1 Talking Point 4 The Week in 60 Seconds 5 China and the World Week in China 6 Rail and Infrastructure 7 Economy 9 Energy and Resources 10 Healthcare 11 Chinese Character 13 China Consumer 18 February 2011 14 Society and Culture Issue 95 17 And Finally www.weekinchina.com 18 The Back Page China’s golden age m o c . n i e t s p e a t i n e b . w w w

y b g u in China’s set to become the world’s biggest buyer. Will it drive gold prices higher? o k y n o a t B s t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Talking Point 18 February 2011

Gold rush Worried by inflation, Chinese discover the lure of gold

ust like the Indian marriage sea- Json – late summer and autumn – the Chinese New Year typically in- volves a lot of gold purchases. Making headlines this year was one particular gift: the son of a wealthy businessman in Nanjing who spent Rmb600,000 ($90,000) on a bouquet of roses made of gold as part of a marriage proposal to his girlfriend. Some complained that the gift spoke volumes on the coun- try’s growing wealth disparity. But others thought that the young man showed foresight: “While real roses lose their value in a week, the value of gold – at the rate it has been going – will only go up,” says the Manager’s Daily. “Who knows, the gold roses might be worth The ultimate in anti-capitalist bling: a gold bust of Chairman Mao Rmb660,000 next week!” As with many commodities, what up 96% year-on-year during the hol- Another key motivator: growing happens in China is having a signif- iday season. And it noticed a new inflationary pressures. Beijing an- icant influence on world prices for group of customers: “Many people nounced a 4.9% rise in the consumer gold, which have been going up on who speculated on the stock and price index in January on a year ago, rising demand. Already the world’s property markets are now buying above December‘s 4.6% increase. largest gold producer, China, is on gold,” an industry insider told China Chinese investors, in common with track to surpass India as the world’s News Service. “They think it’s safer their counterparts in the West, are largest gold consumer this year. to buy gold these days.” turning to gold in their portfolios as Investment demand is now a big a hedge against what are effectively An appetite for all things gold? driver, with many Chinese drawn to ‘negative’ real interest rates (for bank Jewellery has conventionally ac- it as a store of value rather than as deposits). As inflationary expecta- counted for the lion’s share of de- an adornment. One factor is grow- tions grow, so will gold sales. mand. According to HSBC’s precious ing uncertainty over property in- At the Shanghai Gold Exchange, metals strategist James Steel, con- vestment, as the government tries trading volumes increased 43% to sumption of jewellery makes up 50% out different approaches to rein in 5,015 tonnes in the first 10 months of Chinese gold purchases and has prices. “Investment is really driving of 2010, exchange Chairman Shen grown at an average rate of 6% per demand for gold,” Cai Minggang at Xiangrong told Xinhua. Gold fu- annum for most of last decade. If the the Beijing Precious Metals Ex- tures trading on the Shanghai Fu- strong retail sales during the Lunar change told the Financial Times. tures Exchange has soared as well. Photo Source: Reuters New Year are anything to go by, that “People don’t have any better in- China’s central bank has also number will go up further this year. vestment options. Look at the stock been stocking up on the metal of Beijing Caibai, a popular jewellery market, or the property market – Midas, with the Federal Reserve’s department store, said its sales shot you could make huge losses there.” loose monetary policy fuelling in- 1 Week in China Talking Point 18 February 2011

terest in gold as a hedge against the greenback’s decline. China’s State Administration of Foreign Ex- change (SAFE), custodian of the na- tional foreign exchange reserves, has accordingly been diversifying its holdings. SAFE revealed in No- vember that its gold ownership had increased to 1,054 tonnes since the last such announcement in 2003, when it held 600 tonnes. All this suggests that China as a whole is buying more gold than be- fore. Demand from the country’s two largest sectors – jewellery and investment – reached a combined total of 430 tonnes last year, says Xinhua. This has helped push prices up: gold rose about 28% last year. Al- though gold prices softened in Jan- Emerging Markets uary on the back of better economic Bond House Asia-Pacifi c Loan House data in the US, prices for physical gold in Shanghai have still been at a premium of about $20 per ounce over those in London, underscoring the tightness of the market.

So who are the big beneficiaries of China’s gold rush? Jewellery retailers are riding the boom. Department store Caibai told Economic Information Daily that the first eleven months of 2010 saw its own sales reach Rmb7.2 billion, a 60% increase on the year before (Caibai also sells investment-type gold bars, which are reported as fre- quently being out of stock). Meanwhile, more gold-linked in- vestment products are becoming available. For example, investors can now buy gold-backed exchange- traded funds overseas (although in- vestors who buy shares in a gold ETF don’t ever see the real metal). Lion Fund Management, which is backed by the Sinochem Group, is the first to capitalise on the new opportu- nity. This month it reached its fundraising target of $500 million to launch the country’s first gold ETF, says Bloomberg. “We will be the first fund in China 2 Week in China Talking Point 18 February 2011

to offer an access to invest in over- seas gold-backed ETFs,” says Yang Zi, an executive at Lion Fund’s market- Planet China ing department. “Given the infla- Strange but true stories from the new China tionary environment we are in right MICROWAVE MEALS. British carmaker Bentley is prepared to go the extra now, Chinese investors have great mile in securing sales from China’s new rich, reports the South China enthusiasm for gold investments.” Morning Post. One Chinese client not only wanted to pick his car’s colour, but also asked if the Crewe-based company would add a microwave oven. How high could gold prices go? “He really liked eating instant noodles, and wanted to be able to eat them Plenty of people believe that the while riding in his car,” says Bentley China product manager, Rocky Lau. price of gold will continue to rise. The UK carmaker said it was possible. But by then the billionaire had One reason: continuing purchases second thoughts. “Still, it goes to show that whatever our customers dream from SAFE. Sun Zhaoxue, general up, we can make it come true,” says Lau. manager of China National Gold Corp, the country’s largest gold pro- alone. To put that in perspective, not ditional amount purchased by ducer, points out that SAFE’s gold much more than 2,500 tonnes of SPDR Gold Shares, the world’s holdings still trail countries like the new gold supply is mined annually largest gold-backed ETF, according US and Germany by some distance (plus a bit more becomes available to Xinhua. in tonnage terms, and only amount through recyling of gold scrap). So is it possible that prices will hit to a mere 1.7% of its $2.4 trillion for- Last year China’s gold produc- $1,400 again, as they did in Novem- eign reserves. tion actually hit a new record of ber? Reuters reports a brisk start to Another reason: demand for gold more than 340 tonnes – an increase sales this year, with ICBC, a leading jewellery will likely continue its of more than 8% from the year be- Chinese bank, selling nearly seven climb. In a report released by the fore, says the China Gold Associa- tonnes of physical gold last month, World Gold Council in October, tion. But it still wasn’t enough to almost half of its sales total for full China’s per capita consumption of keep pace with demand. Until re- year 2010. Yes, prices fell on global gold jewellery remained one of the cently, China was largely self-suffi- markets for most of January after in- world’s lowest when compared to cient, with imports of only 45 vestors took profits on last year’s other major gold consuming mar- tonnes in 2009. But almost five rally. But events in the Middle East kets, at 0.26 grams. If it were to be times that amount was imported in seem to have reversed the tempo- consumed at the same rate per the first 10 months of 2010, the Fi- rary decline, and gold was selling at capita as in India, Hong Kong or nancial Times reports. That was $1,375 an ounce on Wednesday. Steel Saudi Arabia, Chinese demand could easily enough to absorb all of the at HSBC thinks it could move higher increase by as much as 4,000 IMF’s gold sales last year, as well as again, forecasting prices could reach tonnes a year in the jewellery sector a much larger quantity than the ad- $1,550 per ounce this year. n

Let the train take the strain...

