In rapidly growing countries such as Brazil, China and India, tapping expatriates is becoming obsolete. Instead, global businesses are looking for leaders who have the ability to move easily between different cultures and have deep local roots as well as international operational experience. This talent pool is very small, and they command salary premiums as a result.
The artist who designed the Bird's Nest stadium for the 2008 Olympics (and then boycotted the opening ceremony), and more recently installed an incredible piece of art at the Tate Modern in London involving hundreds of thousands of hand-painted porcelain seeds, has been arrested by Chinese authorities and is missing. The crackdown on dissidents signals a shift towards more repression as the government tries to maintain social stability in China.
It will be "authentically Disney but uniquely Chinese." That is how company officials are describing Shanghai Disneyland, which broke ground today and is expected to open in 2015. The $4.4 billion theme park is a huge gamble for Disney into the huge Chinese market. With 330 million people within a 3 hour drive of the site, Disney hopes it can capture hearts and pocketbooks of generations of Chinese consumers. Disney only owns 43% of the company owning Shanghai Disneyland, with the balance owned by a consortium of state-owned companies, but will own 70% of the company that manages the park. After a bad start in Hong Kong (Chinese consumers take 40 minutes to eat meals, as opposed to 20 minutes for Americans, leading to crowded restaurants), the company hopes to apply its lessons in cultural sensitivity into building a brand and business in China.
Just as Ford is finishing up its sale of Jaguar and Land Rover to the Indian firm Tata, the brands are experiencing a renaissance in sales. JLR posted profit of $443 million in the most recent quarter, something it rarely achieved while under Ford ownership. It is now exploring building cars in China, something Volvo, another former Ford brand, is also exploring.
On Monday, Groupon launched its operations in China, the world's largest Internet market. In doing so, the company faces daunting challenges such as intense competition, price pressures on the Groupon business model, and a fractured market. Groupon hopes to overcome some of these challenges by capitalizing on the business knowledge and relationship network of its local Chinese partner, one of China's largest internet companies.
It was the deal that almost slipped under the radar screen -- in May, Chinese telecom equipment maker Huawei purchased U.S. startup 3Leaf Systems for $2 million, a tiny deal in the world of M&A. 3Leaf creates technology that allows groups of computers to work together like a more powerful machine. When the Pentagon found out about the deal, however, it asked the company to file for a review with the Committee on Foreign Investment in the United States (CFIUS), an interagency committee that reviews FDI into the U.S. that may pose a national security risk. Now, CFIUS has recommended Huawei unwind the deal and divest 3Leaf, something Huawei doesn't want to do. The company has appealed to President Obama for a final decision.
It's official -- China is now the world's second largest economy, displacing Japan from a position it's held since 1967. At the same time, it's still one of the world's poorest economies, with over 100 million citizens living on less than $2 a day. This dichotomy is explored in today's WSJ article, as well as the video above.
When it comes to joint ventures, GE is notoriously shy, prefering to use its own substantial assets to enter a market in order to protect its intellectual property. Those rules are thrown out the door in China, however, where an infant aerospace industry is taking shape. The Chinese want to rival Airbus and Boeing one day, and in order to do so, they need technology. GE, which is desperate to supply engines, avionics and other systems to any Chinese aircraft manufacturer as the market reaches $400 billion over the next two decades, has agreed to share its most prized technologies with the Chinese in a new joint venture as a condition to entering the market, as this report details.
Volvo is a Swedish car company with a Chinese shareholder and a German CEO. The company already builds a small number of cars in China for the Chinese market, but is now considering a major ramp-up in production in a new assembly plant (in Chengdu, where it's owner Geely has a major new plant), not just for the Chinese market, but also for the export market including the U.S. Currently, American consumers readily purchase made-in-China consumer goods, but no one is selling a made-in-China automobile yet, and there is some concern that Volvo's customers may shy away from a Chinese-made vehicle. This strategy is being driven partly by the desire to reduce currency risk. Volvos produced in Sweden and Belgium are priced in Euros, and the exchange rate has eaten into Volvo's profitability. The Chinese currency, the yuan, is pegged to the dollar and would provide Volvo with more protection from exchange rate swings.
