WA and China in Headlines

(A round-up from January 2018)

Aug. 1: Starbucks teaming up with Alibaba in delivering coffee in China

Seattle TimesThe Seattle Times reported that Starbucks, using Alibaba’s Ele.me delivery service, would begin offering on-demand delivery from 150 stores in Beijing and Shanghai in September, with some 2,000 Starbucks stores in 30 Chinese cities expected to offer delivery by the end of the year. Also, Alibaba’s supermarket chain Hema would host “Starbucks Delivery Kitchens” to augment delivery from nearby Starbucks stores, allowing store employees to focus on in-store customers. Times also mentioned that Starbucks sales in China fell 2% in the fiscal third quarter, with one reason being new low-price competitors offering coffee delivery. Times also said Starbucks’ store count quadrupled from 800 to 3,200 in the last five years.--WA China Watch Digest 08/05/18

July 11: Washington geoduck farmers hit by Chinese retaliation tariffs

Seattle TimesA Special to The Times piece in The Seattle Times gave a detailed account on how the new Chinese 25% tariff on selected U.S. seafood exports to China have already affected Washington state geoduck clam farmers. The author said, with the current 7% tariff, then by the current 10% value added tax, and then by the new 25% tariff, the cumulative effect of taxes on top of taxes was an overall tax rate just shy of 50%. The first geoduck clam price reductions occurred July 2, the author said, when two local tribes earned about 40 percent less for their product than they had received the day before. With the tariffs approaching 50%, the author wondered how long the U.S. geoduck industry could remain competitive, not to say hundreds of jobs at risk. --WA China Watch Digest 07/13/18

July 9: Cherries among Washington fruits most affected by China’s retaliation tariffs

Seattle TimesThe Seattle Times reported that Washington’s apple, cherry, pear and wheat farmer were now on the front lines of the trade battle, as China swiftly responded to President Trump’s 25% tariff on $34 billion of Chinese imports with retaliatory tariffs against a list of U.S. exports including top agricultural products in Washington state. Washington-grown cherries were among the most affected, the report said, as the July 6 opening salvos hit cherry growers in the middle of their season, early June through August. China is the top export market for Washington’s sweet cherries, with about $130 million worth sold there last year. Experts quoted in the report expected less profit for growers and less volume going to China. --WA China Watch Digest 07/09/18

July 3: Starbucks opens Beijing Roastery, second in China after Shanghai

36Kr News36Kr News reported that Starbucks opened its Beijing Reserve Roastery at the end of June, the second in the country, six months after the opening of its first one in Shanghai. The new roastery is located in a three-story building in the new shopping and cultural district of Qianmen, not far from the Tiananmen Square, with a daily foot traffic of 150,000 people. What is different is that the new Beijing roastery serves not only coffee, but also tea, at Teavana on second floor, and mixed drinks, on third floor. With its design and decoration in a nod to the traditional architectural style of Beijing, 36Kr said Starbucks Beijing Roastery now offered customers a brand new, richer and elevated “Third Place” experience. --WA China Watch Digest 07/07/18

June 25: Boeing shares lower while China talks to France about Airbus

The StreetThe Street reported that Boeing Co. shares traded lower Monday after China’s Premier Li Keqiang met with French Prime Minister Edouard Philippe in Beijing during the latter’s trade visit there. The talk involved France selling more beef to China and also an agreement for France to sell 180 Airbus A380 jets to the state-controlled China Aviation Supplies Holding Co, with a list price of around $18 billion. At the Great Hall of the People, Premier Li said his government would continue talks with France about the purchase of Airbus aircraft, a deal first floated by French President Emmanuel Macron earlier this year. Li also urged deeper international co-operation on trade going forward and said both sides must resolutely oppose unilateralism and trade protectionism. --WA China Watch Digest 06/25/18

June 9: Labor conditions criticized of Chinese workers making Amazon Echos

Seattle TimesThe Seattle Times reported that the New York-based China Labor Watch in a letter to Amazon last month described its findings of violations of Chinese labor law at a Foxconn plant in Hengyang of Hunan, China, where workers were making Amazon products, including Echo speakers, the smaller Echo Dot, as well as tablets and e-readers. Violations included overtime exceeding legal limits and low wages not enough to maintain a decent standard of living. The watchdog urged Amazon to improve conditions at its supplier. According to the Seattle Times, Melanie Janin, an Amazon spokeswoman, stated that the company had completed an audit of the factory in March and flagged issues of concern. --WA China Watch Digest 06/11/18

