VOL. XXXV NO. 104 * * Wednesday, January 26, 2011
OPINION:
HowXi Jinping’s
rise will test
Sino-U.S. ties
Page 13
Descending on Davos
WORLD ECONOMIC FORUM Pages 16-17
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Stanley Ho’s assets ‘hijacked,’ lawyer says
Emerging world tackles food costs
Governments take aggressive measures to avoid instability, repeat of violent unrest in 2008
Fast-growing emerging na-
tions are taking increasingly
aggressive actions to beat
back rising food prices as
they grow more worried of
threats to stability if prices
don’t start to retreat.
Developing-market govern-
ments have unveiled a laun-
dry list of measures—includ-
ing price caps, export bans
and rules to counter commod-
ity speculation—to keep food
costs from disrupting their
economies as price spikes
that some had hoped were
temporary have stretched into
the new year. Some econo-
mists worry that any further
supply shocks could push
prices even higher, triggering
a food-price crisis like the one
the world witnessed in 2008,
when higher food costs led to
violent unrest across the de-
veloping world.
In the latest indication of
concern, Indonesia said
Thursday it will remove im-
port tariffs on more than 50
items including wheat, soy-
beans, fertilizer and animal
feed in an effort to slow the
rise in food prices. Indonesia
is also planning to raise taxes
on palm-oil exports to 25%
from 20% next month, accord-
ing to a government official
familiar with the matter.
Bad weather, more-afflu-
ent populations and underin-
vestment in agriculture have
pushed up prices of every-
thing from wheat, rice and
onions in India, chilies in In-
donesia and water spinach in
China. Some point to low in-
terest rates in the U.S., Japan
and Europe, as investors use
cheap financing to invest in
globally traded commodities
such as rice, sugar, cotton and
oil, driving their prices
higher. Soy bean prices in the
past six months have risen
46% to more than $14 a
bushel at the Chicago Board
of Trade. Sugar, while lower
than in November, is still up
34% over six months ago to
around 31 cents a pound in In-
tercontinentalExchange trad-
ing.
In response to the price
pressures, India earlier this
month extended bans on ex-
porting lentils and cooking
oil. It also struck a deal with
Please turn to page 15
BY ERIC BELLMAN
AND ALEX FRANGOS
Jakarta,
Delhi ties
point out
new trend
Indonesia and India vowed
to double trade to $25 billion
a year by 2015, with Indone-
sian President Susilo Bam-
bang Yudhoyono on Tuesday
signing $15 billion of invest-
ment pacts with Indian firms
in an unmistakable sign of
how fast-expanding ties be-
tween emerging nations are
steadily reshaping the global
economy.
Economists call it “South-
South” investment, and it is
becoming an increasingly im-
portant growth strategy for
dozens of developing econo-
mies around the world as they
look beyond investment flows
from the once-powerful econ-
omies of Europe, Japan and
North America.
At the same time, the big-
gest developing nations—
China and India—are moving
quickly to secure energy and
minerals supplies from other,
resource-rich emerging coun-
tries such as Indonesia to en-
sure they keep their econo-
mies fully powered up.
The result: a boom in
trade and investment that is
already providing a buffer
against the lingering impact
of the 2008 financial crisis in
the West—and which could
remold the way large chunks
of the world do business.
Just as well, many ana-
lysts say. Globally, foreign di-
rect investments—invest-
Please turn to page 18
BY JAMES HOOKWAY
HONG KONG—A behind-
the-scenes power struggle for
control of one of the world’s
greatest casino empires has
burst into the open, revealing
deep fissures in the family of
ailing 89-year-old billionaire
Stanley Ho.
Opposing members of Mr.
Ho’s sprawling family publicly
accused each other of trying
to seize Mr. Ho’s controlling
18% stake in SJM Holdings
Ltd., the Hong Kong-listed op-
erator of his Macau casinos.
The stake is estimated to be
worth $1.7 billion.
On Tuesday, rival family
representatives released per-
sonal communications from
Mr. Ho and his four families to
prove their cases in the fight
to gain a controlling stake in
Lanceford Co., a vehicle that
holds nearly one-third of the
company that controls SJM.
