CIC to step up pace of investment

CIC to step up pace of investment

China Investment Corporation (CIC), the nation’s $200-billion sovereign wealth fund, will speed up the pace of investment across a broad range of sectors to capitalize on the long-term investment value created by the global financial crisis, the People’s Daily reported yesterday, citing CIC Chairman Lou Jiwei.
CIC invested just $4.8 billion outside China last year as it kept its powder dry during the global financial crisis, when asset prices tumbled.

Lou Jiwei

It held nearly 87.4 percent of its overseas investments in cash or cash equivalents last year, Lou said.
He said the pullback in asset, stock and commodity prices caused by the global financial crisis created long-term investment value, and the fund took advantage of stabilizing markets this year to make some investments in a broad range of sectors, the paper reported.
CIC’s investment this year included purchase of securities products and direct investment in mining, energy and real estate industries, said Lou.
The sovereign wealth fund’s investment decisions are driven by research and asset allocation, he said.
CIC would utilize the beneficial investment opportunities within reasonable levels of risk to create wealth for the country, the chairman said.
The new sovereign fund has over 41 percent employees with overseas study or work experience.
CIC reported in August a negative 2.1 percent return on its global portfolio for 2008.
The fund is investing as much overseas each month this year as it did in all of 2008, Lou said earlier in August during a Beijing think-tank forum.

Oodles of woe for Google

Oodles of woe for Google

Google may draw up a new settlement to put out its copyright fire in China, according to a statement sent to China Daily yesterday.
The Internet giant has come under attack in China for making digital copies of Chinese books and making them available online, despite the fact the books are still under copyright.
In its statement to China Daily, Google emphasized that “the scope of our US settlement is limited to the US and comes under US law and only US readers will benefit”. The company said it will “listen carefully to all concerns and will work hard to address them”.

The statement reiterated that the goal of Google Books “remains bringing millions of the world’s difficult-to-find, out-of-print books back to life”.
Zhang Hongbo, deputy director-general of the China Written Works Copyright Society, said Google’s reply to this issue was neither “clear” nor “satisfying”.
“First, they still did not admit their copyright infringement,” Zhang said. Even difficult-to-find or out-of-print books may still be under protection of copyright law, not to mention popular modern works, he said.
Google is facing complaints from Chinese authors for scanning their works into its digital library without permission. This is the latest battle between Google and copyright holders in the US, Europe and elsewhere over its ambitious project.
A rough estimate showed more than 18,000 books from 570 Chinese writers have been scanned by Google and included in its digital library, which is only open to netizens within the US borders. This was done without informing or paying most of the writers.
Zhang said nearly 80 authors have contacted his group, and entrusted them to get a fair settlement from Google.
“We want Google to admit its infringement, apologize, and authorize a formal negotiator to discuss specific compensation with Chinese authors,” he said.
Reuters reported yesterday that Google countered by saying it had received permission from more than 50 Chinese publishers who allowed the US search giant to digitize more than 30,000 books.
Google has proposed a settlement in the US that authors who accept Google’s scan would get $60 per book plus 63 percent of the income from online reading. China’s copyright society has already made it clear that it is impossible for Chinese authors to accept the settlement.

RBS aggressive in hiring best bunch

RBS aggressive in hiring best bunch

Royal Bank of Scotland, whose private banking entity in Singapore reported mass resignations by 70 employees recently, will continue to hire aggressively for its investment banking business in China, a top executive told China Daily during a recent interview.

