Wamu target for Chinese banks?

Many Chinese banks are flush with capital and aggressively seeking growth opportunities overseas. The strengthening RMB only makes a U.S. acquisition more appealing. Wamu, despite its potential liabilities, would seem to be a prime target. Why? Here's what Bill Virgin at the P-I has to say:

What would an acquirer get? An established retail banking, credit card and home-loan company with a network of 2,200 branches stretching from California to New York and Seattle to Miami.

Here's the entire article from the Seattle P-I.

Sportswear goes local

From today's WSJ:

In efforts to woo China's consumers, Nike Inc., the country's market leader in sportswear, and Adidas AG are both aggressively promoting apparel and shoes with designs incorporating Chinese elements -- a departure from the mostly Western-influenced styles they have marketed in the past.



The companies "will do whatever they can to tell the story, 'we were the partner in China's greatest sporting moment,'" says Terry Rhoads, managing director of Zou Marketing, a Shanghai-based sports-marketing firm. "It's a huge battle."



Already this year, Nike and Adidas will each surpass sales of $1 billion in China, their biggest market after the U.S. From 2002 to 2006, sales of athletic shoes and clothing in China by volume doubled, according to market-research firm Euromonitor International. Overall, sportswear sales are expected to grow at an annual rate of 20% for the next five years, and premium brands such as Nike and Adidas can expect increases of 35% to 40%, Mr. Rhoads says.

China to launch market for small companies in Shenzhen

The Shenzhen Stock Exchange is starting a "NASDAQ-like growth enterprise market" to help smaller companies raise capital. It plans on competing with NASDAQ, London AIM and other markets. First IPOs could be as early as May 2008. Details from WSJ plus possible IPO candidates and reference data from peers around the world below.

The Shenzhen exchange won't identify early listing candidates for the GEM. Analysts point to several companies operating from a high-technology industrial zone outside Beijing known as Z-Park, for Zhongguancun Science Park.



"We are surely to be in the first batch," said He Yuanping, a vice general manager of Beijing Origin Water Technology Co., which makes industrial sewage-treatment equipment. Mr. He, who is in charge of the GEM listing effort, said Origin Water has received a "positive message" about a listing from officials of the Shenzhen exchange and Z-Park management.



Another hopeful is two-year-old Beijing Techshino Technology Co., which develops fingerprint-, face- and eye-recognition systems. The company should qualify for a listing with annual revenue in the neighborhood of 40 million yuan and is overhauling its shareholding structure, said Zhou Jun, general manager.

The price of pork in China

Inflation is becoming an increasingly important problem in China. The price of pork in particular is crucial.

Consumer prices in China rose by 8.7% in the year to February, the highest rate for more than 12 years. Food prices were 23.3% higher than a year earlier.



Pork has been a cornerstone of the Chinese diet for centuries. Rows of 2,100-year-old terra cotta pigs were recently discovered near Xian, a city better known for terra cotta warriors. China’s 1.3 billion people eat more than 92 billion pounds of pork a year — a fifth of a pound a day for every man, woman and child.



And just as higher gasoline prices can lead to a political reaction in the United States, the Chinese government is particularly worried about soaring pork prices because of their impact on household budgets and the way they can exacerbate income inequality.

Haier in the US: Struggling but undaunted

Haier launches new high end refrigerator at its US plant just as economy hits the skids. But adapting to US business culture has also posed challenges. Yet, Zhang Ruiming, Haier's CEO, intends to persevere. "First the hard, then smooth. That's the way to win," he says.





From today's WSJ:

The new refrigerator, which allows consumers to set specific temperatures for individual compartments, was designed and built at Haier's South Carolina factory, at 10 times what it would cost the company to make in China.



The downturn in the U.S. economy crimped consumer demand just as the company's most-expensive U.S.-made products came on the market.



At the same time, Haier's rigid, top-down management structure fell flat with American workers accustomed to a less-authoritarian style.



For Haier, which had $15 billion in revenue world-wide last year, a delay in getting its new refrigerator to market meant that it arrived just as the U.S. economy was turning south. A series of recalls for China-made products last year, which have heightened quality concerns about Chinese manufacturing, compounded the company's challenges. And the new fridge's design simply hasn't set it apart from models by better-known competitors, appliance buyers say.



