Subject: Soya milk as substitute for milk and yogurt

Dear Parents,

It has always been our concern to look into our students’ health. We try our best to give them healthy and nutritious food/snacks to sustain all the nutrients that their growing body needs. In this regard we have decided to provide soya milk and fruits everyday instead of milk and yogurt. The reason is because of the continuous milk scare that goes around, being on the safe side, we will serve soya milk which is equally nutritious and healthy for the children.

I am very grateful to the school team for being such cautious but I can’t prevent myself from raising a couple of questions:

1. The word melamine is carefully not mentioned
2. Either these guys don’t read the news – everything’s possible in China… – and just discovered 6 months later the Sanlu affair, then just realized that feeding kinds with melamine was far from clever
3. Or they are very well informed and there is another scandal underway we are not aware of.

But the real question is then: What do I put in my morning flakes? Beer? Anyone has ever tried?

Take a deep breath, here is some fresh air.

There is still something of the petulant 3-year-old here, brazenly pursuing something that is decidedly not in her [China] interests. It illustrates the fact that China’s foreign policy, its strategy and its world view are anything but mature.

First, it’s not like China doesn’t need friends right now. It’s economy is in crisis. Over the weekend President Hu Jintao told a gathering of Communist Party members that the global crisis could undermine the country’s economy and threaten the party’s capacity to rule China. Europe is China’s largest market. But the Europeans are restless. European businesses want to know why they sell more stuff to Switzerland than to China. Cancel a summit and these questions will only grow louder.

So why did Hu really blow off Sarko, Pomfret asks?

The stated Chinese reason in this case bears scrutiny because of its brazen honesty. According to wire service reports, Qin Gang, a spokesman at the China’s foreign ministry, acknowledged to reporters that France was being held to a higher standard than, say, the United States, whose leaders routinely huddle with the Dalai Lama and barely suffer a slap on the wrist.

Chinese tea-leaf readers have focused on another reason: They’ve wheeled out the old bogeyman of Chinese political calculus, claiming that unidentified “hard-liners” were behind the cancellation. That’s rich.

The reality is that China just screwed this one up.

I am sure Sarkozy will feel less lonely after this…

Le Monde: Do you think the China-EU summit has been canceled because of the Tibetan question only ?

Jean-Vincent Brisset: The Dali Lama is just a pretext. China is focusing on France but the real target of all this is the unity of the Europeans countries. Chinese politicians think they can manage bilateral relations – except with the United States – but they know how much harder it is to manager multilateral relations. Since the French obtained an embargo on weapon trade in 1989, China tries to hamper the EU, because of its capacity to impose economic quotas, currency reevaluation, etc. They identified Nicolas Sarkozy as the weak point. Gordon Brown and Angela Merkel both received the Dalai Lama or did not assist the Olympics opening ceremonial.

Le Monde: France is the weak point then…

Jean-Vincent Brisset: It is, historically. When I was doing my time in the military, there was a saying, “Keep harassing one guy only, you will have one guy only yelling”. This is exactly what China is doing, as France is currently leading the UE Presidency.

But this attitude dates back to long ago, since French diplomats always had a deep admiration for China and and a total outdated understanding of this country. French believe that by being kind to people you can be paid the same in return. Amongst the countries which played a preeminent role in history, France has always been the weakest. France is considered as a female country and as the same time, China does respect powerful nations only.

Le Monde:The Olympic torch incident in Paris doesn’t help as well…

Jean-Vincent Brisset: France has been apologizing only since the beginning of this affair, following the chinese diplomatic tradition. Historically, a vassal State was submitting to China by offering presents. This is exactly what we did by sending Raffarin offering a present to Beijing.

Le Monde: How this was interpreted by Chinese ?

Jean-Vincent Brisset: To them, it is very clear ! France is a vassal State. This will be very difficult to catch up.

Le Monde: How to regain confidence and trust between the two countries ?

