Early positive signs from China, the world braces for more coronavirus spots

With all possible caveats: early signs do indicated the coronavirus is slowly retreating in China. That might reverse, as workers are slowly returning to work, and quarantine measure are partly revoked. Meanwhile, the rest of the world, notably South-Korean, Japan, Iran and Italy are fighting their own hot spots of the coronavirus and the fears of a global pandemic outbreak are all but over. 

When you follow our social media feeds at Twitter, Facebook or LinkedIn, you might notice that our China news - not related to the coronavirus - is growing since the weekend, and that is a good sign too. But still, we do not expect the event industry to pick up before May, and much might depend not only on China and the success of its quarantine measure, but also how the virus is developing in the rest of the world.

 Are you interested in discussing how to deal with your China event? Do get in touch.

How China uses the Iran-US crisis - Victor Shih

Victor Shih

China is profiling itself as a stabilizing actor on world politics, after the US killing of Iranian Major General Qassem Soleimani, says political analyst Victor Shih at the South China Morning Post. However, China’s presentation of itself as respectful of the sovereignty of other nations does not square with numerous examples of China looking to use its economic sway to influence other nations’ diplomacy or politics, Shih said.

The South China Morning Post:

For domestic audiences, state media coverage of the situation, and China’s role, has boosted a long-term drive to present the country as a stabilising international force in contrast to the United States, analysts said. 

“This event obviously has helped China make the argument that the US is in fact isolating itself in the world by engaging in unilateral interventions in other countries, and China is on the side of the righteous majority in resisting [what it frames as] US hegemonic activities,” said Victor Shih, associate professor of political economy at the University of California San Diego’s school of global policy and strategy. 

However, China’s presentation of itself as respectful of the sovereignty of other nations does not square with numerous examples of China looking to use its economic sway to influence other nations’ diplomacy or politics, Shih said. 

Major outlets including state news agency Xinhua, China Daily and People’s Daily, have highlighted the potential for China to play a role in stabilising the region and characterised the US as a destabilising presence in the Middle East.

More in the South China Morning Post.

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more political analysts at the China Speakers Bureau? Do check out this list.

China will not comply with US demands to stop Iranian oil - Sara Hsu

Sara Hsu

The trade talks between China and the US might be moving into the right direction, but tensions on other issues are abundant, for example on US demands to stop importing oil from Iran. Professor Sara Hsu explains why China will not comply with the demands of the US.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on the relations between China and the US? Do check out this list. 

How did the auditors deal with the ZTE scandal? - Paul Gillis

Paul Gillis

ZTE got itself into trouble by violating a ban on using American components for products it exported to Iran and North-Korea. The punishment - no US components for ZTE for seven years - might kill the Chinese companies, who cannot work without them. What did the auditors do, wonders Beida auditing professor Paul Gillis on his weblog.

Paul Gillis:

The ban came about as a result of ZTE violating the terms of a settlement agreement entered into as part of its 2017 guilty plea for conspiracy to sell telecommunications equipment to Iran and North Korea that included American components that are forbid for export to those countries. ZTE agreed to pay a fine of $892 million and be under probation for seven years. An additional penalty of $300 million was suspended provided ZTE complied with the terms of the probation, which it is reported included the requirement for ZTE to fire four top executives and discipline 35 other employees. ZTE did fire the top executives, but instead of punishing the other employees it paid them bonuses.   

ZTE was also required to undergo independent compliance audits related to its observation of export controls. 

Because ZTE violated the terms of probation they have been banned from acquiring US components (including the Android operating system) and presumably has to pay the remaining $300 million fine. ZTE admitted the behavior, but argues that the penalty is too severe and is trying to negotiate a settlement that would allow the company to survive. 

ZTE reports under Chinese accounting standards. Auditors Ernst & Young (EY) issued an audit report on the 2016 accounts on March 23, 2017. The agreement for the initial settlement became effective on March 22, 2017 and is reported in the 2016 accounts with the penalty of RMB 6.2 billion reported in other expense.  The company stated that it was unlikely they would violate the probation agreement and have to pay the other US$300 million. 

The details of when the bonuses were paid are publicly unavailable. Chinese companies usually pay bonuses at Chinese New Year, which was at the end of January in 2017 and in February in 2018. It seems most likely the offending bonuses were paid by February of 2018, before EY issued its audit report on the 2017 accounts on March 15, 2018. 

So what does this have to do with accounting?  The issue is whether EY should have known that there was serious doubt by March 15, 2018 as to whether ZTE could continue as a going concern. Should they have tested compliance with the probation agreement? 

