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China Looks to Improve Intellectual Property Rights Protection

 

At the start of the fourth China patent week in Chongqing on November 7, the Chinese government has expressed an interest in improving the nation’s intellectual property rights protection system.

The State Intellectual Property Office of the People’s Republic of China released the “National Patent Business Development Strategy (2011-2020)” on November 11 and according to Gan Shaoning, the office’s vice president, the strategy will become a new milestone in China’s patent development history.

The new strategy, which maintains and intensifies the principles detailed in the “Outline of National Intellectual Property Strategy” issued on Jun 21, 2008, aims at making China a country with a “comparatively advanced system of patent creation, employment, protection and management” before 2020.

The plan specifically points out that China will improve its patent protection system through extensive international cooperation with organizations such as the World Intellectual Property Organization. It emphasizes that China will play a more positive role in the coordination of international intellectual property affairs and will further strengthen the training of elite patent professionals for global cooperation.

The strategy suggests that in order to encourage domestic industrial restructuring, it is essential to reinforce an effective system of patent creation and regulation. This is especially true in key industries that require core technologies that China has struggled to develop in the past. The government is encouragings domestic companies with technology that is based on, or that draws inspiration from, existing technology to apply for patents.

The Chinese government has said it will play a vital role in guiding the macro patent policy-making to not only make the domestic patent policies more internationalized and transparent, but to also establish a reliable patent management system. The government will also consider taking other measures such as instituting taxation policy adjustments to award enterprises that produce high value-added products with core patents, thus gradually transforming the whole country’s development mode.


China Market for Wealthy Consumers

China now has more billionaires than any other country besides USA, according to Forbes Magazine. China mainland had 128 billionaires in 2009 (more if including Hong Kong) compared to 403 in the USA. In 2000, China had 2 billionaires and USA had 298.

Also, China increased to 4th in the world for number of millionaires to 477,000, ranking behind USA,, Japan and Germany.

Bentley announced it will sell more than 400 vehicles in China this year, making it the 3 largest market behind USA and UK. Most notable is the rapid increase from zero sales less than 10 years ago, and the average price per vehicle is 4-5 million RMB (USD$770-956,000).

BMW announced that China has surpassed Germany in total vehicles sold, and Audi also announced it will sell more luxury vehicles in China than any other market. .

Sales of Beijing Benz, a JV between Daimler AG and BAIC Group currently account for 30% of the total Mercedes sales in China. Daimler CEO Dieter Zetxche states that by 2015 Mercedes sales will reach 300,000 units or 20% of worldwide sales.

Further, China's middle class consumer is expected to reach 350 million in the next 5 years.

Expansion of your company's market into China's is essential.


What are the threats to US-China relationship?

The main issue is jobs—in the U.S. and in China. We have an unacceptably high unemployment rate that doesn't look like it's going any lower. Wages aren't going up. At the same time, we have a very large trade deficit here, and the biggest piece of that is with China. So American politicians—and this has resonated with American workers—want to hold China accountable for the plight of the American worker, and this has come to a head. The House Ways and Means Committee has approved an anti-China bill that will allow U.S. companies to seek remedies in trade sanctions for an undervalued yuan. And that bill will most likely pass soon.President Obama was very tough, according to press reports, with Chinese Premier Wen Jiabao when they met in New York.

Unfortunately, I think this is dead wrong. We've completely missed the role that China plays in the U.S. economy. Last year the U.S. ran trade deficits with 90 countries. China was the largest, but there were 89 others that account collectively for a lot more than our trade deficit with China. We have a multilateral trade imbalance—not a bilateral problem with China. And the reason is we don't save. Our overall savings rate as a nation last year was negative, at minus 2.3% of national income. That's the lowest for a leading country in the modern history of the world.

Closing down trade with China is like rearranging the deck chairs on the Titanic. The Chinese piece just goes somewhere else, most likely to a higher-cost producer, which ends up taxing the American public. What is being suggested by Washington—and a lot of economists who should know better—is a bilateral fix for a multilateral problem. This is bad economics, and it's driving bad politics, and it's extremely dangerous. It will backfire on America and, by the way, the Chinese can retaliate and put trade sanctions on American products made in China. China is America's third-largest—and fastest-growing—export market. And if it really gets ugly, then the Chinese just stop buying U.S. Treasuries. Our interest rates soar, the dollar collapses and we're back in recession.

