PayPal, the online payment service provider that is a owned by eBay of San Jose, has shocked Indian nationals who rely on the service by suspending payment transactions to and from India for more than a week. Almost nothing was given in explanation for this abrupt action except a vague blog post on their website by Anuj Nayar, a PayPal spokesman:

Personal payments to and from India and transfers to local banks in India have been suspended while we work with our business partners and other stakeholders to address questions they have about the service

PayPal executives have been unavailable for comment on specific reasons why the service was discontinued. There is speculation that this may have something to do with new Indian government rules aimed at preventing money laundering. Last November, the Indian government introduced rules requiring financial institutions and other intermediaries to verify the identity of clients carrying out international money transfers.

Paypal has not just been blocking all their money transfer but has also not letting the Indian account holders withdraw money they already have in their accounts. For the past week, merchants have been unable to withdraw funds in Rupees to local Indian banks. shocking many Indians who have relyed on the service. The blocking started on January 28th and Paypal will only say that it is working to resolve the current situations in “the shortest span of time.”

Sony Pictures Entertainment Inc., based in Culver City, will be laying off about 450 people and eliminating 100 open positions to cope with declining DVD sales. Most of the cuts at the studio will occur by the first week of March and will be in the home entertainment and information-technology units in the United States.

The company, a subsidiary of Japan’s Sony Corp. also cut back last March, when it laid off nearly 250 people and eliminated nearly 100 open positions. Company staff was informed of the latest cuts in a memo Monday and through videos by the studio co-chairs on an employee Web site. “Our industry is affected by two things: It’s affected by the economy, of course, and it’s affected by technology,” co-chair Amy Pascal says in the video. “Over the last two years, it’s changed people’s DVD buying habits, which has had a huge effect on our company and the industry at large.”

The home video market has been declining as people have not been buying videos as often, and instead turn to rentals, which are far less profitable for the industry.

The hit movie “Avatar” directed by James Cameron of Fullerton, and distributed by 20th Century Fox, of Los Angeles, is being pulled from most theaters in China, apparently because it is so successful.  As reported in the Los Angeles Times, The movie is no longer being allowed in 2D theaters even though is already the most successful movie of all time in China, having grossed a record $76 million.  The Chinese government only allows 20 foreign movies per year to be shown in China’s theaters. “Avatar,” which opened worldwide in mid-December, was held in Chinese theaters until January because the 2009 quota had already been filled.  The movie is already being widely pirated, with copies available in Beijing’s bootleg DVD stores. 

It seems incredibly strange that the Chinese government should be able to pull one of our most successful products just because it is successful, without any repercussions at all from our government.  Should the U.S. now stop the sale of some manufactured goods from China, as soon as they become successful?

Talk about biting the hand that feeds you.  The Alibaba group – owners of the Chinese trade portal Alibaba has strongly criticized Yahoo – its largest shareholder, for siding with Google after a cyber attack on that company.  

As reported in the New York Times, a spokesman for Alibaba, said executives at the company were “angry” because Yahoo appeared to follow Google in suggesting the Chinese government was behind the cyberattacks.  They issued a statement saying that Yahoo was “reckless” in supporting Google because they believed there was a lack of evidence that the attacks were supported by the Chinese government. 

Yahoo is one of the companies that was targeted in the attacks but the company declined to confirm that it was a victim. “The people with knowledge of the situation said that Google contacted Yahoo about the attacks before it publicized them. Google executives were dismayed that other companies were unwilling to publicly acknowledge the attacks, and they were particularly frustrated by Yahoo’s silence” the Times reported. 

Yahoo paid Alibaba $1 billion in 2005 and gave Alibaba control of Yahoo China in exchange for a 40 percent stake in the Chinese company. Yahoo’s investment in Alibaba has paid off in a big way for that company. Alibaba.com, a unit of Alibaba, went public in 2007 with a huge stock offering in Hong Kong and is now valued at $12.5 billion.  Jack Ma, the founder of Alibaba is a celebrity in China because of his success in forcing California’s Ebay to leave the Chinese market, and for taking over Yahoo’s China operations, as part of their billion dollar investment in his company. 

This was a huge amount of capital from a California company that was used to make Alibaba fantastically successful. Now that company is turning on very the people who helped it become what it is.  Is this a simple case of “sucking up” to the Chinese authorities?  Jack Ma is said to be famous for that, and some people even believe he is now milking the resources out of Yahoo so it eventually fails in that country. 