John Hourican, chief executive of RBS’ Global Banking and Markets operations, said the bank would try to attract and retain talent in China and stick to its stated goal of becoming a top-five banking entity in the country.
“Our proposition is that we will attract the best talent in our core markets and pay competitively so that they can generate returns that satisfy our shareholders’ needs,” the 39-year-old banker said during a recent trip to Beijing.
The Edinburgh-based bank recently announced a barrage of new hires in China in a bid to beef up its investment banking business. Among the key appointments, the bank named Raymond Yin, who joined RBS from JP Morgan where he was chief representative and head of general industrials for the China market, as the co-head of investment banking for China.
The move comes in the backdrop of a battle for banking talent in Asian countries, especially in the private and investment banking sectors. Citigroup recently appointed Rodney Tsang, a senior investment banker with Bank of America Merrill Lynch, as co-head of its China investment banking team.
RBS, which is now 70-percent owned by the British government, also reiterated its strong commitment to the Chinese market. During the bank’s recent strategic review, it decided to adopt a go-forward strategy focusing on products in which it believed it had global, top-tier positions, such as advisory and trading services, Hourican said.
The bank, which took a heavy battering from the global financial crisis last year, is planning to focus on its strengths by exiting from non-core businesses globally, including the retail and SME businesses in Asian countries, he said.
In August, the bank inked a deal with Australia and New Zealand Banking Group to sell its retail and SME banking arm in the regions of Taiwan and Hong Kong, and in Singapore and Indonesia for 325 million pounds ($533 million).
Regarding the sale of its non-core assets in China, which generated less than 30 percent of the revenue for RBS overall from the country, the transaction has reached “the final stages of the negotiations”, said John McCormick, RBS’s Asia chairman, who was accompanying Hourican on his Beijing trip.

McCormick said the bank was keen on partnerships with local brokerages in China, which could help the bank build an all-round business platform in the country.
In addition to its main banking entity, the bank also operates a locally incorporated leasing company and has stakes in Galaxy Futures and Suzhou Trust.

Hisense bets big on overseas markets

Hisense bets big on overseas markets

Hisense, China’s leading television sets maker, aims to grow overseas sales by 300 percent over the next three years and lift revenue from sales abroad to nearly 40 percent from the current 20 percent, top company executives told China Daily yesterday.
“From the long-term perspective, Hisense’s success lies beyond China,” company chairman Zhou Houjian said during the firm’s 40th anniversary ceremony in Qingdao, its global headquarters.
“The company should not be confining itself to the domestic market any longer; the best resources and effort should go into overseas markets,” Zhou said.
Currently, 20 percent of Hisense’s sales are generated overseas. Last year, the company did sales worth 48.9 billion yuan ($7.16 billion). In the long run, the “markets outside China will contribute to the majority of sales”, Zhou told China Daily.

He predicted that Hisense’s revenue from sales would surpass $8 billion this year.
The Qingdao-based electronics goods maker also wants to become a leading international player in the next five years.
The company will enter the US market soon, and the country would be its biggest bet overseas, said another top company executive.
Even as the US economy is recovering from the deepest recession in decades, it “will be the focus market and Hisense will enter it next year”, said Lin Lan, executive vice-president of Hisense.
The company has set up two research and development centers in Chicago and Silicon Valley, but has only a marginal sales presence.
Hisense started selling its products overseas in 2003. Now, its products sell in Europe, Australia and Africa.
The mid-term plan is, “in the next three years, overseas sales will be three times what it is now, and global sales will contribute 35 to 40 percent to Hisense’s annual sales,” Lin said.
“But it cannot be achieved easily,” he added.
“Emerging markets will be the growth engine,” Zhou said.
Hisense will selectively develop “emerging markets, including Australia, Africa, South America and Southeast Asia, as the potential there is great.”
In Africa, Hisense’s televisions account for 80 percent of the market.
“The financial crisis at the beginning largely hurt the business,” said Zhou. But, the emerging markets helped Hisense beat the economic gloom during the past few months.
The company “stuck to the overseas market” and “expanded into more emerging markets”, and the situation “improved quickly”, he said.
Australia and North America outperformed other markets, increasing sales by 162 percent and 110 percent respectively from a year earlier.
Many of Hisense’s peers such as TCL, another leading Chinese television maker, have said that they too would focus on emerging markets. TCL witnessed double-digit sales growth during the second quarter, helped by sales in the Middle East and South America. Nearly 50 percent of TCL’s sales come from overseas markets.
Hisense will also invest more to expand manufacturing capability and sales networks in emerging and developed markets, and strengthen R&D efforts, Zhou said.
In the next three years, the investment will be doubled annually, Lin said.
Besides the two R&D centers in the US, Hisense has set up another in Belgium. As emerging markets gain in prominence, Hisense will have R&D centers there as well, Zhou said.
Meanwhile, the budget for R&D will “grow bigger”, Zhou said, but declined to elaborate. Currently, the budget for R&D annually is “5 percent” of total sales.
“My biggest concern is how to get sufficient and quality staff to meet the expanding overseas business,” said Zhou.
From January to September 2009, Hisense’s year-on-year sales and profits grew by 19.6 and 135 percent respectively, and overseas sales rose by 16.28 percent.
While China’s exports of liquid crystal display panels dropped by 3.12 percent during the period, Hisense, which has been ranked the largest flat panel display maker in China for six years now, increased sales by 45.58 percent.

