ASIA BRIEFING:THE LAST few weeks have seen several measures implemented in China aimed at giving a leg-up to local players at the expense of foreign investors.
Last week, the government in Beijing said it was mulling plans to stop buying state cars from foreign carmakers like Audi and to focus on local limos instead.
There were plenty of eyebrows raised, given such a move would force overseas carmakers out of a €10 billion section of the world’s biggest car market. The move was aimed at boosting China’s FAW Group, which has just reissued C131 Red Flag, a limousine designed for Mao Zedong in 1958.
Early images of the new Red Flag show that its look may at least have been inspired by the curves of the Audi A6 so beloved of Chinese cadres.
From the auto industry to accountancy. The government is introducing changes to the accountancy market which means that only accountants with Chinese qualifications can be partners in the audit practices of the market-dominant Big Four firms.
KPMG, Deloitte Touche Tohmatsu and Ernst Young signed foreign joint venture deals arrangements in China 20 years ago. PricewaterhouseCoopers’ (PwC) joint venture agreement expires in 2017, but it is also involved in restructuring discussions.
The Ministry of Finance wants the Big Four to form special group partnerships, which would require all partners working here to go through the rigorous Chinese accountancy exams.
International investors and regulators watch accountancy practice in China very closely. Last year, a number of Chinese companies listed on US stock exchanges were accused of accounting fraud, and 20 were de-listed from US exchanges, while the SEC warned investors against investing with Chinese firms who sought listing via “reverse mergers”.
Each of the four firms employs more than 10,000 people in Greater China, including Hong Kong and Taiwan and, while they have been taking on Chinese-qualified CPAs as fast as they can, a lot of core staff – including Chinese staff – qualified in Hong Kong, the United States or Europe. The Big Four are hopeful that their foreign-qualified CPAs will be able to hang on to their positions during a handover period.
Corruption worries about ‘clean’ Hong Kong
HONG KONG is China’s most successful city, a haven for investors who want to access mainland China but who also want the former British colony’s well established rule of law, its adherence to international accountancy practice and its stunning infrastructure.
The Irish community in Hong Kong is one of the most successful in the region, enjoying the benefits of the freewheeling capitalism the city offers. For the 18th year in a row, Hong Kong was classified the world’s most free economy by the right wing think tank, the Heritage Foundation. The most senior politician in the territory is even called “chief executive” – the language of politics in Hong Kong is the language of business.
It has lost out to Singapore in the “most liveable city in Asia” rankings in recent years, largely because of the pollution problem from southern China’s factories, but it is a force to be reckoned with in financial services and as a gateway into the mainland Chinese market.
The general feeling is that the territory has retained most freedoms promised 15 years ago before Britain handed Hong Kong back to China. When you ask business leaders in southeast Asia what they most admire about Hong Kong, it’s freedom from corruption. During the 1970s and 1980s the British spent a lot of time stamping out corruption and the Independent Commission Against Corruption (ICAC) is a model for graft-busting. Which is why recent rumblings about collusion between politics and business is worrying. If this was Shenzhen or Manila, no one would bat an eyelid, but Hong Kong has raised the bar and is judged by different standards.
Just four months before he is due to retire, chief executive Donald Tsang is being investigated by the ICAC over his ties to tycoons. These links have seen Tsang enjoy a weekend aboard a tycoon’s yacht, as well as signing a deal to rent a vast apartment in Shenzhen for 800,000 yuan (€95,000) a year. The apartment was built by a firm controlled by the tycoon Wong Cho-bau, an investor in Digital Broadcasting Corp, which was recently granted a broadcasting licence in Hong Kong.
This kind of cosiness is angering the ordinary citizenry of Hong Kong, who feel they are on the wrong side of a widening wealth gap, that property prices are out of control and that only mainlanders and the richest in Hong Kong can afford them.
Tsang (67), a daily communicant, has always appeared squeaky clean. He has conceded the events “created worries among the media and public, civil servants and lawmakers and also shaken the public’s belief in Hong Kong’s system”. The investigation is the first into a chief executive and clouded an otherwise successful six-year stint as the Beijing-backed leader of the city of 7.1 million.
The chief executive is picked by an election committee comprising 1,200 executives, professional delegates, lawmakers and representatives to mainland China’s political bodies. The process is watched closely because China has pledged to allow Hong Kong to move toward universal suffrage by 2017, which would be the first example of democracy on mainland territory.
The man who looked a shoe-in to replace him in the elections on March 25th, Henry Tang, is embroiled in a scandal about building a basement without a permit. He is accused of submitting false building plans and breaching codes of conduct. When the scandal emerged, Tang blamed his wife, which annoyed the ordinary folk of Hong Kong even further. Also, he is accused of trying to falsely blame a civil servant for a disastrous public festival in Hong Kong harbour in 2003. While two-thirds of Hong Kongers want Tang to step down, he refuses as he has secured nominations from the richest men in the city to run, including Li Ka-shing, Hong Kong’s richest man; Lee Shau Kee, chairman of Henderson Land Development; and Sun Hung Kai Properties co-chairman Thomas Kwok. Tang’s opponents are parliamentarian Albert Ho, and Leung Chun-ying, a policeman’s son and former government adviser who is the popular choice.
While the corruption scandal has highlighted how fragile Hong Kong’s position is under the “one country, two systems” policy introduced in 1997, it is also worth noting that it has been the free-wheeling newspapers in the territory, such as the Oriental Daily Group’s the Sun, the Standard and the Ming Pao Daily, which brought the shenanigans to the public’s attention. The free press is a force to be reckoned with, and as long as Hong Kong deals with the question marks about its leaders’ integrity, it remains the go-to place for investors keen on the mainland.
Remembering Liam Ayudhkij O’Keeffe
THIS WEEK the Irish business community in Asia was mourning one of its most prominent and popular members, Liam Ayudhkij O’Keeffe, the chairman and founder of Property Care Services, who died after a long illness in Thailand at the age of 67.
Originally from Dublin, O’Keeffe moved to Thailand aged 18 and became a naturalised Thai, changing his surname to Ayudhkij.
When he started as general manager of the original PCS Company in 1969, it was a pest control company with a staff of six. Over the years, he grew the company into Thailand’s leading property management business with over 20,000 employees.
He was a director and co-founder of the Irish-Thai Chamber of Commerce in 2002 and was also an active member of the Asia Pacific Ireland Business Forum and the Global Irish Economic Forum.
Among his passions was Thai contemporary art, on which he published a book and his gallery in Pattaya, Liam’s Gallery, which aimed to promote both Thai and international artists. He was also founding sponsor of the Junior Dublin Literary Awards for Thailand, an annual English essay contest organised by the Nation newspaper, which ran a prominent obituary of him.
‘Apple’ stoves confiscated
TABLET COMPUTERS, lightweight laptops, smartphones, mp3 players – Apple’s product offering is famously diverse and imaginative. But the iStove is probably a step too far.
Chinese police announced last week that they had confiscated nearly 700 stoves bearing the Apple logo from warehouses in Wuhan in central China. The stoves were straightforward enough, but the green sticker with the words “iPhone” on them set them apart.
Apple is currently fighting a court battle over ownership of the iPad brand with a local Chinese firm. But it has dealt with a fair few cases over the years of people trying to get that Apple feeling when it comes to promoting their products. Last year they found a fake Apple Store in Kunming, which sold real Apple goods and tried hard to match the groovy feeling of the real thing, but fell a bit flat. A bit like the fake Ikea store in the same city.
