1 Talking Point 6 Week in 60 Seconds 7 China Consumer Week in China 8 Banking and Finance 9 China and the World 11 Energy and Resources 13 Property 15 Environment 11 September 2015 16 Society and Culture Issue 295 19 And Finally www.weekinchina.com 20 The Back Page

The usual suspects m o c . n i e t s p e a t i n e b . w w w

In their efforts to apportion blame for the stock market’s crash,

regulators find a familiar target: investors who went short Brought to you by Week in China Talking Point 11 September 2015

The blame game China’s regulators search for stock market saboteurs

“If it wasn’t for those short-sellers”: Beijing seeks culprits after stock turmoil in Shanghai and Shenzhen

ompleted in 1916, the Asia operational experience – and sold stock market, as well as a large num- CBuilding in Shanghai enjoyed shares in them on the local bourse. ber of Chinese lenders. (The Qing the city’s most prestigious address: Money from all over China flew into government tried to intervene by No. 1 the Bund. Later the Asian head- these rubber stocks. A lively deriva- holding local brokers accountable, quarters of the oil giant Shell, it cur- tives and short-selling market also accusing them of helping specula- rently houses China Pacific developed. tors to short-sell the market.) Insurance. But it was actually built The standout performer was But the punitive action was un- by the British merchant George McBain’s Langkate, fuelled by lav- able to prevent an unexpected McBain, who is said to have made a ish advertisements in Shanghai’s twist. A government official had in- killing on the Shanghai market be- newspapers, even though McBain vested heavily in Langkate with fore a spectacular crash in 1910. was yet to grow a single rubber public funds earmarked for a rail- At the time Henry Ford had just tree. Langkate’s share price surged way in Sichuan. The Sichuan firm begun mass-producing his Model T tenfold in less than a month after was forced to sell its track to foreign cars. Rubber prices had surged, as its debut. investors. The move triggered had the profits of rubber producers. In June 1910 the euphoria came protests in the vast province, which P h o t o In Shanghai groups of foreign fin- to an abrupt halt after restrictions in turn led to the revolution of 1911,

S o u r anciers set up rubber firms – claim- were impsed on rubber imports to and the eventual fall of the Qing Dy- c e :

R e ing to have production bases in the United States. Rubber stocks nasty (see WiC282). u t e r s

Malaysia, but in reality with little crashed, bringing down Shanghai’s According to today’s Chinese 1

Week in China Talking Point 11 September 2015

media, this was the “stock crisis that Adding to the list of bogeymen felled an empire” and the episode were 197 internet users accused of has been recalled in recent weeks as spreading rumours; several execu- a reminder of the consequences of tives at listed firms alleged to have mishandling a financial crisis. insider-traded; and even two former Perhaps the historical precedent officials from the CSRC itself. also explains why regulators have Regulators have also suspended unleashed a fierce campaign a number of trading accounts as against the present-day short-sell- part of their probe into what they ers and market manipulators they have labelled as potentially “mali- claim to be responsible for the melt- cious” short-selling. down that has wiped out nearly half Unhelpfully there has been little of the value of the A-share market CSRC Chairman Xiao Gang attempt to define publicly what since June. “malicious” behaviour actually en- to meditate, switching off her tails. But the only foreign account Who has been identified so far? phone over the weekend. thus far affected is the China unit of The first salvo came from an edito- The quest to hunt down offend- Citadel. (The domestic media has rial published by the Financial News ers in the domestic securities in- been quick to point out that the against “foreign crocodiles” (a term dustry has been fierce. Several local Chicago-based investment group is taken from the Hong Kong media, brokerages have been mired in the being advised by a certain Ben which originated in the Asian fi- regulatory probe but Citic Securities Bernanke.) nancial crisis). looks to have been the worst hit. Titled “Fight malicious short-sell- China’s biggest brokerage now has In what ways can investors short- ing without delay”, the PBoC-run eight executives detained for inves- sell Chinese stocks? newspaper singled out the Ameri- tigation. Their offences are not yet Until 2010 the A-share market was a can firm Morgan Stanley, for mak- known, although Xinhua has re- one-way bet (i.e. you could go long ing “malicious remarks carelessly” ported on rumours that they only), but that changed that year and harbouring “ulterior motives” “ganged up with foreign hedge when pilot programmes were intro- in reversing its previously bullish funds to short-sell Chinese stocks”. duced to allow bearish bets in the forecasts on Chinese stocks. The state-run Securities Daily re- equity market. “Why are the international in- ported that other homegrown insti- More sophisticated derivatives vestment banks fluffing the rain tutions have been colluding with have been developed since then. clouds?” Financial News asked. “For foreign investors to take advantage For example, the first option trad- the interest groups behind them or of the central government’s stock ing product was launched in to short-sell maliciously in order to market interventions to make gains. Shanghai in February. This ETF- disrupt China’s economic reforms?” Rumours then began to spread based (exchange-traded fund) op- Unnerving China's foreign in- that Citic Securities chairman tion tracks the SSE50 index, or 50 vestment community further was Wang Dongming had fled to the US, of the most heavily weighted speculation that Li Yifei, the chair- forcing the state-owned giant into stocks on the Shanghai bourse, and woman of the London-listed hedge a statement rebuffing the specula- offers investors a hedging tool for fund giant Man Group’s China op- tion. Wang’s brother Wang Boming, trading the index heavyweights. eration, had been taken into cus- the founder of influential financial (Options on individual stocks, or tody last week. Remarks from Li’s magazine Caijing, might have lost put warrants, were permitted husband, who told reporters the some sleep too. A journalist from briefly in 2011 but then withdrawn businesswoman had been locked in Caijing was arrested and paraded on by the authorities on concerns of meetings with regulators in Beijing, state television last month, leading excessive speculation.) added to the confusion. to an on-air confession. His wrong- The second channel for short-sell- Li then emerged from her mys- doing? He wrote a story in July that ing is via the Shanghai-Hong Kong terious week-long absence this claimed that the China Securities Stock Connect, which has allowed P h o t o week, posting on her weibo that she Regulatory Commission (CSRC) was investors in either city to invest in

S o u r had attended “industry meetings” pondering a halt to its interven- the other's market since last No- c e :

R e but also telling the Financial Times tions, which were aimed at jacking vember. A total of 414 Shanghai u t e r s

she had then gone to the mountains up the market. stocks – out of 568 designated for 3 Week in China Talking Point 11 September 2015

