1 Talking Point 6 Week in 60 Seconds 7 M&A Week in China 8 Auto Industry 9 Property 11 Healthcare 13 China Consumer 14 China and the World 20 June 2014 18 Society and Culture Issue 242 21 And Finally www.weekinchina.com 22 The Back Page The call of Thailand m o c . n i e t s p e a t i n e b . w w w

As China Mobile seals Thai investment, many judge CP Group’s Dhanin

Chearavanont the best-connected overseas businessman in China Brought to you by Week in China Talking Point 20 June 2014

Upwardly mobile Another China deal for Thailand’s influential CP Group

All the tea in China: billionaire Dhanin Chearavanont pictured at a Sino-Thai business summit

any businessmen lay claim venture in Shenzhen’s special eco - Being first brought advantages. Mto being the first to invest in nomic zone. By 1982 he would also “Because we were the only one in - China after it reopened its door to get the “No. 001” licences in Zhuhai vesting in the country, the govern - foreign investment in the late and Shantou too. ment gave us full support. They 1970s. Dhanin’s agribusiness grew wanted to make sure we were suc - But Thailand’s richest tycoon quickly , enjoying a virtual monop - cessful,” Dhanin told China Eco - Dhanin Chearavanont probably has oly at the time. (His local rival New nomic Weekly in an interview three one of the most convincing cases. Hope was a cash-strapped startup in years ago. The magazine had ranked In 1979 Dhanin’s Charoen Pokp - 1982.) By 2012, CP had built more the ethnic Chinese tycoon as hand, or CP Group, teamed up with than 100 feed mills in China, cover - China’s fourth most important P h o t o US-based Continental Grain Group ing all but two provinces. The Thai business leader, and top as a foreign

S o u r c to produce animal feed in Shen - conglomerate today has 200,000 investor. e :

I m

a zhen. And Dhanin won “Foreign In - hectares dedicated to agribusiness, Since 2008, Dhanin has been g i n e

C vestor Certificate No. 001” for making it the biggest foreign leaser chairman of the China Overseas h i n a setting up the first foreign joint of Chinese land. Chinese Entrepreneurs Association, 1 In the future, finance will help new growth flourish.

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HSBC operates in various jurisdictions through its affiliates, including, but not limited to, HSBC Bank plc who is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (USA) Inc., member of NYSE, FINRA and SIPC, and HSBC Bank USA, NA.

Issued by HSBC Holdings plc. AC22067 Week in China Talking Point 20 June 2014

a Beijing-endorsed trade group that promotes foreign investment into China. He has also been busy work - ing his Chinese ties. Last week CP agreed to sell an 18% stake in its tele - com and broadcasting unit True Group to China Mobile for $880 million in the first foreign invest - ment in Thailand since the military coup last month. The investment by China’s lead - ing telecom carrier looks like a much-needed vote of confidence. Observers also say the deal could strengthen Beijing’s ties with one of the few countries in Southeast Asia with which it has no territo - rial disputes.

