With so much going on in China, and only a limited amount of bandwidth, I have created this weekly post to highlight articles that I feel are (1) important, (2) relevant, and (3) interesting.

This week there are 4 articles that I have chosen to highlight as each are quite interesting, they are all relevant, and there are issues within each that I think you the reader should be aware of.

If you have an article that you feel needs to be mentioned, please do so in the comments section. We all have different areas of interest and bandwidth, so I hope you will take some time and post those articles!

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Five years ago, when the major automotive firms were ramping up their China based production and sales, I began to theorize that within 10 years one of the Big 3 would fall.

That in the face of global competition, one of the firms would find themselves unable to compete, and at that time that also included the possibility that the firm to fall would be scooped up by a Chinese firm.

2 years ago when Chrysler was on the chopping block I knew that there would be China based bidders who would throw their hat into the ring, but it turned out that the Chinese were uncompetitive in terms of their financial bid and the value they would add.  However when reading the MSNBC article GM looking at job cuts, sale of brands I get the feeling that we are about to see a Chinese bid that wins.

SED Negotiations and agreements to open investment up between the countries aside, the fall of the USD almost ensures that a foreign group will win the bid … and China’s RMB moving from 8.28 to 6.8 give it a huge leg up over the Euro.

Additionally, with firms like Anhui Cherry already showing at the Detroit Auto Show, and China’s obvious desire to be a global player in the auto market, I am beginning to wonder if we are about to see a big 3 auto maker be purchased in whole/ part by a Chinese firm looking to expand

Any thoughts out there? Anyone think that if GM were bought up by a Chinese firm they would be able to succeed in the press battle that would surely be launched on CNN? Would they work within the unions, or go the Japanese model?

going back to some of my earliest posts on the Olympic Shutdown, I mentioned that there were three hot buttons for firms operating in China to consider when assessing their risk of shutdown.

The first was the level of air pollution in Beijing, and we have all seen in the last week that the government is putting into place a number of shutdowns to combat this.

The second was water. Beijing has been forced to divert water from Hebei as a precaution that the crowds don’t clean Beijing out of its water stock (which is already at emergency levels anyway).

and the third was power. Power supplies have been low for the last 18 months as a drought last year reduced the output of hydro power, the capacity issues on the railroad limited coal deliveries, and diesel shortages kept long haul trucks off the road.

for a firm to be at the highest level of risk of shut down they needed to be on all three of the watch lists for these issues. We all knew that air polluters were going to be taken offline, somethign that was well documented, and if you read through the coverage on the recent Shanghai blackouts you will come to understand why I think the government will take strong moves in the short term to nip this problem in the bud..

The State Electricity Regulatory Commission said in a statement in June that the country would face grave power supply challenges this summer.

The State Grid Corporation of China, the nation’s top power grid operator, is expected to face a shortfall of up to 10 million kilowatts this summer given high coal costs and the hot weather, the agency said

and that increases the risk of shutdowns again.

So, if you are an Aluminum smelter, or a firm that relies on Aluminum smelters (airconditioner manufacturers, big auto, etc), perhaps it is time for you to consider taking on a little extra safety stock because I have a feeling that in the process of forcibly removing demand from the grid the government will look for those that define the 80/20 rule.

for more on the energy issue in general, feel free to look through some of my old posts (particularly the What If, What Else, and What are the Odds notes).

To learn more on these topics, you can go to my previous posts by clicking the Olympics or energy tags

Last week sure was an active one for the major logistics companies, and as I was caught up in the information on the Olympic Shutdown, I did not have time (or space) to devote to th stories properly.

So, in the interest of time, here are the big three releases.. and a few comments of mine as well.

1) DHL announce that they were offering a “green” service to China. GoGreen

A first in the logistics industry, DHL calculates the carbon emissions generated by transporting each specific customer shipment from the country of origin to destination, and offsets these emissions by reinvesting in certified carbon management programs such as alternative fuel vehicle technology, solar panels and reforestation projects.

and

DHL-Sinotrans, a 50-50 joint venture between DHL and China National Foreign Trade Transportation (Group) Corp, has bought 43 delivery vans that meet the stringent Europe IV emission standard. (of 1500 total truck)

At this point, I must say that I am not all that impressed by this. Carbon offsetting, something I am still learning about, is not a solution.. it is an apologetic way to feel better. and only 43 trucks of 1500? Keeping in mind that they trucks were all purchased within the last 3 years, I would have expected this to be significantly higher..

Don’t get me wrong. I appreciate the effort, but as someone who has been working with firms on CSR in China and whom write a blog on CSR/ sustainability in China, my advice would have been to hold onto this announcement until a significant improvement in the trucks had been made. Trucks/ planes are their core problem, and I look forward to the day that I read about how they have reduced their carbon spend in those areas.

2) FedEx announces their 5th rate cute for the year

You know you are having problems in a market when you need to adjust pricing 5 times in a year.

Despite a nationwide 20 percent hike in diesel and gasoline prices last month in China, FedEx cut prices for its FedEx First Overnight services by as much as 77 percent, according to a Reuters report.

