Notice my use of sneer quotes (proper double ones — suck on that, AP) to suggest that this latest Apple scandal involving labor conditions in supplier factories is not at all news. Nevertheless, you might have noticed a wave of commentary over the past week or so devoted to Apple and its behemoth supplier Foxconn, which employs 727 million laborers in Guangdong Province alone (that’s a very rough estimate).

Why so much attention? Has anything happened? Actually, no. However, there has been some excellent reporting on the subject by David Barboza et al at the New York Times, which has published a series of articles (here’s a gateway link) about the plight of workers in these factories. I’d like to say at the outset of this post (before the criticism starts) that the reporting by the folks at the NYT has been top notch, balanced, and a welcome source of information. Kudos to all involved.

OK, with that out of the way, let’s also point out some of the more ridiculous aspects of this renewed debate, starting with CNN and its headline:

Apple in China: The New York Times goes for the Pulitzer

I sincerely hope that this was merely an expression of goodwill on behalf of CNN and not a serious prediction. As I said above, the Times’ reporting has been excellent, but talk of a Pulitzer is really misplaced.

I’m no expert of Pulitzer criteria, but I would hope that for a series to win, it should at least be original. And as much as I like what the Times is doing, I cannot in good conscience say that they are breaking any new ground here.

It seems that the media, not to mention the consumers of media, have very short attention spans. Have we really forgotten about all the scandals and stories that have originated from the same Foxconn factories that are now the subject of this “new” reporting?

This related CNET story lays out the problem, at least in part:

Over the past year or so, stories about working conditions at Chinese manufacturers have trickled into the public consciousness. There were spikes of awareness when, for example, an explosion at the Foxconn factory in Chengdu, China, killed four. Then again when another factory explosion occurred a few weeks later.

Most recently, an amazingly detailed story from The New York Times and a heartbreaking episode of This American Lifehighlighted conditions in China, and Apple’s role specifically as the largest contractor of consumer-electronics devices in the region.

But while the media has been talking about these working conditions for about a year and a half, Apple has known firsthand about the problems for years, and, let’s be honest, has allowed them to continue.

As a criticism of Apple, that’s certainly spot on. But it also reminds us that the latest exposé is more of an update than a news event. Ironically, though, the CNET article fails to go back far enough. Have we already forgotten the lurid details of the string of worker suicides that plagued Foxconn almost two years ago? I wrote about it back in April of 2010.

The labor conditions at Foxconn is far from a new story, and I therefore find the hang wringing and energetic scorn heaped on Apple slightly odd. More ridiculous still is a call for a boycott of Apple’s products due to these working conditions.

Please. Not only does this totally ignore the fact that other multinational electronics companies also use Foxconn to source products, but it also lets all other firms, domestic and foreign, in the tech sector or otherwise, off the hook.

But even worse, what have these boycott supporters been doing over the past couple of years? Perhaps some of the organizers have been hard at work, but for the rank and file of outraged consumers now willing to forego that new iPad, where were you when Foxconn workers were plunging to their deaths in 2010? If you didn’t catch that news, then let’s be honest, at the end of the day, you don’t really care that much about the plight of these people.

Between Apple and Foxconn (and the weak audit policy that CEO Tim Cook has tried to defend), there is much to criticize and plenty of blame to go around. But the breathless excitement and outrage over a “new” cause is ridiculous and, if anything, makes newly-converted activists look out of touch.

© Stan for China Hearsay, 2012. | Permalink | 12 comments | Add to del.icio.us
Post tags: apple, foxconn, labor, manufacturing, working conditions

A good use of taxpayer funds?

Lest you forget, there was indeed a financial services firm so out of touch with reality that they thought paying Sarah Palin to come to Hong Kong and give a speech was a good idea. Well, I guess you have to spend your money on something. After buying a couple houses, a boat, and a few mistresses, what’s left?

These folks don’t just truck with stupid politicians, though. Since they are involved in the financial sector, their entire existence is predicated on pretending that rationality can be injected into a fundamentally irrational system. I refer of course to the stock market.

And what’s the height of irrationality, or what George Carlin called the “Greatest bullshit story ever told?” Religion, of course. So why not put the two together and see what happens?

Enter the latest iteration of the Feng Shui Index, which the Wall Street Journal’s Aaron Back wrote about yesterday (I assume he lost a bet or something).

The index, which applies traditional Chinese astrology to market forecasting, predicts a volatile year (pdf). Though the Year of the Dragon is traditionally considered auspicious, there are likely to be countervailing forces at work, CLSA says. The reason: This particular dragon year is associated with water, which is far less lucky for investing than other elements like fire and metal.

The index predicts a positive end to the year, especially in October and November, when the metal element dominates.

2012 a volatile year? You don’t say? Shit, why did I waste all my time reading up on economic trends, the U.S. election, the China political leadership shift, etc.? Obviously that kind of book learning is for suckers.

By the way, CLSA tells us, none of this should be taken seriously:

CLSA is clear that their Feng Shui Index is meant to be “tongue-in-cheek,” and issues several disclaimers such as this one: “To be fair, feng shui’s original purpose was to locate auspicious burial spots, not call the twists and turns of the equity markets or individual sectors.”

Of course — wink wink — we shouldn’t take that disclaimer seriously, since it was meant to be tongue-in-cheek, no doubt forced on CLSA by its legal counsel. Heaven forbid someone should follow their advice, lose money, and want to sue them.

But maybe I’m not being fair. Perhaps it is just for entertainment. It’s not like any of the smart folks in Hong Kong, particularly the big brains in the financial sector, are actually superstitious, right?

Just in case you think that this post itself is just for fun, go and read this excellent piece on feng shui in the Global Times. Lots of scary stuff in there about the real-world consequences of irrational, superstitious blather, including this anecdote:

Hu Jianxue, the former Party secretary of the tourism city Tai’an, Shandong Province, at the foot of the famous Tai-shan Mountain, was told by his feng shui master that he would soon be appointed a vice-premier of the country.  The only problem the master said cryptically was that Hu lacked a “bridge.”

Hu somehow got it into his head that he literally needed to build a bridge and he ordered it done. He changed the route of a national highway so it would pass a reservoir and would require a bridge be built.

Hu must have thought this was a master stroke at unblocking his feng shui, but it got him nowhere close to his coveted vice premiership. His feng shui master apparently failed to warn him about the essential need of being an honest politician. Hu was later convicted of taking huge bribes and was sentenced to death with a two-year reprieve.

