The attention given to Foxconn (FXCNY.PK) over the past several years has largely concentrated on its role as Apple's leading supplier in Asia. What we have missed in all of that juicy coverage, however, is the longer-term picture. While it is tempting to believe that Apple will always be strong, that it will always rely on offshore outsourcing for its production, and that Foxconn will be content to play Sancho Panza to its client brands, there are several factors that suggest otherwise. In fact, in as little as a decade from now, Foxconn may itself be a global brand.

Hon Hai Precision built its business as a supplier to the world's computer and consumer electronics brands. Most of us still see the company a contract manufacturer, an assembler of devices and machines. Yet over the past seven years, the company has quietly added to its capabilities to the point

Canada has given the "all clear" for the China National Offshore Oil Corporation (CEO) to purchase upstream oil and gas developer Nexen (NXY), a company with reserves in Canada and the Gulf of Mexico (among other places) and, perhaps more important, some interesting capabilities in shale oil and oil sands. CNOOC's interest begins with the reserves but the long-term value of Nexen lies in its oil sands capabilities. China has an estimated 14.5 billion barrels of oil locked up in oil sands, a quantity that is over twice the nation's proven conventional reserves. Even with the technological hurdles, the value of Nexen to China and its energy security would be huge.

One Down…

CNOOC faces one last hurdle: the Committee on Foreign Investment in the United States (CFIUS). That body has not been particularly kind to Chinese companies of late, and it has come under fire at home for

Chinese Internet giant Tencent Holdings Ltd. (TCTZF.PK) is raising some $600 million from a senior note offering this week. Given that in the second quarter it posted $492 million in profit on $1.7 billion in revenue on top of having some $3 billion in cash, the question has to be "why?"

There could be several reasons, one of which could be a desire to buy back the shares of one or more major shareholders. Keep in mind that South Africa's NASPERS Group is a major shareholder, and in a volatile regulatory environment policy could shift against foreign holdings in Chinese internet companies at any time. A full or partial buyout of foreign shareholders could insulate Tencent from that problem quickly.

What I think is more likely, and what I told Josh at TNW, is that the company will use the money to support expansion in two non-core but highly strategic

In an excellent post in the Company Town blog over at The Los Angeles Times, Jonathan Landreth describes News Corporation's (NWS) announcement that it is purchasing just under 20% of Beijing-based Bona Film Group.

The deal is interesting for several reasons. First, it marks a strategic departure for News Corp., which has in the past preferred to own larger stakes in its China ventures. It is also the first major investment News Corp. has made in traditional media since 2006, when CEO Rupert Murdoch told a meeting of industry executives in New York that he'd hit "a brick wall" in China.

Second, it is interesting because News Corp. is now leading from behind in China, preferring to play a fast second rather than trying to beat the rest of the industry. Similar linkages between Legendary Pictures and Orange Sky Golden Harvest, DreamWorks Animation and Shanghai Media

In what China-based business sustainability expert Richard Brubaker calls “the best piece to date on just how rotten Apple's (AAPL) supply chain is,” Charles Duhigg and David Barboza of The New York Times have actually done more than that. They have written a piece that underscores the ethical risks implicit in both outsourcing and offshoring.

Control is the Issue

You could argue that this story and the reception it is getting is a function, in part, of the end of the Steve Jobs Reality Distortion Field, or, as I overheard someone say the other day in reference to Apple, “the King is Dead, the Gloves are Off.” That may be true, in part, but I think that this story is the harbinger of a wider issue plaguing the global manufacturing sector, and the challenges Apple is facing with its suppliers are simply the most visible examples.

Sometimes, when the Chinese government is considering or planning a policy change, it will make some sort of formal announcement in advance. But not always: Often, it will signal its intentions more subtly. That is the kind of behavior that keeps policy analysts in business and keeps all of us watching for statements and remarks that may signal a warning of an impending change.

VIE another day?

Xinhua may have issued such a warning to foreign investors in Chinese online companies a few weeks ago. In an article examining the Yahoo (YHOO)-Alipay (ALBCF.PK) dispute, Xinhua suggested that the structure Yahoo used to invest in Alibaba – and that is used my a number of overseas investors to circumvent laws restricting foreign investment in the Internet – may no longer escape government scrutiny.

The structure, called a variable interest entity or “VIE,” is essentially a set of technical service agreements between

Before I begin analyzing the ongoing train wreck at News Corp. (NWS), for the sake of full disclosure, I must say that I am not in the pay of any organization with ties to News Corporation, nor am I a fan of either News Corporation or any of the Murdoch family. My writings should give ample support to that contention. As such, what is written below is meant as neither defense nor condemnation of either the company or its controlling family.