Colombian megastar Shakira once asked “the CIA wanna watch us?” The line from her hit song Hips Don’t Lie may prove remarkably prescient if a Chinese plan to build an alternative to the Panama Canal through the land of her birth goes ahead. The Financial Times this week interviewed Colombia’s president Juan Manuel Santos who revealed that China was looking at work out.” China also plans to

Illustration: www.benitaepstein.com financing a 220km train line that would provide an build a 791km train line between alternative transport route to the Panamanian Colombia’s economic heartland and waterway. Known as the ‘dry canal’, Santos said: the port of Buenaventura. This will “It’s a real proposal and it is quite advanced. The move 40 million tonnes of cargo a studies [the Chinese] have made on the cost of year, and allow much of it – including coal – to be shipped transporting per tonne, the cost of investment, they all across the Pacific to China.

3 Week in China The Week in 60 Seconds 18 February 2011

Huawei in headlines (again) The major news items from China this week...

It’s official: China passed Japan in 2010 to become the 1world’s second-largest economy after the US, said the BBC. Japan’s economy was worth $5.5 trillion at the end of 2010, while China’s economy was closer to $5.8 trillion in the same period. At its current rate of growth, analysts see China replacing the US as the world’s top economy in about a decade.

Still not making friends: Chinese telecoms equip- 2ment maker Huawei is having a tricky time in the US. This week, a US government committee that vets deals on national security grounds failed to approve Huawei’s $2 million acquisition of patents and staff from start-up Now worth a little less, as inflation bites... 3Leaf. Huawei is appealing directly to President Barack Obama, said the Financial Times. Washington suspects bureau, will improve understanding of house price that Huawei has close ties with China’s military. changes in China’s leading cities.

Fuzzy math. China’s consumer prices rose 4.9% in Meanwhile, the city of Beijing unveiled 15 guidelines 3January from a year earlier, up from 4.6% in Decem- 5on Wednesday to deter real estate speculation. For in- ber and also above Beijing’s current ‘official’ inflation stance, non-Beijing residents who cannot provide five target of 4%. But the statistics bureau also gave the CPI a years of tax documentation will not be able to buy resi- makeover. CPI components had been reweighted in Jan- dential properties, CCTV said. uary by cutting the food component by 2.21 percentage points. The weighting of housing has increased by more Chinese banks lent out Rmb1.04 trillion in January, than 4.2 percentage points, said Xinhua. 6below the market expectation of Rmb1.2 trillion, said HSBC. Compared with the average of Rmb974 billion lent More dodgy statistics. The National Bureau of Statis- in January over the past five years, this is still a high num- 4tics has said it will stop publishing national average ber. However, the recent data suggests slower growth in property prices, and instead release two indices of new and household loans due to the property tightening measures. second-hand home sales from January. The move, said the General Motors plans to sustain its growth within 7China’s market by launching more than 20 new or re- designed cars over the next two years, said the Wall Street Journal. The company is also seeking opportuni- ties to boost exports of its cars made in China. To com- pensate for the effect of a rising yuan, GM, said the company will focus on slashing production costs.

It has emerged that Australia’s Foreign Investment Review Board ordered China Non-Ferrous to limit

Photo Source: Reuters 8 its stake in Lynas (a rare earth miner) to less than 50%. Two years ago, Lynas wanted Chinese funds to resume development of the Mount Weld rare earth mine in Fishing for property in Beijing just got harder Western Australia. n 4 Week in China China and the World 18 February 2011

No Nile fever How Chinese media covered events in Cairo

mid the chaos in Cairo’s Tahrir replacing them with similar sound- ASquare this month, keen-eyed ing characters. observers may have spotted a cou- The state media has focused ple of more unusual requests for more on images of the disorder in Both dislike crowds Mubarak’s resignation – signage Cairo, with the implicit threat of the written in Chinese. dangers that accompany regime as the Chinese leadership is con- Evidence of the demonstrators’ change. “Malfunction is Good for No cerned: the role of high unemploy- media savvy, perhaps? If so, it was One” warned one People’s Daily ment in the Egyptian unrest (the ambitious to hope that the placards headline early in the crisis. The economy not growing quickly would make it to Chinese TV, where Global Times also predicted that a enough to generate jobs for the coverage of the Egyptian unrest has chaotic Egypt could be like “a sec- young), as well as the inflammatory been carefully handled. Any ond Iran” with the world facing “dis- contribution of inflation (running at footage of revolt in the main square aster”. One to remember when sanc- more than 10% for the last two years). of a capital city is always going to tions against Tehran next come up “High prices, high unemploy- be treated with caution in Beijing, for discussion at the UN… ment, official corruption and autoc- by a government reluctant to spot- Readers have also been re- racy for 30 years,” was one assess- light revolutionary scenes (with the minded that democracy Western- ment from “North Wind”, an exception of its own 1949 suc- style probably shouldn’t top the internet user posting on Baidu. “All cesses, naturally). agenda in Africa and the Middle this makes it easy for the Chinese So, suggesting that Egypt’s expe- East. Even the Americans were be- to think of their own situation.” rience is going to have an impact in ing cautious in calling for it, the In comparison to Mubarak’s gov- China itself would be fanciful. Global Times noted, as “they are ernment, of course, China has a rep- Cross-border contagion looks like not sure if there is a beauty or de- utation for delivering much more ro- being much more of a factor in the mon behind that door”. bust economic growth. GDP is Middle East. Still, the Chinese lead- A number of bloggers made a growing at almost twice Egypt’s rate ership hasn’t taken any chances. Ed- comparable point; that Mubarak’s (5.1% last year), with per capita levels itors were reminded that only offi- regime may not have lasted quite so of income about a fifth higher in pur- cial Xinhua news agency reports long without the support of demo- chasing parity terms, according to were suitable for release, and most cratic governments in the West. the IMF. But both countries must of these concentrated on the emer- What will the Chinese leadership also meet the rising expectations gency flights arranged to carry have learned from events in the that growth brings, meaning that home stranded citizens. “Thank the Middle East? To remain deeply sus- Beijing has to keep its foot on the gas motherland!” was one widely re- picious of Western internet compa- in GDP terms. If not, discontent could ported comment from a returnee nies calling for fuller access to a Chi- bubble up to the surface, warns Yuan arriving at Beijing airport. nese audience, for one thing. It will Weishi, a historian at Sun Yat-sen Efforts have also been made to also have been noted that Wael University in Guangzhou. block online material that men- Ghonim, one of the most prominent “The Chinese public now have tions the unrest. But weibo discus- figures in the anti-Mubarak efforts, strong awareness of their rights and sion (see page 14) of the events in is a senior Google executive. Plus they can never return to the old days Photo Source: Reuters the Middle East has proved impos- that he told CNN last week that the when they were subject to manipu- sible to stifle completely, with Egyptian revolution had “started” lation and had no rights to voice many netizens working out how to on Facebook. their criticism,” Yuan told the South navigate around blocked words by But perhaps the key lesson as far China Morning Post. n 5 Week in China Railway and Infrastructure 18 February 2011