Geely, Ford talks for Volvo unit may fall apart

Geely, Ford talks for Volvo unit may ‘fall apart’

Geely Holding Group Co’s 10-month effort to buy Volvo from Ford Motor Co may fall apart within days as the companies struggle to agree on intellectual property rights, two people familiar with the talks said.
Geely and Ford officials are meeting in London this week to try to resolve the US automaker’s concerns about sharing technology and future product plans, said the people, who asked not to be identified because the negotiations are private. Without an accord, Ford may opt to keep the Swedish unit, where losses are narrowing and sales are improving, the people said.

Concerns about intellectual property rights have hindered Chinese automakers’ attempts to make acquisitions, slowing overseas expansion plans. In July, General Motors Co rejected an offer for Opel from Beijing Automotive Industry Holding Co after failing to agree on safeguards for designs and technology.
“Volvo is completely integrated into Ford’s product development strategy, and Ford should be concerned about where its vehicle architectures will end up,” said Michael Robinet, a CSM Worldwide analyst in Northville, Michigan. “This is akin to selling a room on your house. You can’t separate it easily.”
Ford, the only major US automaker to avoid bankruptcy, put Volvo on the block in December as it shed overseas luxury lines to focus on its namesake brand. Geely, China’s biggest private automaker, is offering about $2 billion, less than a third what Ford paid a decade ago, people familiar with the talks have said.
Any Volvo buyer would gain insight into Ford’s future products, which will still share Volvo technology and mechanical vehicle designs, the people said. Ford wants assurances that Geely will keep new-model blueprints secret, the people said.
Without those guarantees, Ford is prepared to put off plans to sell Volvo because the unit’s prospects are improving and it might command a better price when the economy recovers, the people said.
“We are still talking to interested parties,” said Mark Truby, a Ford spokesman, who declined to comment on whether talks could collapse without an agreement on intellectual property. “With any process like this, we wouldn’t want to provide a lot of detail prematurely.”
Geely spokesman Zhang Xiaodong declined to comment.

The Chinese automaker fell 2.8 percent to HK$2.78 ($0.36) yesterday in Hong Kong trading. Ford rose 14 cents, or 1.9 percent, to $7.71 on Tuesday in composite trading on the New York Stock Exchange. Ford has more than tripled this year, while Geely has quadrupled.
Ford also is negotiating with another bidder, known as the Crown group, people familiar with the discussions said. If talks falter with Geely, it isn’t clear whether Ford would still talk with other suitors or shelve a sale for now, the people said. 

Ex-Gomes chair faces insider trading

Ex-Gome’s chair faces insider trading

Huang Guangyu, once China’s richest man and a home appliance tycoon, is likely to be charged with insider trading, which carries a maximum penalty of 10 years in jail.
Huang, 40, former chairman of Gome Electrical Appliances Holdings, was detained on Nov 24 last year on claims he manipulated share trading for two listed companies, Sanlian Commercial Co and Beijing Centergate Technologies Co.
The Beijing People’s Procuratorate has twice sent Huang’s case back to police asking for further investigation, Legal Evening News reported on Tuesday.

