1 Talking Point 7 Week in 60 Seconds 8 China Consumer Week in China 9 Economy 11 M&A 12 Energy and Resources 13 Media 14 Society and Culture 6 June 2014 19 And Finally Issue 240 20 The Back Page www.weekinchina.com

Letting off steam? m o c . n i e t s p e a t i n e b . w w w

Angry words at regional security summit,

as the row over the South China Sea worsens Brought to you by Week in China Talking Point 6 June 2014

Dangerous currents War of words at Singapore forum as South China Sea crisis continues

Grin and bear it: American Defence Secretary Chuck Hagel and the PLA’s Lieutenant General Wang Guanzhong

“ he China seas north and south came up for discussion at a regional that Washington “will not look the Tare narrow seas. They are seas security summit in Singapore. And other way when fundamental prin - full of everyday, eloquent facts, rather than the threat from the ciples of the international order are such as islands, sand banks, reefs, weather, today’s dangers are instead being challenged”. swift and changeable currents – decidedly of the man-made variety, “China has undertaken destabil - tangled facts that nevertheless as a hundred vessels from China ising, unilateral actions asserting its speak to a seaman in clear and def - and Vietnam circle a disputed oil claims in the South China Sea,” he inite language.” rig, and fighter jets from both coun - rebuked. “We take no position on Such is the description in Ty - tries fly overhead. competing territorial claims, but we phoon – Joseph Conrad’s 1902 novel oppose any nation’s use of intimi - – as Captain McWhirr steers his So there were angry words in Sin - dation, coercion or the threat of steamship into the fury of a tropical gapore? force to assert these claims.” P h o t

o storm. Most of the headlines at the Then Hagel listed some of the

S o u r But the language was shrill Shangri-La Dialogue went to US Sec - Chinese activities causing concern: c e :

R e rather than clear and definite last retary of Defence Chuck Hagel, who “It has restricted access to the Scar - u t e r s

weekend, when the South China Sea made a forceful speech promising borough Reef; put pressure on the 1 In the future, finance will help new growth flourish.

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“taste China’s iron fist”. “Let us just wait and see what tricks will be played by this Japanese PM, who is set on messing up Asia,” the People’s Daily had also pre - dicted before the conference. Once the meeting actually began the Chinese soon felt targeted. “I feel they are echoing each other and sang a duet,” the PLA’s Wang com - plained. “We can see from the Shangri-La Dialogue this year, it’s Japan and the US who stirred up conflict.” He showed up too: Japan’s leader Abe Xinhua opted to heap its scorn on Abe, insisting that “such rhetoric long-standing Philippine presence common ground in their shared is fundamentally flawed when it at the Second Thomas Shoal; begun military backgrounds. comes from the nationalist leader land reclamation activities at mul - “I do think it’s much a better way who has been trying to conjure up tiple locations; and moved an oil for soldiers to talk with peer sol - the militarist past of Japan in a drive rig into disputed waters near the diers and we are all very candid,” he to rearm his country.” Paracel Islands.” ventured in what appeared to be a But Major General Zhu Chenghu, Then followed a terse exchange diplomatic riposte. dean of the National Defence Uni - with Major General Yao Yunzhu of But the following morning Wang versity, chose instead to aim his de - the People’s Liberation Army (PLA). turned more confrontational, dra - risive tones at the Americans, Ignoring attempts from the moder - matically dispensing with his pre - telling Phoenix TV that their mili - ator to bring her questioning to a pared remarks to fire back at the tary power was shrinking. Washing - halt, Yao challenged Hagel about American position. ton’s limited response to events in whether Japan had fractured the “Secretary Hagel’s speech is full the Ukraine was further proof of its status quo two years ago when it na - of American hegemony,” he re - “erectile dysfunction,” he scoffed. tionalised the Senkaku Islands in proached. “Secondly, it’s full of Zhu had calmed down by the the East China Sea, which China also threats and intimidation; thirdly, time he gave another interview to claims and calls the Diaoyu Islands it’s full of instigation and incite - the Wall Street Journal, although (see WiC78 for our first article on ment, aimed at provoking restless he was still keen to blame Wash - this longstanding dispute). elements in the Asian-Pacific region ington for making “very, very im - Was Washington’s inclusion of to stir up trouble.” portant strategic mistakes” in the the islands in its defence treaty with region. After alleging hypocrisy – the Japanese not the same coercive Tokyo was caught in the crossfire “whatever the Chinese do is ille - and intimidating behaviour that it too? gal, and whatever the Americans warns others against, Yao de - The day before Hagel’s criticism of do is right” – Zhu finished with a manded? the Chinese, Japanese Prime Minis - more ominous twist. “If you take “I thought I made America’s po - ter Abe Shinzo also warned against China as an enemy, China will ab - sition clear in my remarks about the efforts to “consolidate changes to solutely become the enemy of the position we take on disputed terri - the status quo by aggregating one US,” he warned. tories,” Hagel retorted. “In fact, I fait accompli after another”. think I repeated our position a This contravened the spirit of the What is China’s claim to the South number of times.” rule of law, Abe told the summit au - China Sea? Later Hagel met Lieutenant Gen - dience, although he was careful not Primarily it’s historical: principally eral Wang Guanzhong, the PLA’s to refer to China by name. that the Chinese discovered the is - P h o t

o deputy chief of the general staff. That counted for little with a Chi - lands as early as the second century

S o u r Wang said he was surprised at the nese delegation whose seniority BC; that its naval missions have c e :

R e bluntness of the American’s com - and size had been beefed up, Xin - made references to the Spratlys and u t e r s

ments but that he would try to find hua commented, so that Abe could the Paracels throughout Chinese 3 Week in China Talking Point 6 June 2014

history; that official accounts from the Song and Yuan dynasties demonstrate that the seas were un - der the Middle Kingdom’s writ for hundreds of years; and that maps from the later Ming and Qing dy - nasties prove the point beyond challenge. China’s rivals don’t accept the historical argument. Then again, they don’t always present a united front when seeking to refute China’s claims. For example, they don’t Getting busier by the day: Chinese surveillance ships even agree on what to call the dis - puted waters. The Vietnamese refer Owners of smaller rocks or reefs are namese coast (see WiC237). Hanoi to the East Sea, for instance, while granted smaller expanses of territo - says it is located within its exclusive it’s the West Philippine Sea for the rial water, but they don’t get exclu - zone, while Beijing insists that the Filipinos. sive economic rights beyond. rig is drilling in its own waters. There is also disagreement over Vietnam and Malaysia made One interpretation is that Bei - China’s use of historical arguments submissions to the UN body seek - jing is testing the resolve of its in its row with Japan over islands in ing confirmation of their own strongest adversary in Southeast the East China Sea, says Eric Posner, rights under the same rules five Asia. “If China can break off Viet - a professor at the University of years ago. Beijing’s response was nam they’ve won the South China Chicago Law School. Again, the Chi - swift, reiterating its historical case Sea,” an unnamed American offi - nese claim is based on references to and filing claims of its own within cial told Robert Kaplan in Asia’s events that took place centuries ago. a ‘nine-dash’ map amended from Cauldron , a study of maritime ten - “A typical example is a diplomatic an outline drawn up by the nation - sions in the region published ear - record from 1534 that says, ‘The ship alist Kuomintang Party in 1947. lier this year. “Malaysia is lying low, has passed the Diaoyu Islands’,” This maritime boundary (now em - Brunei has solved its problem with Posner told Slate magazine earlier bossed into Chinese passports) in - China, Indonesia has no well-de - this year. “The ship was carrying a corporates about 90% of the South fined foreign policy on the subject, Chinese official. But passing an is - China Sea and Lieutenant General and the Philippines has few cards land and calling it Diaoyu does not Wang returned to the historical to play despite the country’s in - establish sovereignty. A country claim in Singapore last weekend, in - genious boisterousness and incen - does that by showing it has seized a sisting that the Convention could - diary statements.” territory through an official act and n’t be applied retroactively to Of course, unlike Japan and the then exerted control over it or that redefine sovereignty long estab - Philippines, Vietnam doesn’t have a its government has controlled it as lished through history. defence alliance with Washington. long as anyone can remember.” He also rebuked the Americans But foreign analysts seem divided Posner’s view is that Tokyo’s once more, pointing out that they over whether Beijing is steering a claim to the islands is stronger in aren’t even signatories to UNCLOS new course, pointing to a similar terms of international law because provisions. “Why didn’t the US sign dispute seven years ago, when boats they were vacant until 1895 when the Convention?” he asked. “Because from both countries were damaged the Japanese seized them. it works against the US in many in clashes at a rig not far from the The sovereignty row is further areas. How could a non-signatory current one. complicated by rules stemming party blame China while citing the Ely Ratner, a former staffer at the from the UN Convention on the Law relevance of the Convention?” US State Department, says there are of the Sea (UNCLOS) that came into signs of a new direction in Chinese force 20 years ago. Under the terms Why the flare up with Vietnam? policy. Unlike the response to P h o t

