‘shines’ on World Cup http://bit.ly/cSIz6q (while on the football, aso see: Oh no… RT @CNNGo: Vuvuzelas used by Hong Kong protesters outside Legislative Council http://bit.ly/aWDiiJ ).
2. $$$… RT @JingDaily: China Becomes Fourth-Largest Manufacturer (Of Millionaires) http://is.gd/d0E1t #china #asia (see also: Rolling into Ningbo (& an iPhone app!) RT @GCBRANDS: Rolls-Royce opens eighth showroom in China http://tinyurl.com/29czf9b )
3. @ TheEconomist: China’s new-found flexibility on its currency should ease trade tensions with America, but may turn … http://econ.st/bjQljI (see also: RT @dailyhknews: People’s Bank of China has expanded the yuan settlement scheme for cross-border trade… http://tinyurl.com/33jkt82 – RTHK)
4. Alibuybuy RT @GE_Anderson: WSJ: Alibaba will buy Silicon Valley based Vendio in their 1st US acquisition. http://is.gd/d2tDG 
6. Yes! RT @NiuB: China Intellectual Property Theft. The Statistics Are Damn Lies. http://bit.ly/9otUQK 
7. Internal audit anyone? RT @chinahearsay: IBM Cleanses Its China Ranks Of Corrupt Staff http://goo.gl/Tkzr 
8. Building a better Nest RT @christinelu: “How Not To Run a Business in China” [Businessweek] by @shaunrein — http://bit.ly/-x17 
9. Moving inland RT @InfoseekChina: Li & Fung Says China’s Low-cost Era Over http://bit.ly/adaZJ3 
10. RT @raykwong: Don’t miss: “Best China Books For Your Summer Reading List.” (Forbes China Tracker) http://twurl.nl/jp2xgh 
Keep up-to-date with the news in real time by following us on Twitter at ChinaBlogTweets .
PS Another summer read RT @taniabranigan: …When A Billion Chinese Jump by @jonathanwatts. Essential environment read… http://bit.ly/9BoYWk