When idiots follow the Feng Shui Index and lose money (as they did last year) or when freaks go out and spend 88,000 RMB for an auspicious fish, I may make fun of them, but their actions do not effect the public. However, when powerful local officials interpret the vague ramblings of charlatans as policy prescriptions, the public gets screwed.

And that’s a good reason to call bullshit on these quaint, cultural traditions.

© Stan for China Hearsay, 2012. | Permalink | 8 comments | Add to del.icio.us
Post tags: feng shui

I’ve written twice already this week about administrative corruption. The problem is getting worse, and the government needs to find new ways to ensure that local bureaucrats are not taking bribes or embezzling funds. One of the obvious solutions is to raise benefits to a level such that bureaucrats are not tempted to supplement their incomes through improper means.

Coincidentally, the government is currently reforming civil servant heath care benefits. There are competing interests here that should be acknowledged, including fiscal constraints, equality of benefits, and (I would argue) anti-corruption.

The reforms that will go into effect this year curtail the government-provided free benefits in favor of pushing all civil servants into the health insurance program. This is fine, I suppose, assuming that the new scheme benefit level is comparable.

But some folks would like to see this reform go in a different direction entirely. Here’s one argument in favor of actually reducing benefits:

The message that the free healthcare enjoyed by civil servants will be incorporated into the general employees’ medical insurance system is the first step in reform of public welfare.

The medical costs of all 450,000 of the civil servants in the Beijing municipal government and its affiliated county and district governments have already been merged into employees’ medical insurance since Jan 1, and the change will be extended to civil servants in the central government next year.

The reason people have been calling for reform of the medical insurance system is there is a marked discrepancy between the reimbursement levels enjoyed by civil servants and those of other citizens.

However, the change does little to make the system more equitable as it means civil servants now have more hospitals to choose from than before and they can get exclusive supplementary insurance, which means that their medical service level will still remain much higher than that of other citizens.

Medical insurance is a basic public service provided by the State. Any reform in this field should be conducive to realizing public service equalization, instead of creating new inequalities.

Greater efforts are needed to lower the medical service reimbursement level for civil servants and to increase that of other employees.

OK, I’m all in favor of the idea of health care as a basic service provided to everyone by the government to all citizens (and residents!). However, we’re far from that reality in China at the present time, and there is a great deal of inequality built in to the system.

I would also acknowledge that there is a great deal of resentment out there of public officials and the special treatment they get. I’ve written about income inequality and related issues many, many times in the past couple of years and definitely see this as a huge problem that needs to be addressed immediately.

However, if the issue is inequality of benefits, we can engage in a race to the bottom, cutting benefits for some, or we can focus on raising the benefits of others. I’d much rather see the latter than the former.

Yes, civil servants enjoy certain unfair advantages. But instead of cutting their health care, let’s keep the focus on the Audis, the free trips, and the banquets. Taking away medical benefits while maintaining low salaries would just give them an additional incentive to engage in corrupt activities.

© Stan for China Hearsay, 2012. | Permalink | 6 comments | Add to del.icio.us
Post tags: anti-corruption, civil servants, health care, health insurance

Social unrest in China is no joke. There are tens of thousands of protests/demonstrations/riots every year in response to major problems such as environmental degradation, local corruption, and land swindles. Since I’m a responsible long-term resident of the Middle Kingdom, I would never make light of the legitimate concerns of the masses.

Indeed, there are some mass incidents (that’s the official term, by the way) that, due to the petty grievance that inspired the action, sully the image of all the others.

Case in point, a whole lot of nutjobs waited overnight at the Beijing Apple store in hopes of getting their hands on a new iPhone 4S (which stands for “for shame”?).

Disclaimer: I own an Android smartphone running a Victorian-era operating system, so my judgment in these matters is suspect.

Eventually things got ugly:

We’re now reading reports of fights breaking out between competing gangs of scalpers in the country, each hoping to get their hands on large quantities of Cupertino’s latest smartphone. The conflicts have been significant enough to attract the attention of Chinese police, and we now hear that the Apple Store in Beijing is keeping its doors locked in attempt to make the crowds leave.

And then even uglier:

Enraged Chinese shoppers pelted Apple Inc’s flagship Beijing store with eggs and shoving matches with police broke out when customers were told the store would not begin sales of the popular iPhone 4S as scheduled.

OK, first of all, I should point out that these “enraged shoppers” were a mixed bunch. Some of them were your run-of-the-mill Mac geeks, but others were pros, as in professional scalpers there to get a jump on the competition.

I have little sympathy for either the mindless Mac drones or the working stiffs who were paid to wait in line. And I do mean “stiffs” — it was something like minus ten degrees last night. I can certainly understand their frustration at waiting in sub-zero temperatures for many hours, only to be told that their sacrifice was in vain, but at the same time, what the hell were they doing out there in the first place?

Some Reuters reporters were brave enough to actually talk to these poor schmucks and got these quotes:

“We’re suffering from cold and hunger,” a man in his 20s shouted to Reuters Television. “They said they’re not going to sell to us. Why? Why?”

“I got in line around 11 p.m., and beyond the line the plaza was chock full with people,” said Huang Xiantong, 26, outside the store. “Around 5 a.m. the crowds in the plaza broke through and the line disappeared entirely. Everyone was fighting, several people were hurt,” said Huang, who wanted to buy a new iPhone for his girlfriend. “The police just started hitting people. They were just brawling.”

Cold and hunger? Next time, pack a goddamn sandwich and wear a hat, Einstein. Wanted to buy an iPhone for his girlfriend? Christ. If I was stupid enough to stand outside in freezing cold just for the chance to buy a phone for my wife, she’d divorce my ass on grounds of mental incapacity (or alternatively, put me in a facility for the occasionally coherent). I’ve never been accused of being a romantic.

So who’s at fault for this fiasco? There is plenty of blame to go around:

1. Apple – they screwed up the product launch. Someone at the genius bar needs to do some self-criticism.

2. Scalpers – I know you need to make some cash before the holidays, but can you go do it somewhere else please? You’ve already fucked up train travel in this country, now your’re messing with retail?

3. Mac Geeks – just go away and get a life. Unless you’re waiting in a queue outside a hospital, there’s no good reason to be standing outside in the cold overnight.

4. Cops – should never have allowed this thing to escalate. Let’s hope that the idiots throwing eggs are now having a nice cup of tea with their friendly neighborhood PSB official.

I’m not sure if this whole thing is good or bad publicity for Apple. Perhaps some of both.

