A reader just referred me to a new (relatively) blog called China Stocks Watch and I sort of love it.

The blog is about China’s top twenty stocks and about China business in general and its posts literally alternate between those two.  It describes itself as follows:

China Stocks Watch is a China business blog run by Mike Cormack, who has written for media from Business Tianjin to China Daily, and was most recently managing editor of Agenda magazine. China Stocks Watch provides a running commentary on the twenty biggest stocks in the Chinese business world, alongside relevant China business news of the day.

It even lists out on the side of its home page the twenty stocks it follows:

  1. Sinpopec
  2. PetroChina
  3. ICBC
  4. China Construction Bank
  5. Agricultural Bank of China
  6. Bank of China
  7. China Mobile
  8. Noble Group
  9. China State Construction Engineering
  10. CNOOC
  11. China Railway Construction
  12. China Railway Group
  13. SAIC Motor
  14. China Life Insurance
  15. Dongfeng Motor Group
  16. China Shenhua Energy
  17. Ping An Insurance
  18. China Telecom
  19. China Communications Construction
  20. Bank of Communications

Cormack knows his stuff and the blog proves that.  If you are interested in China’s stock market (or at least in its twenty largest stocks), these blog is a must read.  If you are interested in China’s business and/or economic climate, you should absolutely be reading this blog on the days it does its “China Business Briefs.”

By I qualify my “love” for this blog with “sort of” only because if you are not interested in China’s stock market or a no nonsense deep/technical dive into China’s business world/economy, this blog is not for you as it truly is pure business.

But if it you are seeking a pure stock market/economics/business blog, I highly recommend China Stocks Watch to you.

Every few days I make a point to go to the China section of AllTop News.  Not sure how to describe AllTop so I will simply crib its description straight from its site:

The purpose of Alltop is to help you answer the question, “What’s happening?” in “all the topics” that interest you. You may wonder how Alltop is different from a search engine. A search engine is good to answer a question like, “How many people live in China?” However, it has a much harder time answering the question, “What’s happening in China?” That’s the kind of question that we answer.

We do this by collecting the headlines of the latest stories from the best sites and blogs that cover a topic. We group these collections — “aggregations” — into individual web pages. Then we display the five most recent headlines of the information sources as well as their first paragraph. Our topics run from  adoption to zoology with photographyfoodsciencereligioncelebritiesfashion,
gamingsportspoliticsautomobilesMacintosh, and hundreds of other subjects along the way.

You can think of Alltop as the “online magazine rack” of the web. We’ve subscribed to thousands of sources to provide “aggregation without aggravation.” To be clear, Alltop pages are starting points—they are not destinations per se. Ultimately, our goal is to enhance your online reading by displaying stories from sources that you’re already visiting plus helping you discover sources that you didn’t know existed.

Bottom line: It’s a great place to keep up on the zeitgeist of China and a great way to learn of any new and interesting China blogs.

Lo and behold I came across two today, both interesting, but neither exactly new: Engaging China Blog by Geoff Nairn and the China Economics Blog by Robert Elliott.

Engaging China Blog actually started the same year we did — way back in 2006 and we even did a blogpost announcing its addition to our blogroll:

Just added Engaging China Blog to our blogroll and we recommend our readers check it out.  Engaging China describes itself as follows:

EngagingChina aims to keep you informed about the new strategic opportunities in China’s  fast-growing economy — and warn of potential pitfalls.

There are plenty of other sites that write about China.  But in their enthusiasm to describe this fascinating country, readers risk not seeing the wood for the trees.

Our focus at EngagingChina is strategy, pure and simple.

And unlike other sites, we look across the range of fast-growth industries, rather than concentrating on just one.  That’s because the lessons to be learned from doing business in China are rarely sector-specific.To be sure, the challenges facing electronics companies are different from those facing investment banks or wind farms.  But there are also plenty of parallels. We want to encourage this cross-fertilization by drawing readers from different industries and backgrounds.

Geoff Nairn, the founder and managing editor of Engaging China, is a veteran business journalist and long-term contributor to the Financial Times.