Known for sage-like sayings and for idiosyncrasies such as the flying-saucer-shaped tower he had built at one of his plants, Mr. Zhang insisted that Haier press on with its global expansion. "First the hard, then smooth. That's the way to win," he says.

It's Official: Bear Citic deal nixed

From today's WSJ:

HONG KONG -- China's Citic Securities Co. Tuesday dropped plans for a $1 billion cross-investment with Bear Stearns Cos. in the wake of J.P. Morgan Chase & Co.'s deal to take over Bear.

Medical tourism starts gaining traction

China should be an important player in this as well.



From BusinessWeek:

Yes, just like manufacturing facilities and call centers, health care is moving offshore. "All of the largest U.S. insurers are starting to educate themselves or are putting [offshore] programs in place," says Jonathan Edelheit, president of the Medical Tourism Assn., an industry group formed just last year. Companies that self-insure are also bombarding Edelheit's group with requests for information.



Getting covered employees to leave the U.S. won't be that hard, says Edelheit. An insurance company could waive all deductibles and co-pays, offer to cover travel costs for the patient and family members, even throw in a cash incentive, and still save tens of thousands of dollars. After all, a heart procedure that costs $100,000 in the U.S. runs only $10,000 to $20,000 at some of the best private hospitals in Asia. And the quality of care? Foreign hospitals in such arrangements are typically approved by Joint Commission International, part of the same nonprofit organization that accredits American hospitals.



Blue Cross took the lead in medical offshoring when it formed its first partnership, with Bumrungrad Hospital, in February. Since then the insurer has signed similar pacts with the Parkway Group Healthcare, owner of three hospitals in Singapore, and hospitals in Turkey, Ireland, and Costa Rica. Three members of India's Apollo Hospitals Group are also joining the network. And another large Indian chain, Wockhardt Hospitals, is talking with U.S. insurers as well. "Americans haven't come to grips with having their heart surgery in Thailand," says Curtis Schroeder, the American CEO of Bumrungrad. "But that will change."

Commodities "Supercycle" - The Long Boom

Imports of both soya beans and oil increased 35x since 1999. Wow!



From the Economist:

China, with about a fifth of the world's population, now consumes half of its cement, a third of its steel and over a quarter of its aluminium. Its imports of many natural resources are growing even faster than its bounding economy. Shipments of iron ore, for example, have risen by an average of 27% a year for the past four years.

Chinese demand for raw materials of all sorts is growing so fast and creating such a bonanza for farmers, miners and oilmen that phrases such as “bull market” or “cyclical expansion” do not seem to do it justice. Instead, bankers have coined a new word: supercycle.

MySpace Ramps Up Seattle Operation

It seems that any technology company of consequence sees a significant presence in Seattle as de rigueur. MySpace is the latest example.

MySpace, with 60 local employees, plans to double its Seattle work force in the next 12 months after making the city the first remote development office for the Beverly Hills, Calif., company. MySpace also has facilities in San Francisco, London, Korea and Australia.



"We chose Seattle because it is a hotbed for innovation and disruptive ideas," said MySpace Chief Technology Officer Aber Whitcomb, adding that it served as a blueprint for its decentralized technology efforts. "It was a natural next step for our strategy of opening offices around the world."



MySpace employs about 1,200, including 480 in the development/engineering group. Seattle has been one of the fastest-growing offices for the company. The Seattle area is an adopted home of tech giants Yahoo Inc. and Google Inc., which have established branch offices.

Bank of China seeks growth through acquisition

Can't get much clearer than that.



From Bloomberg:

``Mergers and acquisitions are an important part of Bank of China's overseas expansion strategy, and we are actively seeking takeover targets abroad,'' said Wang Zhaowen, a Beijing-based spokesman for Bank of China, the nation's third-largest.

CITIC to invoke MAC clause?

Back in October last year, Citic Securities announced it would buy up to 9.9% of Bear Stearns. This would have been a landmark deal but, given Bear's current troubles, it will be surprising if Citic doesn't bail.



From 10/23/2007 Washington Post

NEW YORK, Oct. 22 -- China's Citic Securities would acquire up to a 9.9 percent stake in Bear Stearns under a joint venture that marks the first time an entity controlled by the Beijing government has obtained a significant stake in a major Wall Street investment bank.