The stake stands to benefit
from a gambling boom in
Macau, where revenue is ex-
pected to rise 30% this year to
about $35 billion, compared
with $7 billion on the Las Ve-
gas Strip.
The most recent chapter of
the Ho saga began Monday,
with the release of regulatory
filings showing that Mr. Ho
split his stake, roughly in two,
with slightly less than half go-
ing to the children of the
woman he considers his sec-
ond wife and the rest to the
woman known as his third
wife, leaving Mr. Ho with
nearly nothing.
But Mr. Ho, through law-
yers claiming to represent
him, later denied he approved
the share distribution and ac-
cused his third wife and the
children of his second wife of
stealing his shares without his
knowledge, according to a let-
ter provided by these lawyers.
A regulatory filing by SJM
on Tuesday confirmed that
Mr. Ho is contesting the re-
structuring.
“It would appear the assets
at Lanceford have been hi-
jacked by members of the sec-
ond and third family insofar
as shares were issued to the
effect to dilute Stanley to
nothing,” said Gordon Old-
ham, a senior partner at Old-
ham, Li & Nie, Mr. Ho’s law-
yers. Mr. Oldham said in an
interview Tuesday morning
that Mr. Ho had always made
it clear he wanted his assets
to be held in a trust for the
four families in equal share
and would file a lawsuit un-
less the share were returned.
“This has always been my
intention and wish,” Mr. Ho
wrote in a letter dated Jan. 5
that was provided by his law-
yers at the time and ad-
dressed to Daisy Ho, a daugh-
Please turn to page 18
Stanley Ho’s letter, Jan. 5, 2011
Daisy Ho’s letter, Jan. 7, 2011
Stanley Ho and Daisy Ho
attend the funeral for Nina
Wang in April 2007.
BY SHAI OSTER
AND KATE O’KEEFFE
Garuda IPO
Indonesian airline Garuda ran
into trouble trying to sell
shares at a premium price,
unable to overcome investor
concerns that it can navigate
government meddling and
contend with growing
competition. Page 19
dingbat India’s central bank raises
rates as inflation surges.........4
Bloomberg News
2 * * THE WALL STREET JOURNAL. Wednesday, January 26, 2011
THE WALL STREET JOURNAL ASIA
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PAGE TWO
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North Korean state
media reported on a
visit by telecom
company Orascom’s
chief executive.
The Egyptian company started the
North’s 3G mobile network in 2008.
Technology
Twitter is still a niche
activity, but it might have
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blogs.wsj.com/digits
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wsj.com/hk
Luxury rental rates
are rising in Asia’s
sixth-most expensive
city for expats. See a
5,548-square-foot
house leasing for
US$38,000 a month.
i i i
Business & Finance
n The U.K. economy, battered by
snow, shrank in the fourth quarter
of 2010 for the first time in more
than a year, a surprise hit that
will trigger debate about the
country’s aggressive fiscal tight-
ening and the direction of interest
rates amid high inflation. 14
n The IMF said the uneven global
recovery continues, but sovereign-
debt and financial-sector risks,
particularly in Europe, could
threaten global stability. 14
n India raised key interest rates,
suggesting policy makers have
been caught off-guard by a recent
surge in inflation, which has been
driven mainly by food prices. 4
n Foreign direct investment into
India fell by more than a third
from April to September 2010,
hurt in part by problems with
land acquisition and poor infra-
structure, the central bank said. 4
n U.S. stocks fell, with investors
trading cautiously as the Fed
kicked off a two-day policy meet-
ing. In Japan, technology stocks
helped the Nikkei gain 1.2%. 27
n Japan kept its easy monetary
policy unchanged and maintained
its view that the nation’s economy
will gradually return to a moder-
ate recovery path. 4
n Garuda Indonesia will cut the
value of its IPO roughly in half to
$500 million, reducing the size
and price amid investor concerns
about the state-owned airline. 19
n A move by Japan’s financial
watchdog to urge some banks to
support customers who bought
foreign-exchange derivatives has
been met with controversy. 19
n Chinese Internet company
