Description
With this detailed outline in relation to telling chinas story to global executives every week.
Telling China’s story to global executives – every week
What is Week in China?
1
W
eek in China was launched in February 2009
as a tool for the world’s business executives.
Working in exclusive partnership with global banking
giant HSBC it aims to help decisionmakers around the
world better understand China. For this elite group,
knowledge of China is becoming essential. To help our
readers form more informed views and make better
decisions about China, each week we deliver a diet of
articles that give an equal weight to both the country’s
challenges and it’s opportunities.
Written in an easy-to-read style that’s designed
to appeal to busy corporate leaders, the main focus
is business. Week in China covers more than 20
industries and has pro?led over 100 Chinese business
tycoons. But to add context, we also brief our readers
on key social and cultural trends to show how they are
shaping the debate on China’s direction. Occasionally
we also offer our readers insights on China’s long
history, from the battle strategies of Zhuge Liang to
the continuing relevance of the Opium Wars.
A value-added tool
2
W
eek in China is published in English
every Friday, typically offering readers
a 20 page digest of the week’s news. Over the
years we have built up a loyal relationship
with our subscribers. Why? Because they trust
and value our ability to ?lter and select the
news from China that matters most to them.
They know that if they spend just 30 minutes
reading Week in China each week, they can
stay up to date and also enjoy intelligent
analysis of the trends shaping Chinese
business.
Improving understanding
3
W
eek in China analyses local media, as well as
social media like Sina Weibo to generate its
content and ideas for articles. We select the most
interesting stories and themes and develop them
with our international reader in mind. Thanks to our
experienced team of international and Chinese writers
in Hong Kong, and balanced editorial tone, Week in
China acts as a bridge. Our mission is to tell China’s
story to the world’s business leaders.
Our approach can give our readers an edge. For
example, Week in China was the ?rst English language
media to report on China’s decision to consolidate
and protect its rare earths industry (issue 13, April 30,
2009). The consequences of this decision would go on
to impact manufacturers globally and lead to action at
the WTO.
Energy and Resources
D
eng Xiaoping once said: “The
Middle East has oil, while China
has rare earth.” China’s former
leader was right. China tops the
global rankings in rare earth re-
serves; accounting for 53.5% of the
world’s total. However, some local
experts reckon that at its current
pace of mining, China could totally
exhaust these reserves in 30 years.
Zhou Hongyu, a member of the
National People’s Congress, has even
submitteda proposal to China’s par-
liament for the “strict control onthe
production and export of rare
earth”. In an interview with the
China Business Herald he describes
the current industry structure inun-
flattering terms saying it is creating
“an absolute waste of resources”.
What, youmight ask, is, or are, rare
earth? Well, there are 17 of themand
they include scandium, yttriumand
promethium. It is estimated that
one in every six new inventions
rely on rare earth being used. Rare
earths have excellent physical
Week in China
3o April 2009
Why rare earth is cheap
properties, such as photoelectro-
magnetism, which can blend with
other products to enhance their
performance and quality. Steel, alu-
minium and titanium alloys all see
notable performance improve-
ments when specifically blended
with rare earths metals.
Their use inmilitary applications
is especially vital. For example, the
Patriot missile’s guidance system
uses samarium and neodymium.
The composite metal body of anF-22
requires rare earth materials too.
China could be a one-nation
OPEC where rare earths are con-
cerned, but due to a blundering in-
dustrial policy, it has no pricing
power at all. This is thanks to exces-
sive competition and over-mining.
The world market for rare
earths is about 80,000 tonnes per
year. China currently has the ca-
pacity to mine 180,000 tonnes
annually. This supply-demand im-
balance – of China’s making – has
depressed prices.
The beneficiaries are Japan and
South Korea which are buying 70%
of China’s rare earth exports at bar-
gainprices. Infact, Japanbuys 100%
of its rare earth from China. It, the
US and Europe are using the oppor-
tunity to build a strategic reserve of
rare earths at a very lowcost.
According to the latest data,
China accounts for 96% of the
world’s rare earth production, but
thanks to the chronic oversupply
problem, it has no control over
price. Its fragmentedindustry struc-
ture has, moreover, led to reckless
over-mining. According to Chen, the
deputy secretary of the Shanghai
Municipal Youth League: “The in-
discriminate excavation and over-
exploitation over the years has re-
sulted in the global proportion of
China’s recoverable reserves of rare
earth declining from more than
80%to 53.5%today.”