I agree with Mr. Nairn’s views of China, but I disagree with his perceptions on the Chinese blogosphere.  All Roads Lead to ChinaChina Business ServicesChina Economic Review Blog, and Diligence China [now China Solved] all “look across the range of fast-growth industries, rather than concentrating on just one” and they do an excellent job of it.  ImageThief and Danwei, though to a large extent focused on media, are great blogs that also often look across the range of fast-growth industries.

Having said this, however, China being as vast as it is, and as quickly changing as it is, there is definitely room for another stellar China business blog, and Engaging China definitely fits that bill.

In e-mail correspondence with Mr. Nairn, I learned he is “a Brit” currently living in Spain.  He has been a journalist in various European countries for nearly 20 years.  For the past decade, he has been a regular contributor to the Financial Times (FT), “writing mostly on IT and telecoms, but also areas like  renewable energy, medical innovation and financial technology.”

Mr. Nairn first became interested in what he calls the “China story,” while writing a magazine article on Cable & Wireless back in 1987.  According to Mr. Nairn, C&W wanted to use Hong Kong as a springboard to the mainland and it had built a fibre optic network in the Shenzhen SEZ. “The idea that China would one day be a huge and attractive market for western tech companies then seemed far-fetched.  A decade on, I was writing about the  internet boom.  A  clutch of  China dotcoms listed on Nasdaq and the western world woke up to the advances that had been made in China’s economy.”

Mr. Nairn sees China as “impossible for western businesses to ignore” and he aims his blog at helping them better understand it.

Mr. Nairn described EngagingChina to me as follows:

It is not an “insider’s view” on  doing business in China — that would be presumptuous, as I don’t live in China. Nor do I set out to exhaustively detail every  Chinese announcement made by Microsoft, each new store opened by Carrefour or every mobile phone model launched in China.   There are other sector-focused China sites that do that, but they are often light on analysis and sometimes one cannot see the wood for the trees.  EngagingChina’s focus is strategy, pure and simple.   To narrow it down, it covers a handful of sectors that are developing rapidly — IT and telecoms, China’s consumer boom, financial services, energy and the environment, and high-tech.

Engaging China has rapidly become one of my daily “must reads.”  It is both thoughtful and original and I urge all readers interested in China business to check it out.

The new EngagingChina looks as though it has not missed a beat as it still consists of short pithy China business update posts.  For example, its five most recent posts consist of the following:

Do check it out.

The China Economics Blog is another recently revived oldie but goodie.  Back in 2010, in a post entitled, China Blogs: That’s The way, Uh-Huh Uh-Huh, We Like It, Uh-Huh, Uh-Huh. Part V, we explained why that blog was on our blogroll:

China Economics Blog. This blog describes itself as a “place to find news, observations, statistics, information on undergraduate (BSc and BA economics) postgraduate (MSc economics) and academic analysis of important issues for China’s economy including economic growth, inequality, stock market, shares, exchange rates, the environment, foreign direct investment, WTO and much more” and that is exactly what it is. I read it for its usually spot on and clearly written China economic analysis.

I have every reason to believe the same will hold true of its latest incarnation.  Its three posts since its return consist of the following:

Do check it out.

And let us know what you think of them both.

More than three years ago, I did a post, entitled, “I Hate Alibaba (The Website, Not The Company),” voicing my concerns with foreign companies thinking that they were safe sourcing through Alibaba. My concern at that time stemmed from the fact that many of the calls my office was getting regarding really bad or never delivered product were coming from people who had sourced through Alibaba.

Just back from China (Hong Kong, actually), where I saw a television interview with Jack Ma of Alibaba. He never fails to impress the hell out of me and every time I see him my first thought is BUY.

But then I think about all the harm Alibaba has caused to so many Western SMEs and I change my mind about calling my broker/brother. Alibaba makes the naive think China sourcing is easy. I realize blaming Alibaba for the mistakes companies make in using its site is really not fair to Alibaba, but at the same time, I do not see much use for the site beyond its serving as a really good directory of potential manufacturers of particular products.