Jean-Vincent Brisset: Fortunately, a lot of European people begin to understand China is not such a friendly country. It’s a selfish country maintaining rough relationships with the rest of the world, and we should keep our distance with it. China is testing the power of the EU, not France. Should China gain to imposing economical retorsion measures toward France without any EU reactions, it would be a victory. On the contrary, if France puts the EU in front of the battle, this affair can find a smooth settlement. But if the EU shows some weakness, China could step then towards each of the European counties, except the UK which will always resist.

Ouch ! I told you this guy was rough… Interesting times indeed, let’s see what’s next for French.

Looks like China no longer appears as a bargain and some corporations might be tempted by mitigating the risk of their overdependence over operating in one country only.

The International Herald Tribune make a very interesting point here, not by ranking the two countries systems but by pointing out their similarities and why top Chinese policy makers have been watching the Vietnamese economic unfold : What is happening in Vietnam rings an alarm bell for China.

There is little contagion risk, as the Vietnamese economy is less than a third of the size of nearby Thailand, which triggered the 1997 Asian financial crisis.

But China and Vietnam have similar fundamental economic problems. Both face mounting inflation pressures, they have large foreign money inflows and both have been reluctant to let their currencies appreciate in recent years.

Vietnam, often referred to as little China, has followed its larger neighbor in beginning market-oriented reforms.

Like many of its Asian neighbors who want to use exports to pull out of poverty, Vietnam chose to resist currency appreciation so it could keep its costs low.

Importantly, Vietnam, unlike China, failed to soak up the funds it injected into the domestic banking system when it bought up the foreign investment inflows. The result was 54 percent credit expansion in 2007 and a current inflation level above 25 percent.

“The issues are the same, but their policies are completely different,” said James McCormack, a managing director at Fitch Ratings. “China’s response to inflation has been more aggressive and effective.”

China’s pockets are deeper. It boasts large reservoirs of domestic and foreign cash, which help it lock in excess liquidity and release it when necessary. It has $1.7 trillion in foreign reserves, the largest amount ever held by any country.

Still, the Vietnam experience is a rude awakening for China. Before the Vietnam crisis, several influential domestic experts in China had proposed that policy makers allow domestic inflation to rise to correct the undervaluation of the currency, instead of allowing the nominal exchange rate to go up.

Vietnam shows that that would have been a big mistake because inflation can do a lot of damage. Exports would be hurt because high inflation drives up the cost of doing business.

Vietnam has been so focused on rapid economic expansion that it forgot how economic overheating could sacrifice short-term growth.

By comparison, Beijing has been far more assertive in controlling liquidity.

Last week, Beijing unexpectedly lifted the bank reserve ratio, the money banks must hold in cash or on deposit, by a full percentage point to a record 17.5 percent. Many experts see this as a signal that Beijing is taking inflation more seriously.

What makes Vietnam’s currency policy even more vulnerable, the country has a fairly open capital account.

Vietnam, on the other hand, has operated a policy that pushes the dong slightly lower against the dollar each year.

Vietnam has taught Chinese leaders that negative real interest rates, an open economy and fixed currency are a “recipe for disaster,” said, Hong Liang, an economist at Goldman Sachs. No country can fix interest rates and exchange rates unless the economy is closed. Both Vietnam and China have moved to become more open and market oriented.

The lesson for China is that it needs to allow more flexibility in the yuan and to take seriously the risks posed by inflation. Otherwise, what seems like a minor headache could well turn into a policy nightmare.

Look,  this can only be true because it has been stated on a report by S&P, a major rating agency.

Those guys are never wrong, as we all know.

Vietnam’s extensive” capital controls and the management of its currency will prevent overseas investors from fleeing the nation even as inflation accelerates and economic growth slows, said Standard & Poor’s.

Foreign funds are mostly limited to buying property and stocks, said Ping Chew, the Singapore-based head of Asian sovereign and corporate ratings at S&P, the first of three ratings firms to lower the Southeast Asian nation’s credit outlook to negative. Stocks have slumped almost 60 percent this year, the world’s worst performance, and the dong is set for its biggest drop since 2001, falling 3.6 percent.

