In the news: GSK accused of corruption, Alibaba registers a film company and State Grid invests in hi-tech power networks

GSK under fire for corruption

Mark Reilly, a former executive of GlaxoSmithKline's China business, and two Chinese executives, Guowei Zhang and Hongyan Zhao, have been charged by the police with corruption, after an investigation found the company made billions from schemes to bribe doctors, hospitals and officials in the Beijing and Shanghai AICs. Bribery charges carry a maximum life sentence in prison. Officials gave no specific amounts of paid bribes or illegal earnings, although they previously accused GSK of giving Rmb3 billion (US$482 million) to travel agencies to facilitate bribes to doctors and officials. The company was found to have forged accounts, faked transactions to inflate revenue, coerced sales staff to engage in bribery and tried to hide its tracks.

Source:
Reuters

The GSK scandal had increased the vigilance of foreign corporations in China against bribery. Chinese officials visited other multinational drugs manufacturers last year such as Novartis, AstraZeneca, Sanofi, Eli Lilly and Bayer in a sweeping investigation into the industry. The GSK allegations have damaged the company's reputation, its China team (the head office put the blame on Chinese management) and business values. China is a key growth market (the second-biggest in the world) for big pharmaceuticals that rely on the country's growing middle class to counter falling sales in Western countries. Is this case going to be a one-off event or will it really kick start a broader campaign to clean up the health sector once and for all?

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Alibaba registers film company in HK

Alibaba has registered a film company called Alibaba Pictures Group in Hong Kong to boost its media businesses. Preparing for its US listing later this year, Alibaba has spent more than US$3 billion on film and television investments, including Youku Tudou, Wasu Media and ChinaVision. The directors of Alibaba Pictures Group were listed as Dong Ping, ChinaVision chairman, and Zhao Chao, also an executive director of ChinaVision. Alibaba's executive vice chair Joe Tsai stated earlier this year that the company aims to sell more digital content in the future on top of the physical goods provided to consumers.

Sources:
Reuters
The Hollywood Reporter

Hong Kong has a rich history in cinema. Alibaba Pictures Group is planning to sign big-name directors, such as Wong Kar Wai, Peter Chan and Stephen Chow. Alibaba is said to be planning to use the new film group to launch movie channels on its Taobao and Tiaomao e-commerce platforms and its focus on entertainment is aimed at enhancing the company's prospects for the forthcoming IPO. It wants to integrate all of its film and video businesses before possibly spinning them off as a separate company. The world's largest e-commerce firm, Alibaba, could see its listing be the largest in history. How will other internet companies compete?

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State Grid builds hi-tech power networks

China will build the world's largest high power electricity transmission network in an effort to battle pollution. State Grid, the world's largest state-owned utilities company, said the government will soon approve plans for the construction of 12 power lines connecting the energy-rich interior with heavily-industrialised coastal areas. The initial investment is expected to be at least Rmb210 billion. The 12 power lines include eight ultra-high-voltage lines, which can transmit electricity over significantly longer distances with greater efficiency than conventional power lines. State Grid claims they can reduce the density of smog particles by 4% to 5% and cut coal consumption by 200 million tons a year. While this technology is ultimately a far cleaner and efficient means of delivering power across the country, there are problems such as vulnerability to system-wide failures and blackouts.

Source:
South China Morning Post

The completion of the project will allow China to relocate many power plants near populous cities like Beijing, Shanghai and Guangzhou to remote central areas. It will also allow many coal-fired power plants to be retired, hopefully cleaning up the air. More than 75% of China's coal reserves are in the northwestern region, while 80% of hydropower is in the southwest – but 70% of electricity consumption is in the heavily-populated eastern provinces. With the project, State Grid aims to fight pollution (it believes the technology is the “ultimate cure” for smog) and drive up efficiency in electrical transfer nationwide and China is aggressively implementing this new technology. But this is a political decision – as an SOE State Grid will benefit and is using the public's fear of smog to push through these projects. Some experts question how beneficial this will be for the environment and whether it will be worth the time and money.

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