The two firms would invest about $1 billion in each other, sell financial products in China and start a Hong Kong-based joint venture offering financial services in other Asian markets.



"Citic invests in energy and other sectors, but this is a major step so far in investing in the financial services area," said Wenran Jiang, director of the China Institute at the University of Alberta in Canada. "The simple fact is that there is a lot of cash flowing around. The basic law when you have so much surplus capital is just to go diversify and look into the big guys overseas."

China makes hostile bid for iron ore in Australia

On the one hand, the increasing wealth and financial sophistication in China makes further hostile cross-border M&A bids more likely. Offsetting this, in the U.S. at least, is negative political sentiment.



Geopolitically, massive Chinese investment in Australia must be troubling for those tasked with sustaining American influence in the Asia-Pacific region.



Yet another interesting sitution that bears closer attention.



From today's WSJ:

MELBOURNE, Australia -- In China's first hostile bid for an Australian company, Sinosteel Corp. launched a cash bid for iron ore miner Midwest Corp. that values the target at A$1.2 billion (US$1.1 billion).



The move illustrates China's strong desire to get a foothold in Australia's resource sector as demand, and prices, for raw materials surge. It also comes as big miners BHP Billiton Ltd. and Rio Tinto PLC squeeze Asian steel mills for a 71%-plus rise in iron ore contract prices.



"It's time Midwest shareholders had the opportunity to decide for themselves the value of their investment in Midwest," Sinosteel President Tianwen Huang said.



If the bid is successful, it will be China's first hostile takeover of a foreign company, according to data supplied by Dealogic, but not its first attempt.

Seattle startup scene poised for a Cambrian explosion?

People like Jeff Schrock, now at Monster Venture Partners, believe that the slowdown at Microsoft may be the catalyst that sparks an explosion of new startups in Puget Sound.



Also, while many rightly note that Silicon Valley is sui generis in terms of scale, the diversity of successful startups in Seattle is remarkable. Starbucks, Costco and Amazon are just the most prominent examples.



In some important ways, these developments are highly complementary to the growth of venture capital and entrepreneurship in China.



The excerpts below are from today's Washington Post.

"Seattle has arrived in the big leagues," said Scott Darling, a general partner at Frazier Technology Ventures in Seattle. "We're not Silicon Valley, nobody is, but we're playing for real." Darling lived in Silicon Valley from the mid-1970s to 1990, when Andy Grove, one of Intel's founders, asked him to move to the Northwest to continue working for Intel. Darling said Washington state is now tied with Texas for third place in terms of VC money, behind Silicon Valley and Boston.



The recent boom in Seattle could be partly due to Microsoft's decreasing stature as a cutting-edge technology leader, at least according to one theory from an investor. Silicon Valley and Boston both boomed after a great company began to slow down -- in the valley, it was Fairchild, and in Boston, Digital Equipment -- leading bright minds to leave and start their own businesses, said Jeff Schrock, a partner at Monster Venture Partners in Seattle, who used to work for Yahoo in California.



"I think we're at an interesting stage in Seattle with Microsoft becoming more of a slow and steady growth company," he said. "For the first time, there are lots of people coming out of Microsoft looking for entrepreneurial opportunities."

Chinese national soccer team in Seattle April 16

The Chinese national soccer team will play the Mexican team at Qwest Field on April 16. Key details below with more at Clare Farnsworth's blog.

KIRKLAND – In partnership with Soccer United Marketing (SUM), MLS Seattle announced today the Mexican National Team will face the national team of China on April 16 at Qwest Field in Seattle. First kick is set for 8 p.m. (PT) and gates will open at 6 p.m. (PT).



Tickets will go sale Saturday, March 15 at 10 a.m. Ticket prices range from $20-$50 and can be purchased through the following outlets:



1. By calling Ticketmaster at 206-628-0888

2. Visiting www.mlsinseattle.com or www.ticketmaster.com

3. In person at all Ticketmaster outlets

4. In person at the Qwest Field Box Office: Monday-Friday from 10 a.m.-5 p.m.; Saturday 10 a.m -2 p.m.



"We are excited to partner in this match between Mexico and China," said MLS Seattle Owner & General Manager Adrian Hanauer. "Since we are still 12 months away from our first home match, the opportunity to host these two teams will provide our fans a taste of the world's game in anticipation of what they will experience next spring at Qwest Field."

