March 15, 2010
Google Reported to Plan Closing of Chinese Language Search Engine
[The alternate title for this post could very well be "Baidu Executives Celebrate Gift-Horse with New Strategy to Capture Existing Google Customer Base."]
WSJ reports Google throwing in the towel -- or at least leaking the rumor that they will, by publicly threatening immiment closure of its Chinese language search engine. A few posts ago, I strongly suggested this was likely, given the company's extraordinary intransigence before those select few who have no need to back off.
Google's closure of Google.cn would leave the Internet in China—which has about 400 million users, more than any other country, and is adding 250,000 each day—almost entirely dominated by local companies.
[Our old friend Jeremy from Danwei.org is quoted in the story.]
See also this report:
Google Inc. advertisers in China are being advised to switch to rivals such as Baidu Inc. and business partners are exploring alternatives as speculation grows the U.S. company will shut its Web site in the country.
Why is it Americans fail to effectively respond in kind with Chinese firms? Because, in short, standards differ.
Google's departure could hardly be better news for the Standing Committee of the Politburo. One can imagine the round-table where a hypothetical thorn in the side is discussed...
A: On to that damn company....
B: Who is the boss? Can we shoot him?
C: No. It would be too messy. The whole world is watching.
B: It is your job to persuade the world that the execution is justified!
D: My son-in-law has internet interests. I think the stock would go down. You own stock in that company, too, don't you?
C: I do, and many others in that commercial sphere.
A: Yes, yes, the stock will fall. No execution. Agreed?
All: Agreed.
A: Force them to leave the Motherland.
B: Yes, be as hard as nails. Attack from all sides.
E: Sirs, the company has just decided to withdraw from China.
All (in a flurry, picking up cellphones): Buy Baidu! Buy Sohu! Buy Sina!
Humor aside (if, in fact, you considered the above dialog to be humorous), Chinese media is forbidden territory for foreign firms -- its control is of such value to the Party's propaganda as to overwhelm whatever social benefit Westerners, such as Google and its executives, believe to have perceived. And frankly, if Chinese value such ideals, and wish to adopt them -- which I do not believe to be the case for the majority of mainland Chinese -- it is for them to overturn the ideas which Westerners (and some Chinese) believe oppress them.
However, apart from higher notions of God-given rights, and turning strictly to commerce, the US is a far more open environment for the activities of Chinese nationals than is China for American nationals. As an example, thousands of Chinese nationals, even those without immigrant status in this country, are licensed to practice law in many of these United States. No American, who is not a Chinese national and thus subject to heightened discipline by the Chinese state, is permitted to be similarly licensed.
Whither parity?
All of this occurs while a substantial portion of China's foreign exchange reserves are in the hands of the US government -- all of it eminently confiscatable.
Posted by Richard at 2:06 PM | Comments (0)February 28, 2010
"China" in the Minds of Americans
Many Americans, especially those who know little about the subject, feel strongly that the torch for the world's next generation, has passed to China. John Pomfret takes this idea to task here. For Americans, China -- not what is actually China, but what Americans think they see -- has become a kind of collective projection of fantasy upon which all of the America's shortcomings are writ large.
"Every day we wait in this nation, China is going to eat our lunch," Sen. Lindsey Graham (R-S.C.) said this month. Arguing for nuclear power, as well as renewable energy sources and cleaner ways to use coal, Graham said: "The Chinese don't need 60 votes. I guess they just need one guy's vote over there -- and that guy's voted. . . . And we're stuck in neutral here."
It is certainly untrue that one man decides policy. Coming from a southern republican, it reads like an indirect argument for a strong man in America who might override collective decision making -- a political failing of those in DC, including the man who uttered the comment.
It is thus imperative for those of us who write on China -- journalists and bloggers, corporate consultants and Congressional aides -- to write seeing what really is. This requires an offloading of the burden of one's own buy-in to the collective psyche of the moment. Invisible and incorporeal, it is nonetheless a weight which perverts an accurate reflection of truth.
Posted by Richard at 1:42 PM | Comments (0)February 25, 2010
US Federal Government Investigates Toyota
The U.S. Federal Government, heavily invested in General Motors, investigates not only its competition, but its competition's suppliers, using its extraordinary powers:
Warrants were carried out on the Michigan offices of Yazaki Corp. in Canton, Denso International America Inc., in Southfield, and Tokai Rika Co., also known as Tram, in Plymouth, an FBI spokeswoman confirmed Wednesday.
"The Antitrust Division is investigating the possibility of anti-competitive cartel conduct of automotive electronic components suppliers," said Department of Justice spokeswoman Gina Talamona.