the Stock Connect scheme – are available for short-selling. But the Planet China daily limit for each stock is small: Strange but true stories from the new China capped at 1% of the holdings of all foreign investors through Stock Connect. Brokers also have to file Over the years the Apple Daily newspaper has run their short position reports every many reports on fake food in China. But even the most cynical staff at week. “Their trading is not only the Hong Kong paper seem to have been surprised when it heard of a peanuts in terms of size but also family from Guangdong province that had dined on a rice strain it hadn’t heavily restricted, so it can’t call the tasted before. Upon closer inspection, the “rice” they had bought from a local market was revealed as a bag of many thin strips of paper, each tightly market’s tune,” the South China rolled-up to look like the desired grain. Morning Post has noted. As a production process, it seems almost as labour-intensive as rice Then there are index futures. The farming itself. But this isn’t the first fake rice scandal to hit China this year. first of these contracts, which tracks Earlier in May ‘rice’ made from potato and resin made its way across Asia. the large-cap CSI300 Index, was in- Whilst the potato provided a little nutritional value, any calorific benefit was troduced in April 2010. It was not soured by the resin, which formed a skin like plastic when boiled up. Then until this April that two more prod- again, some netizen wonder if the ‘paper’ rice is a hoax, pointing to a similar ucts – based on the CSI500 Index story in 2007 that wrongly claimed steamed buns were made from paper and SSE50 Index – were added to too. the short-selling toolkit, as regula- tors moved cautiously to expand Are regulators now shutting the Margin requirements for non-hedg- the range of financial derivatives short-selling windows? ing contracts are also to be raised to open to investors. Not exactly. But they are trying 40% from 30%, while fees for set- A final means of going short: in- harder to make the rules of the tling positions that were opened on vestors could leverage their bets game less exciting. Tightening the same day will double too. with margin financing. This prac- measures have been announced by As a result, Bloomberg notes, vol- tice was permitted as far back as different regulators this week to re- umes in both CSI300 Index futures 2010, but interest was dormant duce market volatility. For example, and CSI500 Index futures sank to until last year’s bull run in stocks the Shanghai Stock Exchange (SSE) record lows this week. The Chinese gained steam. By mid-June, at the said on Monday it would tighten market was ranked by the World peak of the A-share market rally, limits on the positions of ETF stock Federation of Exchanges as the Chinese brokerages had extended options linked to its SSE50 Index. most active for index futures as re- nearly Rmb2.26 trillion ($354 bil- On the same day, the Shenzhen cently as July, but has since plum- lion) worth of margin loans. Stock Exchange (SZSE) and the China meted 99% from that peak (when These investors would have ac- Financial Futures Exchange (CFFEX) more than 3 million contracts a counted for the bulk of the short- also began discussions on a planned month were traded). “China just selling market. circuit breaker mechanism. Accord- killed the world's biggest stock- As compared with these short- ing to the draft regulations, trading index futures market,” Bloomberg selling channels, the actual amount could be suspended for 30 minutes has proclaimed. of investment foreign foreign fund if the market rises or falls by 5%, and The process of deleveraging has managers are allowed to have in for an entire day if the volatility ex- also been spectacular in the margin Chinese stocks (mainly through the ceeds 7%. financing business. Outstanding QFII and RQFII schemes) remains “Circuit breakers in both direc- margin loans on the SSE and SZSE small. Former World Bank president tions will be conducive to curbing had nearly halved to Rmb1.25 tril- Robert Zoellick estimates it ac- excessive transactions and reining lion by the end of last month from counts for just 1% to 2% of the entire in market fluctuations,” the draft their peak in June. The figure con- A-share market. document suggested. tinues to shrink, dropping to “It is hard to imagine how for- Also starting from Monday, the Rmb962 billion last week. “The reg- eign investors could have such a big CFFEX began to label a position of ulators’ objectives [to stamp out ex- effect,” Sina Finance has also admit- more than 10 contracts on a single cessive short selling] have been ted, countering the idea that it was index future as “abnormal trading” largely achieved… the process of ‘black hands’ from overseas that (the standard was earlier lowered deleveraging should be coming to sabotaged the market in mid-June. from 600 to 100 in late August). an end,” CBN, a newspaper, com- 4 Week in China Talking Point 11 September 2015

mented this week. major correction was long overdue. regulators in the West would later Meanwhile, the Chinese govern- But the extensive efforts to appor- admit. “The costs appear to out- ment is boosting efforts to keep tion blame for the subsequent rout weigh the benefits,” Chris Cox, the more money at home. Major state has unnerved foreign investors, es- former chairman of the US Securi- lenders such as Bank of China are pecially those that have received ties and Exchange Commission, beefing up their internal checks on the dreaded invitation for “a fact- later acknowledged. large conversions of foreign ex- finding chat” with the market regu- Back in China the damage may change by corporate clients, accord- lators in Beijiing. take longer to rectify. Many foreign ing to Chinese banking executives. A big US hedge fund with opera- investors are taking the view that And there were no new quotas for tions in China told the Financial the hostile mood is a clear step back Chinese residents to invest overseas Times that it is now conducting from Beijing’s earlier and highly- via the QDII scheme for a fifth extra audits of its trading activity, publised commitment to freer mar- month running in August, the because of concerns that the au- kets and further reform. longest halt in six years. Meanwhile thorities are imposing additional Additionally, the limits on short- the Ministry of Public Security has scrutiny on foreign investors. selling are sapping liquidity and re- started a campaign to crack down An executive at the fund told the moving a key source of demand for on underground banks and illegal Financial Times: “Are they [the au- times when markets are in freefall, cross-border money transfers too. thorities] going to decide that mali- (short-sellers must trade to square The day after that announcement cious short-sellers brought down their positions and take profit). was made, Hong Kong’s benchmark the market? Are they going to create Right now the instinct of the Hang Seng Index plunged more a witch-hunt? It is hard to tell be- authorities is to cage volatility. It’s than 1,000 points. cause they are so unpredictable.” understandable, but it has an un- Other markets, including the US welcome consequence: the era in Is it fair to target short-selling? and countries in Europe, banned which the Shanghai and Shenzhen In the first half of the year – when short-selling of shares in banks and bourses play a more meaningful the A-share market was on a ra- brokers during the global financial role in allocating investment capi- tionality-defying winning streak – crisis of 2008. But these interven- tal now looks to be much further the prevailing sentiment was that a tions might well have backfired, as off… I

Uber confident

Standing in front of a map featuring 100 Chinese cities, Travis Kalanick upped the ante on his ambitions there this week. The boss of Uber announced he’d secured a $1.2 billion investment in his standalone unit Uber China, with top Chinese search engine Baidu being one of the parties to pump more money in. Kalanick said he planned to use the funds to expand the car-hailing app’s presence from the 20 or so Chinese cities it operates in today to 100. And he wants to do so within a year. Kalanick was in effusive form at the Baidu World event, saying Uber was creating 100,000 new jobs a police raids). “Coming to China we’ve had to relearn month in China and that he “welcomed” forthcoming everything that we do,” he said. government regulations on car-hailing apps. Kalanick says he needs the new funds to take on his I l l u s t r He admitted that breaking into the Chinese market cash-rich local rival Didi Kuaidi, which claims 80% a t i o n

: hadn’t been easy and that the company faced staunch market share. But the Silicon Valley tycoon disputes w w w opposition from taxi firms and some of the local this, saying that Uber began the year with a 1% share . b e n i t governments that licence taxi fleets (particularly in a of the Chinese car-hailing business, but that in nine e p s t e Chongqing and Guangzhou, where Uber has faced months it has grown it to 35%. i n . c o m

5 Week in China The Week in 60 Seconds 11 September 2015

Google to return to China? The major news items from China this week were...

Google is in discussions to open a version of its 1Google Play app store in China. The version of the app store would be pre-installed on the release of a new set of Google-licenced Android phones, designed for the Chinese market. The Wall Street Journal says Google has been working on a version of its store that includes only apps and services approved by the Chinese gov- ernment.

After months of bidding wars, Indonesia has can- 2celled plans for its first high-speed train connection, deeming it unnecessary. Among the foreign companies bidding for the rail contract were at least seven Chinese Premier Li Keqiang tries to calm nerves in Dalian firms, with the Chinese also ready to provide a loan for the line’s development. Indonesia’s president cancelled year-on-year reading – while imports slipped further to the plan, instead opting for a lower-speed line, costing a decrease of 14.3%. The trade surplus expanded by 20.1% 40% less, disappointing the Chinese firms keen to show- to Rmb368 billion ($57.63 billion). case their bullet train expertise abroad. At a meeting of the G20 last week, the head of China’s Bohai Leasing – a subsidiary of China’s HNA Group – 5central bank, Zhou Xiaochuan, declared that the rout 3has agreed to buy Irish aircraft lessor Avolon for $2.51 in Chinese stocks is close to ending and that the markets billion. The deal saw privately-owned Bohai prevail over will soon become “more stable”. This was the first time state-owned AVIC, a rival bidder. In recent years, state- Zhou has publically addressed the market volatility, ac- owned ICBC, China Development Bank, and BOC have all knowledging that there had been a “bubble” in Chinese entered the aircraft leasing sector. China is poised to equities, which he claimed was due to investors borrow- overtake the US as the largest domestic aviation market. ing money to buy shares. On Wednesday, plans for a new “circuit breaker” mechanism emerged, suggesting that China’s foreign trade fell 9.7% year-on-year in Au- the government is less than sure of a return to stabil- 4gust, reports show. This is steeper than July’s 8.9% ity. The latest source of investor concern: that China’s FX slump. Exports fell 6.1% – less than the previous month’s reserves fell $94 billion in August.

