Chinese Smartphone Brands Push Into U.S.

A host of Chinese smartphones have big ambitions for the U.S. -- but don't expect a flood of marketing from them.

Just a few weeks ago, research firm IDC declared that Xiaomi, a four-year-old Beijing company, had stormed to third in the worldwide smartphone market based on units shipped. Only a day later, it was leapfrogged when Lenovo completed its Motorola acquisition. These companies now aim to replicate industry leader Samsung's rise, parlaying success at home to go global.

Realizing this goal, however, could be an expensive marketing proposition for brands that are obscure outside of China. U.S. carriers are reluctant to carry the political risk (and marketing weight) of selling Chinese devices. That puts the onus on the smartphone brands themselves.

"Chinese brands don't do a great job of brand building," said Ben Bajarin, an analyst with Creative Strategies. "The cost to invest and build a brand in the U.S. seems a bit too daunting for them."

Daunting but tempting. Western markets still hold the industry's best margins -- and its prestige. "To be a truly global brand, you have to be in the U.S.," said Lawrence Lundy, a Frost & Sullivan analyst. He expects that some Chinese brands will follow Samsung's strategy of investing broadly in media; others will attempt to sell devices without spending big, like Apple. Here's what to expect from the top five. >>

Going Gaga Over Alibaba

What do Midland Railway and IBM have in common? The answer is they were the largest companies by market capitalisation in the UK and the US when each country reached the apex of its economic dominance in 1914 and 1967 respectively.

Both firms were emblematic of their era. Midland Railway was the biggest coal hauler in the country that had ushered in the industrial revolution. IBM was the leading hardware manufacturer at the dawn of the computer age when American consumers were the envy of the world.But the two examples also highlight how fleeting global hegemony can be.

Few now remember the railway firm, which lost its independence after the First World War thanks to the Railways Act. IBM may still be a colossus, but it no longer ranks in the top 20 global companies in market cap terms.

In fact, when the New York Stock Exchange opens later today, IBM is also likely to be eclipsed by Alibaba, the company now best symbolising China’s ascendance on the world stage. The e-commerce giant priced its IPO in New York last night at $68 per share to the thunderous applause of global investors.

How gigantic is the deal?
Should the greenshoe be exercised, Alibaba’s flotation will raise $25 billion and rank as the world’s largest, beating Agricultural Bank of China’s $22.1 billion debut in 2010. When founder Jack Ma rings the opening bell, Alibaba’s market cap will be $177.5 billion, similar in size to Samsung Electronics. However, the stock price is expected to be much higher by closing on its first day, fuelled by newspaper hype and insistent demand from investors. Enthusiasm for the deal has been overwhelming, notwithstanding the fact that many investors have placed inflated orders to try to get some kind of allocation. The frustrated purchasing power of unallocated institutions, combined with the mass of retail investors who were unable to get into the IPO at all, could easily push the stock up into the stratosphere over the coming few days.
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How is it likely to perform?
What happens to Alibaba after the initial fanfare dies down depends on what investors believe about its prospects for growth. Shareholders are unlikely to reap the same upside as investors in rivals Tencent and Baidu, which both listed a decade ago when they were less than five years old. Tencent has risen 150-fold since its June 2004 IPO, for example.

Alibaba is now 15 years old, so can we expect similar growth? There are numerous jumbo IPOs of companies with relatively mature business models which have still done well for investors. The most famous is Visa, which listed in March 2008 and still ranks as the largest IPO on record by a US firm. It rose 28% on its first day of trading and has quintupled since then.
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A century of upside?
Jack Ma has no such qualms about Alibaba’s future. In the company’s pre-roadshow filing, he wrote a letter to prospective investors explaining how the company is only at the beginning of a 102-year journey, that will span three separate centuries from its inception in 1999.

Alibaba is not a mature business, its management says. Rather, its digital ecosystem will disrupt and transform all that it touches to the benefit of its Chinese customers and, increasingly, its global ones too.

A few years ago, Alibaba identified three pillar industries. In many respects it has only made inroads into the first one – e-commerce.
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And outside China?
For many Chinese companies, their hallmark of success comes from going global. Alibaba has not really spent too much energy overseas yet, although it has made a number of smaller acquisitions. This is likely to change.

As Jack Ma put it in his recent investor letter: “In the past decade, we measured ourselves by how much we changed China. In the future, we will be judged by how much progress we bring to the world.”

Sohu Finance says one upshot of the IPO is the way it is shaping new perceptions of China’s internet firms. It notes that past listings tended to reinforce the view on Wall Street that China’s online giants were copycats of business models born in Silicon Valley. Thus Baidu was referred to as China’s Google, Renren as China’s Facebook and Sina Weibo as China’s Twitter.

