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 Those sounding the death knell for an Apple, China Mobile iPhone partnership maybe a bit premature. On Friday, a China Mobile spokesperson in Hong Kong confirmed(in Chinese) that discussion between the two sides is still ongoing, but didn’t elaborate on any details.
China Mobile has bluntly stated that it has no intention of sharing subscription revenue with handset manufacturers, the core of Apple’s business model. And as the overwhelmingly dominant carrier in China, it is in the unusual position of being able to dictate terms to Apple, much to the chagrin of Steve Jobs.
But all of that may not matter. Unlocked iPhones are already available in China’s gray market, priced around 4500 yuan per, or roughly USD $610. To make matters worse for Apple, Gizmodo, a widely followed consumer electronics blog, is reporting that hackers will soon open source a functional copy of unlocking software for the iPhone, thereby liberating end users from a designated GSM carrier, and making any exclusive contracts carriers sign with Apple moot.
Ok, maybe it is time to the sound the death knell.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
Photo from Engadget.com
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 A group of 1,800 angry workers demanding overdue pay at a cotton mill in Xinhe, Chongming Island have held seven top managers of the Korean-owned mill hostage since Friday, including the chief executive officer of the factory. The news was reported in the Korean Chosun Ilbo, and as Fons Tuinstra of China Herald notes, the Chinese media has been silent on the story because "Chinese media cannot write about such unharmonious behavior". Our own search also turned up zero search results (so if anyone finds anything, please do let us know).
Apparently, like the Shenzhen gang attacks we just told you about, this one is also related to the upcoming labour law changes.
More from Chosun Ilbo:
According to the Consulate General, several hundred Chinese workers in groups blocked the gate of the factory to prevent the Korean officials from leaving. During the process, some of the Koreans were beaten by workers.
H has been doing business for 10 years and set up a second cotton spinning factory two years ago. However, it has been preparing for liquidation due to a worsening management environment.
After being alerted to the situation, the Consulate General asked local police to protect the Koreans. It also asked the local government to mediate the situation and try to negotiate with the workers. Negotiations between the workers and Korean management are underway now.
Photo of factories on Chongming Island from juliekimyan
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 The Xinhua News Agency is reporting that China may allow foreign multinationals to list on the Shanghai Stock Exchange(SSE). SSE officials are conducting feasibility studies and companies names mentioned include HSBC Holdings Plc, Coca-Cola Co., and Siemens AG.
China is under renewed international pressure to speed up its currency reform and open its financial market. Letting foreign firms trade on domestic bourses may just be the first of many steps toward integrating China into the global financial community.
Currently, the yuan is not freely convertible. Money flow into and out of China are still tightly controlled by the People’s Bank of China.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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 Maybe. China Mobile’s CEO Wang Jianzhou confirmed that his company has been in discussion with Apple to bring the wildly popular handset to China, “because our customers like this kind of fashionable product,” said Wang.
But, negotiations have stalled over Apple’s subscription revenue sharing business model. In Europe and the US, Apple receives a portion of iPhone users’ data/voice revenue from their wireless carriers. China Mobile, with its 350 million user base and de facto monopoly status, doesn’t feel that it needs to play by Apple’s rules. Besides, if Apple doesn’t play ball, there is always Android, Google’s recently announced open source linux Mobile OS offering. China Mobile was on hand and spoke during Google’s unveiling of its highly anticipated wireless initiative last week.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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 Ladies (and guys with long hair), resist from buying those cheap hair bands you find at the mom and pop stores in your 'hood because the news is out that some of them are made from USED condoms. China Daily cites an unnamed dermatologist with the Guangzhou Hospital of Armed Police who says viruses and bacteria abound on these hair bands recycled from condoms and users could be infected with AIDS, genital warts and other sexually transmitted diseases (any doctors here? How long can those viruses live outside the human body?). True or not, the thought of using anything made from somebody's used condoms is revolting enough to make us not to want to have long hair ever.
So it does appear there'll be no end in sight to the string of headline-hitting product scares. This year has seen quite a few high-profile ones and no we are not repeating them here again. Earlier this week, more Chinese toys were recalled in Australia and the US when they were found to contain the date rape drug, gamma hydroxy butyrate, better known as GHB (can you imagine all those poor kids getting high while playing with their toys?). What's heartening in the latest hair band case is that the Chinese media were the first to report the problem, and not some foreign product quality authority. We will bet a million more stories are out there waiting to be told. Hopefully the authorities realise that it is way better to allow your own media to uncover those nasty stories before they make their way across the border. Honesty is still the best policy.
