Week in China Modi's Moment

1 Talking Point 5 Week in 60 Seconds 7 China and the World Week in China 8 China Consumer 9 Shipping 11 Economy 13 Internet and Tech 15 Banking and Finance 26 September 2014 16 Society and Culture Issue 254 19 And Finally www.weekinchina.com 20 The Back Page Modi’s moment m o c . n i e t s p e a t i n e b . w w w

Why both Japan and China have been trying to woo India’s

new leader this month Brought to you by Week in China Talking Point 26 September 2014

Not exactly a love triangle Xi looks to repair relations in India. His main motivation? Japan

Passage to India: China's President Xi Jinping is greeted by Prime Minister Narendra Modi

hinese names can be hard to what lies beyond it. Indians feel a Delhi, was the first by a Chinese Cpronounce, even if they are mixture of admiration and fear for head of state in eight years. written in Pinyin. That said, an In - the Chinese, especially in economic The Indian Prime Minister soon dian newscaster made a pretty fun - terms, but those emotions are made it clear how pleased he was to damental error during the visit of based on very little information. welcome Xi. the Chinese president last week. Most Chinese, on the other hand, “I attach great importance and Mistaking the “Xi” in Xi Jinping for believe that India is “dirty” and priority to our relations with China. Roman numerals, she referred to “chaotic”. Only the most adventur - We are two ancient civilisations China’s leader as “Eleven Jinping” ous tourists travel there and many with a long history of engagement. live on air. Chinese businesses have avoided China is our largest neighbour, and The Indian state broadcaster Do - the Indian economy too, preferring India’s neighbourhood occupies a ordarshan later apologised – telling to look first at other markets. special place in my national devel - Reuters it was “an unpardonable But now it seems that Chinese opment plans and foreign policy,” mistake” and sacking the offending President Xi and Indian Prime Min - Modi said in a speech delivered on journalist – but the error high - ister Narendra Modi are keener to the first day of Xi’s trip. lighted a more serious point: boost relations between two of The next day, addressing an au - knowledge about China within Asia’s great powers. dience at a think tank in New Delhi, India is low, even amongst the edu - The first stage of that revival Xi responded: “China and India cated classes. came last week when Xi concluded have a combined population of over P h o t

o The two nations may share a his week-long tour of central and 2.5 billion. If we speak with one

S o u r 4,000-kilometre border (much of it South Asia with a visit to India. The voice, the whole world will listen, c e :

R e disputed) but there is surprisingly three-day trip, which took in Modi’s and if we join hands, the whole u t e r s little knowledge on both sides about home state of Gujarat as well as New world will pay attention.” 1 In the future, finance will help new growth flourish.

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So why the shift? could become part of a coalition of For the past 10 years India has been democratic nations looking to ‘con - ruled by the left-of-centre Congress tain’ a rising China. Party and its allies. It largely lacked Under the Bush administration a cohesive China policy during this Washington was keen to develop period and even appeared reluctant India as a counterbalance to Chi - to engage with its undemocratic nese power. Japan has always main - neighbour. Instead the narrative tained high levels of investment in was more of China as an aggressor: India, Nepal, Bangladesh and a country intent on claiming huge Bhutan too. Its Prime Minister Abe chunks of India’s territory and an Shinzo has even spoken of creating economy willing to flood the sub - an “Asian Security Diamond” continent with cheap, faulty goods. And with Abe Shinzo stretching from India to Australia Gujarat, run by Modi before he and Hawaii “to protect the mar - became prime minister in May, this recent trip because of insta - itime commons of the Indian was one of the few regions to bility there. Ocean and the Western Pacific”. It’s adopt a more positive attitude. not hard to guess that China is the During his thirteen-year stint as But what does China get out of target of this Abe initiative. Gujarat’s boss, Modi attracted a big closer relations? Tellingly, Modi made his first for - proportion of the Chinese invest - China’s motives are a little more eign visit this month and it was to ment made in India. Gujarat also complicated. Tokyo. Abe bear hugged him on his enjoyed more rapid economic Firstly, increased engagement arrival and reporters were informed growth than many of its peers, with India fits neatly with Xi’s mis - that Modi was one of only three earning itself a nickname as ‘the sion to boost Chinese influence people that Abe follows on Twitter. Guangdong of India’. across the region. And if relations To sweeten ties Tokyo promised $34 So perhaps it follows that Modi thaw across the Himalayas, New billion of foreign direct investment will try to replicate much of what he Delhi is more likely to lend its sup - within five years, and discussed achieved in Gujarat at the national port to Chinese initiatives such as deepening military ties, including level. In short, his primary aim in the 21st Century Maritime Silk via the sale of Japanese aircraft to reviving the dialogue with China is Route (see WiC253). Such schemes the Indian navy. development. He wants help with are important to China because “From this day on, Prime Minis - bulking up India’s industrial base, they allow Beijing more say in the ter Modi and I will work hand-in- and assistance with renewing its development of the region. (By con - hand to dramatically strengthen creaking infrastructure, most no - trast, countries that participate in relations in every field and elevate tably its British Raj-era railway net - the projects hope to see increased ties to a special, strategic global work and possibly with building trade with China, as well as get partnership,” Abe pledged. nuclear power plants too. loans to help them build infra - Modi responded to these over - In addition Modi wants to cool structure.) tures: “We intend to give a new mutual tension over disputed bor - Modi has already given his thrust and direction to our defence der areas. He also looks keen to blessing to a related project, the cooperation, including collabora - work with China to help both coun - Bangladesh-India-China-Myan - tion in defence technology and tries increase their international mar (BCIM) Economic Corridor. equipment, given our shared inter - standing and influence through the And although military strategists est in peace and stability and mar - creation of institutions such as the in New Delhi have expressed con - itime security. The 21st century Asian Infrastructure Development cerns about the Maritime Silk belongs to Asia... but how the 21st Bank – which will be based in China, route, it seems that he may be century will be depends on how but headed by an Indian. mulling that too. strong and progressive India-Japan If a closer relationship means “India believes that reconnecting ties are.” that China’s friendship with Pak - Asia is important for its collective In a veiled attack on China, re - P h o t

o istan weakens, that would be a prosperity,” he said in his speech. ported Reuters, Modi also criticised

S o u r bonus. For instance, the Indian There are other reasons for get - the expansionist mood of countries c e :

R e media was quick to trumpet that ting New Delhi on side and they in - that have encroached on the seas u t e r s

Xi dropped the Pakistan leg of clude Beijing’s concerns that India and territories of others. 3 Week in China Talking Point 26 September 2014

Modi is in a good position to play China and Japan off against each Planet China other and win concessions from Strange but true stories from the new China these increasingly antagonistic East Asian rivals. Arguably India has never mat - UNIFORM APPROACH . With violence on the rise in Chinese hospitals (see tered more, from the perspective of WiC252), the authorities are coming up with some innovative solutions to the Asian balance of power. A poll calm angry patients. The People’s Daily recently posted photos of one new earlier this month by the China initiative at the First People’s Hospital in Zhengzhou city. The hospital has Daily found that 53.4% of Chinese dressed 20 of its nurses in flight stewardess uniforms and stationed them at respondents envisage a military the entrance to greet new arrivals. Their duties include serving tea and escorting critically ill patients to the requisite areas. conflict with Japan, and one fifth A hospital spokesperson told news website The Paper that the said that it could happen within “a “stewardess-style nurses” were having a good impact but the Beijing few years”. In a parallel poll in Japan, Morning Post demurred, commenting instead that it was a silly gimmick. A 29% said they could foresee mili - nursing lecturer from Nanchang University School of Medicine also warned tary confrontation. that the uniforms led to patients being “full of passion” and so were “not Thus one reason for China to suitable for a hospital atmosphere”. cosy up to India is to dissuade its Whether this is an idea that’s about to ‘take-off’ is hard to predict but neighbour against any deeper al - Xinhua reports that Huai’an city’s Lianshui Hospital has 12 nurses similarly liance with Japan. Chinese military attired. Nor is this the first time female uniforms have caused controversy. strategists are clearly concerned at When the (now jailed) Bo Xilai ran Dalian he created a special mounted the idea of being ‘encircled’ by Japan division of pretty policewomen who patrolled the city on horses. Critics have and India, in much the same way since described the unit as decorative, with the Apple Daily pointing out that the policewomen had apprehended just one criminal in two decades of that the German General Staff wor - service (see WiC196). ried about France and Russia encir - cling their country in 1914.