From Stephen Roach, former Chairman of Morgan Stanley Asia October 2010


Chinese Worker Wages on the Rise?

By now, everyone has  heard of Foxconn, the worlds largest electronic contract manufacturer owned by Hon Hai of Taiwan. Foxconn is famous for assembling Apple products, as well as Sony, HP, Nokia and others and also known for a string of worker suicides in their Shenzhen factory where they employ more than 400,000.

In June, Foxconn raised factory worker salaries from 900 to 1,200 Yuan per month ($179), and in October, another increase to 2,000 Yuan ($298) is planned. The legal minimum salary in Shenzhen is 1,100 Yuan per month ($164). The average wage in China's southern factories is 800 Yuan per month ($120) as some cities do not impose minimum wages.

By contrast, the minimum wage in the USA is $7.25 per hour or $1,160 per month and the average US Factory worker salary (as of October 2010) is $2,416 per month (NOT including benefits). Still, a huge disparity if only comparing to one company, Foxconn. 

The question is whether this will impact costs of exports with this rise in costs, which only affect the assembly portion of the cost of products. It does not appear that the move to near $300 per month for 6-7 day work weeks will bridge the gap between US and China manufacturing costs.

Further, Foxconn just opened a factory in Zhengzhou, Henan  which is China's most populous province with 100 million people. Foxconn plans to have 300,000 workers in Zhengzhou where they are paying lower wages in a move away from Shenzhen.


Too Many Hamburgers? by Thomas L. Friedman

Tianjin, China

To visit China today as an American is to compare and to be compared. And from the very opening session of this year’s World Economic Forum here in Tianjin, our Chinese hosts did not hesitate to do some comparing. China’s CCTV aired a skit showing four children — one wearing the Chinese flag, another the American, another the Indian, and another the Brazilian — getting ready to run a race. Before they take off, the American child, “Anthony,” boasts that he will win “because I always win,” and he jumps out to a big lead. But soon Anthony doubles over with cramps. “Now is our chance to overtake him for the first time!” shouts the Chinese child. “What’s wrong with Anthony?” asks another. “He is overweight and flabby,” says another child. “He ate too many hamburgers.”

That is how they see us.

For the U.S. visitor, the comparisons start from the moment one departs Beijing’s South Station, a giant space-age building, and boards the bullet train to Tianjin. It takes just 25 minutes to make the 75-mile trip. In Tianjin, one arrives at another ultramodern train station — where, unlike New York City’s Pennsylvania Station, all the escalators actually work. From there, you drive to the Tianjin Meijiang Convention Center, a building so gigantic and well appointed that if it were in Washington, D.C., it would be a tourist site. Your hosts inform you: “It was built in nine months.”

I know, I know. With enough cheap currency, labor and capital — and authoritarianism — you can build anything in nine months. Still, it gets your attention. Some of my Chinese friends chide me for overidealizing China. I tell them: “Guilty as charged.” But have no illusions. I am not praising China because I want to emulate their system. I am praising it because I am worried about my system. In deliberately spotlighting China’s impressive growth engine, I am hoping to light a spark under America.

Studying China’s ability to invest for the future doesn’t make me feel we have the wrong system. It makes me feel that we are abusing our right system. There is absolutely no reason our democracy should not be able to generate the kind of focus, legitimacy, unity and stick-to-it-iveness to do big things — democratically — that China does autocratically. We’ve done it before. But we’re not doing it now because too many of our poll-driven, toxically partisan, cable-TV-addicted, money-corrupted political class are more interested in what keeps them in power than what would again make America powerful, more interested in defeating each other than saving the country.

“How can you compete with a country that is run like a company?” an Indian entrepreneur at the forum asked me of China. He then answered his own question: For democracy to be effective and deliver the policies and infrastructure our societies need requires the political center to be focused, united and energized. That means electing candidates who will do what is right for the country not just for their ideological wing or whoever comes with the biggest bag of money. For democracies to address big problems — and that’s all we have these days — requires a lot of people pulling in the same direction, and that is precisely what we’re lacking.

