China Redux

Last week I wrote about worrisome signs of speculation in the Chinese stocks market.  DiligenceChina has a long post with deep intelligence on why the Chinese stock market will undergo a correction shortly.  Here’s a interesting excerpt on what to expect from the Chinese goverment in the wake of a correction:

The Chinese government has no love for speculative bubbles, and they probably won’t take direct action to maintain market price levels – but can be expected to take action to protect the integrity of the trading system. In other words, listed companies will be bailed out, but individual speculators will not.

DiligenceChina also has a great list of “5 non-signs of things to come” as China reaches towards superpower status, even though I disagree with many of the points.  It looked as if China got off easy for the anti-satellite test, but it’s a little too early to tell how this is playing out behind the scenes.   And China and Japan are not going to become bosom buddies, Abe’s visit aside.  And yet, progress is being made…

ChinaLawBlog has a great post on the newly released International Chamber of Commerce survey of businesses on countries with the best and worst intellectual property protection environments. China finished last. Having visited the famed DVD shops in Shanghai, I am not exactly shocked.

I agree with Dan’s key point — that IP protection is an economic issue, not a moral or cultural one. And IP protection should improve in China, India, Brazil, etc., but will it be soon enough to avert rising tensions? It seems as if more and more trade cases against the BRICs are filed each week, at least in the US.

In the meantime, Hollywood will continue to hope that Daniel Craig and co-stars can persuade their adoring fans to lay off the goods.

UPDATE: It’s not IP protection, but the US just yesterday filed a trade case against China in a dispute involving trade subsidies.

The complaint, filed with the World Trade Organization in Geneva, alleges that China is using government support and tax policies to bolster local companies in competition against U.S. and other foreign firms.

This is the second such case filed by the US against China in the past year. In March, the US accused China of illegally blocking imports of American and other foreign-made auto parts into China.

This most recent action comes two days after Treasury Secretary Henry Paulson was raked over the coals by Democrat legislators in a hearing on Capitol Hill about China trade and currency issues. The Bush Administration has taken calculated action in filing this new trade case today.

If China is ever going to really challenge and/or supplant the United States as the world’s superpower, it will need to develop institutions that transcend national boundaries and present deep, lasting appeal to the rest of the world. Having the world’s second largest economy (on purchasing power parity basis) is not enough. It needs…its own McDonald’s?

Sebastian Mallaby, the Washington Post columnist and noted advocate of free trade, argues that McDonald’s recent turn-around and growing success in international markets shows that “the appeal of the American way seems to transcend all boundaries” (see story here):

When McDonald’s opened its first restaurant in Kuwait in 1994, 15,000 customers formed a seven-mile line at the drive-through. China boasts 780 McDonald’s restaurants; and this month, in a Beijing suburb not far from the Ming tombs, McDonald’s pinned its prospects to the motorized middle class by unveiling a drive-through in a gas station. For a while in China, McDonald’s offered customers Asian-style wraps and considered marketing a “rice burger.” But now the company has realized that the Chinese want hamburgers.

Has anyone checked out the new drive-through (in a gas station?) in Beijing?

McDonald’s and Mallaby see opportunity in China. But there are considerable risks. It’s worth noting that McDonald’s was a prominent target of anti-American riots in China in May 1999 after a NATO bombing of the Chinese embassy in Belgrade. I know: I was set to leave for Xian to teach English just days before the riots touched off.

And it’s not as if McDonald’s has a monopoly in China.  It faces stiff competition in China from Yum Brands (KFC, Pizza Hut, Taco Bell) and a host of others.  Still, the prospects looks good for the brand to sustain its lead.