September 17th, 2010
06:36 AM GMT
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Beijing, China (CNN) – I’ve never really understood the whole obsession with Apple. Like today in Beijing, where it has been gently raining overnight and outside the Apple store (one of two in China, the other is in Shanghai), there they were – the Mac Heads, not a lot, maybe a hundred lining up to buy the iPad.

Technically this was the official launch, but in reality I could have bought one in April in what’s known as the gray market. My “dealer,” who’s name is also John, told me for a fee flight attendants deliver iPads from the U.S.; he then adds his costs so a gray market iPad costs about US$800 for the basic model. I guess for John, today’s official launch means he’s out of the iPad business.

But the point is – for a few hundred dollars extra, a true Mac Head in China could have had their own iPad months ago, yet there was something special about buying the tablet gizmo from the official Apple store. A point not lost on Han Ziwen, a 35 year old book store owner, who stood in line for three days.

“I don’t support smuggling, although some Chinese people got to use this product before me, they’re not like me, because I purchased this product in China,” he said.

Seems like a pretty fine point to me.

But Mac Heads are not like ordinary people, which may explain why they have their own online dating service – at first I thought it was an internet hoax, but the web site (http://cupidtino.com/home) seems real enough (iPhone 4 girl seeks older iPhone2 guy, must be in good condition?). And it may explain why in the movie “Mac Heads” – one woman says: “I’ve never knowingly slept with a Windows user.”

That must narrow down the playing field. Hence, the dating service – just don’t mention Adam and Eve and the Apple thing. Another telling point in the movie is the man who says “Muslims have Mecca, we have Macca.”

But getting back to China, such is Apple’s status in this country that Mac Heads here are willing to pay more than American Mac Heads – almost twenty per cent more mostly because of higher Chinese taxes. That’s a lot in a country where wages are a lot lower. One woman told me just spent a month’s wages on an iPad and thought it was a bargain.

And for Apple, launching in China means the company may now be on track to sell 12 million iPads this year, maybe 20 million next year. That’s a lot of Mac love.

Final disclosure, I use Windows, while my wife and daughter both love Mac (Mac Heads don’t just use it they loooove it) so we’re a divided family. I often warn them “We are Microsoft, resistance is futile”.

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January 26th, 2010
06:14 AM GMT
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Beijing, China – A lot of strange stuff happens in China, especially when dealing with government departments.

In the ongoing Google versus China row, we contacted the China National Computer Network Emergency Response Team to speak with deputy operations chief Zhou Yonglin.

Zhou claimed during an interview with the state-run Xinhua news agency that China was the world’s largest target for hackers and he questioned Google’s claim that it had traced cyber attacks back to China.

The team sent us a two-page application form for our interview request with Zhou.

At the bottom of the first page is a column titled, “The Approval and Censorship of the Content Regarding the Interview,” in which it states the applicant and his/her media organization should promise that before the content of the interview regarding CNCERT is officially published, the to-be-published article or news should be censored and approved by CNCERT.

The articles or the news that haven’t been approved could not be published or released to a third party.



September 7th, 2009
06:02 AM GMT
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You know how it is –- you’re in a strange city, maybe a strange country, tired, hungry, missing home, it's kind of late. You walk into that little (in my case, Chinese restaurant), there are teeth marks on the chopsticks, the floor is kind of sticky, and on the menu is the house specialty: rabbit face. Not quite what you wanted, but as luck would have it, just down the road you can see it in the distance – the golden arches, sitting high and proud calling to you.

OK, this might be (in my case) China, but you know that somehow, once you walk through those doors, there on the menu will be a cheeseburger, a Big Mac, Quarter Pounder and fries. And for the most part the food will taste pretty much like the Mickey Dee’s on Santa Monica not far from my old apartment in LA.

So, when I buy my Big Mac here in China, it’s just over 12 RMB, or $1.76. When I buy a Big Mac in L.A. it costs around $3.50. The great thing about a Big Mac as far as economists are concerned (wel, the ones at “The Economist” magazine, anyway) is that it's pretty much the same wherever you go . . . two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun.