Zhou, the NPC member, reckons
that at the current pace of mining
“China will have more or less no rare
earth left in two to three decades,
and we will have to spend huge
amounts to import it fromabroad.”
His plan is to establish national
management agencies to regulate
the mines’ production. He also reck-
ons the (huge) number of operators
should be whittled down by state-
driven consolidation. And export
volumes should be brought down
to 30,000 tonnes (annually), which
Zhou says will “bring high profits
and allow the sustainable develop-
ment of China’s rare earth re-
sources; and ensure China retains a
long termgraspover rare earthpric-
ing power.” n
Chinese legislator’s bold plan could drive up world prices
13
Photo Source: asdfasd
Top gun: the F-22's aerodynamic bodywork relies on rare earths
An ongoing conversation
0
W
ith our weekly news cycle we track stories
over an extended period, referring back to
relevant material that we’ve mentioned before.
The advantage for readers is that this becomes
an ongoing review, as we follow a storyline from
inception in China through to its impact on an
even wider stage.
Just a few examples of themes that have
evolved over time: the emergence of local
government debt as a cause for concern after
the credit binge of 2009/10; the bitter pricing
battle between China’s steelmakers and the
international iron ore miners; the struggle for
control over the Chinese internet, and the birth
of weibo; and the growing lure of the Chinese
consumer for foreign multinationals.
Energy and Resources
R
eaders probably won’t be sur-
prised to hear that Saudi Ara-
bia, owner of the largest reserves of
oil, is also China’s biggest supplier
of crude. But a more unexpected
name ranks second on the list, An-
gola, which provided 15.8% of
China’s oil imports in 2010, accord-
ing to ChinaOilWeb.
Sudan is another big supplier,
with 6%of the total.
The rankings serve as a reminder
of Africa’s growing status as a re-
source provider to China, withboth
partners seeking to benefit from
burgeoning commercial ties.
Events in Zambia this year show
that Chinese companies canalso be-
come targets for resentment as they
dig deeper into the continent’s un-
tapped resources.
In Zambia, the story is copper.
China Non-Ferrous Metals Mining
Corporation(CNMC) has beenwork-
ing in the country since 1998, when
it bought the Chambishi mine for
its subsidiary Non-Ferrous China
Africa (NFCA).
Last month, miners at Chambishi
downedtools, the latest ina series of
stoppages at Chinese employers.
Workers have been demanding bet-
ter safety conditions, as well as im-
proved wages.
Striking is risky business, it
seems. In 2006, Chinese managers
shot sixminers at Chambishi during
a wage dispute, reports the Wall
Street Journal. Andat least 13 miners
were shot during unrest at another
Chinese-owned mine last year.
One can only wonder at the re-
sponse if foreign managers ever
Week in China
18 November 2011
Copper-bottomed excuse
took potshots at workers on a fac-
tory line withinChinese borders (al-
though admittedly such stuff rout-
tinely happened a century ago).
But what made the latest Cham-
bishi strike stand out from those
before it is that it followed the elec-
tion of new Zambian president
Michael Sata.
He was elected after a campaign
including promises to force Chinese
investors tocomply withlocal safety
regulations, as well as pay higher
wages to workers. The strike also co-
incided withthe publicationof a re-
port by Human Rights Watch, an in-
ternational NGO, that detailed
miserable conditions at Zambian
mines under Chinese bosses.
“They just consider production,
not safety,” a local miner told Hu-
manRights Watch. “If someone dies,
he can be replaced tomorrow.”
That isn’t necessarily discrimina-
tory to the Zambian workforce,
sounding like a view shared by
morethanafewminingbosses back
in China itself (although the Chi-
nese Embassy in Zambia hit back
quickly, saying that the charges
were “not faithful to the truth”).
Still, NFCAshows fewsigns of re-
lenting to Zambian demands for
higher wages, after firing more
than 1,000 workers for failing to
obey anorder to returnto work fol-
lowing the resumptionof wage ne-
gotiations, reports the Wall Street
Journal. The chief executive at
NFCA, Wang Chunlai, then told
Century Weekly that giving in on
pay would push the company to
“the verge of bankruptcy”.