To the Grave Dancers of Fleet Street

Yesterday, the editors of The Wall Street Journal, in a sanctimonious, blame-shifting editorial defense of News Corporation that ill-serves the paper and its outstanding journalists, managed to make one point that strikes home. The media establishment is doing neither itself nor the public a service when it allows schadenfreude to seep into coverage of News Corp.’s troubles.

One need only

Going through my notes while writing my report on last week’s Global Mobile Internet Conference for Warc.com, I am starting to realize that GMIC was one of those conferences where I wish I could have cloned myself. I’ve just fired a request for more materials to Edelman, the PR agency for the show, and I’m hoping it comes through.

One of the better tidbits of the show was a speech by Wang Jian, Alibaba‘s (ALBCF.PK) chief architect and the CEO of its cloud computing group. Originally billed as a “Keynote and Product Launch,” the presentation was just a speech. Or, as I noted to myself at the time, a launch without the product.

All Foreplay, No Payoff

In his speech, Wang acknowledged the power and advantages of the app-based mobile phone operating systems, Apple's (AAPL) iOS and Google’s (GOOG) Android, but he noted that even these most modern of

Tom Orlick, who does the Heard on the Street pieces for China at the Wall Street Journal, did a short but excellent rundown of some of the commercial challenges Chinese hot-pot chain Little Sheep (LSGLF.PK) faces as global fast-food monster YUM (owner of KFC, Pizza Hut, and Taco Bell) sets out to acquire the company. There are other bogeymen in the basement of this deal, however, and the largest of those is the Chinese government.

The government has regularly demonstrated (but not often communicated) its policy on foreign companies buying local firms, a topic I last covered in the wake of Coca-Cola’s failure to acquire Chinese juice giant Huiyuan. Put simply, while the government is comfortable allowing foreigners to acquire struggling or failing Chinese companies, they object to healthy, growing local companies winding up in foreign portfolios.

Regulators especially object to budding local brands like Little Sheep falling into

In the January edition of WIRED magazine, in an article entitled “Shanzhai,” Frog Design‘s Jan Chipcase takes writer Bobbie Johnson on a tour of Shanghai’s electronics markets. If Chipcase’s name does not ring a bell right away, you may have encountered one of the articles that were written about him when he was Nokia‘s (NOK) leading human interface designer and wandering cultural anthropologist.

The Invisible Competition

Chipcase makes great copy. In the course of perusing the fetid underbelly of China’s mobile phone industry, he offers entertaining pearls of insight. Of particular interest was this little chestnut:

Although some shanzhai phones are obvious imitations, others are harder to spot as fakes. Pausing by a stall, Chipchase rolls one example around in his palm, feeling its weight and examining it. Counterfeit phones usually have surprising features: Unexpected video cameras, extra ports or unusual connectors. He notes that it’s worth checking

Last week Baidu (BIDU) confirmed that it has begun developing an operating system for smart phones. There was a lot to the announcement that invites comment, not least of which was Baidu CEO Robin Li’s remark that he wants to create a universal interface for all computing applications, and that the goal was “to let people become increasingly dependent on the Baidu box.”

I know: If such words were to emerge from the mouth of an American CEO, they would invite either ridicule or an anti-trust investigation, depending on the company. But coming from Baidu’s Li, they simply bumped the stock price.

Leaving to the Twitterverse the debate over whether Li is being realistic, megalomaniacal or both, the matter that concerns many of us who are involved with China’s mobile communications business is whether China – or the world – needs yet another operating system for smart phones.

Hang On,

In an excellent article about luxury retailers going online in China, Laurie Burkitt at The Wall Street Journal drops an interesting little insight halfway through the piece:

China is the world’s second-largest market for luxury brands when counting purchases by Chinese consumers world-wide and is set to overtake Japan for No. 1 in a few years, according to consulting firm Bain & Co. Chinese sales of luxury products surged 20% to €9.2 billion ($12.1 billion) last year, Bain said. [italics mine]

Counting purchases worldwide vs. locally is no small distinction. China’s consumers know they pay a steep duty on the price of the baubles they buy in China, and those with the means (and the patience) often shop locally but put off their purchases for when they go abroad. That’s important for a couple of reasons.

First, it is impossible to judge the real return-on-investment

The Atlantic’s Megan McArdle asks an important question in her article “Can GM Get Its Groove Back?” Sadly for the subject and surprisingly for McArdle, she predicates her answer on a single factor: GM’s (GM) prospects in North America.

The home market is critical for GM, of course. At the same time, the U.S. is a mature and probably shrinking market, so It is not where GM’s growth prospects are. Even though the company downplayed

In the October Vanity Fair, the magazine offers us its list of “New Establishment” leaders. In the entry on Steve Ballmer, the magazine whacked the Microsoft (MSFT) CEO for what it felt was a bad call:

BROKEN CRYSTAL BALL: Three years ago Ballmer proclaimed, “There’s no chance that the iPhone is going to get any significant market share. No chance.” (The iPhone is now the No. 2 smartphone, with a 28 percent market share.)