Premier Li Keqiang spoke at the World Economic 6Forum in Dalian this Wednesday. Whilst Li accepted that there is still downward pressure on the economy he maintained that overall the outlook was positive, and that the government wouldn’t be swayed from its long term plan by short term economic fluctuations. The cre- ation of seven million urban jobs in the first half of the year was once again raised as an indicator of the nation’s P h o t o core stability, and Li asserted that government debt re-

S o u r mains low and manageable. The devaluation of the yuan c e :

R e in mid-August was said to be due to exchange rate re- u t e r s A (low-speed) train travels from Bandung to Jakarta forms and not an attempt to increase exports. I 6 Week in China China Consumer 11 September 2015

Not so sweet Why Mondelez is cutting back on biscuits

life-sized cardboard cutout of peak the plant had 400 staff and Nestle. The Swiss food firm’s chief Aactor Nicholas Tse stands in the four production lines producing executive has described the speed window of his shop in Hong Kong. about 30,000 tonnes of snacks an- of change in Chinese consumer He’s dressed in a chef’s outfit and nually. “Now one line runs for two preferences as unprecedented and holding a tin of his own-recipe days every three weeks, so the plant conceded that Nestle “is out of cookies. For much of this year there is almost in a state of suspension,” touch… we are planning to reinte- have been long queues outside the says the same staffer, adding the grate with the market”. store as Tse’s fans from mainland plant director left a few weeks ago, A recent report by AC Nielsen China sought to buy his high-priced and the remaining 100 employees shows that 20% of Chinese con- biscuits which come in butter, are negotiating compensation. sumers surveyed said their snack of lemon and chili flavours. Mondelez is the food company choice today is fruit (a trend corrob- At one stage the star’s cookies that was spun-out of Kraft and pro- orated by our article about surging were being rationed to two tins per duces some of the world’s most fa- cherry consumption in WiC294). customer, though WiC can report mous brands, including Cadbury’s Next come chocolate, nuts and yo- that in our strolls past the store in chocolates, Ritz crackers and gurt, while biscuits and potato- recent weeks the lines seem to have Nabisco biscuits. A Mondelez based snacks have dwindled in pop- diminished. We are not sure spokesperson told CBN: “In order to ularity. These survey results are whether the fad for Tse’s cookies has further optimise the company’s strikingly different from a similar run its course, but we suspect the supply chain, we are working to poll in 2013, when biscuits ranked star must be realising that mainland transfer part of the production ca- highly. This led to more cookie pro- consumers are a fickle bunch. pacity of the plant in Shanghai to duction lines being opened, to cater Indeed, that is something US Suzhou. With the transfer and opti- for demand growth (then) predicted snack food giant Mondelez has be- misation of this production line, the to run to double digits in the com- come grimly aware of too, as it required labour force will be re- ing decade. moves to shut one of its production duced accordingly.” Instead biscuit makers have dis- factories in Shanghai. It has discov- Jiemian, a news website, reported covered that a slowing economy, ered in particular that Chinese buy- that it is not just in the factory changing Chinese tastes and rising ers are no longer so keen on its where there are layoffs. Sales teams labour costs are an unsavoury mass-market Oreo and Chips Ahoy! in various Chinese cities are also be- combo. Their big investments in cookies, as they migrate to eating ing reduced in a restructuring plan new plants means the biscuit in- more fruits and snacks with more code-named “Himalaya”. dustry now faces overcapacity. locally-tinged flavours (such as Mondelez told Jiemian the “Hi- Competition from nimble local green tea or purple potato). malaya” project is in process, brands – quick to pick up on rap- CBN reports that “signs of shut- though the initiative is designed to idly evolving new trends – and a down” at the Shanghai plant have maintain its competitiveness as well general shift to healthier foods, been very obvious, with an em- as to better allocate resources. have likewise taken multinationals ployee suggesting that only one pro- An industry insider confirmed to like Mondelez by surprise. duction line runs sporadically, and CBN that the snack industry has ex- China National Radio notes that inventories of raw material have perienced a seismic shift, with some unlike Americans – who grow up been run down. The plant was es- categories that were popular just a munching cookies – it is becoming tablished in 1993 and one veteran few years ago having suddenly lost apparent the Chinese are proving to told the newspaper: “I have worked favour. Indeed, it is not just Mon- be among the “world’s most fickle” here for almost a lifetime. Seeing it delez that has been hit but other when it comes to tastes and eating shut up, I feel it is really a pity.” At its multinationals such as Danone and habits. I 7 Week in China Banking and Finance 11 September 2015

Bunching up Profit growth plunges at the state’s Big Four banks

hina’s four biggest listed banks ratio of debt overdue for 90 days or C(all state-controlled) have just more rose by 77 basis points. This was posted very similar results for the much higher than the 24 basis point first half of 2015. The message has increase in the ratio the banks’ actu- pretty much gone out in unison ally reported for bad loans. too: growth in the Chinese banking “Pressure on asset quality in par- sector has stagnated, at best. ticular, is reflected not only in the rise Take Industrial and Commercial in headline non-performing loan ra- Bank of China (ICBC): its net profit tios, but also in the less stringent for the six months ending in June recognition of such loans,” said Chris- came in at Rmb149 billion ($23 bil- tine Kuo, a Moody's Senior Vice Pres- lion). That’s still respectably prof- ident. “We note that an increasing itable but earnings growth at the amount of loans overdue for at least biggest Chinese bank by assets has 90 days are not classified as non-per- slowed to less than 1% on the same forming loans.” period in 2014. CBN, one of the better-regarded The April-to-June figure had Still profitable, but growing slower Chinese newspapers, agreed that the even dipped by 0.1% – the first year- latest financial results might not be on-year drop in quarterly profit double-digit percentages in the an accurate reflection of lenders’ as- since 2009. past – they were up more than 60% set quality. Bank of China (BOC) reported the during ICBC’s peak performance in “On the one hand lenders have to best financial results among the tra- 2007, for instance. respond to the CBRC’s requirement ditional “Big Four”, with a 1% gain in Bank bosses will argue that the and make prudent provisions net profit to Rmb90 billion during good times are long gone. As growth [against bad loans]. On the other the same six-month period. slows to its weakest pace in a quarter hand no one wants to be the first China Construction Bank (CCB) re- of a century, lenders are bracing bank to report a profit decline,” it ported a 0.9% rise to Rmb132 billion, themselves for more bad loans. And reported, citing the view of an un- while Agricultural Bank of China since November, the central bank named analyst. (ABC) managed to grow its bottom has cut interest rates five times to Hence the similarly reported line by a mere 0.3%. try to boost the economy, piling growth figures, perhaps? “In the first half of 2015, the bank pressure on net interest margins. “The banks have chosen the bal- proactively adapted to the economic But are the growth rates in the Big ance point in the middle, which is ‘new normal’ amidst a complicated Four’s latest financials a little too sim- no growth,” CBN claims. macroeconomic environment,” ilar? The bunching in results has led A vote of confidence from in- ICBC explained of its stagnating some analysts to raise concerns that vestors has been lacking too. Ac- earnings. The phrase ‘new normal’ the banks might have taken liberties cording to 21CN Business Herald, the popped up in the financial reports in window dressing their accounts. stock market correction means that of the other three banking heavy- And the same concerns apply for most lenders are trading below their weights too. some of the other indicators, which net asset values. ICBC, for instance, Shortly before he stepped down don’t always paint a consistent pic- is trading in Hong Kong at less than P h o t o from office in 2012, Premier Wen Ji- ture of the industry’s financial health. 5 times its 2014 earnings, and at 0.85