Is this so bad ?

“Vietnam is not in a currency crisis,” Chew said in a June 17 interview. “There’s definitely a bit of hot money that went in. But is it going to leave en masse like that which decimated Asia in 1997? I don’t think so.”

Vietnam’s inflation rate rose to 25 percent in May as food and energy prices climbed and the trade deficit tripled in the first five months of the year.

Foreign investors have cut their stock purchases in half this year to $334.2 million, according to data compiled by Bloomberg. Morgan Stanley last month said the dong was heading for a “currency crisis,” citing a widening current-account deficit. Calyon, Credit Agricole SA’s investment banking unit, said this month there was a threat of a balance of payments crisis and Citigroup Inc. said a banking crisis is the primary problem facing Vietnam.

“Vietnam is turning into a very bad story,” said Thomas Harr, a senior currency strategist from Standard Chartered Plc in Singapore. “The 2 percent devaluation a few weeks ago was not a good move. They should instead have been more aggressive on hiking rates to signal that they are committed to dealing with inflation.”

The dong won’t stop falling until investors are convinced of the central bank’s commitment to fight inflation, he said.

What else ?

The impact of flagging confidence will be limited as investors will “have difficulty” taking profits out of Vietnam, said Joseph Lau, an economist at Credit Suisse Group in Hong Kong.

“Generally banks aren’t allowed to trade the currency for speculation, you need to have a reason for it,” said Lau. “It is difficult for a householder to purchase dollars legally, which is why when they do want to do it, they have to go through the black market.”

So what’s the good new ? Got Any ?

Vietnam’s economy “is in reasonably good shape,” buoyed by strong currency reserves, Alex Thursby, Asian-Pacific managing director for ANZ told reporters in Ho Chi Minh City. “I don’t think there’s a crisis.”

Vietnam’s foreign currency reserves are about $20 billion to $22 billion, Credit Suisse’s Lau said. By comparison, the market capitalization of companies on Vietnam’s benchmark stock market, the VN Index, is $9.08 billion, the second smallest in Asia after Sri Lanka, according to data compiled by Bloomberg.

“This is still a managed currency with extensive capital controls,” said Chew at S&P, which issued a report today saying that Vietnam faces pressures but no crisis.

I will not to summarize the full story, Jack Perkowski did it already in a brilliant manner along the past and current year, in Managing The Dragon:

Danone/Wahaha: Just the Facts, We Think (Part 1)

Danone/Wahaha: A Breakdown in Mutual Trust (Part 2)

Danone/Wahaha: Failure to Create a Common Vision (Part 3)

Danone/Wahaha: Dispute Resolution in China (Part 4)

Danone/Wahaha: Everybody Loses (Part 5)

Danone/Wahaha: Divine Intervention (Part 6)

Danone/Wahaha: Danone Loses in China Courts (Part 7)

Danone/Wahaha: Both Parties Agree to Truce (Part 8)

Danone/Wahaha: Learning From Crisis (Part 9)

Dan Harris at The China Law Blog did an excellent piece of work too, right on this page.

As Dan Harris says:

We love that dispute because within it lies just about every China business or business law issue one might confront.

And his conclusion to be, excerpted from A Tale of Two Companies:

- Stay calm and do not get involved with personal invective. This will nearly always backfire in the PRC media.

- Say as little as possible about the dispute. Any comment can be counter-productive.

- Lobbying high-level government officials may not help resolve a dispute because it can give lower-level officials an excuse to do nothing.

- Any strategy must be carefully and pragmatically planned based on the circumstances of the dispute. There is no magic formula.

My comment would be: Should any of the top French Business Schools be looking for case study, don’t search too far, there is a bunch of inspirational stuff there…

The mood is set right from the beginning, by raising the question :

Can foreign investment flourish in a state notorious for corruption, weak laws and business secrecy?