Photo from Ruddington Photos
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Yahoo China has taken a jibe at its arch-nemesis in the search arena, Baidu, with new banner ads featuring a bald big-bellied man peering out into the distance with a telescope and a tagline that says "If you can search only 100 degrees, you might as well search 360 degrees with Yahoo" (搜索只能搜100度，不如雅虎全能搜搜360度). Baidu's Chinese name 百度 means, literally, "100 degrees". According to this report at least, several webmasters have complained that their websites were penalised by Baidu since they started putting up Yahoo ads. Shanghaiist loves a bit of comparative advertising every now and then. Let's see how Baidu will respond.
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 And in a class all by itself, the US$1 trillion(1,000,000,000,000) club.
On Monday, the 4 billion A-share offering, priced at 16.7 yuan per share, finished its first day of trading on the Shanghai Stock Exchange at 43.96 yuan, rising as high as 48 yuan intraday. At US$1.005 trillion, PetroChina’s market cap is more than twice that of its US peer, Exxon Mobil (USD $486 billion), even though Exxon Mobil generated four times as much revenue last year and trades at only a quarter of PetroChina’s price to earning ratio, 13 to PetroChina’s 55.
But the craziness doesn’t end there. The lofty market cap comes with an asterisk: US$1 trillion only if you go by PetroChina’s local valuation. Shares traded overseas (Hong Kong and New York) values the company at roughly US$400 billion. One HK share (H-share) confers equity holders the same amount of ownership as one A-share, and one share of ADR traded on the NYSE grants 100 times as much ownership. While PetroChina’s A share closed up today at 43.96 yuan, its H-share finished down 8.2 percent at HKD $18, or 17.65 yuan (1 yuan=1.02 HKD). The gaping difference is a function of many factors: Beijing’s restriction on capital flow, lack of investment choices in China, and of course, out-of-control greed coupled with widespread ignorance on the part of Chinese retail investors.
In a related story, billionaire investor Warren Buffet sold his entire PetroChina stake several months ago, calling the price action in China “carried away.”
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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 For the first time in 17 months, China will raise wholesale price cap of gasoline, diesel and jet fuel, “to guarantee domestic supply of refined oil and promote energy conservation/为保证国内成品油供应，促进能源节约,” or so says the National Development and Reform Council. Per metric ton of all three refined products will go up 500 yuan, or roughly 10 percent, starting November 1.
China has kept fuel price steady even as world oil market continues to set new highs, seemingly on a daily basis. Oil is now over USD $95/barrel, up 50 percent year to date. One liter of diesel costs USD $0.64 in China, USD $1 in Singapore, and USD $2 in London.
Domestic refiners are bleeding red ink. Sinopec, China’s largest refiner, reported a USD $704 million loss in its refining segment during the past quarter. Given the economics, it’s not surprising Chinese oil companies are reluctant to invest in downstream operations to keep up with surging demand. Reuters is reporting widespread fuel shortages across China, especially diesel. Gas stations are rationing what little supplies they have left.
Don’t expect the situation to improve under the new pricing structure. Refiners will continue to lose money hand over fist. Consumers aren't likely to alter their driving behavior for what amounts anywhere between USD $7 to 14 extra a month. To make matters worse, China doesn’t have much maneuvering space for future price increases. Inflation is already running at 11 year high, another jolt from energy cost is the last thing China needs at this point. One possible solution is to have the government picking up the cost of energy subsidy. Beijing already rebates oil companies for some of their refining losses. But, to fundamentally address the supply demand imbalance in fuel, short of having a free market, China must take over the subsidy burden from the oil industry.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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 Industrial and Commercial Bank of China(ICBC), the world???s largest bank by market capitalization, is buying 20 percent of South Africa???s Standard Bank Group Ltd. Standard Bank is based in Johannesburg and has branches in 18 African nations. The USD $5.5 billion price tag marks the most expensive overseas investment by a Chinese firm to date. Earlier in the week, CITIC Securities, also a state owned company, swapped USD $1 billion worth of equities with Bear Stearns. Both tie-ups are just the latest examples of corporate China???s aggressive international merger and acquisition binge, started back in 2004 when Lenovo bought IBM???s PC business.
