China Digital Media Readings for October 3rd

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  • on October 3rd, 2011
  • Alibaba May Buy Its Biggest Investor Yahoo – Bloomberg- Ma’s role in the Alipay dispute may make it more difficult for his company to acquire Yahoo, said Laura Martin, an analyst at Needham & Co. in Los Angeles.“Jack Ma has damaged his credibility in American capital markets by his transfer of Alipay,” said Martin, who has a “buy” rating on shares of Yahoo and doesn’t own the stock. “With him, I’d get the cash at closing. You never know what you’re going to end up with.”
  • China group’s eye on Yahoo fuels privacy fears – Rebecca McKinnon, a senior fellow at the New America Foundation, said that any attempt by Alibaba to buy Yahoo was likely to be “highly controversial”, given the negative reaction in Congress last year when Chinese equipment maker Huawei attempted to become a supplier to Sprint, the US telecoms company.“Will people who use Yahoo email feel comfortable using a service owned by a Chinese company, knowing that in China all internet companies are expected to share information about user identities and activities on request?” she said.

    In a close parallel, US regulators had taken a close look at Deutsche Telekom’s purchase of a US wireless carrier, making it likely they would also study a Chinese acquisition of a big online communications firm, said Marc Rotenberg, head of the Electronic Privacy Information Center.

    The rapid increase in the amount of data held by US internet concerns had made possible foreign acquisitions more of a concern, Mr Rotenberg added. “That is one of the scenarios that has long been of concern with respect to Google’s enormous data aggregation.”

  • “Rumors are a Cancer that Threatens the Internet and Society” | China Digital Times (CDT)- fairly nasty rhetoric, expect detentions over weibo posts as part of apparent october internet rectification campaign//In order to restrict rumors online, we must promote a civilized Internet atmosphere and form an atmosphere where everyone is self-disciplined. First, as netizens, it’s of the utmost importance to respect Internet law and policy, to use the Internet in a civilized way, to not post or transmit rumors, and to be responsible for oneself. Secondly, to preserve a reasonable Internet attitude, netizens must distinguish that news with unclear origins and that specious or sensational news and not give it the merit of good faith nor help rumor-mongers spread it. Netizens must be responsible for others. Additionally, Internet enterprises should make even greater efforts to strictly master information dissemination management and cherish the development of their own credibility and professional integrity. They should not allow themselves to be used by rumor-mongers

    The Internet is an important carrier of society’s civilization and progress. But rumors are a cancer that threatens the Internet and society. Working together for a healthy Internet requires netizens, Internet enterprise and all of society’s broad participation. And eradicating the fertile soil where rumors take root and multiply will require strengthened web management efforts and a stronger crackdown. According to laws and regulations and led by the public security bureau department, those who use the Internet as a place to spread lies and threaten society should be investigated and prosecuted. According to the facts about their rumor-mongering, the harm caused to society and their criminal motives, as well as other objective elements, they must pay the deserved price for their crimes.

  • Received New Round from Baidu, Considering Adding Reputation System | TechNode | TechNode -
  • The Cash Reserves of China’s Internet Companies- very rich and debt-free. some hunting for overseas deals//The shares of Chinese internet companies tanked in September amid acute regulatory uncertainty. In the US, the Justice Department is probing for potential criminal charges against the series of Chinese accounting scandals and frauds in March-May. In China, the government is considering reforms to the VIE corporate structure that could constrain the ability of Chinese firms to raise finance and operate off-shore.

    In the face of such bleak outlook, cash-on-hand is key to maintaining normal operations. This is especially true of firms that are not yet cash-flow positive. For the bigger players with available cash, this is a ripe environment for acquisitions–Baidu and Tencent both have huge funds for this purpose, with a special focus on e-commerce.