Prior to the federal bailout of GM, GMAC, Chrysler and Chrysler Financial, the Department of Transportation was relatively inactive with regard to Toyota safety issues. Surely, the Justice Department had not been involved. After the bailout, we see significant activity. What other agency will descend upon this company? Not I alone consider the dramatic change in Toyota's fortunes -- and now its suppliers -- with great suspicion, which the administration has brushed away like so much dander.
Yesterday, Secretary LaHood was asked before Congress if the the fact of US investment in the auto industry would have any impact upon the Toyota investigation. He immediately promised it wouldn't (I am looking for an mp3 or transcript of his testimony, which I heard over the radio.) With any administration, but especially with this strongly pro-statist group manning the helm, who can possibly believe such glib nonsense, especially when federal actions belie it?
We now have the US, as a regulator cum stakeholder, launching a criminal probe against a competitor. Do you not find this as frightening as I do?
Posted by Richard at 2:59 PM | Comments (0)February 18, 2010
It's the Yuan, Again, and Again, and Again, and...
More hollering about the value of the Yuan. This is simply Washington window dressing on the more profound problem to which none of the "best and brightest" supposed to be leading this country seems to care deeply enough about to create a solution for. Are there any newly instituted and significant incentives aimed at encouraging American business to bring manufacturing back onshore? (That was a rhetorical question.)
Richard McCormack, editor of Manufacturing & Technology News, writes:
The United States is not a desirable place to build a new semiconductor wafer fabrication (fab) plant. Such plants are massive, costing upwards of $8 billion and generating thousands of direct and indirect high-paying jobs, spinoff revenue for local communities and massive investments in research, equipment and materials. Semiconductors sit at the top of the electronics industry pyramid. The United States invented the technology, but it's become a small player as measured by global production.
In 2009, 16 fabs began construction throughout the world. One of them was in the United States, according to Daniel Tracy, senior director of industry research and statistics at Semiconductor Equipment Materials International.
...
China led the world last year in new semiconductor factory construction, with six fabs, followed by Taiwan with five, and Korea, Japan, the European Union and Southeast Asia, all with one apiece.
...
The United States does lead the world in one category, however: closures. In 2009, 27 fabs closed worldwide, with 15 of them in the United States (followed by four in Europe, four in Japan, two in China, one in Korea and one in Southeast Asia). The number of closures last year almost doubled from the previous year, when 15 fabs were shut down worldwide, again, with the largest number in the United States (at four).
Why is the United States losing out on the next phase of the semiconductor boom? "It's not direct labor," says George Scalise, president of the Semiconductor Industry Association. "It's not materials -- they cost the same everywhere. If you go down the list of expenses, every-thing is the same, except for tax policies and subsidies." [Emphasis added.]
Read the rest here.
Posted by Richard at 2:28 PM | Comments (0)February 2, 2010
Interview with a Chinese Cyberthief
From the NY Times:
“Here’s a list of the people who’ve been infected with my Trojan horse,” he says, working from a dingy apartment on the outskirts of this city in central China. “They don’t even know what’s happened.”
Worthwhile reading.
Posted by Richard at 2:51 PM | Comments (0)February 1, 2010
MI5: PLA and PSB "Gifts" to Businessmen Bugged
Commercial espionage among nations should not come as a surprise to anyone involved competitive businesses. I am a proponent of the idea that American intelligence should practice it far more than we already do, which is either so brilliantly executed as to stay below the radar of public view or relatively inconsequential.
Not so Chinese commercial espionage, which is far from a new story. I distinctly remember in the early 1990s the Taiwanese visitor to a certain bearing manufacturing in the United States, discovered wearing shoes with magnetized metal soles to catch iron filings during a factory tour.
But Chinese commercial espionage is "evidently" well-funded and coordinated. An MI5 report, leaked to the Sunday Times, contains details of interest, including this:
A leaked MI5 document says that undercover intelligence officers from the People’s Liberation Army and the Ministry of Public Security have also approached UK businessmen at trade fairs and exhibitions with the offer of “gifts” and “lavish hospitality”.
The gifts — cameras and memory sticks — have been found to contain electronic Trojan bugs which provide the Chinese with remote access to users’ computers.
Granted, given the prevalence of virus activity and the near absence of antivirus applications in use in China, it is always possible that rogue applications find their way onto "gifts." It has also been rumored -- and I believe unproven, correct me if I'm wrong -- that applications to ease ingress by hackers have been installed unto computer hardware at certain Chinese factories.
Need I say it? if you are senior executive or assistant to such an officer in a sensitive industry or multinational, beware of strangers -- especially PLA or PSB people -- bringing gifts.
