Posted by: Bruce Einhorn on July 09
While the world’s media are rightly focusing on the brutal ethnic clashes in Xinjiang, the arrest of a handful of people thousands of miles away from Urumqi could end being a bigger concern for companies doing business in China. A spokesman from China’s foreign ministry today confirmed that four Shanghai-based employees of Rio Tinto, the Anglo-Australian mining giant, are under arrest, with spokesman Qin Gang saying one of the Rio Tinto employees is “suspected of stealing state secrets.” As the Associated Press points out, the arrests come in the midst of contentious talks between Rio Tinto and Chinese companies over the price of iron ore. The AP is careful to add that “there has been no indication whether the case is linked to the negotiations,” but it doesn’t require a great leap to see that the two are probably related. And Reuters is reporting that “computers, likely containing sensitive commercial information relating to iron ore contracts, have also been removed from Rio's Shanghai offices.”
Stealing state secrets is a favorite charge of Chinese authorities, since just about anything in China could conceivably be a state secret. Remember Shi Tao, the Chinese journalist imprisoned for in 2005 after Yahoo China provided police with information about his email account? In an email, he summarized a government memo on how the media should cover the news; he got ten years for revealing state secrets.
The arrests come after an ugly falling out between Rio and the state-owned Aluminum Corp. of China, with a deal for the Chinese company to invest $19.5 billion in Rio collapsing last month after encountering opposition in Australia. The Aussie dollar slumped today on the news of the state-secrets accusation, with traders worried about the impact on bilateral relations. All this is terrible news not only for the four employees and their families but also for any foreign company hoping to do business in China. It’s hard enough for companies to negotiate deals in China without having to worry about whether their workers are going to find themselves in jail if some Chinese officials decide they don’t like the way the talks are going.
Posted by: Moon Ihlwan on July 09
It’s easy to blame North Korea for nasty attacks on the global community. After all it is an international bogeyman facing sanctions by the U.N. for undertaking nuclear and missile tests in defiance of numerous calls for an end to its dangerous weapons programs. Yet the fact is there’s no evidence that Pyongyang is behind attacks on more than two dozen of major U.S. and South Korean websites in recent days, as suspected by Seoul’s spy agency.
It simply is too early to point fingers at North Korea or anyone else for the attacks that began on the July 4 U.S. Independence Day holiday. The widespread attacks, targeting websites of such government bodies as the White House, the Pentagon, the South Korean presidential office and the National Intelligence Service, Seoul’s equivalent of the CIA, are primarily designed to disrupt systems by deluging them with Internet traffic rather than penetrate them and obtain internal or classified files. The relatively simple attacks could have been waged by hackers looking to make money or prove their skill sets.
The National Intelligence Service has shown a tendency to quickly link North Korea to any maneuvering targeting key institutions in South Korea or its allies. For the latest attacks, the spy agency told the local media that they were “premeditated provocations aimed at paralyzing the Internet infrastructure.” But despite the widespread attacks, many government websites in the U.S. and South Korea resumed normal day-to-day operation after being affected for hours. In fact, a sophisticated state-sponsored organization with malicious intentions would not resort to the “denial of service” attacks that would attract a lot of attention and prompt cyber security experts to defend their networks.
Posted by: Frederik Balfour on July 08
Sheldon Adelson's Las Vegas Sands (LVS) could raise $2 billion to finance its Macao operations through a Hong Kong IPO soon, said Michael Leven, company president and CEO. He told Bloomberg today in an interview in Singapore that the company will decide this month whether to list its shares.
A listing could provide a serious revival of fortunes for Adelson’s plans in Asia. Last fall he halted construction of new casinos in Macao, and he has been trying, unsuccessfully, to sell his retail properties adjacent to the Venetian Macau and Four Seasons Hotel. An IPO in Hong Kong spinning off Macao assets would ensure the parent company has enough cash to complete its $5.5 billion Marina Bay Sands casino project due to open in Singapore next year.
Raising the money in Hong Kong seems like a good bet. The local IPO market is roaring, and Hong Kong investors would love for a way to benefit from Macao’s growth. “I definitely think there is an appetite,” says Aaron Fischer, gaming analyst with regional brokerage CLSA. “Macao may not be looking so hot because of swine flu, but if you take a view longer than six months, fundamentals are improving.” Despite a decline in visitors and gaming revenues this year, Macao still tops the Las Vegas strip in terms of gaming revenues, and its long run prospects are excellent.
Fischer figures that in the best of all worlds, Adelson would be able to find a strategic investor from either Hong Kong or China who would be an asset in dealing with Beijing and Macao regulators. Local understanding is certainly something casino tycoon Stanley Ho, as well as his son Lawrence Ho, whose City of Dreams casino (MPEL) opened in June,
and daughter Pansy, who has a joint venture with MGM Mirage,(MGM) have going for them.
Posted by: Frederik Balfour on July 07
The Chinese yuan could overtake the Japanese yen to become the third most important international currency used in trade by 2012. Or so HSBC economist Qu Hongbin thinks. That's a far sooner than most people expect, considering China just launched a pilot program allowing the settlement of trade in yuan a few days ago. In a research note sent on July 7, he went so far as to say that as much as 50% of China’s trade could be settled in yuan by 2012. How much money are we talking? A cool two trillion dollars [oops, I mean 13.6 trillion yuan!]That will certainly make for an interesting talking point at the G8 summit starting April 8 in Italy.