o of the Convention, countries can The immediate context for the ten - Japan’s ‘nationalisation’ of the dis -

S o u r claim exclusive economic rights up sion in Singapore last weekend is puted islands in the East China Sea, c e :

R e to 200 nautical miles from the the ongoing clash over a Chinese oil or the confrontation with the Philip - u t e r s

edges of their territorial waters. rig exploring for gas off the Viet - pines at Scarborough Shoal, China 4 Week in China Talking Point 6 June 2014

was the protagonist this time around, Ratner believes. That makes Planet China it harder to claim that they have Strange but true stories from the new China been provoked, he told China File last week. Other analysts put Beijing’s dec - NEXT STOP, MELTDOWN. When Charles Dickens wanted to kill off the laration of an Air Defence Identifi - character Krook in Bleak House , he opted for spontaneous combustion. cation Zone last year in the same Many of his critics thought it far-fetched, although the author believed that it was possible. Unexpected incineration was back on the agenda in Chengdu bracket (see WiC218). last month, albeit involving public transport rather than people. The Global One of the Chinese responses is Times reports that a woman surnamed Hu was riding a local bus when she that energy multinationals have noticed a strong burning smell and grew suddenly convinced the “bus was been drilling in disputed waters off going to spontaneously combust”. So she took an emergency hammer, Vietnam for some time, so their shattered a window and jumped out of the still-moving vehicle. own exploration efforts are hardly Suffering minor injuries, Ms Hu later admitted: “I may have made the revolutionary. wrong call”. The bus driver pulled over when he heard the commotion, Yet it’s hard to deny that Beijing although video footage shows the other passengers remaining remarkably is getting more assertive in the re - calm as Hu smashes the window to escape the imaginary inferno. The bus gion. Partly that’s down to advances company’s head of security also seemed sanguine about events, telling the in its reach (until recently CNOOC newspaper that passengers have broken windows to escape bus journeys wouldn’t have been capable of in each of the past three summers. Perhaps passengers are wise to stay alert. As the South China Morning Post reports, fires can happen. Last May drilling for gas at such depths off - a bus exploded into flames in Yibin in Sichuan, killing one and injuring 20. shore, for instance). But it’s also an expression of China’s rising politi - cal and economic power, particu - larly relative to its smaller What happens next? largely two dimensional using air neighbours. China isn’t unique in First, some better news. Neither and maritime forces,” he said, pre - this regard, Kaplan points out in his China or Vietnam wants to see the dicting that the Chinese navy would book, comparing current events confrontation spur their general overwhelm any force that Vietnam with activity in the Caribbean 150 public into more volatile unrest. The puts to sea. “Vietnam has no expe - years ago, when the US extended its Chinese authorities have curtailed rience and has not practiced for a authority at the expense of the Eu - media coverage of the rig standoff conventional engagement at sea.” ropean powers. Posner agrees, say - to avoid riling its citizens. Hanoi has Then again, having an oil rig as ing that Washington’s efforts to learned its lesson too, clamping the flashpoint might give Beijing justify its foreign policy goals were down on last month’s rioting after more room for manoeuvre politi - often as dubious legally as some of crowds targeted factories that they cally. It can always say that drilling China’s today. Besides, interna - thought were Chinese. is over and move the rig without tional law has never stopped bigger The fact that the two countries losing too much face. But there’s countries from bullying smaller managed to come to agreement in been little sign of either side step - ones, Posner says. “Why should demarcating the Gulf of Tonkin a ping back at this point. On May 26 China go along with territorial allo - decade ago also shows that a com - a Vietnamese fishing vessel was cations that result from rules that promise isn’t impossible. sunk in a collision, an incident favoured strong nations a century The two countries last went to which Hanoi’s foreign ministry ago,” he asks. war in 1979 (both claimed victory spokesman attacked as an “inhu - Or as one China-based analyst after Chinese forces retreated man action”. On Sunday, Chinese told the Wall Street Journal (on con - across the border after a few weeks). coastguards fired water cannon at dition of anonymity): “You could But a future conflict could be more another Vietnamese vessel before say now that the Chinese are behav - expansive. “The 1979 border war colliding with it. The Vietnamese ing more like a great power – they’re was purely a one-dimensional con - boat was “severely damaged”, ac - behaving with a sense of entitle - flict involving land forces only,” cording to China National Radio. ment, a sense of exceptionalism – noted Carl Thayer, a professor at the If the confrontation continues the way the Americans have done, University of New South Wales in Hanoi might follow Manila’s exam - and the British before them – as if Australia. “Any conflict between ple in filing a case at The Hague. the rules don’t apply to them.” China and Vietnam today would be This is the first time that a country 5 Week in China Talking Point 6 June 2014

has brought a claim against China has shown little capacity for coordi - cluded a new defence agreement under UNCLOS, although Beijing is nated action and few of its mem - with Washington, while in May refusing to participate, warning the bers will want to risk Chinese anger. there were combined military exer - Philippines that the move will se - Beijing’s response to the ministerial cises off Palawan. In April the Viet - verely damage ties. statement was predictably implaca - namese concluded their first Vietnam says it hasn’t taken a ble too, warning that it has nothing search-and-rescue exercise along - final decision on international arbi - to do with ASEAN’s members. side American troops, while ana - tration. “They [the Chinese] have More likely is that the compet - lysts think that both Vietnam and asked us several times not to bring ing countries will try to forge a Malaysia are likely to welcome the case to the international court,” more united front themselves more frequent visits from the US Nguyen Chi Vinh, the deputy de - against the Chinese. Tokyo is do - navy too. fence minister, told Japanese media nating new coastguard boats to The problem is that Beijing is in - last week. “Our response was that the Filipinos, for instance, while creasingly indignant at American it’s up to Chinese activities and be - Hanoi and Manila have also been activity in the region, especially haviour; if they continue to push us working on integrated action, when it challenges Chinese princi - we have no choice.” overlooking for the moment that ples of territorial integrity and stirs Other countries may launch they disagree about some of the some of the historical bitterness re - their own cases if Manila’s is up - islands themselves. sulting from former subjugation by held, although enforcing a judge - Recently Vietnam and the Philip - foreign powers. ment is a very different matter. In pines have signed agreements on As far as the Chinese are con - the meantime ASEAN leaders may coastguard cooperation, something cerned, this vast expanse of ocean try to put more pressure on the par - that will be celebrated at an unlikely will always be regarded as “blue na - ties to negotiate. In May attendees barbecue-and-beach-volleyball tional soil”, Kaplan writes in Asia’s at an annual summit expressed “se - party on a tiny cay in the Spratlys Cauldron . And quite probably, the rious concerns over the ongoing de - this month. seas are even more cherished than velopments in the South China Sea” Xinhua isn’t expecting an invite, that: “How would you feel if I cut off – the first time in 20 years for a chastising the “Manila-Hanoi co - your arms and legs?” Wu Shengli, statement of this kind at ministerial hort” instead as “built on shaky commanding officer of the Chinese level. But hopes that ASEAN might ground and doomed to fail”. navy, asked an international forum bring the disputing parties together More American support will be four years ago. “That’s how China look optimistic. The regional body courted too. In April, Manila con - feels about the South China Sea.” n