Posted by Richard at 2:50 PM | Comments (0)
January 29, 2010
Google CEO Criticizes Chinese Leadership at World Forum
Breaking news at WSJ:
Google CEO Schmidt at Davos: 'We like what China is doing in terms of growth ... we just don't like censorship. We hope that will change and we can apply some pressure to make things better for the Chinese people.
Uh oh.
This is worse than merely shooting oneself in the foot, is it not? Direct foreign criticism of Chinese "internal affairs" declaimed to the world's elite political leadership.
Posted by Richard at 3:50 PM | Comments (0)January 19, 2010
Google Delays Phone Launch in China -- Getting In Deeper...
Google has announced a delay in China of the launch of mobile phones using its Android software.
One must question this move as simply more Google shadow boxing. Despite its threat to remove web filtering, Google does not appear to have done so. Similarly, a postponement is simply that. The delay of a marketing expense will have no effect on top-level cadres, other than to demonstrate weakness of resolve. Why?
Because Google can't extricate itself from China. Think of the likely effect "leaving China" on the introduction into world markets of the Nexus, the new Google phone. After all, the product itself will be manufactured in China (where else?). Apple must be jumping for joy.
(Even were Google to leave, Chinese authorities would still welcome revenues resulting from the contract manufacturing of the Nexus, but the threat of being cut off from supply would remain.)
If Google's Board believes its announcement serves to generate public pressure from foreign investors, I think it is much mistaken. Could they suffer from grandiose notions of its importance in Chinese affairs? China can do very well without Google. After all, China has its own Google: Baidu, modeled in its image.
Google is vulnerable, and in China the strong prey upon the weak without mercy. American manufacturers and even end-users, including the United States armed forces, now plainly see how vulnerable they have become to the agglomeration of manufacturing resources in China, the purported need to sell in China and the compromises that must be made to do so.
January 18, 2010
Google in China: A Brief Update
Sources not named by Reuters allege employee collusion:
Google (GOOG.O) is investigating whether one or more employees may have helped facilitate a cyber-attack from China that the U.S search giant said it was a victim of in mid-December, two sources told Reuters on Monday.
Extraordinary -- unnamed sources. Unnamed and yet virtually identified?
The sources, who are familiar with the situation, told Reuters that the attack, which targeted people who have access to specific parts of Google networks, may have been facilitated by people working in Google China's office.
In other words, other Google employees with an ax to grind? American executives who are sick and tired of surveillance? The PR department?
Furthermore, despite Google's claim to cease filtering, it is not evident that the company has made any change in Web search filtering.
This is a strange game of cat and mouse. We know what the cat wishes to do. What exactly is the mouse doing?
Posted by Richard at 1:59 PM | Comments (0)January 14, 2010
New York Times Removes Negative Quotations from Article on Google and Baidu
I write this to satisfy the curiousity of those who may not see a quotation referenced in an Asiabizblog post.
The New York Times has removed or revised two quotations from an article it published on January 13, originally titled, "China's Exit Threatens China's Internet," by David Barboza, et al. The revised article, running at the same URL as the original, is entitled, "Baidu’s Gain from Departure Could Be China’s Loss." Among the quotations removed is that of Anne Stevenson Yang, whom I quoted in yesterday's post. (See post below.) Yes, that quote was there and is now gone. Along with this one: "It's the epitaph for US online involvement here."
In addition, the following quote from the original story was partially revised.
“Baidu keeps a great relationship with the government,” says Hong Bo, a consultant at 5G, a Beijing-based consulting firm. “If the government wants something removed it will do it immediately. On the other hand, everything with Google has to go through its headquarters.”
The revised article curiously allows the writer to ventriloquize the first sentence:
Baidu’s strong relationship with the government contributed to its rise. “If the government wants something removed, it will do it immediately,” said Hong Bo, a consultant with 5G, a Beijing consultancy. “On the other hand, everything with Google has to go through its headquarters.”
Other than these changes, the articles appear similar. So, why were any changes made? Why were quotes dropped?
[H/T to a friend.]
Posted by Richard at 9:13 PM | Comments (1)CYBERSITTER v. China et al -- Attorneys for the Plaintiff Hacked, Get Your Complaints Here
More on cyberattacks originating in China of private companies with interests contrary to the Party. Article here.
Lawyers suing China for 2.2 billion dollars in an Internet-censoring software piracy case said they came under cyberattack this week.
Attorneys at the California law firm of Gipson Hoffman & Pancione said that on Monday they began receiving "Trojan emails" crafted to trick them into opening files booby-trapped with malicious software code.
Download the original complaints filed in federal court in California.
Cybersitter v. People's Republic of China, et al.
Cybersitter v. CBS Interactive
Posted by Richard at 3:26 PM | Comments (0)
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