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China: Apple Finally Confirms New iPad Release Date; Mead Johnson Gets an Apology From Chinese Agency


Navistar and automakers also make the headlines.

MINYANVILLE ORIGINAL As predicted, China's economy slowed in the second quarter, with growth coming in at 7.6%, down from 8.1% in the first quarter. The result also represented China's lowest level of economic expansion since the start of 2009, when the financial crisis was still raging.

A spokesperson from China's National Bureau of Statistics, Sheng Laiyun, put a positive spin on the figure, saying, "We should not be too obsessed with an 8-percent economic growth. Generally speaking, China's economy has run smoothly during the first half."

Klaus Baader, a senior economist at Societe Generale, also asserted that the news from China is not as gloomy as some think it is. "However, the official report contained a piece of good news, which was that quarterly growth quickened to 1.8% quarter over quarter from 1.6% in Q1, which was stronger than median expectations. While not too much emphasis should be placed on this, it may be a sign that growth has already bottomed in Q1," he told MSN.

Many analysts are expecting China to implement further stimulus measures in the second half of 2012 since the central government has stated that stabilizing economic growth is on the top of its agenda.

Here are this week's top business news:
Apple (AAPL): It's official -- after a long wait, Chinese consumers can finally grab their hands on the new iPad on July 20. Apple released a statement on Tuesday confirming the release date, adding that the new iPad will be priced between $499 to $829, depending on the memory capacity and the device's wireless-connection compatibility.

After the instances of long lines and clashes between customers and employers when the iPhone 4S was released in China earlier in the year, Apple is taking steps to ensure the rollout of the new iPad goes smoothly. At its retail stores, the device can only be purchased by reservation. It will also be sold online and at authorized resellers.

Meanwhile, the State-run China Daily reports that Defend the Diaoyu Islands, an iPad game where players fight off Japanese forces attacking the disputed islands with weapons, was removed by Apple's online store.

Both China and Japan have claimed the sovereignty of Diaoyu Islands, also known as Senkaku Islands. The maker of the nationalistic game, Shenzhen ZQGame Network, told China Daily that they were not provided as explanation as to why it was taken down.

It is likely, the paper notes, that the game violates Apple's terms of use, which "specify that 'enemies' within the context of a game cannot target a specific race, culture, real government or corporation, or any other real entity." After all, the Wall Street Journal notes, in a description of the game at the Apple store, the Japanese are referred to as "devils."

Auto companies: The auto industry delivered good news for June, as passenger vehicle sales in China rose, exceeding analyst estimates for a fourth straight month. General Motors (GM), the top foreign auto company in China, reported a 10% sales growth to 213,495, while Ford (F) saw an 18% rise to 52,440 units. Honda (HMC) and Toyota (TM), both of which saw sales and production disrupted a year ago due to the Japanese earthquake and tsunami, saw 84% and 19% sales gain respectively. Honda delivered 64,652 units in June, while Toyota sold 70,500 units, reports Bloomberg.

It appears that domestic automakers are shouldering the pain from China's economic slowdown. BYD, the company in which Berkshire Hathaway (BRK-A) has a share, registered a 12% drop in cars sold for the first 5 months of 2012. Additionally, auto industry analyst Michael Dunne told the Wall Street Journal that the market share in passenger vehicles held by Chinese brands has dropped from 31% two year ago to 26%.

"Five years ago almost everybody [in China] was buying their first car. Now they're coming around for the second time, and that's separating the stronger brands from the weaker," he told the Journal.

Big Pharma: While China heralds a world of opportunities for pharmaceutical giants like Pfizer (PFE), GlaxoSmithKline (GSK) and Boston Scientific (BSX), it also might not become the financial windfall that these corporations expect.

The Chinese government is intent on keeping medical costs low while expanding coverage for its citizens, which means policy decisions that drive down profit margins for Big Pharma. Among such price-control policies are the recent withdrawal of differential pricing for some 100 drugs foreign pharmaceutical companies sold in China and a recent change in patent laws to allow for compulsory licenses, which, as Benjamin Shobert notes at CNBC, "are used by nations in rare situations where a particular drug is deemed too expensive to purchase, yet necessary for the public's health."

"Investors will need to pay close attention to how a possible recession in China impacts the government's planned investments in this sector, as well as whether proposed reforms to the healthcare space incentivizes industry or mandates price controls, technology transfer or otherwise wall off lucrative parts of the market," Shobert writes.

Mead Johnson Nutrition (MJN): It was a topsy-turvy week for Mead Johnson. On Tuesday, a Chinese consumer watchdog group claimed that vanillin, a prohibited vanilla substitute, was found in some of the company's baby formula in Hunan, China. The bad news sent Mead Johnson stock falling 4.3% on the NYSE that day, closing at $75.29.

A day later, however, Mead Johnson had a reprieve when Hunan Agricultural University, which was commissioned to conduct the baby formula tests, admitted that there had been testing errors that resulted in the incorrect conclusion that there was vanillin in Mead Johnson's baby formula.

"On this matter, I can only express my deep regret," a representative of the consumer watchdog group, the Hunan Province Credit-Building Association told Reuters. "We sent the samples to the Hunan Agricultural University's Food and Nutrition Examination Centre for inspection. They issued a preliminary report indicating that the milk powder contained vanillin compounds. But they later came forward to say that there were errors in their monitoring."

On Wednesday, Mead Johnson shares rose back up above $78.00.

Navistar (NAV): If Navistar has its way, we'll soon see millions of the classic yellow American school bus taking to the streets of China. After a series of horrific accidents last year, China implemented a new set of tougher school bus safety standards in consultation with Navistar.

Michigan-based automotive adviser Sanjeev Varma told Businessweek that China was introducing tough regulations faster than local companies can keep up with them. "The Chinese want to get to Western standards sooner rather than later. They're trying to access technology at a much faster rate, either by hiring Western consultants and advisers or by forming joint ventures," he said.

Currently, the mainland has some 285,000 school buses, of which only 10% satisfy the new standards. In the next 10 years, Navistar and other companies like Blue Bird Corp. see China buying 1.5 to 2 million new school buses, which represents a huge opportunity for both bus makers, who will look to expand into the market through joint ventures with local firms.

Twitter: @sterlingwong
No positions in stocks mentioned.
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