S o u r abao accused the mainstream For example, after studying the times its book value. And that’s with c e :

R e banks of making profits far too eas- first-half results of 11 listed banks, rat- a dividend yield as high as 6.7%. u t e r s

ily. Net incomes regularly rose by ings agency Moody’s noted that the Investors are clearly sceptical… I 8 Week in China China and the World 11 September 2015

Blame America What has been the Chinese reaction to Europe’s refugee crisis?

or eight days in the summer that China should do more to help Fof 1938, representatives from its own people before helping for- 32 countries met in the French re- eigners. sort town of Evian-les-Bains to A typical post commented: discuss the refugee crisis unfold- “China’s rural migrants suffer so ing in Europe. many restrictions on food, clothing, The outflow was the result of shelter, mobility, education and Nazi Germany’s intensifying per- everything. How can we take secution of the Jewish people, and refugees?” the Evian Conference hoped to In addition there was a strong reach an agreement on assisting sentiment that China isn’t respon- the large numbers of people seek- sible for the situation that has been ing asylum. But the conference was creating the human exodus. Plenty a failure, given that 31 of the 32 at- of weibo users agreed with the view tending countries refused to accept that “Whoever started it should deal more refugees. with it” and there are no prizes for The Republic of China was one of guessing that – for many people in the governments refusing to pro- China – the guilty party in this par- vide further assistance. But fortu- A refugee with her child ticular crisis is America. nately for a small group of the Jew- Hence Hu Yao, a commentator for ish population of Austria, the ROC’s lan Kurdi, who had drowned as his Xinhua news agency, argued that Consul-General in Vienna, Ho Feng- family fled the Middle East, heading Washington’s interventionist poli- Shan, disagreed with the decision. for Europe. cies in the Middle East have led to He issued about 2,000 China visas, The picture sparked calls for Eu- increased instability in the region, effectively allowing a small group ropean governments to do more to triggering the current crisis sweep- of Jews to cross the border out of assist the refugees arriving on their ing across Europe. Austria and escape the Nazis. borders. And at the same time, An editorial in China Daily went Ho was later admonished by his newspapers in China took to social further in demanding that Wash- superiors. And the signs are that the media to ask if its government ington accept responsibility for the Chinese authorities will be similarly should accept refugees from the crisis as a consequence of its politi- unmoved by the plight of thou- continuing crisis. cal and military intervention in the sands of migrants currently seeking The answer was a resounding no, region. (It was headlined: “The US sanctuary from conflicts ongoing in although there were different rea- has unshirkable role in addressing the Middle East. sons given for the refusal. Some refugee crisis”.) On Thursday last week images of were more technical, like Phoenix This same conclusion was es- China’s military prowess flooded the New Media, which blamed the inad- poused by Russian president and media, as Beijing paraded its latest, equacies of China’s legal system for friend of China, Vladimir Putin, entirely domestically-produced, ar- making little provision for housing who, told a press conference last senal. The day before, however, the or feeding asylum seekers. Rather Friday that Russia has warned re- global media coverage had concen- than accepting more newcomers, peatedly that “mistaken foreign P h o t o trated less on the hubris of war, and would it not be better to improve policy” by Western states in the

S o u r more on its harrowing conse- the legislation first, it asked. Middle East would lead to humani- c e :

R e quences, with the awful image of But the most popular responses – tarian disasters. u t e r s three year-old Syrian refugee, Ay- posted by Chinese netizens – argued Of course, Russia and China, as 9 Week in China China and the World 11 September 2015

permanent members of the UN Se- dangers posed by Xinjiang’s reli- curity Council, have vetoed resolu- gious extremists. tions allowing for intervention in According to a census study from Syria, with the Chinese citing their 2013, Han Chinese accounted for non-interventionist stance in the 40.6% of Xinjiang’s total population. domestic affairs of other nations. The Han began to emigrate to this FTChinese journalist, Wei Cheng, western region of China in substan- initiated discussion on this theme tial numbers after 1949 (see our de- on his weibo page, where netizens scription of the process in WiC192). discussed whether the efforts to As a result many disgruntled topple “big devils” including Sad- Uighurs claim their own culture is dam Hussein and Bashar al-Assad gradually being diluted by Han ar- had unwittingly unleashed a legion rivals as well as their policy meas- of “little devils”, including militant ures (see WiC252 for more on efforts groups like Islamic State (ISIS). to promote marriage between the A number of responses opined two groups as well). that US-led intervention in the In response Uighur ethnic ex- Middle East was typical of the Heading west to Europe tremists have launched a series of West’s strategy of forcibly impos- brutal attacks in Xinjiang and in ing its own ideals on other coun- are Han Chinese (they are estimated other parts of China, stirring tries, even if these countries aren’t to make up 92% of mainland greater antipathy towards the ready to accept them. China’s population) and the defen- Uighurs among the public at large These sentiments once again tout sive tone of those netizen remarks (Beijing views these groups as Is- the central ideology that has seen just cited reveal a particular fear lamic terrorists). China resist foreign intervention on among the Han about what hap- Hence some of the predictions issues such as human rights abuses, pens when their cultural homo- from netizens about an apocalyptic asserting that Western ideals are not geneity (based on 5,000 years of future in which the Muslim mi- truly universal ideals and that Chinese civilisation) clashes with grants from the Middle East will democracy for China must be an or- outside forces like Islam. erode the values of tolerance Euro- ganic and, most importantly, dis- For instance, in Xinjiang, a re- pean nations claim to hold so dearly. tinctly Chinese evolution. gion of China that’s home to the A typically bleak assessment: This desire to maintain “Chinese Uighur Muslim minority, there has “Wait until the theft and murder characteristics” is prevalent in Chi- been a persistent push to “har- rates increase, and refugees seize nese policy. China exerts strict con- monise” the cultural identity of the the country’s finance and welfare, trol over religious and cultural ex- area and its people. and then start talking of equality pression within its borders. Nor – it As we reported in WiC290 these and human rights, ultimately forc- would seem from the voluble and can inflame relations overseas too. ing them all to believe in Islam.” volumous opinions being aired on In July a Turkish nationalist group Of course, away from the more the internet – do many Chinese called the Grey Wolves began burn- contentious commentary there disagree with this aspect of gov- ing Chinese restaurants in Ankara were also some alternate insights, ernment policy. One weibo user, and attacking Chinese tourists, as a including the acceptance that few for example, commented that the means to show sympathy with the of the refugees making the journey EU countries currently accepting Uighurs – who also speak a Turkic to Europe had expressed any inter- Muslim asylum seekers will regret tongue. These acts occurred after est in heading east to start new lives it in years to come, when Islamic news reports claimed that China in China. cultures so subvert their own that had prevented the holy month of “Don’t overworry yourself, even if they "can't eat pork or drink beer". Ramadan being observed in Xin- we say yes, they wouldn’t want to Other netizens went further, spec- jiang. Chinese state media retorted come,” one person predicted on ulating that “in two years, Europe angrily that this report was based Tianya, a popular online forum. P h o t o will be entirely Muslim” and warn- on a fake online rumour, but the re- Most of the newcomers would