Off the rails Train boss ousted for corruption

n August 8, 1963 a postal train suspect contracts may have related Owas held up at a railway bridge to high-speed train equipment pur- in Ledburn in England. The heist chased from Broad Union Group. soon gained fame as The Great The Shanxi-based firm had won Train Robbery. Some of the gang massive tenders on the Beijing-Tian- Where’s my cut? were caught, others fled the coun- jin high-speed railway and other try. Accounting for inflation, they bullet train lines, providing the been considered too powerful a fig- stole the equivalent of £40 million, wheel pairings for the electrically- ure to purge, even when his own in today’s money. Most of it was powered carriages. Broad Union’s family members were accused of never recovered. boss, businesswoman Deng Shu- wrongdoing. Liu’s brother was given The news from China this week miao, has been under investigation a suspended death sentence when is that it may have had a railway rob- since January. he was found guilty of hiring an as- bery of its own. But unlike the Liu’s replacement as head of the sassin to kill someone about to re- British heist, this looks like it may rail ministry told the China Daily: veal his own involvement in graft. have been more of an inside job. “The ongoing investigation into the However, Liu leaves a consider- Last weekend the official news activities of my predecessor shows able legacy. Under his stewardship agency Xinhua reported that the the Party’s resolve to punish corrupt China built 8,000km of high-speed head of China’s rail ministry had officials and pursue clean gover- track, the world’s longest; by 2015 been removed from his post. The 58 nance.” He added that the rail sector that’s projected to rise to 13,000km. year-old Liu Zhijun – minister of continues to be a “major battle- The current scandal has rekindled railways and Party secretary of the ground” in the war on graft. debate over how Liu went about his rail ministry – is being investigated The scale of Liu’s misdemeanours work. One concern is safety. The for a “severe violation of Commu- will become clearer in coming South China Morning Post quotes a nist Party discipline”. The elaborate weeks. What is not in doubt is that professor from Sun Yat-sen Univer- phraseology employed by Beijing China’s gargantuan spending on sity as observing: “With corruption, for such matters normally indicates the rail sector opens up vast oppor- the safety and quality of railways a corruption case. tunities for the less-than-saintly of- will suffer. People will cut costs and The bolder elements of the Chi- ficial. In the wake of the financial lower quality.” nese press were quick to elaborate crisis, the railway ministry was one Caijing magazine prefers to focus on the graft. The Economic Observer of the quickest to boost its capital on another problem ahead: making quoted an insider from the Party’s spending, as part of wider efforts to the huge investments in rail pay. It’s Central Commission for Discipline stimulate the economy. For exam- a theme WiC first explored in issue Inspection who said that Liu’s mis- ple, in 2009 it spent $102.5 billion. 82, with local governments con- demeanours related to Rmb10 bil- Over the next five years, China has cerned that their debts to pay for lion of train contracts and the budgeted to invest Rmb3.5 trillion railway construction may not be Southern Metropolis Daily reported more in high-speed trains. serviced by ticket receipts. Caijing that Liu had received Rmb1 billion of Liu ran this powerful department also cites a recent report from Min- bribes. (Another eye-opening stat: for eight years, with three million sheng Bank that estimates the rail Photo Source: China Imagine corruption and mistresses seem to staff and combining the potentially ministry’s annual interest costs will go hand-in-hand for Chinese bu- conflicting roles of owner, operator, reach a staggering Rmb100 billion reaucrats – China Business discov- supplier and regulator. Many have (versus Rmb40 billion in 2009). ered Liu had an impressive 18). likened it to a state within a state. That’s a financial situation it reports Securities Daily reported that the That meant that Liu may have to be “worrying”. n 6 Week in China Economy 18 February 2011

Bitter harvest Fears of failed Chinese wheat crop are driving world grain prices up

hinese farmers produce almost Call of their wheat between au- tumn and spring, with a harvest in June. The crop needs rain in the au- tumn, snow cover through the win- ter and then rain again in the spring. But the current crop has not received the typical watering, nor the normal snow needed to keep it insulated from the extreme cold of winter. Hence a minor snowfall in parts of Shandong last Sunday was greeted with considerable relief, as the first precipitation in much of the province for 140 days. Three days earlier Beijing had also received its first wintry dusting, after 108 Crop failure: wheat seedlings that have been dried up by drought days of its own without rain. But that still constitutes very lit- ports, by driving up bread prices. cerns are overblown. Donna Kwok, tle rainfall since October and ac- Analysts say other Middle Eastern an economist on HSBC’s Greater cordingly the UN’s Food and Agri- governments have also been buying China economics team, believes ex- culture Organisation put out a up wheat reserves, in anticipation isting stockpiles of 30% to 40% of special alert last week on the threat of further discontent on the streets annual production are sufficient to to 60% of China’s wheat production in the weeks ahead. see off the worst of any shortfall this (concentrated mostly in Shandong, It doesn’t help that speculators year. Others say higher tempera- Jiangsu, Henan, Hebei and Shanxi). are keenly aware that the Russian tures than normal mean that the ab- It was the first warning of its type wheat crop was down by a third last sence of snow cover has been less for China in 15 years. year (drought and fire) or that the devastating, and that a spring sea- But why is the wheat harvest now Australian harvest has been hit hard son of more plentiful rain is always making international headlines as by the recent flooding. As a result the key factor in determining winter well as domestic ones? Partly be- wheat prices are at a three-year high, wheat yields. cause of its inflammatory impact in up 80% on 12 months ago. Some even question whether the already volatile Middle East, says The news is rippling through the drought necessarily entails crop fail- Ben Simpfendorfer at China Insider. global equity markets too. Wheat, ure – in 2009 China’s wheat produc- As the world’s largest producer, together with rice, accounts for tion regions also experienced a se- China usually grows just about about 40% of the food component vere drought but final grain output enough wheat to meet its domestic in the Chinese CPI basket, so the increased, rather than subsided. needs. But when it looks like falling worry is that a continuing climb in But the anxiety seemed real short, it must turn to the global prices will stoke wider inflation, enough for the State Council to as- Photo Source: Reuters markets, pushing up prices interna- leading to more pressure on interest semble in special session last week tionally. That hits countries like rates and a greater likelihood of fur- to discuss crop policies, and subse- Egypt, the largest wheat importer ther monetary tightening. quently announce a plan to allocate with nearly 10% of the world’s im- Some forecasters think the con- Rmb12.9 billion ($1.96 billion) to 7 Week in China Economy 18 February 2011