PRC Pharma R&D group makes US acquisition

Another example of the consummation of Chinese ambitions to acquire both technical expertise and market access, this time in pharma.

WuXi PharmaTech (NYSE: WX), China's premier provider of pharmaceutical R&D outsourcing services has signed a definitive agreement to acquire US-based AppTec Laboratory Services, Inc. (AppTec).



The acquisition of AppTec allows WuXi PharmaTech to immediately obtain biologics capabilities and expertise, gain a significant U.S. operational footprint, and expand its customer base and addressable market size.



The combined business operations of WuXiPharmaTech and AppTec in both the U.S. and China will enable WuXi PharmaTech to provide a full service suite of outsourced chemistry and biology services to global pharmaceutical, biotechnology and medical device clients.



The transaction consideration totals approximately $151 million and the assumption of debt held by AppTec totaling approximately $11.7 million.

Cancer immunotherapy trials in China?

It's unclear whether there's any substance behind this. The company seems a bit sketchy but, as his bio below shows, Dr. Daopei Lu is certainly a distinguished member of the medical community.

Generex Biotechnology Corporation (GNBT) announced it would stage the Phase I trial of its cancer immunotherapy in China. The trial will be performed in collaboration with Dr. Daopei Lu and the Beijing Daopei Hospital in Beijing, China. Dr. Lu, a hematologist-oncologist, has conducted many clinical trials and authored over 200 articles in peer-review journals.




Dr. Lu simultanously acts as a vice president of the Chinese Medical Association, chairman of the Society of Hematological Malignancies, Chinese Anti-Cancer Association and a member of the Advisory Committee of international Bone Marrow Transplantation Registry. In addition, he is also editor in chief, deputy editor in chief or editor for eight domestic medical journals and an editorial member of two international journals.

SCI may fall below 3,000

Because investment income is an important component of earnings for many listed companies, there is a very real risk that we will see a downward spiral where lower than expected earnings takes the index below 3,000. Since a stronger RMB and potential monetary tighening must also negatively affect earnings and investor sentiment, a more significant correction may well be in the cards. This is from AP:

The benchmark Shanghai Composite Index lost 98.85 points, or 2.4 percent, to close at 3,971.26, its lowest level since July 19, when it settled at 3,912.94. The Shenzhen Composite Index fell 3.3 percent to 1,248.19.





The decline below the psychological level of 4,000 points prompted waves of panic selling, analysts said. They said the market would likely look to Wall Street for cues in coming days.





Apart from worries over what the authorities will do to combat inflation, which is at its highest level in a dozen years, investors are jittery over an expected slowdown in average corporate profit growth.





"If profitability comes in as we expect, the Shanghai Composite may stabilize around 3800," said Li Nian, a strategist at Shenyin Wanguo Securities. "But the index can head to below 3000 if there's a further downward adjustment in corporate earnings forecasts."





Li forecasts that corporate profit growth will fall to a still robust 30 percent, but that's well below the average of about 50 percent last year.

Wen Jiabao turns to health care and other social services

As the except below from the FT explains, Premier Wen Jiabao's (sometimes referred to as "Grandfather Wen" for his empathetic manner towards the common people or laobaixing) focus on domestic issues is a response to very real problems in China as well as a way to distinguish the current regime from the previous one. Because of these two powerful incentives, this policy orientation should be durable and will benefit businesses in health care and education, especially those with products or services suitable for the less well off.

Mr Wen has spurned the bright lights of the "new China" and the heavily publicised meetings with foreign business leaders that were a feature of the administration of Jiang Zemin and Zhu Rongji. Instead, he has played empathiser-in-chief, sharing meals with migrant workers, hugging Aids sufferers and heading underground for photo opportunities with black-faced coal miners.





Part of his approach is Politics 101 for any incoming government, which needs to distinguish itself from its predecessor before striking out on its own. And part is because foreigners, by and large, do not need cultivating any more. They are already here, or on their way. But most of all, Mr Wen's approach is an acknowledgement of the deep fissures left by China's rush for growth and the collapse of education, health and social services for the poor in cities and the countryside in the past decade.

Evidence of China as a responsible int'l stakeholder?

This demonstrates that at least one part of the PRC government wants to be viewed as a responsible stakeholder in the existing international order. Note that the foreign ministry's statement is at odds with that expressed by the sovereign fund itself. Stay tuned to see how this plays out.