No slam dunk

Whenever an NBA franchise is put up for sale, However, it now appears that the speculation was former Houston Rockets star Yao Ming is faulty once again, after former Microsoft boss Steve rumoured as a potential suitor. Ballmer was revealed to be close to a It happened when the Milwaukee $2 billion takeover. Forbes had Bucks were sold for $550 million this earlier estimated the franchise was year. And the speculation started worth $675 million, ranking it 13th in again when the bidding started for the the league. But now Ballmer looks LA Clippers. Citing sources, ESPN likes paying the highest price ever said the retired player was leading a for a NBA franchise. Chinese consortium to bid for the Los Job done, then, in linking Yao’s Angeles-based franchise. consortium to the Clipper sale I l Yao himself quickly rejected the perhaps? Yes, but expect those l u s t r a reports. But Chinese media followed up with keen Yao rumours to resurface the next time an NBA t i o n :

w interest too. Most newspapers thought Yao’s name was franchise comes up for sale. w w . b being mentioned to beef up the Clippers’ price tag, In the meantime some of his fans are suggesting on e n i t a

e although many in the local press reckoned it would social media that if the Houston Rockets becomes p s t e i make a good pairing. available, Yao will go to the hoop to buy his former club. n . c o m

6 Week in China The Week in 60 Seconds 6 June 2014

Li says 7.2% growth is ok The major news items from China this week were...

HSBC’s final PMI index stood at 49.4 in May, up from 148.1 in April. The reading suggested that the economy is stabilising but “it is too early to say that it has bot - tomed out, particularly in light of a weaker property sec - tor,” Qu Hongbin, HSBC’s chief China economist, wrote. “Stronger policy support is warranted” and Qu expects monetary and fiscal policy “to be loosened gradually over the coming months”.

Premier Li Keqiang said China could still meet its job 2creation goals as long as its GDP grew this year by 7.2%. That is lower than the target of 7.5% growth but Li said it would still be sufficient to create 10 million jobs. Mainland tourists in Hong Kong are spending less

The US Department of Commerce said it will impose penalties and punishments, and for anyone who steals 3anti-subsidy tariffs of up to 35% on Chinese solar our information, even though they are far away, we shall panels, even if they contain solar cells made outside punish them!” China. It has also identified companies that it says are enjoying illegal subsidies. China’s Ministry of Commerce Hong Kong is considering reducing the number of said that it is “strongly dissatisfied” with the decision, 5mainland tourists to the city by as much as 20%, after claiming “ an obvious hint of trade protectionism” that chief executive CY Leung confirmed to media that offi - “will inevitably lead to the escalation of trade disputes cials are discussing a controversial visitor cap. The news between China and the US.” comes after weeks of protests locally at the rising num - ber of Chinese tourists. But Hong Kong might want to re - The state broadcaster CCTV has added to the current think any restrictions after retail sales dropped 9.5% in 4criticism of Microsoft’s Windows 8 operating sys - April, probably because the growth rate of mainland vis - tem, saying that Microsoft can obtain sensitive user data itors slowed to 14.7% from 26.7% in March. including phone numbers and bank account details. It also accused tech giants like Facebook, Google and Apple Russia and China have agreed to set up a joint credit of aiding cyber espionage in Washington. The People’s 6rating agency, with both countries eager to establish Daily weighed in too: “The priority is strengthening institutions that reduce their dependence on the US and Europe. The Financial Times said the new combination was likely to pair Chinese rating agency Dagong with a state-backed institution from Russia.

Shipments of copper and aluminium have been 7halted into China’s third largest port in Qingdao. The move comes as the banking regulator launches an in - vestigation into fraudulent lending against the metals. The commodities were used as collateral for loans. How - P h o t

o ever, it is widely suspected that the borrowers faked doc -

S o u r uments so as to borrow again and again against the c e :

R e warehoused metals – meaning a lot of loans were made u t e r s Microsoft’s operating system gets attacked by CCTV against fabricated collateral. n 7 Week in China China Consumer 6 June 2014

Bad for the brand? Burberry begins selling via Alibaba platform

f all the luxury labels, China, the new middle class still has OBurberry can lay claim to be an appetite for goods from the sector. among the first to incorporate a “Tmall can help Burberry generate digital strategy. Burberry World, as plenty of traffic and bring in new Burberry’s website is called, houses customers. In the long run, it can Now available on Tmall its online store. But it also offers also deter the counterfeiting in de - more – from live streaming of signer goods that thrives online,” Lai on Tmall,” another critic believed. Burberry’s latest catwalk shows to Yang from the Beijing Institute of Some of the other luxury labels social media channels like Art of Business Economics told Xinhua. that have experimented with store - the Trench, where fans post pic - Burberry’s Tmall store is a boost fronts on Tmall haven’t been partic - tures of themselves in their for Alibaba, which has been courting ularly successful. For example, high- favourite Burberry coats. Western brands ahead of its initial end Benefit Cosmetics closed its Former chief executive Angela public offering in New York (see Tmall shop in 2012 after only a few Ahrendts, who has since joined Ap - WiC237). Tmall’s storefronts are months. It had generated high traffic, ple, argued that the brand needed more exclusive than Alibaba’s free - company bosses said, but they were to keep pace with a generation that wheeling bazaar Taobao, where any - worried that online discounting by downloads images rather than tear - one with a Chinese ID can set up other makeup brands was hurting ing them out of magazines. shop (there are currently seven mil - the firm’s image. “I’ve seen what has happened to lion vendors). For example, Indeed, if sales in the first month brands like Kodak that did not keep Burberry will have more control at Burberry’s store are indicative, it up with digital change,” she said. over the customer’s online experi - might be a battle to win over the “That’s a lesson in what to avoid.” ence. But many luxury players have wealthier shoppers. Beijing Youth So perhaps it’s consistent that the shied away from online malls, fear - Daily says that the goods being pur - company, which now has 78 stores ing damage to their brands or asso - chased were the lowest-price items in 36 cities in China, is opening a ciating them with the kind of steep like perfumes and cosmetics. More virtual storefront on Tmall, Al - price discounts that has turned costly items like trench coats and ibaba’s massive business-to- Tmall’s Singles’ Day sale into China’s purses had no takers, the newspa - consumer site. Shoppers will find a biggest shopping event of the year. per reports. full range of items from perfumes at After the announcement, some The Wall Street Journal mean - Rmb500 ($79.94) a bottle to trench retail analysts wondered whether while reported this week on what coat favourites costing more than this was a step too far for Burberry might be a better fit between the Al - Rmb22,000. in widenening its distribution. An - ibaba shopping site and a multina - “The new tie-up is a first for any gela Kapp told CBN that the collabo - tional intent on growing its China luxury brand and reflects a shared ration was “seriously mismatched”. sales. Diageo is also opening for commitment to offering Chinese “Basically the kind of ‘neighbours’ business on Tmall in the hope of consumers the best in luxury expe - you have is very important for lux - selling more of its whiskies and riences across all of Alibaba Group’s ury brands,” she suggested. “From a other spirits to Chinese consumers. platforms,” Burberry said in a state - branding point of view, this [tie-up Unlike in the US, liquors can be or - ment. between Tmall and Burberry] is not dered online in China directly from P h o t

o While the slowdown in the wider a very good marriage.” the firms that make them and