Sourcing from China is not easy and my concern with Alibaba is how so many who use it start to think it is easy and then they fail to take precautions and then they call my firm because they are out hundreds of thousands (more or less) of dollars. Seems it is even worse than I thought.

Now we learn from Time Magazine that not just some of the companies that list on Alibaba are fraudulent, but that Alibaba engaged in fraud as well:

An internal investigation by independent board member Savio Kwan revealed that beginning in late 2009, Alibaba had noticed an increase in fraud claims against sellers designated as “gold suppliers,” which means they had been vetted by an independent party as legitimate merchants. The investigation revealed that about 100 Alibaba sales people, out of a staff of 5,000, were responsible for letting fraudulent entities evade regular verification measures and establish online storefronts.

The company said it uncovered fraudulent transactions by 1,219 of the “gold suppliers” registered in 2009 and 1,107 of those in 2010, accounting for about 1% of the total number of gold suppliers during those years. It further said that “the vast majority of these storefronts were set up to intentionally defraud global buyers” by advertising consumer electronics at cheap prices with low minimum-order requirements.

Whether you use Alibaba or not, there are certain “rules” you should follow when sourcing from China and those rules include conducting due diligence on your potential supplier, notwithstanding the color of star by their name.

Alibaba. A force for good or for evil? What do you think?

UPDATE: Michael Zakkour of the China Business Blog did a post, entitled, “Alibaba Fraud Case Not Surpising,” [link no longer exists] in which he talks of visisting two grossly inferior factories that looked just great on Alibaba. Makes for some good (and funny) reading.

China Business Blog and Podcast just did a post on a CNBC television appearance this morning by Technomic Asia’s Steve Ganster. Because so many of my firm’s clients are in the international food business and because I see China as a tremendous market for Western food companies, Steve’s analysis is of particular interest to me.
The key takeaway from Steve’s interview is this from the China Business Blog post:

As companies are learning that what works at home won’t necessarily work abroad in the Chinese marketplace, they’re finding new ways to cater specifically to the needs and desires of Chinese people — rather than shoe-horning American products into a distinctly non-American set of tastes.

Check it out.

Excellent post on negotiating in China at the new China business Blog, Chinese Negotiation/Negotiating in China [link no longer exists]. The is entitled, “Negotiating in China — Trust is just the beginning [link no longer exists] and it is geared to the foreign company  doing its first deal in China.

The post rightly posits that in any negotiation with a Chinese business, “TRUST is going to come up early and often.” But the “trust” that must be discerned actually involves the following:

  • Can you trust their intentions?
  • Can you trust their ability?
  • Can you trust their judgment?

The post then goes on to explain each of these three questions.

Intentions. Do they plan to fulfill the terms of the contract or not? Are they honest and reliable? This is the most basic type of due diligence in China, and it’s relatively easy to spot those with bad intentions: they are the ones who can’t give you references from past satisfied customers or partners. Make sure you get current referrals, and check them carefully.  Be sure that you are discussing the same individuals, not just companies or associations.  You also have to make a value judgment about the people giving you the reference, so don’t cut any corners here.

Ability. This is equally important. There are plenty of China businesses and China consultants who are completely honest and completely incompetent. Good intentions are great, but don’t mean a thing if the person you are negotiating with doesn’t have the ability to do the job you need done. Chinese counter-parties often underestimate the complexity of the task they are agreeing to or misunderstand your standards. Get very specific very fast about jobs they have done in the past. Make sure you are clear about their experience. Did they actually do the work you are discussing, or were they part of the team that did it? Beware of generalists when you need a specialist. Talk about deadlines and schedules, and be wary of unrealistic estimates. Find out what they WON’T or CAN’T do. A competent supplier or consultant will know their limits, and won’t take an assignment that they can’t handle.

Judgment.  Standards are different in China, and your idea of an adequate solution may be very different than your potential partner. Expats in China often complain about jobs that they consider to be 75% finished. You need to establish a “meeting of the minds” with your counter-party. Don’t be satisfied with vague statements or simple agreement. Drill down to details, and pose scenario-type questions. It is notoriously difficult to draw out the true opinions and feelings of Chinese business people, but that doesn’t mean they are being dishonest or evasive.

