A big difference between doing research back home in Los Angeles and here in China is that I feel like I'm on the clock 24 hours a day. Not that I have had much fun over the past five years that I've been attending UCLA, but when I'm away from home, there's this constant feeling that, for every moment of fun or relaxation I may have here, that's one moment longer that I will be away from home.
I guess all of this is to say that, I've been neglecting my blog, and I feel a little guilty about it -- but not so guilty that I'm going to start posting frequently again. Which is a shame because there have been so many interesting events for which I have started outlining blog posts in my head only to decide later that my time would be better spent reading an article, reviewing my field notes or preparing for my next interview.
One recent topic of interest for which I would love to write a much longer analytical article has been the reaction by various governments to the H1N1 swine flu. The contrast between the responses of the US and Chinese governments (including Hong Kong) could not be more stark.
Whereas China and Hong Kong are checking temperatures on planes before allowing people to disembark, and forcing anyone with an elevated temperature (as well as anyone who has been in close proximity to them) into quarantine, the US government has done very little.
While I have an uneducated opinion about the efficacy and necessity of various preventative measures being taken in China and Hong Kong, the purpose of my writing about this topic is not to criticize, but to point out the huge disparity in reactions.
Back in 2003, China's reaction to SARS was widely criticized, but the criticism was not about what China did to prevent SARS. Rather, it was about what local Chinese officials did to cover up the presence of the disease. China's actions now to prevent the spread of H1N1, a disease only slightly more fatal than common seasonal flu, appear to be intended, if nothing else, to demonstrate to the Chinese people that their government can indeed protect them from disease. And the complaints about quarantine that I have been reading online are coming primarily from foreigners (i.e. citizens of countries other than China) who have been forced to waste time and money confined in Chinese hotels. Commentators in China and Hong Kong seem (from my perspective) fairly supportive of their governments' respective actions to protect them.
The US government, on the other hand, is behaving pretty much the same as during the SARS outbreak of 2003. Though SARS was a far more deadly disease, in both cases, the US government basically assessed the risks and allowed American citizens to make their own decisions as to whether they should travel. Only today did the US government issue a travel warning, and ironically, the warning was not about the dangers of contracting swine flu, but of the risks of being quarantined by the Chinese government which does not reimburse lost travel expenses.
While I know there are certainly exceptions, my guess is that most Chinese and American citizens reading this post are thinking "well, of course, our government is doing exactly what we expect of them!". Chinese aren't complaining about quarantine, and Americans aren't begging for more protection. In the end, whether democratic or not (and depending on whether it threatens their hold on power), governments tend to run day-to-day operations in ways that they think will best serve the interests and wishes of their citizens.
In a few weeks, I will be meeting my wife, whom I haven't seen in over two months, in Hong Kong. If you happen to see a mushroom cloud over HK during that time, that will be my head exploding due to one or both of us being quarantined by the nanny state. :-)
Saturday, June 20, 2009
Thursday, June 4, 2009
So Who IS Buying Hummer?
Short answer: no one really knows, and those who do aren't saying much.
The name of the company that appears to be ready to take Hummer off GM's hands is 四川腾中重工机械有限公司, or Sichuan Tengzhong Heavy Industrial Machinery Company, Ltd. Their company website is located here, but it has periodically been down ever since the announcement. Apparently a lot of people are curious about this company.
I was fortunate enough to catch the website working a few minutes ago, but I'll save you the time. The site (both Chinese and English versions) has only the bare minimum of information about the company. It only tells what businesses they are in, but does not discuss the company's ownership.
Here is a timeline of the company's brief history from the site:
I also searched the ISI Emerging Markets database. Most, but not all, of the articles (in English and Chinese) refer to Tengzhong as "private". None of them even suggest that it is controlled by a state-owned entity.
This story I found on PR Newswire lists the Brunswick Group as Tengzhong's PR contacts, and even lists names, phone numbers and email addresses. (I'm not suggesting that you contact them, but I'm not telling you not to either.)
A few people I have corresponded with have suggested that it has "military connections", but all I can find are claims that it makes equipment for the military. By that standard, we could also say that Boeing has "military connections".
Today, journalists from the Wall Street Journal actually visited the site of Tongzheng, about an hour south of Chengdu in Sichuan Province. Aside from a few pictures, their story only adds to the mystery about this company.
From all I can tell, this is a company that does not appear to want any publicity. However, there are about 800 workers in Shreveport, LA, who are probably eager to know more about their new bosses.
Anyway, the point could prove to be moot. China's central government still has yet to approve the purchase, and both SASAC and the NDRC have warned Chinese companies not to buy foreign assets, or at least to be careful about it.