S o u r economy and the crackdown on lav - “Luxury brands rely on exclusiv - shipped nationally. Diageo’s China c e :

R e ish gifting has curtailed the luxury ity, so I don’t see why they would boss sees “enormous potential in e- u t e r s market’s double-digit growth in lower themselves and have a store commerce”, says the Journal. n 8 Week in China Economy 6 June 2014

Finger on the trigger Weapons firm wants to IPO, as Hong Kong’s auditors come under fire

Market information about Great Wall Military is limited by state secrecy rules

he largest yuan note is worth chines to tally up the haul, which Great Wall Military, one of the four Tonly Rmb100 or about $16, was later calculated to have weighed units of the Anhui Military Indus - meaning that cash-rich Chinese at least a tonne. try Group which supplies weapons need cavernous wallets. But Beijing’s Stacked vertically the cash tower to the People’s Liberation Army, finance chiefs have been reluctant to would have climbed to 328 feet, the wants to raise Rmb450 million to issue larger denominations on con - Chinese media reported excitedly. fund its future operations. Because cerns that it will make it easier to Without helpful details like these, of escalating tensions between store and smuggle illicit cash. many of China’s corruption cases China and some its neighbours, in - Are they being too fearful? Not if tend to morph into a distasteful but vestors have been chasing stocks the case of Wei Pengyuan is a repre - indistinct mass. Prosecutors have that might benefit from higher sentative one. A deputy director at probed more than 10,000 officials spending on military equipment, the coal division of the National En - in the first three months of the year, says Shanghai Securities News. ergy Administration, Wei is cur - for instance, with investigations Great Wall is exciting market inter - rently caught up in the graft purge reaching deep into state firms like est because it would be China’s first sweeping through the state energy oil giant CNPC and the conglomer - “pure military play” if the IPO goes P h o t

o sector. What makes him stand out is ate China Resources. ahead later this year.

S o u r the revelation that he stashed The sweep doesn’t look likely to Great Wall has suffered from its c e :

R e Rmb100 million at his house. Inves - delay one of the most talked-about own corruption scandal relatively u t e r s tigators needed 16 counting ma - IPOs in the domestic stock market. recently, with its former chairman 9 Week in China Economy 6 June 2014

Huang Xiaohu expelled from the Party last year. But the IPO prospec - tus doesn’t explain if Huang’s re - moval should concern investors. In fact, it doesn’t even mention the case, stating only that Huang re - signed last March. Great Wall coun - ters that it’s not a concern, telling National Business Daily that the charges against Huang relate to mis - conduct before he became boss. That’s not the only area in which Great Wall is being tightlipped. Be - Gunning for investor interest? cause of its core business, much of its work is classed as a “state secret”. – which EY may yet contest – cen - The move seems related to main - According to China’s three-tiered tres on Standard Water, a munici - land fears that Hong Kong ac - standard, Great Wall falls into the pal water firm in China. The stock countants might disclose state se - “Grade 2” grouping, meaning that it market regulator wanted a closer crets to foreign regulators, says engages in “confidential projects” look at the audit documents after Paul Gillis, a professor at Peking (firms with “top secret” projects are EY dropped Standard Water as a University and the author of China classified as Grade 1, apparently). client on the eve of an IPO four Accounting Blog. That also means that it isn’t re - years ago. EY said no because the For US listings, most auditors al - quired to disclose commercial in - audit was conducted by its main - ready have their Chinese affiliate formation such as the identities of land affiliate, which was refusing sign the audit report. But the pro - its major customers or key com - to turn over the working papers be - posals would create a tricky situa - petitors. The same applies for prod - cause of secrecy laws. tion for companies hoping to IPO uct reviews. It positions itself as the How a water firm might have in Hong Kong, as well as those al - leading producer of mortar shells, state secrets to protect is unclear ready there. “The problem is that for instance. But the state secret rul - and the judge in the case was cer - Hong Kong rules require the use of ing means that it has no need to out - tainly unconvinced, ruling EY’s ob - Hong Kong auditors,” Gillis says. line its market share. jections “a complete red herring”. “That is the rule that needs to “Weapons makers carry state se - Ashley Alder, chief executive at change. I don’t see China allowing crets to the stock market,” the Bei - Hong Kong’s Securities and Futures Hong Kong regulators the right to jing News reminded its readers. “Se - Commission, agreed. “This case is regulate anything on the mainland, lective disclosure could hamper the primarily about the obligations of including Chinese companies listed public from making an accurate an accounting firm in Hong Kong to in Hong Kong.” judgement on risks.” comply with requirements under Hong Kong’s auditors were soon Great Wall reported just Rmb1.2 Hong Kong law,” he insisted. “The warning that the proposals would billion in revenues for 2013, a frac - case is not about PRC law. Auditors dent investor confidence, while in - tion of China’s Rmb720 billion in de - should not withhold information dustry representatives are expected fence expenditure last year. Selling that is in their possession and to travel to Beijing to lobby against 25% of its enlarged capital would sought by the SFC in connection the changes. value it at Rmb1.8 billion, or just 13 with suspected misconduct in Hong “A key issue is that under the times earnings. At those levels, at Kong’s markets.” Hong Kong listing rules, Hong Kong least the price isn’t too demanding. But only a few days before the de - accountants are responsible for Separately, a Hong Kong court cision in Hong Kong, China’s Min - signing the books. But according to queried the state secret mandate, re - istry of Finance (MoF) proposed new MOF’s proposals, they would not be jecting arguments from accounting rules that would prevent interna - allowed to do the audit by them - firm Ernst & Young (now rebranded tional accounting firms from send - selves,” admitted KC Chan, the bu - P h o t

o as EY) that it couldn’t hand over in - ing staff to audit Chinese compa - reaucrat in charge of Hong Kong’s fi -

S o u r formation because of the confiden - nies, requiring instead that they nancial services industry. “We would c e :

R e tiality rules. delegate the work to their domestic like the Ministry of Finance to clar - u t e r s The landmark ruling last month partners. ify how this would work.” n 10 Week in China M&A 6 June 2014