How did Xi’s charm offensive go? As we have seen in the 18 months since he became president, Xi and his wife are much savvier ambassa - dors for their country than most of their predecessors. On this trip the couple won points by flying straight to Gujarat to celebrate Modi’s 64th birthday. The India media was also im - pressed with Xi’s donning a Nehru guards that part of the border – is create a clearly defined border style-waistcoat. And China’s pledge now facing off against some 800 through the ambiguous territory. to invest $20 billion in business PLA troops, The Times of India re - Chinese leaders said they wanted to parks and infrastructure went ported this week. New Delhi has re - hold concrete talks on the issue too, down well too. acted by cancelling a Sino-Indian but talks have yet to take place. But despite the smiles and hand - media forum in the capital and de - Analysts say discussions have shakes, the trip has been overshad - laying the Indian Army chief’s stalled because China is unwilling to owed by two incidents in disputed planned trip to Bhutan. stop a road-building programme up border territory about 400 miles Chinese officials then made a to the LAC and India refuses to de - north of Delhi. The two “incursions”, statement explaining that the two molish structures built in the area as the Indian media is calling them, countries have different under - that shelter troops. began when Chinese personnel standings of how the border and Several so-called ‘flag session’ crossed India’s self-defined Line of LAC are defined. Thus Chinese meetings between Indian com - Actual Control (LAC) and set up troops believe themselves to be in - manders and their Chinese counter - camps. About 1,800 Indo-Tibetan side China. Previously, the Modi parts have taken place without any border police – the agency that government has said that it wants to results. Modi also raised the issue 4 Week in China Talking Point 26 September 2014

with Xi during their meeting, ac - the Hindustan Times) bemoaned translators, analysts and innovative cording to several Indian sources. that the most pressing issues be - policies, Indian governments since tween the two nations had been the 1962 war have been only reac - Is China keener on forging better parked for the time being. tive to steps taken by China, always relations than India is? “The many agreements that ap - trying to catch up to its neighbour Based purely on media coverage it pear not to have been signed during without comparable dedication, re - would seem so. this visit should worry those who sources or skills,” he lamented. Of course it is not entirely fair to expected the Xi trip to set the tem - Sen pointed out that several of compare China’s state-controlled plate for the future,” the newspaper the documents prepared by Modi’s press with India’s more opinionated said, citing disputes over rivers and office for Xi’s visit were marred by Fourth Estate. water rights, as well as disagree - Chinese typos, while an official Even allowing for that, Indian re - ments over territory in Kashmir transcript on the prime minister’s action to the latest Chinese over - and the eastern state of Arunachal website even called the Chinese tures were muted. Pradesh, which China claims as president “Xi Zinping”. Maybe they had hoped to get South Tibet. More embarrasingly, maps in more than the $20 billion of invest - On the economic front there was documents related to establishing ment pledged thus far. Japan prom - also pessimism about how India 'Sister Province' relations between ised more a few weeks before, of was going to be able to lure more Guangdong in China and India’s Gu - course. Or maybe the border stand - Chinese investment. Few of India’s jarat were revealed to outline Aksai off loomed too large. states have the combination of Chin (which India claims as part of “In the euphoria over the poten - high-quality governance, physical Jammu and Kashmir) as Chinese tial economic and diplomatic gains infrastructure and clarity of eco - territory. from the visit of the Chinese presi - nomic purpose, including a friendly “It was like a slap in the face of dent, the nagging problem at Dem - investment climate, required to at - the country,” complained Congress chok and Chumar remained tract global capital, the Hindustan spokesperson Abhishek Manu inexplicable to most casual ob - Times concluded. Singhvi, adding that incursions dur - servers. The games being played… Tansen Sen, a professor of Asian ing the summit were unacceptable have long gone on and ‘tolerance for History at the University of New “for the sovereignty, ethos and for - ambiguity’ has its limits,” warned York, told the Indian Express that eign policy of the country”. an editorial in the Indian Express. India also needs more policymakers It was time for Modi to “walk the Another piece (titled “High on who understand China better. talk” on national security, Singhvi expectations, low on delivery” in “In the absence of competent insisted. n

Flying start for Alibaba

If Jack Ma had said “We want to be bigger than Wal- Mart” a decade ago, few would have taken him seriously. But when he said the same thing to CNBC’s anchors last Friday, plenty of people were ready to believe it could happen. The founder of the e-commerce giant was speaking just after trading opened in Alibaba’s stock. The shares surged 38% on debut – giving the Chinese firm a market capitalisation of $231 I l l u billion, larger than Procter & Gamble, reports the Wall s t r a t i o Street Journal. The newspaper later said that the IPO’s greatest growth lay ahead. He also predicted that n : w w greenshoe allocation had been exercised, meaning the China’s e-commerce industry would ship 200 million w . b e IPO had raised $25 billion in total, a record for a new packages a day within a decade, versus the 27 million n i t a e p listing. Ma told CNBC he was keen to earn investors that are daily shipped now. Alibaba currently enjoys an s t e i n

. “trust” and “take care of them”, and promised the era of 80% share of China’s e-commerce market. c o m

5 Week in China The Week in 60 Seconds 26 September 2014

Jack Ma named richest man The major news items from China this week were...

The HSBC Manufacturing PMI rose to 50.5 in the flash 1reading for September, up from the final reading of 50.2 in August. Factory employment has slumped to a five-and-a-half year low. “This is an improvement com - pared to what markets were expecting [but] if we just look at recent numbers, this is just hovering at 50. So the big - ger picture shows that it is growing but only marginally and very slowly compared to past standards,” said John Zhu, Greater China economist at HSBC.

