China's biggest television exporter announced major losses yesterday stemming in part from declining sales in the US and an unfolding financial scandal involving its biggest American customer.
The exporter, the Sichuan Changhong Electric Co (
A Changhong spokesman, Liu Haizhong (
Changhong estimated that it might be able to recover US$150 million and that it was making provisions to take losses on US$310 million. It also said that Apex had "suffered large losses to royalty payments, US anti-dumping measures and adverse business factors, and is experiencing considerable hardship making full payments."
The announcement of the losses followed a report in a Chinese newspaper of the detention in China of the president of Apex Digital, David Ji (
According to a report in Monday's 21st Century Business Herald, a Chinese-language newspaper, Ji was detained in Shenzhen after an investigation by the police in Sichuan Province, where Changhong is based.
Apex Digital has been a big seller of lower-price televisions, DVD players and other home entertainment products at discount retailers like Wal-Mart.
Problems with its largest customer would be the latest blow for Changhong, which has seen its sales in the US decline. Earlier this year, the US Department of Commerce imposed 25 percent tariffs placed on televisions exported to the US by Changhong and other Chinese makers after it decided they were dumping sets by selling them below a reasonable market price. Apex has also been accused of ignoring royalty payments for patented DVD technology.
In the first half of this year, Changhong exported US$200 million in television sets, compared to US$600 million for all of last year, Liu said. In recent years, Chang-hong has made about 90 percent of the television sets China exports to the US, and Apex sold about 90 percent of Chinese-made TV's in America.
Claims of fraud abound in China's business world, but analysts said this case, because of the companies involved, has the potential to tarnish China's standing in the US electronics market.
"Lack of confidence would hurt everyone," said Richard Doherty, the research director of the Envisioneering Group, an electronics market research company in Seaford, New York.
Trading in Changhong was suspended on Monday on the Shanghai stock exchange; its stock is down 27 percent for the year.
Until recently, Ji and Apex Digital had been among the celebrated stars of China's effort to shift more of its trade from simple manufactured goods to more lucrative electronics products.
Ji, 52, was born in Jiangsu Province and moved to the US to study in 1987. He started Apex with a Taiwanese partner in 1997, along with investors from the US, Taiwan and China. Apex's low-cost products quickly became strong sellers in Wal-Mart and other stores.
But analysts said Apex's presence in the US had dimmed earlier this year because of its shrinking investment in new products and advertising. As advertising slowed, its shelf-space plummeted in recent months, said Doherty, the analyst.
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