Toyota has a problem. The automaker, a leader in hybrid cars, is heavily reliant on neodymium (above, being mined), a rare earth metal that is used in magnets. All electric cars rely on magnets in their motors. These rare earths are mined almost exclusively in China (China makes 95% of the world's neodymium), making Toyota highly reliant on a supply chain that is vulnerable to import quotas, export tariffs (up 67% last year), political upheaval, and outright bans. The price for these metals has soared recently as China orders more production to stay within China. Toyota is forced to explore a new type of motor that doesn't rely on these metals.
Last year the Obama administration imposed tariffs of up to 35% on tires from China, arguing that the surge in imports had threatened domestic manufacturing. China's ascession agreement into the WTO included a special safeguard section that allows the U.S. to make this argument, and this case marks the first time the U.S. has invoked this section of the WTO agreement. Unlike traditional antidumping case, the U.S. only had to demonstrate that U.S. companies suffered "market disruption" from imports. This week, a WTO dispute resolution panel ruled that the U.S. tire tariffs were legitimate and legal. China vows to appeal the ruling.
In late October this year, a college student named Chen Xiaofeng was inline skating with a friend on the campus of China's Hebei University. A VW sedan, driven by a drunk driver, struck them head on, killing Chen. The driver tried to speed away, but was stopped by security guards. "My father is Li Gang!" he yelled at them. Li Gang is the Deputy Police Chief in the Beishi district of Baoding. When the Communist Party tried to suppress the story for fear of populist reaction to the son of a high-ranking official being given favored treatment, the opposite happened on the Internet. Soon, the driver was arrested and the phrase "My father is Li Gang" has become a mocking catchphrase.
With sales in the U.S. sluggish, Gap Inc. is setting its sights on China's fast-growing consumer market, opening a flagship store in Shanghai today. The company expects to open Old Navy and Banana Republic stores in the future.
Twenty years ago, there were hardly any dogs in Beijing. In the communist era, dogs were likely to be herders, guards, or meals, rather than companions. China's rapid globalization and increasing wealth, however, means that dogs are common these days, and increasingly pampered.
The Chinese village of Jili was once known throughout the world as a producer of extremely high quality silk. Using traditional methods of sericulture, villagers produced silk for emperors and royalty everywhere. Now, industrialization means most silk is produced in factories. Environmental degradation means the water in Jili is no longer clean enough for sericulture. And higher wages in booming cities elsewhere means there are no longer any young people willing to learn the craft of silkmaking in Jili. Within a few years, the town will probably close its last silk mill, as the NY Times reports.
China has built more than 30,000 miles of expressways in the last decade. Auto sales were up 46% last year to 13.6 million vehicles, and there are expected to be 200 million vehicles on the road by 2020. Business models that started in the U.S. fifty years ago to capitalize on this new car culture are taking off in China. From McDonald's drive-in's (there are currently 105 with 100 more planned for each of the next three years) to suburban strip malls to big box retailers to hotels to tourism to parking lots to commercial radio stations, the domestic car culture is driving big investment -- and big profit potential -- for these industries.
Faced with a mature market and slow growth in the U.S., Kentucky-based Yum Foods (which owns the Taco Bell, KFC and Pizza Hut brands) has looked to China to propel new profits. That strategy is paying off, with the company reporting a 6% jump in revenue in China, compared to only 1% in the U.S.
The Chinese boat captain captured by Japan and arrested for being in territorial waters claimed by Japan has been released after China began to withhold exports of rare earth minerals to Japan late last week. That has sparked a furor in Japan, where many Japanese citizens believe the government caved in to China. Now, China is demanding an apology and compensation from Japan, something Japan has flatly denied it will do. Japan in turn is seeing compensation from China for damage caused to its naval vessels during the incident. Above, protesters rally in Hong Kong with signs saying "Japan Get Out."
A year ago, President Obama imposed a stiff tariff on tires from China in an antidumping case. Less than two days later, the Chinese began an investigation into whether the United States harmed China's poultry industry by exporting chicken parts for less than it cost to produce them. Now, China has decided to impose tariffs on American poultry of up to 105.4%. The United States exports about $4 billion a year of chicken products, of which $678.2 million went to China last year. It is one of the few industries in which the U.S. maintains a positive trade balance with China.