The name of the company that appears to be ready to take Hummer off GM's hands is 四川腾中重工机械有限公司, or Sichuan Tengzhong Heavy Industrial Machinery Company, Ltd. Their company website is located here, but it has periodically been down ever since the announcement. Apparently a lot of people are curious about this company.
I was fortunate enough to catch the website working a few minutes ago, but I'll save you the time. The site (both Chinese and English versions) has only the bare minimum of information about the company. It only tells what businesses they are in, but does not discuss the company's ownership.
Here is a timeline of the company's brief history from the site:
I did some additional searching, and I am quite certain that Tengzhong is not listed on any stockmarkets. I searched Shanghai, Shenzhen and Hong Kong exchanges, and there is no company with either 腾中 or the pinyin equivalent.
- In early 2005, the company acquired Sichuan Changdian Electric Co., Ltd and renamed it Tengzhong Electrics Co., Ltd. Sichuan Changdian Electric Co., Ltd was established in 1965.
- In 2006, the Company was renamed Sichuan Tengzhong Machinery Manufacturing Co., Ltd.
- In 2006, the Company acquired Guangyuan Construction Machinery Group which was established in 1958.
- In 2007, the Company established an additional production base in Xinjin, Sichuan. The Company was again renamed Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd.
- In 2008, the Company acquired Xinjin Road Construction Machinery Factory from China Communication Construction Corp.
- In 2008, the Company entered into the energy equipment manufacturing business.
I also searched the ISI Emerging Markets database. Most, but not all, of the articles (in English and Chinese) refer to Tengzhong as "private". None of them even suggest that it is controlled by a state-owned entity.
This story I found on PR Newswire lists the Brunswick Group as Tengzhong's PR contacts, and even lists names, phone numbers and email addresses. (I'm not suggesting that you contact them, but I'm not telling you not to either.)
A few people I have corresponded with have suggested that it has "military connections", but all I can find are claims that it makes equipment for the military. By that standard, we could also say that Boeing has "military connections".
Today, journalists from the Wall Street Journal actually visited the site of Tongzheng, about an hour south of Chengdu in Sichuan Province. Aside from a few pictures, their story only adds to the mystery about this company.
From all I can tell, this is a company that does not appear to want any publicity. However, there are about 800 workers in Shreveport, LA, who are probably eager to know more about their new bosses.
Anyway, the point could prove to be moot. China's central government still has yet to approve the purchase, and both SASAC and the NDRC have warned Chinese companies not to buy foreign assets, or at least to be careful about it.
Tuesday, June 2, 2009
Who's Not Buying Hummer / Chery's New not-so-Private Equity
Who's Not Buying Hummer
News surfaced today that GM has finally found a buyer for its Hummer division. The buyer is Sichuan Tengzhong Heavy Industrial Machinery, and the undisclosed price is rumored to be in the neighborhood of $500 million.
This was preceded by the improbable story back in February that the previously unheard of Sichuan Auto was rumored to be the buyer of Hummer. The management of Sichuan Auto (not affiliated with Sichuan Tengzhong) appeared to have been genuinely perplexed as to how their company, with only $146 million in assets at the time, could possibly buy Hummer.
Now it would seem that a leaker close to the story apparently got the Sichuan part right, but not the actual company that would ultimately buy Hummer.
How this company will manage to make Hummers conform to China's newly proposed fuel economy standards is a mystery.
Chery's New Not-So-Private Equity
Let's get this out of the way first. Chery is NOT a private company. Its controlling shareholder is the City of Wuhu in Anhui Province. Its next largest shareholder is Anhui Province.
Perhaps a lot of journalists continue to confuse Chery with a private company because, according to some people I have talked to, it "acts like a private company". Well, from what I have observed, even that notion is highly debatable.
Without further belaboring the point, I'll move on to today's news which is that Chery has just received two billion yuan ($293 million) in "private equity" funding.
It has been no secret that Chery is dying to do an initial public offering (IPO) in recent years, but for whatever reason, continues to be kept out of the equity markets. Last December, China's Export-Import Bank provided Chery with 10 billion yuan in loans. This was presumably because Chery is China's largest exporter of cars.
Today's additional two billion yuan in funding comes from a "private equity" consortium that includes Bohai Industrial Investment Fund Management and CDH Investments. How much of these funds are actually private? Well, we're not supposed to know that, but we do know that the majority owner of the Bohai Management company is none other than the Bank of China. And CDH has raised a large portion of its funding from China's Social Security Fund.
This equity is hardly "private".
News surfaced today that GM has finally found a buyer for its Hummer division. The buyer is Sichuan Tengzhong Heavy Industrial Machinery, and the undisclosed price is rumored to be in the neighborhood of $500 million.