“Hey, our customers are fighting for the chance to buy our shit” — sounds good.

“Hey, our customers are stupid enough to fight for the chance to buy our shit” — sounds even better.

“Because we screwed up and our stupid customers started fighting, attracting the attention of the (always nervous) government, we are now on the State-level shit list, slotted in between Google and Richard Gere” — sounds pretty bad.

Might I suggest a new procedure for the next product launch? First, a Real-ID system, maybe a DNA check. Second, institute a mandatory holding period. Anyone who purchases a new iPhone must wait a minimum of three months before the phone can be resold to a third party. Third, metal detectors and a cavity search at the entrance to the store. Anyone found with eggs on his person will be forced to hard boil and eat them in the grand tradition of Cool Hand Luke. Fourth, anyone moronic enough to queue up overnight in sub-zero temps will immediately be sent to a mental health facility for a minimum of 48 hours or until a competency hearing can be convened.

I bet all those environmental and anti-corruption activists out there who have literally risked their lives protesting societies’ injustices are not amused at all.

© Stan for China Hearsay, 2012. | Permalink | 19 comments | Add to del.icio.us
Post tags: apple, iphone

I must have written over a hundred posts about the income gap last year alone. That’s how important that subject is to me, and in my opinion, to the future development of China. But perhaps a better way to discuss the issue is to talk about equality of opportunity and what that means for individuals.

Paul Krugman has written an excellent Op/Ed on the topic within the context of U.S. presidential politics but, in the spirit of “They Got the Same Shit Over There,” it could just as easily apply to China:

[A]s a report in The Times last week pointed out, America actually stands out as the advanced country in which it matters most who your parents were, the country in which those born on one of society’s lower rungs have the least chance of climbing to the top or even to the middle.

And if you ask why America is more class-bound in practice than the rest of the Western world, a large part of the reason is that our government falls down on the job of creating equal opportunity.

The failure starts early: in America, the holes in the social safety net mean that both low-income mothers and their children are all too likely to suffer from poor nutrition and receive inadequate health care. It continues once children reach school age, where they encounter a system in which the affluent send their kids to good, well-financed public schools or, if they choose, to private schools, while less-advantaged children get a far worse education.

It doesn’t stop there, as socioeconomic background is also a good predictor of performance. Krugman summarizes one line of research with this rather stunning conclusion: “smart poor kids are less likely than dumb rich kids to get a degree.”

Keep in mind that this is more than just a disparity of income. Many countries can have income inequality, but because of an excellent social safety net, including health care and education, individuals have a decent chance of moving up the socioeconomic ladder as adults.

If you’re a regular reader of China Hearsay, and particularly if you peruse some of the articles I link to on the @chinahearsay Twitter feed, you’re probably already thinking about several current initiatives/problems in China that relate to equality of opportunity.

Just to name a few relevant issues that I’ve seen in the news over the past week or so, you can’t have equality of opportunity here if:

• Kindergarten fees are excessively high
• Food inflation outstrips wage growth
• College grads need connections to land jobs
• Small and medium-size businesses do not have access to capital
• Health care is not guaranteed to all, or at least at a reasonable price
• There is a de facto need to own a house to get married

It would be quite depressing if, a decade or so from now, neither of the world’s two superpowers was a meritocracy.

© Stan for China Hearsay, 2012. | Permalink | No comment | Add to del.icio.us
Post tags: economic development, income inequality

From the Wall Street Journal:

Natural monopoly. That’s the new term that China’s former state assets regulator has used to describe the dominance of the country’s giant state-owned enterprises – a dominance that economists and rivals say has been associated with high prices and low efficiency in many industries.

In a wide-ranging interview with the 21st Century Business Herald, Li Rongrong, the former chairman of the State-Owned Assets Supervision and Administration Commission, sought to dispel the notion that many Chinese government-controlled companies remain monopolistic, cumbersome and uncompetitive despite years of reforms.

“The monopoly of Chinese companies is mostly in the form of natural monopoly. It’s not like companies are using their monopoly to manipulate prices and the market,” Mr. Li said.

This guy has started a shitstorm over these comments, with criticism coming from academics and industry alike. I just have two points.

First, I don’t think Li understands what a ‘natural monopoly’ is. When the government steps in and, by fiat, creates a monopoly, that doesn’t make it natural. What makes a monopoly natural is that a firm’s costs in a given sector are most efficient when it is the sole producer. This happens whether government is involved or not. Does he really believe that “most” of these dominant public firms are natural monopolies?

Second, let’s remember the context here. There has been a great deal of criticism recently about the commercial behavior of certain State-owned Enterprises (SOEs), including telecom service providers that have been accused of pricing irregularities and poor services.

This is not just about public criticism. Last year, the National Development and Reform Commission (NDRC) opened an investigation into the activities of China Telecom and China Unicom, specifically their broadband Internet services. The NDRC’s authority here comes from China’s Anti-monopoly Law (AML), Article 7 of which states:

With respect to the industries controlled by the State-owned economy . . .  the state protects the lawful business operations conducted by the business operators therein. The state also lawfully regulates and controls their business operations and the prices of their commodities and services so as to safeguard the interests of consumers and promote technical progresses.

The business operators as mentioned above shall lawfully operate, be honest and faithful, be strictly self-disciplined, accept social supervision, shall not damage the interests of consumers by virtue oftheir dominant or exclusive positions.

So yes, SOEs enjoy special protection under the AML (i.e. are exceptions), but at the same time, the State is obligated to regulate SOE activity on behalf of consumers.

Mr. Li should understand that it’s not the monopoly status of SOEs that’s at issue here, but rather what these companies do with that power. If they abuse their market positions in ways that harm consumers, the government, under the authority of the AML, will step in.

© Stan for China Hearsay, 2012. | Permalink | No comment | Add to del.icio.us
Post tags: anti-monopoly law, NDRC

If you were a well-known Chinese company looking to acquire a famous American Internet firm, you’d be smart to consider the political implications. After all, anti-China rhetoric is rampant not only in D.C. these days, but across the nation as know-nothing, smarmy douchenozzles (i.e. Republican candidates) vie for high offices in the 2012 elections. Alibaba is now saddled with this problem, and they appear to be taking the advice of that famous M&A specialist Archie Bunker, who when faced with a challenging legal issue said “I’m gonna go into town and get me a good Jew lawyer.” Indeed.