China's foreign minister indicated yesterday that Beijing is willing to work on an international code of conduct for sovereign-wealth funds, showing a more flexible stance than was projected last week by a senior executive at China's sovereign-wealth fund.





"I believe that appropriately using sovereign-wealth funds based on international rules is beneficial to the concerned parties. The rules of the game, of course, ought to be set by all," Yang Jiechi said.

Government spending on health care to increase 7x by 2016

With the country on a relatively sound fiscal footing, the PRC government is turning to major domestic issues like health care. According to the WSJ, government spending on health care will reach US$170 billion in 8 years.



This should be especially beneficial for domestic medical device companies like Mindray.

Liu Yanming, an analyst with Galaxy Securities, expects government funding for health care to soar to about 1.2 trillion yuan (roughly $170 billion) in 2016 from about 170 billion yuan in 2006.



Du Jinsong, an analyst based in Hong Kong for Credit Suisse, says some medical-device companies will benefit from this increased spending. Mr. Du estimates that revenue in China's medical-device market will grow an average of 20% a year between 2007 and 2010.

Shenzhen med device company buys sales network in US for $202 million

As I've said elsewhere, companies with established sales (and distribution) networks in the U.S. will become increasing attractive acquisition candidates for Chinese firms looking to access what is still, by far, the biggest market in the world.



From 3/11/2008 WSJ:

Mindray Medical International Ltd., one of China's top medical-device makers, will acquire Datascope Corp.'s patient-monitoring business for $202 million, Mindray said, securing a foothold in the U.S. market as the company strives to become an international competitor.



The deal between Mindray, of Shenzhen, and Datascope, of Montvale, N.J., comes as Chinese health care companies increasingly look to overseas markets to build on profits made on low-cost manufacturing at home.



The purchase of the Datascope business, which had revenue of $161.3 million last year, will give Mindray access to Datascope's network of sales and service representatives, some 90 people who peddle the company's products to hospitals and surgery centers across the U.S. Building that kind of network from scratch would have been a challenge, said Joyce Hsu, Mindray's chief financial officer, who confirmed the deal.

The meaning of the Chinese zodiac

Not sure where this is from but it's a memorable story about the 12 animals making up the Chinese zodiac.

I said: "The first pair is made up of the rat and the cow. The rat represents wisdom and the cow hard work. Wisdom and hard work must be closely relate d. Just being wise without hard work will turn someone into a wise guy. Just hard working without wisdom might end up being fool hardy. So they need to complement each other. This is the most important pairing according to our ancestors."



I continued: "The second pair consists of the tiger and the rabbit. Tiger represents bravery/agressiveness and rabbit exemplifies caution. Bravery and caution need to be closely connected. Just being brave, lacking caution, often results in doing things in a rash way. Being too careful. without the can do spirit is just plain timid. This is a very important pairing and that's why it is the second pair. So when you observe that a Chinese person is cautious, never assume that he or she does not have another attribute, which is bravery. Indeed, our ancestors, with great wisdom, sought harmony and teach/espouse/practice the principle of complement and balance."



I saw that many of the guests have become deep in thoughts. so I added: "The 3rd pair is made up of dragon and snake. Dragon represents firmness and strength. Snake exudes flexibility and persistence. Something that is too tough, taut or tight is easily breakable. On the other hand, if all you have is something just placid or too soft, it could result in being wishy washy, indecisive, lacking independence, and unable to take leadership."



"The next pair that follows is horse and sheep/lamb. A horse runs forward, looks towards the far away goal. Sheep/lamb prefers peace and serenity. If one only darts forward, oblivious of what is around, he will crash land, and probably won' t arrive the destination. Conversely, if one only devotes all his time to make peace, finding it necessary to please every one all the time, he most likely ends up direction-less, and not reaching his destination. So these two different human inclinations need to be closely inter-connected."



"What follows is the next pair: monkey and rooster. Monkey represents dexterity/fluidity. As for rooster, very long time ago, there was no clock, the crowing of the rooster heralded the beginning of a new day. So rooster helps to keep and define time, and represents constancy. Fluidity and constancy need to be complemented. If things change all the time without a degree of stability, even the best policies will not produce results. If things are so constant they become stagnant, like dead water, or a piece of iron plate, then there would not have been any devel opment, or things would not be progressive. Only when these 2 attributes are complemented harmoniously will it produce the necessary positive outcomes."