But, the ICBC move has an added layer of political complexity: the bank is majority owned by the Chinese government. As a 25 percent shareholder of Standard Bank, the largest bank in Africa, ICBC, therefore by extension China, now has a direct mechanism with which to shape Africa???s finance. And just so happens, Beijing has taken a real interest in Africa as of late, what coincidence! Senior Chinese leadership, including both President Hu Jintao and Premier Wen Jiabao have, on separate occasions, led good will tours to the continent. Last November, Beijing organized a two day China Africa summit, attended by leaders of more than 40 African nations.
Most Western observers believe China's foreign policies towards Africa are driven directly by China's voracious appetite for natural resources. A strong Sino-Afircan bond would ensure China's mineral and oil needs are met for the next decade and beyond. Some have gone so far as calling China a ???neo-colonialist???, a charge China, of course, vehemently denies. What is undeniable however is China's growing influence on Africa, eerily reminiscent of empire building campaigns undertaken by prior superpowers. Whether China will actually go down that road remains to be seen.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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 For those keeping scores at home, and we know you are, this is now the third installment on the on-again, off again love affair between Bear Stearns and the Chinese government sponsored investment firm, CITIC. At this point, we don't know what or whom to believe.
Dow Jones Newswires broke the story last week after speaking to a senior Chinese official, who had confirmed that CITIC Bank and Bear Sternrs had been talking.
A few days later, CITIC Bank, a publicly traded entity filed a statement to the Shanghai Stock Exchange denying it had made any contact with the US investment firm.
Just minutes ago, news crossing the wire indicated that supposedly CITIC Securities, also a division of CITIC Group, had reached an agreement to swap approximately USD $1 billion worth of equities with Bear Stearns in a complicated convertible debt deal. That is of course until CITIC Securities files a statement of its own, denying all involvement. The saga continues.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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Earlier this week, we told you that a Chinese state owned bank is in talks to buy a stake in US investment bank, Bear Stearns. Apparently, we got some bad info, well actually Dow Jones Newswires got some bad info. See what happens when Rupert Murdoch gets involved? Anyway, today, we learned from a much more reputable publication, Shanghai Daily, that the deal is off, or something like that, here is the quote
The bank said in a statement to the Shanghai Stock Exchange that it has not held any talks with Bear Stearns or any other relevant parties and no intention or agreement was reached on buying shares of Bear Stearns.
Kinda hard to reach an agreement if no talks were held, no? Also, was the VP of China Banking Regulatory Commission who confirmed the apparent non-existent overture and discussion just making things up? Calls into CITIC Bank's press office were not returned.
Regardless, the deal is definitely off.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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 According to Bloomberg News, finance ministers of the G7 nations, currently meeting in Washington are once again expected to issue a strongly worded statement prodding China to do more with an undervalued yuan. The traditionally US championed trade tussle is getting some very vocal support from the Europeans and the Canadians this time around.
Of course, Beijing will tell you that its ongoing currency reform is doing just great: the yuan gaining roughly 10 percent against the US dollar since 2005, 3.9 percent just this year. But, with the greenback in a free fall, hitting decade lows against all major currencies except the Japanese yen, China’s argument is misleading if not deceptive. For example, the yuan has actually fallen on the year versus the euro and the Canadian dollar, down 4.1 percent and 13 percent respectively. In other words, if one believes that the exchange rate should reflect a nation’s macro economic condition, China, with the world’s fastest growing major economy is still very much trying to keep a lid on the yuan as opposed to letting it float toward market value. The only difference is Beijing has channeled some of the exchange pressure from the US dollar into other currency markets, presumably to appease American policy makers and diversify China’s economic dependence away from a less than friendly Bush administration.
America’s gain is Europe’s loss. The latest EU figures showed trade deficit with China for the first seven months in 2007 soared 25 percent to a record 59.9 billion euros(USD $85.6 billion). A cheaper yuan makes Chinese goods more competitive in overseas markets. “We are concerned, very concerned with the huge trade deficit between Europe and Chinia,” said EU President Jose Barraso after seeing the numbers. Luxembourg’s Finance Minister Jean-Claude Juncker offered an even more dire assessment, “we have a real problem with the yuan”.