Meanwhile, Outside the Manhattan Vortex…

Not defending Ballmer, but the editors at Vanity Fair would have done well to ask “market share of what, exactly” before taking the Head Microsoftie to task. Assuming Mr. Ballmer was talking about global handset market share, Vanity Fair‘s editors are wrong to spank the Monkeyboy. For if said editors would teleport themselves ever-so-briefly off of the island of Manhattan, they would find that the world is

In the October Vanity Fair, the magazine offers us its list of “New Establishment” leaders. In the entry on Steve Ballmer, the magazine whacked the Microsoft (MSFT) CEO for what it felt was a bad call:

BROKEN CRYSTAL BALL: Three years ago Ballmer proclaimed, “There’s no chance that the iPhone is going to get any significant market share. No chance.” (The iPhone is now the No. 2 smartphone, with a 28 percent market share.)

Meanwhile, Outside the Manhattan Vortex…

Not defending Ballmer, but the editors at Vanity Fair would have done well to ask “market share of what, exactly” before taking the Head Microsoftie to task. Assuming Mr. Ballmer was talking about global handset market share, Vanity Fair‘s editors are wrong to spank the Monkeyboy. For if said editors would teleport themselves ever-so-briefly off of the island of Manhattan, they would find that the world is

Not only I am one of that growing number of believers who expects Oracle (ORCL) to make a bid for a major computer hardware manufacturer, I also think it will be a good thing. Whatever the virtues of the present structure of the enterprise I.T. industry, the average company has so many things to buy (and so many people to buy it from) that setting up, upgrading, or rebuilding a corporate IT system has become more complex than buying a jetliner.

Give Larry a Chance

Even in the biggest of companies, this means that iT managers spend a disproportionate percentage of their time dealing with procurement, a costly distraction that takes away from what IT managers should be doing, which is figuring out ways to put IT at the better service of the company and its people.

(Mind you, there are probably more than a few IT managers who

Jonathan Watts in The Guardian offers an intriguing contrast to The Washington Post article about China investing in Hollywood when he posits that the PRC is much more interested in defeating it on the global stage. He quotes Xiang Yong of the Institute for Cultural Industries at Peking University:

“There’s a saying that Hollywood is the real foreign ministry of the US, which shows the importance of the movie industry.

From a cultural perspective, the promotion of the movie industry is an important way to strengthen the soft power of our country.”

We have made this point before, but it bears repeating. The Party and the government have three identical goals for each of the media and cultural sectors. In the case of film, they are:

1. To construct a commercial cinema industry that dominates the domestic market for filmed entertainment, regardless of means

Keith Richburg and Zhang Jie wrote an enjoyable piece in The Washington Post about the different ways in which the U.S. film industry is seeking to tap Hollywood. The article is encouraging in that it suggests that Hollywood is getting over its blinkered view of China as a really big version of France (big market, different language, resists our product, resistance is futile, will eventually be assimilated.)

The article notes that product placement, scripts (read “story ideas”) and locales have made China more interesting to Hollywood. There is even a bit about the importance of “co-productions.”

It’s Spelled O-P-M

The biggest attraction, however, is cash.

For Hollywood, the reason for the sudden interest in China might be described as more mercenary. Hollywood traditionally runs on other people’s money – and China has a lot of cash to spread around these days.

Our favorite films notwithstanding, Tinseltown’s most remarkable

Jack Perkowski continues our serve-and-volley on the future of China’s construction equipment makers on his Managing The Dragon blog, and he brings out the Caterpillar (CAT) fanboy in me when he notes:

How should Cat, Komatsu, and the other global leaders prepare for Chinese competition overseas? By far, the best way is to compete successfully with them in China. That is why the battle for the construction equipment market in China is so critically important.

That seems obvious, but the next logical question is how?

They Drive ‘Em Different Here

The global majors are geared up to compete in very different kinds of markets. In any ordinary market, you are selling a piece of equipment to a construction company that is concerned about things like the total cost of ownership of a road grader over a 10-20 year life. To serve markets like that,

As with many memorable blog posts, Paul Denlinger’s excellent article about China and its outdated version of capitalism holds a few hidden gems not to be overlooked. On second reading, this one popped out at me:

“Most of the reasons which [Ronald Harry] Coase outlined for the creation of the corporation in “The Nature of the Firm” no longer exist. Thanks to Google and other tools, small organizations can resolve all of these issues for almost no costs at all. Isn’t it time we start thinking and talking about deprecating large corporations?

Of course, many in the US and China would argue that only a very small and select minority would be able to work on different time zones and in remote locations with minimal supervision; I would beg to differ. For many service jobs where key personal relationships are not important, this will become the