S o u r ing that “women won’t be allowed ligious violence it sparked in Turkey prefer to settle in the “welfare states c e :

R e to dress revealingly”. only reinforced prejudices within of the West”, China’s netizens ac- u t e r s The majority of China’s people China’s Han community about the knowledged. I 10 Week in China Energy and Resources 11 September 2015

Golden opportunity? Zijin Mining’s rush to expand global presence focuses on Australia

hina is believed to have experi- Cenced its first gold rush during the Tang Dynasty in the 9th cen- tury. It even led one of the era’s most famous poets and social com- mentators, Bai Juyi, to express his horror at the huge numbers of peas- ants leaving their ancestral lands to try and make their fortune along the river banks. Gold cannot be eaten or worn he wrote. It will not feed a man who is hungry and cold. Some 11 centuries later and China’s appetite for gold remains undimmed, as does its inability to satisfy that demand from its own Chen Jinghe: the chairman is banking on expansion abroad mines. The country is now the world’s largest consumer, but do- in 1997 by using 1,000 tonnes of ex- no future,” he said of the domestic mestic production can only fulfill plosives to blow the top off Zijinshan, gold mining industry. about 30% of its needs. The ratio a mountain near Shanghang county The magazine estimates that Zijin will progressively decline given in Fujian province. As we reported in spent about $1 billion in acquisi- China holds just 3.5% of global WiC15, Zijin has made many of the tions during 2014. In the process, the gold reserves but accounts for inhabitants of Shanghang extremely miner has rapidly propelled itself more than 20% of global con- wealthy (they got shares). Not least up the global league tables. It still sumption. among these is chairman Chen has nowhere near the same kind of To rectify this, leading producers Jinghe who started life as a state ge- international profile as longer-es- have been following the country’s ologist before forming Zijin with the tablished rivals, although its current state-owned enterprises along the help of the local government. Today, market capitalisation, at around well-worn trail of the global M&A the Shanghang government still re- $10.5 billion, has already circuit. Leading the charge is China’s mains the largest single shareholder leapfrogged the New York-listed Bar- largest gold producer, Zijin Mining, with a stake of 26.3%. rick Gold on $7.4 billion. Zijin is now which is listed both in Shanghai and These days Zijin is very keen to not that far behind the world’s Hong Kong. burnish its environmental creden- largest listed pure play, Goldcorp on The company has been working tials. On its website the company $11 billion. hard to improve its image since says: “Gold and silver we explore, All the world’s listed gold compa- 2010 when it was better known as mountain and clear water we care nies have suffered a spectacular fall one of the country’s worst polluters even more.” The company’s motto from grace since the metal started after 9,100 cubic metres of acidic may not have the lyricism of a Tang its decline from its all time high of copper found its way into a local Dynasty poem, but its message is $1,921.50 per ounce in July 2011. Both river, killing four million fish. It took very clear. Barrick Gold and Goldcorp have lost P h o t o Zijin nine days to even admit there Similarly Chen Jinghe was very almost 90% of their stock market

S o u r was a problem. explicit about the company’s strat- value over the past four years. c e :

R e Eyebrows were also raised when it egy in a recent interview with China Zijin’s big fall has been more re- u t e r s created China’s largest open pit mine Economic Weekly. “No acquisitions, cent. Earlier this year, its stock was 11 Week in China Energy and Resources 11 September 2015

Chairmen Chen confused the situation last week when he ap- peared to suggest that Zijin would not be increasing its offer as many had expected. But analysts say that Zijin’s ongo- ing M&A strategy is likely to be its main share price driver over the next few years and that it makes sense for the company to take ad- vantage of cheap domestic capital to purchase international assets while prices are low. (Zijin has plans to raise Rmb10 billion via a new is- sue of A-shares, but is somewhat Zijin is betting big that demand for gold will grow in China hostage right now to volatile market conditions in Shanghai and regula- one of the biggest beneficiaries of tonne. This is very low compared to tory approvals.) China’s A-share frenzy. Since June, the $150 to $250 industry average, Yet a key factor will be whether it has been one of the biggest losers but reflects the difficult operating the gold price continues to fall – as retail investors dump basic ma- environment of the mine, which is many predict it will drop further terials stocks, with Zijin almost halv- located on remote, rugged moun- if the US dollar gets stronger. At its ing in price. tainous terrain. nadir in 1999, gold sank to just More significantly, Zijin is now Some question just how lucrative $251.70 per ounce. It is currently the world’s biggest gold company in Zijin’s expanding asset pile will trading around the $1,119 level. terms of revenues. For the first half prove to be. Two of its other recent One bank forecasts that 32% of of this year, it posted revenues of acquisitions, for example, are in the the world’s gold miners will become Rmb38.8 billion ($6.1 billion), above Congo. They include a 49.5% stake in free cashflow negative below $1,000 Goldcorp’s $2.2 billion and Barrick Ivanhoe’s Kamoa mine and a 51% per ounce. During the second quar- Gold’s $4.5 billion. stake in the nearby Kolwezi copper ter Goldcorp cut its dividend by It is still not yet as profitable as mine. To address power supplier is- 60% so it could remain free cash- Goldcorp, which reported net in- sues, the company is already plan- flow positive. come of $305 million to Zijin’s $204 ning to fund repairs at three local Zijin must also hope its growing million. This is largely because Gold- power stations. international profile does not pro- corp has one of the best unit cash Zijin’s first major international voke the same response the first costs in the industry (roughly $547 acquisition was Australia’s Norton Chinese miners received when they per ounce), whereas Zijin still re- Gold Fields in 2012 when it paid $223 sailed across the Pacific during the mains towards the other end of the million for an 87% stake. This ac- US gold rush. It is estimated that the scale, at around the $730 level. quisition has also prompted its number of Chinese immigrants in But Zijin has already out- most recent sally – an A$0.10 per California rose by about 3,000% be- stripped Barrick Gold, which re- share bid for a neighbouring West- tween 1849 and 1876. ported a first half net income of ern Australian company called And as the gold rush failed to de- just $80 million thanks to a heavy Phoenix Gold. liver the promised riches, anti-im- $10.7 billion debt load. Barrick Gold Late last week, Phoenix Gold’s migrant legislation soon followed. aims to reduce debt by $3 billion board recommended investors re- It included the infamous Anti- this year and has been offloading ject the offer, which is below an in- Coolie Act, the Pigtail Ordinance assets including a 50% stake in its dependent valuation of A$0.156 to (relating to the distinctive queues Porgera gold mine in Papua New A$0.244 per share. It is also below a the Chinese miners wore their hair Guinea, which Zijin snapped up for competing cash and shares offer in) and culminated in the Chinese P h o t o $298 million. from existing shareholder Evolu- Exclusion Act of 1882, which

S o u r Analysts believe the deal was tion Mining, which was initially val- banned Chinese immigration to c e :

R e fairly priced – at an enterprise ued at A$0.12 in mid-May and is now the US altogether. It was not re- u t e r s value-to-reserve of about $45 per worth A$0.13 according to analysts. pealed until 1943. I 12 Week in China Property 11 September 2015