In any event, a consensus seems to be forming that this is a free trade issue.  If the Chinese government blocks Google or other American Internet firms – or forces them to leave that country, the the American Goverment should take the same action with Chinese Internet firms – and it seems like a good place to start would be Alibaba.

China has unilaterally declared that their depute with Google over censorship and strong evidence of government sponsored hacking will not affect U.S. Trade relations, but do they get to make that call?  

“Any decision made by Google will not affect Sino-U.S. trade and economic relations, as the two sides have many ways to communicate and negotiate with each other,” Chinese government spokesman Yao Jian told a news briefing in Beijing.

Well of course the two sides have many ways to communicate with each other – that is not the point. If one party to a trade agreement censors and blocks the content of the other party, then of course it should it should be a trade issue.  In the tit for tat world of diplomacy, if they block the content from one of our companies, then shouldn’t we block one of theirs?

California buys a huge amount of Chinese imports, but they don’t by nearly as many of our exports. One of our strongest industries in the movie industry – but only 20 foreign films are even allowed to be shown in that country each year. The rest of the movies we produce here are simply pirated (i.e. stolen) there, Can you imagine if we said to China, “we will only allow the products from 20 of your manufacturers in our country each year”. Now they are blocking, and possibly even attacking, one of California’s other great industries – Internet services.

It is not at all disrespectful to China to expect our government to respond to blocking and censorship with reciprocal actions that affect Chinese companies. That is how a mature trade relationship works. Mr. Yao Jian has it wrong. This is exactly the kind of thing that should affect trade and economic relations – this is a trade issue.

UPDATE: Evidence that the Obama Administration may be looking at these blocking and censorship issues from a more sensible “fair trade” perspective, might be found in a speech Secretary of State Clinton plans to give on the issue on Thursday. From a column by Andrew Ross in today’s San Francisco Chronicle:

“The Internet is integral to the international trading system,” said Ed Black, CEO of the Computer & Communications Industry Association, who is scheduled to meet with Clinton on the matter this week. “China cannot limit the free flow of information and still comply with its international trade obligations.” “You can’t lecture the Chinese on human rights,” said another industry executive. “You won’t get anywhere with that. So, it’s best to treat it as a trade issue.”

Should the administration go that route, it will enlarge the can of U.S.-China worms already growing around the latter’s increasingly protectionist economic policies. “Greater control of the Internet is part of a wholesale tightening up of the Chinese economy,” said an executive with a high-tech trade organization that is also due to meet with Clinton. “It’s about protecting domestic industries and pushing indigenous innovation. But they’re doing it in blatantly discriminatory, brazenly unfair ways.”

Yahoo, based in Sunnyvale has issued a statement supporting its cross town rival Google in their dispute with the government of China.  Google apparently believes the Chinese government or its spy agencies were responsible for an attack on its technical infrastructure, which targeted the accounts of human rights activists.  Yahoo issued the following statement:

“We condemn any attempts to infiltrate company networks to obtain user information.  We stand aligned with Google that these kinds of attacks are deeply disturbing and strongly believe that the violation of user privacy is something that we as Internet pioneers must all oppose.”

The issue is sensitive for Yahoo because they provided information from their servers to the Chinese government that resulted in long prison terms for two Chinese journalists.  Yahoo is much more entrenched in China however.  They sold their Internet operations to Alibaba – a Chinese trade portal operator, but retained a 39 percent stake in that company.  According to the San Francisco Chronicle, Yahoo spokeswoman Nina Blackwell declined on  to say whether its solidarity with Google would cause the company to sell its Alibaba holdings.

Google Inc. will stop censoring its search results in China and may pull out of the country after experiencing an attack on the email accounts of human rights activists, according to a report in the San Francisco Chronicle:

Google disclosed in a blog post that it had detected a “highly sophisticated and targeted attack on our corporate infrastructure originating from China.” Further investigation revealed that “a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists,” Google said in the post written by Chief Legal Officer David Drummond.

Google did not specifically accuse the Chinese government. But the company added that it is “no longer willing to continue censoring our results” on its Chinese search engine, as the government requires. Google says the decision could force it to shut down its Chinese site and its offices in the country.

It’s unclear how much of a blow to its business Google would suffer by pulling out of China. The country has the world’s largest population of Internet users but research firm Analysys International said last year that Baidu.com handled 62 percent of Web searches in China compared with 29 percent for Google.