Tencent Holdings plans to launch
a $759.5 million investment fund
to target online game companies
and other funds. 21
n U.S. steelmakers blamed slow
economic recovery for larger-
than-expected quarterly losses as
high raw material and labor costs
and lukewarm demand offset the
positive impact of rising prices. 21
n Yahoo Japan’s profit rose 19%
in the latest quarter from a year
earlier amid solid growth in ad-
vertising revenue, and it said its
planned search-technology tie-up
with Google is going smoothly. 21
n India’s largest mutual-fund
company is struggling with poor
performance and plans changes to
try to boost investor returns. 25
n Hindustan Unilever said its net
profit in the October-December
period slipped 1.7% because of
high raw material costs. 20
i i i
World-Wide
n Chinese military experts re-
jected claims that China obtained
secret U.S. technology to develop
its new stealth fighter, saying it
used homegrown innovation. 3
n Obama will call for a five-year
freeze on nonsecurity discretion-
ary spending “as a down payment
toward reducing” the U.S. deficit,
a White House official said. 8
n Russia’s Medvedev said terror-
ism is “the main threat” the coun-
try faces and vowed to find and
punish those responsible for the
suicide bombing at the country’s
busiest international airport. 8
n A blast from a suspected bomb
ripped through a bus in the Philip-
pine capital’s financial district,
killing four people and injuring 14.
n A roadside bomb killed nine
people in southern Thailand,
where an Islamic separatist insur-
gency has entered its eighth year.
n Suicide bombers attacked po-
lice protecting marches by minor-
ity Shiite Muslims in Pakistan’s
two largest cities, killing 12 people
and wounding dozens.
n Australian police charged
three Indonesians with people-
smuggling offenses over the De-
cember shipwreck of a boat of
asylum seekers that killed dozens.
Thousands of protesters, some throwing rocks, clashed with riot police in the center of Cairo in a Tunisia-inspired
demonstration to demand the end of Hosni Mubarak’s nearly 30 years in power. Police responded with blasts from water
cannons and set upon crowds with batons and tear gas. The demonstration was the largest Egypt has seen in years.
Eu
ro
pe
an
Pr
es
sp
ho
to
A
ge
nc
y
What’s News— Inside
Markets: Japanese
stocks defy weak yen
and soft economy. 19
Property: Hong Kong
home prices are the
world’s highest. 24
World News: Dispute
over funding ensnares
Fiji rugby team. 7
Personal Technology:
The iPad has taken
over your computer. 9
Wednesday, January 26, 2011 THE WALL STREET JOURNAL. 3
WORLD NEWS
Stealth-theft claims denied in China
BEIJING—Chinese military ex-
perts disputed that China obtained
secret U.S. technology to develop its
new stealth fighter, saying the coun-
try relied on homegrown innovation
to produce a plane that has drawn
new international attention to its
military advances.
Speculation that China obtained
U.S. stealth technology has been cir-
culating since aviation experts
noted that the J-20 stealth-fighter
prototype looked like a larger ver-
sion of the U.S. F-22 Raptor, cur-
rently the world’s only fully opera-
tional stealth fighter. The
twin-engine J-20 made its first pub-
lic test flight two weeks ago during
a visit to China by U.S. Defense Sec-
retary Robert Gates.
On Sunday, the Associated Press
quoted Balkan military officials say-
ing China likely learned some of its
stealth technology from pieces its
agents obtained of the wreckage of
a U.S. F-117 shot down by a Serbian
anti-aircraft missile during the 1999
Kosovo war. The F-117 Nighthawk
was the first U.S. stealth fighter.
Then, on Monday, a former U.S.
B-2 stealth bomber engineer called
Noshir Gowadia was sentenced by a
U.S. court in Hawaii to 32 years in
prison for selling stealth-missile
technology—with potential applica-
tions on fighter jets—to China.
Mr. Gowadia’s son, Ashton Gowa-
dia, said his father plans to appeal.
The Chinese experts rejected the
idea that China obtained American
technology from espionage or from
the wreckage of the F-117—which
they said used less advanced tech-
nology than what China has devel-
oped—although some acknowledged
that China may have used publicly
available source materials.