Operationally, one of the strongest logistics firms in China, FedEx has impressed me with their rollout to date. Where I think this announcement is important is not just that FedEx is having problems really pricing the market, it is that this is a problem that all international firms are going to have to contend with (as I wrote about in my Logistics white paper 2 years ago).

3) TNT announces their overland service to 5 Asian countries

TNT starts the only scheduled road services between China and Southeast Asia
Asia Road Network up to 30% cheaper than air and three times faster than sea Intra-Asia road services poised to support regional trade and business growth

Where this will be interesting to see is just how much traffic they are able to capture. Will their pricing be competitive, and how many of their global clients have been asking for this service (perhaps there is only one).

Overall, even though al of these announcements have some issues that need to be resolved, where I am excited by all of them in some manner is that they each show firms who have made their investments, cleared some major hurdles, and are now looking to expand/ improve/ tweak the model

going back to the DHL announcement, while I believe the GoGreen Service was announced prematurely (wait for results first), lower in the article is a paragraph that I find quite exciting

The GoGreen Express service is part of a series of environmental protection initiatives by DHL. The company has set strict targets for reducing emissions per package sent, tons transported and square meters of real estate used by 10 percent by 2012 and by 30 percent by 2020, as compared to 2007 levels. DHL is the first express and logistics company to set specific carbon efficiency targets.

As I began writing about 6 months ago, the end of June/ beginning of July would prove to be critical. It was the time frame I was given as a deadline for when Beijing would begin making the decisions of when and where to shut down factories and begin taking aggressive steps to clean the air.

As you can see from the last week of my writing, that is exactly what happened. Beijing announced curbs, Tianjin announced curbs, Tangshan announced curbs, and with the U.K. based Times Online reporting that Smog in Beijing five times over safety limits, I am
absolutely certain that we have only begun to see the shutdown announcements.

According to the article:

Last week The Sunday Times used an industrial hand-held air monitor to measure the number of particles in the atmosphere, which include car emissions and coal dust from factories. The particles are considered the biggest polluting factor.

The average reading at the stadium was 780,000 particles per litre of air. Even factoring in a 25% margin of error for humidity levels exaggerating the readings, this is more than five times the amount deemed safe by the WHO.

To learn more on this topic, you can go to my previous posts by clicking the Olympics Tag:

In case anyone felt that Tianjin or Tangshan were a safe bet for Plan B during the Olympics, I have some bad news for you.

Tianjin to limit building construction, factory pollution during Olympics

Tianjin, one of the co-host cities of the Beijing Olympic Games, is to ban construction at key building sites and limit factory sewage from July 25 to Sept. 20 to help improve environment for the Olympic Games

The city will also suspend some operations of 40 factories, including two cement factories and 6 factories which cause effluvial contamination.

Olympic co-host Tianjin to limit vehicles on road

From July 25 to Sept. 25, vehicles with odd and even numbers in Tianjin, an Olympic co-host city bordering Beijing, will take turns running within the outer ring road to guarantee smooth traffic and clean air.

China to close plants over Games

On Friday, similar action was taken in the city of Tangshan, 150 km (90 miles) east of Beijing where about 300 factories will suspend their operations.

With disputed traffic in Beijing, Tianjin, and Tangshan now confirmed, I suggest readers read the DHL’s Updated China Olympic Contingency Plan.

18TH ASIAN CORPORATE CONFERENCE OF ASIA SOCIETY OPENED IN TEDA
On the afternoon of May 28, 2008, the 18th Asian Corporate Conference of Asia Society was opened in the Convention Center of the Renaissance Tianjin TEDA Hotel in TEDA, Tianjin Binhai New Area. The theme of the conference is “a new era for global business: sustainable growth for China and the world”. The three-day conference attracted 1,100 people, including political leaders, celebrities from economic and academic circles, and CEOs and senior executives of multinationals from over ten countries and regions of the Asia-Pacific region attended the three-day conference. The conference involved an opening ceremony, keynote speeches of government leaders, speeches given at meetings, and seminars on specific topics, etc. (Tr. by Chen Yu)

TEDA NAMED A MODEL GREEN INDUSTRIAL PARK
The working meeting for state-level eco-industrial parks was held in TEDA from May 20th to 21st with the presence of the Ministry of Environmental Protection, the Ministry of Commerce, and the Ministry of Science and Technology. The meeting, highlighted by the theme of scientific development concept, has briefed the progresses and experiences in the development of state-level bio-industrial parks and released next-step work plans. Ms. Fu Wenjuan, Member of the Party Leading Group of the Ministry of Environmental Protection and Commissioner of CPC Central Commission for Discipline Inspection at the Ministry of Environmental Protection, Ms. Ma Xiuhong, Vice Minister of Commerce, and Mr. Cao Jianlin, Vice Minister of Science and Technology granted certificates to China’s first batch of accredited state-level eco-industrial parks such as TEDA, Suzhou Industrial Park and Suzhou National New and Hi-tech Industrial Development Zone.

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