boost grain production and fight drought, according to CCTV. There was also another bout of large-scale cloud seeding (see WiC32), leading to scattered snowfalls across several of the breadbasket provinces. Of course, the current conditions should lead to a wider debate on whether the third year in three of dry conditions is a man-made prob- lem or a climactic one (or even just a natural weather cycle). That hasn’t been the case in most of the Chinese press, however. Prob- ably under encouragement to put a Conserve it... dampener on inflationary talk, the media has concentrated instead on nounced that a third of its loans China’s development model. The man-made solutions to the drought. this year would go into funding south, where water resources are An immediate priority (albeit less water conservation projects. Al- generally far more abundant, has short term than the rainmakers’ sil- though the rain may not have been more of an industrial economy, with ver bullet) is to improve water con- falling, the news flow was certainly locals more reluctant to grow crops servation. The problem, says China moving in the right direction… on land that might make more Business, is that investment in irri- This year’s No.1 plan also expects money used for other purposes. gation has tailed off hugely since the local authorities to allocate at least That means farmers to the north, 1970s. The Shanghai Morning Post 10% of the proceeds of land sales where water resources are lacking, agrees, claiming that future spend- (which could be as much as $30 bil- are being relied upon more heavily. ing must move beyond “rail, road lion annually, or 10 times last year’s A third is how water consump- and aviation” towards water infra- irrigation spending) to water-related tion targets will fit with expanding structure as well. agriculture projects. As is so often energy demand, and continuing Fortunately, other newspaper ed- the case, provincial administrators economic growth. itors expect positive things here too, are getting most of the blame for the Zhong and Wen say the full de- noting that water conservation ini- current predicament, although their tails of the latest Five Year Plan will tiatives were given pride of place in reluctance to spend on irrigation in include new efficiency targets for this year’s “No.1 Central Document”. the past is understandable given that the big water-dependent industries No.1 – traditionally the first pol- grain production has not been re- like petrochemicals, iron and steel, icy paper to be released by the garded as much of a contributor to and in previous Plans the power sec- State Council each year – is usu- GDP growth. tor was also required to improve wa- ally thought to signpost the gov- Getting less discussion are the ter efficiency by 10%. But herein lies ernment’s priorities for the period longer-term obstacles to ensuring another conundrum, as many of the ahead. All of the recent editions that China has enough water. That newer power generation technolo- have focused on rural develop- debate is being left more to the spe- gies have very high levels of water ment (and it’s not always easy to cialist blogs, like Asia Water Project, consumption. Nuclear power needs pick out substantial differences which asked Lijin Zhong and Hua a lot of water for cooling, for in- between documents from year to Wen from the World Resources In- stance, and large scale solar farms year). But the 2011 version does stitute for the bigger picture on the even more (almost double that of seem to have a clear water conser- challenges ahead. pulverised coal per unit of energy vation theme, talking about things One is ongoing urbanisation (city generation, says Zhong). Conven- like improving water efficiency residents consume three times as tional coal-fired power churns out and adjusting prices for urban and much water as the rural population, greenhouse gas, of course, but has Photo Source: Reuters industrial users. according to the two experts). much more modest water usage. Right on cue, Agricultural De- Another – and more specific to With that kind of choice on offer, velopment Bank, one of China’s the agricultural sector – is the re- who’d be a Chinese environmental three policy banks, then an- gional imbalances brought about by planner? n 8 Week in China Energy and Resources 18 February 2011

Sore about ore China’s iron and steel association capitulates on pricing

iligent readers of WiC might be exclusive negotiator had been scaled Dwondering why we haven’t back – and that big steelmakers like mentioned CISA for several months Baosteel would get a seat at any fu- or its increasingly stuttering efforts ture negotiating table beside CISA. to negotiate down the price of im- CISA’s heavyhanded tactics had ported iron ore. Last year this sub- proved a failure – in full public view. ject was just about our most heavily So it was a humbled CISA paying reported item. a visit last month to miners in Aus- On one side you had the China tralia. “The quarterly pricing index Iron and Steel Association (CISA), has been accepted by both sides and and on the other the big three ore CISA is no longer blindly emphasis- miners, BHP Billiton, Vale and Rio ing the need to make changes to it,” Tinto. Tensions first became appar- commented the Economic Observer ent in early 2009, when CISA tried to of the capitulation. collectively bargain ore prices down The Chinese parties (individual on behalf of the Chinese steelmak- Hot issue: price of ore mining firms joined CISA on the trip) ers – which, as a group, are the min- have scaled back their ambitions, ac- ers’ single biggest customer. price for ore each January. The Fi- cording to the newspaper. They But CISA’s negotiating hand was nancial Times said the move was talked instead about the index on soon weakened – ironically when likely to favour the ore producers. which the quarterly prices are set, China’s very own stimulus package CISA was apoplectic, to say the and they suggested prices to include pushed the spot price of ore from least. Far from throwing its towel volatile shipping costs, using a rate the lows the metal saw during the into the ring the association’s secre- known as CIF (cost, insurance and post-Lehman recession. Rather than tary general, Shan Shanghua, gave freight). This was an issue, said EO, accept this, CISA obstinately refused an interview to China Business because the Chinese believe the min- to budge from its demand for a 50% News announcing he would be back ers now also exercise too much in- price reduction. As negotiations for another round of confrontation. fluence over shipping rates too. dragged on and CISA flailed, WiC In fact, CISA declared a boycott of Then again, EO didn’t expect the was reminded of a bloodied boxer the new quarterly pricing mecha- miners to agree, as CISA’s negotiat- who’d gone one too many rounds; nism and ordered Chinese steelmak- ing position is only getting weaker. the miners meanwhile were run- ers not to buy at all from the three In January, China’s iron ore imports ning rings around their Chinese ne- iron ore producers – a punchy move surged 48% from a year earlier, ac- gotiating counterpart. Every day given their virtual dependence on cording to government data and CISA refused to do a deal, the spot BHP, Vale and Rio for the commodity. website steelguru.com reckons that price of ore edged higher. Indeed, with only two months of the CIF price of imported iron ore Then came what looked like the iron ore reserves, cracks were soon hit $200 a tonne in China last week. knockout blow. Last April (see appearing in the boycott. CISA ad- To put that in perspective: when WiC56), the miners announced a mitted that individual steelmakers CISA’s negotiations began in 2009, new pricing mechanism: setting had began negotiating deals with the spot price was $58 per tonne. iron ore rates on a quarterly basis the three foreign miners. Worse: just as it conceded the quar- Photo Source: Reuters using average spot prices. This By the second half of the year, the terly pricing principle, BHP has an- ended the longstanding practice – erstwhile staccato CISA had gone nounced a switch to monthly previously favoured by China’s strangely quiet. Local media noted arrangements – a move that’s likely steelmakers – of agreeing an annual that its role as the steel industry’s to irk CISA further. n 9 Week in China Healthcare 18 February 2011