The first time the case was sent back, prosecutors asked for more “specific manipulating measures of insider trading”.
The case was sent back a second time because of “insufficient evidence”.
Unless a higher procuratorate permits a longer investigation, Huang will have to be prosecuted within a month and a half, the report quoted sources as saying.
Insider trading refers to illegal profits in stock and securities trading by using or giving away confidential insider information that has not yet been made public.
This allows the person to buy or sell a stock before news affects the price of the security.
Someone acting as an individual faces a maximum of 10 years in prison. Someone acting as a legal representative of a company faces at most five years in prison.
Huang’s lawyer says that Huang should be treated as a legal representative of Gome group.
Huang, who founded Gome Electrial Appliances, is a Chinese billionaire. He ranked first last year on the Hurun Rich List, a ranking of the 1,000 richest individuals in China.
After he was arrested last year, his personal wealth started to shrink as the price of Gome’s stock, of which he is the biggest shareholder, started to decline.
The Hong Kong High Court on Sept 9 extended an order to freeze $214 million of Huang’s assets. Huang sank to 17th place on this year’s Hurun Rich List, which was released last Tuesday.

Allianz, Amex retain ICBC stake

Allianz, Amex retain ICBC stake

Allianz SE and American Express Co plan to keep their Industrial & Commercial Bank of China Ltd stakes, which have a combined value of about $3.1 billion, past a lockup on the holdings that expired yesterday.
Allianz and American Express have no immediate plans to sell, the companies and Beijing-based ICBC said in statements. Allianz has 3.22 billion Hong Kong-traded ICBC shares, worth HK$19.9 billion ($2.57 billion), while American Express owns 638 million shares with a value of HK$3.95 billion.
The agreement “is an indication that key shareholders are optimistic about ICBC’s business and growth potential and will lend some support to its shares”, said Victor Wang, an analyst at UBS AG in Hong Kong who rates ICBC a “buy”.
ICBC is the world’s biggest bank by market value and profit. It has more than 16,000 outlets nationwide, 112 branches overseas, and 190 million individual customers — equivalent to the combined populations of Japan and France.
The Beijing-based bank’s profit may rise 16 percent to a record 128.4 billion yuan ($18.81 billion) this year, according to analysts surveyed by Bloomberg.
ICBC shares advanced 2.4 percent to HK$6.34 yesterday in Hong Kong trading, taking this year’s gain to 55 percent.
Reevaluating holdings
“In case of a potential disposal in the future, Allianz will explore all potential methods of sale that would maximize value and minimize market impact, with a preference for a private sale to investors,” the companies said.
American Express “will reevaluate its shareholding from time to time depending on market conditions” and “has no current plans to sell its shares”, ICBC and the New York-based company said in a separate statement.
Allianz would have a profit of $2 billion and American Express a $400-million profit if they sold their stakes, bought in April 2006, at the current market price.
Goldman Sachs Group Inc, Allianz and American Express purchased a total of 24.2 billion shares in ICBC at that time for about $3.8 billion, six months before the Chinese bank’s initial public offering. They agreed to hold half their shares for three years, and the remainder for six months more.
Previous sale
Munich-based Allianz, Europe’s second-biggest insurer by market value, and American Express immediately sold half their original investments in ICBC after the first lockup period ended on April 28. Goldman Sachs extended the period it must hold 80 percent of its stake to April 2010 under a revised agreement. The New York-based bank sold some of its ICBC shares in June.
Allianz, which booked a gain of 658 million euros on the sale of the first half of its stake in ICBC in the second quarter, has provided the bank with expertise in asset and risk management, while American Express issued co- branded credit cards with the Chinese lender.
“Our partnership with ICBC offers a platform for expansion in our strategic growth market China and gives us access to a huge number of Chinese customers,” said Christoph John, a Singapore-based spokesman at Allianz.
Chinese banks “offer probably the clearest earnings visibility” for 2010 among the nation’s major industries, JPMorgan Chase & Co analysts led by Samuel Chen wrote in an Oct 11 report. They forecast 32 percent average earnings growth for Chinese lenders next year, driven by loan expansion and a recovery in lending profitability.