Update, according to the New York TimesGoogle linked its decision to sophisticated cyberattacks on its computer systems that it suspected originated in China :

Those attacks, which Google said took place last week, were directed at some 34 companies or entities, most of them in Silicon Valley, California, according to people with knowledge of Google’s investigation into the matter. The attackers may have succeeded in penetrating elaborate computer security systems and obtaining crucial corporate data and software source codes, though Google said it did not itself suffer losses of that kind.

While the scope of the hacking and the motivations and identities of the hackers remained uncertain, Google’s response amounted to an unambiguous repudiation of its own five-year courtship of the vast China market, which most major multinational companies consider crucial to their growth prospects. It is also likely to enrage the Chinese authorities, who deny that they censor the Internet and are accustomed to having major foreign companies adapt their practices to Chinese norms.

Pasadena-based eSolar Inc. has signed a deal with a Chinese electric equipment manufacturer to build solar thermal power plants throughout China.  The agreement between eSolar and China Shandong Penglai Electric Power Equipment Manufacturing Co. calls for eSolar to provide the technology and information to build solar farms with a capacity totaling 2,000 megawatts over the next decade.  The first plant will have a 92 megawatts capacity and will be built in 2010 in the Mongolian desert in northern Chinanorthern China at the Yulin Alternative Energy Park.  Plans are for the solar thermal power plants to be co-located with biomass facilities, the companies said in a press release.

Toyota Motor Corp. has announced that it plans to end production in March 2010 at the Fremont plant it has run with General Motors Co. The Toyota-GM partnership has run the plant since 1984 – Corolla compact and Tacoma pickups are built there. Bob Wasserman, mayor of Fremont expressed disappointment at the news that the 5.3-million-square-foot plant would close: “This is a real tragic loss of jobs, very good jobs, for the workers at NUMMI,” he said. “There are a lot of good people there who will now be out of work. And this impact will be felt well beyond Fremont, considering all of the people employed by suppliers around the East Bay and the Central Valley. This is a very difficult situation.”

Agricultural holding company Yasheng Group reported a $76 million profit for 2008 as part of its goal to be listed on a major U.S. stock exchange, according to a report in the San Francisco Business Times. Yasheng Group is a Redwood City holding company focused on agriculture in China. It has about 15,000 workers. It owns seven agricultural businesses in China that grow products such as onions, potatoes, apples, alfalfa, flax, beets, wheat, apricots, sunflowers, beer barley and cumin. As part of its move towards a major stockmarket listing, Yasheng published its financial results for 2006 and 2007 in January. More on Yasheng Group seeking stock exchange listing

China has blocked the video-sharing Web site YouTube but has not offered any reason or explanation for the ban. Mountain View-based Google, which owns YouTube, said it began noticing a decline in traffic from China about noon Monday.  By early Wednesday, site users insider China continued to encounter an error message: “Network Timeout. The server at youtube.com is taking too long to respond.” “We do not know the reason for the blockage and we are working as quickly as possible to restore access to our users,” said Scott Rubin, a spokesman for Google. It’s not the first time users in China have been unable to access the site. In March 2008, China blocked YouTube during riots in Tibet.

Sony Pictures Entertainment Inc., the movie studio subsidiary of the Japanese electronics maker, is laying off nearly 250 people and eliminating nearly 100 open positions in an effort to cut costs. According to a report in the San Francisco Chronicle, about 150 of those jobs will be in the Los Angeles area:

Chief Executive Michael Lynton and studio co-chair Amy Pascal announced job cuts of 3.5 percent of the studio’s staff worldwide in a staff memo sent out Tuesday afternoon. “Our studio remains profitable, but over the past five months, the deepening global financial crisis has begun to impact some of our lines of business, such as television syndication, DVDs and advertising sales,” they said in the memo. These economic effects have, regretfully, made it necessary to take the step we had hoped to avoid, and worked hard to minimize: reducing our headcount.”

As reported in New American Media, San Francisco-based AsiaWeek has stopped publication after nearly three decades of service.