  • Shift in Sentiment Toward China’s Internet Darlings – shorts have been working reporters hard//Investors dumped the stocks of some of China’s biggest Internet companies, as scandals with some smaller Chinese firms has shaken Wall Street’s confidence in the country’s businesses.
  • Digital Dao: Questions about Yuri Milner, the KGB, and the Influence of Foreign Governments- CFIUS now paying attention to Internet deals? I thought the various rumors/consipracy theories about Yuri Milner had been debunked long ago. he has partners who do better due diligence than some governments//As discussed at the recent Suits and Spooks conference, social networks are contributing to revolutionary changes taking place worldwide and as a result they’ve become an indispensable platform for offensive operations as well as intelligence collection. One of the world’s most sophisticated investors in social meda is Yuri Milner. As co-founder and CEO of DST Global (formerly known as Digital Sky Technologies), he leads a multi-national social media investment powerhouse staffed by many ex-Goldman Sachs employees and fueled with investment by Tencent (China) and Naspers (South Africa). Combined, these three companies have significant ownership interest in some of the largest online properties in the world including Facebook, Twitter, GroupOn, Zynga, Riot Games, Astrum Online Entertainment,, QQ, ICQ, Ibibo, Alibaba, and many more.
  • As U.S.-Listed China Internet Stocks Dive, Renren CEO Smacks Alibaba – Kara Swisher – News – AllThingsD- Silverlake has been trying for a while to get a deal with Alibaba. //“It’s quite unfortunate,” Chen said to Bloomberg about disagreement, which has since been settled. “It caused a lot of uncertainty about Chinese Internet companies.”

    Them’s fightin’ words, and a source close to Alibaba reacted with, well, reaction.

    “Yeah, it shook confidence so badly that Silver Lake and DST [Global] just decided to put in billions to back Jack Ma,” referring to a recent funding deal by the large investors. “People shouldn’t try to blame their own lack of performance on others.”

  • Regulatory Uncertainty Threatens Chinese Stocks; iChinaStock 30 Fell 33% in September | iChinaStock- VIE fears totally overblown, shorts pushing the story hard w western reporters, making bank.DOJ investigation fears also overblown for the China Internet stocks. Targets are the reserve merger firms and the ecosystem that brews them.

    But an October Internet crackdown appears to be coming, so investors should still be concerned about regulatory risk

  • Internet firms co-opted for surveillance: experts | Reuters- not in China but in US and elsewhere. Panopticon irresistible to security services, most people don’t know/care?//Internet companies such as Google, Twitter and Facebook are increasingly co-opted for surveillance work as the information they gather proves irresistible to law enforcement agencies, Web experts said this week…

    “The marginal cost of surveilling one more person is now essentially approaching zero.”

  • China Calls for Internet Crackdown After ‘Prostitute Diary’ Blog Is Shut – Bloomberg- heard from good source weeks ago that october rectification coming, people will need to watch what they say on weibo, arrests should be expected. grim//China’s government told its 500 million Internet users to stop spreading “malignant tumors” online or face punishment, the official Xinhua News Agency reported, citing a Cabinet spokesman it didn’t name.

    Users in China must “abide by the law, show self- discipline and refrain from spreading rumors,” the spokesman for the State Council’s State Internet Information Office said, according to Xinhua.

  • Shift in Sentiment Toward China’s Internet Darlings – Investors dumped the stocks of some of China’s biggest Internet companies, as scandals with some smaller Chinese firms has shaken Wall Street’s confidence in the country’s businesses.U.S.-listed shares of China’s leading search engine, Inc., and Sina Corp., the operator of the country’s Twitter-like messaging service, plunged 16% and 18%, respectively, in the last two days of trading on the Nasdaq Stock Market even though these companies haven’t been accused of wrongdoing.
  • 坚决制止捏造事实编造谎言在网上传播的行为_时政频道_新华网- original chinese about quashing net rumors. perhaps the october internet rectification campaign i have been hearing about really is coming// 新华网北京9月30日电 国家互联网信息办网络新闻宣传局负责人30日发表谈话,对最近有人在网上捏造所谓“微博名妓若小安”等谎言予以谴责,要求有关属地管理部门和各网站依法查处,坚决制止在网上捏造事实、编造谎言等扰乱网络传播秩序和社会秩序的行为,维护社会和谐稳定。
  • China vows to punish posters of Internet rumors – Yahoo! News- BEIJING – China is renewing threats to punish people who post falsehoods on the Internet as the government tries to rein in a medium that has become a source of lively debate and criticism.A spokesperson for the State Internet Information Office said in a statement released late Friday that Internet rumors were malignant tumors that harm social stability. The statement carried by the Xinhua News Agency calls on Internet users to abide by laws and stop spreading rumors.
  • Alipay’s Transfer Sowed Doubt in China Internet Companies, Renren CEO Says – Bloomberg -
  • Alibaba’s Jack Ma at Stanford: “We Are Very Interested” in Buying Yahoo – Kara Swisher – News – AllThingsD -
  • The Jamestown Foundation: Public Security Officially Joins the Blogosphere- moe evidence that while the government may neuter weibo they will not shut it down. they still think they can co-opt, channel and exploit it//On September 27, the Ministry of Public Security (MPS) announced the national launch of “police microblogging construction” (gong’an weibo jianshe) as the newest element in its social management toolkit and public security informationization (, September 27; People’s Daily, September 27). To prepare the national launch of police microblogging, the MPS convened a special seminar on September 25 and 26 to help establish the “normalization” of police microblogging with informed research and lessons from a trial period for the MPS program that took place over the last 18 months at sub-national levels. MPS Vice Minister Huang Ming presided over this launch seminar and said the results so far have been very promising (China Police Daily, September 27).