But let’s back up a bit first. Although most deals involving Chinese companies sail through with little fanfare, other inward investment deals have been sabotaged by political campaigns. I speak of course of electronics giant Huawei, whose U.S. deals have been repeatedly thwarted by concerns over its ties to China’s government and military. Is Alibaba in danger of being Huawei’d? And if so, can it avoid such a fate?

So here’s the proposed deal, which has been the subject of much discussion over the past few months:

Alibaba, China’s largest e-commerce business, has sought to buy back a stake that Yahoo owns in the company. It stepped up efforts to make a deal after the September ouster of Yahoo Chief Executive Officer Carol Bartz, who opposed a sale. Yahoo also is considering proposals by private-equity firms seeking to buy minority stakes, people with knowledge of the talks have said.

[ . . . ]

Yahoo has considered offers for a minority stake from bidders such as TPG Capital and a group led by Silver Lake, people familiar with the matter have said. Silver Lake’s bid valued Yahoo at about $16.60 a share, these people said. TPG Capital’s offer was higher, they said.

News of friction between Alibaba head honcho Jack Ma and folks over at Yahoo has been percolating for years, and with the shakeups at Yahoo and the tension over the Alipay restructuring, a lot of people were waiting for something to happen. As with any partnership or joint venture that sours, at some point working together becomes too difficult. Moreover, Yahoo is not what it used to be and wants to sell, and Alibaba has a right of first refusal for those shares.

Assuming that a price can be agreed upon (that certainly won’t be easy), is there really a danger of the U.S. government stepping in a la Huawei and shutting down the acquisition? The concern here is that the privacy of Yahoo users’ personal data might be misused by Alibaba. I wrote about this possibility back in October:

[T]he U.S. has a national security review process for inward investment deals like this. The review body is called CFIUS, and I’ve discussed it many times in the past. Is personal data that was disclosed to or collected by Yahoo and later turned over to the control of Alibaba a matter of national security? I’m no expert on CFIUS, but I’d strongly suspect that the answer is “no.”

Several problems here. First, one would assume that detractors would argue that Yahoo and its assets constitute part of the “critical infrastructure”/technology of the U.S. The scope of the law under which CFIUS operates was expanded in 2007 to include this language. Obviously, “critical infrastructure” is a rather loose term.

I would argue that there is nothing about Yahoo that is critical to the tech backbone of the U.S., nor do they own any assets, including data, that would bring a takeover within the scope of that language.

I also shot down the idea that Alibaba has close ties with the Chinese government or military (this has been the sticking point with Huawei) and questioned whether a CFIUS rejection would simply be an excuse for protectionism. On the whole, I think that a rejection based on national security would be a joke, and I can’t think of any other reason that would justify blowing up a Yahoo acquisition.

That doesn’t mean it can’t happen, though, and it definitely doesn’t mean that Alibaba wouldn’t face hostile politicians and media criticism in the U.S. during this process. And it looks like Alibaba is taking steps to deal with this possibility.

They’ve gone local, not only snapping up New York M&A law firm Wachtell, Lipton, Rosen and Katz, but also the Duberstein Group, a powerful D.C. lobbying group headed by Ken Duberstein, Ronald Reagan’s former Chief of Staff. In their battle against potential national security concerns and other protectionist roadblocks, Alibaba has definitively chosen some high-powered Chosen People.

It’s a smart move, and I’m not just saying that as a fellow professional Jew (Note: I mean a Jew who is a service professional, not someone who makes a living at being a Jew). With a Yahoo deal, I strongly believe that Alibaba would have the law (in addition to lawyers) on their side, not to mention the principles of free trade. However, the election looms, the Internet and data privacy is a hot button issue, and stubborn high unemployment in the U.S. means that many Americans are sympathetic to China bashing.

The good news is that Alibaba does not have the kind of historical or structural baggage that has plagued Huawei. Whether that, and their high-powered Yiddishe posse, will enable Alibaba to avoid running afoul of American protectionism remains to be seen.

© Stan for China Hearsay, 2011. | Permalink | 4 comments | Add to del.icio.us
Post tags: Alibaba, CFIUS, Huawei, Ken Duberstein, Yahoo

Image via Penn Olson

I’ve written before about the pushback on Alibaba’s new rules for its e-commerce platform, Taobao, but here’s an update on the basics before I get to the legal issues:

Taobao.com, China’s largest online trade platform, has accused those protesting the platform of being illegal merchandisers that had been punished by the platform, a spokesman for the platform said at a news conference on Monday afternoon in East China’s Zhejiang province.

The online and offline attacks were triggered after the platform announced that it would quintuple its service fees starting in October. The protests began with small sellers attacking big sellers. The protests escalated when 200 sellers protested at the Taobao.com headquarters in Hangzhou, the capital of Zhejiang.

A few different issues have been floating around this story. First, did Taobao have the right to raise fees in this way? Although it is a private company, there are laws in China that govern pricing decisions, including the Consumer Law and Anti-monopoly Law, so there is definitely a role here for government to play. Whether Taobao violated any relevant law with respect to pricing has not yet been determined.

I do not know enough to offer a solid, informed opinion, but from the limited facts that have been circulated by the media, I’m not sure what the problem is in terms of pricing. Maybe there’s more going on here?

Second, how should operators of sites like Taobao deal with issues like product quality and counterfeit goods? Thus far, the legal system here as a whole has leaned in the direction of “Notice and Takedown” policies. Essentially, if a site has an adequate internal policy that allows rights holders or other complainants the ability to notify Taobao of a certain problem, and if Taobao responds to these notices in a timely fashion, then the courts will most likely consider that to be an adequate response.

However, there must be balance between protecting the rights of brand owners and consumers, on the one hand, and merchants who utilize Taobao’s services on the other. Under what circumstances will products be removed from the site? When will merchant accounts be cancelled? What will Taobao do to verify complaints?

Taobao, and similar sites, already have their Notice and Takedown policies in place, but the answers to the above questions are still being worked out. Moreover, future civil litigation (and judicial guidance) will definitely help to shape what an adequate policy should look like.

In the meantime, the protests have taken a turn for the theatrical:

A group of online merchants operating on Chinese e-commerce platform Taobao, a subsidiary of Alibaba Group, set up a “mourning hall” for the group’s very-much alive chairman Jack Ma in Hong Kong on Sunday to protest the online sales platform’s new service terms.

A total of 19 protesters gathered at an anti-Taobao protest in Hong Kong’s Times Square on Sunday, setting up a mourning hall centered around a portrait of Alibaba chairman Jack Ma.