Jack Ma, founder and executive chairman of Alibaba 2Group, and his family have a net worth of about $25 billion following last week’s initial public offering, ren - Taiwan is worried about Lei Jun’s Xiaomi phones dering him China’s richest man, according to the latest Hurun Rich List published this week. Half of this year’s China’s security concerns over foreign smartphones top 10 were technology executives (including Ma Hu - 4could present an opportunity for local handset mak - ateng from Tencent and Lei Jun from Xiaomi). Mean - ers, said the China Daily, as the Shanghai municipal gov - while, only two property developers made the top 10. ernment was reported to have ordered officials to use Huawei phones instead of those made by Apple and Sam - Property developer Agile, which is based in Guang - sung. On the other hand, the Taiwanese government is 3dong province, announced a rights issue last week to now investigating whether China’s Xiaomi is a cyber se - raise money to pay down debt. The issue, which plans to curity threat. The Chinese smartphone maker has also raise $360 million, is a step toward repairing its fragile been accused in the Hong Kong media of sending copies balance sheet. The developer follows Country Garden of user text messages back to servers on the mainland. Xi - and Yuexiu Property in tapping shareholders for funds aomi has denied the claims. as tighter credit conditions and an economic slowdown continue to eat into demand for property. Agile has a net Tencent raised its minority stake from 9.9% to 11.55% debt-to-equity ratio of 99%, compared with an average 5in the shopping mall and logistics developer China of 61% among its peers. South City. Tencent, which bought its initial stake in Jan - uary, will pay $106.1 million to raise its holding. In June the two companies signed a strategic partnership which involves plans to launch outlet malls where consumers can use the mobile payment feature on Tencent’s WeChat messaging app for shopping.

While there’s still no timeline for Apple to release 6the new iPhone 6 in China, Samsung Electronics said this week that its latest Galaxy Note 4 smartphone will go on sale in China and South Korea soon. Samsung said all three Chinese mobile carriers will release the new P h o t

o phone before the end of this month. The announcement

S o u r marks the first time the South Korean company has re - c e :

R e leased a flagship smartphone in China before its other u t e r s Tencent boss Ma upped stake in China South City major overseas markets. n 6 Week in China China and the World 26 September 2014

United we stand Scotland says no but China uneasy it voted at all

hen Li Keqiang visited ond-rate one” and that the UK was WBritain in June he made a “standing on a precipice”. point of expressing his support for Unmentioned by the majority of a “united United Kingdom”. Chinese newspapers was the possi - The message was clear enough: bility that referendums might be Beijing isn’t keen on sovereign welcomed closer to home. break-ups. China Review News Agency, a pro- But that didn’t prevent some Beijing newswire based in Hong points-scoring in the Chinese me - Kong, was one of very few outlets to World's most famous 'splittist' dia last week as David Cameron, the grasp the nettle. It took a hard line: British prime minister, scrambled “Those who have been encouraged “He bewitched and coerced desperately to keep the United King - by the referendum in Scotland and young ethnic students and built a dom together. are calling for independence should criminal syndicate. Tohti organised Cameron would go down as “a return to reality… and give up the this group to write, edit, translate sinner of history” if Scotland voted fantasy for seeking a referendum for and reprint articles seeking Xin - to break away from Britain on his Taiwan’s independence.” jiang’s separation from China. watch, the Global Times suggested The benefits of such democratic Through online instigation, Tohti ahead of the referendum on Scot - processes also came under scrutiny. encouraged his fellow Uighurs to tish independence. The Global Times commented use violence,” it added. Netizens even took to Cameron’s that Scotland’s “white knuckle ride” Tohti’s supporters say that he is a personal weibo account to gloat at debunked the notion that “democ - much more moderate critic of Bei - his discomfort over the vote. “What racy can resolve everything”. jing’s policies in the restive region. poor management!” one scoffed. “Of The context here: turbulence in “The idea of separating the country the three parts of your territory, two Hong Kong over demands for has never occurred to me, and I have are fighting for independence!” greater democracy (see WiC244). never been involved in any sepa - Elsewhere, there was satisfaction Then again, perhaps the biggest ratist activities,” he also pleaded in that Hong Kong’s former master was elephant-in-the-room was how court. getting some comeuppance. “Back China’s own Uighur minority might But perhaps his sentence will be when they were obstructing Hong view Scotland’s vote. food for thought for another former Kong’s return, I bet they didn’t think Local media was silent on this economist, who has been licking his it would come to this”, one contrib - topic even though the referendum political wounds this week. utor crowed. “Now you know the to break away from the UK came Alex Salmond, boss of the Scot - pain of secession, please stop mak - just ahead of the trial of a former tish National Party and currently ing problems for Hong Kong,” in - economics professor from Xinjiang, Scotland’s First Minister, announced structed another, in reference to the who this week received a life sen - he will step down after the disap - UK politicians who recently took tence for ‘splittism’ from a court in pointment of losing the referendum sides over the thorny question of the Urumqi. battle. But he may reflect on the rel - territory’s electoral system. Ilham Tothi, a Uighur Muslim, ative status of splittists in China and China’s media came out force - was found guilty of colluding with the UK. Campaigning against the P h o t

o fully against Scotland’s independ - foreign groups “in hyping incidents status quo in Urquhart, Unst and

S o u r ence, warning that the Yes camp was related to Xinjiang with the aim of Upper Ingleston seems like a safer c e :

R e on the verge of transforming Britain making domestic issues interna - option than speaking out in Urumqi, u t e r s

“from a first-class country to a sec - tional,” said Xinhua. for a start. n 7 Week in China China Consumer 26 September 2014

Drink to success Iconic Hong Kong brand in big China push

inston Lo Yau-fai, Vitasoy’s “To many local consumers, Vita - mainly soya milk. At the moment, it Wexecutive chairman, says his soy is more than a casual drink. It has no direct competitor in that favourite drink from the beverage represents quality and whole - arena and no one comes even close firm’s 300-strong roster is its origi - someness. There is a strong emo - to its size.” nal one – soya bean milk. tional bond between Vitasoy and National Business Daily was pos - “I like Vitasoy soya bean milk the our customers. We grew up to - itive about Vitasoy’s prospects too, most and drink it every morning. I gether,” he says. believing that more lactose-intoler - like to add one third of a pack to my Although Chinese consumers ant consumers will switch to plant- coffee, making it nutritious and haven’t grown up with Vitasoy in based alternatives. tasty,” he told the South China quite the same way that many peo - Moreover, one of Vitasoy’s Morning Post. ple in Hong Kong have, the com - strengths is its ability to release The story of Vitasoy begins in pany is betting that they’re going to new drinks flavours that appeal to Hong Kong in the 1940s when Lo’s be equally receptive to its drinks. Chinese tastes. In July it launched father Kwee Seong Lo started work - To that end Vitasoy now boasts fac - Hong Kong-style milk tea – a mix - ing with refugees from mainland tories in Shanghai, as well as in ture of black tea and evaporated China. Worried about the malnutri - Shenzhen and Foshan, both of milk – to much excitement. tion of many of the children, he also which are in Guangdong province. Mainland China is Vitasoy’s noticed that many of the immi - Last week, it announced that it will largest market outside Hong Kong, grants were lactose intolerant. Soy - invest a further Rmb500 million contributing 34% of its total rev - bean is a rich source of fat and pro - ($81.48 million) in a new plant in enue. Last year, sales reached $192 teins, which he believed would help Wuhan, which is expected to start million, a growth rate of 28%. The the malnourished. production next year. Hong Kong market grew only 6% to The original Vitasoy soya bean The fact that Vitasoy is making $238 million, or 42% of total sales, milk, which is slightly sweetened, another major investment only during the same period. quickly became a household name three years after opening the Fos - “The development of the Hong in Hong Kong. han plant suggests that it is confi - Kong market has become increas - Over the years Vitasoy has dent about expanding beyond ingly mature. On the other hand, added tea-based beverages like southern China. But Apple Daily the growth rate for the mainland lemon and chrysanthemum to its reckons that it is too early to tell market will continue to grow product range. whether the plan will succeed. “Even faster… It won’t be too surprising It was so popular that Coca-Cola though Vitasoy has performed well when the China business exceeds even launched a brand of non-car - in China, its business is largely in Hong Kong,” says Lu Botao, Vita - bonated drink called Yeung Gwong Guangdong province [which is close soy’s chief executive. (which means Sunshine in Can - to Hong Kong]. So it is much harder But Coca-Cola may not have tonese) to challenge its dominance to predict whether it will succeed in given up entirely on the soya milk and compete against a variety of other parts of the country,” one in - market. There are rumours that the Vitasoy’s most popular drinks. dustry-watcher told the newspaper. soda giant is interested in acquiring However, Yeung Gwong failed to Hua Ling, an analyst at China VV Group, another soya milk pro - erode the Hong Kong firm’s mar - Merchant Securities, was more op - ducer, says the Hong Kong Eco - P h o t

o ket share. timistic. “Compared with Yili, Meng - nomic Journal. VV Group, which is

