PrivateEquityChina

Starbucks vs Xingbake

Shanghai Xingbake Cafe Corp has appealed a court order to change its name and pay 500,000 yuan (US$62,000) in damages, claiming Starbucks is just a bully.  Starbucks will defend the appeal.

Starbucks opened in China in 1999 after Xingbake had successfully registered its Chinese name.
Xing is star. Bake is pronounced "bah kuh".

Using the same Chinese name as Starbucks and imitating the Starbucks cafe design was considered "illegitimate competition" according to the ruling of Shanghai's No. 2 Intermediate People's Court.

Xingbake does not use Starbucks as its English name. Amusingly Xingbake has no plans to sue Starbucks for using the same Chinese name!

The high profile Starbucks trademark dispute is being closely watched as an indicator of the progress being made by China to protect intellectual property rights.

A Starbucks coffee in any of their 40 stores in Shanghai costs more than an average Chinese worker makes in a day.

January 2006

US$150m for China Greentown - Private Real Estate Developer

JP Morgan and Stark Investment have underwritten convertible bonds and equity shares worth US$150 million issued by China Greentown Group, one of the nation's largest private developers.

Hangzhou, Zhejiang Province-based Greentown said in a statement yesterday that the consortium managed a bond sale in the Singapore stock market for it on January 10.

The two US investors have also acquired an undisclosed ownership stake in the developer.

Greentown, which has more than 40 ongoing development projects across the country, has been actively seeking more financing tools since domestic banks restricted lending to the real estate industry last year.

JP Morgan and Stark Investment will also help Greentown secure an overseas listing to raise more capital in the near future, according to Song Weiping, Greentown's board director.

The deal is the latest example of involvement by overseas institutional investors in expanding domestic developer's financing channels.

"With a slowdown in volume and a drop in housing prices starting from the second half of last year, developers in China definitely feel pressure financially," said Michael T. Hart, head of research at Jones Lang LaSalle Shanghai.

Shanghai Greenland Group, one of the city's largest developers, last month received a 700 million yuan (US$87 million) loan from Hypo Real Estate Bank International, a German real estate fund, to finance residential projects in the city.

In the same month, China Vanke Co Ltd set up a real estate fund with Hong Kong-based Citic Capital Markets Holdings Ltd, to raise up to US$150 million.

Ralph X. Parks, Asia chairman of JPMorgan, expects the investment return from the Greentown deal will be no less than 20 percent. Greentown said its sales maintained growth last year despite the industry downtown.

20 January 2006 Beijing Time

Sierra Invests in Gobi

U.S. fund Sierra Ventures has partnered with Shanghai-based Gobi Ventures to do early-stage deals in the Middle Kingdom.

Sierra Ventures

• a Silicon Valley venture firm with $1.1 billion in committed capital
• invested in Gobi Ventures - the first time its invested as a limited partner in another fund
• was seeking a partner in China to enable it to invest in early stage investments

Gobi Partners

• a Shanghai-based venture capital firm focused on early-stage technology companies
• fund expanded to $50 million following the Sierra investment
• Co-investors were International Business Machines, NTT DoCoMo, and The McGraw-Hill Companies
• fund's focus is information technology, internet, wireless, and digital media companies
• founded in 2002 by Wai Kit Lau, Thomas G. Tsao, and Lawrence Tse
• portfolio companies include Digital Media Group, which operates digital media networks in China’s subway systems, and Lingtu, a digital-mapping and location-based services provider.

Cisco Invests $32M in Shanghai VOIP Research Centre

Cisco is targeting the networking growth market of Asia with significant investments, including $32 million over the next five years for a Chinese research center located in Shanghai, the launch of a venture capital firm in India, and the establishment of new financing services for small and medium-sized business customers in Korea.

Cisco will hire 100 employees over the next 18 months in the Shanghai facility, which will focus on Voice over Internet Protocol (VoIP) technologies and other new features for telecommunications equipment, particularly for Chinese telephone carriers. It will open in the second half of 2005. Daniel Scheinman, senior vice president of corporate development for Cisco, noted that China's consumers rapidly adopt advanced technologies, and so the country is a breeding ground for new communications applications.

"By being closer to potential customers, it will help our engineers understand their requirements and react more quickly to their needs," Scheinman said in a statement.

This will be the first Cisco research center in China, although it has invested heavily through the years in Chinese startup companies. It has already spend $250 million in direct and indirect investments in Chinese startups.

CRN Breaking News

Headline News, Shanghai 'Eclipsed' by Suzhou

Above the fold news today in Hong Kong's South China Morning Post business section is that Foreign Direct Investment (FDI) to Suzhou was up 28.6% yoy totalling US$4.05 bn. Shanghai managed US$3.84 bn a 15% increase.

The story goes on to suggest that Shanghai is losing its competitiveness due to higher (and rising) labour costs than other cities in the Yangtze River Delta. Examples noted:

- 3M is reported as constructing its 5th PRC plant in Suzhou Industrial Park
- Unilever is reported to be moving some production to Hefei, capital of Anhui province to reduce production costs by 30%.

Suzhou City profile

Map of Yangtze River Delta

I have observed similar trends in the Pearl River Delta. The developing (and more remote) provinces are offering incentives (ranging from lower taxes to cheaper electricity) and reputedly have lower cost (and arguably more stable) labour forces. Counting against them is the longer distances to travel to reach coastal ports. As international businesses look more to the domestic market in the PRC perhaps reaching the port becomes less of a factor. For a 30% saving maybe you can wait an extra day or so in transport?