“Of course, there are still many people calling Alibaba China’s Amazon,” writes Sohu Finance. “But this time there are a growing number of Wall Street investors realising that this title is not accurate.” In fact, many have given up trying to apply a simile to Ma’s creation.
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Oh yes, so why didn’t it list domestically?
Some wonder why Alibaba didn’t list in Shanghai – where enthusiasm for buying into the IPO would have been intense.

But Doug Young, who writes the Young China Biz blog, says that this was never a realistic option since Alibaba is incorporated outside China (a common practice among Chinese venture-backed tech firms).

“Such overseas incorporation has not only barred internet giants like Tencent and Baidu from listing in China, but has also locked out other major names like China Mobile and Lenovo, which are also technically incorporated outside China for historical reasons,” he notes. Read more detalied report at Week in China.

A Yankee Inventor Takes On Beijing Smog

On days when Beijing’s heavy air pollution is especially pungent, you can smell and taste the acridity—whether you’re outside on the street or inside most buildings. Air pollution doesn’t stay outdoors but seeps inside through open doors and window sealings. On most days, levels of dangerous pollutants, such as PM 2.5, are somewhat lower outside than inside, but not much lower.

This unhappy fact has fueled a growing market for pricey indoor air filters in China, made by such companies as Chicago’s BlueAir and Switzerland’s IQAir. A basic model will set you back at least $800. And ideally, you should have one for each room in your home, school, restaurant, or office. In other words, these filters don’t come cheap.

But what if there’s a simple but less costly way to achieve roughly the same effect? Now there might be.

During the Beijing “Airpocalypse” of January 2013, Thomas Talhelm, a Fulbright scholar spending a year in China, began to research how air filters worked. Soon Talhelm realized that the essential components—a HEPA filter, a fan, and a velcro strap to hold them together—could be purchased on Taobao, China’s leading e-commerce site, for less than $35. So he rigged up his own air filter and invested in a scientific particle monitor to see how well it worked. (The DC1100 Pro Air Quality Monitor, which measures levels of PM 0.5 and PM 2.5, was more of a splurge, at $260.)

Using a HEPA filter strapped to a simple flat-surfaced fan, he found that the device reduced indoor levels of PM 0.5 by 84 percent and indoor levels of PM 2.5 by 92 percent. When he tested a more powerful rotating fan, the results were even better. His DIY device lowered indoor levels of PM 0.5 by 97 percent, and indoor levels of PM 2.5 by 96 percent. (The expensive premade air purifiers he tested had similar results.)

Read more at Bloomberg Businessweek.

Deal of the century?

Putin and Xi ink deal for China to import Russian gas

“My enemy’s enemy is my friend” is a pithy phrase but hardly a new one. The concept is thought to have been first expressed in a Sanskrit treatise on statecraft in the fourth century BC. Much later Winston Churchill invoked the sentiment once more in defence of wartime aid to the Soviet Union. In the battle with Germany Britain’s leader said he had put his anti-Communist sympathies aside, declaring: “If Hitler invaded Hell, I would make at least a favourable reference to the Devil in the House of Commons.”

In the contemporary world of power politics, the phrase is again being applied to Russian relations with China. Faced with a hostile reception in Europe and the US, Moscow has looked east to China, a country that has chosen not to condemn Vladimir Putin’s annexation of Crimea. In part China’s Russia policy is an extension of its own deteriorating relations with Washington. Prime among these are its strategic concerns over the US “pivot” to Asia (which China views as an attempt to militarily thwart its own regional ambitions). Relations received another jolt last week when the US Justice Department indicted five Chinese army officers on charges of espionage.

Putin’s visit to Shanghai brought back into sharp relief the idea of ‘my enemy’s enemy’ as he portrayed the bear and the dragon as grand bedfellows in a US-dominated world. In an interview with local media Putin called China “our trusted friend” and claimed that cooperation between the two countries had “reached its highest level ever”. In a remark that seemed squarely aimed at the White House, Putin also said of the new Sino-Russian amity: “Our positions on the main global and regional issues are similar or even identical.”

And the Russian president was keen to provide more concrete evidence of his reorientation from west to east. So even before he arrived it was widely touted he would sign a 30-year deal to pipe vast amounts of gas into China. Doing so would demonstrate the strengthening of ties, analysts thought, as well as allow the Russians more room for maneouvre with some of their international critics.
After years of bickering over the terms, the contract was finally signed last week.