S o u r Vitasoy has proven an enduring niu and other dairy producers, based in China and which also pro - c e :

R e competitor, which Lo puts down to which focus on the production of duces food and alcohol, had u t e r s its heritage. milk and yogurt, Vitasoy sells Rmb500 million of sales last year. n 8 Week in China Shipping 26 September 2014

A very large deal The Valemax war looks to be over as Cosco and Vale finally make peace

abius Maximus is known – at Fleast among military strategists – as the general who undertook the first ‘war of attrition’. The strategy was devised to defeat the superior army of Carthage’s Hannibal. The crux of this tactical innovation was to curtail enemy access to food and deny Hannibal his preference for a pitched battle (an outcome via which he hoped to annihilate the Roman army). Victory instead would come from weakening Han - nibal’s formidable troops without directly challenging them. As such, the forces of Carthage would be de - feated by time, rather than the usual pincer movement preferred Valemax: stood upright, it’s taller than the Eiffel Tower by generations of generals. Time eventually saw Rome pre - Valemax – each capable of trans - lated that the full Valemax fleet vail over its rival, with Carthage de - porting 400,000 deadweight making four round trips a year stroyed in 146 BC – albeit a half cen - tonnes. This new fleet – to be com - would account for about a 40% tury after Fabius had died. His role pleted by 2013 – would carry Vale’s share of existing freight volume be - in its defeat was recognised and he iron ore to China, lowering its freight tween Brazil and China. The threat was bestowed with the honorific ti - costs by a quarter and helping it to to Cosco was palpable. tle ‘the Shield of Rome’. Almost two compete with rival exporters of iron Thus the Valemax’s greatest ad - millennia later, George Washington ore from Australia. vantage was turned against it: the emulated the very same tactics in The scale of these vessels dwarfed vessel’s sheer scale (one of WiC’s the Revolutionary War against Brit - anything in China. Cosco was con - favourite stats about the ship is that ian, a deed that earned him the cerned: its largest ship could carry if stood upright it would be taller monicker: the American Fabius. roughly half as much ore. To make than the Eiffel Tower). A war of attrition has also been matters worse, many of its own Vale’s Chinese rivals lobbied the waged in China’s ports over the past capesize vessels were performing government to deny the vessels ac - couple of years too. The battle on unprofitably due to some ill-timed cess to the nation’s ports on “safety this occasion has seen the Chinese leases signed in 2008 at the height grounds”. Sure enough, the first state-owned shipping firm Cosco of the shipping bubble. The last Valemax to head for China was de - look to wear down Vale, the Brazilian thing it needed was yet more com - nied permission to dock in Dalian mining behemoth. petition – the effect of which would in June 2011 and in February the fol - WiC first reported on the conflict be to drive freight rates even lower lowing year the Chinese authorities in 2011 (see WiC125). The casus belli and cause it and other Chinese ship - clarified that no ship would be al - P h o t

o in this case was Vale’s decision to en - pers to go further into the red. lowed to unload in China if it ex -

S o u r ter the shipping industry. In a bold And the Valemax promised for - ceeded 300,000 deadweight c e :

R e move, it announced it would build midable competition. tonnes. The ship being targeted by u t e r s 35 ships – known by the name the In 2011 Caijing magazine calcu - this measure was fairly clear. 9 Week in China Shipping 26 September 2014

The 21CN Business Herald reports Valemax vessels and is building 10 A deal with Vale is one route back to that by 2012 Vale had already com - equivalent-sized ships of its own. profitability. mitted $4 billion to the building of So who won this war and why has By 2018 Vale predicts it will be its fleet – owning 19 of the ships it - the deal been done now? shipping 300 million tonnes of ore self and leasing back the rest. How - Political pressure played a part in every year to China. A big chunk of ever, the Brazilian firm hadn’t fac - the timing, with both countries that could fill the Cosco fleet, 21CN tored in the nightmare scenario that mindful that this year is the 40th estimates. Beijing would bar the boats from anniversary of the establishment of So far there have been no formal Chinese ports. Overnight, the Vale - diplomatic relations between Brazil announcements from the authori - max fleet looked like becoming and China. In fact, in May the Chi - ties about a relaxation of its port some of the most expensive white nese ambassador to Brazil had made restrictions on larger vessels. But in elephants the world had ever seen public that China intended to estab - an interview with CBN, Liu Bin, a (Hannibal’s elephants were real, of lish some form of partnership with professor at Dalian Maritime Uni - course). A Fabian war of attrition Vale. versity, said that he expected Vale - had begun, with Vale losing money For Vale there were financial pres - max ships will soon be allowed to almost by the hour on a fleet that it sures that made plain the logic of dock at ports with the capacity to couldn’t deploy as intended. Instead an armistice. As 21CN reports, falls in handle them (such as Dalian). it has had to unload the Valemax iron ore prices – largely due to a The outcome of the war: Vale’s vessels in neighbouring countries slowing Chinese economy – have strategy to control more of its and switch their cargoes onto seen Vale’s net profit fall from a China supply line has been jetti - smaller boats. Then in a tit-for-tat bumper $22.85 billion in 2011 to soned. The Chinese side has got reprisal, it also refused to buy $4.86 billion in 2010 and only $584 what it probably wanted: a part - freight space on Cosco’s fleet. million last year. nership. But for Vale, getting the Both Vale and Cosco had an in - But Cosco too had reason to seek Valemax fleet into full operation is terest in seeking some sort of truce some form of compromise. As regu - an imperative. That will again have to end the war. And last week it lar readers know, the shipper nar - hit home this week with the Finan - emerged that the pair had signed a rowly missed being delisted in cial Times reporting that prices of ‘cooperative framework agreement’ Shanghai (see WiC233) this year after iron ore fell below $80 per tonne that might bring an end to hostili - consecutive years of losses. It (versus the peak price of $190 per ties. Vale later disclosed that this 25- avoided the delisting with sleight of tonne in 2011). Such declines in ore year deal will see Cosco transporting hand, selling assets to its parent in rates mean that the Valemax strat - large quantities of its iron ore to 2013. But 21CN reckons it’s almost a egy and its economies of scale now China once more. As part of the pact, foregone conclusion it will be look more vital for the Brazilian Cosco has purchased four of Vale’s drowning in red ink again this year. miner than ever. n

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10 Week in China Economy 26 September 2014

