Business and Finance

Business Briefs: Will housing prices drop? Has the chemical explosion hurt investment?

Has the "housing bubble" come to an end?

This article is sponsored by The China Perspective

Yahoo China's been in the news fairly often recently now that Jack Ma, Alibaba's outspoken chief, is running things. This week, though, it made headlines after it was sued over search technology company 3721's handling of rights to the "taobao" keyword. Gome's also been in the business pages a lot recently, but this week it loses out to Gree, which profited handsomely since breaking with Gome last year.

Also in papers this week was promising news about dropping housing prices, and answers to all your questions about the effects of the Jilin Chemical explosion.

Yahoo's 3721 sued over keyword

More domain-name fun this week. 3721, a service owned by Yahoo China, offers browser keyword resolution. Users can enter Chinese directly into their browser's location bar and be automatically taken to the website that has registered that keyword with 3721.

Taobao, as anyone who's been following the war of words between eBay and Alibaba knows, is one of China's big auction sites. The keyword "taobao," on the other hand, was registered in 2004 to a new and used machinery trading site hosted by MachiNet. In September, 3721 cancelled MachiNet's registration because of alleged infringement on the rights of the legitimate owner of the "taobao" keyword. Alibaba's Taobao later picked up the registration through the year 2020.

So MachiNet sued, saying that 3721 had acted improperly in giving the "taobao" keyword to Alibaba, which coincidentally had just become part of the Yahoo China family that month. Since MachiNet's original registration would expire in 2009, even if it gets the keyword back, 3721 is unlikely to let the company renew its registration beyond that point.

Housing prices to drop?

Good news for Beijing home-buyers: statistics from the Beijing Real Estate Association predict that housing prices in the city will begin to drop by the end of the year, with a downward trend continuing througout 2006 and possibly 2007. It's a bit later than other cities - Shanghai's prices have already begun to drop - but it's still welcome after a six-year period of 20-30% annual increases.

Developers, on the other hand, are not so pleased. Beijing is already running a large commercial vacancy rate - up 21.1% over last year to 10.54 million square meters of office space - and this number is set to increase in 2006 due to the completion of 100 million square meters currently under development.

Understandably, neither developers nor the government are particularly inclined to announce that prices are falling for fear of touching off an avalanche. It's probably inevitable, though, and certain analysts feel that unless Beijingers are able to feel that their homes are investments, not just living spaces, the market won't see an upswing for three to five years. That'll be a neat trick when prices of new homes are falling.

Gree profits after break from Gome

Performance in China's air conditioning market has been pretty dismal this year. Plagued by an overcapacity of nearly 30 million units, a crowded domestic market of 69 brands, and technical barriers preventing large-scale exports, manufacturers slashed prices and hoped they wouldn't be one of the 40-some companies slated to exit the sector in 2006.

One bright spot is Gree, which last year was written off when it broke off its distribution agreement with consumer electronics chain Gome. The two companies disagreed over how Gree's products were promoted, and in March 2004, Gree pulled its air conditioners from Gome's shelves. Since this represented the loss of an important distribution channel, analysts expected Gree's sales to suffer. With its network of independent sales agents, however, Gree has managed to increase sales of its air conditioners 29% over the first three quarters of this year, lifting profits 20%.

Fallout from the Jilin blast

One week ago there was an explosion at Jilin Chemical's benzene plant in Jilin city, killing five and forcing the evacuation of thousands. In the midst of this tragedy, the question in everyone's mind was "How will this affect PetroChina's plan to take Jilin Chemical private?"

The answer, said this week's business papers, was "not at all." Jilin Chemical and the two other Shenzhen-listed companies PetroChina is planning on privatizing saw their stock increase slightly after the blast.

Since Jilin Chemical is the largest domestic producer of aniline as well as a major phenyl acetone producer, other companies in the industry may be affected by the accident. Phenyl acetone producers like Bluestar New Chemical will get a boost, while companies that use aniline as a raw material, like Yantai Wanhua Polyurethane, will be negatively affected.

Also in the news this week:

  • CCTV held its annual advertisers' conference this week, and Proctor & Gamble once again grabbed the top bidder's crown with commitments to 394 million yuan worth of ad spots. P&G bid 385 million yuan last year.
  • Baidu formed an alliance with sixteen record labels to offer authorized free downloads of MP3s. The major international labels - Sony BMG, EMI, Warner, and Universal - were not involved, and Baidu will probably have to settle with them separately or face a court judgement.
  • A standard for cell-phone radiation is set to be released by the end of the year, which, depending on how strict it is, may result in the elimination of many manufacturers.

These summaries were collected from the The China Perspective, which covers major business news and trends in the China marketplace.

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