Drug addicts China’s antibiotics binge is a danger to us all

nne Sheafe Miller made history set down by international stan- Ain 1942, when she became the dards,” said Zhu Zhixin, vice direc- first person on record to be cured- tor of the NDRC. Zhao Deyu, direc- with penicillin (surviving a high tor of emergency medicine at fever brought about by septicemia). Nanjing Children’s Hospital, also Dose me up, doc The discovery of modern antibiotics told Xinhua that many lower-grade a few years earlier not only saved antibiotics widely used in other Those fees often provide essential Miller’s life – it also revolutionised countries have been abandoned in income to hospitals and their staff. public health. Chinese treatments, as they are no “[In some hospitals] drug-generated But it was a breakthrough that longer effective. revenue accounts for 70%-80% of the came with severe risks, doctors How about the potential for more total hospital revenues,” explains warned. Misuse of antibiotic treat- drug-resistant super bugs to de- Xinhua, “and the use of high-grade ments could allow more virulent velop? As the data builds up on IV antibiotics is the fastest and most diseases to evolve, by creating bac- higher levels of antibiotic resistance secure money-making method.” teria much more of a challenge to among Chinese patients, some ex- A scandal last December in the eradicate. perts fear a return to a pre-antibi- southern city Zhuhai, just across the The warning is one that many otic era of medicine, in which exist- border from Macau and Hong Kong, Chinese medical practioners do not ing treatments begin to prove less highlighted the problem once again, appear to be heeding. State Food effective on a global basis. when local authorities reportedly and Drug Administration vice di- The impact of overuse in China uncovered illegal fees paid by phar- rector Wu Zhen recently admitted itself is already apparent. Complica- maceutical firms for drug contracts. that the country’s antibiotics use tions from overdoses and allergic re- “All nine hospitals in Zhuhai was more than 10 times the global actions to antibiotic treatments al- were implicated,” according to average (at 138 grams per person) ready kill an estimated 80,000 Caixin magazine. “The system of That’s an extraordinary statistic – people nationally each year. More corruption and bribes has remained China’s population size normally than a million children have also unchanged. It is still widely known brings down per capita averages to been made deaf by misuse of the an- that kickbacks and bribes are the pri- well below its international peers. tibiotic streptomycin, according to mary source of income for public “About 90% of Chinese inpa- the People’s Daily. hospitals in Zhuhai.” tients are prescribed antibiotics, Why are antibiotics so often over- One solution that’s been sug- while the figure is only 30% in West- prescribed? In part, because patients gested is the introduction of West- ern hospitals,” Du Wenmin, vice di- are eager for strong medicines. But ern-style clinical pharmacists to rector of Shanghai Clinical Centre experts say the main reason is the fi- monitor the prescriptions that doc- for Drug Adverse Reaction Moni- nancial incentives built into China’s tors hand out. But what’s to stop toring, told the Shanghai Daily. healthcare system. them being tempted by the incen- The misuse extends to the most Some doctors tend to prescribe tives on offer too? A recently estab- potent form of the drugs: intra- the most advanced antibiotics to lished centralised drug list may venous antibiotics (those injected achieve the quickest results, says bring down costs and reduce the directly into the bloodstream). Huang Liuyu, director of the Insti- shortfall in hospital budgets – alle- China used a “staggering” 8 bottles tute for Disease Prevention and Con- viating the pressure to generate in- Photo Source: Reuters of IV treatments (including antibi- trol of the People’s Liberation Army. come via over-prescribing antibi- otics) per person in 2009, reports But he also told China Daily that otics. Beijing’s vaunted healthcare Xinhua. “The figure is much higher many others do so to cash in on kick- reforms are intended to achieve than the 2.5 to 3.3 bags per person backs from drug companies. this; but will they work? n 10 Week in China Chinese Character 18 February 2011

Exit the expert Chinese concur: Huntsman has proven America’s best ambassador to China

Well qualified: Huntsman spoke Mandarin and even rode a Chinese-made bicycle

“ eep your friends close, but at the end of April – prompting him one of the shortest serving Kyour enemies closer” – says speculation that he may campaign American ambassadors to China in mafia-don Michael Corleone in for the White House in 2012. history – and comes just weeks af- Francis Ford Coppola’s classic, The On the surface at least, Obama is- ter a Newsweek article predicted Godfather Part II. Wisdom that n’t worried. “I’m sure that him hav- he’d soon run for Obama’s job. Nor many argued President Barack ing worked so well with me will be a would it be the first time a former Obama was applying when he made great asset in any Republican pri- China envoy pulled off a success- Jon Huntsman his ambassador to mary,” he joked with reporters dur- ful presidential bid: George HW China in August of 2009. By elevat- ing President Hu Jintao’s recent Bush previously held the post un- ing the moderate Republican, then Washington visit. der Gerald Ford. governor of Utah, Obama took But the pundits aren’t as sanguine. Huntsman may have had a short credit for reaching across party “White House officials are furious at stint in China (just 21 months), but it lines. But he also eliminated a po- what they consider an audacious be- seems to have been a popular one. tentially dangerous political rival. trayal” contends Politico.com, “but That came as a surprise to some, Photo Source: Reuters Or so he thought. know that any public criticism would given the disputes arising during his The plan may very well have be likely to benefit Huntsman if he tenure, including the testy issue of backfired: Huntsman has handed in enters the primaries.” US arms sales to Taiwan, as well as his resignation, and leaves his post Huntsman’s resignation makes North Korea’s sinking of a South Ko- 11 Week in China Chinese Character 18 February 2011