The new Silicon Valley? Why Intel is betting big on Shenzhen

f you had asked a Hong Kong res - Iident what neighbouring Shen - zhen was good for 10 years ago, you would probably have got the reply, “It’s where I get my fake handbags and DVDs from.” Ask someone the same question today and you would probably hear a very different refrain. “Ah yes, that’s where I developed my smart handbag.” In this context, smart does not just mean elegant, but WiFi-enabled as well. For it was in Shenzhen that a hardware incubator called Haxlr8r (pronounced “hackcelerator”) Now with "Shenzhen inside" helped an American couple to de - velop Everpurse – a clutch bag with a government body set up in 2011 to from a cluster effect both in terms a built-in battery and docking sta - foster its efforts to move up the tech of the sheer magnitude of electron - tion for smartphones. value chain. Its general director Chen ics factories surrounding the city, as Shenzhen has become a mecca Zhaozhao tells the newspaper that well as the hardware start-ups. for the “makers” – with entrepre - the main aim is to attract more of Haxlr8r moved its headquarters neurs now gaining increasing the world’s largest tech companies from Silicon Valley to Shenzhen last prominence as the inventors of and make sure they “feel proud of year. Other hardware incubators in - smart gadgets. Once known as the opening their R&D centre in Shen - clude Highway1 and Seeed Studio factory city of the world , Shenzhen zhen”. (which has the motto, “Innovate has been metamorphosing into its In 2013, R&D accounted for 4% of with China”) have also set up shops tech hardware capital as well. Shenzhen’s economy. This compares in Shenzhen. In doing so, it is eating into Tai - with 4.4% in Israel, and China’s aver - Typically, these companies offer wan’s once dominant share in elec - age of 2%. would-be inventors hardware kits, tronics manufacturing and innova - Moreover, hardware designers plus seed capital in return for an eq - tion. Earlier this month, the and engineers working close uity stake. Others, like PCH Interna - Economic Observer published a enough to Shenzhen’s factories can tional, which started life as a com - lengthy feature examining Shen - get their most imaginative ideas ponents sourcing platform for zhen’s transformation. It concluded: into up-and-running hardware pro - overseas companies, offer an end- “All the fields originally dominated totypes far quicker because the to-end service for hardware design - by Taiwan’s manufacturing industry components are close at hand. These ers and manufacturers. have now been transferred to Shen - prototypes can also be cheaper to Another major advantage pro - zhen,” although it did acknowledge make than those developed in the pelling Shenzhen’s rise as a tech that in some respects, “many indus - West. This helps developers sell hub, ironically, is its shanzhai cul - P h o t

o tries in Shenzhen are driven by Tai - more realistic business proposals on ture. The term originally referred to

S o u r wan”. crowd-funding sites such as Kick - the defensive strongholds built by c e :

R e The newspaper attributed part of starter. regional bandits in early twentieth u t e r s the city’s success to Invest Shenzhen, As a result Shenzhen is benefiting century China, but then came to re - 11 Week in China Economy 26 September 2014

fer to pirated goods.More recently according to MIC figures, up from the problems. When we had a com - still, the meaning of shanzhai has about 96 million in 2012. China ponent shortage, Intel went to talk mutated again into a positive term shipped about 100 million in 2013, with suppliers to ensure we would describing the information-sharing triple its 2012 shipments, which get the components we needed.” culture among many of Shenzhen’s were in turn almost quadruple its Wang says he will shift all his chip newest tech firms. The information 2011 shipments. (Research firm IDC purchases to Intel. With more orders exchange that once helped counter - estimates that 44% of the tablets like his, the Santa Clara-based firm feiters to pirate goods at lightning sold globally this year will be made says it hopes to have installed 40 speed is now being used to churn in Shenzhen, with the lowest priced million Intel chips in Chinese-pro - out innovative prototypes and de - at $48.) duced tablets by the end of 2014, vices at very low costs. Chinese manufacturers can quadruple the figure for 2013. As such, Shenzhen has been able thank Taiwanese firm Mediatek and Intel’s China President Yang Xu to steal a march on Taiwan in its pro - Chinese counterpart Rockchip for tells the Economic Observer that duction of more mainstream prod - their increased presence. Together Shenzhen is becoming a “global cen - ucts like smartphones and tablets. they have provided the low-cost tre for innovation in intelligent de - As the Guardian wrote earlier this chips which have reduced the entry vices”, revealing that Intel’s Shen - year, “The phones that fuelled the barriers for Chinese electronic firms zhen R&D team won an internal bid Arab Spring were soldered on the in the smartphone and tablet busi - against their Taiwanese equivalen - backstreets of Shenzhen.” ness. Rockchip is an ARM licensee sts to produce a keyboard for the Global estimates vary, but Tai - and until 2014 was using the British firm’s Ultrabook. The Taiwanese wan’s Market Intelligence & Consul - firm’s computing architecture for team had proposed a 3.5mm thick tancy (MIC) said the island shipped the majority of its products. ARM- keyboard, while the Shenzhen team roughly 230 million smartphones based dual and quad-core proces - had pitched a 3.7mm version. How - in 2013. This gave Taiwan a global sors also power Samsung and Apple ever, the Shenzhen unit could pro - market share of 24.1%, down from products. However, in May Rockchip duce the keyboard at far lower cost, 29.7% in 2012. And by 2018, MIC be - forged an agreement with Intel to and their production cycle was two lieves Taiwan’s market share will use the latter’s quad-core chipsets months faster than in Taiwan. As a drop below 20% for the first time. for entry-level Android tablets. This result, Shenzhen now leads the en - Almost 70% of current shipments marked a major step forward for In - tire production process for this Intel relate to Apple’s iPhone and in the tel, which has been largely shut out product. short-term, at least, analysts fore - of the ARM-dominated tablet and Cost is still one of Shenzhen’s big cast the launch of the iPhone 6 will smartphone market. Intel began its attractions for hardware start-ups. provide an end-of year boost to ex - global fightback in 2013 when it es - And while they have risen consider - ports. tablished its China Technology ably in the past 10 years, a local en - By contrast, China has seen its Ecosystem in Shenzhen to build an gineer’s salary is still roughly one- market share in smartphones ex - industry chain for non-branded, tenth the cost of a similar role in plode. Many have been sold domes - white-box producers alongside 14 Silicon Valley. tically, but increasingly to emerging domestic tablet manufacturers. It And news broke on Thursday that markets where price is a key consid - is now hoping to ride on China’s Intel might be about to raise the eration too. coat tails and build up market share stakes on its China bet considerably. In 2011, China was producing in the low-end of the tablet – and Reuters reports that Intel is close to about 70 million smartphones per potentially smartphone – market. buying a stake in the Chinese-gov - annum. In 2012, this tripled to The Wall Street Journal reports ernment affiliated mobile chip - roughly 208 million and in 2013 it that Intel’s customers have been im - makers Spreadtrum Communica - shot past Taiwan to produce 350 pressed by the resources the US gi - tions and RDA Microelectronics, in million, although some analysts be - ant is pouring into Shenzhen. It what it described as “its latest move lieve the actual figure could be cited the example of a tablet-maker to catch up in a smartphone chip in - closer to 500 million if the legions called Hampoo, whose boss Star dustry led by Qualcomm”. of small manufacturers are taken Wang comments: “We had some Citing sources closes to the deal, into account. technical issues, and Intel sent an Reuters said Intel could spend The same picture is evident in engineer to stay with us for a month around $1.5 billion for a 20% stake in tablet shipments. Taiwan shipped and a half, working late until the chipmakers’ parent, Tsinghua roughly 120 million tablets in 2013 10:30pm or even midnight, to solve Unigroup. n 12 Week in China Internet and Tech 26 September 2014