As Billy Joel once wrote, “Melodrama’s so much fun. In black and white for everyone to see.” But what do these guys want exactly? And how are they going to get satisfaction? Here’s a clue:

[O]ne of the Hong Hong protest organizers named “Laozhou,” a merchandiser who was also an organizer for the online attacks, sold substandard products from his shop in Taobao.com and his shop was closed by the platform in October.

Laozhou confirmed with Xinhua that he was among the organizers of the “Anti-Taobao” parade. “My products were indeed without washing tags, but it’s up to the government to decide whether my shop should be closed.”

This brings us, therefore, to the third issue: what’s the proper role for government regulators here? Our friend Laozhou suggests that the government should ultimately make decisions about whether a merchant is removed from Taobao.

This guy must be high on goofballs. Jurisdiction and legal scope aside, let’s consider the practicalities here. There’s a reason why the law in many countries now recognizes Notice and Takedown as adequate responses to online infringement, counterfeits, etc. The high volume of transactions on these platforms makes it impossible for either the government or the operators to perform any sort of verification. Moreover, due to high deal volume, the government simply cannot step in and adjudicate in each instance.

Therefore Laozhou’s implication that the government has an adjudicatory role here is simply unworkable. If this were attempted, the flood of cases would mean that brand owners and consumers would have lengthy waits before receiving a hearing. The issue of transaction costs for complainants is another issue; seeing as how many of these deals are low value commercial transactions, any kind of filing fee would most likely discourage a large number of complainants.

But of course, many online merchants would be quite pleased if the system didn’t work efficiently. If the government was involved, everything would be more expensive and much, much slower than the current system adopted by Taobao. This would benefit merchants at the expense of consumers.

It seems as though the protesters are left with a possible complaint about pricing (i.e. the fee hikes) but little else to rail against. Notice and Takedown is already firmly in place in China law, and the protesters are all alone on this issue, fighting not only against Taobao, but also consumers and brand owners. A lonely position to occupy.

I don’t think the theatrics are going to win the day this time.

© Stan for China Hearsay, 2011. | Permalink | 4 comments | Add to del.icio.us
Post tags: Alibaba, copyright infringement, counterfeits, e-commerce, Internet, notice and takedown, pricing, safe harbor

This fat cat does not appear troubled by the critics.

Thought that the Occupy Wall Street folks had the monopoly on this sort of thing? Think again. It seems that these pesky issues relating to income inequality and abuse of power and privilege are pretty much a global phenomenon at this point. Strange how politicians in the West and in the East still try to pit workers against each other, though, instead of focusing on the root causes of these problems.

Jesus, I’m starting to sound like a Comintern apparatchik.

On the other hand, there’s a lot of similarity in popular resentment out there. Consider this criticism of executive pay at State-owned Enterprises (SOEs):

Weighty salaries for high-up managers of state-owned enterprises can be attributed to monopolies those companies have, said a recent report on the salaries of senior officials at listed companies.

The report, issued by Beijing Normal University on Sunday, is based on the research of more than 1,700 listed companies on the Chinese mainland in 2010, said Du Wencui, the assistant director of the Research Center for Corporate Governance and Enterprise Development with the university.

“The report puts the average annual salary of the top three highest paid managers at China National Petroleum Corporation (CNPC) at 1.1 million yuan ($173,470), which is excessively high[.]“

Yeah, that salary sounds rather quaint by Western standards, but when you consider average salaries here, that’s pretty high. Also keep in mind that this place is supposed to be a Communist country, sort of, so executive compensation at a company owned by the State really shouldn’t be that high. Bad optics.

Not that this is anything new. I dimly recall that some leftish revolutionary types here many years ago, famed for their participation on a prolonged perambulation through Guizhou, Sichuan and other scenic spots, actually rode in litters. Privilege is an old story here.

But these days, when even the government is going after the monopolistic practices of the big telecom operators, it’s tough to justify high pay at firms that are able to dominate the market by sake of their State-owned status.

The people (i.e. the government) grant these companies special status, and then they turn around and provide poor service and pay themselves a lot to do so.

If this echoes of Occupy Wall Street, you’ve been paying attention. Those folks have also complained that although the U.S. government (i.e. the people) bailed out these financial institutions, they are still chugging along with sky-high compensation and little regard for repeating the same mistakes.

By the way, our State-owned friends are getting smacked around from all sides these days. The government is taking a closer look at their activities from a competition law perspective. Whether this adds up to much remains to be seen, of course.

They’re also under fire from the public, who are pissed off at poor services and (sometimes) higher prices. Moreover, the way that these firms elbow out private companies fosters a great deal of resentment.

Last but certainly not least is the loud criticism coming from offshore. With all these WTO anniversary retrospectives out there, you’ve probably noticed many commentators complain how difficult it is to reconcile China’s commitment to the international trading system while maintaining such a strong State-run sector. SOEs will most likely be the big free trade battleground in the years ahead.

We obviously shouldn’t expect anyone over here to emulate the Occupy Wall Street movement. That way is fraught with danger. On the other hand, expect rhetoric concerning privileged institutions on both sides of the Pacific to sound strangely complementary.

© Stan for China Hearsay, 2011. | Permalink | 5 comments | Add to del.icio.us
Post tags: AML, competition law, executive compensation, monopoly

You’ve probably been doing your best to ignore the “WTO 10-year Anniversary” retrospectives in the press over the past couple of weeks. I don’t blame you. Most of these are either yawn-inspiring amalgams of past WTO stories, eye glazing cheerleading pieces in the Chinese press, or mind-numbing chest thumping from foreigners who are (as usual) dissatisfied with the status of trade liberalization here in the PRC.

Bleah.

We all know what the criticisms are all about: closed markets, IP infringement, government procurement, RMB, etc. Nothing new there.

But these are all specific issues that are often addressed via bilateral negotiation. Some problems get fixed (e.g. indigenous innovation restrictions), some do not. And life goes on. Is that the story of the first ten years of China’s WTO experience?

I don’t think so. There’s something a lot more interesting going on, something that is hinted at in these press treatments of the topic. And it brings us to the West’s greatest fear regarding China and free trade.

EU Trade Commissioner Karel De Gucht got close with this recent comment:

China is having to increasingly recognize and respect not only the legal responsibilities it now faces as a member of a global rules-based body, but also the WTO ‘spirit’ of promoting open markets and non-discriminatory principles in its domestic legislation, and the enforcement of it,” De Gucht said[.]

Yes, the West is certainly concerned that China will not live up to its WTO promises, particularly those that are not enumerated in law or in the schedules attached to China’s Accession Protocol.