So a deal is signed at last?
Most of the press has reported that there were 15 years of negotiations leading up to last week’s announcement, although Xinhua dates the dialogue back even further to 1994, when the first memorandum of understanding was signed between the two countries on gas exports.

Whatever the starting point, the talks have advanced at a glacial pace. And while eight further agreements have been signed over the last 10 years, there’s been no sign of final terms being reached.

Please read the whole story at Week in China.

China Turns To Africa For Resources, Jobs And Future Customers

China's economic engagement in Africa can be measured in dollars — for instance, the $71 million airport expansion contract in Mali, funded by American foreign aid, that went to a Chinese construction firm.

More remarkably, it can be measured in people: More than a million Chinese citizens have permanently moved to Africa, buying land, starting businesses and settling among local populations.

Journalist Howard French, who spent years reporting on Africa and China for The New York Times and The Washington Post, has a new book that looks at these trends. In China's Second Continent, French draws on interviews with Chinese and African businesspeople, government officials and ordinary citizens to explore China's presence in 15 African countries.

He says there's a debate about the long-term consequences of China's push into the African continent: Will it create development and prosperity, or will it lead to exploitation reminiscent of 19th-century European colonialism?

French tells Fresh Air's Dave Davies that African citizens, for their part, would like Chinese businesses to be more open and transparent. He also explains that when Chinese leaders look at Africa, they don't just see arable land and natural resources — they see a potential market for Chinese products.

Please go to NPR website to read/listen the whole interview about the book.

China's Second Continent: How a Million Migrants Are Building a New Empire in Africa, by Howard French, Random House, 285 pages, $27.95

What the U.S. Can Learn from Uniqlo

Rich country, rising unemployment, sluggish growth, big debts. Sound familiar? Japan’s notorious “lost decade,” the long stretch of economic stagnation that followed its massive property bubble in the late 1980s, looms large in the American mindset today. A lot of people think we may be headed down the same path.
The parallels between what happened to Japan and what’s happening to the U.S. have inspired a flurry of teaching points on what not to do next. The latest come from Tadashi Yanai, the mastermind behind Uniqlo, the discount Japanese clothing brand whose stores have spread across the globe like wildfire at a time when Japan’s economy and many Japanese companies are staring into the abyss. In the latest McKinsey Quarterly, Yanai focuses on what still struggling Japan can learn from Uniqlo’s success. But a lot of those lessons can also be applied to the U.S. Here’s a sampling of what Yanai has to offer: 

1. Don’t look down on developing countries 
Japanese companies seem to have their eyes in the rearview mirror. They have become introspective. I   think we should get back to something more like we were at the end of the war when Japan rose to prominence from a situation in which it had nothing. (It was during this period that Fast Retailing got started, in 1949.)

We’ve lost that spirit, maybe because we are under the illusion that we are rich and superior. But many countries are just as rich, and in Japan, income has stagnated for many people for a decade or more. Japan is still very comfortable to live in, if you are Japanese. But there’s a difference between being comfortable and being viable. We are gradually losing our viability.

 2. Leadership means working the global sales floor
One thing Japan has to get rid of is the idea that things are one way here and different everywhere else. The Japanese are really strong at home, and incredibly weak away from home. We need Japanese who are strong away, or who don’t distinguish between home and away. We’re trying to build this idea into Uniqlo’s culture. For example, English is spoken at business meetings with foreigners, and we want all emails to be in English in a few years…

My advice for young Japanese is simple: get out of Japan. One of our weaknesses as Japanese is our ineptness at communicating with other cultures. Even people who speak English well are closed off psychologically. They don’t speak frankly like I do. There’s this uniquely Japanese standoffishness, this hesitancy to become too involved. And it’s detrimental to globalization.

3. Don’t work backwards
We saw food distribution as a backward sector, so we went into partnership with a food group, Ryokuken, in 2002. But vegetables are not an industrial product; you don’t know exactly when they will be ready or in what volume. We eventually understood that it would be impossible to succeed unless we ran our own farms, and we did not want to be farmers. After two years, we shut operations down.

4. Don’t give up your national identity
We opened our first store outside Japan in 2001, in London. And we failed spectacularly. We quickly opened 21 outlets in Britain—and shut down 16 of them by 2003. In retrospect, that was probably good, because we learned so much. Our big mistake was to try to do things the British way. We never capitalized on our strengths…

All this sounds pessimistic, but I don’t see this as the counsel of despair. Japan has everything—people, goods, money, technology, information. As a nation, we are honest, hard-working and serious…

Even if we experience failure, we can pick ourselves up and try again. That’s what Uniqlo did—and that is what Japan can do…

Written by Roya Wolverson , please go to Time magazine to read the whole article.