The post goes on to discuss how Chinese companies spend way more time than Westerners in getting to know those with whom they are doing business and though you “may walk away from your initial meeting with lots of simple answers and agreements” those “don’t really mean as much as you think they do.”  The post’s wise advice on this is not to be “afraid to ask naive questions or rephrase the same idea several times”:

If anything doesn’t sound 100% right, then take the time to explore it thoroughly. Experienced China negotiators know that what seems simple and clear at the beginning can quickly turn complex and confusing after money changes hands ‘ even if it is only a relatively small deposit or up-front payment.

All good advice, to which we add the following:

  • Go into your negotiations prepared. Far too often our China lawyers have had Western clients who insist on a particular term from their Chinese counterparts that no Chinese company can give or ever gives. If every manufacturer of widgets in China requires at least a 60 days turnaround time, you are wasting your own time and money by insisting on 10 days for you.
  • As a corollary to the above recommendation, we are big fans of using an already tested contract to gauge the bona fides or good faith of a Chinese company. For instance, my law firm has been using the same China NDA (non-disclosure agreement) for so long that we can in large measure assess the legitimacy of Chinese manufacturers just by how they react to it. Legitimate Chinese companies always eventually agree to it (usually rather quickly, but sometimes with reasonable modifications). The illegitimate Chinese company refuses to sign, usually claiming such agreements are “never” signed in China or are “illegal.”

For more on negotiating in China, check out the following:

Okay, so I blatantly stole the title line from my friend Jeremy Gordon over at the China Business Blog, but since he has been on a blog vacation since December 7 (why is it that Europeans go on vacation — or as they put it —go on holiday, and we Americans don’t?), I figured I would borrow it.

I liked the following quote so much, I had to do something:

Chinese authorities may not have a great sense of humor in many respects, but they absolutely LOVE applying western-inspired regulations exclusively to foreign-invested companies doing business in China. They think it’s hilarious ‘ and it goes over GREAT in the Chinese blogiverse.

So says Andrew Hupert of the Diligence China blog, in his post, “The Evil Industrialist in the Mirror.” The post is on how the New York Times delights in painting foreign companies in China as bad guys and the quote nicely dovetails with our recent posts,China Consultant, Protect ThyselfChina’s Foreign Business Blame Game, and “URGENT ALERT: Register Your Business In China NOW“) on the Chinese government’s mounting crackdown on foreign companies seeking to skirt China’s laws.

I actually learned of this Diligence China post from a loyal reader who e-mailed us with the link in response to our recent posts, eBay: How To Fail In China 101 — What’s Politics Got To Do With It? and eBay As China Failure, Part II — Guilty As Charged, attacking the New York Times for its fawning (and inaccurate) coverage of eBay in China. The loyal reader, who has spent many years in China, has this to say about the Times’ China coverage:

The NYTimes’ approach to journalism is as follows: to look for poignant or otherwise revealing “local” stories that somehow transcend their specific place/time to reveal something paradigmatic about the country as a whole.

The value of that approach is that it is often entertaining and emotionally laden; the danger is overreaching. This approach tends to veer closer to storytelling than to to fact-telling.

What troubles me about the NY Times on China is that it implicitly presents itself as neutral while adhering conveniently to a pre-conceived story arc or moral lesson. Other papers do this as well, but the Times, perhaps due to arrogance, tends to presume a certain divine authority.

What do you think?

If you are doing business in China and you are not reading Andrew Hupert’s Diligence China Blog [no longer exists], you are making a mistake. Plain and simple. Andrew Hupert is one of the best versed and straightest talking China business writers in the blogosphere and his China focused business blog is essential reading. He just did a post on an issue I had been wanting to post on for weeks:  a recent influx of what I call conservative United States companies seeking to go into China. His post is called, “China Business: The Learning Curve has just gotten much Flatter.”