"Finally we have the pair of dog and pig. Dog epitomizes loyalty. Pig is casual or easy going. If one is too loyal but too rigid, he tends to repel and exclude others. Conversely, if he is too easy going but not devoted, he tends to be one without principles. So whether your loyalty is with your nation, your team, or your own dreams, it needs to occur in the relevant context of not trying to be too rigid/stubborn. Only with this approach will one truly keep his loyalty in the depth of his heart. Indeed we Chinese like to aspire to this ideal of flexible adjustment based on ingrained firm principles."



"Every Chinese person was born to one of the 12 animal s of the zodiac. Some were born in the year of the pig; others the year of the dog. What are the meanings behind? Practically, our ancestors expected us to be flexible, not going to extremes, that we know how to adjust. For example if I have the quality of a pig, then I would learn to complement my easy going-ness with the nature of loyalty or devotion. And vice versa for someone who has the human nature of a dog."

Nuclear power another growth area in China

Nuclear power represents another growth opportunity for American business in China. With oil at $107/barrel and with coal and natural gas following along, this trend can only accelerate.



From 3/10/1008 WSJ:

China's installed nuclear power-generating capacity is expected to reach 60 gigawatts by 2020, a senior Chinese energy official said -- much higher than an earlier government estimate of 40 gigawatts. A gigawatt is the equivalent of one billion watts. The new estimate is equal to about two-thirds of Britain's total electricity-generating capacity today, although still equivalent to less than a tenth of China's current total.



"Construction of nuclear-power plants has been progressing faster than planned," Zhang Guobao, a vice minister of China's National Development and Reform Commission, was quoted by the official Xinhua news agency as saying Saturday. The commission is China's top economic-policy planner.



China's nuclear-power sector is relatively underdeveloped. It has 11 reactors in operation, providing about nine gigawatts of power -- out of total electricity-generating capacity in China of some 700 gigawatts. The vast majority of China's power comes from coal-fired power plants.

Blackstone Q4 loss crushes value of Chinese gov investment

The Chinese government invested $3 billion in Blackstone in May 2007. At the time, it looked like they were getting a deal by buying in at a 4.5% discount to the IPO price of $31. Since then, the price of BX has plummeted from a high of $35 in July 2007 to $14 today. While this is a long-term investment, the paper loss of more than $1.5 billion, in both absolute and relative terms, is breathtaking. Significantly, according the CEO, it is "unclear" when things will turn around.



Chinese bloggers were critical of this deal. Brace yourself for another firestorm of controversy.





From 3/10/2008 Seattle P-I:

Blackstone posts 4Q loss of $170 million



NEW YORK -- Private equity firm Blackstone Group LP said Monday it swung to a loss during the fourth quarter due to a write-down on its investment in bond insurer Financial Guaranty Insurance Co. and deterioration in the credit markets.



Blackstone, which went public in June, lost $170 million during the fourth quarter, compared with earnings of $1.18 billion during the final quarter in 2006.



Adjusted net income, which was adjusted for special revenues and expenses tied to the company's public offering, fell to $88 million, or 8 cents per share, from $808.1million, or 72 cents per share, during the year-ago period.



Blackstone Chief Executive Stephen Schwarzman said in a statement deterioration in the credit and fixed income markets during the second half of 2007 reduced the level of new investments, transaction fees and appreciation on Blackstone's portfolio of investments.



Schwarzman said those problems have continued into 2008 and it is unclear when conditions will improve.





Blackstone shares fell 3.6 percent to $14.05 in morning trading. The stock, which debuted last June at $31, touched an all-time low of $13.82 at one point in the session.

Hainan Air to begin Seattle-Beijing flights in June

From the 2/6/2008 Seattle Times:

China's Hainan Airlines said Tuesday it will begin the first nonstop service between Seattle and Beijing in June.




Seattle will become the first North American city served by China's fourth-largest carrier, which was founded in 1993 and is privately held.




With traffic from Seattle to China growing at 12 percent a year, the route is aimed at frequent travelers who now have to make connections through other cities. The 11-hour flight will shave hours off trips by avoiding layovers.