This was preceded by the improbable story back in February that the previously unheard of Sichuan Auto was rumored to be the buyer of Hummer. The management of Sichuan Auto (not affiliated with Sichuan Tengzhong) appeared to have been genuinely perplexed as to how their company, with only $146 million in assets at the time, could possibly buy Hummer.
Now it would seem that a leaker close to the story apparently got the Sichuan part right, but not the actual company that would ultimately buy Hummer.
How this company will manage to make Hummers conform to China's newly proposed fuel economy standards is a mystery.
Chery's New Not-So-Private Equity
Let's get this out of the way first. Chery is NOT a private company. Its controlling shareholder is the City of Wuhu in Anhui Province. Its next largest shareholder is Anhui Province.
Perhaps a lot of journalists continue to confuse Chery with a private company because, according to some people I have talked to, it "acts like a private company". Well, from what I have observed, even that notion is highly debatable.
Without further belaboring the point, I'll move on to today's news which is that Chery has just received two billion yuan ($293 million) in "private equity" funding.
It has been no secret that Chery is dying to do an initial public offering (IPO) in recent years, but for whatever reason, continues to be kept out of the equity markets. Last December, China's Export-Import Bank provided Chery with 10 billion yuan in loans. This was presumably because Chery is China's largest exporter of cars.
Today's additional two billion yuan in funding comes from a "private equity" consortium that includes Bohai Industrial Investment Fund Management and CDH Investments. How much of these funds are actually private? Well, we're not supposed to know that, but we do know that the majority owner of the Bohai Management company is none other than the Bank of China. And CDH has raised a large portion of its funding from China's Social Security Fund.
This equity is hardly "private".
Saturday, May 30, 2009
What Happened to GM's China Export Plans?
A couple of weeks ago, GM let the world know that it was planning to export small, China-made autos to the US beginning in 2011. At the time, I speculated that this announcement was merely a tactic being used to pressure the UAW in negotiations.
Today, the Financial Times is reporting that GM is now planning to build its small car in the US. This is apparently a "concession" it made to the UAW.
Today, the Financial Times is reporting that GM is now planning to build its small car in the US. This is apparently a "concession" it made to the UAW.
My friend Andrew Hupert, an expert in negotiation, would have spotted GM's straw man from a mile away. Fortunately for GM, the UAW didn't.Ron Gettelfinger, the UAW’s president, told PBS on Thursday that the union had put pressure on GM and on the administration to block GM’s plans to build the small cars in China.
GM’s 60,000 union members were set on Thursday to approve modifications to their 2007 contract, including fewer holidays, an end to cost-of-living increases and more flexible work rules.
Mr Gettelfinger said: “I have a lot of misgivings about it. But, look, we did the absolute best that we could.”
Geely vs Chery? It's not so simple.
The car buffs at China Car Times, one of my favorite sites for learning about the latest car models being manufactured and sold in China, have posted an editorial pitting Geely against Chery and proclaiming Geely the winner.
(Geely and Chery are two of China's largest manufacturers of domestic brands.)
While I'm not an expert on the inner-workings of either company, I have seen the same profusion of models that erupted from both companies at this year's Shanghai Auto Show. China Car Times (CCT), however, strongly criticizes Chery for this shortcoming, while failing to recognize that Geely is guilty of the same problem. (Both companies are criticized in this article at Automotive News China).
Furthermore, it isn't clear why CCT finds Geely so fascinating, aside from its praise of Geely R&D Chief, Frank Zhao. Perhaps I should know who Frank Zhao is, but CCT could have at least explained to us why this gives them an advantage. Who is Chery's R&D Chief, and why is he (or she? -- who am I kidding, it's a he) inferior to Mr. Zhao?
One of the commenters to CCT's article (for whom CCT obviously bears no responsibility) quite astutely suggests that Geely's advantage lies in the fact that it is private, whereas Chery is state-owned. And as we all know (a phrase that should make any reader cringe) the private sector is better at running businesses than the government.
I would like to suggest that, in China, the lines between public and private are not are as clear as they are in many other countries. Yes, China does have a nominally "private" sector, but in reality, nothing in China is truly "private". In China, the government still owns all land, and is therefore everyone's landlord.
Li Shufu may be Geely's controlling shareholder, but Geely is just as beholden to the government of Zhejiang Province as Chery is to the City of Wuhu. Yes, Geely has more flexibility, not because it is private, but because it is headquartered in one of China's richest provinces. The government of Zhejiang doesn't care where Geely builds factories, but if it did, they would all be built in Zhejiang. Geely would have little choice in the matter.