May 29: Washington state-based Costco got a Taiwan headache in China

WSJThe Wall Street Journal reported that the Issaquah, Washington-based Costco Wholesale Corp. was the latest of American companies, including Delta Air Lines and Marriott International, confronted in China over its stance on Taiwan. The controversy started because of a 2016 Costco letter, stating that it very much considered Taiwan a country, in response to a Taiwan organization complaining that the company didn’t include Taiwan in its online menu of countries. With Costco now having just signed agreements to open its first store in Shanghai in 2 1/2 years, images of the letter circulating on Chinese social media drew expressions of anti-Costco sentiment, with calls for Costco to apologize for its past support of Taiwan and for boycott. According to WSJ, Costco declined to comment. --WA China Watch Digest 06/01/18

May 18: Starbucks’ first China Investor Conference, projecting 6,000 stores by 2022

Wash PostWashington Post reported that Starbucks held its first China Investor Conference in Shanghai last week, gathering company executives, shareholders and analysts. The report said the Conference agenda highlighted Starbucks’s plans to expand across mainland China — including a push for 600 new stores yearly, and locations cropping up in roughly 100 new cities, by 2022. Starbucks already operates roughly 3,300 stores across 141 cities in China. An earlier report by the Puget Sound Business Journal said Starbucks would have 6,000 stores in 230 Chinese cities by 2022, up from its previous target of 5,000 by 2021. WP quoted Starbucks Kevin Johnson, “We’ve been in China for 20 years now,” and “We have built this business in China, for China.” –WA China Watch Digest 05/20/18

May 15: Luckin Coffee in China is suing Starbucks for market monopoly

China DailyChina Daily reported that Luckin Coffee, a rapidly expanding Chinese brand coffee chain opening 525 stores in four months, has accused Seattle-based Starbucks of indulging in monopolistic practices. In a letter to Starbucks on May 15, Luckin Coffee said Starbucks has signed exclusive contracts with many property owners in China, blocking them from leasing shops to coffee chain brands other than Starbucks. Luckin Coffee said many of their top suppliers who supply Starbucks said they were asked to stop providing products to Luckin Coffee. Luckin Coffee has asked their law firm King & Wood Mallesons to represent them in the anti-trust suit against Starbucks. In a reply, Starbucks said it “welcomed orderly competition,” but was not willing to participate in “marketing promotions of other brands.” --WA China Watch Digest 05/16/18

May 8: Former Chongqing Party chief Sun Zhengcai sentenced to life imprisonment

XinhuaXinhua News reported that Sun Zhengcai, former Party chief of Chongqing, Seattle's sister city, former member of the Political Bureau of the 18th CPC Central Committee, had been sentenced to life in prison for taking bribes of over 170 million yuan (26.7 million U.S. dollars.) It was announced by the First Intermediate People's Court of Tianjin. Sun was deprived of his political rights for life, and all his personal property was confiscated. The court found, between 2002 and 2017, when his posts included secretary general of the CPC Beijing, secretary of the CPC Jilin Province, and Party chief of Chongqing, Sun had accepted "extremely huge amounts of bribes" in money and property. –WA China Watch Digest 05/08/18

May 7: Microsoft CEO Nadella says U.S.-China relations defines next 30 years

CNBCCNBC reported that in an interview ahead of his company’s annual Build conference, Microsoft CEO Satya Nadella said that the next 30 years would be defined by China and U.S. relations: "I think the next 10 years, next 20 years, next 30 years, whatever your time horizon, is going to be defined by these two countries — China and the United States — creating more interdependence, not less." That, the “more interdependence,” Nadella continued, was going to be good for the two countries, and good for the world.” According to CNBC, Microsoft counts China as its second-largest revenue stream, behind only the U.S., with nearly 10 percent of the company's revenue. --WA China Watch Digest 05/08/18