Google violating copyrights, authors say

Google violating copyrights, authors say

Search engine giant Google is facing accusations that its employees, illegally and without permission, scanned Chinese writers’ works into its digital library, Google Books.
“Google’s infringement to Chinese authors is very severe,” said Zhang Hongbo, deputy director-general of China Written Works Copyright Society (CWWCS), the only domestic administration of written works copyrights.
Chinese government departments, such as the National Copyright Administration, will push the US government to handle the issue properly, considering Google is such a major force in the online world and has acted arbitrarily in this issue, he said.

According to a rough estimate from CWWCS, nearly 18,000 books from 570 Chinese writers have been scanned by Google and included in its digital library, which is only open to netizens within the US borders. This was done without informing or paying most of the writers.
“So far, no writer we reached said he or she has authorized Google to do the scanning,” Zhang said.
Google has not yet replied to the accusation. Its spokesman was not available for comment yesterday.
Google has been scanning millions of books under US copyright since 2004. Under a tentative settlement with US authors and publishers, that will cover all books unless the copyright holders object.
Google is in the final stages of reaching a settlement with two US copyright organizations, which brought copyright infringement lawsuits against the search company for its book-scanning project.
A US court has given the parties until early next month to revise their current settlement agreement and ensure its compliance with antitrust and copyright laws.
According to the settlement offered by Google, authors who accept Google’s scan could get $60 per book as compensation, as well as 63 percent of the income from online reading. Readers of the books online would pay a fee for digital access to the book.
According to the settlement, if the author rejects Google’s right to scan, he or she should appeal before Jan 5, 2010. Authors should approach Google authorizing the scanning and get the compensation before June 5, 2010.
But Zhang said this settlement is not acceptable to Chinese writers.
“First of all, Google violated Chinese writers’ copyright. It doesn’t make sense for them to set a deadline for Chinese writers to protect their interests.
“Secondly, the company should show a clear attitude to admitting its infringement and then negotiate with Chinese authors sincerely,” he said.
The US often criticizes China’s inefficiency in protecting property rights, Zhang said.
“But you see what their company is doing in China? Many of our writers are infuriated,” Zhang said.
Zhang Kangkang, a prominent writer and also vice-president of the Chinese Writers’ Association, said she was “surprised” and “angry” at Google’s copyright infringement.
“It’s one-sided agreement to scan the work without permission from the author. It is illegal to enjoy the writer’s work in the name of knowledge sharing,” said Zhang, whose books have been scanned by Google.
Chen Cun, another well-known Chinese writer who lives in Shanghai, said Google is “day-dreaming” if it wants to buy copyright from him for $60.
“The price should be set by both sides. It is impossible to buy an object with your bid only,” he said.
Google Books is planning to turn millions of books into electronic literature available online.
Google’s head of Print Content Partnerships in Britain, Santiago de la Mora, earlier said that Google is solving one of the big problems in the print world – that some books are pretty much dead in the sense that hard copies can no longer be found.
“We’re bringing these books back to life, making them more visible to 1.8 billion Internet users in a very controlled way,” de la Mora said.
However, Google Books is facing big legal problems in the US, Europe and elsewhere around the globe over the issue of copyrights.

FMG hardens its stance on discount

FMG hardens its stance on discount

A heavy lift ship elevates FMG’s shiploader at the company’s Anderson Point port facility in Port Hedland in Western Australia. [Agencies]
Australia’s third-largest iron ore miner, Fortescue Metals Group (FMG), is likely to stop offering Chinese steelmakers an earlier agreed-to price discount on its iron ore in the fourth quarter, a top company executive said yesterday.
FMG’s move has dealt a blow to China’s steel industry lobby, the China Iron and Steel Association (CISA), which had last Friday said that it was looking at separate negotiations with global miners on iron ore pricing for next year, rather than being clubbed with other countries on the issue.
This year’s iron ore price negotiations hit a deadlock in June after CISA insisted on a better discount on 2008-09 prices after a 33-percent cut in benchmark iron ore prices had been set with other Asian steel mills.
FMG had settled an agreement with CISA in August for a higher discount during the second half of the year than what global mining giants Rio Tinto and BHP had offered to other Asian mills. FMG was the only global miner to offer a higher discount to China’s steelmakers.
In return, FMG was supposed to get up to $6 billion in funding from Chinese investors to expand production.
However, after the final deadline for negotiations, FMG failed to get the necessary financing.
“We are still in discussions over how to price the rest (of iron ore) in the final quarter,” FMG’s Executive Director Graeme Rowley said in Australia yesterday during a media tour to the group’s mines.
He said FMG had sold about 10 million tons of ore at the discounted price in the September quarter, but that it was no longer obliged to continue this pricing arrangement.
Although the lobby maintained last Friday that the long-term contract settled by China’s steel enterprises and FMG were separate from any other financial agreements, FMG’s statement on the matter gave little room for ambiguity.