It is very unlikely though that China will buckle under international pressure and significantly alter its monetary policy. With the 2008 Olympics only ten months away, stability is paramount. However, equally unlikely is China risk alienating its major European trade partners, nothing a few jumbo jet orders can’t fix.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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Bear Stearns, the troubled US investment bank may soon find the People’s Republic of China among its key shareholders. According to Dow Jones Newswires, Jiang Dingzhi, vice chairman China Banking Regulatory Commission confirmed reports of China Citic Bank holding preliminary discussion with Bear Stearns for a stake in the Wall Street firm. China Citic Bank is a division of China Citic Group, an investment arm of the Chinese government. Bear Stearns’s Tokyo spokesperson refused to comment on the story.
Bear suffered heavy trading losses when the US sub prime residential mortgage market crumbled the past summer. At its worst, the company saw its market cap cut by nearly 40 percent. The stock has since recovered somewhat as the credit market has stabilized for the time being, albeit at a much lower level. One man’s misery is another’s opportunity. Institutional investors including Bank of America, Wachovia Corp and even Warrant Buffet controlled Berkshire Hathaway are reportedly interested in acquiring a piece of Bear Stearns. At this stage, it’s still anyone’s game, but with strong political allies such as Chucky Schumer and Lindy Graham sitting on Capitol Hill, Citic definitely has the inside track.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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We don't often watch telly here, so this might a bit late and some of you might have already seen this. In this ad, McDonald's calls for children to march their way to the Beijing Olympics next year! Way too cute! Does anyone know which agency was behind the ad?
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 Alibaba.com, China’s largest B2B commerce site is going public in Hong Kong in a few weeks. With the current frenzied market back drop, and Alibaba’s tremendous earning power (Goldman Sachs’ analyst pegs the site will earn a net profit of USD $83.8 million this year, up 186 percent from last year), the IPO will no doubt be a roaring success.
Sounds great, so where can we get some allocation? Well, that’s the thing, there will literally be trillions of dollars chasing this deal pre IPO, and even with Shanghaiist’s far reaching guanxi, the prospect of our grabbing some coveted shares is pretty much nil.
Thanks for nothing!
Nah, do not despair, there is perhaps a workaround. Buy shares of US traded Yahoo (YHOO) to get in on some of the Alibaba love. Let us explain. In 2005, Yahoo forked over US$1 billion for a 40 percent stake in Alibaba Group, the parent company of Alibaba.com, owner also of Taobao.com, Alipay.com and Yahoo China. Never heard of Taobao and Alipay? They are the Chinese equivalents of Ebay and Paypal, both with 80 percent plus market share. The upcoming IPO is only for Alibaba.com, and the offering price values the site at roughly USD $6 billion. So, even if Alibaba’s share trades flat once public, and the other internet properties in Alibaba’s parent company are completely worthless. Yahoo has already pocketed USD $1.4 billion from its 2005 investment. But a more realistic valuation would put Alibaba Group’s worth much higher. Baidu.com, China’s other internet juggernaut sports a USD $11.5 billion market cap, and it is projected to make USD $77 million this year, up 105 percent from 2006. So, Alibaba.com with a higher earning profile should be worth at least that much. Taobao, Alipay, and Yahoo China combined should fetch no less than USD $3 billion(probably a lot more), which puts Alibaba Group’s market cap north of USD $15 billion and Yahoo’s 40 percent stake with a USD $5 billion plus gain in two years. Got all of that?
Yahoo’s own market cap however has actually gone down a few billion dollars since its Alibaba investment. There are of course several moving pieces in Yahoo’s story, not the least of which is search rival Google’s meteoric rise at Yahoo's expense. But a swing of USD $10 billion in the company's market value (factoring in its investment gains) just doesn’t add up. Alibaba.com’s upcoming IPO could act as a catalyst to unlock the value in Yahoo’s investment portfolio, which also covers Japan and South Korea. If nothing else, the hype alone should be good for a few bucks. So, those of us that are shut out of Alibaba’s Hong Kong debut, let’s party it up on Yahoo.
Alibaba.com will begin its Hong Kong listing on November 7.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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