While we could make up our mind right at this point, let’s continue reading. What kind of risks investors face then ? Entry-strategy risk ? Not only:

While finding suitable targets in Cambodia may be difficult enough, private-equity buyers are also certain to face challenges when they try to exit years from now. “This really is a frontier market,” said Chris Leahy, a managing director in Singapore at risk consultant Kroll Inc.

Then come the three major risk areas:

• Lack of skilled people

Roughly 1.7 million people, a fifth of the population, were killed during the communist Khmer Rouge’s reign of terror from 1975 to 1979. Special attention was paid to exterminating the educated. Three decades later, the consequences continue to ripple through the country; a lack of skilled people hampers efforts to lift millions out of grinding poverty.

• Corruption

Transparency International, of Berlin, ranked Cambodia the 14th most corrupt out of 179 nations in its 2007 study.

• Business contracts law enforcement

“There are issues in Indonesia or Philippines enforcing rights but it’s much harder in Cambodia,” said Kroll’s Leahy. “A creditor needs more than 400 days to get a claim enforced, and that’s assuming the court decides to side with a foreign creditor’s claim”

Despite this, what is attracting private equity funds then ?

“Cambodia offers an enormous potential for future capital gains,” Mr. Faber wrote in a recent newsletter for acolyte investors. Faber and Rogers are advising some of the private-equity firms that will pour upward of $500 million into Cambodia from already completed and continuing fund-raising.

Malaysian interests have been active in the country for years and South Koreans are investing in banking and property, including a $2 billion satellite city on the outskirts of the capital, Phnom Penh.

What is the key to success ?

Given the perception that large-scale business activities require an unsavory accommodation with powerful figures in the government, staying small may be the key to success for private equity investors.

“We want the small- and medium-sized investments below the political radar screen,” said Douglas Clayton, a managing partner of Leopard Asia, which is raising $100 million for its Cambodia fund.

Last but not leats…

But finding enough suitable opportunities to absorb several hundred million dollars of private equity capital is another issue facing investors. The challenge is finding companies with accounting and management standards that approach international norms, said Peter Brimble, managing director of the Cambodia Emerald Fund

So go or no-go ?

The money can be absorbed if the economy continues to grow strongly and the government continues to improve transparency and legal standards, Mr. Brimble said. “As we dig deeper into this country and connect with the entrepreneurial class we are finding a lot of opportunities,” he said.

Finally, this looks like a GO !

“Five hundred million dollars is really just a few golf courses and hotels. A lot more could be absorbed,” said Douglas Broderick, the U.N. Development Program’s resident representative in Cambodia

What I understand from this is that Cambodia actually offers huge opportunities for those who take risks, those who were among the first to step in and now don’t want too many people to join…

Even some of them wave the ugly flag of corruption to keep the big players away by now, I feel like Cambodia is one of the next frontier around here.

1. Impact on local communities

Who is this project harming ? What is the added value created ? How is this added value redistributed ? If you can’t provide the communities with the right answer, there are good chances you might be taught the answer the hard way, especially in a low-wages economy, following the old habit of “If you don’t give then I will take”. Don’t miss out to create a real two-ways relationship with communities and this will greatly help your project sustainability.

1. the NGOs and your Corporate Reputation

Big corporations might think they are evil but NGOs just do their job and you can’t beat them on the communication battlefield. So my advise would be don’t get them angry, involve them instead and work on your corporate reputation.

Seems that the Chinese companies are doing exactly the opposite in Cambodia…

So what’s the point ?

China, hungry for strategic influence and natural resources, is asserting itself as a major investor in Cambodia, sparking concerns that a huge inflow of Chinese cash will fuel existing corruption and exploitation in one of the world’s poorest countries.

What China is bringing at the table ?