Milking it Bright Food wants to buy an Israeli food giant

he first kibbutz opened in De- Bright’s management has set a Tgania in 1909. The farms goal of growing overseas sales to started out as utopian communi- 25% of its total revenues by the end ties, with a heavy tinge of socialist of next year (they currently stand Cottage cheese controversy values. So it is perhaps appropriate at 15%). that a state-owned firm from Com- Bright says it will retain the bulk 100,000 supporters and led to a munist China now wants to get its of Tnuva’s existing management boycott of Tnuva’s cottage cheese. A hands on their produce. team, but will assign its own repre- class action lawsuit was launched, A Chinese buyer is looking to gain sentative as the new chairman. alleging that Tnuva had “abused its a majority stake in Tnuva, Israel’s Despite the assurances from both position” to raise cottage cheese largest food group. The cooperative the buyer and the seller that the deal prices by more than 40% in the pre- sources much of its foods from kib- will proceed smoothly, Chinese me- vious five years. An Israeli antitrust butz, which make up a significant dia is not so sure. National Business investigation followed into whether proportion of its 620 members. Daily reports that it requires regu- Tnuva (the company’s name means Founded in 1926, Tnuva has gained a latory approval from Tel Aviv, which ‘fruit’ or ‘produce’ in Hebrew) had dominant position in Israel’s dairy could prove sensitive given Tnuva’s taken advantage of its monopoly industry controlling about 70% of imposing market share. power to hike prices. the market. It owns seven of the 10 Israeli consumers may also be Israeli financial newspaper best known food brands in the coun- unenthused at the prospect of most Globes then ran a series of articles try and its products occupy 14% of of the country’s dairy industry be- that traced the price increases to shelf-space in the country’s super- ing ceded to a Chinese firm. As WiC Apax’s demand for improved prof- markets. has reported on a host of earlier oc- its. Politicians soon got involved and In 2007, British private equity casions, China’s own dairy produc- the government lowered duties on firm Apax Partners bought 56% of tion has been plagued with scan- imports to create more competition. Tnuva, in a deal that valued it at $1.03 dals since 2008 – when melamine After an investigation found that billion. According to the Jerusalem was first found in local milk powder Tnuva’s prices were “excessive and Post, Bright Food Group – a state- (see WiC6). unreasonable” the government im- owned entity controlled by the Of course, one advantage of the posed price controls last year, forc- Shanghai municipal government – purchase might be for Bright to ing down the price of two of Tnuva’s has now agreed to purchase the learn from Tnuva’s supply chain products by 20%. Apax stake for $1 billion (giving and quality control techniques. It Given Tnuva’s PR pounding, its Tnuva an enterprise value of $2.5 bil- might also seek to sell Tnuva’s new Chinese controller will have to lion). The kibbutz movement will re- branded products, such as yogurts, tread carefully (assuming the deal tain 23% of the company. back into China where consumers goes through). A little over half of The deal is part of Bright’s plan to favour ‘safer’ foreign dairy products. the company’s dairy products are expand its international footprint. It Then again, Bright executives are now subject to price supervision has already made a series of high buying a firm that has battled its too, limiting potential gains from profile purchases, such as the $1.9 own set of controversies too, espe- margin improvements. That sug- billion acquisition of the Weetabix cially a public backlash when Tnuva gests that if its goal isn’t to sell a lot Photo Source: Reuters cereal brand in the UK (see WiC149), raised prices for some of its staple more of Tnuva’s produce to Chinese as well as inking deals with Man- items. Back in 2011 one angry con- consumers, Bright’s latest acquisi- assen Foods in Australia and Synlait sumer started a protest group on tion may not deliver the most excit- Milk in New Zealand. Facebook that soon surpassed ing returns. n 11 Week in China Energy and Resources 6 June 2014

Switching tactics State Grid makes reform-friendly noises

ast week State Grid used an new economic reform agenda. Levent in Shanghai to tout its This envisages a dilution of some commitment to electric cars. As of the power and influence of the part of a new partnership it will country’s largest state-owned enter - build public charging sites at the prises by compelling them to part - site of the former World Expo park ner with more entrepreneurial and and at 46 other prime locations in efficient firms from the private sec - the city. Setting itself an aggressive tor (see WiC230). But you can’t have these... timetable for implementation, it State Grid is now singing lustily promised car owners would be able from the policy hymn sheet. The to its monopoly (such as the boss of to recharge their vehicles at these first focus for public-private part - Chinalco, see WiC229). newly built locations by the end of nership is the electric vehicle charg - State Grid now says that the two the year. ing stations. The second is grid dis - business areas that it is opening up State Grid added that the stations tribution facilities for new sources to external capital will grow their will be compatible with electric of clean energy (a business line revenues at an average pace of models made by BYD and SAIC, as would include approaching those Rmb13 billion ($2.07 billion) annu - well as foreign brands like BMW with solar panels on their rooftops ally and that they will be worth at (however, they won’t be able to and connecting them to the grid to least Rmb100 billion each by 2020. recharge Elon Musk’s Tesla cars, as sell their excess power). Despite the large numbers, some these require a different ‘super - CBN says the Shanghai an - commentators are underwhelmed, charger’ network which the entre - nouncement is the first time that viewing the move as more of a di - preneur is looking to build himself). State Grid has welcomed private versionary tactic to protect State The new targets come as the gov - capital, calling it an “ice-breaker” Grid’s core business and its cher - ernment tries to encourage new en - moment. It would also be an ideo - ished investment in its new ultra- ergy vehicles as a means to combat logical volte face for the power giant, high-voltage power grid (see air pollution. It is also belated which WiC has mentioned fre - WiC235). In comparison to this gar - recognition that State Grid’s unen - quently as one of the most impreg - gantuan project, the business lines thusiastic efforts at building a nable bastions of state-led capital - conceded are immaterial to its bot - charging network have held back ism. State Grid has a near monopoly tom line. That makes them the per - consumer demand for green cars. of China’s energy distribution sys - fect token gesture, say the com - There are fewer than 70,000 such tem, controlling 88% of transmis - pany’s critics. State Grid is showing vehicles on China’s roads, embar - sion lines, with business interests in support for ‘mixed ownership’, but rassingly shy of the official target 26 provinces. Whenever electricity without giving too much away. that 500,000 new energy vehicles reformers have tried to break its Hence Xinhua has reported that will join the Chinese automobile monopoly, it has resolutely de - the Shanghai announcement has fleet by next year. fended its turf. “disappointed the market” in com - The fact that State Grid brought in So what’s changed? Well, for a parison to news from the oil majors private sector carmakers like BYD start any sense of complacency at CNPC and Sinopec that they will and BMW for the Shanghai cere - the firm may have been shaken by spin off their pipelines and gas sta - mony is also telling. It aligns with the anti-corruption purge pulsing tions to private investors. P h o t

o another policy imperative: the shift through the electricity industry (see Compounding the sedate re -

S o u r in direction towards the ‘mixed WiC232). Likewise, even some of its sponse from onlookers: details of c e :

R e ownership’ concept that govern - siblings at other big state firms how State Grid will choose its pri - u t e r s ment has now put at the core of its seem frustrated, calling for an end vate partners are vague too. n 12 Week in China Media 6 June 2014

