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China: Google's Android Leads the Smartphone Market; Olympic Badminton Scandal Rocks Nation


Sinopec and BYD also make the news.

MINYANVILLE ORIGINAL One week into the Olympics and predictably, China is neck and neck with the US at the top of the medal standings. Controversies abound for Chinese Olympians, however. Fifteen-year-old record-breaking swimmer Ye Shiwen has been haunted with doping allegations, while top women's badminton doubles duo Yu Yang and Wang Xiaoli were among four pairs who were disqualified after deliberately playing to lose. Who knew badminton could be so scandalous?

In economic news, the Chinese central bank said that it will maintain a "prudent" monetary policy so as to keep economic growth stable. Goldman Sachs has lowered its GDP growth forecast for China this year from 8.1% to 7.9% and from 8.7% to 8.5% for 2013.

Here are the rest of this week's business stories:
Smartphone makers: While the greater Chinese economy has slowed, the mainland's smartphone market has gone from strength to strength. According to research firm Canalys, China received shipments of a record-breaking 42 million smartphones in the second quarter of 2012, which made up a mammoth 27% of the 158 million smartphone shipments worldwide. In comparison, the US received 16% of the worldwide total in shipments.

Android (GOOG) phones posted the strongest showing in the quarter, making up about 81% of all smartphones shipped in China. Android now has 68.1% of the Chinese smartphone market, which is an increase from 48% last year. Samsung (SSNLF) retains its position as China's No. 1 phone maker, with 17% of the market. Apple's (AAPL) iPhone, meanwhile, was fifth with a 9% share of the market. Asian companies ZTE, Lenovo and Huawei were second, third, and fourth, respectively.

Despite the introduction of its new line of Lumia devices in April, Nokia (NOK) continues to struggle in China, plunging out of the list of the country's top 5 smartphone makers with 6% of the market share. Shipments have fallen 47% from last year as customers have not taken to Windows Phone 7.5.

Looking ahead to the rest of the year, Samsung could see sales rise now that its popular Galaxy SIII is out on the market. Similarly, Apple's iPhone 5 is more than likely to sell well when released later this year.

Sinopec (SNP): Sinopec's plan to acquire China Gas Holdings (CGHOF) in a joint bid with ENN Energy Holdings (XNGSF) is in danger of collapsing, with regulatory obstacles still standing in its way, Reuters reports.

Sinopec and ENN Energy's $2.2 billion bid for China Gas was announced in December, but it still has not received anti-monopoly approval from China's Ministry of Commerce, or MOFCOM. The regulatory approval was one of the preconditions laid out in the bidding consortium's proposal.

Sinopec and ENN Energy had set August 6 as the offer's long-stop date, which means that if preconditions they laid out have not been met by then, they might have to redraw their bid or change the long-stop date for the fourth time. MOFCOM has said the deadline for its review of the deal is end August, so it is likely the consortium will extend the long-stop date to September.

China Gas has thus far resisted the hostile takeover. In December, it rejected the offer, noting that the price of the bid undervalued the company. Sinopec, Asia's largest oil refiner, is hoping to acquire China Gas's portfolio of piped-gas operations in 160 cities across China.

China Telecom (CHA): The smallest of China's big three carriers, China Telecom announced plans to buy 3G assets from its parent company for about $19 billion. The company is currently leasing its 3G bandwidth and infrastructure from its parent, the state-owned China Telecom Corp, and it hopes to cut costs by transitioning from rental to ownership.

The offer price, according to Reuters, is higher than the assets' combined book value. China Telecom will pay for its purchase with internal funds and debt financing, and will not issue new equity. The deal is expected to close at the end of the year.

BYD: The outlook for Chinese car company BYD in the short term is positive, what with high-level executives and big shareholders having sold about $135 million worth of the company's shares in the last month.

The Wall Street Journal reports that six senior BYD executives sold a total of 13 million domestic A-shares in July. BYD, in which legendary investor Warren Buffett's Berkshire Hathaway (BRK-B) has a 9.6% stake, will report earnings for the first half of 2012 on August 27. The company estimates that net profit will come in at about 75%-95% lower than the figure a year ago.

"It's normal for company executives to take profit. But it does send a message to investors that these executives are not confident about their operations, especially given the situation that the stock market is sagging and the economy is slowing," explained Qiu Yanying, a strategist at TX Investment, to the Journal. "At the very least, the sales indicate that the company's operations are not doing well."

Twitter: @sterlingwong
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