The decision looked as though it
would provoke a fight between
NFCAand the newgovernment. But
Sata failed to live up to his anti-Chi-
nese rhetoric, taking a much more
conciliatory tone towards Chinese
investors at a forumlate last month.
“They are going to sort me out
and so we are going to use themto
develop,” he told attendees, before
pledging to tighten relations be-
tween the two countries. The Chi-
nese ambassador was pleased with
the newline, before blaming the in-
ternational media for stirring up
trouble in a country in which China
was “investing massive amounts of
money”. Sata’s anti-Chinese spiel
was also a thing of the past, the am-
bassador now thought. “I was the
first diplomat he called to the State
House after he was sworn in and he
said to me ‘let’s open a new page
and work together’,” he told Zam-
bia’s Daily Mail. n
Zambian leader backs down on China rhetoric after coming to power
8
Photo Source: Reuters
Friends now? Sata and China envoy
Internet and Tech
J
ack Ma evidently finds some of
his shareholders a distraction –
and not just the American internet
firm Yahoo, with whom he had a
public falling out last year.
Infact he’s planning to pay off all
the shareholders in business-to-
business platformAlibaba.com, and
delist fromthe Hong Kong Stock Ex-
change completely.
In a statement, the founder of
Alibaba Group wrote: “[Delisting
will] free the company from the
pressure of market expectations,
earnings visibility and share price
fluctuations.” Ma also acknowl-
edged that a deteriorating share
price had been causing problems:
“A depressed share price may con-
tinue to adversely impact…em-
ployee morale.”
Alibaba’s offer of HK$13.50 a
share is about 46% higher than the
closing price two weeks ago, when
trading in the firm’s shares was
halted. Most analysts expect share-
holders to accept the offer, al-
though the stock’s longer term in-
vestors won’t be as excited by the
proposal, as it only matches the
offer price of the firm’s initial pub-
lic offering in 2007.
The deal will likely set Alibaba
back $2.3 billion.
Ma also argues that the delisting
will give the group much needed
spaceas it works out anewstrategyto
turn Alibaba.comaround – one that
couldrequireheavyinvestments that
reduces short-termreturns.
Aturnaround strategy is needed.
The listed company has just re-
leased its latest quarterly results
Week in China
2 March 2012
Close, sesame
which show profit down 6%. The
number of premiumsuppliers also
fell (Alibaba charges no commission
onsales, making its money fromex-
tras such as fees charged to suppli-
ers seeking ‘premium’ status).
The portal is still in recovery
mode from a scandal related to
fraudulent sale of goods (the CEO
was forcedto resign; see WiC96) and
it has also endured a backlash from
some users unhappy with changes
to the way the site operates.
Analysts add that Alibaba.com’s
core business – charging small and
medium-sized Chinese sellers to
connect with buyers at home and
abroad – is under attack from
search engines like Google and
Baidu, says 21CN Business Herald.
That’s because many sellers now
choose to set up their own websites
and pay search engines to promote
them prominently in internet
search queries. Other business-to-
business platforms similar to Al-
ibaba.com (like HC360.com and
Global Sources) have also recorded
diminishing sales.
There may also be other reasons
why Ma is taking Alibaba.com pri-
vate. The plancomes at a time when
he has also been in negotiations to
buy back shares fromYahoo, which
owns a 40% stake in parent com-
pany Alibaba Group (see WiC125). So
far, the dialogue has proved fruit-
less. But analysts reckonthat the pri-
vatisationof Alibaba.com– the only
division in the group to be listed –
could help facilitate further discus-
sion with Yahoo.
“By taking the unit private, it will
make it more flexible for the parent
company to reorganise its assets,
and this will be helpful to the dis-
cussions,” says Dundas Deng, anan-
alyst at Guotai Junan Securities.
Other speculation is that last
week’s move is the first steptowards
a wider flotation of the whole Al-
ibaba Group. Though the company
has denied the rumour, commen-
tors say such a listing would attract
massive interest frominvestors ex-
cited about buying into China’s
leading e-commerce specialist. The
group’s portfolio includes the
highly successful shopping site
Taobao (see WiC94).
“The fact that all of Alibaba’s dif-
ferent pieces are centred around its
core e-commerce business may
make such a parent-level IPO a
smart move, as this could be a rare
case where all the pieces collectively
might get a better price than the
sum of the individual parts,” says
Doug Young on his Business Blog.