I had a conversation on this topic a few weeks ago with Jeremy Gordon of China Business Services and the China Business Blog. During our conversation, we discussed how we were both seeing increasing in business from old-line companies (mostly American in my case and mostly British in Jeremy’s case) looking to manufacture or sell in China. We talked about how these companies had previously taken a wait and see position towards China, but were now ready to move in. As Jeremy put it (this is a very rough quote on my part), “five years ago, China was on everyone’s mind. Two years ago, China was on everyone’s agenda. Six months ago, China was placed on everyone’s desk.” There is a certainty about China now that was not there even one year ago. Immediately after I got off the phone with Jeremy, I started a post on this topic, but abandoned it after realizing I had nothing more to say than what I have said in this one paragraph.

Thankfully, Mr. Hupert just wrote the blog post I should have written. Hupert sees the same “shift” of which Jeremy and I (and countless other China service providers) were discussing:

China business has just shifted again. It’s a little hard to tell because it was subtle, but the last few weeks have seen some powerful trends confirmed. US companies’ 06 China operations threw off 50% more profits than in the first half of 05. Starbucks is buying back their JVs and running their China stores independently. Wal-mart has unveiled plans to become the #1 foreign retailer in China.

US corporations, who have largely been waiting on the sidelines during the Great China Opening, are finally ready to start moving into this market.

Hupert then goes beyond merely seeing the trend to explaining it.  He sees the following as driving the trend (my comments are in italics):

  1. International MNCs [multinational companies] have officially learned how to do business in China. “China is still hard and unpredictable, but now it’s possible. Expensive, bureaucratic, and slow” but that’s what legal departments are for. There are enough roads and wires and regulations in place for the US giants to execute their large-scale, integrated plans. The Americans are coming.” He is absolutely right.  There are still risks, of course, but they can be calculated.

  2. Chinese bureaucrats have officially learned how to do business with the World. “They have a good idea about what is possible, what is not possible, and what works. Again, he is absolutely right.  Just by way of example, we are now able to fairly accurately predict the minimum capital requirements for various businesses seeking to form in the Shanghai area and in various other China locales.  There is actually pretty good consistency there.

  3. Private Chinese and ex-pat’s have learned where the opportunities in China really lie. “While not always successful, they are a lot more savvy and sophisticated about how to attack the China market. They know that if they go with the flow, they will find tremendous opportunities. But anyone who bucks the trends or looks to get rich quick will get destroyed by the big forces in this environment.” This does seem to be the case, though we are still seeing many Americans seeking to do business in China without enough of a real plan.

Hupert then sets forth the two basic rules of China’s opening to business that all must “take to heart: 1) China’s policy of economic opening is essentially a conservative attempt to safeguard the long-term security of the Party. 2) China’s intent was always to interact with the West as little as possible while securing maximum possible gain in terms of technology, knowledge, process and intellectual property.

He then goes on to say that an accommodation has now been reached between the Chinese government and foreign business: Westerners get access to the China market so long as they act to support the bureaucracy.  The Chinese get to hold on to manufacturing, but are to “back-off [from] the notion of Chinese consumer branding.” For the most part, Chinese brands have not taken hold either inside or outside China  and the “lion’s share of the Chinese domestic economy will be engaged in OEM [original equipment manufacture] manufacture for western companies or servicing international brands.”

I agree with Hupert regarding Beijing’s goals in opening its economy and I also agree that Beijing, at least to a certain extent, will continue favoring foreign companies over domestic ones because it sees big money in the hands of its own people as a potential threat to its own power.

Hupert then discusses how American companies (rightfully so) do not like to partner; they like going it alone. China has been “a scary and unfamiliar place,” but that all changed last month when Starbucks bought out its Beijing joint venture (JV) partner and Wal-Mart made clear its plans to go full bore into China.  Hupert sees much “more US style business entry into China, with US based companies establishing a toe-hold in Shanghai or Beijing and then rolling-out new locations as part of a systematized, scheduled plan.” Hupert sees “new energy in M&A and buy-out activity as US firms look to collect assets, brands and marketing territory.”

