Today’s China Readings May 7, 2012

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

Chen Guangcheng and his family are still in hospital in Beijing. The Wall Street Journal reports that the  U.S. Discusses With China Departure of Blind Activist while the Washington Post writes that Chen says U.S. diplomats, friends still barred from visiting him and that his family and friends face tempest of retribution. Let’s hope that Chen does get to leave for the US; any delays or problems now would be very messy, especially back in DC. As for retribution against Chen’s friends, his escape to Beijing exposed holes in China’s security network and may lead to a crackdown on the underground network, per some reports a Christian network. “Hostile foreign forces”, as Beijing likes to say, were involved in Chen’s flight and whether or not there is a happy ending for Chen and his immediate family there is not likely to be one for many others.

Switching to business, Jack Ma and his Alibaba Group are back in the news for corruption and a possible deal with Yahoo. Bloomberg reported a couple of days ago that Alibaba Says Some Taobao Staff Arrested, Online Stores Shut over bribery allegations. This crackdown follows a recent cover story in IT Times (淘宝腐败黑幕调查  – IT时代周刊) that details significant corruption at Alibaba’s Taobao unit. Alibaba foreign PR head John Spelich is fortunate that Alibaba does not get nearly the foreign media scrutiny it deserves given that is one of the 5 biggest Internet companies in the world. That will change if/when it lists any of its units on a US stock exchange.

The Wall Street Journal is reporting that Yahoo and Alibaba are again discussing a partial sale of Yahoo’s Alibaba stake, though this time Yahoo has given up on its blatant tax dodge structure and instead is working on a new, taxable deal. Yahoo is crazy to sell any of its Alibaba stake right now. Jack Ma would only be a buyer if he saw significant upside and Yahoo has no other investments or business lines that have nearly the growth and shareholder value creation potential that Alibaba does. The recent news that Yahoo CEO Scott Thompson lied on his resume may delay any deal talks, especially if he is fired.

Corruption issues notwithstanding, Taobao is probably the best private Internet company in China, and may be the last world-class one that has yet to list in the US.

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