In the U.S., the flight will connect to other Northwest markets, such as Spokane, Portland, Boise and Las Vegas, and in China it will offer connections to 40 Chinese cities, Hainan said.




Beginning June 9, the flight will operate four times a week: on Mondays, Wednesdays, Fridays and Saturdays.




"Seattle and the Pacific Northwest are home to many world-class companies that have significant business ties to China," said Deng Jian, Hainan Airlines' chief marketing officer in Beijing. "We hope to strengthen the friendship between China and the United States through our world-class service."

China signs investment MOU with WA State

This is an early step in the PRC government's policy of promoting outbound investment. Like most policy decisions taken by the PRCG, this is likely to have a big effect on China and the world.



From 5/12/2007 Seattle Times:

More than 50 government and business leaders from China visited Seattle on Friday, part of a multibillion-dollar buying-and-investment mission paving the way for a major meeting between the U.S. and China later this month.



Earlier Friday, Gov. Christine Gregoire met the group in Olympia during the signing of a memorandum of understanding to enhance cooperation between Washington and China.



State officials believe it is the first bilateral agreement between a state and the Chinese government.



Officials from China's Ministry of Commerce signed an agreement with the state's Community, Trade and Economic Development office to promote two-way investment.



Wang Chao, assistant minister of the Ministry of Commerce, said he hoped the agreement would help usher in deals aimed at expanding imports from the U.S. and Chinese investment to the U.S.



China has become the largest export market for Washington state, with exports totaling $7 billion last year, he said.



Wang said Chinese companies such as shipping giant Cosco, China National Petroleum Co. (CNPC), Haier and Huawei have all invested in the U.S.

Gates Foundation tackles HIV in China

Another example of how Seattle is assuming a role of strategic importance for US-China relations.



From 11/14/2007 WSJ:

With an initial foundation grant of $50 million and China's chipping in funds of its own, the partnership will push prevention in 12 major cities, including Beijing, Shanghai and Guangzhou, and the island province of Hainan. The aim will be to find people at high risk of AIDS and refer them to voluntary counseling and testing centers, which will offer education and tools to avoid the deadly virus. For people with HIV, the program will stress not passing it on.



The $35 billion Gates Foundation, which was created to tackle problems affecting global health, education and family issues, usually prefers to design its own programs and to put them into practice by teaming with nonprofits. But Beijing's centralized control made it necessary to collaborate with health, security and Communist Party agencies; indeed, it took four years of diplomacy by Mr. Gates before Beijing would permit his organization to register as a foreign foundation.



The Gates-funded AIDS Media Project has produced television spots showing Houston Rockets basketball star Yao Ming and former Los Angeles Laker Magic Johnson -- who is HIV positive -- shooting hoops and sharing takeout food to emphasize that casual contact with infected people is safe.

Commercial Real Estate Fire Sale?

I'm guessing that commercial real estate values will take a bigger hit than forecast in the article below.



Also, it's surely a sign of how bad market conditions are when an almost 50% increase in delinquencies for non-residential commercial mortgages can be called a "slight increase" (compared to a 4x increase for condo construction loans that's not too bad, I suppose).


A few big sovereign fund deals can't be far behind. And, with the recent pullback in mainland stock markets and the Chinese affinity for real estate, I'm sure they will be another important source of transaction volume.



It will be interesting to see how this impacts the Seattle market.




This is from the WSJ:

During the current downturn, commercial real-estate values are likely to fall 20% from their recent peaks, according to J.P. Morgan Chase. By contrast, Credit Suisse projected late last month that home prices, which peaked in 2005 and have declined substantially since, will fall an additional 25% to 40% in some regions before hitting bottom. The average price of a house in the Miami area, which has already fallen around 6%, is expected to tumble an additional 40%, the report says.




For banks lending to condo developers, the pain was even worse. Delinquencies for condo-construction loans rose to 10.1% in the fourth quarter, up from 2.6% a year earlier. By comparison, delinquencies on nonresidential commercial mortgages, secured by properties like office buildings and shopping malls, were 1.6% in the same quarter, up slightly from 1.1% according to Foresight Analytics.




The problem is that while most properties' cash flows are holding up, their values are falling primarily because financing is so much more costly. That's particularly scary for owners (and their lenders) who borrowed aggressively during the easy-money years of 2005 to 2007 and need to refinance soon. Many won't be able to borrow nearly as much or get the same terms, putting them at risk of default.