And that means for economists it’s a great way to compare currencies. Much like the Big Mac itself, it’s not perfect – wages, rents and other costs vary, as well as the size (I have noticed the Chinese burgers a little on the small side). But for more than 20 years the people at “The Economist” have been doing this exchange rate comparison, and – surprise, surprise – they found Asian currencies under-valued, European over-valued.

In the case of China, by about 40 percent undervalued – this is at the far end of the spectrum as far as many critics in the U.S. are concerned. They accuse Beijing of deliberately manipulating the currency, keeping it undervalued. That means exports from China are a lot cheaper, giving exporters here an unfair competitive advantage, they claim.

Imagine if you could go to that McDonald’s in L.A. and instead of paying $3.50 or so for the American Big Mac, you could pay $1.76 for the Chinese version, knowing the ingredients are the same.



August 12th, 2009
10:42 AM GMT
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It seems one of the biggest challenges in covering the Stern Hu/Rio Tinto case is trying to explain how the Chinese legal system works, or doesn’t work. For a start everything is in Chinese, which may seem pretty obvious, but it makes it pretty tricky; there are translation issues, which starts to get really tough when you include legal terms, as well.

China says the Rio Tinto case will not affect the development of ties with Australia.
China says the Rio Tinto case will not affect the development of ties with Australia.

On Wednesday came word that the “Rio Four” - as they’ve being called by some in Australia - had been “arrested.” This was the cause for a great deal of confusion in our newsroom – hadn’t they already been arrested? Didn’t that already happen when police swooped in last month? How can someone be arrested by police without being arrested?

And this is perhaps why the Stern Hu case is causing such nervousness among so many of my highly-paid, still-employed, executive friends in Beijing. A number of lawyers who have nothing to do with the Rio case explained to me how it works. Unlike other countries such as the U.S., Britain and Australia, in China police have the power to detain those suspected of being up to no good. They can do that for 37 days. No arrest, no charges, nothing.

So you sit in a jail for 37 days, 888 hours, wondering what it is you’ve done (or if you know, wondering how they found out and what evidence they have). By day 38, police must decide to either formally arrest you or let you go. In the Rio case, they went ahead with the arrests. The police have another two months to gather evidence, can apply for an extension of a month, and then if they need to, another two months and another two months. That’s a total of seven months. All the time you are in a jail, wondering what is going on.

If there is good news here for Mr. Hu and the three others it is that they’ve been arrested on charges of illegally obtaining commercial secrets, not state secrets. Lawyers told me those are likely to be the charges they’ll face in court if it goes that far.

There’s always a slim chance that illegally obtaining state secrets could get back into the mix (legally it’s possible and politically anything is possible, as well.) But there does seem to be a sniff of maybe a deal in the works. China is backing away from the most serious allegations, the heat is coming out of the relationship a little. China’s Deputy Commerce Minister, Fu Ziying, said Wednesday he believed “this case should not, and will not, affect the stable development of the economic and trade bilateral ties between China and Australia."

And a source of mine in Canberra tells me a Chinese embassy car has been parked in front of the Department of Foreign Affairs and Trade for most of the early afternoon.

Coincidence? Maybe, but four Rio employees sitting in a Shanghai prison will no doubt be hoping it’s not.

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July 27th, 2009
05:16 AM GMT
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BEIJING, China - There's something strange these days over Beijing, something many of us here have not seen for a very long time. As I look up, there's this strange blue-looking color - at first I thought the officials may have been dying the pollution blue, or maybe I had lived here so long that I had forgotten what a sky should looked like.

I've lived in Beijing for a little less than three years, but one of our local office workers made the remark that she had never seen such beautiful, white fluffy clouds, so I knew something had changed. Don't get me wrong, this place is still polluted, but since the Beijing Olympics it seems the number of adversely polluted days is about the same as the number of really good days we had last year, in other words, not a lot.