But that’s not exactly the fundamental concern. If China proves recalcitrant on further liberalization or ramps up non-tariff barriers to trade, the West can handle that. It will then just come down to negotiation, leverage and diplomacy. Surely the EU and U.S. can navigate that world just fine.

This all assumes, however, that both the West and China are “on the same page” when it comes to the international trading system and that China is just jockeying within that system for the best position. Again, if that’s true, the West knows how to play that game.

But what if it isn’t true? What if China and the West have a fundamentally different understanding of what the game is? This is certainly a possibility, given differences in culture, attitudes and modern historical experiences.

So does China “get” the WTO and the international system of free trade? I have no idea. There is plenty of evidence to support either position. Take this provocative article in Global Times for instance, entitled Official Suggests Halting New Auto JVs, which starts off with this:

A Chinese official yesterday suggested that the authorities should suspend approval of new auto joint ventures in the country so as to support the development of domestic brands.

“It is not necessary to approve too many auto joint ventures which always focus on fast market expansion in the country,” Cui Dongshu, deputy secretary-general of the National Passenger Car Association, told the Global Times yesterday.

Cui noted that the competition at the domestic passenger car market is already fierce and “domestic brands have little room to expand.”

Obviously this fellow is not being properly supervised. Officials are not supposed to say things like that in public, particularly if they represent an honest opinion about policy.

To compound the error, another official was also caught on record with this revealing statement:

[A]nalysts said halting approvals for new auto joint ventures is not a realistic move.

“Actually, nearly all well-known and popular foreign brands have already entered into the Chinese market,” said Chen Guangzu, committee member of the China auto industry consultancy commission.

Chen suggested Chinese automakers should focus on brand building and after-sales services, and try their best to expand into overseas markets, rather than limiting foreign brands’ entry into China.

Wow. The way this guy so blithely discusses protectionism suggests to me that there might be some confusion about what China has promised in the past when it comes to the WTO and free trade. It’s possible that both these officials are just plain ignorant, but that seems quite far fetched.

For officials to come right out with a public statement to a newspaper about the possibility of engaging in outright protectionism speaks volumes about whether these individuals “get it.” To be fair, though, I am not suggesting that these two jokers speak for the rest of the government or anyone else in China. Indeed, the Global Times reporter was sharp enough to include this quote at the end of the article for balance:

Zhang Junyi, a project manager at Roland Berger Strategy Consultants, said that halting new auto joint venture approvals could not be achieved since the country is already a member of the World Trade Organization.

It would have been nice if that last quote was from someone in the government, but I guess that’s too much to ask.

Look, this kind of talk just reinforces the feeling among a lot of foreign investors (and their home country governments) that China is not just playing hardball, they are playing a completely different game.

One further example from the auto industry. The “win-win” idea of China’s WTO entry in a sector like this was that foreign automakers could get access to the China market, while at the same time, China would gain technology and expertise. In order to safeguard those benefits, China insisted that it would restrict foreign investment in the sector to Joint Ventures, ensuring that foreign firms would not completely take over the market and that local firms would indeed enjoy the technology transfer.

Neither side got everything it wanted, but both sides have benefited from investment in the auto sector thus far. That’s the spirit of the WTO right there, which makes this comment from a JD Power analyst confusing:

But JVs do not reflect the original intention of the Chinese government’s regulations.

The government encourages localization, which was supposed to include the whole value chain, not just a factory. But while local partners may be able to fully participate in the R&D, production and human resource systems, such cases are rare.

Sure. No one likes JVs. They are a compromise. The Chinese firm might be limited in terms of the entire value chain. On the other side, the foreign investor is virtually handcuffed to their partner, sometimes in a death grip, all the while teaching a possible future competitor how to run the business.

But if JVs were not the original intent here, what exactly did the Chinese government expect was going to happen? Were foreign auto makers going to simply hand over the keys to the kingdom, governed by even less favorable terms?

Again, I’m not sure who actually believes that, but if that does represent a popular government position, then both sides might not be reading from the same free trade page. If so, the next ten years should prove fascinating for WTO watchers.

© Stan for China Hearsay, 2011. | Permalink | 24 comments | Add to del.icio.us
Post tags: auto sector, free trade, WTO

Coca-Cola said Friday there was no “product quality issue” with its Pulpy Milky drinks, after a boy who had consumed the product died and three others fell ill.

Stores around the country pulled bottles of the fruit-flavoured milk drink from their shelves after a boy died and his mother fell into a coma in the northeastern Chinese province of Jilin.

Two other people, a mother and daughter, were also hospitalised after drinking a bottle of Pulpy Milky, but have since recovered and returned home.

Investigators have said the drinks were tainted with organic phosphorous, a toxic pesticide[.] (AFP)

I don’t know about you, but it seems to me that Coke is kinda screwed on this one. Even if an investigation finds some crazed lunatic out there deliberately putting pesticide in bottles of “Pulpy Milky” (barf), Coke is going to take a big hit. Remember what happened to Tylenol back in 1982? Nasty situation.

I’m sure that the PR folks out there have endlessly case studied the Tylenol horror show and now have detailed crisis management instructions in place for just such an eventuality. But when the Wall Street Journal runs an article with this headline: “Coke Says China Juice Drinks Not Toxic,” I think Coke may find it a challenge to dig itself out of this hole.

Moreover, I’m not sure that this helps:

“This case does not involve a product quality issue,” said Joanna Price, Coca-Cola’s China-based spokeswoman, without elaborating.

Well, just what does that mean anyway? I had already assumed that pesticide is not part of the normal manufacturing process of this stuff. If that’s true, then the toxic substance either found its way into the beverage while it was under the control of Coke or when it was in the hands of a third party (e.g. during transport, with a wholesaler, or at a retail establishment).

Either way, this is not a question of ensuring that the usual ingredients are up to spec, that the bottling machinery has not been contaminated, etc. This is, one would hope, the introduction of a substance foreign to the process of making this particular concoction.

Couldn’t Coke have simply said that they have confidence in their quality control procedures, that they are cooperating fully with the authorities, and that an investigation will be completed ASAP?

© Stan for China Hearsay, 2011. | Permalink | 2 comments | Add to del.icio.us
Post tags: Coca-Cola

Well, I actually don’t have any kids, and there is no God, but the question is a good one regardless of these minor contextual details. As the Chinese economy is undeniably heading for a rough patch and the usual fierce competition here gets even more bloodthirsty, questions are being raised about the special treatment afforded to State-owned firms (aka SOEs).