Time will tell what Ma has in
mind. “Ma is a very clever chess
player. Whether listing as a whole
or as part of the organisation, what
he is doing now is setting up the
three pieces (Alibaba.com, Taobao,
and Alipay) so that the whole com-
pany will growsmoothly and strate-
gically,” says Ge Xuehui, partner of
Chinese Economic and Investment
Consultants. I
Ma offers to take Alibaba.comprivate
6
Photo Source: Reuters
Taking stock: Ma to delist
A powerful, growing readership
4
W
eek in China has built a powerful
subscriber based of around 18,500
HSBC corporate and investor clients
and banking staff. This distribution is
increasing rapidly, thanks both to the
growing interest in the Chinese economy
and HSBC’s client promotional activities.
For example, the subscriber base grew over
100% in 2011.
Week in China now has subscribers in 92
countries, with the three biggest audiences
being in the UK, the US and Hong Kong.
Our subscribers are primarily executives
at international companies and fund
management ?rms.
Australia
3% Canada
1%
China
10%
Germany
1%
Hong Kong
19%
India
3%
Singapore
3%
UAE
1%
UK
19%
US
12%
Others
28%
Geographical
breakdown of
subscribers
A digital magazine
5
W
eek in China is available as a digital
magazine, published in colour each week as
a PDF. Additionally, it can be read via an iPad App,
or in a format designed for smartphones.
Our website, www.weekinchina.com, contains
over 2,500 articles, making it the go-to place for
our subscribers to enhance their China knowledge
and check back issues. The user-friendly site
features over 30 categories – encompassing
industries as diverse as property, healthcare and
aviation. It also allows subscribers to customise
their homepage and to use our company index
to read all the articles about Chinese ?rms that
interest them.
A research resource
6
Three times a year Week in China publishes a Focus issue, an in-depth report on a big theme. Examples of these include:
1 From Made in China to Made for China
A history looking at how China built up
its manufacturing prowess in the wake
of Deng Xiaoping’s ‘Opening up and
reform’; and then how in recent years
China’s own consumer revolution has
occurred, making China a key market for
foreign ?rms.
2 The Rise of the RMB
China’s currency, the renminbi,
is rapidly internationalising, and
becoming a bigger part of world
trade. How has this happened so fast
and what hurdles stand in the way of
the yuan displacing the dollar as the
world’s reserve currency?
3 The Magni?cent Seven
A look at seven ?rms that
managed to enter mainland
China crack its fast-growing
consumer market and why: Coke,
P&G, Richemont, Tai Fook, Tingyi,
Volkswagen, and Yum Brands.
4 China Eyes Australia
For both nations, this bilateral
relationship is increasingly
vital. We look at what Australia
has that China wants and why
Chinese economic growth and
that of Australia are increasingly
intertwined.
Writing the book on China
7
I
n 2011 we published a book, China’s
Tycoons which featured pro?les and
photographs of the nation’s most successful
entrepreneurs. A huge success with
subscribers, it told the tales of individuals
– but collectively it narrated why China’s
economy has grown so fast in the past three
decades.
The foreword was written by Stuart
Gulliver, CEO of HSBC Group who noted how
many of these featured started with “virtually
nothing” but have built businesses that span
China and increasingly the globe. “I hope
China’s Tycoons will give readers a ?avour of
both China’s achievements and its potential,”
he wrote.
The original book contained 75 pro?les.
The second edition of the book contains 100,
providing a unique insight into Chinese
business for foreign executives and investors.
How can I subscribe?
8
Subscribing to Week in China is simple
and straightforward. As a digital product,
all registrations can be done online,
with the process taking less than a minute.
For HSBC staff, the registration page can
be found at this URL:
www.weekinchina.com/welcome/staff/
HSBC clients can sign-up (for FREE) using this URL:
www.weekinchina.com/welcome/
doc_844071238.pdf
With this detailed outline in relation to telling chinas story to global executives every week.
Telling China’s story to global executives – every week
What is Week in China?
1
W
eek in China was launched in February 2009
as a tool for the world’s business executives.
Working in exclusive partnership with global banking
giant HSBC it aims to help decisionmakers around the
world better understand China. For this elite group,
knowledge of China is becoming essential. To help our
readers form more informed views and make better
decisions about China, each week we deliver a diet of
articles that give an equal weight to both the country’s
challenges and it’s opportunities.