And it might just be making the people who live here a little happier, as well. In the parks, on the streets, many Beijingers seem to be smiling a little more, perhaps a bit more relaxed.

So how did this happen? The government has been trying to clean up this city for years - building subway lines, converting buses and taxis to natural gas, and stopping cars from driving one day a week (a watered-down continuation of the tough traffic controls in place during the Olympics). Some major polluters, too, have been closed down and relocated - notably Beijing Capital Iron and Steel, the biggest single contributor to the city's air pollution problem. Now that the Olympics are over there's been a massive drop in construction, and so dust particles have been reduced. But also playing its part is the global economic slump; many of the factories which were meant to close temporarily for the Olympics have never re-opened.

An old joke was never check the stock market or government statistics to know the state of China's economy, just look to the sky. When those gray skies are blue, the economists would say, start to worry. Well, the sky has been blue a lot this year, but in a bizarre coincidence, as economic growth here started to head toward 8 percent, we seem to be getting more polluted days. I'll let you know what happens of the GDP numbers hit double digits.

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July 20th, 2009
03:42 AM GMT
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To get by in China, it’s all about relationships. In business there may be rules and regulations, but long-time China hands will tell you it can be a complicated and often frustrating experience. So to get anything done, you need to find the right person – either in government or the private sector – and you need that person to like you.

So, a little wining and dining, spending some time getting to know each other, doesn’t seem unreasonable.  How about entertaining a senior member of the Chinese team which negotiates the price of iron at a luxury box during the Olympics, as BHP did last year? It’s not illegal, but a grey area of the law, says Xianfang Ren, a senior analyst with Global Insight.

“The line between entertainment, public relations, and government relations and bribery, commercial bribery it’s kind of blurred here in China,” he said. “Especially in a country that good government relationships are important in getting deals and contracts.”

But China is accusing the mining giant Rio Tinto, and its Chinese born Australian national executive Stern Hu, of paying bribes for crucial information. At the time, Rio Tinto was involved in tense and often acrimonious negotiations over the annual price of iron ore. They are accused of stealing state secrets.

“What’s happened here, the stakes have gotten so high that they’ve trotted out their heavy artillery: ‘You’ve taken state secrets’. It’s a very vague charge and it can mean anything the party wants,” says Derek Scissors, a research fellow for Asia Economic Policy at The Heritage Foundation's Asian Studies Center.

Many within China’s iron and steel industry will say privately it is fraught with corruption. Hu is the only foreigner being detained, the rest – a small but unconfirmed number – are Chinese. The investigation may be an indication that Beijing is moving to clean up the industry, analysts say.

But with one foreign national behind bars, the Australian Prime Minister warned the world is watching. On the same day, U.S. Secretary of Commerce Gary Locke told CNN: “We need assurances and confidences that people working for multinational companies, international companies, American companies will be treated fairly.”

Derek Scissors from Heritage warns the situation can suddenly change, especially during some high-level iron ore negotiations where billions of dollars are at stake.

“The international message they’re sending is, if things get ugly enough and important enough we’re going to break the rules. We’ll follow our rules not international rules; we’re not going to respect the rights of multinational executives’,” Scissors says.

Where does this all leave the expatriate businessman or woman living in China? Many Western companies spend big on commercial research for strategic planning and marketing in China. And every business person on the ground here knows the cultural importance of guanxi – or “developing good long-term relationships” – with government officials and local Chinese business partners. Has the line of acceptable behavior in China been redrawn?

Perhaps the best advice for foreign workers in China comes from Xianfang Ren from Global Insight, “I think it is always safe for them to stick to the higher standards, the stricter standards because some multinational companies, I understand they have much stricter standards overseas.”

In other words, don’t do in China what you wouldn’t do back home – even if it seems everyone else is doing it.