“A condition subsequent to this agreement is the completion of finance by Sept 30, 2009, by Chinese financiers on terms acceptable to FMG,” it said.
“FMG’s stance may lead to a more difficult situation for CISA,” said Yu Liangui, a senior analyst at consultant firm Mysteel. “Chinese steelmakers should talk to their Japanese and Korean counterparts on the right pricing arrangement with global miners.”
In a related development, FMG also indicated that it might seek to blend its lumpy ore with Vale SA’s fine ores to suit Chinese steel mills.
Vale has a diminishing supply of so-called lumpy ore and may benefit from mixing it with FMG’s ore, Rowley said, adding FMG hasn’t held any talks with Vale on a venture.
An employee at FMG who declined to be named said the company’s proposal to blend iron ore was because lumpy ore contains a lower percentage of iron ore. Mixing with Vale’s high iron ore content fine ores will reduce the procedures to achieve a marketable iron ore content percentage, and cut production costs, he said.

Chinas “sock capital” grows on clustering

China’s “sock capital” grows on clustering

Exports of China’s “sock capital,” Datang, rose 6.7 percent in the first 11 months, as manufacturers elsewhere found themselves mired in the global economic downturn.
Datang, a town in east China’s Zhejiang Province that specializes in making socks, exported 3.5 billion pairs of socks worth 530 million U.S. dollars from January to November, said YuanZhigang, Datang’s Party chief.
The 6.7 percent growth outshines most of China’s export-oriented cities as exports dived 18.8 percent and those of Zhejiang declined 16 percent in the first 11 months, according to the National Bureau of Statistics and the Department of Commerce of Zhejiang Province.
With its 70,000 population and 130,000 migrant workers living on making socks, Datang acquired the nickname “the capital of socks” as city officials claimed it produced one in every three pairs of socks worn on the planet.
Datang’s advantages in the global hosiery market were well beyond cheap labor and resources, said Professor Lin You, director of the Zhejiang University Industrial Development Research Center.
Lin said Datang’s real edge is the myriad sock-related businesses clustered together, including textile material processors, yarn dealers, sewing firms, pressing operations, packagers, and forwarders.
Proximity of closely related firms in the same industry helped save operational and transaction costs and provided easier access to skilled and specialized workers, Lin said.
China’s local clusters of consumer goods manufacturers contributed greatly to bringing China’s industry to global prominence, said Professor Wang Jici, of Peking University’s College of Urban and Environmental Sciences.
Wang said clustering and networking helped small and medium-sized enterprises to raise their competitiveness by being more specialized.
In Datang, specialists abound for every procedure of making socks. There are even workers specializing in binding pairs of socks with metal clips, said Yuan.
The clustering effects theory finds echoes in the UN Industrial Development Report 2009, released in April, which said manufacturing activity benefited from economies of scale — unit costs of production would fall when similar and closely related firms were clustered.
“Closely related firms in the same industry benefit from sharing of technological or marketing knowledge, and learning effects may be easier to achieve because it is easier to monitor what the neighbors do and learn from their successes and mistakes,” said the report.
However, Lin warned that Datang could not live on its low-end socks forever as workers’ pay and costs of land and resources rose.
Datang had to upgrade and produce more high-value-added socks if it was to continue flourishing and retain its strong position in the global marketplace, Lin said.