Written in an easy-to-read style that’s designed
to appeal to busy corporate leaders, the main focus
is business. Week in China covers more than 20
industries and has pro?led over 100 Chinese business
tycoons. But to add context, we also brief our readers
on key social and cultural trends to show how they are
shaping the debate on China’s direction. Occasionally
we also offer our readers insights on China’s long
history, from the battle strategies of Zhuge Liang to
the continuing relevance of the Opium Wars.
A value-added tool
2
W
eek in China is published in English
every Friday, typically offering readers
a 20 page digest of the week’s news. Over the
years we have built up a loyal relationship
with our subscribers. Why? Because they trust
and value our ability to ?lter and select the
news from China that matters most to them.
They know that if they spend just 30 minutes
reading Week in China each week, they can
stay up to date and also enjoy intelligent
analysis of the trends shaping Chinese
business.
Improving understanding
3
W
eek in China analyses local media, as well as
social media like Sina Weibo to generate its
content and ideas for articles. We select the most
interesting stories and themes and develop them
with our international reader in mind. Thanks to our
experienced team of international and Chinese writers
in Hong Kong, and balanced editorial tone, Week in
China acts as a bridge. Our mission is to tell China’s
story to the world’s business leaders.
Our approach can give our readers an edge. For
example, Week in China was the ?rst English language
media to report on China’s decision to consolidate
and protect its rare earths industry (issue 13, April 30,
2009). The consequences of this decision would go on
to impact manufacturers globally and lead to action at
the WTO.
Energy and Resources
D
eng Xiaoping once said: “The
Middle East has oil, while China
has rare earth.” China’s former
leader was right. China tops the
global rankings in rare earth re-
serves; accounting for 53.5% of the
world’s total. However, some local
experts reckon that at its current
pace of mining, China could totally
exhaust these reserves in 30 years.
Zhou Hongyu, a member of the
National People’s Congress, has even
submitteda proposal to China’s par-
liament for the “strict control onthe
production and export of rare
earth”. In an interview with the
China Business Herald he describes
the current industry structure inun-
flattering terms saying it is creating
“an absolute waste of resources”.
What, youmight ask, is, or are, rare
earth? Well, there are 17 of themand
they include scandium, yttriumand
promethium. It is estimated that
one in every six new inventions
rely on rare earth being used. Rare
earths have excellent physical
Week in China
3o April 2009
Why rare earth is cheap
properties, such as photoelectro-
magnetism, which can blend with
other products to enhance their
performance and quality. Steel, alu-
minium and titanium alloys all see
notable performance improve-
ments when specifically blended
with rare earths metals.
Their use inmilitary applications
is especially vital. For example, the
Patriot missile’s guidance system
uses samarium and neodymium.
The composite metal body of anF-22
requires rare earth materials too.
China could be a one-nation
OPEC where rare earths are con-
cerned, but due to a blundering in-
dustrial policy, it has no pricing
power at all. This is thanks to exces-
sive competition and over-mining.
The world market for rare
earths is about 80,000 tonnes per
year. China currently has the ca-
pacity to mine 180,000 tonnes
annually. This supply-demand im-
balance – of China’s making – has
depressed prices.
The beneficiaries are Japan and
South Korea which are buying 70%
of China’s rare earth exports at bar-
gainprices. Infact, Japanbuys 100%
of its rare earth from China. It, the
US and Europe are using the oppor-
tunity to build a strategic reserve of
rare earths at a very lowcost.
According to the latest data,
China accounts for 96% of the
world’s rare earth production, but
thanks to the chronic oversupply
problem, it has no control over
price. Its fragmentedindustry struc-
ture has, moreover, led to reckless
over-mining. According to Chen, the
deputy secretary of the Shanghai
Municipal Youth League: “The in-
discriminate excavation and over-
exploitation over the years has re-
sulted in the global proportion of
China’s recoverable reserves of rare
earth declining from more than
80%to 53.5%today.”
Zhou, the NPC member, reckons
that at the current pace of mining
“China will have more or less no rare
earth left in two to three decades,
and we will have to spend huge
amounts to import it fromabroad.”