Hacker academy What goes on inside China’s most famous vocational school?

he origins of polytechnic Tschools were military. By the late eighteenth century artillery had become so sophisticated that armies needed to train officers in mathematics and mechanics. The École Polytechnique is widely re - garded as being the first of these new schools. In 1804 Napoléon Bonaparte confirmed as much when he designated it with military status and the motto ‘For country, science and honour’. West Point modelled itself on the École too. China’s own foray into modern The Pentagon’s greatest fear? Lanxiang’s computer lab tertiary education began almost a century later with the Imperial gramme has grown much bigger headmaster (though, it should be Tientsin University (now the Uni - since then, as has the belief that is stated, the college isn’t named after versity of Tianjin). It also started as now one of the breeding grounds him, being composed of differnt a polytechnic in 1895, with the im - for China’s secretive army of com - Chinese characters), has also com - perial government desperate to puter hackers. plained that Lanxiang is a victim of train military specialists to defend In early 2010 the New York Times misinformation. itself against foreign powers. named Lanxiang and Shanghai Jiao - “The Foreign Ministry has already Polytechnic schools blossomed tong University as the two Chinese made clear China’s stance. I hope do - again in the 1980s as economic re - schools behind a massive cyber at - mestic media will stop speculating forms called for huge numbers of tack against Google. Tracing an IP on the rumours,” he told 21CN Busi - new technicians and better-skilled address to one of Lanxiang’s com - ness Herald in an interview. labour. By 2013, there were more puters, the report also suggested the Rong also moans that the school than 13,600 institutes of technology hackers were students at a class has become a target for overseas or vocational schools in the coun - taught by a “Ukrainian professor”. hackers itself. “These guys visited try. Chances are you have never A short time later the Wall Street our website 70 to 80 times a day. heard of most of them. One possible Journal reported that Google had Sometimes it goes completely blank exception is Lanxiang Vocational identified a phishing assault against and we need to rebuild it again.” School. overseas targets as originating in Ji - Rong founded the college in 1984, The Shandong-based institute nan, Lanxiang’s hometown. the year that Deng Xiaoping pub - first attracted international head - With the escalation of cyber spy - licly proclaimed his new pro-mar - lines in 2006 when it broke the ing rows between China and the US ket idea of “socialism with Chinese world record for having the biggest (see WiC248) the whispering about characteristics”. P h o t o computer class, with 1,135 students hacking activity at Lanxiang has Millions of rural migrants soon

S o u r c in a single room. A certificate com - grown, even if the state media ar - descended on the cities looking for e :

I m

a memorating the event still hangs gues that the allegations have exag - jobs. The enterprising Rong – then g i n e

C in the school’s trophy room. gerated its influence. Rong Lanxi - in his late teens – rented a dozen h i n a

But Lanxiang’s computer pro - ang, the school’s founder and classrooms from a high school in 13 Week in China Internet and Tech 26 September 2014

Shandong’s Jinan city and offered training programmes (initially they included instruction on sofa-mak - ing and hairdressing). “Many people were opening pri - vately-run vocational schools. There were more than 1,000 in Jinan alone, doing courses from repairing timepieces to fixing radios,” Rong recalls. Rong doesn’t deny that Lanxiang’s big break came after it was acquired by the People’s Liberation Army (PLA) in 1989, a period when military units started buying into non-mili - tary businesses. (By the early 1990s the PLA-affiliated Poly Group was al - Rong Lanxiang: headmaster of the hackers? ready operating hundreds of compa - nies in industries ranging from real ports they are all earning “re - ternet newspaper, enrolled an un - estate to elephant training, see spectable incomes”. dercover journalist in one of the WiC203.) Such is Lanxiang’s reputation computer programmes to see if In 2001 Lanxiang acquired its that state firms and government there was any substance to the alle - first school site, which it has since bodies seem eager to employ the gations about Lanxiang’s hacking expanded into five campus dis - school’s former students. classes. tricts covering more than 400,000 Some employers even pay “reser - In an eight-month course, he square metres. It now has a teach - vation fees” to the college to ensure started out with a two-week module ing staff of over 1,000 people and they get the skilled labour they are on Microsoft Office applications. He provides 60 vocational training looking for. These revenues con - soon discovered that most of his courses to more than 30,000 stu - tribute a third of its income, accord - classmates came from rural areas dents every year. ing to Rong (who declined to dis - and half of them were busy snooz - The PLA, on other hand, was told close the full extent of Lanxiang’s ing or playing with their smart - to exit its commercial activities in financial situation). phones during lessons. He found 1997, although the ban has proved But he did reveal that he had de - out that no foreign teaching spe - difficult to police. And though no clined an investment proposal from cialists had ever been employed longer PLA-owned, Lanxiang itself a private equity firm and promised there. In one of the giant server has maintained close ties with the that the school won’t be launching rooms, he could only find a 60 year- military. In fact, it even markets the an IPO. old security guard whose main task relationship, describing itself as So is Rong really headmaster of was to prevent students from eat - “the only private-run vocational the hackers? Rather improbably the ing there. school which supplies technicians Jinan Daily says the most presti - The Zhihu Daily’s man dropped to the army”. gious programmes at the college are out of college on the 20th day of his The rapid expansion of higher the cookery classes (In May alone undercover mission, having forked education in China has obviously more than 20 trained chefs gradu - out tuition fees of Rmb10,000 led to more competition for stu - ated from Lanxiang and have since ($1,625). His conclusion? That Lanx - dents among the vocational schools gone on to work for state firms op - iang’s reputation for producing tech (see WiC245). But Lanxiang’s hint of erating in Uganda). whizz-kids capable of hacking into intrigue allows it to stand out from For the foreign press, Lanxiang is American targets is “as unbelievable the crowd. Despite the “most diffi - less about Peking Duck and more as a Chinese farmer successfully P h o t o cult jobseeking season in history” about hacking. But the domestic building a space shuttle”.

S o u r c for those leaving colleges with de - media is less impressed, the Beijing Then again, some cynics in the e :

I m

a grees, Lanxiang achieved “100% em - Times says, and tends to view Lanx - Western press may wonder if this g i n e

C ployment” for its new graduates last iang more with derision than dread. report might not be an ingenious h i n a year. Moreover the Jinan Daily re - For instance, Zhihu Daily, an in - exercise in disinformation... n 14 Week in China Banking and Finance 26 September 2014