AsianWeek is just the latest in a string of Asian-American media closures, including KQED’s Pacific Time, AZN Television, and the San Jose Mercury News’ Vietnamese-language supplement Viet Mercury. While most cities have trouble supporting one daily newspaper, he said, San Francisco has five Chinese-language dailies, offering not only local and national news, but a dozen pages of international coverage of news from Taiwan, mainland China, Hong Kong, and Southeast Asia.  But just as the mainstream media are being hobbled by declining readership and revenue, hastened by a faltering economy and growth of online media, their ethnic media counterparts are being squeezed too. “There are fewer major newspapers, fewer newspaper readers and fewer newspaper advertisers than ever before,” wrote AsianWeek President
James Fang, and Ted Fang, editor and publisher, in a letter to readers published in the newspaper. In the last few months, a handful of ethnic publications has gone the way of AsianWeek, scrapping paper editions and going online, reaching out to readers for help or pulling the plug completely.
Ted Fang said AsianWeek would continue publishing online and in special newspaper editions. He said, however, that all staff had been laid off. Fang said AsianWeek plans to do more community work, which Fang counted among the newspaper’s greatest “successes.” “Media is a part of bringing together APA communities,” he said. “We plan to organize around events… around issues and causes as a way of helping the community.”

Two Engineers from China have been sentenced to a year in prison after pleading guilty to economic espionage against the United States. The two men – Fei Ye, a citizen of the U.S., and Ming Zhong, a permanent U.S. resident – were facing a maximum of 30 years in prison after confessing to stealing microprocessor designs from their Silicon Valley employers in 2006. They had planned to smuggle the designs to China to launch a government-sponsored startup company there. Their guilty pleas were the first convictions for the most serious crime under the 1996 Economic Espionage Act. Prosecutors asked for a lenient sentence because the men cooperated with investigators – both apologized in court.

Unlike traditional industrial espionage economic espionage means that someone acted to benefit a foreign government and is a more serious crime. Only a few economic espionage cases have been resulted in convictions, mostlybecause it’s difficult to prove a person was acting to benefit a foreign nation. The case against Ye and Zhong began seven years ago, when they were arrested at San Francisco International Airport while attempting to board a flight to China. Their luggage was allegedly full of sensitive documents on chip designs taken illegally from four Silicon Valley tech firms who had employed the engineers. The companies include NEC Electronics Corp., Sun Microsystems Inc., Transmeta Corp. and Trident Microsystems Inc. Both had worked at Transmeta and Trident, while Ye had also worked at Sun and NEC. Other documents seized by authorities allegedly demonstrate the engineers were attempting to solicit money from Chinese government agencies to fund a startup firm.

Prosecutors say the documents showed that Ye and Zhong were promoting the startup as something that would elevate China’s chip-making capabilities, however, the documents do not confirm the Chinese government was aware that the chip designs were stolen.

Hewlett-Packard Co. has announced plans for an advanced manufacturing complex in West China.   According to a report in Silicon Valley / San Jose Business Journal, Palo Alto-based HP plans a 20,000-square-meter facility in Chongqing where it will make notebook and desktop PCs for customers.  Manufacturing operations are expected to begin in 2010. When in full operation, the HP-managed plant is expected to have the capacity to meet market demand in Chongqing as well as other parts of China across government, public and retail sectors. 

The California Travel and Tourism Commission will open an office in Seoul on to generate marketing and promotional campaigns to bring South Korea travelers to California. The commission hired AVIAREPS Marketing Garden to represent the California tourism industry in South Korea. South Korea is California’s fourth-largest overseas market, with 331,000 visitors, according to Caroline Beteta, CTTC chief executive officer.  “We expect that number to increase dramatically with the easing of visa restrictions and expected expansion in airlift.” South Korean travel in California generated $405 million in 2007, with an average leisure travel expenditure of $1,368 per visit. California now has overseas travel offices in the United Kingdom, Japan, Australia, Germany and Mexico.

Japan’s Mitsubishi UFJ Financial Group has offered to purchase the 35 percent stake in San Francisco based UnionBanCal- parent of Union Bank of California, that’s held by the public. As reported in the San Francisco Business Times:

Japan’s largest bank my market cap sees the Union Bank branch network as a nice launch pad for its own banking ambitions in America. “We view this transaction as a first step of our growth strategies in the United States, and we will achieve greater management flexibility and aim to further strengthen our presence,” MUFG said.