“China is completely capable of
making its own stealth fighter jet,”
said Li Daguang, a professor at the
People’s Liberation Army’s National
Defense University. “I think we de-
veloped the J-20 largely on our own
research, but at the same time
learning from existing foreign mod-
els. Many countries have already
possessed stealth-jet technol-
ogy...stealth materials are not con-
sidered highly sophisticated or con-
fidential at all.”
China’s Defense Ministry and Air
Force declined to comment on any
of the reports, as did China Avia-
tion Industry Corp., which is devel-
oping the J-20, and the Chengdu
Aircraft and Design Institute, where
it is being tested. Asked about the
reports at a routine briefing, For-
eign Ministry spokesman Hong Lei
said “I am not aware of relevant in-
formation.”
Current and former U.S. officials
also said in 2009 that computer
spies had repeatedly broken into the
program to develop the F-35, the
next generation of U.S. stealth
fighter. The former officials said at
the time they thought the attacks
came from China. Beijing has denied
involvement in such cyberattacks.
Song Xiaojun, a former naval of-
ficer who is now a military com-
mentator for Chinese state televi-
sion, attributed the reports that
China appropriated its stealth tech-
nology to those who “just envy and
hate us for having developed the jet,
for we made something they
thought we’d never be able to make.
I’m saying that I’m sure the technol-
ogy is 100% Chinese.”
The F-117 was developed in se-
crecy in the 1970s and began service
in 1983. It was not completely invis-
ible to radar, but was very hard to
detect because of its unique radar-
absorbent coating. The one shot
down over Serbia was the first to be
hit. The F-117 was retired in 2008.
The AP quoted Adm. Davor Do-
mazet-Loso, Croatia’s military chief
of staff during the Kosovo war, as
saying intelligence reports in 1999
described Chinese agents “criss-
crossing” the region where the F-117
went down, and buying bits of
wreckage from local farmers.
“We believe the Chinese used
those materials to gain an insight
into secret stealth technologies ...
and to reverse-engineer them,” he
was quoted as saying.
Parts of the F-117 are still exhib-
ited at Belgrade’s aviation museum.
Wang Yanan, associate editor-in-
chief at China’s Aerospace Knowl-
edge magazine, said there was no
point in China acquiring wreckage
parts of the F-117, as its technology
was already outdated in 1999.
Still, other analysts point to
signs of Chinese interest in the
F-117. Andrei Chang, the Hong Kong-
based editor of Kanwa Defense, an
online publication about military af-
fairs, said China had also built a
scale model of the F-117 at an avia-
tion research institute in the city of
Luoyang in Henan province.
He included in an emailed state-
ment what he said was a satellite
photograph of the F-117 model,
taken in May 2010.
“This is the fundamental reason
why it took China only a very short
period of time to develop several
types of stealth materials in Bei-
jing,” he said.
The B-2, which was developed in
the 1980s and first unveiled in 1988,
is still used as a long-range strategic
bomber and has never been shot
down.
Mr. Gowadia—the former B-2 en-
gineer sentenced Monday—moved
from India to the U.S. for postgradu-
ate work in the 1960s and became a
U.S. citizen about a decade later.
He helped design the propulsion
system for the B-2 when he worked
at Northrop Corp., now known as
Northrop Grumman Corp., between
1968 and 1986.
He was arrested in 2005. A fed-
eral jury in Honolulu found that he
pocketed about $110,000 to help
China design a cruise-missile ex-
haust nozzle that would give off less
heat, allowing it to evade infrared
radar detection and U.S. heat-seek-
ing missiles.
He was not accused of assisting
with the J-20 program, although
prosecutors did say that he visited
an aviation design facility in
Chengdu, the western city where the
stealth fighter has been tested.
However, aviation experts have
noted that the J-20 prototype that
made the test flight had unusual ex-
haust nozzles, which appear to be
designed to prevent it from emitting
enough heat to be detected by infra-
red radar.
—Yoli Zhang and Juliet Ye
contributed to this article.
BY JEREMY PAGE
Some Chinese experts say
J-20 designers may have
looked to publicly available
material on foreign models.
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