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June 2nd, 2009
07:11 AM GMT
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BEIJING, China — Not long ago, the U.S. government was talking tough with accusations of currency manipulation by China. But U.S. Treasury Secretary Timothy Geithner struck a very different tone on his visit to Beijing this week.

At his speech at Peking University and with government officials, Geithner sought to reassure Beijing that the value of the dollar was safe – as are the $768 billion in U.S. treasuries Beijing owns.

The tough talk has evaporated with the spiraling credit crisis and the ballooning U.S. budget deficit of $2 trillion – nearly 13 percent of GDP. Geithner assured the Chinese that the U.S. would work to cut that deficit down to 3 percent of GDP once the economy stabilized and was on the path to recovery.

Geithner says the U.S. aims to rebalance the world economy with China exporting less and importing more – preferably from the U.S., to help reduce the massive trade surplus.

How these twin economic powers can escape this embrace, however, is another matter.

Chinese bloggers, economists and editorial writers are complaining that their government is financing U.S. hegemony and urges Beijing to stop bankrolling U.S. debt. But for the Chinese economy, there are few credible options for what to do with its massive foreign currency reserves.

Should it move that cash back to China it could trigger an appreciation of the value of the yuan. Chinese asset-buying across the globe would raise thorny political concerns. The U.S. credit market is still the best place to park its cash reserves.

For the U.S., the dance is difficult because if Chinese exports decline, so too does the cash China has to buy U.S. debt.

The bond between the two has been likened to two drunks trying to carry each other down the street, or that of a crack dealer and buyer. Regardless of metaphor, it’s a very complicated relationship – one in which the fate of the world economy hangs in the balance.

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Filed under: BusinessChinaUnited States


March 17th, 2009
03:02 AM GMT
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SHANGHAI, China - When Xiao Hongjun, a 38-year-old engineer, went looking to buy his first car he knew exactly what he wanted: a Buick.

GM China President Kevin Wale, left, attends the unveiling of the Volt sedan in Shanghai last year.
GM China President Kevin Wale, left, attends the unveiling of the Volt sedan in Shanghai last year.

"Because from my heart, I like American goods. Buick is a very good brand," he said shortly before paying almost $20,000 cash for a new car.

Xiao is not alone. First-time car buyers in China are driving this market. Helped by the government's cut in sales tax on smaller models and vehicle subsidies for farmers, sales surged 25 percent in February compared to the same time last year.

And the best selling brand in China: General Motors. The struggling American giant has held that position for the past four years. GM China President Kevin Wale is expecting another good year.

"The market unlike the rest of the world looks like it's going to be stable, and in fact we think it is going to grow a little bit, between 5 and 10 percent. We've been able to start the rollout of our new product introductions, and we've got a lot of momentum."

In many ways GM China is everything GM North America is not.

"GM's operations in China are flexible and efficient and profitable. And the things it does in China are applicable to its North American operations which are right now the opposite - they're inflexible, inefficient and losing money," says John Casesa, an auto industry analyst in New York.

He estimates that in a good year, GM makes around a billion dollars profit in China, and not only has that kept the company out of bankruptcy in recent years but makes a strong case to U.S. policy makers that the company is worth saving.

"Its Chinese experience underscores that this company, under the right conditions, can be very competitive, be competitive globally in markets outside North America and position itself for the best growth opportunities in places like China, India, and Brazil."

GM China operates new plants, wages are low, and there are no financial liabilities like health plans or pension schemes that are the main issues facing the operations in North America. But Wale argues there's more to the company's success than that.

"The secret to winning in any marketplace is to provide the products the customers want to buy, which is why we say we listen very closely to what the market wants, and we react very quickly to put it in place."

Analysts believe China will become the world's biggest car market within the next five years, and if the big auto makers are to survive, they'll need to be successful here, and General Motors is well placed. It just needs to ride out the great recession.

Xiao, the new car buyer, has no concerns.

"I am confident in America. I think that the financial crisis will pass quickly."

Watch my report on what's driving GM's success in China.

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