Why does China Mobile want the True stake? Unlike some of its previous acquisi - Now pushing into Thailand tions, China Mobile hasn’t offered a reason why it is buying into the in 2009 ran into political resistance Daily, a pro-Beijing newspaper, con - Thai market. In a brief announce - in Taiwan when Taipei refused to curs. “It is puzzling to see China Mo - ment to shareholders, the telco said ease ownership curbs. Also in 2013, bile investing in a debt-laden only that it will be exploring “ex - China Mobile had to pull out of a telecom firm that only occupies the tensive and long-term cooperation” bid with Britain’s Vodafone for a third position in a mobile market with True. new licence in Myanmar. that is already 140% saturated,” it Going global has become a With a subscriber base of 29 mil - suggests. “Rather than underlining clichéd strategy for China’s state- lion, True is Thailand’s only fully in - the growth prospects of the telecom controlled giants. But China Mo - tegrated telecom firm. It is also the market in Thailand, the deal actu - bile hasn’t been deal-hungry, leading pay TV operator and runs ally reflects Dhanin Chearavanont’s despite sitting on more than $70 the country’s largest broadband powerful China connections.” billion in cash. In fact, it has com - network. pleted just two takeovers offshore. Even so, Forbes expects the deal How well-connected is he? The first was a buyout of China Re - to be of little consequence for China “It has never been a secret that sources Peoples, one of six mobile Mobile, especially in the short term, Dhanin Chearavanont has a long - telecom operators in Hong Kong, as it already enjoys the world’s standing and close relationship with in 2005. And back in 2007, it took biggest customer base of 785 mil - the Chinese government,” China over Pakistan’s PakTel for $460 lion subscribers. Economic Weekly claims. The mag - million. That firm was later re - “It is somewhat surprising that azine (run by the People’s Daily) branded as Zong and currently ac - China Mobile chose to invest at notes that CP has invested at least $6 counts for a little under a fifth of such a time,” the magazine writes, billion in China over the years and Pakistan’s 133 million mobile pointing to the political situation in that the conglomerate’s operations phone users. But the contribution Thailand. Separately a financial have spawned 213 units and employ from overseas revenues is so in - columnist at Hong Kong’s Apple more than 80,000 people. Besides significant (i.e. less than 5%) that Daily questions if the deal was the being one of the biggest animal feed China Mobile has never provided a result of a “pure commercial deci - producers, CP has pharmacies, su - P h o t

o segmental breakdown. sion”, and whether it might even permarkets, a real estate portfolio

S o u r There have been unsuccessful have been put together “against and a motorcycle business. Annual c e :

R e forays too. For example, an attempt China Mobile’s own wishes”. China revenues are over Rmb50 bil - u t e r s

to buy part of Far EasTone Telecom Even Hong Kong Commercial lion ($8 billion). 3 Week in China Talking Point 20 June 2014

