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China: Linsanity Sweeps the Nation while Apple Faces Yet Another Lawsuit

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Citigroup also makes the news.

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MINYANVILLE ORIGINAL The twisted saga of ousted Chongqing Communist Party Leader Bo Xilai appears to have reached its conclusion, at least on the surface. On Thursday, Bo's wife, Gu Kailai confessed to murdering British business partner Neil Heywood at her one-day trial.

According to the Xinhua, Gu did not contest the charges and pled guilty in less than four hours. She told the court that Heywood had threatened her son after a dispute over a property deal, which caused her to poison Heywood.

"The case has produced great losses to the party and the country, for which I ought to shoulder the responsibility, and I will never feel at ease," Gu said. "I solemnly tell the court that in order to maintain the dignity of the law, I will accept and calmly face any sentence and I also expect a fair and just court decision."

Meanwhile, new NBA sensation Jeremy Lin made a whirlwind promotional trip to Taiwan and China this week, where he conducted coaching clinics for youths organized by Nike (NKE). American-born Lin was asked to comment on China-Taiwan relations, but he wisely sidestepped the contentious issue, simply saying that his grandparents were born in China while his parents were born in Taiwan.

As Chinese netizens ponder whether or not China has put too much pressure on its athletes to excel at the Olympics, Lin's message to aspiring basketballers was simply: Have fun and "fall in love with the game."

Here is this week's business and economic news:
Chinese economy: China's export growth fell to a 6-month low in July, led by a 16.2% year-to-year decline in exports to Europe, which is China's biggest export market.

For the month of July, China's exports were up a mere 1% year-on-year to $151.8 billion, down 11.3% from June, falling far beneath market expectations, according to China's General Administration of Customs (GAC).

"The July data were poor indeed," Zheng Yuesheng, head of the GAC statistical department, told the state-owned Xinhua news agency. "It will be an arduous task to fulfill our foreign trade target, as external demand is weak."

Besides poor demand, another factor for the poor trade data is rising costs, which has decreased the competitiveness of Chinese exports. According to the Wall Street Journal, wages in China have gone up over 150%, while land prices are up more than 70%. The cost of electricity is also up by over 30%. Additionally, the yuan has also become stronger, up over 30% against the dollar.

The latest poor economic data further confirms that China will likely take steps to ensure GDP growth stays on track for its 7.5% target this year. Likely, China's central bank will cut interest rates once again, while there might also be more stimulus spending on the way.

Apple (AAPL): Almost two years after the iPad was first released in China, the device has become the undisputed champion of the mainland's tablet market. According to a survey by research firm Analysys International, 2.34 million tablets were sold in the second quarter of 2012, up from 1.46 million last year. A whopping 72.6% of those 2.34 million tablets sold in China were iPads. For context, Apple's global tablet market share in the same quarter is estimated to be around 61.5%.

Apple's 72.6% Q2 market share represented a 7.45% increase from the previous quarter, thanks to the introduction of the new iPad and also a price reduction for the iPad 2. Lenovo was a distant second, with 8.38% of the market share, while Samsung (SSNLF) could only muster up a 3.59% share.

Meanwhile, Apple is facing yet another fresh lawsuit in China, this time over its FaceTime technology. A Taiwanese man, who works as a technician at a Taiwanese tech company, is claiming that the Cupertino, California-based company's FaceTime infringes on his "voice network personal digital assistant" technology patent. The Intermediate People's Court in Zhenjiang will hear the case next month. Apple has thus far not responded to the suit.

Citigroup (C): Following contemporaries Goldman Sachs (GS), UBS (UBS), JPMorgan (JPM), Credit Suisse (CS) and Morgan Stanley (MS), Citi will become the latest foreign bank to enter China's capital markets. The New York-based bank is launching an investment banking joint venture with Shanghai-based Orient Securities, which will be named Citi Orient Securities.

The joint venture will have a registered capital of 800 million yuan (US$126 million). Citi holds a 33.3% share in the venture, which is the maximum stake a foreign firm can hold in an investment-banking enterprise under China's financial regulations. Citi plans to increase its stake in the future, although that would depend on regulatory approval.

According to the Wall Street Journal, Citi Orient Securities has already signed deals for nearly 50 Class A-share initial public offerings. Besides IPOs, the joint venture will also handle energy, automobile and entertainment mergers and acquisitions.

Citi also wants to expand its retail presence in the mainland, with plans to double its number of outlets in China to 100 in three years. Although China's economy has stalled in recent months, Citi's global head of retail banking, Jonathan Larsen, is confident that the long-term outlook is still sunny. Citi's Asian retail business booked a profit of $2 billion in 2011, which was half of its total profit for the region.


Twitter: @sterlingwong
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