May 1: First China-U.S. Quality Summit held in Seattle

XinhuaXinhua News reported that the first China-U.S. Quality Summit was held in concurrence with the ASQ (American Society for Quality)-hosted Global Summit on Quality in Seattle Monday through Wednesday. "This is a historic event. This has never been done before to have a quality summit between our Chinese friends in the U.S.,” William Troy, CEO of ASQ told Xinhua. Attending the Summit were 20 CEOs and top business leaders from major Chinese companies such as Shanghai Zhenhua Heavy Industries Company Limited, Haier Group Corporation, and XiamenAir, and 50 entrepreneurs from about 30 U.S. companies, including Boeing Co., Google, IBM and Microsoft. --WA China Watch Digest 05/04/18

Apr. 30: T-Mobile CEO John Legere says ‘not allow” U.S. be behind China in 5G

CNBCAccording to CNBC report, T-Mobile CEO John Legere said that the company’s blockbuster buyout of Sprint would supercharge competition, with services to be broadened, prices to go down, and speeds to go up. On 5G next-generation wireless, Legere said, “China is beating the U.S…., but the new company can change that,” and “It's the early innovation cycle of 5G. We are behind China. This is not something we can allow." Sprint CEO Marcelo Claure added, “The U.S. needs to lead in 5G," and "The only way to lead 5G is by combining Sprint and T-Mobile. AT&T cannot do it. Verizon cannot do ... the way we’re are going to build this 5G network." –WA China Watch Digest 05/01/18

Apr. 27: Chinese investment in Puget Sound real estate dropping off

PSBJMarc Stiles at the Puget Sound Business Journal reported that with China’s new rules restricting foreign investment had choked off funding of Chinese companies in real estate acquisitions in the region. In 2015, Stiles said, the total commercial real estate investment by Chinese companies reached $1.17 billion, including the $711 million 76-story Columbia Center. In 2017, however, the amount of money fell to just $78 million. Not just commercial. Becco Zou, broker with Berkshire Hathaway in Bellevue, told PSBJ that while still interested, the Chinese would-be buyers just couldn’t transfer the money out of China. While in the past, 9 out of 10 of her buyers paid cash, now it is down to one fifth. --WA China Watch Digest 04/28/18

Apr. 26: Boeing Zhoushan completion center to open by end of 2018

EChinanewsChinanews reported that Boeing Co plans to open its new 737 jet delivery and completion center in Zhoushan, Zhejiang province, China by the end of this year. It quoted Boeing CEO Dennis Muilenburg as saying that with the construction under way and, “We're still driving toward a goal of beginning to have operational capability toward the end of this year." The center will carry out tasks including cabin installation, painting, flight testing and aircraft maintenance. Boeing will continue assembling 737s at its plant near Seattle, the report said, but send some planes to China for completion at the new plant. --WA China Watch Digest 04/27/18

Apr. 25: Alibaba directly links American merchants to Chinese consumers, bypassing Amazon

AxiosAxios reported that while American politicians and technologists were sensitive to what's often perceived as China horning in on American customers, markets and tech, Alibaba was linking U.S. merchants directly to millions of Chinese customers, bypassing Amazon and other American platforms as an essential way-station to the Chinese market. The report quoted Brion Tingler, an Alibaba spokesman in the U.S., as saying that the company was selling 7,000 U.S. brands in China as of 2017 and that they had no designs on the U.S. consumer but wanted to help U.S. companies sell to the Chinese consumer. --WA China Watch Digest 04/27/18

Apr. 16: Weekly in China calls homeless in Seattle “strange phenomenon”

CEWeeklyChina Economic Weekly carried an article with this headline, “Strange Phenomenon of Seattle: Growing Homeless Population Behind Prosperity.” It quoted statistics from U.S. Bureau of Economic Analysis that of the 15 major cities in the U.S., Seattle’s GDP growth in 2016 ranked third, behind only Silicon Valley and Austin. However, the report said, under this prosperity there was a place called Licton Springs Village where more and more poor and destitute people gather. Homeless population in Seattle, it continued, soared rapidly by 44% from 2015 to 2017, reflecting the similar growth all over America. The article also included the image of the cover story “Homeless in Seattle” of The Weekly Standard. –WA China Watch Digest 04/17/18