Many Chinese grew familiar with CP – which goes by the Chinese Planet China name “Chia Tai” in the country – Strange but true stories from the new China after Chia Tai Hour was first aired on state broadcaster CCTV in 1989. The one-hour variety show is the ROAD KILL. A man in Shandong – who was driven crazy by his wife – came up with a gruesome scheme to leave her earlier this month. Police in only CCTV programme named after Rizhao City were called to a road accident where a body was found. It had a foreign firm. Still aired weekly, been battered into pieces by repeatedly being hit by passing vehicles. The Chia Tai Hour is also CCTV’s longest abandoned car was identified as belonging to a man named Li (the -running non-news programme. disenchanted husband). The police took what remained of the corpse and CP is able to ride on such privi - had it analysed in the lab. However, it turned out to be the remains of a dog, leges, says China Economic Weekly, not a human, reported Shandong TV. The next day it also became clear Li because Dhanin has won Beijing’s was still alive when he used his bank card to withdraw money from an trust, committing to China during automated teller machine in Jilin and was thereby picked up by police and “difficult times when foreign in - brought back to Rizhao. At this point he confessed that he’d tried to fake his vestors were fleeing or hesitating”. death by skinning the animal, dressing it in his own clothes and then leaving Dhanin demonstrated his re - it on the highway to be crushed by oncoming vehicles. He said he had done solve during his own most trou - so to escape his wife and run away with his lover. Law enforcement officials were unimpressed and Li is now due to be tried for ‘seriously endangering bled moment. As the 1998 road safety’. financial crisis engulfed Asia, CP sold its Lotus supermarket chain in Thailand to Britain’s Tesco. But that didn’t stop CP going ahead into Thailand. In doing so, he has ers visited China for talks on re - with the opening of the first Lotus pulled off a coup: reducing the gional security. Pleased with the supermarket in Shanghai. The re - large debt burden at True and put - telco’s vote of confidence, the junta sult? CP now runs more than 75 ting it on a sounder footing as it claimed to have China’s support. In Lotus Supercentres in China, mak - looks for regional growth. Gener - contrast, Western countries, includ - ing it one of the biggest players in ally analysts haven’t been too ex - ing old ally the US, have reproached the supermarket business. cited about the likely impact for the coup leaders and called for a Long term relationships may also China Mobile, which is facing stiff speedy return to democracy. explains CP’s confidence when it competition from two rival mo - Dhanin’s past dealings had al - comes to buying sizable Chinese as - bile carriers at home, as well as ready led to meetings between the sets. In 2013, it bought a $9.4 billion, mobile messaging services such as Beijing leadership and some of 15.57% stake in Ping An Insurance WeChat that are eating into its rev - Thailand’s most powerful politi - from HSBC, with reports that the ac - enues. cians. In October 2002, when CP un - quisition was financed by a loan Competition in the Chinese veiled its Super Brand Mall in from state lender China Develop - market is expected to get more in - Shanghai, General Prem Tinsu - ment Bank. CP was also among the tense too with the introduction of lanonda attended the inauguration shortlisted bidders when Li Ka- Mobile Virtual Network Operators ceremony with Dhanin. The retired shing, Hong Kong’s richest man and (MVNOs) that have been given out officer served as Thailand’s prime the biggest foreign investor in to cash-rich rivals such as Alibaba. minister from 1980 to 1988 and re - Britain, put supermarket chain mains an influential figure as the ParknShop up for sale last year. So is Dhanin China’s man in head of the Privy Council of the Bloomberg has suggested that CP Bangkok? Thai king. The Global Times has also was teaming up with Woolworths in That is the question that the Wall reported that Prem was a “long- a bid that could have exceeded $4 Street Journal asked last week, sug - time principal consultant” of CP billion. (Li eventually sold a 25% gesting Dhanin might be China’s (athough the company denied the stake in Watsons, the holding firm favourite Thai billionaire. report last year following its Ping for ParknShop, to Singapore’s CP’s tie-up with China Mobile An investment). Temasek instead.) seems to have had a beneficial im - But it doesn’t mean that Dhanin This time around Dhanin has pact on Sino-Thai relations. A few is tilting Bangkok entirely in Bei - reversed the investment flow, days after it was announced, a dele - jing’s direction. Coup leader Gen - bringing capital back from China gation of Thai military command - eral Prayuth Chan-ocha, for 4 Week in China Talking Point 20 June 2014

example, seems to be stalling on Prayuth claims. “They offer to fund ests of the opposition camps. In two mega infrastructure contracts the entire project with their own east Asia China is the only one who that China badly wants to win: the money but then they request 50 can provide such resources in construction of a canal through the years of concessions and two kilo - abundance,” he told the Oriental Kra Isthmus, and high-speed train metres of space on each side to Morning Post. projects linking the seaway to serve their business.” Economic ties may draw southern China. Bangkok closer to Beijing, although “A lot of people ask me to do a lot So what can Beijing expect from some Chinese critics expect Thai - of things using the powers I have, Thailand’s new leaders? land to remain a “distant ally”. An without listening to criticism. Kra The South Metropolis Daily reck - op-ed featured in the Yangcheng canal, for example. Someone urged ons China isn’t losing too much Evening News notes that Thailand me to order that the project pro - sleep about who is in power in was the only southeast Asian coun - ceed since it will benefit the coun - Bangkok. “No matter if it is the red try to avoid being colonised by try, but it needs to be considered shirts [supporters of deposed Western countries and that the rea - that such a project may be consid - Prime Minister Thaksin Shinawa - son was that it acted as a buffer be - ered as ‘separating’ the country,” tra] or the yellow shirts in power, tween larger colonial powers as the Bangkok Post quoted Prayuth or even the junta, the different po - they vied for influence. Thailand as saying this week. litical camps in Thailand have all will stick to this positioning now The waterway is designed to pass been friendly to China,” the news - that geopolitical tensions are esca - through the thinnest point in the paper claims. “Some cooperation lating in the region between China Kra Isthmus, offering a way of by - such as the rail-for-rice pro - and the US, the newspaper sug - passing the Strait of Malacca, and gramme could be delayed but it gests, as well as with Japan, Viet - saving fuel and journey time on one won’t affect the nature of China’s nam and the Philippines. of China’s key supply lines. Thailand relationship.”. Perhaps that means more of a For the high-speed train projects, Zhou Fangye at the Chinese bridge-building role for CP Group which China has offered to build in Academy of Social Sciences expects too, which has a mission to become a barter deal for Thai rice, the coup even closer ties between the two “the Kitchen of the World”, Dhanin leader sounds equally sceptical. countries because of the coup in told Forbes last year. “There are several offers from Bangkok. “Thailand needs to bring Currently CP produces 54,000 foreign countries which sounded in a lot of external resources to tonnes of eggs every year in China. favourable on the surface. But there push for economic reforms that Prudence suggests that it shouldn’t is no such thing as a free lunch,” could sooth the conflicting inter - put them all into one basket. n