China has become one of the biggest investors in Cambodia, with 3,016 Chinese companies making cumulative investments of US$1.58 billion to the end of 2007. Bilateral trade last year rose by 30% from 2006, to $730 million. Since the signing of an investment protection agreement in July 1996, a further $350 million has been pledged, mostly in the forestry sector, power, textiles, construction materials, and agricultural development.

Something else ?

Besides investment and assistance, China has also granted military assistance to Cambodia, providing the country’s dilapidated navy with nine patrol boats in November 2007 and five warships in 2005.

Let me guess… what it a price to pay ?

“The effect of lots of money coming in with few strings attached, going to a lot of people in the government, is generally exacerbating corruption,” Simon Taylor, director of the international anti-corruption group Global Witness, said.

“This manifests itself as land-grabbing, massive plantations and illegal logging, unregulated mining, the building of dams, and so on,” Taylor said.

Meanwhile, workers’ rights are often sidestepped in Chinese-invested factories, especially in the textile industry, activists said.

“The Chinese companies, especially garment factories, today have a lot of problems with Cambodian workers,” Chan Saveth, of the rights advocacy group Adhoc, said.

They have described an atmosphere in which they are constantly pressed into unpaid overtime, with too many financial worries and too little spare time to cause trouble for management. Unauthorized deductions from pay-packets are common, and paid sick leave is rare.

What impact on local communities ?

Chinese money has been tied up with massive agricultural and forestry exploitation projects, which are destroying traditional ways of life such as bamboo-harvesting and resin-tapping, activists said.

The Cambodian government granted a Mondulkiri forest concession of 200,000 hectares – 20 times the legal limit – acquired secretly by Pheapimex, an ethnic-Chinese owned Cambodian conglomerate with close ties to Prime Minister Hun Sen.

Pheapimex formed a joint venture with China’s Wuzhishan plantation firm to exploit the region, displacing indigenous minority people who rely on the forests for their traditional livelihoods.

Global Witness said bigger deals involving Chinese state-backed companies were likely the least transparent and the most strongly defended by government security forces, who responded with military force to anti-logging protests by villagers in Mondulkiri.

He said the outcome of such deals for people living in rural areas was disastrous. “They know nothing until the moment that the bulldozers turn up and start pushing down their houses.”

What is the government position ?

Hun Sen has banned illegal logging and called anarchic logging “the biggest mistake” of his political career, and his views have been backed up by anti-logging speeches by ministers, but with little apparent effect.

Why is China acting this way ?

Chan Sophal said China’s interests in Cambodia were clear. “They help us, but they also look into the resources we have, such as mines, oil, gold, iron, and land. They need land to grow agricultural and agro-industrial crops to meet the demands of the [China's] population.”

China wrote off significant loans to the Cambodian government six years ago, making new loans and grants worth $600 million during the visit to Cambodia of Chinese Premier Wen Jiabao in April 2006.

While no conditions were attached, analysts say Beijing is keen to secure access to the southern port of Sihanoukville for strategic reasons, particularly as a delivery point for imported oil.

This is it. Reminds me of a similar situation… Myanmar maybe ?

In China though, because so little is consistent in any industry and because everything here moves so fast, BI is very different here. It relies less on traditional tools (internet, news surfing, speaking to sales people, etc) and takes on a much more guerrilla approach. In many ways, it requires a deeper knowledge of the industry while at the same time having a real sense of where the hidden data lies, and being willing to go out and get that information.

Some Don’t:

In China, where foreign executives are on heightened alert against Chinese firms looking to steal information, it is always amazing to see the exact same executive pour out their firm’s problems over a pint at the local pub… and that through a number of relatively simple steps, one can get nearly any bit of data needed. It isn’t always used for bad, but one thing is for sure, it is not always used for good.

… and some Do’s:

For market leaders in China the most important thing to know about competitive intelligence is how to construct a strong defense. Protecting documents that are available on the internet, training up gatekeepers on phone lines, improving employee satisfaction. Each will go a long way to protect what has taken so long to build.

The biggest threat always come from the inside…