Ever growing shadow A dodgy deal defaults, leaving a bank on the hook

omen and money are two of Wthe worldly concerns that Buddhist monks are supposed to avoid. So it came as a shock when a woman was killed at the Guangfu Temple in Jiangxi province this month. She is thought to have pressed for repayment of a loan to the temple of Rmb10,000 ($1,625). The suspected killer is the abbot, who is being charged with murder. Chinese investors were equally surprised last week by the unravel - ling of yet another debt tangle, this time in the banking sector. An off- balance-sheet product has left a A bank with a very heavy exposure to Chengdu’s property market state-affiliated lender on the hook for at least Rmb4 billion, the Peo - Evergrowing – which runs more vestment had a strategy to combine ple’s Daily has revealed. Worse still, than 100 branches nationwide – has property development and tourism. the capital in question was lent to argued that it is merely “acquiring According to 21CN Business Herald, two of its own shareholders. The col - financial assets in a normal inter - it planned to invest Rmb2.3 billion lateral they put up for the loan? The bank operation” and that the credit in a variety of ‘cultural heritage’ real lender’s own shares. risk involved is “manageable”. estate projects in Chengdu. “Its Back in August 2013, Evergrowing However, the domestic media has biggest shareholder is also an en - Bank set up an asset management described the prior lending arrange - thusiastic art investor. It operates scheme for two of its shareholders ments as “hidden inside a drawer” six museums, of which five are in via a trust firm. The two, which and warned that it looks like they Chengdu, with more than 13,000 owned a combined 6.5% stake in bypassed regulatory rules. relics,” 21CN reported. Evergrowing, were affiliated to real “It is against the rules for a bank Sales at one of these Chengdu real estate developer Mind Investment. to provide an undisclosed guarantee estate projects have now become a With Evergrowing acting as the for a connected party. And it is crucial factor for Evergrowing as it guarantor, Mind Investment was worse for a bank to accept its own tries to recoup the Rmb4 billion then able to obtain Rmb3.7 billion shares as collateral,” an insider told owed by Mind Investment. (Based in funding from two Tianjin banks. CBN. on the bank’s net book value, the Mind Investment then failed to The People’s Daily reports that shares in the bank owned by Mind repay the loans on time. The Peo - the dodgy lending was uncovered Investment and offered as collateral ple’s Daily said last week that Ever - after new managerial staff were ap - on the initial loans are worth growing has now repaid the princi - pointed at Evergrowing. The lender Rmb2.3 billion.) pal on the loan, plus Rmb300 has since set up a special task force That means Evergrowing bosses million in interest, indicating that to investigate the risks involved and need good news from Chengdu to

P Mind Investment has defaulted. The the Shandong government is look - help meet the shortfall. But “con - h o t o

S full repayment obligation equates ing into the matter as well, it said. struction progress is behind o u r c e to a hefty 58% of Evergrowing’s 2013 Before forcing Evergrowing to schedule” says 21CN of the prop - :

C F P net income. take a bullet on its behalf, Mind In - erty project. n 15 Week in China Society and Culture 26 September 2014

Fading stars More celebrities targeted in government’s anti-vice crackdown

f the Chinese zodiac is to be be - Ilieved, the marriage between di - rector Wang Quan’an and actress Zhang Yuqi was doomed from the start. Zhang was born in the Year of the Tiger (1986). Wang is a Dragon (1965). Tiger and Dragon – both powerful and feisty – are not re - garded as terribly compatible. And sure enough, Southern Metropolis Daily is speculating that the mar - riage has already come to “a com - bustible end”. Wang, a 48 year-old from Shaanxi, grabbed headlines last week after being caught with a pros - titute on September 10 at an apart - ment in Beijing. Both parties are said to have admitted their guilt. Wang and Zhang met on the set of White Deer Plain , a movie in which she was cast in a rather erotic lead role (see WiC165). They got married in 2011. But in recent public appear - ances Zhang was seen without her wedding band and there were ru - mours that the two had started di - vorce proceedings. The police re - port, which surfaced after Wang’s arrest, sheds more light on their marital discord. The filmmaker ad - mitted to soliciting sex with a num - ber of women for three days run - Zhang Yuqi: her husband has been detained for soliciting sex ning, supposedly paying the last prostitute Rmb800 ($130.35). Wang, Prior to the scandal Wang was After her husband’s detention along with six other sex workers better known as one of China’s lead - was made public, Zhang wrote in a and an 18 year-old pimp, are being ing art-house directors. He was weibo post: “Thanks for everybody’s held for further questioning. awarded the Golden Bear award at concern for me and my family. I Prostitution and soliciting are il - the 2007 Berlin International Film have mixed feelings now. I believe legal in China. If convicted, offend - Festival for Tuya’s Marriage and he the law-enforcement authority will

P ers face at least 15 days in detention won the best-screenplay award for impose a fair punishment for the h o t o

S and a fine of Rmb5,000, according Apart Together at the 60th Berlin In - violation of public rules. We [she o u r c e to the Public Security Administra - ternational Film Festival with co- and her husband] will face the inci - :

C F P

tion Punishments Law. writer Na Jin. dent’s effect on our family calmly 16 Week in China Society and Culture 26 September 2014

Bring’s a tear to your eye: tennis star Li photographed telling the press she is retiring

and take joint responsibility.” ing prostitutes” because “Chinese ther than the number of WTA Wang is the latest celebrity to be society has more stringent moral events hosted there. A decade ago it caught up in the wider crackdown standards for celebrities”. was just two, but this year 10 events on gambling, prostitution and “Exposing celebrities’ illegal con - were arranged in China. drugs in the entertainment indus - duct is a typical government method The growing popularity of tennis try. In August, Taiwanese actor Kai to deter the public from soliciting is largely thanks to Li Na, the Ko and Jackie Chan’s son Jaycee prostitutes,” Li Yinhe, a sociologist, Wuhan-born player who went on to Chan were arrested for doing drugs told the South China Morning Post. become Asia’s first female Grand at a foot massage parlour in Beijing. “But the measure is not going to be Slam winner. To capitalise on her Police later recovered more than nearly as effective in China where star power the WTA has even added 100 grams of marijuana from prostitution is prevalent.” a Wuhan Open to the circuit. It be - Chan’s home in Beijing (see WiC250) Wang’s scandal quickly became gan last Friday but organisers can’t and he was formally arrested last the highest trending topic on have anticipated quite how news - week on suspicion of allowing other weibo, prompting a widespread worthy it was going to be. In a tear - people to consume drugs, a charge discussion about infidelity. Unsur - ful announcement Li told media that carries a maximum sentence of prisingly, most of the comments that she would not be playing at the three years in jail. expressed sympathy for Zhang. tournament in Wuhan, but also that In May, the actor Huang Haibo “Wang Quan’an is a pig,” one fumed. she is giving up professional tennis, was also detained for soliciting a “Who says unattractive men make aged 32, because of a knee injury. prostitute after police received an good husbands? Look at Wang She did her best to put a brave face anonymous tip-off from a member Quan’an, he cheats and he’s really on the decision. “I feel this is the best of the public. ugly,” mocked another. time for me to retire. I don’t feel sorry His punishment was six months A few contributors tried to stand or have any regrets about retiring,” of “detention and re-education for up for the beleaguered director: she told a packed news conference on those involved in prostitution”. “There are two types of men that Sunday at the National Tennis Centre State news agency Xinhua has criticise Wang: those who are too in Beijing. “When I was making this been publishing commentaries sup - poor to afford a prostitute, and decision I asked myself, ‘Will I regret porting the current crackdown. “Dis - those who are jealous that he can it?’ My heart told me I wouldn’t, be - oriented moral standards, weakened do it continuously for three days.” cause I’ve done my best.” legal awareness, blended with fame Li won the French Open in 2011. and gains, have plagued today’s en - She won her second major in Janu - tertainment sphere. It is of great ur - ary, claiming the Australian Open. gency to have the necessary profes - But plagued by the knee injury, Li sional ethical restraints and strict Final set has only entered seven more tour - legal deterrence,” it proclaimed. Li Na retires from tennis naments and hasn’t played at all P h o t

o The Global Times has also since a third-round defeat at Wim -

S o u r weighed in, warning that misbe - he Women’s Tennis Association bledon. She withdrew from three c e :