“We are not ready to act on our strength,” said my Indian friend, “so we’re waiting for them [the Chinese] to fail on their weakness.”

Will they? The Chinese system is autocratic, rife with corruption and at odds with a knowledge economy, which requires liberty. Yet China also has regular rotations of power at the top and a strong record of promoting on merit, so the average senior official is quite competent. Listening to Prime Minister Wen Jiabao of China tick off growth statistics in his speech here had the feel of a soulless corporate earnings report. Yet he has detailed plans for his people’s betterment, from universities to high-speed rail, and he’s delivering on them.

Orville Schell of the Asia Society, one of America’s best China watchers, who was with me in Tianjin, put it perfectly: “Because we have recently begun to find ourselves so unable to get things done, we tend to look with a certain overidealistic yearning when it comes to China. We see what they have done and project onto them something we miss, fearfully miss, in ourselves” — that “can-do,” “get-it-done,” “everyone-pull-together,” “whatever-it-takes” attitude that built our highways, dams and put a man on the moon.

“These were hallmarks of our childhood culture,” said Schell. “But now we view our country turning into the opposite, even as we see China becoming animated by these same kinds of energies. I don’t idealize China’s system of government. I don’t want to live in an authoritarian system. But I do feel compelled to look at China in an objective way and acknowledge the successes of this system.” That doesn’t mean advocating that we become like China. It means being alive to the challenge we are up against and even finding ways to cooperate with China. “The very retro notion that we are undisputedly still No. 1,” added Schell, “is extremely dangerous.”
 


China imposes anti-dumping duty on US chicken

 

BEIJING – China will impose an anti-dumping duty as high as 105.4 percent on US broiler chicken products, effective from Sept 27, the Ministry of Commerce said on Sunday.

China found that the US industry dumped such products on the Chinese market, hurting domestic production, the ministry said. The tax rate will be 50.3 percent to 53.4 percent for those US producers who cooperated with the investigation and 105.4 percent for those who didn't, it said.

"The final ruling is that the there is a causal relationship between the US dumping of broiler products and the losses suffered by the Chinese industry," the ministry said in Beijing.

China said in April an initial investigation showed the US provides subsidized soybeans and corn to its poultry industry, hurting Chinese producers. On Aug 31, the government imposed five-year punitive anti-subsidy tariffs after upholding a finding that the US broiler chicken products were subsidized.

Imports by Pilgrim's Pride Corp will incur a 53.4 percent anti-dumping duty and imports by Tyson Foods Inc 50.3 percent, according to the ministry.

The anti-dumping investigation has been completed, the ministry said in its statement.

China Daily News September 27, 2010


Are the Chinese better at math than Americans?

Econ 001 

Ever since our financial meltdown, the US has been accusing China of 'currency manipulation'. These accusations are in spite of the fact that the Yuan has risen nearly 20% from 2005-2008 and the US imported at least as much in those years as we do now.

Somehow this just seems too simple to bother with economists, treasury secretaries, or in particular the financially astute US politicians.

Ready?

-Most exports from China to the US are only ASSEMBLED in China (such as Apple's iPod where the China export value input to an iPod is about $18). Since the Chinese input to this export constitutes no more than 10% of such export, another 20% appreciation in the Yuan would AT MOST increase the price of these exports by 2%. 

-Then, the appreciation of the Yuan may cause China to LOSE these jobs to other countries (Vietnam, India) which will reduce the buying power of Chinese to buy (import) US goods

Therefore, it is not the currency. Labor is the most significant component of most goods exported from China to the US. If wages go up in China then prices of its exports will rise which is what US is hoping to achieve by increasing the value of the Yuan.


Cultural dynamics while doing business in China

The Basics of American and Chinese cultural differences when doing business in China:

Some key differences in business culture between US and China:

  • Americans wants do 'do a deal' while Chinese want to 'build a relationship'
  • Americans wants to maximize short-term profits while Chinese are long term thinking
  • Americans are 'direct' while Chinese will not deliver bad news
  • Americans want to move quickly, while Chinese move when they're ready

Guanxi:
Guangxi describes the Chinese dynamic in personalized networks of influence and is the central idea in Chinese business relationship. Knowing someone who can make introductions for you is a very important step in successful business dealings in China.