rean warship (the Cheonan). W Bush between 2001 and 2003. In become the next US president? “It is due to his efforts that the the interim he helped expand the It’s still unclear whether Hunts- Sino-US relations in the first year of China footprint of the multi-billion man plans to run in the coming President Obama’s term of office dollar chemicals business co-founded election, in 2016, or even at all. Cer- displayed a good upward trend,” by his father, the Huntsman Corpo- tainly, his foreign policy experience proclaims the Guangzhou Daily. ration (which now has five manufac- could turn into an advantage if he “Despite the great waves in Sino-US turing facilities in the country). can persuade Republican voters to relations in the subsequent year Jon How will his time time as ambas- overlook his service to a Democratic Huntsman’s efforts have been sador be judged back at home? Prob- administration. recognised by China.” ably on his record in pushing two Still, that presupposes Huntsman The idea of a Huntsman cam- core US interests: the reduction of has enough of name recognition to paign has also been well received by the trade imbalance and the pro- make it to the Republican nomina- some. “Huntsman’s experience in motion of yuan appreciation. And tion (Sarah Palin, he isn’t). Or that China will likely help him in any fu- by those yardsticks he wasn’t very the US electorate at large will be im- ture presidential bid as he might be effective. The trade deficit rose from pressed by his China experience able to deal with relations with $268 billion at the end of 2008 to (not a certainty, either). China in a more comprehensive and $273 billion last year. And the yuan That’s a little ironic, given that balanced way,” Chinese Academy of has only appreciated around 4.1% some Chinese commentators have Social Sciences academic Ni Feng since he arrived in Beijing. said that this experience is a gen- told the Global Times. Despite that, he’s managed to uine asset. “This doesn’t only mean One story in particular helps ex- avoid a reputation as a pushover. that there’s a pre-built bridge with plain how he sometimes got the bet- “Huntsman is no panda-hugger,” the US,” warns the Southern Me- ter of his hosts. Summoned to re- former National Security Council tropolis Daily, “but also that there’s ceive an official rebuke, Huntsman advisor Michael Green told the a tough opponent who knows China chose to turn up for his diplomatic Washington Post on his nomination. well… Jon Huntsman is bound to dressing down by bike (and on a vin- “He knows the country well, but he seek more substantive benefits than tage Shanghai Forever brand) rather will be firm.” The leaked ‘Wikileaks his predecessors from China and his than arrive by embassy car, accord- cables’ appear to validate that pre- understanding of China’s culture is ing to the Wall Street Journal. It was diction. In some of the dispatches a unique weapon. Is China prepared a clever gesture, showing humility Huntsman describes China’s foreign to deal with such an adversary?” n but also breaching protocol in a way policy as one of “muscle-flexing, tri- that befuddled government offi- umphalism and assertiveness” and cials, putting them on the backfoot. argues that its investing rules “add Keeping track Of course, Huntsman also has an to the overall sense that China plays adopted Chinese daughter (11 year unfairly in the global marketplace.” China’s latest step towards kicking its old Gracie Mei), and is the first US (Remember Coca-Cola’s failed 2009 legendary smoking habit has been ambassador to actually speak Chi- bid for Huiyuan Juice?) welcomed by anti-smoking activists – nese. He learned the language at 27, Those concerns were doubtless even if it was just a small one. during a two-year stint as a Mormon appreciated by the US multination- Last week, the State Administration of missionary in Taiwan. He was also als trying to do business in the Radio Film and Television ordered film and television studios to ensure that part of Ronald Reagan’s delegation country. “Huntsman is the most ca- scenes with actors smoking be made to Beijing in 1984 – when he met pable and effective ambassador that “as short as possible”. then paramount leader Deng Xiaop- Washington has dispatched to Bei- The move follows the release of a ing and saw China in the early days jing in many years,” opined James Beijing Centre for Disease Control survey that found that nearly a third of of reform. McGregor, former chairman of the students polled wanted to smoke after In the years that followed, Hunts- American Chamber of Commerce in seeing actors light up. man had several opportunities to China. Promoting their cause may China seems to have an ambivalent visit China and negotiate with offi- have helped to soften some of the approach to tobacco control (see cials – mainly during Republican ad- ‘buy-China’ policies (for example, WiC91), and the sections of the government that benefit from cigarette ministrations. He was appointed am- the repeal of a rule that 70% of wind sales have so far managed to talk down bassador to Singapore by George HW turbines erected in the country had most of the more restrictive policies Bush in 1992, and served as deputy US to be made from components man- proposed by anti-smoking advocates. Trade Representative under George ufactured domestically). So could he 12 Week in China China Consumer 18 February 2011

Avon (not) calling Why the cosmetics giant has stumbled in the Chinese market

ancy smearing mashed insect being forced to vote for Christmas Fguts on your lips? If the red dye comes to mind). “There have been in your lipstick is ‘carmine red’ (or if new policies coming out all sup- you’ve kissed someone wearing it), porting direct sellers,” Avon store- then you probably already have. The owner Lin Yueqin told CBN Weekly, cactus-chewing cochineal insect has “and the company seems to be been big business since the days of slowly killing us.” the Mayan and Incan empires, and On paper at least, that recruit- with more Chinese women (and ment drive has been effective – as men) wearing makeup than ever be- many as a million people have be- fore, it’s only getting bigger. come agents, compared to around That should be good news for the 200,000 for Amway). The real num- direct-selling cosmetics giant Avon. ber may be lower as storeowners But it has been struggling to get its have played their own game – they act together in China, reporting Avon: getting a makeover get a better discount if they say an sales down over a third on last year. order is from a salesperson, so The company also announced a loss and open retail stores. Avon grew phoney recruits have flourished. Lin of nearly $11 million (versus a profit quickly nonetheless, putting to- admits that, of the 300 people she’s of $22 million the year before). gether a network of roughly 6,000 ‘recruited’, “only 3 of them are work- Avon was one of the earliest di- franchised stores. ing in any real sense.” rect-sellers to get into the China Eventually the government re- Avon has also struggled to con- market – as far back as 1990 – but laxed restrictions and gave Avon trol how its products are priced in that headstart hasn’t paid divi- one of the first new direct-selling li- China. Previously, storeowners have dends. Its model works by recruiting censes in February 2006. But there bulked up on Avon’s monthly spe- salespeople (mainly women) who was a catch: Avon was only allowed cial offers, and used them to pursue sell to their friends and acquain- to recruit salespeople directly – and a discounting strategy . But the prac- tances. That method is cheaper than ‘team payments’ (which encouraged tice hits the direct sales agents par- paying rent for retail stores, and has the sales staff to go out and recruit ticularly hard, who then can’t com- the advantage of friends making people for themselves) were banned. pete with store prices. The gradual more trusted marketers than con- Five years into its recruitment closing down of the store sales chan- ventional advertising. drive for door-to-door Chinese Avon nel should see an end to more of And that’s just the problem. In ladies, the US firm is ditching its re- these pricing anomalies, at least. 1998 direct selling was banned in tail network. CEO Andrea Jung re- One other piece of bad news China. Officially authorities say the portedly estimates it will take an- from last year: Avon was forced to restriction was designed to prevent other year and a half to switch over suspend four employees. The Peo- ‘pyramid scheme’ sales frauds. Un- completely to the preferred direct ple’s Daily reports that the em- officially, it’s thought the blanket sales model, and it’s this transition ployees were alleged to have ban was also motivated by govern- that she is blaming for the com- breached the US Foreign Corrupt ment fears about the mobilisation pany’s recent red ink. Practices Act and were told to take Photo Source: China Imagine of new mass organisations, specifi- Naturally, store owners are not a leave of absence while being in- cally religious groups. happy about Avon’s strategic switch. vestigated. The Wall Street Journal To stay in business, direct-sellers Nor at the company’s requirement reckoned the probe related to the like Amway, Nu Skin and Avon were to sign up customers for Avon prod- executives paying for foreign trips forced to go the traditional route – ucts as future salespeople (turkeys for Chinese officials. n 13 Week in China Society and Culture 18 February 2011