MUFG unsolicited offer calls for the Japanese bank to pay $63 per share, or $2.7 billion, for the UnionBanCal shares in public hands. That was up from a previously undisclosed offer of $58 per share that the San Francisco bank’s board rejected in June as too low. The proposed transaction values the entire bank at $8.8 billion. Investors anticipate that the purchase price may be nudged higher, pushing the bank’s shares up 13 percent Aug. 12 to $65.50 at the close of New York Stock Exchange trading.

UnionBanCal operates 330 branches in California, Oregon and Washington state. Union Bank in recent years has adopted a strategy of courting business owners and affluent customers rather than trying to go head-to-head against California’s two-largest banks, Bank of America and Wells Fargo. The numbers don’t work for Union Bank to engage in that costly battle, given the larger banks’ ubiquitous branches and ATMs.

As reported in the San Francisco Chronicle. It certainly sounds like a good idea- afterall, California has spent a huge amount of time and money to reduce the smog and pollution in our major cities, only to find that we are now the recipients of Chinese pollution. It remains to be seen whether this agreement will be purely symbolic or not. I am especially curious as to how the State intends to “encourage private entities in California to support climate change projects in China”. The State of California has few effective business programs. Will these projects go mostly to business associates of of the Governor, or channeled through shadowy lobbying organizations such as the California Foundation on the Environment and the Economy?

California’s top environmental official on Tuesday plans to sign an agreement with the United Nations to help China reduce its greenhouse gas emissions. The memorandum of understanding drafted by the U.N. Development Programme pairs California with one of the world’s largest emitters of greenhouse gases. California produces more greenhouse gases than any other state but also has taken strides to significantly reduce its output. That includes attempts to roll back auto and factory emissions, while trying to institute an emissions-trading system for industry.

California promises to share policy ideas and research for curbing greenhouse gas emissions, according to the four-page agreement to be signed on Earth Day in Beijing. The state also would mobilize public agencies and encourage private entities in California to support climate change projects in China.

“I think it will help show them they can indeed reach set targets and move forward on environmental protection and maintain a strong economy as California has,” Linda Adams, California’s Environmental Protection Agency secretary, said…

California’s agreement with the development program, a subsidiary of the U.N. that promotes economic development, follows several years of international outreach by the state. In 2005, Gov. Arnold Schwarzenegger signed an environmental agreement with the Beijing Municipal Environmental Protection Bureau to help improve air quality and water quality. The agreement was amended in 2007 to further bolster California’s support of Beijing’s air quality programs.

Schwarzenegger also has entered agreements with other states and parts of Canada to implement a carbon-trading program. The governor has said those agreements will help California meet the goals of a 2006 law seeking to cut greenhouse gases roughly a quarter by 2020.

On Monday, Schwarzenegger said the state’s agreement with China recognizes that climate change requires a global solution. “America has to lead, and we are doing so with or without Washington,” Schwarzenegger said in a statement. “California is not waiting for the federal government to take action.”… While California is pursuing its climate change goals, state regulators and politicians are bickering over how best to implement the landmark 2006 greenhouse gas law.

Two men stopped from boarding a plane to China were charged with trying to illegally export sensitive infrared cameras that authorities say are restricted because of their potential military uses. As reported in the San Francisco Chronicle:

Beijing residents Zhi Yong Guo, 49, and Tah Wei Chao, 52, were named in a criminal complaint alleging they knowingly exported or attempted to export restricted items without a license, the U.S. attorney’s office said.

Prosecutors said both men were a flight risk and asked that they be held without bail. Both were scheduled to be arraigned on April 28. Chao’s attorney Richard Goldman said he did not yet know how his client planned to plead. “I believe in the presumption of innocence,” Goldman said..

Guo and Chao each face up to 20 years in federal prison if convicted. The men were arrested Saturday at Los Angeles International Airport after they tried to board a plane to China with 10 thermal imaging cameras in their luggage without the proper export licenses, the government said.

The cameras, which are primarily used by law enforcement, fire departments and the military, are carefully controlled for national security reasons, and are treated as munitions under the International Trafficking in Arms Regulations. They produce heat-based images invisible to the naked eye.

Federal authorities had been investigating the men since last August, when an Oregon-based company informed them of an order for three of the cameras from a new customer — Printing Plus Graphics of San Gabriel, Calif., according to an affidavit from Special Agent Steve Huerta of the Department of Commerce. The company, Flir Systems of Wilsonville, Oregon, repeatedly warned the customers that they could not export the cameras without a license, and shared Chao’s e-mail address and other documents with authorities.