Category Archives: China

All the ‘Coffee’ in China: Starbucks Moving East

Starbucks, the giant coffee purveyor, is planning on adding an additional 12,000 stores to their existing 25,000 within the next five years. Luckily for people who like to see other stores besides those that sell coffee, not all of the additional 12,000 are going to be in Manhattan. As a matter of fact, only half are going to be built in either the US or China.

But if you really do like coffee and were even slightly worried that you might need to walk more than 30 seconds from wherever you may be to get your mandatory Caramel Brulée Latte, you can rest at ease now. As CEO Howard Schultz puts it:

“These are the early days of the growth and development of the company. If Starbucks was a 20-chapter book, I still think we’re in chapter 4 or 5.”

“Demand is there, and our ability to deploy capital and get the return on invested capital is very strong,” Starbucks President and COO Kevin Johnson said.

The fabulously successful company discussed their business plans at an investor day even in New York City last week. Schultz reassured his shareholders that:

“Our core business has never been stronger in the U.S. and around the world.”

Starbucks has its eye on the enormous potential market in China.

“Not only will China one day be bigger than the U.S., but our business in China will demonstrate that we will be one of the…most significant winners in terms of a Western consumer brand,” he said.

China Tightening Control of Cyberspace

As of November 7, 2016, a new Cybersecurity Law was proposed which will help strengthen the Chinese government’s ability to enforce existing practices, while introducing new requirements that will make it harder for companies and individuals to operate freely online.

The law will require internet companies such as instant messaging services and others to register using their real names and personal information. They will also have to censor content that the state deems “prohibited.” Forcing people to use their real names suppresses anonymity and promotes self-censorship for online communication.

Another aspect of the new law requires data localization which forces “critical information infrastructure operators” to store their data within the borders of China. One group which is opposed to the legislation, Human Rights Watch, says the law does not state a clear definition of these “infrastructure operators” and they fear many businesses could be lumped together into the definition.

“The law will effectively put China’s Internet companies, and hundreds of millions of Internet users, under greater state control,” said Sophie Richardson, Human Rights Watch’s China director.

Richardson of HRW also worries that now that the laws are being implemented more broadly this will lead to stricter enforcement than has been seen in the past.

Censorship is not the only issue worrying people concerned with freedom in China. Companies will be required to report “network security incidents” to the government. They will also have to let consumers know about security breaches, and must provide “technical support” to government agencies when they are investigating security breaches. But “technical support” is not well-defined, leaving room for companies to give encryption backdoors and other surveillance assistance to the government.

Even more worrisome is that the Cybersecurity Law makes criminal several types of content, including content that “encourages the overthrow of the socialist system,” “fabricating or spreading false information to disturb economic order,” or “inciting separatism or damage national unity.”

“If online speech and privacy are a bellwether of Beijing’s attitude toward peaceful criticism, everyone — including netizens in China and major international corporations — is now at risk,” said Richardson. “This law’s passage means there are no protections for users against serious charges.”

Philips Sale of Lumileds Waiting for CFIUS Approval

The Dutch-based electronics company Philips says that its sale of a sub-company called Lumileds for $3.3 billion is now being scrutinized by a group called the Committee on Foreign Investment in the United States.” According to the Philips third-quarter results, the CFIUS has “expressed certain unforeseen concerns” which made the sale of Lumileds uncertain.

Lumileds manufactures LEDs and car components, and also owns many LED patents.
Philips is selling an 80.1 percent stake in Lumileds to a consortium of mostly investors from China. The consortium is called Go Scales and is made up of GSR Capital, Nanchang Industrial Group, and Asia Pacific Resource Development, all of which are based in China.
The sale was announced in March and is part of the company’s plan to better concentrate on consumer goods and its medical technology business.

Philips said that it will “continue to engage with CFIUS and will take all reasonable steps to address its concerns” but did not give any details about what those concerns are and in what way they will be engaged.

“Our operational performance continues to strengthen, despite deteriorating macro-economic conditions in a number of markets, most notably China,”  said Philips chief executive Frans van Houten.

Chinese President Xi to Visit US Later this Year

"Leon Panetta and Xi Jinping in Beijing, Sept. 19, 2012" by DoD photo by Erin A. Kirk-Cuomo
“Leon Panetta and Xi Jinping in Beijing, Sept. 19, 2012” by DoD photo by Erin A. Kirk-Cuomo  Licensed under Public Domain via Wikimedia Commons

In what will be Chinese President Xi Jinping’s first official visit to the US as president, plans are now underway to invite him for a state visit later this year. It is expected that President Xi will push for a “new model of major-country relations,” an idea Xi first introduced during his 2012 visit to Washington.

The visit is also being planned during a time of a strong American Asia-Pacific military presence whose goal is to contain he military power of the communist country. The visit is being planned with the help of China’s ambassador to the United States, Cui Tiankai.

No date for the visit has yet been determined, but discussions are now underway, according to Cui, who also pointed out that high-level meetings have been going on successfully in recent years, despite the many differences in each country’s outlooks.

“We are also very willing to see such interactions continuing this year, and we may even have a greater success,” Cui said.

The future meeting will not be the first meeting between Xi and President Obama. They leaders met after the informal summit in California in June 2013. They also met informally at the Asia-Pacific Economic Cooperation meetings in Beijing this past November.

Although no date has been fixed, US National Security Adviser Susan Rice said that the US had officially invited President Xi for a state visit to be held later this year.