Rent negotiations Luxury brands’ shop closures send warning on Hong Kong property prices

o establish their longevity and Tpromote their prestige it’s com- mon for luxury goods firms to flaunt their date of founding. How- ever, in the case of US bag maker Coach the year of its establishment will strike anyone with a knowledge of history as an especially unpropi- tious one. The firm began making men’s wallets in Manhattan in 1941. By December of that ill-fated year the US had entered the Second World War. These might not strike you as ideal business conditions for a consumer goods start-up. How- ever, the firm managed to make it through four years of war and to- day Coach sells its products in more than 1,000 locations. But this month Coach delivered some unpropitious news of its own – at least insofar as Hong Kong prop- erty tycoons were concerned. It shut- tered its store in one of the territory’s most visible and high-profile loca- tions on Queen’s Road Central. This flagship store opened five years ago Turn the corner: this building cost over $1 million a month to rent to promote the brand to visiting mainland Chinese consumers and broker research that predicts Hong tourists ‘locusts’ for emptying featured expensive external cladding Kong’s retail sales will see their shelves of goods (such as infant for- that doubled as a billboard for biggest annual decline this year mula), and straining local transport Coach’s logo and its China ambitions. since 2000, with jewellery, watches infrastructure with their numbers. Its closure indicates that Hong and luxury goods hardest hit with a This has led to fractious debates in Kong’s high-priced property market 12% fall. local media, on the internet and may be finally feeling the effect of a In some respects Hongkongers even heated clashes between the decline in mainland tourist num- have got what they wished for, and Chinese and Hong Kong football bers. This has resulted in a drop in are now reaping the whirlwind in teams (see this week’s And Finally retail spending, particularly in the the form of fewer mainlanders for the latest example). To address all-important luxury segment. The storming through their malls. As the problem there were even calls Wall Street Journal points out that in WiC has reported before (see issue from the general public to limit July the number of mainlanders vis- 271), the city’s residents have been cross-border Chinese arrivals. iting Hong Kong fell by 10% versus aggravated by the number of main- In response, affluent Chinese the previous July; while CBN cites land Chinese arrivals, calling the consumers and tourists have 13 Week in China Property 11 September 2015

shunned Hong Kong and gone shop- dently waning Chinese tourist num- Land, Swire, Sun Hung Kai and ping elsewhere, particularly Japan, bers have started to make the equa- Wharf. South Korea and Taiwan (see tion look ugly. What speaks volumes: (Softening in Hong Kong’s luxury WiC272). Adding to the misery of Coach closed the store two years residential property market looks to Hong Kong’s retailers has been Pres- ahead of its lease expiring, a phe- be underway too, with the local ident Xi Jinping’s anti-graft cam- nomenon that Hong Kong’s retail press recently reporting on a pent- paign, which has led to a cut back in sector hasn’t seen since the SARS epi- house that had been on the market luxury goods purchases. demic in 2003. for HK$66 million. After being un- This has not just impacted Coach. Chow Tai Fook, a large jewellery sold for 3 months it was purchased Last month LVMH also took the de- chain, is also rethinking its expan- for HK$45 million, or $5.8 million, cision to close a high-priced retail sion plan in Hong Kong and may i.e. 30% lower than the asking price.) location on Russell Street in Cause- close some stores in the territory’s Meanwhile Coach has been in way Bay, where it had a flagship Tag prime shopping areas, the com- damage limitation mode, stating Heuer watch boutique (at its peak pany’s chairman Henry Cheng told that its new Hong Kong flagship Russell Street commanded the high- reporters last month. store has just opened in Harbour est shop rents globally, surpassing This means more bargaining City in Tsim Tsa Tsui, and that it bet- even New York’s Fifth Avenue, com- power for tenants, and landlords ter embodies its new retailing con- ments the South China Morning are finally beginning to budge. This cept and product mix. It told CBN Post). Kering’s CFO Jean-Marc Du- week Emperor, another jewellery that it now has 171 stores in Hong plaix added to the pressure on land- chain, took advantage of a break in Kong, Macau and mainland China, a lords, when he announced the com- its lease to negotiate the rent down net increase of 18 stores versus 2014. pany’s latest quarterly results. by 70% on its premier Russell Its CEO Victor Luis said last Duplaix told analysts that Kering Street location, reports the Hong month on a conference call: “Al- was renegotiating the rent for its Kong Economic Times. The paper though the macro-environment ap- flagship Gucci store and would con- also pointed out that there are va- pears to show a slowdown in sider quitting the location if the cant units in the street, a further growth, we believe that Greater landlord “does not provide better telling sign. China maintains the driving force conditions”. Cushman and Wakefield research for long-term growth, which makes While Coach has never publicly shows that retail rents in the Central us remain optimistic about the disclosed the rent paid on its erst- district fell 12% in the second quar- prospects of this region.” while flagship in Central, Hong Kong ter, but the decline only looks likely Last Friday Coach also reopened media has confidently declared that to increase in the coming quarters its store on Tmall in a renewed ef- the three floors and outer cladding as brands start to question the com- fort to target China’s online shop- was costing the US retailer $1.1 mil- mercial logic of these prestigious lo- pers. It first opened on the Alibaba lion per month. You’ve got to sell a cations and play hardball with ma- site in 2011 but closed its Tmall on- lot of bags to cover that, and evi- jor landlords such as Hongkong line store after just a month. I

Your China website keeps getting bigger

ith an archive that has surpassed 4,000 articles, WiC's website is Wthe place to go to find out about China. Over the past five years we've covered all the big business stories and trends, making our site a comprehensive and trusted resource. Readable, uncluttered and easy to use, you can use the site to look up our articles by industry, or even by company. Plus you can download back issues, as well as our book on China's Tycoons and our in-depth Focus reports.

Access is free to Week in China's subscribers, using their logins. www.weekinchina.com Week in China

14 Week in China Environment 11 September 2015

In a hurry to bury Netizens mock plan to turn explosion site into eco park

ommunities blighted by tion of schools and kinder- Cindustrial disasters nor- gartens. “This isn’t an eco- mally have to wait decades park it’s a bio-chemical park. for the government to put People shouldn’t send their up a memorial. It took 40 kids to school there until years for the city of Mina- government officials also mata in southern Japan to move their offices there,” get a sculpture and a mu- wrote one incensed weibo seum dedicated to the thou- user. “Now the government sands who died from has been forced to buy all mercury poisoning. the surrounding housing of It took four years for Cher- course they are going to try nobyl to erect its first statue. to make the area nice. How And the people of Bhopal else can they resell them?” in Central India are still lob- asked another. bying for a museum and park of re- A man-made lake will go here As of last Friday some 9,000 peo- membrance some 30 years after a ple had signed compensation agree- Union Carbide factory exploded, what to do with the land when ments with the government but an- killing over 3,000. hundreds are in hospital and thou- other 8,000 were still holding out So perhaps the government of sands are still living in temporary for better deals. The families of the Tianjin thought it was doing the accommodation? 96 firemen killed in the blasts are right thing last week when it an- Some suspected a cover-up and also unhappy with the amount of nounced a plan to turn the site of an attempt to make money. “They compensation they have been of- the recent warehouse explosion have a design for the park already, fered, local media reported. that rocked the port city into an eco- doesn’t anyone else find that odd?” “We should use this money to park. The park will cover 43 hectares asked one weibo user. “What are help the victims, not help the gov- and a statue to those who have lost they trying to bury under these ernment cover up their deadly se- their lives will be given “pride of hastily planted trees and grass?” cret,” vented another netizen. place”, Xinhua said. asked another. Others objected to the idea of The local authority – which also The precise cause of the August 12 turning the crater in the centre of claimed the clean-up at the site was blast has yet to be established but the blast site into a lake.“I would say almost complete – said the new park Tianjin authorities have confirmed that it is better to just leave the would be finished by July of next the presence of nearly 3,000 tonnes crater the way it is. That could re- year. It also published an artist’s ren- of hazardous chemicals, including mind us of the disaster better than a dering of what it would look like, sodium cyanide, at the storage fa- peaceful lake,” said one. featuring a lake that appears to be cility. Sodium cyanide and its by- But one Tianjin resident may made out of the enormous crater products are deadly even when in- have summed it up best with the made by the deadly blasts. gested or inhaled in small doses. following remarks: “Twelve people Many Chinese netizens were out- As recently as a week ago pockets are still missing. We still have no raged. How, only three weeks after of other flammable chemicals were credible explanation for what hap- P h o t o the blasts, could the clean-up be still burning at the site, the South pened. The site is still a graveyard