Apr. 12: Greater China a central market for Boeing Business Jets

AINonlineAINonline reported that, Greg Laxton, the new head of Boeing Business Jets, called Greater China a central market for both new and pre-owned BBJs. Laxton spoke ahead ABACE, the Asian Business Aviation Conference & Exhibition in Shanghai, Apr. 17-19. The BBJ fleet has jumped from 10 aircraft in 2012 to 29 this year in Greater China, which accounted for 42 percent of all pre-owned BBJ sales since 2012. The fleet is slated to continue to expand in the region this year with two BBJs, one BBJ 2 and a BBJ 787. AINonline quoted Laxton as saying, “Greater China, is coming on,” and “Boeing really believes this is the region of tremendous growth.” --WA China Watch Digest 04/17/18

Apr. 4: China tariff not hitting Boeing hard in short term

King 5Glenn Farley of King 5 reported that “China's proposed tariff could hit Boeing, but not hard.” He explained that China’s proposed 25% tariffs on U.S.-made aircraft included those with an empty weight of between 15,000 to 45,000 kilograms, little less than 50 tons, leaving out the new Boeing 737 MAX 8 and MAX 9 jetliners. Most of the current unfilled jet orders from Chinese airlines were for Renton-built MAX 8 and 9 models. Farley quoted Michel Merluzeau, an industry analyst with Bellevue-based Air Insights Research, that the proposed tariff was China warning and saying we are looking at your commercial aircraft production. Farley also reported Boeing’s statement that they were confident that dialogue would continue, and they would also continue to proactively engage both governments. --WA China Watch Digest 04/06/18

Apr. 2: Washington state growers worry new China tariffs to hurt apple, cherry exports

APAP reported, as carried in the Seattle Times, that cherry and apple growers in Washington state are worried their exports to China will be hurt by a growing trade war, as China raised import duties on a $3 billion list of products, including apples, cherries and pears. According to AP, China is the top export market for Washington cherries, buying 2.9 million cases worth $127 million a year, and it also bought about $50 million worth of apples and $1.5 million worth of pears last year. The report quoted Kate Woods, a vice president of the Northwest Horticultural Council in Yakima, Washington: “Our hope is that the U.S. and China will reach a solution before cherry season starts in June." –WA China Watch Digest 04/03/18

Mar. 22: Washington state leaders worry about China’s retaliation tariffs

King5Natalie Brand at King 5 had this post, “China retaliation to tariffs worries Washington state leaders," with statements from a number of local leaders on the impact of China’s retaliation against President Trump’s tariffs. They were Governor Inslee, Lt. Governor Habib, former Governor and American Ambassador to China Gary Locke, former Port of Seattle Commissioner Bill Bryant, Rep. Dave Reichert, Sen. Maria Cantwell, Dr. Richard Ellings of the National Bureau of Asian Research, and Economics Professor Brian Kelly at Seattle University. Gary Locke said China could give a lot of orders to Airbus. Lt. Governor Habib worried about the 15% tariffs proposed by China on Washington’s fruit and wine. Most shared the view that tariffs were not an effective way to deal with Chinese piracy and forced technology transfer. --WA China Watch Digest 03/24/18

Mar. 21: China’s C919 wins near 1,000 orders, potentially undermining Boeing 737

PSBJAndrew McIntosh at the Puget Sound Business Journal reported that C919 passenger jet, China’s answer to Boeing's popular 737 single aisle aircraft, was approaching 1,000 orders. The C919, made by Commercial Aircraft Corp. of China Ltd. (COMAC), had gained 815 orders from 28 customers in China and abroad, as COMA announced. The value of the deals was not, however, disclosed. McIntosh said, as COMAC wins more C919 orders, it could undermine Boeing's own sales in China, where Boeing now sells one in three new 737s made in Renton, and where it's also launched a completion center for 737s in a joint venture with COMAC. Any decline in 737 sales could also hurt Puget Sound region aerospace companies that build and supply parts for 737s. --WA China Watch Digest 03/23/18