BYD is also private, and it has factories outside of its home city of Shenzhen. Shenzhen, as it happens, is China's richest city.
Great Wall is also private, and all of its factories are in its home province of Hebei. Why? Though I cannot prove this, I would suggest that it is because Hebei needs those factories there. Hebei's GDP per capita is roughly half that of Geely's home province of Zhejiang.
If one is going to study cars in China, it is simply impossible to ignore the politics. I suppose the same goes for the US too -- since GM is now an SOE.
(Geely and Chery are two of China's largest manufacturers of domestic brands.)
While I'm not an expert on the inner-workings of either company, I have seen the same profusion of models that erupted from both companies at this year's Shanghai Auto Show. China Car Times (CCT), however, strongly criticizes Chery for this shortcoming, while failing to recognize that Geely is guilty of the same problem. (Both companies are criticized in this article at Automotive News China).
Furthermore, it isn't clear why CCT finds Geely so fascinating, aside from its praise of Geely R&D Chief, Frank Zhao. Perhaps I should know who Frank Zhao is, but CCT could have at least explained to us why this gives them an advantage. Who is Chery's R&D Chief, and why is he (or she? -- who am I kidding, it's a he) inferior to Mr. Zhao?
One of the commenters to CCT's article (for whom CCT obviously bears no responsibility) quite astutely suggests that Geely's advantage lies in the fact that it is private, whereas Chery is state-owned. And as we all know (a phrase that should make any reader cringe) the private sector is better at running businesses than the government.
I would like to suggest that, in China, the lines between public and private are not are as clear as they are in many other countries. Yes, China does have a nominally "private" sector, but in reality, nothing in China is truly "private". In China, the government still owns all land, and is therefore everyone's landlord.
Li Shufu may be Geely's controlling shareholder, but Geely is just as beholden to the government of Zhejiang Province as Chery is to the City of Wuhu. Yes, Geely has more flexibility, not because it is private, but because it is headquartered in one of China's richest provinces. The government of Zhejiang doesn't care where Geely builds factories, but if it did, they would all be built in Zhejiang. Geely would have little choice in the matter.
BYD is also private, and it has factories outside of its home city of Shenzhen. Shenzhen, as it happens, is China's richest city.
Great Wall is also private, and all of its factories are in its home province of Hebei. Why? Though I cannot prove this, I would suggest that it is because Hebei needs those factories there. Hebei's GDP per capita is roughly half that of Geely's home province of Zhejiang.
If one is going to study cars in China, it is simply impossible to ignore the politics. I suppose the same goes for the US too -- since GM is now an SOE.
Wednesday, May 27, 2009
Shanghai Lagniappe
A "little something extra" today... Three random thoughts from Shanghai...
Historical Monument in Xintiandi
This morning I had a revealing and fascinating research interview at a location in Shanghai's swanky Xintiandi area. For those who don't already know, Xintiandi (新天地, or "new heaven and earth") is a relatively new development in the former foreign concession area of Shanghai where old Shanghai-style buildings have been completely renovated and turned into a very interesting collection of shops and restaurants. Some Chinese friends introduced it to me as a place where I can go to "have a drink with other foreigners" -- which is not exactly something I've been looking for, but it's nice to know.
While strolling around I came across this sign that seemed quite ironic to me. It says this is the location of the first meeting of the People's Congress of the Chinese Communist Party -- right here in the middle of this monument to capitalism and possibly the largest concentration of foreigners in all of China.
Surely I am not the first person to make note of this, so if you're already aware of it, then please feel free to chalk it up to yet more inane comments from yet another white-dude blogger. :-)
Taxi Advertising
Last evening someone posted a link in Twitter to this WSJ article about seat-back advertising in Shanghai. On the way back to my hotel from Xintiandi today, I was (un)fortunate to grab a taxi with one of these things. It's a small LCD video screen running nothing but constant ads.
As with the other times I have seen these things, I watched for about ten seconds before hitting the mute button. It strikes me that this model is all ads and no content. If the taxi offered Tivo, the screen would remain blank. I'm not an advertising executive, but I am a human, so I think I have a valid opinion on this. Then again, maybe it was intended for the average Shanghai resident who has seen the city so many times that they would rather watch ads than look out the window.
Yes, I'm still stuck on autos...
In yet another Twitter posting I saw today, someone put up a link to this Steve Clemons blog entry at The Washington Note. In this post, Steve tells about his visit to the BYD factory in Shenzhen and praises their development of plug-in hybrids.