S o u r nearing completion, they asked? China Morning Post reported. for us. We don’t need a park to re- c e :

R e Was it really right for the gov- Much to people’s anger, plans for mind us of what happened. We are u t e r s ernment to be thinking about the park also include the construc- still living it.” I 15 Week in China Society and Culture 11 September 2015

Nothing on the box Last week’s TV and movie schedules were somewhat less exciting than usual

or those taking a taxi through FBeijing ahead of last week’s pa- rade to mark the 70th anniversary of victory against Japan (to use its abbreviated name), there was no Mandarin pop music to ease the de- lays caused by the endless road- blocks put up as part of the preparations. Instead, the radio’s soundtrack was the stirring anthem The Story of Spring, a song praising Deng Xiaop- ing (though it never mentions him by name) – a tune deemed by the authorities to be suitably patriotic. Meanwhile, for fans of The Voice and other light entertainment shows It’s a thumbs-up success: cast of The Hundred Regiments Offensive on TV, it was bad news too. Soap op- eras and shows like Dad, Where Are ing which a Japanese-supported in its first 10 days, according to fig- We Going? and Up Idol were replaced collaborationist government was ures from the research group Ent- with documentaries such as The run by Wang Jingwei in Nanjing Group. The movie tells the story of Main Battlefield in the East and Fly- from 1937 until shortly before his Communist General Peng Dehuai, ing Tigers: The Unforgettable Mem- death in 1944. Over on Jiangsu TV, who launched an offensive against ory, or the animated Five Cannons: The Song of Graduation was a stir- the Japanese using 400,000 men in Defending the Yuanzi Cliff. ring tale of young people’s love and Hebei and Shanxi provinces, mark- From last Tuesday until Saturday, struggles during wartime. Not to ing a break from Mao Zedong’s the state broadcaster CCTV and be outdone, the state-run film usual guerrilla warfare tactics. China’s eight top satellite TV chan- archive announced it had digitally The battle is not without contro- nels suspended their regularly restored around 800 historical versy. Although 600 miles of rail- scheduled entertainment shows in films about the conflict to cele- ways were destroyed, some histori- favour of more nationalistic fare. brate the anniversary. ans argue that ultimately it was a (That wasn’t all: in the weeks run- And fittingly on the movie chan- strategic failure as it galvanised the ning up to the parade around 150 nel CCTV 6, there were also a batch Japanese forces. anti-Japanese and anti-Fascist films of anti-Japanese movies, including Mao wasn’t happy at having his had been shown by the public The Marco Polo Bridge Incident, tactics upstaged either. For this, broadcaster, according to CCTV.) Guerrillas on the Plain and Zhang General Peng suffered during the Some of last week’s highlights Ga, the Soldier Boy, as well as over- Cultural Revolution, when he was on CCTV 1, its main channel, in- seas ‘anti-fascist’ war movies such publicly humiliated in struggle ses- cluded The Yellow River is Roaring, as Schindler’s List and Enemy at the sions and died in prison in 1974. a film that focused on war-torn Gate. Meanwhile there was contro-

P China and paid tribute to the mar- In cinemas, the patriotic movie versy about the film’s box office h o t o

S tyrs who fought Japan. The Hundred Regiments Offensive success. It has been speculated that o u r c e

: O n H u n a n S a tDeisl- l i tweas oTneV of tTheh bieg h its of the week, cinemas have been forced to redi-

C F P guiser dramatised the period dur- grossing $60 million cumulatively rect revenues from the popular 16 Week in China Society and Culture 11 September 2015

Arnold Schwarzenegger movie Ter- minator: Genisys to The Hundred Regiments to make the propaganda film look good. This is based on the disparity between bookings and ticket sales – Terminator: Genisys’ bookings were much higher but ticket sales were low relative to The Hundred Regiments. It wouldn’t be the first time something like this has occurred. Netizens also exposed some dubi- ous ticketing tricks in 2011 designed to boost the box office of Beginning of the Great Revival, a big-budget flick about the founding of China’s Communist Party (see WiC115). Senior executives from two lead- ing independent Chinese studios have also publicly complained that The Hundred Regiments “stole” box office from other Chinese-made films too. “Where’s all the box of- fice gone? Please keep those dirty She killed it: Shu Qi stars in Hou’s martial arts movie The Assassin hands away!” wrote Wang Zhonglei, president of Huayi Brothers on his even a shared language can be ally positive too, with the film cur- weibo. The studio’s romantic drama problematic. The reason? The re- rently scoring a four-star rating on Tale of Three Cities appeared to have lease of Taiwanese martial arts epic, Douban (a favoured Chinese site for suffered after it opened on the The Assassin. discussing popular culture). How- same day as The Hundred Regi- The Assassin is the latest wuxia ever, in addition to the praise for the ments. (martial art) genre film from Asia to film’s aesthetic achievements, a sep- stir international attention, and arate discussion has cropped up stars in its title role Shu Qi. The film with cinemagoers discussing earned its director and screenwriter, whether they actually understood Hou Hsiao-Hsien, the award for Best what was going on. Not getting it Director at this year’s Cannes Film A review in Beijing Youth Daily Hou’s film praised for beauty Festival, and media coverage in the describes how many audience but deemed incomprehensible West has mostly been positive. members had gone to see the film in The movie is adapted from a fic- a state of anticipation but were soon he first Academy Awards cere- tional tale about a girl called Nie Yin- bemoaning that they couldn’t un- Tmony was held in 1929. It was a niang, who is kidnapped by a nun derstand what was being said by the private Hollywood dinner in which and eventually trained to become a actors. In an account on Taipei- the guests numbered about 270. In skilled assassin. Hou says he has based website The News Lens, a re- the 86 years since its inception, no been longing to turn the legend into porter recounts how from the very foreign-language film (that is to say a film since he read it as a student at opening dialogue of the film, audi- non-English language) has won Best National Taiwan University of Arts. ence members were asking their Picture. Instead, in 1956 the Acad- According to the New York Times, it neighbours whether they could emy created a separate category for is the largest project Hou has shot to comprehend what was being said. Best Foreign Language Film – per- date, with the $14 million budget The complication came from manently demarcating the linguis- shared between a Hong Kong firm Hou’s resolute commitment to tic divide in American cinema. and Hou’s own production house. maintain a sense of ‘total’ historical Meanwhile over in China this Reception in mainland China and authenticity. The film is set in Tang week audiences are finding that Taiwan appears to have been gener- Dynasty China (an era that lasted 17 Week in China Society and Culture 11 September 2015

from around 600-900 AD), and so nacular that is China’s lingua franca words [i.e. more archaic]”. Then in addition to the costume, scenery today. For perspective: to make a again, for those baffled by the lan- and setting of the film – all of which film in which the cast speak only guage used, Hou’s distinction is ev- are stunning – the language too has Middle Chinese is akin to a British idently a moot point. been tailored to suit the era. studio releasing a movie about King Acclaimed dancer, Hseu Fang-Yi, According to the New York Times, Richard II in which all of the actors who also stars in The Assassin, con- Hou considered the script as his speak in a manner modelled on that ceded that she had to read the script “biggest challenge”. Many Chinese used by Geoffrey Chaucer in his several times before she really un- viewers have grumbled that the film fourteenth century Canterbury derstood the content. only has a few narrative moments. Tales. Most Brits and Americans In fact, this may mark the first Shu Qi only utters nine lines in the would be flummoxed. time that a “Chinese-language film” entire movie. And the sparse dia- However, during a press confer- can hope to find a more cognisant logue is entirely in classical Chinese ence in June, Hou vehemently de- audience in the West than in China. – i.e. of the type that Tang poetry is nied that the dialogue is classical That’s because, ironically, the Eng- composed in. The Tang spoke what Chinese. Instead, Hou maintains lish subtitles are more direct and is termed by some linguists as ‘Mid- that it is simply an “imitation of that less ambiguous than the poetry-in- dle Chinese’, which is somewhat dis- period’s speech” in that “it is a little spired Chinese dialogue, and so less tant from the current Mandarin ver- more concise, using more dynastic likely to confuse. I

Ask Mei: Why do drinkers finger-tap the table?