In its audit report EY states its responsibilities as including to: 

Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on ZTE Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to issue a qualified opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause ZTE Corporation to cease to continue as a going concern. 

EY did not draw attention in their auditor’s report to any events or conditions that may have cast significant doubt on ZTEs Corporations ability to continue as a going concern. I think there was information available to EY (the payment of bonuses in violation of the agreement) that should have led to its questioning the ability of the company to continue as a going concern. I believe that auditors rarely ask these questions, although if this were a loan agreement with covenants, I am quite certain they would have tested compliance with the covenants. 

The company got a clean opinion as of March 15, 2018, although only a couple of months later the survival of the company is in question. Should EY have blown the whistle earlier?

More at the Chinaacountingblog.

Paul Gillis is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts to manage your China risk? Do check out this list.  

Why caviar from China will boom - Shaun Rein

Shaun Rein

When it comes to caviar, China seems to be able to become a major producer, despite its reputation of food-scandals, says business analyst Shaun Rein in Bloomberg. A boycott of both other producers, Iran and Russia, does help too, he adds.
Bloomberg:

Mention China alongside almost any food product, and people get nervous. After international incidents involving bleach-soaked meat, antifreeze-laced apple juice, and pine nuts “unfit for human consumption,” the country “is known for tainted food because of repeated quality-control scandals,” says Shaun Rein, managing director for the China Market Research Group. 

Kaluga Queen, which produces its caviar about 300 miles southwest of Shanghai, is mindful of these associations 

“The biggest obstacle is the low trust of Chinese food safety,” says Lily Liu, marketing manager for parent company Hangzhou Qiandaohu Xunlong Sci-tech Co.... 

Until recently, Russia and Iran dominated the caviar export market, harvesting the delectable eggs from beluga sturgeon in the Caspian Sea. Overfishing there eventually landed them on the endangered species list, and as supply dwindled, other nations, including Japan, Israel, and China, have started to fill the gap. 

“Exports of Chinese caviar will boom because of sanctions and limited supplies from Iran and Russia,” Rein says. “Many restaurateurs will buy Chinese caviar because of good quality, reasonable price, and ample stock.”

More in Bloomberg.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more stories by Shaun Rein? Do check out this list. 

China, Iran trade: beyond oil and gas - Andy Mok

Andy Mok

China and Iran are preparing for mutual trade of about 600 billion US$, tells Beijing entrepreneur Andy Mok to Iranian TV station TV-Press. But the recently reopened trade offers much more than the usual suspects, oil and gas.

Andy Mok is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.  

Are you looking for more experts on China´s outbound investments at the China Speakers Bureau? Do check out this list.

Related articles

• Iran's Chabahar port to harbor Chinese industrial town
• China's Tech Leaders Try Teaching Dinosaurs to Dance
• Iran may ship heavy water to Russia

The fallout of the China-Iran deal - Sara Hsu

Sara Hsu

The world should carefully watch the new ten-year deal of US$600 billion between Iran and China, writes Sara Hsu in the Diplomat. The two new kids at the block is likely to change the international power balance.

Sara Hsu:

China’s aims in relations with controversial foreign regimes are most often to promote economic ties that serve its self-interest rather than to choose a preferred political ideology. Even as China has maintained genial relations with the West, the nation has been criticized for doing business with dictators that engage in atrocious human rights violations. China’s policy has been “noninterference in internal affairs.” Although regular trade relations with violent regimes may be necessary to supply goods to the people, trade in weapons and nuclear materials supports violence and can be easily viewed as interference in internal affairs. 

Moreover, Iran’s commitment in fighting terrorism can be called into question. The U.S. State Department has repeatedly accused Iran of supporting terrorism, including Hezbollah and the Syrian army under President Bashar al-Assad. Terrorism has been viewed as a tool of the state since 1979, after the launch of Iran as an Islamic Republic. Iran has used terrorism to weaken rival governments, influence disputes outside its borders, and to intimidate or use as political leverage. While certainly relations in the Middle East are complex and often hostile, Iran’s use of terrorism against a multitude of parties renders it a questionable ally against terrorism. 

Whether China’s relations with Iran are a threat to the West can be viewed from different perspectives, but the real threat of violence stemming from Iran must be taken seriously. As a key stop on China’s One Belt One Road, Iran’s importance to China seems healthy, but the sales of weapons or nuclear material in particular cast a shadow over this partnership. As China becomes increasingly influential on the world stage, this relationship will likely be more deeply scrutinized.

 More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´request form.

Are you looking for more political experts at the China Speakers Bureau? Do check out this list.