Television drama CCTV bigwig latest to be detained for graft

s befits an obedient state TV are unclear but the speculation is Achannel, China Central Televi - that there is a connection to two sion (CCTV) has been diligent in its of his channel’s shows: the 3.15 coverage of much of the govern - Consumer Rights Gala and the Chi - ment’s ongoing anti-corruption nese Annual Economic Figures drive. awards ceremony. Trouble at broadcaster’s HQ Come the start of this week, how - Both have been influential. ever, the broadcaster turned As regular WiC readers will unpaid land tax. Shortly after news strangely silent about the latest de - know, the 3.15 Gala is an annual of the Guo’s detention emerged, Ren velopments. event (broadcast on March 15, Zhiqiang, chairman of Huayuan The reason? Perhaps because the hence the name) exposing shoddy Property (one of the companies in news involved one of its own top ex - goods and bad customer service CCTV’s report on taxes) wrote on ecutives – Guo Zhenxi, head of the though whistleblower interviews weibo that Guo and his colleagues business news channel CCTV2. and undercover camera work. It’s “only serve themselves”. Guo has been detained along got wider attention outside China Online chatter about Guo’s case with one of his channel’s producers, in the past couple of years owing was intense, with rumours sprout - Tian Liwu, on suspicion of taking to the fact it has gone after multi - ing that dozens of other CCTV em - bribes. nationals. Foreign firms put under ployees have been taken in for ques - Century Weekly was the first me - its unwelcome spotlight have in - tioning. But the revelations also dia outlet to break the story, saying cluded respected brands like Apple, served as a lighting rod for long-held that authorities from Jilin were Volkswagen and Nikon. dissatisfaction with the state broad - spearheading the investigation into The second extravaganza is more caster among the general public. the pair. celebratory in nature, highlighting “A rotten tree like CCTV should That was confirmed late on Sun - the commercial (and other) achieve - have been felled years ago,” wrote day night by a statement from the ments of business leaders (Chinese, one netizen. Supreme Prosecutor’s Office. this time) and handing out awards “Forget the companies on the 3.15 “Recently, prosecutors have for innovation and social responsi - show, CCTV is the number one fake started an investigation into the di - bility. enterprise in China!” crowed an - rector of CCTV’s business channel Both shows can have a major im - other. Guo Zhenxi and a producer Tian pact on company images, so there “This is just how state media use Liwu for bribe-taking. We have have been rumours that local firms their monopoly to make money,” taken legal measures to detain have been willing to pay to avoid ap - warned a third. “Put simply it is the them,” it read. pearing in the first but falling over monetisation of power.” The arrests follow that of Li Dong - themselves to get their bosses fea - The Global Times rallied in sup - sheng, a former deputy director of tured in the second. port of its state partner. Although it CCTV, for “serious violations of dis - The 3.15 Gala has certainly earned was critical of Guo personally, it in - cipline” last year. At the time of his Guo some enemies. When online sisted that China needs large media detention Li was a vice-minister for games company Giant Interactive firms because they are less corrupt - public security and widely regarded was highlighted last year, Giant’s ible than smaller, poorly-funded as a protégé of Zhou Yongkang, the boss Shi Yuzhu denounced Guo as ones. “Big media organisations are P h o t

o former domestic security tsar now “shameless”. A group of Chinese less susceptible to seduction… if this

S o u r thought to be the focal point of a se - property developers also cried foul business channel goes down, it will c e :

R e ries of high-profile graft cases. last November when CCTV2 accused be a tragedy for the order of China’s u t e r s

The specifics of Guo’s situation them of owing trillions of yuan in economic life,” it pleaded. n 13 Week in China Society and Culture 6 June 2014

On a budget Hunan TV won’t sell new show to online video sites

When in Rome: stars of China’s latest reality TV hit

he city of Trier isn’t known as a Hunting for handbags trumps gality creates tensions too, with Tbig draw for tourists. Unless historical materialism any day of Zhang Han wallowing in self pity you have a soft spot for Karl Marx, the week, it seems. “Our group had when the others forget to share their who was born there. Fortunately for lingered in the Mecca of the Chinese fruit (a relative luxury for the one of Germany’s oldest cities, People for just eleven minutes,” Os - budget travellers). many Chinese still do think fondly nos recalls. But 45 year-old Xu Qing is the of him, making Trier an “unusually Another group of Chinese most needy tourist: she starts sob - popular” destination for Chinese tourists has a little more time to bing when she gets separated from bus tours on European itineraries, spare on its travels. Hunan Satel - the rest of the group in Barcelona. writes Evan Osnos in his new book lite TV’s Divas Hit the Road follows Similarly, viewers see Zhang Han, Age of Ambition: Chasing Fortune, a group of Chinese celebrities as who takes on the role of group Truth and Faith in the New China . they backpack through Spain and leader, experience numerous emo - While Osnos was the New Italy on a tight budget for two tional break downs. However, to - Yorker’s Beijing correspondent he weeks. The team includes male wards the end of the series they see joined one of the tour parties. Trier teen idols Hua Chenyu and Zhang him ‘grow up’ (he is 30) and gain re - was his first stop, which surprised Han, as well as the older actresses spect from his fellow travellers. him until he consulted his Chinese- Zheng Peipei, Zhang Kaili, Xu Qing, Fans of the show will only find language guidebook which de - Liu Tao and Li Fei’er. Divas Hit the Road by tuning in to scribed it as “the Mecca of the Chi - Like many reality shows, part of Hunan Satellite TV or to the chan - nese People”. But the tour guide was the fun is watching the protagonists nel’s own website hunantv.com. The less impressed, urging the group to suffer. The divas are travellling on a network surprised the industry by P h o t

o hurry up as they posed for photos budget and struggle to make ends announcing that it won’t be selling

S o u r outside the Marx museum. “The meet. The shock on their faces when the series or any future pro - c e :

R e sooner we finish here, the sooner we they realise they will have to travel grammes to online video sites. Ana - u t e r s get to Paris,” he chivied. by bus is painfully honest. The fru - lysts say the move indicates the sta - 14 Week in China Society and Culture 6 June 2014

tion’s determination to build its generators of content so even own online platform. though the total number of views It’s a bold move as broadcasters may be smaller on its website than have counted on sales of online at other online video sites, it is still rights to video sites like Youku Tu- a big improvement from before,” dou and Sohu as a steady source of Zhang suggests. revenue. While such arrangements The first three episodes of Divas are lucrative (see issues 232 and 227), Hit the Road accumulated 59 mil- Hunan TV says it is facing a big drop lion views for hunantv.com, with in its traditional viewership, which viewer numbers per episode far out- is turning to online content. That’s a pacing the averages of other shows problem facing all mainstream TV on the site. Hunan TV says the series channels: a government survey in has also boosted website traffic by a were killed in a plane crash before Beijing reveals that only 30% of factor of 10, helping it to maintain they could arrive in the new Chinese households were watching tradi- an average of three million active capital. Soon after that more than tional TV in 2012, down from 70% users every day. 100,000 PLA soldiers (and 40,000 three years earlier. women) were sent to Xinjiang and The prospects for advertising rev- settled as the Xinjiang Production enue are another factor. Statistics and Construction Corps (see from the State Administration of WiC192). The CPC’s rule in Xinjiang Press, Publication, Radio, Film and Minority report was secured. Television show that advertising Violence in Xinjiang sends But ethnic tension in Xinjiang is revenues earned by broadcasting shockwaves through China resurfacing once more. Last month, stations reached a record-breaking five men in two jeeps drove through Rmb130.2 billion ($20.81 billion) in ccording to the Chinese Com- security barriers at a market in Xin- 2013. But that was only up 2.5% from Amunist Party’s (CPC) history jiang’s capital Urumqi. They mowed the year before. Advertising spend books, Sheng Shicai was an oppor- down shoppers in their path and on online video sites was smaller at tunistic warlord who relied on So- lobbed explosives into the crowd. Rmb12.8 billion but increased 43% viet support to rule Xinjiang for Four weeks earlier at a nearby rail- last year, says iResearch. more than a decade after 1933. way station, two men detonated That makes Hunan TV’s move But when Germany launched Op- bombs and used knives to kill three look like a defensive ploy designed eration Barbarossa against the So- passersby and injure more than 70. to slow down the progress of online viet Union in 1941, Sheng switched The killings came only a few days streaming. There will be some short allegiance to the Kuomintang (KMT), after a visit from Chinese president term pain as a result – with analysts executing many of the Communists Xi Jinping. forecasting as much as Rmb400 he had previously befriended in Violence has spread to other Chi- million in foregone sales to video 1943 – including Mao Zedong’s nese cities. On May 6, an assailant websites. younger brother Mao Zemin. stabbed six people at a railway sta- CCTV is rumoured to be consid- The KMT’s grip in Xinjiang was tion in Guangzhou. On March 1, a ering a similar strategy by with- short-lived. Discontented Uighurs dozen people dressed in black went holding online broadcasting rights staged violent uprisings against on a killing spree at a railway sta- for the World Cup, which begins in their Han Chinese rulers in three tion in Kunming, murdering 29 and Brazil this month. northern districts of Xinjiang and wounding more than 140. In Octo- “At the moment, online video the East Turkestan Republic was ber last year a family from Xinjiang sites generate the most traffic from briefly declared. drove another jeep full of explo- the biggest hit TV shows… so secur- Because the rebellion weakened sives into a crowd at Beijing’s For- ing the broadcasting rights to the the KMT, the CPC initially endorsed bidden City. most popular TV shows is very crit- the uprisings as the “Three Districts The authorities have blamed ical for the websites,” media analyst Revolution” that helped to liberate Uighur terrorists, creating a new Zhang Ruobo told the Beijing Times. the province. In 1949 the CPC even sense of insecurity in many cities. Hunan’s new strategy is to capture a invited five of the Uighur leaders of For instance, there was a stampede larger online audience itself. “Hu- the uprisings to discuss Xinjiang’s in a Shenzhen mall last week when a nan Satellite TV is one of the largest political setup in Beijing. All five man accidentally pushed over a 15 Week in China Society and Culture 6 June 2014