When I dine with my Chinese friends and were also dressed in plain clothes. The emperor was colleagues, they often tap the table with their so impressed with the local tea that he kept filling up fingers when being served tea or wine. What does the cups for his courtiers. The ancient Chinese that mean? tradition held that whenever the emperor gave Tapping the table with the index and middle fingers somebody anything (even a rope to hang himself) when being served drinks is a very common practice that person should kneel down to thank him. But in China. It basically means “thank you” in an since they were in disguise, nobody could do that in unintrusive way – with the welcome effect it won’t public. Luckily, one smart official came up with a interrupt conversations at the dining table. solution by bending the index and middle fingers of This practice is believed to have originated with his right hand and tapped the table three times –a the Emperor Qianlong of the Qing Dynasty. As the hand gesture to symbolise kneeling and kowtowing. longest living emperor (1711-1799) who reigned over Qianlong was very pleased with this clever invention China during the relative peak of its economic, and others immediately followed suit. So next time military and cultural might, Qianlong is the source of you are served drinks at a Chinese dinner, you many legendary stories and anecdotes – some real should also try this tapping gesture – see if your and some fictional. Chinese friends are as pleased as the emperor. As a sophisticated connoisseur of tea, art and literature, Qianlong is believed to have made seven A native Chinese who grew up in northeastern China, leisurely trips to the beautiful and wealthy southern Mei attended an elite university in Beijing in the late part of China, specifically the Yangtze River Delta – 1980s and graduate school in the US in the early the area that includes modern day Shanghai, Jiangsu 1990s. Over two decades she has worked in the US, and Zhejiang – to sample life there. He enjoyed Hong Kong and mainland China, both in the media travelling in disguise so that he could observe the and with two global investment banks, where she has common people at close quarters. honed her bicultural perspective. If you’d like to ask During one of his southern trips, Qianlong visited a her a question, send her an email at teahouse – incognito – with a small entourage, who [email protected] \

18 Week in China And Finally 11 September 2015

Dog days China’s World Cup hopes dented by Hong Kong

ootball derbies are always The 25 year-old was poised to be- Fheated affairs. For instance, come a professional footballer in when China’s national soccer team mainland China in 2013. But a Yapp to the rescue lost to Hong Kong in 1985 a riot planned transfer to Guizhou Renhe broke out in Beijing (it was a deci- was vetoed by the Chinese Football time. Only dogs would do this,” one sive World Cup qualifying match). Association (CFA), which doesn’t al- China fan wrote on his weibo. “But The two teams locked horns low ‘foreign’ goalkeepers. He was re- the team of locusts still can’t beat again this month in another World duced to venting his frustration on the underdogs,” came an online ri- Cup qualifier. As expected, it was a social media. A photo of him hold- poste from a Hongkonger. highly charged affair, although the ing a poster that read “I am Chinese Zheng has denied Yapp’s accusa- former British colony came away not a foreigner” was widely shared tion. He told Sina Sports: “I just told with an unexpected result: a goal- among fans across the Hong Kong- him to get up on his feet as he had less draw. China border. been lying on the pitch for too Most Chinese fans have learned Yapp has been back on social me- long.” This might have got lost in the hard way not to invest too much dia in recent days – saying he was in- translation, according to the chief national pride in the fortunes of sulted in the last minutes of the of Hong Kong’s football association, their football team. Yet more than match last Thursday. Posting a who suggested that the word “long” 26,000 turned up at a Shenzhen sta- photo of the Chinese captain Zheng (jiu) sounds similar to “dog” (gou) in dium last Thursday (with Zhi he alleged: “You are mad at not Mandarin. Yapp wasn’t convinced. Hongkongers allocated around winning. You came up to me and “My Mandarin is not that bad,” He 2,000 tickets) in the hope that China called me a dog. Asian Footballer of told reporters. would end its Hong Kong jinx on the Year, you have good skills, but Hong Kong fans subsequently the football pitch (see WiC278) . you fail in terms of sportsmanship!” booed the Chinese national anthem The Chinese team had more than That soon had China’s netizens this week in their fixture against 70% of the ball possession and hit and their Hong Kong compatriots Qatar. That could mean that the re- the woodwork four times. But it swapping another round of animal turn match against China (in Hong couldn’t find a way past Hong insults (see WiC136 for an earlier in- Kong in November) is played behind Kong’s goalkeeper Yapp Hung-fai, stance in which mainlanders com- closed doors. That’s because FIFA who pulled off a string of stunning pared Hongkongers to dogs in re- had warned Hongkongers that if saves to deny most of the 41 shots venge for being slurred as locusts). they booed the Chinese national an- on goal. “Hong Kong parked the bus for them again, the home leg would be For Yapp it was a sweet moment. 90 minutes and Yapp dived in extra played in an empty stadium. I

The numbers game

“The cool down is good for us, there are too many competitors in the market” P h o t o

Huawei’s Richard Yu says global revenue from its smartphone and retail business will grow S o u r c 30% next year to $20 billion. The global head of Huawei’s consumer business division told the e :

R e Wall Street Journal that he foresees consolidation among Chinese smartphone makers. Huawei’s Yu u t e r s

19 Week in China The Back Page 11 September 2015

Photo of the Week In Numbers 33.9 million metric tonnes The weight of iron ore shipments from Australia’s Port Hedland to China in August, rising 15% from 29.5 million tonnes in July to hit a record figure for a single month’s exports. It also marked a year-on-year increase of 6%.

$93.9 billion P h How much China’s foreign exchange o t o

S reserves plummeted last month. o u r c e :

I m a g 10% i n e

C Beijing’s planned increase in government h i n a

spending to boost the economy. And the winner is: according to newspaper Wenweipo, the Henan Art This increase will widen China’s fiscal deficit by Rmb270 billion ($42 billion), Centre was voted China’s ugliest building in an online poll this week taking the total deficit to Rmb1.6 trillion.

281% Where is it? Tibet’s GDP growth since it was established as an autonomous region under Party rule Some of the places referred to in this issue 50 years ago.

Xinjiang Beijing 2% Dalian Hebei Tianjin August’s consumer price inflation rate, Shanxi higher than analysts expected and driven by food inflation. However, core CPI China (excluding food and energy) was Shanghai unchanged at 1.7% versus July.

Chongqing $60.91 The new low hit by Alibaba’s US-listed

Guangzhou Hong Kong stock on Tuesday, down 49% from its November high of $120, on fears of slowing consumer demand.

Want to sign up for Week in China’s website, the Friday email and our digital magazine? Go to www.weekinchina.com/welcome and fill out our subscriber form. It only takes a few moments and subscriptions are free. Invite friends to register too? Just send them the same link. Need to change your subscriber email address? There’s a button at the bottom of the weekly email that allows you to change email address. Or just send an email to [email protected] and we can do it for you. Want the iPad and Android apps? If you type Week in China into the search function in the Apple App Store and/or the Google Play Store you will be able to download our app respectively for your iPad and Android smartphone devices.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.

@2015 Week in China is published weekly by ChinTell Limited, a company based in Hong Kong. All rights reserved. To contact us email: [email protected] 20