    Part transparency, part opinion shaping and part two-way information service, police microblogging aims to achieve a number of objectives. The primary objective is related to improving the relationship between the people and MPS elements at every level.

  • How They Did It: The Continuing Adventures of Benjamin Wey In The U.S. Capital Markets : The Financial Investigator- Tianbing “Benjamin” Wey, the head of New York Global Group, a firm that functions as a sort of Grand Central Terminal for Chinese companies, appears to be a big fan of the concept of vertical integration.In the language of business this implies that a corporation’s various subsidiaries are united in one large supply chain to deliver a product to market. That’s exactly what Wey does, except that instead of an automobile, New York Global helps bring Chinese reverse mergers to the U.S. investor.

    The results have put a goodly amount of change in Wey’s pocket.

  • Lax Telecoms Give Privacy Pirates Free Rein_英文频道 Caixin Online- Experts say recent cases of personal data theft underscore weak employee management at China’s telecom operatorsWith the right software, any switched-on mobile phone in China can be traced by a single computer user within 50 meters, sometimes within five, of his or her location.

    Phone-locator software is supposed to be highly restricted and require special consent. And in theory the privacy of mobile phone customers – including their locations and personal data – are protected by China’s telecom laws.

  • For China’s Smaller Video Sites, It’s Consolidate or Die | iChinaStock -
  • Exclusive: Justice Department probing Chinese accounting | Reuters- The FBI has an embedded agent in an SEC working group on Chinese companies that enter the stock market through so-called reverse mergers with U.S. shell companies.Officials from the SEC and the Public Company Accounting Oversight Board (PCAOB) are due to meet with their Chinese counterparts in Washington, D.C. in October for a second round of talks on joint inspections of auditing firms in China.

    “Not having proper accounting and reliable audit review for publicly traded companies with operations in China is just not acceptable. We have to find a path to resolution of this issue,” Khuzami said. “It is … a big issue for us.”

  • The Staggering Stats of China’s Mobile Sector [Infographic] -
  • Asia Unbound » Adam Segal » Collision in Cyberspace is Unavoidable: The View from Chinese Analysts – People’s Tribune Magazine (人民论坛杂志) has a collection of twelve articles on cyberspace and cyber conflict by Chinese analysts at think tanks and academic institutes. All of the articles are worth glancing at, but four—”A Sovereign Country Must Have Strong Defense” by Min Dahong, director of the Network and Digital Media Research Office at the China Academy of Social Sciences; “America’s ‘Pandora’s Box’ Cyber Strategy Confuses the World” by Shen Yi from Fudan University’s Department of International Politics; “Cyber Power ‘Shuffles the Cards’: How China Can Overtake the Competition” by Tang Lan, assistant director of the Institute of Information and Social Development Studies at the China Institute of Contemporary International Relations; and “How to Construct China’s Cyber Defenses” by Liu Zengliang, from the PLA National Defense University—do a particularly good job of illustrating what some Chinese analysts are saying about U.S.-China relations in cyberspace.  The picture is not pretty. All see cyberspace as an emerging, critical area of competition and are notably pessimistic about the future. Conflict seems almost inevitable.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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