It’s a weibo world Not heard of it? Weibo’s an online phenomenon that’s transforming China

eng Wenle is officially China’s Pmost famous six-year-old. The child – kidnapped in Shenzhen three years ago – became headline news last week when he was re- united with his father, after a stu- dent living on the other side of the country had matched Wenle’s face to a picture he’d seen online. The boy’s father, Peng Gaofeng, told the China Daily that the child was kidnapped in 2008. Desperate to find his son, Peng started posting pictures online. The story caught the attention of a reporter for Phoenix Weekly magazine, who told Peng’s tale and posted pictures of the young boy through his own Sina weibo account, a Chinese Twitter- like microblogging service. Thou- A victory for the web: Peng Wenle, kidnapped boy, saved by weibo users sands of users reposted the photos. The student, from the city of locally as Dashan. The man still re- tic media. Government officials were Pizhou in coastal Jiangsu province, garded as the “the most famous forced to react and two local officials saw the pictures and thought he foreigner in China” (see WiC83) has were sacked as a result. recognised the boy. Details of the just started out in the weibo world “It’s not a revolution,” Xiao case remain unclear and a DNA test but has already lured 166,000 fol- Qiang, director of the China Inter- is pending, but videos of Peng’s tear- lowers. Dashan offers everyday net Project at the University of Cal- ful reunion with his son have be- commentary (and also gives occa- ifornia, Berkeley, told TIME maga- come a nationwide sensation in the sional English lessons). zine. “But this takes the ability of local media. But Weibo – the majority of which the internet to generate public “It’s a miracle, a miracle that are currently hosted by web giant opinion and the scope of informa- could not be true without the help Sina – are far more than a celebrity tion a big step further. It’s facing of netizens,” the father told the Chi- phenomenon. China’s internet users censorship, just as before. But po- nese press. are now using them for everything litical participation, among other Peng’s story says much about from accessing news and informa- things, has taken a big step forward how microblogs are used in China. tion to fighting social injustice. because of microblogging.” Yes, weibo (blogs capped at 140 In fact, one of last year’s most The ability of weibo (which di- characters) are a tool for celebrities prominent stories, the family in rectly translates as ‘microblog’) to to connect with their fans. The Jiangxi province that set itself on fire disseminate information widely Photo Source: China Imagine most popular is written by actress in protest at the demolition of their and quickly has proven a headache Yao Chen has 5.9 million followers home, used Sina weibo to broadcast for China’s censors, which explains (see WiC50 for our first mention of their story. Thousands of mi- Beijing’s mixed feelings towards the her weibo). Another celebrity con- crobloggers relayed the post, which service. Twitter was blocked in vert is Mark Roswell, better known was eventually picked up by domes- China in the days following the eth- 14 Week in China Society and Culture 18 February 2011

nic riots in Xinjiang in July 2009. users worldwide as of September. It The much-hyped romantic flick But the government clearly be- shouldn’t be long before Sina over- Jiang Ai Qing Jin Xing Dao Di has a ti- lieves that weibo can be useful too. takes its US peer in user numbers. tle that’s adapted from Mao’s well According to the Economist maga- One reason for Sina Weibo’s pop- known phrase: Jiang Ge Ming Jin zine, mid-ranking officials in Bei- ularity is that it isn’t just a knock-off Xing Dao Di. That translates as ‘To jing are being trained in the art of of its American counterpart. The Carry Revolution to the End’ and was weibo communication in an at- Chinese site hosts voicemails, pho- penned in 1948 as a call to comrades tempt to connect with the country’s tos and videos, unlike Twitter, which to fight on until the civil war was won. younger, tech-aware population. Po- relies on third parties for these fea- The film’s title renders in English lice officials are also leveraging so- tures (so a Twitter user would be di- as the somewhat more amorous ‘To cial media as a means to solving rected to a different location in Carry Love to the End’, and it is based criminal cases, and hundreds of search of this functionality – not the on a hit TV show from 1998 of the public security bureaus in China case for Sina). same name (perhaps realising that have launched their own mi- Weibo fans can also comment on Mao references will be lost to Eng- croblogs, said Xinhua in January. other user messages, and not just lish speakers, the film’s international Take the police force in Xiamen. It relay them, says TIME. Still, to ap- title is Eternal Moment). says that its microblog helped it pease the censors, Sina filters con- Starring Xu Jinglei and Li Yapeng catch the murderers of a three year- tent for sensitive subjects before al- (the husband of famed local popstar old girl after they used it to release lowing posting. The word “Egypt” Faye Wong), the movie appeals to a details about the case, as well as off- has been one of those blocked re- generation keen to recall the popular fer a Rmb5,000 reward. The mes- cently (see page 5). Charles Chao, small screen drama. sage was forwarded more than Sina’s chief executive, claims his Fast forward just over a decade, 10,000 times, says the China Daily, product is very much a homegrown and the sentiment seems more com- leading to the uncovering of crucial champion, with features specifically mercial than nostalgic. Wong, who information used in solving the case designed for a Chinese audience. has emerged from self-imposed six days later. “When it was launched it [Sina’s ‘early retirement’ to sing the theme The country’s microblogging pop- weibo] was a much more advanced song, evidently senses box office ulation is already so big that it’s hard product than Twitter.” gold. Her husband has co-produced for Beijing to ignore. Hudong.com Its success has also attracted the released a nationwide survey late attention of investors, and Sina’s last year indicating that around 25% share price jumped to a record on of China’s 450 million internet users speculation that Baidu and Al- are micro-bloggers. Pick-up has been ibaba.com, two of China’s most vis- rapid. Analysys International, a mar- ited websites, were thinking about ket research firm, said there could co-investing, technology consulting be 145 million people using weibo by firm Marbridge Consulting reported next year, up from eight million in in January. The company’s stock 2009. And because weibo are easy to continues to trade close to its all- use on mobile phones, the target time high of $93.89. market goes far beyond PC penetra- tion to the 850 million mobile phone population. Sina Weibo, the leading mi- croblogging service in China Cost of loving launched only two years ago, says it Big profits as Chinese embrace has so far attracted 50 million users Valentine’s Day who collectively post 25 million comments per day. The company ixing Mao with romantic en- Photo Source: China Imagine says an average of 10 million new Mtertainment does not sound users have signed up for the service like the most promising collabora- each month since last August. In tion. But a film released on Valen- comparison, Twitter, launched in tine’s Day has managed to connect 2006, had more than 160 million the two, if only thanks to its title. Xu Jinglei: in Valentine’s movie 15 Week in China Society and Culture 18 February 2011