Mar. 19: Microsoft milestone: machine translating Chinese as well as humans

Tech Wire AsiaTech Wire Asia reported Microsoft’s announcement last week that three teams of Microsoft researchers from the company’s Beijing and Redmond, Washington labs worked together and reached a “historic milestone: the development of the first machine translation system that apparently had the same quality and accuracy as a person when translating Chinese news articles to English. Microsoft hired external bilingual human evaluators to verify the machines translation accuracy. Xuedong Huang, a US-based technical fellow in charge of Microsoft’s speech, natural language and machine translation efforts said, “Hitting human parity in a machine translation task is a dream that all of us have had. We just didn’t realize we’d be able to hit it so soon.” --WA China Watch Digest 03/19/18

Mar. 7: Fortune lists Boeing, Starbucks top U.S. businesses at risk from trade war with China

FortuneFortune magazine carried an article titled “These U.S. Businesses Are Most at Risk From a Trade War With China.” Of the ten businesses on its list, Boeing was number one, followed by Starbucks. About Boeing, Fortune said, with Boeing expecting China to need 7,240 new planes valued at almost $1.1 trillion in the two decades through 2036, it would be an easy target if China’s leaders decided to punish American companies. About Starbucks, Fortune said that as the most visible U.S. brands, and especially with its newly opened first international Roastery and Tasting Room in Shanghai, Starbucks could be an easy target of Chinese consumers angered by Trump. Other businesses at risk included Westinghouse, Tesla, Apple, and Ford. --WA China Watch Digest 03/09/18

Mar. 2: Don Bonker called steel, aluminum tariffs first shot of trade war with China

Seattle TimesFormer U.S. House of Representative Don Bonker wrote in the Seattle Times an oped titled “A trade war will hurt Washington” and called President Trump’s decision to impose more tariffs on steel and aluminum the first shot in the coming trade war with China. Bonker said Washington state would feel the brunt of China’s retaliation, in agricultural export, port facilities, not to say Boeing would have to pay more for aluminum products from China. He also mentioned how the Trump administration had pressured AT&T to quash its plans to roll out a smartphone by Chinese company Huawei, and asked what if Beijing reciprocated and banned Apple products entering the China market. Huawei, Bonker said, had planned to locate its America consumer headquarters in Bellevue. --WA China Watch Digest 03/03/18

Feb. 16: Chongqing-led group blocked in buying Chicago Stock Exchange

Chicago TribuneChicago Tribune reported that the decision of the Securities and Exchange Commission to reject a bid by a Chinese-led investor group to buy the Chicago Stock Exchange was a major blow to its international aspirations. The lead investor was from Chongqing, Seattle’s sister city: Casin Enterprise Group Co., which wanted to serve as a conduit to bring Chinese companies to the U.S. to raise capital. The SEC said it couldn't resolve concerns about the proposed ownership structure, which would have given 29% of the company to a China-based shareholder. CEO and president of the Exchange John Kerin expressed disappointment. An analyst at Greenwich Associates was quoted as saying, however, the Exchange's plan to help Chinese companies go public in the U.S. didn't require owning an exchange and that the motivation was a little unclear. --WA China Watch Digest 02/16/18

Feb. 5: Boeing transferring technologies to China Southern Airlines

China DailyChina Daily Guangdong reported that on Feb. 2 in Guangzhou, Boeing and China Southern Airlines (CSAIR) signed an agreement to convert passenger planes into cargo planes. Boeing will transfer technologies in a series of joint programs, including undercarriage overhaul for Boeing 777 and 787 planes, establishing a production line for converting Boeing 737 NG passenger planes into cargo planes, a support center for Boeing 787 planes, and support programs for Guangzhou Aircraft Maintenance Engineering Co (GAMECO). Boeing VP Stanley Deal was quoted as saying Boeing looked forward to the collaborating to meet demands for Boeing 787 operators, support regional airlines, promote the Boeing Converted Freighter program, etc. This was the first time Boeing made such technologies in aircraft MRO (maintenance, repair, and operation) available to China. --WA China Watch Digest 02/05/18

Jan. 25: Amazon has a potential competitor: Alibaba and Kroger

ReutersReuters reported that Chinese e-commerce and technology company Alibaba and U.S. grocer Kroger Co have had early discussions on working together. The discussions come, the report said, as U.S. e-commerce company Amazon has expanded aggressively into groceries with its acquisition of Whole Foods Market. While Amazon last week opened to the public its Amazon Go checkout-free grocery store, which relies on cameras and sensors to track what shoppers remove from the shelves, Alibaba runs its Hema supermarket chain as a test bed for the e-commerce firm’s move into traditional retail, where mobile phones are used to order, pay and get information about items. Reuters also said Alibaba’s talks with Kroger were not CEO-level yet. --WA China Watch Digest 01/27/18