Earning trust and respect should be considered the first step in business interactions. With a strong Chinese partner, everything is possible.

Negotiations:

  • Americans value straightforward, while Chinese are master of oblique
  • Be prepared and know all details, because the Chinese always do (Even after bottles of rice wine)
  • Chinese may appear indifferent and unemotional during negotiations
  • Remain calm and impersonal during negotiations and discussions
  • Know that Chinese will negotiate ANY price
  • Americans tend to appreciate value, where Chinese are transactional and price driven
  • Give in to some issue in your negotiations, as this will benefit you in the long run
  • Be copious and diligent in your contract discussions and signing

China Foreign Domestic Investment up 30% in July

BEIJING – The amount of foreign direct investment (FDI) China received in July rose by 29.2 percent year on year to $6.924billion, said Yao Jian, spokesman of the Ministry of Commerce (MOC), Tuesday.

The figure brought the country's FDI inflow to $58.35 billion in the first seven months of the year, an increase of 20.65 percent from a year earlier.

 

Yao said on a month-on-month basis, FDI inflows had increased by more than 20 percent for two straight months, reflecting the solid recovery in FDI flows into China. The manufacturing sector received 47.94 percent of the July FDI inflow and the services industry got 45.09 percent.

A total of 14,459 foreign-invested companied were approved for establishment in China during the first seven months of the year, up 17.9 percent year on year.

China's FDI up nearly 30% in July


China-related M&As to rebound

 

BEIJING – Most China-related merger and acquisition deals have rebounded strongly in the first half of the year, and set the scene for robust activities for the remainder of 2010 and into 2011, accounting firm PricewaterhouseCoopers (PwC) said on Monday.

Chinese outbound merger and acquisition deals for the first six months of 2010 have reached record levels, up by more than 50 percent over the same period last year, PwC said in a report. A total of 99 outbound deals were announced in the first half of this year, continuing a growing trend that began in the first quarter of 2008.

Natural resources are the main industry target for Chinese investors overseas. Fourteen resource deals were announced in the first half, with the largest being Sinopec's $4.7 billion acquisition of a 9 percent stake in Synacrude from ConocoPhillips.

Another notable investment was China Investment Corporation's double investment in PennWest Energy, aggregated to $1.2 billion in total.

Though Australia is identified as the main target destination, Africa is growing in prominence for Chinese resource investors.

"Although natural resources continue to be the priority industry target for Chinese investors overseas, we are seeing other industries starting to get increased attention, including technology, manufacturing and services industries," said Andrew Li, Transaction Services Partner at PwC. "Meanwhile, investors are broadening their target regions to include the United States, Japan and the European Union."

China's domestic and in-bound merger and acquisition deals also rebounded strongly, reaching peak levels before the financial crisis. Deal volumes increased by 26 percent to 1,884 in the first half of this year, compared to a three-year low in the first half of 2009.

The largest transaction in the first half of 2010 was China Mobile's acquisition of a 20 percent stake in Shanghai Pudong Development Bank for $5.8 billion. Foreign in-bound merger and acquisition activities are still below pre-financial crisis levels, but are trending back.

Financial buyer activities including private equity and venture capital have flat lined, but foreign funds remain committed and domestic private equity and venture capital fund raising in the first half of 2010 reached record levels.

Looking ahead, domestic strategic merger and acquisition activity in China is expected to increase in industries previously only accessible to State-owned enterprises.

Meanwhile foreign investors are expected to re-enter the market at volumes last seen prior to the financial crisis.

 

As for Chinese outbound investment which has seen record growth, this trend is expected to continue and in an increased number of industries apart from natural resources including automotive, equipment, and high-technology industries.

"The appetite for Chinese enterprises to invest overseas is showing no signs of slowing, and with Chinese enterprises' increasing interest in global markets, technical capability and production expertise, and stable financial returns in mature asset markets.We can look forward to the announcement of many more outbound transactions," said PWC's Xiaogang Wang.