So why do we have SOEs? Here are some of the more popular rationales:

1. Insufficient incentives for private sector — There are some activities that are insufficiently profitable for the private sector. Think of long-distance passenger rail in the U.S. and the role of Amtrak. If governments decide that the public sector is the only solution to this problem, an SOE model may be preferred.

2. Avoiding a private monopoly — Sometimes technology will only allow a single operator at a given time (e.g. telecom, depending on the technology). Faced with a private monopoly, the government may choose to place that power in the hands of an SOE so it can be better controlled.

3. Key sectors — Some areas of business are considered too sensitive, either in terms of national security or importance to the overall economy, to entrust in the hands of a private company. In many countries, natural resources often fall into this category.

4. Bailouts — Companies can become nationalized if they get into trouble and the government determines that the firm is essential (e.g. too big to fail). The recent bailout of General Motors in the U.S. is one example.

5. Economic control — General ideology often dictates the size of the state-owned sector, and some governments believe that a certain level of direct state involvement is necessary to set the tone with respect to employment and pursue specific objectives like overseas foreign direct investment.

Some folks don’t like SOEs. There are two general categories of critics: those who would like to see the public sector better managed/regulated, and those who are ideologically opposed to SOEs. I’ll put aside the ideologues for the moment; arguing with committed libertarian types is often an exercise in futility, and their position does not hold sway in Beijing anyway. Let’s focus on reasonable criticism of the current system.

Against the backdrop of the recent negotiations of the Trans-Pacific Partnership, U.S. Undersecretary of State Robert Hormats took some shots at SOEs and was sucked into a limited back-and-forth with Chinese academics. This was his basic point:

[T]he U.S. is not passing judgment on whether or not China chooses to have state owned enterprises. Our concern is that to the extent they do, those SOEs should not receive benefits (e.g., preferred financing, exemption from anti-monopoly laws, generous export credits, etc) that put them at an artificial competitive advantage vis a vis private enterprises[.]

Hormats is underlining concerns with international competition. China is a member of WTO, and so the question becomes to what extent does having a thriving state-owned sector conflict with the principles of free trade? Well, there is no necessary conflict as long as the problems cited by Hormats are avoided. Indeed, many of the current trade conflicts between the U.S. and China involve these issues, with the U.S. claiming that their firms are operating at a competitive disadvantage, while Beijing responds with “We are following the letter of the law.” It will be years before these matters are sorted out at the multilateral level.

This international focus on China SOEs in not exactly a new thing. American complaints about SOEs have, after all, been going on for decades now. However, when it appeared that economic reform was pushing state-owned sectors towards consolidation and (at least) partial privatization, the criticism was limited. In recent years, however, as state-owned sector “champions” in key industries emerged and have increasingly asserted their market dominance, the West has grown worried.

But I find more recent domestic criticism to be even more interesting. There are competing issues here. On the one hand, the State wants to retain control of key industries, assets and economic activities. If done properly, this will ensure that the the profits from the nation’s natural resources and other kinds of commerce will be shared equitably and that private monopolies will not harm the consumer.

On the other hand, the commercial activities of state monopolies, if not managed properly, can also harm consumers. This is the tension explicitly acknowledged in China’s Anti-monopoly Law. It all comes down to optimal regulation.

To complicate matters, times are tough. As the economy slows and competition ramps up, the firms that are at the most risk are small and medium-sized businesses (SMEs), and they aren’t happy. As Ken Rapoza of Forbes noted recently in a story on the Business Environment Index for China’s Provinces 2011 survey:

The main complaint was not the U.S. and European economies, but about taxes and fees charged by local governments, regional protectionism and tight credit, said Fan Gang, director of the National Economics Research Institute at the China Reform Foundation, which compiled the data.

“The competitiveness of Chinese companies is highly related to the policy environment thus, less government intervention in the market and a better relationship between businesses and the authorities will be the direction of our next step in economic reform[.]“

While we can’t take too much from one survey that was heavily weighted towards manufacturing SMEs, the basic tension here is not surprising. SOEs receive benefits and protection from the government, leaving SMEs that are not politically connected out in the cold to fend for themselves, often in the face of burdensome local rules.

This takes us back (as usual) to the larger issue of the income gap and China’s problem of the “haves” and the “have-nots.” If you are wealthy, politically connected, or in the public sector, you are part of the “in crowd.” The question is whether public discontent with rapacious plutocrats, corrupt local governments and criminal polluters will be enlarged to include state-owned champions.

Perhaps Beijing has anticipated this possibility. The ongoing anti-monopoly investigation of China Telecom and China Unicom over Internet broadband service by the NDRC is a signal that the power of state-owned firms do not trump the concerns of Chinese consumers, or at least not always. Whether this investigation heralds a shift in policy towards more aggressive regulation of SOEs remains to be seen.

Indeed, SOE prognostication is rather difficult at the moment. Will an economic downturn change regulatory policy? There are competing interests at play. On one hand, SOEs play a vital role during economic crises; in 2008 they were instrumental in funneling cash into infrastructure and other projects and firming up employment. On the other hand, monopolistic practices that harm consumers can be heightened during a recession.

The safe bet here is that since the underlying rationale for SOEs in China hasn’t changed, no fundamental shift is likely. It will, however, be fascinating to watch the tension between economic growth and security policies against consumer protection and competition. This may not mean a change in the overall level of SOE involvement in the economy but rather how these companies are dealt with by regulatory authorities.

© Stan for China Hearsay, 2011. | Permalink | 7 comments | Add to del.icio.us
Post tags: anti-monopoly law, public sector, SOE, State-owned Enterprise

Image via The Atlantic

In its Perspectives on Global development 2012 report, published on Monday, the OECD says recent social unrest from Thailand to Tunisia shows it is not enough to prioritise economic growth and pursue technocratic policymaking while disregarding people’s desire to participate in the political process and share in the benefits of growth. (Guardian)

While it’s nice to see that the OECD is paying attention to this in places like China, which definitely has a huge income inequality problem, it would be nice if some folks in the media point out that this is not just a development issue anymore. Or perhaps the pictures from the UC Davis debacle (see above) have not been circulated to enough people?

“While the absolute living standards of the poor may have improved, thanks largely to shifting wealth, the number of people who are socially excluded through some form of relative poverty has in fact grown over the last two decades,” says the report. Economic inequality had “increased dramatically” in China, India and South Africa over the last two decades[.]