and invested in the film, and esti- mates are that it took Rmb100 mil- lion ($15.18 million) on its opening day –a pretty good start. Perhaps that should not be such a big surprise. The script has been written very much with a key Chi- nese demographic in mind – the ‘Post-Eighties Generation’, so-called because they were born in the 1980s after Deng’s economic reforms be- gan. The movie brings them up to date on how the original characters have fared. Much like the (apparently never ending) Sex and the City franchise, this chick-flick may find one or two reluctant husbands dragged to the cinema in coming days. Nor was it a coincidence it was released on Valentine’s Day: a tactic that reflects the increasing popularity of this Western celebration in China. Online shopping mart Taobao (see WiC94), for example, reported that February 14 is becoming big This is what you get for Rmb99,999: the suite at Shanghai’s Peninsula business. The site had sold 2.1 mil- lion flowers and 40,000 boxes of a splash, Shanghai’s Peninsula Hotel 78 of our rooms were reserved for chocolates ahead of Cupid’s offered a special package in its pre- Valentine’s Day by mid-January,” favourite day. That was up 110% on mier 400 square metre suite. Com- says Xu Wen, manager of Shanghai- last year. plete with a working fireplace, pri- based We Love Hotel. Meanwhile a survey conducted vate gym and view over the Bund, For those lacking a relationship, by Xinhua found that 65% of re- the Peninsula Suite is true lap of lux- the celebratory day was anything spondents were budgeting for at ury stuff. Guests also got a round- but. An annual event at Beijing’s least Rmb800 to spend on a dinner, trip transfer by Rolls-Royce, as well as Sculpture Park – held in the week flowers and a movie – that was up dinner in the hotel restaurant of before Valentine’s Day – drew 30% versus last year (prices are up their choice – as well as champagne 50,000, with single guys and girls too, of course). in the suite. It wasn’t cheap, mind posting their personal information Western brands have been pro- you. The one-night Valentine’s pack- in the hope of finding their match. moting Valentine’s Day in recent age was evidently targeted at the Many commented that it was a years, sensing a commercial oppor- country’s super-rich, given it cost fairly uninspiring experience. “This tunity. Hence the Wall Street Journal Rmb99,999. is not romantic at all,” 24 year-old Yu notes that KFC (see WiC53) has been China Daily reports that – at a Junjie told the China Daily, com- pushing its egg tarts this year as the somewhat more modest price point plaining that many of the people perfect way to say ‘I love you’. KFC – ‘love hotels’ were also a benefici- posting were far less concerned with claims to sell 300 million of the cus- ary. Copied from the Japanese, most affairs of the heart than with their tard-based desserts annually, and hotels have a range of themes and prospective partner’s financial sta- marketed a Valentine’s gift box of features. Rooms are booked in three tus. As if to prove the point, the Photo Source: China Imagine six (the Portuguese delicacy made hour slots (so plenty of time to pro- newspaper interviewed a lady called it onto the KFC menu by way of its fess one’s love with a few rounds of Li, who described her requirements popularity in Macau). KFC’s tarts). Leading online travel as “quite simple”. The man of her For those who wanted to declare agency Ctrip reported that love was dreams had to own an apartment, their undying love with a bit more of in the air on Monday evening. “All and have a college degree. n 16 Week in China And Finally 18 February 2011

Milking it Why Macau saw stocks of baby powder run out

he residents of Macau are nor- in the afternoon.” Tmally keen on mainland Chi- Local websites in Macau have nese tourists. The local economy even called on mainland buyers to has prospered from the wallets of face special taxes to stop them buy- Chinese gamblers, virtually eradi- ing up all the available stock. Locals cating unemployment and boosting complain they’ve been reduced to Emptying Macau’s shelves incomes. feeding their babies rice congee Peak season is China’s Lunar New when they haven’t been able to buy odic scares. In WiC75 we wrote about Year. And this year’s seven day holi- their favoured brands. reports that linked infant girls show- day – which took place between Feb- The Shanghai Daily reports that a ing premature development to lo- ruary 2 and 8 – saw visitor numbers similar phenomenon was seen in cally-made milk powder sold in hit 805,000. To put that in context, Hong Kong during the Lunar New Wuhan and Beijing. the average number of visitors to Year too. One mainland visitor ar- The milk powder purchases in Macau during the week-long Chinese rived in the city with three empty Macau and Hong Kong show that holiday was 57% higher than the av- suitcases and took back 12 cans. parental concerns remain signifi- erage for December. Records were Why? One reason is price. An im- cant. China-based consultant (again) broken for a single day’s ported Japanese brand of milk pow- Matthew Crabbe of Access Asia com- casino takings. der can cost Rmb104 in Hong Kong, ments: “This renewed and intensive But not everyone in Macau was but as much as Rmb298 in China. snapping up of infant formula and happy about the influx of Chinese But the main motivation is pharmaceuticals shows that all trust visitors. Foremost among those health-related. As we have reported in mainland products has collapsed complaining were parents of new- before in WiC, food scares are a wor- and that anyone who can get them born babies. According to Chi- rying fact of life in China, and none from Hong Kong, either by going nanews.com Chinese tourists were more so than those related to con- themselves or knowing someone clearing the shelves of imported taminated baby milk powder. A ma- who’s going, will do so. With only the baby milk powder. Prices of the what jor milk powder scandal occurred in one heir, and no spares, taking remained were marked up by 10%. 2008 and claimed the lives of 6 ba- chances with mainland babies health “Milk powder has been in short bies, making 300,000 sick. The milk is too risky for one-chance parents.” supply,” a staffer in a Macanese had been illegally mixed with (For more on Macau and its pharmacy told the website. “We melamine to shave costs. Trust in booming economy, download our replenish our stocks in the morn- locally-made powder waned. special Focus issue on our website ing, but they’re usually sold out Since then there have been peri- www.weekinchina.com). n

In the bag

“China is a fantastic opportunity. There’s a confidence and comfort in Chinese men utilising bags in

Photo Source: Reuters the same manner as women do.”

* Men represent 45% of the $1.2 billion market for luxury handbags in China, Victor Luis, president of Coach Retail International told the LA Times. The equivalent figure is just 7% in the US. Victor Luis

17 Week in China The Back Page 18 February 2011

Photo of the Week In Numbers $4 billion The amount of US Treasuries China sold in December last year, reducing its holdings for the second month in a row (following a $11.2 billion sale in November). China remains the largest foreign holder of US government bonds.

813,000

Photo Source: China Imagine The number of cars imported by Chinese dealers last year, according to the China Association of Automobile Manufacturers. The figure is almost double the previous year, with demand largely focused on German and Japanese brands.

Have bike, will marry: Beijing couple wed on Valentine’s Day 26 billion The number of SMS text messages sent during China’s seven day Lunar New Year holiday. It was up 13% on the previous Where is it? year. Some of the places referred to in this issue $80 million The value of a UN contract awarded to Beijing Chinese solar panel maker Suntech Power. It’s the largest order the international Shanxi organisation has placed with a Chinese firm China to date. The panels are intended for use by UN peacekeepers. Wuhan Shanghai

Hong Kong Zhuhai Macau

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