R e having stars “would pay [a] griev - sees the Chinese market as cru - tournaments in August, including u t T e r s ous and long-term price for solicit - cial. How to judge this? Look no fur - the US Open. 17 Week in China Society and Culture 26 September 2014

her own agent – something then unheard of for sports stars who had come up through the state ranks – and she profited handsomely from a series of endorsements and spon - sorships. “Players like Li Na that don’t play for the country but for themselves should have retired a long time ago. If it wasn’t for her country how could she have her success today? She’s a disgrace to China!” one neti - zen fumed. Li’s reputation for individualism may also explain why state-run newspapers like the China Daily and the Global Times didn’t dwell much on her contribution to the tennis world. Instead the China Daily ran a story about younger Chinese play - ers who could “take over from Li”, while the Global Times took the line that Olympic swimming star Sun Yang could “fill Li’s void” in terms of Happier times: Li Na earlier this year with the Australian Open trophy celebrity. But Li says she will not com - “After the surgery in July, I tried became one of the most discussed pletely give up on tennis. “What I re - very hard to recover, hoping I can topics on weibo, with netizens ally want to do now is try to set up a make it to participate in tennis thanking the athlete for repre - tennis school of my own and do ba - matches in China especially the senting her country and wishing sic things to help build up the base Wuhan Open which is the first ever her well. “Thank you Li Na. We for Chinese tennis,” she says. big tennis match in my home - wish you all the best. You will al - Li also says her academy will re - town,” Li said. ways be the pride of the nation,” flect Western coaching methods, “However, this is my fourth big one wrote. which she preferred to the training surgery, and with my age and phys - “Li Na is retiring and everyone is techniques of her more critical Chi - ical state, it is hard for me... I think so sad. That’s because not only did nese instructors. this is about the right time to say she make tennis so fun to watch, her She also expressed a desire for goodbye to everyone, because my unyielding attitude and confidence the venture to have a philanthropic body doesn’t allow me to participate fills everyone with hope and posi - tilt, with a focus on underprivi - in high-level tennis matches.” tive energy,” said another. leged children. After Li’s announcement, some Li was an unorthodox sports star. During the press conference, Li of her fellow players expressed In fact, some other netizens were was back to her straight-talking best, their sadness at the news. “It is ob - annoyed that she left the national as she struggled to hide her disdain viously a very big loss for tennis in team in 2002 after she was barred for Chinese male tennis players. general all around the world, and by sports officials from courting the “Right now they think, ‘Oh my specially here in China where Li Na man who became her husband and ranking is around 300, that’s per - has been so influential for so many coach, Jiang Shan. fect,’” she suggested. “But it’s not years,” said Maria Sharapova, the Li later rejoined the Chinese perfect. I mean, 300 is nothing in Russian player, adding that it was training team after tying the knot the whole world. So they need to “super sad” for Li not to be able to with Jiang but left again in 2009 have high goals. The women are compete in the tournament in her and hired her own team of coaches doing well but I hope one day the hometown. and trainers. men can grow up as well. They are News about Li’s retirement also She also insisted on recruiting lazy.” n 18 Week in China And Finally 26 September 2014

A just crime? How corrupt officials got exposed by burglars

n 2012 three economists pub - ernment offices since 2006. It was a Ilished Robbing Banks: Crime lucrative trade. After each heist mu - Does Pay – But Not Very Much . It ar - nicipal offices soon refilled with gued that bank robbers should find gifts, coupons and cash (although another job. The average bank rob - Tang said that there has been less on bery in the US netted just over offer since the nationwide anti-graft $4,000, the authors found. A large campaign was launched in late 2012). Wang Shengli’s inspiration? percentage of the robbers were ar - In early September, news broke rested too. of another robber in Henan After further investigation, it was Criminal masterminds in China province who again claimed only to discovered that the officials had also have turned to more lucrative av - burgle bureaucrats’ luxury homes. been colluding with the police to enues than robbing banks – namely, The Beijing News reported that cover up the amounts involved, stealing from corrupt government Wang Shengli and his gang were fi - aware that such large sums far ex - officials. In August, two women con - nally caught in late 2012 (in their ceeded their pay grades. victed thiefs in Jiangsu province car police found cash, six gold bars That explains why Wang’s arrest confessed that they mainly targeted and 40 pieces of jade). for theft only made the news more bureaucrats because they are known Under interrogation, Wang said recently, following Zhao’s detention to hoard wads of cash at home. (In - the gang made more than Rmb3 for graft (several police officers were vestigators needed 16 counting ma - million ($489,000) burgling four also arrested, reports Legal Evening chines to tally up the haul of one residences in 2011 and 2012, of News). disgraced official earlier this year, which Rmb1 million – all cash – was Wang and his gang are now await - see WiC240.) taken from the home of Zhengyang ing their own trial. They are hoping They make attractive prey: first county’s Party boss, Zhao Xinghua. that by exposing the corrupt offi - because they avoid putting their However, in the police report, cials, they could get lighter sen - bribe money into banks to evade de - Zhao claimed that just Rmb6,000 tences. And indeed, some netizens tection; and second, because they was taken from the break-in. Simi - have praised them as modern-day aren’t likely to report the theft of larly, Wang broke into the home of Robin Hoods. The comparison is not their stash, knowing unwelcome another official in Henan, taking quite accurate, for while they did rob questions might follow. over Rmb800,000 in cash. But the from the (improperly) rich, they did Tang Shuiyan, one of the thieves, police filing showed that the victim not pass the proceeds on to the said she had been stealing from gov - reported only Rmb1,300 was stolen. poor… n

Studying China

“Learning from and learning about China has never been more important than it is now”

P * A remark from the UK’s Prince William as he opened the Dickson Poon University of Oxford h o t o China Centre. Its director Professor Rana Mitter told China Daily: “I hope our centre will be at the

S o u r forefront of breaking down and reinterpreting this idea that China, unlike any other country, is sup - c e :

S posed to be a fixed and unchanging place.” The campus cost $34 million, half of which was donated h u t t e by Hong Kong tycoon Dickson Poon. r Prince William s t o c k

19 Week in China The Back Page 26 September 2014

Photo of the Week In Numbers 20% Share of total social financing accounted for by the shadow banking sector in the first half of the year, according to Moody’s. This has dropped from 30% last year, with traditional bank loans rising to 62% of credit.

10.4 billion Tonnes of carbon estimated as emitted by

P China this year, a rise of 4.5% according to h o t o

the Global Carbon Project. The US will emit S o u r

c 5.2 billion tonnes this year, a fall of 0.9%. e :

R e u t e r s 353,500 Keep your heads up: a military training session at a college in The number of students studying overseas who returned to work in China last year, Zhengzhou in Henan according to the Ministry of Education. It says that is nearly 30 times the number at the beginning of the century. Where is it? $39 billion Some of the places referred to in this issue Chinese outbound investment in the first six months, according to the Heritage Foundation. This is down from $46 billion in Beijing Dalian the same period in 2013. The think tank Tianjin Shandong says the fall is due to state firms being cautious about investments because of China President Xi Jinping’s anti-graft campaign. Shanghai Chengdu Correction In our Numbers section in WiC251 we noted that HSBC's August PMI was 54.1. Guangdong However, we failed to mention that this Guangzhou Shenzhen Hong Kong figure was the services PMI not the manufacturing one. The latter was 50.2.

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