His plan is to establish national
management agencies to regulate
the mines’ production. He also reck-
ons the (huge) number of operators
should be whittled down by state-
driven consolidation. And export
volumes should be brought down
to 30,000 tonnes (annually), which
Zhou says will “bring high profits
and allow the sustainable develop-
ment of China’s rare earth re-
sources; and ensure China retains a
long termgraspover rare earthpric-
ing power.” n
Chinese legislator’s bold plan could drive up world prices
13
Photo Source: asdfasd
Top gun: the F-22's aerodynamic bodywork relies on rare earths
An ongoing conversation
0
W
ith our weekly news cycle we track stories
over an extended period, referring back to
relevant material that we’ve mentioned before.
The advantage for readers is that this becomes
an ongoing review, as we follow a storyline from
inception in China through to its impact on an
even wider stage.
Just a few examples of themes that have
evolved over time: the emergence of local
government debt as a cause for concern after
the credit binge of 2009/10; the bitter pricing
battle between China’s steelmakers and the
international iron ore miners; the struggle for
control over the Chinese internet, and the birth
of weibo; and the growing lure of the Chinese
consumer for foreign multinationals.
Energy and Resources
R
eaders probably won’t be sur-
prised to hear that Saudi Ara-
bia, owner of the largest reserves of
oil, is also China’s biggest supplier
of crude. But a more unexpected
name ranks second on the list, An-
gola, which provided 15.8% of
China’s oil imports in 2010, accord-
ing to ChinaOilWeb.
Sudan is another big supplier,
with 6%of the total.
The rankings serve as a reminder
of Africa’s growing status as a re-
source provider to China, withboth
partners seeking to benefit from
burgeoning commercial ties.
Events in Zambia this year show
that Chinese companies canalso be-
come targets for resentment as they
dig deeper into the continent’s un-
tapped resources.
In Zambia, the story is copper.
China Non-Ferrous Metals Mining
Corporation(CNMC) has beenwork-
ing in the country since 1998, when
it bought the Chambishi mine for
its subsidiary Non-Ferrous China
Africa (NFCA).
Last month, miners at Chambishi
downedtools, the latest ina series of
stoppages at Chinese employers.
Workers have been demanding bet-
ter safety conditions, as well as im-
proved wages.
Striking is risky business, it
seems. In 2006, Chinese managers
shot sixminers at Chambishi during
a wage dispute, reports the Wall
Street Journal. Andat least 13 miners
were shot during unrest at another
Chinese-owned mine last year.
One can only wonder at the re-
sponse if foreign managers ever
Week in China
18 November 2011
Copper-bottomed excuse
took potshots at workers on a fac-
tory line withinChinese borders (al-
though admittedly such stuff rout-
tinely happened a century ago).
But what made the latest Cham-
bishi strike stand out from those
before it is that it followed the elec-
tion of new Zambian president
Michael Sata.
He was elected after a campaign
including promises to force Chinese
investors tocomply withlocal safety
regulations, as well as pay higher
wages to workers. The strike also co-
incided withthe publicationof a re-
port by Human Rights Watch, an in-
ternational NGO, that detailed
miserable conditions at Zambian
mines under Chinese bosses.
“They just consider production,
not safety,” a local miner told Hu-
manRights Watch. “If someone dies,
he can be replaced tomorrow.”
That isn’t necessarily discrimina-
tory to the Zambian workforce,
sounding like a view shared by
morethanafewminingbosses back
in China itself (although the Chi-
nese Embassy in Zambia hit back
quickly, saying that the charges
were “not faithful to the truth”).
Still, NFCAshows fewsigns of re-
lenting to Zambian demands for
higher wages, after firing more
than 1,000 workers for failing to
obey anorder to returnto work fol-
lowing the resumptionof wage ne-
gotiations, reports the Wall Street
Journal. The chief executive at
NFCA, Wang Chunlai, then told
Century Weekly that giving in on
pay would push the company to
“the verge of bankruptcy”.
The decision looked as though it
would provoke a fight between
NFCAand the newgovernment. But
Sata failed to live up to his anti-Chi-
nese rhetoric, taking a much more
conciliatory tone towards Chinese
investors at a forumlate last month.