His note came a couple of days after China started allowing some overseas exporters and importers to settle their trade with China in yuan. Hong Kong, Macao, and a handful of Southeast Asian countries are part of the pilot scheme designed to make the Chinese currency, also known as the reminmbi, more freely used outside China by enabling them to use it for trading purposes. It’s all part of China’s aim to make the yuan eventually freely convertible, and one day, a major global currency along with the dollar, euro and yen.
In the past several years yuan has become more commonplace in Hong Kong thanks to the influx of Chinese tourists here. Hong Kong cabbies, Starbucks and hotels, as well as luxury purveyors like Louis Vuitton and Christian Dior all readily accept Chinese cash, as few mainland tourists pay with credit cards anyway. Hong Kong banks are also allowed to receive yuan deposits of up to 50,000 yuan per day from retail banking clients.
That’s small change compared to the business they are expected to gain from trade finance generated by cross border yuan settlement. Don’t be surprised to see more mainland bank branches opening overseas to position themselves for this burgeoning business. It also means that China will have less need to hold foreign reserves in dollars, so demand for U.S. treasuries and other securities in the future would be less than otherwise.
We have written about other developments to extend the use of the yuan overseas. HSBC and Bank of East Asia have received permission to raise money through the sale of panda bonds in Hong Kong, and Standard Chartered plans to sell yuan bonds on the mainland. And foreign banks are expected to get permission to list their local subsidiaries on the Shanghai Stock Exchange soon. It’s all part of making the yuan more widely integrated into the global economy. Who knows? Perhaps it won’t be too long before the baccarat tables at Macao are taking bets in yuan too.
Posted by: Dexter Roberts on July 06
It’s the worst ethnic violence in China since last March’s Tibet uprising. On Monday, China reported that at least 140 people had been killed and 828 injured in riots Sunday in the city of Urumqi, capital of the oil and gas-rich far western Muslim region of Xinjiang. Apparently sparked by anger over a conflict late last month between Uighur Muslims and Han Chinese at a factory in southern China, street protests involving at least 1,000 people grew violent starting in Urumqi’s Muslim district of Erdaoqiao.
By the time police and other security forces had squelched the riots several hours after they began plenty of damage had been done. While initial reports suggested only four had died, by Monday the official Xinhua news agency had revised that upwards to 140 and said that figure would likely grow higher. At a press conference on Monday the regional police chief announced that 261 vehicles, including 190 buses, at least ten taxis, and two police cars, as well as 203 shops and 14 homes had been destroyed in the city of 2 million-plus on Sunday.
Although Tibet’s problems with ethnic and religious strife are better known, and seized world headlines when riots in Lhasa occurred last March, the ten or so million Uighurs that make up roughly half the population of Xinjiang (that’s according to official Chinese figures; Uighur groups outside China say that the real number could be as high as 20 million) have a long history of resisting, sometimes violently, Beijing’s control. Indeed, a series of bomb attacks, including in Kunming and Shanghai, in the run-up and during last year’s Beijing Olympics, were claimed by groups saying they advocate an independent Xinjiang or what separatist-leaning Uighurs usually call Turkistan. And sixteen armed police in Xinjiang’s far western city of Kashgar were killed in a bomb and stabbing attack on Aug. 4 last year, just days before the Olympics opened.
As in the past, China quickly blamed exiled Uighur businesswoman Rebiya Kadeer for inciting the unrest (she has lived in the U.S. since being released in 2005 from a Chinese jail after six years of imprisonment on the charge of “harming national security”). "Rebiya had phone conversations with people in China on July 5 in order to incite and Web sites ... were used to orchestrate the incitement and spread propaganda,” Xinjiang’s governor Nur Bekri said on Chinese television Monday. A spokesman for Kadeer has denied she had any role in the riots. Meanwhile, Xinhua quoted a government statement Monday saying that the violence was "a pre-empted, organized violent crime. It is instigated and directed from abroad and carried out by outlaws in the country."
Regardless of whether there was any support from outside the country, the latest riots suggest an uncomfortable reality for Beijing: as I noted in a blog during the Tibetan and Uighur unrest last year, China’s official policy of pushing rapid economic development in its lagging western areas seems of limited effect when it comes to appeasing its minorities (the hope has been that well-off minorities will be less likely to press for independence.) There is no doubt that the larger economic picture looks pretty good. Indeed I recently wrote about the rise of China’s southwest region economy (which borders on Tibet) and how that is drawing business investment to cities like Chengdu, Sichuan. Xinjiang, making up much of China’s northwest region, also looks quite good: its economy has grown at double digits for all of the last six years and in 2008 grew 11%-well above the national average.
But the fact is that the overall growth numbers in the west obscure a troubling reality: the economic benefits—including those emanating from massive centrally-funded infrastructure projects like the Qinghai-Tibet railway—the world’s highest track—and a series of gas pipelines that already run from the desert in Xinjiang to Shanghai and later will reach Guangzhou—are not equally reaching all.
That is apparent when one parses the official per capita income growth figures—while both urban and rural incomes grew more rapidly in Xinjiang than nationally last year, up 10.9% and 10.1% respectively, compared to 8.4% and 8% across China--they still were well below the national average. In particular, Xinjiang’s average rural income (most Muslim Uighurs live outside cities like Urumqi and make up the bulk of the region’s rural poor) was just $513 a year, or less than 75% the national rural average. At the same time, the broader economic growth continues to draw ever larger numbers of Chinese migrants to the region that often monopolize newly created jobs, adding to the resentment felt by local minorities. As more information comes out in the coming days it will be interesting to see to what degree economic concerns, including resentment about unequal economic opportunities, contributed to the violent Xinjiang riots.