He sees development in China’s second tier cities exploding as US companies radiate out from Shanghai. US investors will scour for under-utilized assets and inefficient competitors ripe for consolidation. They will take the brand and customer lists, shut the factory, and centralize production and operations in an efficient, high-volume facility. Hupert concedes all this has been going on for years, but on a much smaller scale than he anticipates going forward.

Hupert sees a difference in how American and European companies approach developing markets:

The new competition in China will be between the market-dominating US brands and the market-building Europeans. Europeans tend to get in early and try to slowly change the rules of the game in their favor. Americans like to wait until the regulatory and physical infrastructure is on the ground, and then move in force. There is still time for some Chinese private brands to emerge, but companies like Wal-mart and Best-Buy tend to be category-killers that discourage new competitors from entering the market.

I do not know enough about European companies to concur in Mr. Hupert’s comparison, but his description of American companies perfectly coincides with what I see with my firm’s mostly American clients.

China is becoming less exotic and more doable for American business.

I have always hated the person who stakes out a favorite musical group/movie/book/TV show/restaurant just to show that he or she knows somebody nobody else does. We all know and hate people who do this, right?

Well I finally get to be one of those people.

Yesterday I discovered a really good blog on China business (mostly IT and outsourcing) that is not yet on the blogosphere’s radar. It’s the “This is China! Weblog, ” appropriately subtitled, “Doing Business in China, Investment Trends, Advice and Adventure from Inside China.” It is written by  William R. Dodson, who heads up Silk Road Advisors, which describes itself as advising “Western companies entering into the China market and managing businesses in china. Silk Road has offices in Chicago, Beijing, Shanghai, and Suzhou (where Mr. Dodson lives). It’s the best China business blog not yet on the radar.

It took me all of one post to realize this blog is written by someone who knows China business.  I just added it to our blogroll.

So there.

China Business Blog (an excellent blog on doing business in China) did a nice post the other day, entitled, “Chinese Pirates Like Chinese Brands Too,” on increasing intellectual property litigation in China between Chinese companies.

The post is based in large part on a McLatchy Newspaper article that describes China as the most litigious country in the world in terms of intellectual property lawsuits.  It notes that the number of intellectual property lawsuits in China is up more than 50 percent since 2004 and that there were 16,583 such cases filed in 2005, of which only around 5 percent involved foreign companies.  China Business Blog notes the increased litigation is probably due in part to the fact that Chinese patent applications were up 44 percent in 2005.

The post graciously points out that “no article on this issue would be complete without a quote from the guys at China Law Blog/Harris Bricken . . . . and Mr. Johnson’s article provides one:  “[Chinese companies] would not go to court if they thought it was an empty exercise, said Steven M. Dickinson, a lawyer for a boutique Seattle law firm, Harris Bricken.”

The China Business Blog post goes on to note that though “intellectual property rights (IPR) abuses remain a real risk when doing business in China, it is clear that the legal environment is improving, and that the courts are increasingly willing to enforce judgments against infringers.”

As we have so often noted on this blog, Chinese enforcement of intellectual property rights will see marked improvement when China has reached the point where enough powerful Chinese companies are demanding real enforcement.  We are of the view that point has already been reached with respect to trademarks, but not yet for either patents or copyrights, and certainly not with respect to movies or software.  We would love to see a breakout of the 16,000+ cases brought in 2005 between trademark, patent and copyright and we are going to try to find out if such a breakout is possible.  We would guess that a surprising number of those cases involve trademarks because it is in that arena where enforcement in China is by far the strongest.

China Business Blog (an excellent blog on doing business in China) recently did an interesting post on China’s drinking water, entitled, “Where Is All The Water.”  To summarize, the news is nearly all bad. Dysentery, Schistosome worm, Ascariasis, intestinal worm, and water borne Diarrhea are rampant in China due to the poor condition of its drinking water.  Water shortages and pollution make matters worse.

The post concludes with the following clarion call:

China’s economy has already entered a new phase of managed growth and international integration. It is now time for some of the proceeds of that economic growth to be spent on the environment that helped make it all happen. Let’s hope it is not a case of too little, too late.

I concur.