Jan. 25: Boeing China breaking record in delivery of aircraft in 2017

NetEaseNetEase reported that Boeing China president John Bruns gave a press conference on Jan. 24 on Boeing’s achievement in 2017. He pointed out that, for the first time, Boeing broke the record by delivering 202 aircraft to China, after six years of delivering over 140 aircraft a year. By the end of 2017, China’s fleet of Boeing planes reached 1,500. In addition, Boeing also began construction of its 737 completion and delivery center in Zhejiang, expecting first delivery of 737 Max by the end of 2018. Boeing’s composite materials company in Tianjin also assembled its millionth product in 2017, and with its number of employees growing bigger than that of its competitors. With the competition of high speed trains, Boeing estimated that China would still need 7,000 new aircraft in the next twenty years. --WA China Watch Digest 01/27/18

Jan. 25: Starbucks Shanghai Roastery one day sale doubles one week sale of U.S. store

CNBCCNBC reported that the eight-week old Starbucks Shanghai Roastery is raking in insane sales: its one day sales more than doubles what a traditional U.S. store makes in an average week. It quoted Howard Schultz, Starbucks' chairman, "Our U.S. Starbucks stories, on average, do about $32,000 a week… The Roastery in Shanghai, after eight weeks of operations is doing, on average, twice that not each week, but each day." Shultz then continued to say that in the history of Starbucks, he had never, ever, seen anything remotely like what happened when they opened the Shanghai Roastery, as it shattered every sales record in the history of the company. --WA China Watch Digest 01/27/18

Jan. 5: Chinese homebuyers file lawsuit against Realogics Sotheby broker for inflating prices

Seattle TimesMike Rosenberg at the Seattle Times reported that a lawsuit had been filed by two plaintiffs from China who bought homes in Kirkland, alleging that their broker at Realogics Sotheby’s International Realty was actually working on behalf of the builder selling the homes. They were told there were multiple offers on the table and that they needed to bid more than $2 million each to buy the homes. But when they arrived in the area after the deals closed, they discovered the homes weren’t as promised, and that there had been no evidence that other buyers were interested in the homes. The plaintiffs are Jie “Gabby” Jiao, and the married couple Maoqi Zhang and Wei Fan; the defendant is Realogics Sotheby’s broker Connie Blumenthal. –WA China Watch Digest 01/06/18

Jan. 4: Starbucks spends $1.4 billion and buys 1,400 stores in East China

PSBJThe Puget Sound Business Journal reported that Starbucks closed a deal on Wednesday, spending $1.4 billion and buying 1,400 stores in East China. The Journal said Starbucks announced back in July that it would spend $1.3 billion to buy out the remaining 50% of a partnership with two other companies, or 1,300 stores, in Shanghai, Jiangsu and Zhejiang provinces. The acquisition on Wednesday, the Journal said, meant that Starbucks had added 100 stores in the past six months. Back then, Starbucks CEO Kevin Johnson said, “Unifying the Starbucks business under a full company-operated structure in China reinforces our commitment the market.” The report said Starbucks now operates 3,000 stores in 136 Chinese cities, opens a new store every 15 hours. --WA China Watch Digest 01/04/18

Jan. 2: Chongqing showcased in Times Square New Year’s Eve celebration

East Day NetSeattle’s sister city Chonqing took part in the Times Square New Year's Eve Countdown celebration on Dec. 31, 2017 in New York City, according to East Day news. As the official partner city of this year’s celebration, Chongqing sent its representatives to Times Square, the crossroads of the world, promoted its famed landscape and cultural heritage, and presented the revelers with its Tongliang Dragon Dance. Along with those from Chongqing Tourism Bureau, also appearing at the ceremony were officials of the New York City, the Chinese Consulate in New York, Times Square Committee, and U.S.-China Friendship Association. A banner held up by the Chongqing group in Times Square read, “Happy New Year 2018. Chongqing, China Welcomes You!” --WA China Watch Digest 01/02/18