“They are going to sort me out
and so we are going to use themto
develop,” he told attendees, before
pledging to tighten relations be-
tween the two countries. The Chi-
nese ambassador was pleased with
the newline, before blaming the in-
ternational media for stirring up
trouble in a country in which China
was “investing massive amounts of
money”. Sata’s anti-Chinese spiel
was also a thing of the past, the am-
bassador now thought. “I was the
first diplomat he called to the State
House after he was sworn in and he
said to me ‘let’s open a new page
and work together’,” he told Zam-
bia’s Daily Mail. n
Zambian leader backs down on China rhetoric after coming to power
8
Photo Source: Reuters
Friends now? Sata and China envoy
Internet and Tech
J
ack Ma evidently finds some of
his shareholders a distraction –
and not just the American internet
firm Yahoo, with whom he had a
public falling out last year.
Infact he’s planning to pay off all
the shareholders in business-to-
business platformAlibaba.com, and
delist fromthe Hong Kong Stock Ex-
change completely.
In a statement, the founder of
Alibaba Group wrote: “[Delisting
will] free the company from the
pressure of market expectations,
earnings visibility and share price
fluctuations.” Ma also acknowl-
edged that a deteriorating share
price had been causing problems:
“A depressed share price may con-
tinue to adversely impact…em-
ployee morale.”
Alibaba’s offer of HK$13.50 a
share is about 46% higher than the
closing price two weeks ago, when
trading in the firm’s shares was
halted. Most analysts expect share-
holders to accept the offer, al-
though the stock’s longer term in-
vestors won’t be as excited by the
proposal, as it only matches the
offer price of the firm’s initial pub-
lic offering in 2007.
The deal will likely set Alibaba
back $2.3 billion.
Ma also argues that the delisting
will give the group much needed
spaceas it works out anewstrategyto
turn Alibaba.comaround – one that
couldrequireheavyinvestments that
reduces short-termreturns.
Aturnaround strategy is needed.
The listed company has just re-
leased its latest quarterly results
Week in China
2 March 2012
Close, sesame
which show profit down 6%. The
number of premiumsuppliers also
fell (Alibaba charges no commission
onsales, making its money fromex-
tras such as fees charged to suppli-
ers seeking ‘premium’ status).
The portal is still in recovery
mode from a scandal related to
fraudulent sale of goods (the CEO
was forcedto resign; see WiC96) and
it has also endured a backlash from
some users unhappy with changes
to the way the site operates.
Analysts add that Alibaba.com’s
core business – charging small and
medium-sized Chinese sellers to
connect with buyers at home and
abroad – is under attack from
search engines like Google and
Baidu, says 21CN Business Herald.
That’s because many sellers now
choose to set up their own websites
and pay search engines to promote
them prominently in internet
search queries. Other business-to-
business platforms similar to Al-
ibaba.com (like HC360.com and
Global Sources) have also recorded
diminishing sales.
There may also be other reasons
why Ma is taking Alibaba.com pri-
vate. The plancomes at a time when
he has also been in negotiations to
buy back shares fromYahoo, which
owns a 40% stake in parent com-
pany Alibaba Group (see WiC125). So
far, the dialogue has proved fruit-
less. But analysts reckonthat the pri-
vatisationof Alibaba.com– the only
division in the group to be listed –
could help facilitate further discus-
sion with Yahoo.
“By taking the unit private, it will
make it more flexible for the parent
company to reorganise its assets,
and this will be helpful to the dis-
cussions,” says Dundas Deng, anan-
alyst at Guotai Junan Securities.
Other speculation is that last
week’s move is the first steptowards
a wider flotation of the whole Al-
ibaba Group. Though the company
has denied the rumour, commen-
tors say such a listing would attract
massive interest frominvestors ex-
cited about buying into China’s
leading e-commerce specialist. The
group’s portfolio includes the
highly successful shopping site
Taobao (see WiC94).
“The fact that all of Alibaba’s dif-
ferent pieces are centred around its
core e-commerce business may
make such a parent-level IPO a
smart move, as this could be a rare
case where all the pieces collectively
might get a better price than the
sum of the individual parts,” says
Doug Young on his Business Blog.
Time will tell what Ma has in
mind. “Ma is a very clever chess
player. Whether listing as a whole
or as part of the organisation, what
he is doing now is setting up the
three pieces (Alibaba.com, Taobao,
and Alipay) so that the whole com-
pany will growsmoothly and strate-
gically,” says Ge Xuehui, partner of
Chinese Economic and Investment
Consultants. I
Ma offers to take Alibaba.comprivate
6
Photo Source: Reuters
Taking stock: Ma to delist
A powerful, growing readership
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Writing the book on China
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I
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The original book contained 75 pro?les.
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