Paramilitary policemen stand guard after an explosion in Urumqi

shopping shelf. Fellow customers promising “a year-long nationwide Han Chinese. panicked, thinking it was a terrorist anti-terror operation”. Xinjiang’s Anticipating a massive invest - attack. The Nanfang Daily said that Party chief Zhang Chunxian has also ment spree and potentially huge high schools in the city are also called for a “people’s war” against ex - policy subsidies, shares of listed holding drills on “anti-terrorism self tremism. Last week 55 people were companies known to have major protection”. convicted en masse for acts of terror - Xinjiang operations have been re - “In contrast to past episodes of ism and separatism. Unusually, spec - porting gains, says China Securi - low-level violence in Xinjiang, which tators were allowed to witness the ties Journal. have been characterised by low tech - sentencing at a sport stadium in Yili The security drive has been mas - nology and opportunistic attacks on near China’s border with Kazakhstan. sive too. Beijing News reports that in representatives of the state… the Three of the defendants now face the the capital alone 850,000 civilian current spate of violence is clearly death penalty. volunteers are now patrolling public designed to be indiscriminate and The central government is also areas. Another 100,000 will help mass impact in nature,” Michael trying to address economic griev - with intelligence collection and any - Clarke, a research fellow at Aus - ances in the region, knowing that one who provides important infor - tralia’s Griffith Asia Institute told they have fanned anti-Beijing senti - mation will get a Rmb40,000 re - the BBC. ment among the Uighurs. While the ward. (In Xinjiang residents will be Because of the killings at trans - country’s western-most region has paid Rmb500 for each gun turned port hubs, local tourism is being been a recipient of significant in - in; Rmb10,000 for any tip that leads hampered. Xinjiang is suffering vestment, there is a growing reali - to the recovery of larger amounts of most of all. More than five million sation that Han Chinese residents weapons; and Rmb30,000 for intel - domestic tourists visited last year may have benefited most. But Bei - ligence that foils bombing plots.) but arrivals have dropped 40% jing wants wealth to be distributed The effort to stamp out the vio - compared with the same period more evenly among different eth - lence may help Xi to consolidate his last year, says China Radio Interna - nicities, especially in the poorer authority further. He chairs the Na - tional. southern region. The ruling Polit - tional Security Commission, which In an effort to boost visitor buro announced last week that “cre - was set up last year. Likewise, his numbers the Xinjiang government ating jobs for local people will be “new Silk Road” plan will probably is even planning to offer Rmb500 put on the top of the agenda” and advance more quickly. He first ($80) vouchers to tourists visiting nearly 300 projects will start in floated the idea during a visit to P h o t

o the autonomous region. southern Xinjiang to create 45,000 Kazakhstan last September, aiming

S o u r Beijing’s response to the violence jobs, it said. Moreover, 25% of new to narrow regional disparities be - c e :

R e has been characteristically hardline, hiring by state firms must now be tween China’s east and west, while u t e r s with the Ministry of Public Security set aside for residents who aren’t also encouraging closer ties with 16 Week in China Society and Culture 6 June 2014

neighbours such as Russia, Kyrgyzs - tan and Uzbekistan via Xinjiang. Meanwhile an ancient Chinese id - iom has been used in support of the security measures, marking their consecration as key policy initia - tives. In this case Xi has told security forces to employ “nets spread from heaven to earth” – an expression that derives from Laozi’s “ Tian wang hui hui, shu er bu lou ”. What Xi means is that there must be no way for perpetrators of vio - lence to escape.

Blink, and you may miss her Fan Bingbing in highest profile role – but doesn’t say much

ost WiC readers will have Mmissed Fan Bingbing’s first Hollywood foray in the blockbuster Iron Man 3 . Her cameo appearance – she plays a nurse who attends to Tony Stark – was cut entirely from the film’s international release. Even for the Chinese version, where Fan does make an appearance, it’s a blink-and-miss-it moment. So perhaps it’s appropriate that Fan’s second attempt at Tinseltown stardom sees her play a character called Blink in the latest X-Men in - stalment, Days of Future Past. Fan: her latest attempt to crack Hollywood sees her star in X-Men movie Fan plays a mutant with powers of teleportation (a tough role for line doesn’t mean she appears in in Hollywood because there’s lots of method actors, WiC would guess). just one scene,” it pointed out. “Al - things for me to learn.” But Fan seems to have concentrated though, admittedly, most of her Chinese cinemagoers were keen more on dialogue, with producers scenes are fight scenes,” it conceded. to appraise Fan’s latest perform - hiring a language coach to help her Fan says she’s not bothered by ance. The X-Men flick logged an im - with the script. It’s difficult to know her relatively brief appearance. pressive $39.5 million in ticket sales whether it was worth the money “There are a lot of Hollywood stars during its first weekend, the biggest (Blink has one line: “They are here”). in the movie and everyone’s screen Hollywood opening in China this P h o t o But Xinhua was still impressed, and time is limited. But the film is said year. X-Men should continue to do

S o u r c helpfully pointed out that Fan had to be the best in the X-Men fran - well, helped by the Dragon Boat Fes - e :

I m

a the same screen time as former chise. To be a part of that is good for tival holiday on Monday, which will g i n e

C Bond girl Halle Berry. me,“ she told reporters. “I’ll be much have prompted larger audiences h i n a “Just because Fan only has one happier if I get more opportunities over the long weekend. 17 Week in China Society and Culture 6 June 2014