Chinese company buys Seattle consulting firm

Given the enormous liquidity in China plus the fierce urgency with which many Chinese companies want to climb the techology and marketing ladder, this is just the beginning of a powerful cross-border M&A trend.



This is also noteworthy because it signals a dawning appreciation among Chinese business people of the value of professional services and other intangible assets.



Here's the official press release:

Beijing, China and Seattle, Wash. — Feb. 28, 2008 — Today iSoftStone Information Service Corporation (iSoftStone) and Akona Consulting announced they have finalized an agreement whereby iSoftStone will acquire Akona Consulting, a business and technology consulting firm headquartered in Seattle, Wash., USA. With the acquisition of Akona, iSoftStone will significantly grow its United States operations and expand its core offerings into strategic business services which include research, business strategy, and interactive design.




“This combination allows us to strategically expand our business through Akona’s well respected presence in the United States,” said T.W. Liu, Chief Executive Officer of iSoftStone. “Our customers are continuously asking us to provide a combination of off-shore technology capabilities as well as local, on-site business consulting services. As such, we look forward to expanding our presence through Akona’s business service offerings as we grow globally, particularly in the United States and Europe.”

Itron showcased to Chinese

Itron, a Spokane company, was recently showcased as an exemplar of the capabilities the Pacific Northwest can offer China for addressing energy and environmental challenges.



Here's the excerpt about Itron from the Seattle Times:

The company
has begun to sell software to utilities in China, and it manufactures
natural-gas meters at a factory in Chongqing. Its most cutting- edge products
are advanced metering systems that take precise measurements of energy use and
deliver data back to utilities. Two-way systems can send signals to customers or
to smart appliances to cut consumption at times when the energy supply is
constrained. In measuring water use, its technology can detect leaks under the
street using acoustics.



Itron sees opportunities in China's plan to
boost its energy efficiency, said marketing director Tim Wolf. But concerns over
intellectual-property rights have made Itron cautious about the China market.



"Senator Cantwell and everyone made it clear that IP rights are an
important concern as we go forward," Wolf said. "Working directly with a
government-sanctioned group in China mitigates those concerns to some extent."

Another boost to China's foreign reserves

With the strengthening RMB, it looks like no end in sight for China's continued accumulation of foreign reserves. $2 trillion here we come! This is from the WSJ:

Brad Setser, a fellow at the Council on Foreign Relations in New York,
estimates that more than $200 billion in hot money may have flowed into China
last year, eclipsing the $82.66 billion in foreign direct investment.

Clean Tech: The beginning of a beautiful friendship?

Seattle has been selected as the US site for meetings for the newly formed US-China Clean Energy Forum. This should be a big boost for the Puget Sound's ambitions to foster a thriving clean tech industry cluster here.




Here's the lowdown from Kristi Heim at the Seattle Times:

As part of the US-China Strategic Economic Diaglogue, officials from the U.S.
Treasury, Commerce, Energy and State Departments and the Environmental
Protection Agency met privately in Gig Harbor with Chinese representatives from
the National Development and Reform Commission (NDRC); Ministry of Foreign
Affairs; Ministry of Science and Technology; State Environment Protection
Administration; and the Ministry of Finance to discuss cooperation on energy and
the environment.






They agreed to form the U.S.-China Clean Energy Forum,
committing to meetings two or three times per year in Seattle and Beijing for
the next several years. American members include former U.S. Trade
Representatives Carla Hills and Mickey Kantor.



The group said it will
identify and implement projects in clean energy and alternative fuels and
recommend solutions to the two governments to address trade, legal and financial
barriers.



One of the key legal questions is how to protect the
intellectual property of technology companies like Itron.



The UW signed an agreement with the Energy Research Institute "to begin
to collaborate on areas of energy efficiency, renewable energy and environmental
protection by looking at possibilities for joint research and joint training
programs," said Phyllis M. Wise, UW provost and executive vice president.



The effort will start with meetings and workshops between UW faculty and
researchers and their counterparts at the Chinese institute, eventually leading
to joint studies and joint training programs, she said.



At the national
level, the U.S., China energy talks will begin to address intellectual property,
export regulations and financing when they resume in China later this spring, a
U.S. Treasury Department spokeswoman said.