Think you're right, Jay. Based on the news reports posted to RB SFTBF today, the following picture is emerging.
Being no hand at things Chinese, but a negotiator by trade, I'm impressed that Son has something everyone (but everyone) including Tokyo, Taipei and Bejing seems to want, namely, a way to manage an internet/IT VC conglomerate and create synergies and billions of dollars of market cap along the way. Each of these players need the same facility for the benefit of its own respective constituency for both personal and political gain.
Son is dealing in the context of a trilateral struggle for influence in which all three suitors want his endorsement, advice and capital but employ different strategies in their dealings with him to extract the desired concessions.
Chinese leaders have been assiduously courting Tokyo since the recent Taiwanese elections stressing Japan's embrace of a pro-independent Taiwan is unacceptable. They know Son has interests in several Chinese projects (eg, SBISF, Alibaba, Chinadotcom JV, UTSI) and, being who they are, they believe threats, intimidation and heavy-handed coercive measures aimed at Son and Taiwan will best preserve future bargaining positions and face before their own hardliners.
Tokyo, and most immediately the FRC, wants him to take NCB off its hand for the full price and soon so as to maintain Japanese control of NCB, not appear weak in price negotiations and to prevent further slippage in the bank's asset values and attendant loss of bargaining power. At the same time, it is concerned about the Chinese military buildup and probably enjoys the prospect of Son, who it may hope China will view as Tokyo's proxy, flaunting his relationship with Chen during this delicate period of Sino-Japanese courtship.
Chen wants Son to publicly embrace him as a confidant and advisor and thereby show Bejing he has gained the upper hand in the competition for Tokyo's and Son's affections while also securing Son's advice on matters of e-commerce (and, I'd wager, a few hot tips <g>).
Despite all of its bluster, China holds the weakest hand here, IMO. They need Tokyo's, Taiwan's and even Son's investment and technology to modernize their economy and provide capital inflows. Their ideology is designed to perpetuate mainland authoritarian rule, but both the internet and the information it brings are educating the masses; leadership's time, while very ample, may begin to diminish. Under the circumstances they require ultimately a means to save face and otherwise return to the status quo ante business relationships.
All of which brings us to Son's visit with Chen last weekend. Whether prearranged or not (and the accounts are fuzzy at best on this score), after the formalities and business at hand were dispensed, Chen asked Son to become his personal tech advisor. Son politely declined but added, sure, you can call me anytime if you'd like to talk tech, or words to that effect. The media hounds caught wind and suddenly the world (read China) understood a great pro-independence cabal had formed. Chen for the moment has gained the propaganda advantage he sought, Son has a bargaining chip to play with Bejing and the PRC is very embarrassed and vindictive.
China, knowing no other way, decided to try to drive a wedge between Son and Chen by hitting Son hard in the pocketbook and the hope of further mainland dealings. It attempted this ploy by 1) halting deployment of UTSI and related technology which it otherwise badly wants and 2) threatening Honk Kong businessmen not to do business with pro-independence interests in Taiwan. After HK leadership raised a fuss, but the damage had been done, Bejing backed off of the latter position.
Now the issue becomes, how do Son and Bejing resolve their disputes over 1) Son's perceived affiliation with Chen; 2) China's threats to all who may listen that to do business with pro-independence Taiwanese interests is "forbidden" under penalty of financial punishment and 3) the halt in the UTSI deployment. And, how do Son and the FRC deal with the NCB standoff so Son takes a deal if he wants it and the FRC saves face before the asset wastes further and the public foots the bill for it's poor negotiation?
The answer probably involves some of the following elements: Son and Taiwan clarify for the Chinese that, gee, this was merely an informal, unofficial and personal discussion between Chen and Son which led to no meaningful agreement or agenda beyond courteous expressions of mutual respect. Son's praise for Chen was in the nature of gracious complement and protocol but was not intended as a political statement.
China graciously accepts this clarification and obtains a similar, informal advisory commitment from Son (after all, a lot of PRC officials are making money off of Taiwan's outsourcing and IT; why not let Son possess knowledge of both parties' needs in this regard so as to promote a more efficient, harmonious and profitable relationship going forward). Naturally, under these circumstances the review of UTSI's technology confirms all is right with it and the stock immediately takes off.
And in Tokyo (elsewhere too) Son is presented as a peace and king maker who has done much to enhance the standing of the Japanese nation in promoting cross-Straits harmony. And also, by the way, time and loans are a wastin' over at NCB so what's it going to be boys, my way or the highway? If you'll offer me what I want I'll think about it and talk with your old pals Goldman about what to do with the proceeds of my Yahoo sales.
All in all not a bad position he finds himself in, provided the UTSI class actions hold off long enough to let it all play out. g2
Btw: The Economist, whose work I've defended previously, dropped several notches in my opinion based on this last article. It is completely devoid of fact, source references or even a rudimentary grounding in the background and nuance of the NCB process and negotiation history. Maybe if they paid these fops a competitive wage they'd axe the charlatans and insist someone sign their trash. IMHO. |