Hong Kong in gun tragedy Hongkongers are shocked by Kowloon Bay shooting

hen Chinese neighbours Whave a dispute it can be deadly. Last month an argument be - tween two neighbours over feng shui led to a knife attack in Lushan, Henan province, leading to the death of eight people, including three children. Police said the killings occurred because the family living opposite to the assailant A rare shooting in Hong Kong provokes a media frenzy fixed a mirror on a gate, a move the knife-wielder thought was ominous olent crime told the newspaper that “In the nineties people crossed for him, says China News Service. it was likely that the attacker was the border from the mainland and Last week, a heated argument be - seeking revenge. Police say an in - some of them brought Black Star tween two neighbours also had a vestigation is ongoing. guns with the intent to commit tragic ending in Hong Kong. Late last But as it turns out, Li has had a crimes,” Superintendent Lam Sai- month residents in a public hous - history of attacking his neighbours. kit, of the Hong Kong Island regional ing estate in Kowloon Bay com - In 2011, he served jail time for crime unit, told the South China plained that they heard loud shout - wounding another neighbour with Morning Post back in 2006. ing on the 21st floor of the complex. a chopper and hammer. A Hunan The Hong Kong Police, mean - These were followed by three gun - native, Li moved to Hong Kong in while, says it suspects that the mur - shots. Police quickly arrived on the 1980 but he became badly affected der weapon also came from China scene and found Liu Kai-chung, 43, by the collapse of his trading busi - and is now working with Guang - in the lift lobby near his home, shot ness after 1997, and his marriage dong authorities to trace the guns. n twice in the chest and once in the ended in 2010. back. Three empty 7.62mm car - The victim Liu, too, was also a mi - tridges were found beside the dead grant, in his case from Beijing, says Keeping track man, local media reported. The Sun, a Hong Kong newspaper. After watching footage from the Still, the biggest question re - In WiC235 we looked at how China’s security cameras, police identified mains how the man obtained a factories are increasingly being filled with robots, to counter rising labour costs and Li Tak-yan, 51, who lived 11 floors be - firearm in Hong Kong where there to move up the value curve. The Financial low Liu, as the killer. The shooting are strict gun control measures and Times released updated data on this sparked a 12-hour siege, which private gun ownership is extremely trend on Monday, noting that China has, ended when the Special Duties Unit unusual. Li Yongquan, the president for the first time, surpassed Japan as the used stun grenades and tear gas to of the Hong Kong Shooters Confed - world’s biggest buyer of industrial robots. In 2013 it bought around one in five of storm the attacker’s flat. (Li fired eration, told the Apple Daily that the the robots sold globally. In fact, it twice at the officers as they entered make of the pistol – known collo - purchased 36,560 of them, 60% more his flat, while the police returned quially as a Black Star – used to be than in 2012. fire.) They later found him fatally the choice of weapon for mainland The International Federation of Robots wounded with a gun by his side. Two police. When they abandoned the reported that Japan bought 26,015 robots last year and the US was third with pistols were also discovered inside model for more sophisticated

P 23,679. h o t o his flat. firearms, the obsolete guns started However, Japan still has the biggest

S o u r So what happened? Ming Pao flooding the black market and be - robot stock, with 310,508 installed, c e :

R versus China’s 96,924. e Daily says the motive for the crime came a popular choice of weapon u t e r s remains a mystery. An expert on vi - for the triads in the eighties. 18 Week in China And Finally 6 June 2014

“We love LA” China tour group spends $85 million in California

he theme of CNN’s On China tory,” he told Jing Daily. Tshow this month was the Offers of holidays as rewards to growth in Chinese tourists travel- top salespeople are not uncommon ling overseas. Jane Sun, in charge of – direct-seller Nu Skin’s China divi- one of China’s largest travel agents, sion is reported to have sent 14,500 asked CNN host Kristie Lu Stout to of its vendors on a 10-day jaunt to In the US and ready to spend guess how long it took for Ctrip to Dubai and Abu Dhabi in April. But sell all the spots on a $200,000-per- destinations are now bidding to host Weibo. For others there were suspi- head 88-day luxury world tour. similar groups from China. Cali- cions that the trip was more about Stout guessed 8 minutes. The an- fornian tourist bosses beat Dubai to self-promotion for Wan Mei and swer was 17 seconds. Of course, that get Perfect’s tour, even arranging for that news of their employees big sounds like rather an exclusive a mall on the trip to accept bank spending was designed to persuade group of travellers. But had they cards connected to China’s Union- others to join its sales network back waited a few days longer to film, Pay network. in China (lured by the idea of be- CNN would have come across an- The tour is said to have gener- coming similarly affluent). other staggering statistic – the ated more than $85 million in busi- “Isn’t this just a massive PR spending binge racked up by a ness for the Anaheim area of south- event?” wrote one netizen, while 7,000-strong Chinese tour of Cali- ern California, Jing Daily also another asked if anyone had even fornia. reported. heard of Wan Mei before its Cali- The tourists were vendors of the But news of the trip didn’t play as fornian tour. He then expressed direct-selling company, Wan Mei well back home. For example, a concern about how direct-sellers (which translates as Perfect). Their mass rendition of the Chinese na- do business. “Doesn’t anyone else 10-day day holiday was a reward for tional anthem by the tour group find it suspicious that we don’t employees that hit the Guangdong- outside an Anaheim conference know how these companies work?” based firm’s sales targets. centre was soon being criticised as he asked. Company vice-chairman Xu “vulgar” and “uncivilised” by neti- According to its website, Wan Mei Guowei was delighted to discuss the zens, while the visitors spending was set up in 1994 with investment size of the delegation. “We have habits were also rebuked for being from Malaysia. Similar to better- taken 86 flights, stayed in 26 hotels, unpatriotic. known Amway, it mainly sells cos- and according to UnionPay, our “They are just throwing their metic and health products – flogging group attendees have spent $10,000 money away to the Americans,” its wares in Malaysia and Singapore each this visit. We are making his- fumed one of the killjoys on Sina as well as in China. n

Steaking his future on it

“In China, I am being asked, ‘Andrew, where can I get high-quality reliable beef?’” Photo Source: Reuters * Andrew Forrest tells Bloomberg that he gives out packets of beef to people he meets in China. The iron ore magnate owns Western Australia’s only licenced beef exporter to China, and hopes to see consumption surge. Fillet from Forrest?

19 Week in China The Back Page 6 June 2014

Photo of the Week In Numbers 9.4% The decrease in South Korean exports to China in May compared with a year ago. South Korea’s exports to Europe rose 32% and by 4.5% to the US. Analysts say Chinese holidays during the month, on top of a slowdown in the economy, may explain the fall.

$834

P Price of palladium (per ounce) on New h o t o

York’s spot market, the highest since mid- S o u r

c 2011 and well up on $700 in February. The e :

R

e rally is due to increasing demand for the u t e r s metal in catalytic converters in Chinese

cars, says the Wall Street Journal. Look who dropped into Shanghai: actress Angelina Jolie visits the city to promote her latest film Maleficent $21.4 million The annual salary of Lenovo’s CEO Yang Yuanqing last year, up 46% from a year Where is it? earlier, according to the company’s annual Some of the places referred to in this issue report.

Xinjiang Rmb1.2 billion Beijing The amount that Alibaba Group is paying for a 50% stake in Guangzhou Evergrande Qingdao Football Club (it equates to $191.93 China million). The general view is that the Anhui Shanghai Sichuan purchase is intended to strengthen Chengdu cooperation between Guangzhou Hunan Evergrande and Hangzhou Greentown, another Chinese Super League team that Ma bought recently. Guangzhou Hong Kong

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