Though I think he is a little too optimistic in his assessment of BYD's (and China's) new energy vehicle capabilities (I have noted my pessimism in a previous post) he is one of the few people who dares to mention the unthinkable, an increase in the US federal gasoline tax so that gasoline never drops below $4 per gallon. Since I don't intend to run for President, I would like to say that I agree with this proposal -- particularly if it is phased in over a few years and the proceeds are 100% devoted to local public transportation alternatives.
As for my assessment of China's new energy vehicle development, I have still yet to meet any auto insiders here who are as optimistic as foreigners are, but I am still fully supportive of anyone who is pouring money into this important effort.
Historical Monument in Xintiandi
This morning I had a revealing and fascinating research interview at a location in Shanghai's swanky Xintiandi area. For those who don't already know, Xintiandi (新天地, or "new heaven and earth") is a relatively new development in the former foreign concession area of Shanghai where old Shanghai-style buildings have been completely renovated and turned into a very interesting collection of shops and restaurants. Some Chinese friends introduced it to me as a place where I can go to "have a drink with other foreigners" -- which is not exactly something I've been looking for, but it's nice to know.
While strolling around I came across this sign that seemed quite ironic to me. It says this is the location of the first meeting of the People's Congress of the Chinese Communist Party -- right here in the middle of this monument to capitalism and possibly the largest concentration of foreigners in all of China.
Surely I am not the first person to make note of this, so if you're already aware of it, then please feel free to chalk it up to yet more inane comments from yet another white-dude blogger. :-)
Taxi Advertising
Last evening someone posted a link in Twitter to this WSJ article about seat-back advertising in Shanghai. On the way back to my hotel from Xintiandi today, I was (un)fortunate to grab a taxi with one of these things. It's a small LCD video screen running nothing but constant ads.
As with the other times I have seen these things, I watched for about ten seconds before hitting the mute button. It strikes me that this model is all ads and no content. If the taxi offered Tivo, the screen would remain blank. I'm not an advertising executive, but I am a human, so I think I have a valid opinion on this. Then again, maybe it was intended for the average Shanghai resident who has seen the city so many times that they would rather watch ads than look out the window.
Yes, I'm still stuck on autos...
In yet another Twitter posting I saw today, someone put up a link to this Steve Clemons blog entry at The Washington Note. In this post, Steve tells about his visit to the BYD factory in Shenzhen and praises their development of plug-in hybrids.
Though I think he is a little too optimistic in his assessment of BYD's (and China's) new energy vehicle capabilities (I have noted my pessimism in a previous post) he is one of the few people who dares to mention the unthinkable, an increase in the US federal gasoline tax so that gasoline never drops below $4 per gallon. Since I don't intend to run for President, I would like to say that I agree with this proposal -- particularly if it is phased in over a few years and the proceeds are 100% devoted to local public transportation alternatives.
As for my assessment of China's new energy vehicle development, I have still yet to meet any auto insiders here who are as optimistic as foreigners are, but I am still fully supportive of anyone who is pouring money into this important effort.
Tuesday, May 26, 2009
So is China Happy or Not?
A recent bestseller in China entitled Unhappy China (中国不高兴) created a stir a few months back. Not having read it, my understanding is that it was written by five authors who think that China is more qualified to lead the world, and that the West should just step aside and let that happen. I'm not sure exactly why a collective China should be unhappy, but the title of the book just never set well with me.
Even though it comes from a Chinese source, to me the title seems to perpetuate what I thought was auniquely Western myth, that of China as a monolith. If I have learned nothing else in my years of living in, and traveling to, China, it is that the Chinese are about as individualistic as any other group of people one would ever meet.
From what I understand, though the book has sold well in China, it hasn't been universally well-received in China -- further confirming the fact that not all Chinese are unhappy. Or maybe it's just the fact that the overwhelming majority of China's population probably cannot afford to buy the book.
Like bestsellers in the US, this one apparently had enough legs to spawn a few offshoots. Yesterday I saw these three books at a bookstore in Raffles City, Shanghai.
The first book is the original, Unhappy China. In the middle is Happy China. And on the right is Why is China Unhappy?.
So is China happy or not?
Stupid question.
Even though it comes from a Chinese source, to me the title seems to perpetuate what I thought was a
From what I understand, though the book has sold well in China, it hasn't been universally well-received in China -- further confirming the fact that not all Chinese are unhappy. Or maybe it's just the fact that the overwhelming majority of China's population probably cannot afford to buy the book.
Like bestsellers in the US, this one apparently had enough legs to spawn a few offshoots. Yesterday I saw these three books at a bookstore in Raffles City, Shanghai.
The first book is the original, Unhappy China. In the middle is Happy China. And on the right is Why is China Unhappy?.
So is China happy or not?
Stupid question.
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