Monthly Archives: March 2009

Huawei Finally Coming to America?

Is the Company’s “Long March” Nearing its End?

It looks like the Chinese telecom giant Huawei might make its oft-delayed entrance to the US market, after what Forbes calls the company’s “Long March”:

For years, the Chinese networking and telecom vendor’s attempt to expand its U.S. presence has been held back in part by security worries stemming from its murky association with the Chinese government. But now, the Shenzhen-based company is said to have won a major U.S. deal: a contract to build the network infrastructure for a cellphone service that Cox Communications plans to launch later this year. Huawei is also a contender to build Clearwire’s 4G network.

I’m keeping a close eye on this story, since making big deals in the US is never an easy task for Chinese multinationals — also, Recent chatter from Britain indicates that British authorities have serious concerns about allowing Huawei to install telecom infrastructure. As the Times points out,

A confidential document circulating in Whitehall says that while BT has taken steps to reduce the risk of attacks by hackers or organised crime, “we believe that the mitigating measures are not effective against deliberate attack by China”.

(…)

A Whitehall report is understood to warn that, although there is at present a “low” risk of China exploiting its capability, “the impact would be very high”.

So who knows? The US contracts might be a financial windfall for Huawei. Or, as was the case in their attempted 3Com deal and Haier’s abortive Maytag deal, security and/or protectionist concerns might threaten to scupper the whole deal. With the British report coinciding with Huawei’s American overtures, it could, quite possbly, go either way.

Look to Beijing – Washington Post

Has the G2 Become More Important than the G20?

Interesting article in the Washington Post today about the global recession — can coordinated effort between Washington and Beijing help pull the world out of “the great recession”? Shouldn’t the G20 summit be held in Beijing, the symbol of a 21st century capital, rather than its 20th century counterpart, London? Zachary Karabell seems to think so:

Today, China needs the United States as much as the United States needs China. This isn’t codependence; it’s interdependence, especially since the rest of the world needs both of them equally.

For Beijing and Washington to pull the world out of this Great Recession, they must overcome both mutual suspicion and self-perceptions that are quickly losing validity. China is no longer as poor as it claims; the United States is no longer as rich as it acts. This transition will be tough for both. China is a bit like a newly muscular adolescent; it is gaining power but doesn’t yet know how to wield it or to what purpose. As for Washington, it must learn to use muscles it hasn’t stretched for many years, muscles that are adept at collaboration rather than dictation, that are flexible rather than simply big.

Any thoughts on this? Is saving the world’s economy the job for the “G2″, the US and China, rather than the G20? Or is this problem so large that these two monoliths will only play a part — albeit, an immensely important part?

Outside In Exhibition

Exhibition at Princeton Highlights the Deeper Meanings of “Chinese” Art

In the New York Times, Benjamin Genocchio reviews the “Outside In: Chinese x American x Contemporary Art” exhibition at Princeton University, going on until June 7:

What is meant by “Chinese” art in our age of globalization and transnational migration? To answer that question, Jerome Silbergeld, Cary Y. Liu and Dora Ching, the curators of “Outside In: Chinese x American x Contemporary

Art” at the Princeton University Art Museum, have selected six artists who are all United States citizens but have some connection to China. The result is a smart, visually impressive but somewhat strange and idiosyncratic exhibition.

Four of the artists are ethnically Chinese but either live or have lived in the United States. One is an American living in China; another is an American-born Vietnamese living in Everett, Wash., who has adopted Chinese art and culture as her own. I am all for shaking up the categories of national identity and cultural affiliation, but I wonder how this group can realistically be said to exemplify contemporary Chinese art or, as the catalog puts it, “Chinese-ness.”

The Implications of the Yuan Appreciation

The evolution of China leads to internationalization of the yuan

wangguangyi1

Wang Guangyi: "Great Criticism Series" 1993 painting 200 x 200 cm

In December of last year, the Chinese economic publication Caijing introduced a new economic experiment conducted by the Chinese government in the Pearl River Delta — China’s go-to destination to test-drive new capitalistic ideas. To simplify foreign trade, the government began a pilot program to allow foreign trade exchanges to be conducted with the Chinese yuan rather than the previously-dictated dollar or Euro. This development, Caijing pointed out, is an early indicator of how the yuan is increasingly becoming a global currency:

The RMB took a step toward becoming an international currency…Currently, foreign traders denominate sales in foreign currencies, such as dollars and the Euro, and have to go through the State Administration of Foreign Exchange to change currency. This brings added risk from fluctuations in foreign exchange rates.

Since then, Caijing has posted a more thorough “roadmap for yuan internationalization,” written by Ye Xiang, a former official at the Hong Kong Monetary Authority. While Ye feels that the yuan could prove a stable international currency in the long run, he is more pragmatic about the time it would take for the currency to become more widely used or perceived as “the” global currency.

We must understand that it is an inevitable trend that the overseas yuan investment market will grow after foreign trade settlements in yuan become widely accepted…[W]e should let companies engaged in imports and exports adjust their yuan positions via banks to allow development of the overseas yuan monetary market. Gradually, a yuan investment market will take shape.

Is the yuan’s internationalization running parallel to China’s evolution as a global player? In other words, as China’s position in world affairs grows, will the same be said of its currency? If the yuan does indeed significantly appreciate against the dollar and China’s new Pearl River Delta experiment succeeds in making the yuan more of a global currency, will it magnify the global demand for Chinese assets such as consumer products, real estate, luxury goods, art, etc.?

Tough questions with no clear answer, particularly because the Chinese government’s exact intentions for the yuan remain so opaque. Also, it is hard to tell whether the government is in a hurry to see the yuan appreciate against the dollar during the current financial crisis, since China’s exposure to the dollar and US Treasuries is so high.

UPDATE 3/30: BusinessWeek throws in their two cents:

The yuan’s emergence as a major currency will take “certainly not years; it’s more likely to be decades,” said Simpfendorfer at Royal Bank of Scotland. He said it could depend on whether Chinese consumers step up spending in coming years, giving other countries a reason to use yuan the way free-spending Americans drove the dollar’s popularity.

UPDATE 4/1/09: The Financial Times weighs in on the subject:

Beijing has…been taking cautious steps to make its currency more internationally relevant. This week, [Zhou Xiaochuan, China’s central bank governor] signed a Rmb70bn ($10bn, €7.7bn, £7.1bn) currency swap deal with Argentina, designed to allow the Latin American nation to settle some trade bills in renminbi. It followed swaps with South Korea, Malaysia, Indonesia, Hong Kong and Belarus.

There is much substance to Mr Zhou’s proposals. Arthur Kroeber of Dragonomics, a research company in China, argues that Beijing is staking out a responsible position whereby it seeks a multilateral alternative monitored by a multilateral body. It does not want to challenge the dollar but is serving notice that, over time, the world should diversify from overdependence on one currency.