[ . . . ]

In Argentina, the richest 1% of the population accounted for 17% of the country’s national income in 2004 – a jump from 12% in 1997. The richest 1% of China’s population, meanwhile, accounted for nearly 6% of the country’s national income by 2003, up from 3% in the early 1990s. And in India, the richest 1% held 9% of the country’s national income, nearly doubling its share since 1980.

These numbers are rather disheartening, yes? I think about all the ink spilled on this issue, all the academic conferences on economic growth and development, and I can’t help but wondering whether all those guys can quote this statistic from the U.S. (from the Christian Science Monitor):  ”the top 1 percent reaped a 17 percent share of all income, up from 8 percent in 1979.”

OK, reality check. Yes, in many ways being poor in a country like the U.S. is not at all the same as being poor in Tunisia or India. So I suppose if time and effort is given to the subject, focusing on the worst off people makes sense. Fair enough.

On the other hand, if the issue is political stability (as opposed to human suffering), then discussion of nations like the U.S. becomes just as interesting as countries with different political systems, like China. I’ve sort of become used to news reports of mass protests here in the PRC, many of which involve poor citizens appealing to the government for redress following third party action (often in collusion with local government). Such actions include land swindles, environmental degradation, and violent criminal acts. Moreover, although the government here has attempted to “rebalance” the economy, the income inequality problem does not appear to be going away.

It’s a bit of a hobby for Western China analysts to talk about mass protests, income inequality and political stability. I engage in the practice myself on a regular basis. Certainly the OECD is on top of this with respect to China and a large number of other nations.

But when it becomes difficult to tell whether that video footage of a mass protest took place somewhere in rural Shaanxi or in affluent Northern California, it suggests to me that something besides a failure of economic development is going on. This is starting to look like a much bigger phenomenon, an issue that deserves to be taken seriously as a global problem.

Given the initial media treatment of the Occupy Wall Street movement in the U.S. and the continued inability of the establishment in America to translate popular discontent into policy solutions, the issue will not be going away anytime soon in the US of A either.

I just hope that a couple decades from now, perhaps when both China and the U.S. are considered global superpowers, the issue of income inequality is no longer considered something that only poor countries need to worry about.

© Stan for China Hearsay, 2011. | Permalink | 3 comments | Add to del.icio.us
Post tags: income inequality, OECD

This was highly anticipated:

New rules for major U.S. exchanges promise to make it harder for foreign companies to enter the U.S. market via “reverse mergers.”

The Securities and Exchange Commission on Wednesday said it approved tougher new exchange rules for companies that enter the U.S. market through so-called reverse mergers, arrangements that allow a company to avoid the regulatory scrutiny that comes with an initial public offering. (Wall Street Journal)

(...)
Read the rest of SEC Issues Rules on Reverse Mergers. And There Was Much Rejoicing. (119 words)

© Stan for China Hearsay, 2011. | Permalink | 3 comments | Add to del.icio.us
Post tags: Amex, NASDAQ, NYSE, reverse mergers

I’m not sure whether it’s a coincidence that the news about Johnson & Johnson, which I wrote about last night, also had to do with Corporate Social Responsibility (CSR), but today’s news had plenty more of the same. Today it was all about the new report by the China Academy of Social Science (CASS), the “Corporate Social Responsibility Blue Book.”

Disclaimer: I do not have a copy of the report, so my criticisms here reflect reports in the (State) media only. However, the media reports seem to agree on the basics, and I’ll stick to those.

What’s the big takeaway here? That companies in China suck when it comes to CSR. One wonders why we needed an academic report to tell us that. Anyway, here’s how the report was put together:

The report investigated the top 100 State-owned, private and foreign companies in China and scored them on a 100 points scale by comparing them to international CSR indices, the Domestic CSR Initiative and the CSR Evaluation Package of the World’s Top 500. (China Daily)

So far, so good. The benchmarks were based on bribery, quality control, environmental protection and philanthropy.

The suspense is probably killing you. Here are the results: the average score of all companies came out at an abysmal 19.7. This is atrocious, and surprisingly low, even though I certainly didn’t expect high scores.

But here’s where it gets interesting:

The report revealed that SOEs are the best CSR performers among the three groups, with an average score of 31.7, much higher than private businesses at 13.3 and foreign companies at 12.6.

A total of 26 companies scored zero, including foreign giants such as Daimler Chrysler and Coca-Cola. Adidas (China) brought up the rear of list with minus 4 points. (Global Times)

At this point, you might be thinking WTF? Good instinct. Note that this story is prominent in today’s local news, with headlines that scream about how horrible Adidas is (among others). Some of the accompanying commentary has been hilarious, claiming that SOEs are better supervised and are more committed to CSR than foreign multinationals. I’m sure that’s true for some (e.g. I’m sure that SOEs scored very high in the money-given-to-earthquake-relief category), but we are talking about aggregate numbers on a variety of issues here, so I’m at best amused by these statements.

Anyway, as usual, there is a reasonable explanation for this weirdness, and it lies in the bizarre methodology of this report that is unfortunately being taken very seriously by the press.

Basically, the researchers compiled data on these companies, which included requests of their CSR policies/activities:

“We mainly collected CSR data from the companies’ own coverage of their social activities, as well as their websites and annual reports,” said Zhai, an employee of the CASS’ CSR Research Center, told the Global Times.

“To balance their own CSR information, we also collect negative reports about their activities,” Zhai said.

Fair enough, but what happened if CASS didn’t receive any information from a company? Naturally, these companies were not included in the statistics, right? Uh, unfortunately that’s not the case.

Believe it or not, if there was no information on the CSR activities of a company, they scored that firm zero! And if their search of negative reports uncovered anything, then the company ended up with a negative score. That’s how Adidas wound up with a minus-four rating.

Gee, you think that scores of zero and lower might have something to do with those low averages?

I’m not the only critic:

Liu Baocheng, director of the Center for International Business Ethics at the University of International Business and Economics, said that the CASS report was encouraging as it tried to promote CSR in China, but called its rating method questionable.

“Their research oversimplifies quantitative data analysis, is not very representative in its sample selections and its scientific approach to data is questionable. From an academic standpoint, they still need to improve their systematic analysis,” Liu said.

I think Liu is being charitable here. I could end here with a comment on CSR in China, but I think most of you who read this blog are already aware of the challenges. Alternatively, I could say something about lies, damn lies, and statistics, but it’s probably not necessary at this point.

© Stan for China Hearsay, 2011. | Permalink | 13 comments | Add to del.icio.us
Post tags: China Academy of Social Science, corporate social responsibility