Here Comes a Busy Year for Asia


By Bruce Einhorn Had your fill of year-in-review stories? So have I. Given the havoc caused by SARS, 2003 wasn't one of China's best years, so I'd rather look ahead. Here are some of the big stories that will be shaping the agenda in 2004 in China, Taiwan, and Hong Kong:

Elections. In much of Asia, 2004 is going to be the Year of the Voter. The biggest election is Taiwan's, where President Chen Shui-bian is fighting hard to win a second term when voters go to the polls in March. The hottest exchanges aren't between Chen and his main rival, Lien Chan of the Kuomintang, but between the incumbent and officials in Beijing. They loathe Chen and his Democratic Progressive Party, which has long opposed Taiwan's reunification with the mainland.

During previous elections, China has clumsily tried to influence the outcome by staging military exercises and firing missiles to warn voters against choosing anti-Beijing candidates. The heated rhetoric hasn't led to any fireworks yet in this bout, but give it time.

In Hong Kong, voters will choose members of the legislature in September in what could be another embarrassment to China's man there, embattled Chief Executive Tung Chee-hwa, following the stunning setback of pro-Beijing candidates last November.

Bush and the Democrats. Of course, the other election in 2004 that will have a huge impact on Asia is one for the U.S. Presidency. Asia's exporters have enjoyed the benefits of the rebounding American economy, and countries such as China and India have been winning business from multinationals that are shifting jobs overseas to be more competitive. That makes it tempting for candidates to flirt with protectionist messages.

With his support of steel tariffs, Democratic front-runner Howard Dean certainly hasn't sounded like much of a free trader. If Dean does manage to win the nomination, many businesspeople in Asia will be nervously watching to see if he works his way back to the center.

Electronics Surge. Thanks to the long-awaited turnaround in the information-technology industry, Asia's electronics companies enjoyed 2003. Indeed, for many it was a rerun of the good old days -- before the Nasdaq crash ended the Internet bubble.

Taiwanese chipmakers, including Taiwan Semiconductor Manufacturing Corp. (TSM) and United Microelectronics (UMC) are now operating at close to 100% of their capacity, and second-tier players like Malaysia's Silterra and Korea's DongbuAnam have been winning new customers.

Can the party continue in 2004? Market researcher International Data Corp. predicts that it will, with the chip industry growing at an annual rate of 18%, compared to last year's 14%. But if the U.S. economic recovery runs out of steam, that sort of growth may be hard to generate.

Chip War. Late last year, TSMC announced that it was filing a lawsuit in the U.S. against Shanghai upstart Semiconductor Manufacturing International, alleging copyright infringement. The two companies have had a long-simmering feud. SMIC founder Richard Chang, a Taiwan chip industry veteran whose previous company was taken over by TSMC, is eager to build a Chinese rival to Taiwan's top companies.

For his part, TSMC Chairman Morris Chang (no relation) alleges that SMIC is hurting the whole industry by building too much capacity and bringing down prices. SMIC hopes to have an initial public offering in 2004, and people who follow Asian high tech will be watching closely to see how the TSMC lawsuit affects SMIC's plans.

Chinese Brands. For many of China's biggest electronics companies, dominance in the home market is just a step in their plan to become global powers. In the new year, Chinese companies like networking equipment producer Huawei, consumer electronics maker TCL, white-goods manufacturer Haier, and PC power Legend will be making more moves overseas.

Chinese Net IPOs. In late 2003, a small Chinese travel company called C-trip.com (CTRP) scored a big success with an IPO on Nasdaq. Shortly thereafter, a company that controls one of China's biggest online search engines, Huicong, went public in Hong Kong. That's just a taste of what's likely to come in 2004. Many people who follow the Chinese Internet industry expect a slew of IPOs from the country's Net companies, especially those that specialize in instant messaging or online gaming.

And given the growth of the Chinese Internet -- with more than 78 million people online, China is already the No. 2 Internet market, after the U.S. -- it's likely that lots of Chinese dot-coms will look to go public before the IPO window slams shut again.

Li Ka-shing and 3G. In Hong Kong, billionaire Li Ka-shing, chairman of shipping, retailing, and telecom conglomerate Hutchison Whampoa (HUWHY), is often called Superman. But with Hutch having made a big bet on 3G telecom technology, this Hong Kong superhero may have met his Kryptonite.

In Britain and Italy, Hutch's 3G service is off to a slow start. And in Hong Kong itself, it has repeatedly delayed the launch of its 3G operations, to be known simply as 3. In 2004, Hutch says 3 will finally debut in its hometown. Hong Kong residents are famous for their love of cell phones. The question is whether they'll embrace 3G when few others have.

With the new year just a few days old, it's impossible to tell how each of these stories will play out - or what unforeseen ones will develop and change the landscape. But clearly, Asia's reaction to world events as well as its ability to help shape them will make for interesting developments in 2004. Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BusinessWeek Online


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