Pencil pushers

Contrary to popular opinion, pencils haven’t been made of lead since the discovery of graphite 450 years ago. The latest to make this common blunder was an official in Hunan, after 300 children took blood tests that showed lead levels far in excess of national standards. Parents are blaming untreated waste from a nearby chemical factory, which was shut down last week, according to the Global Times. But Su Genlin from the township’s government was reluctant to make the same link. “Students, when they’re studying at school, they chew on pencils,” he claimed. “That can also cause lead poisoning.” The media lined up to ridicule Su’s explanation. “It is scientific knowledge that pencils are made from graphite,” an op-ed in the People’s Daily scoffed. I l l u s t r

a “Does this official’s statement show ignorance, or just disregard for the t i o n :

people’s welfare?” w w w

. Netizens were similarly unimpressed. “His own brain has been poisoned,” b e n i t a one claimed. “How can a normal person say something like that?” e p s t e “It seems he sucked on too many pencils as a child,” another joked darkly. i n . c o m

5 Week in China The Week in 60 Seconds 20 June 2014

Big British welcome for Li The major news items from China this week were...

During his first trip to London, Premier Li Keqiang 1signed over $30 billion in trade deals. The Queen also made an appearance, meeting China’s premier at Wind - sor Castle. David Cameron presented gifts of an original script from the Downton Abbey television series and a collection of Charles Dickens screen adaptations. Never - theless, London’s charm offensive didn’t appear to work very well because Global Times wrote this week that Britain is an “old, declining empire” that resorts to “ec - centric acts” to cover its waning importance.

A top Chinese diplomat met with Vietnam’s foreign “I think we both deserve a round of applause” 2minister in Hanoi on Wednesday as the two sides seek to resolve a standoff over the Paracel Islands in the China blocked a shipping alliance formed by the South China Sea. However, not much was accomplished 4world’s three largest container-shipping companies, during the meeting. Chinese State Councillor Yang Jiechi ignoring US and EU approval. The Chinese Ministry of blamed Hanoi for inflaming tensions: “[Hanoi should] Commerce said that the proposed P3 vessel-pooling ac - stop disrupting Chinese operations, stop hyping prob - cord – which included Denmark’s AP Moeller-Maersk, lems and disagreements, and refrain from creating new France’s CMA CGM, and Switzerland-based Mediter - disputes.” Vietnam, meanwhile, reaffirmed its sover - ranean Shipping – would “restrict competition” on the eignty over the Paracel islands. busiest Asia-Europe container routes. Following its an - nouncement, Maersk’s chief executive said the P3 plan The first renminbi-denominated “green bond” has would now be scrapped. 3been issued in London, marking another step for - ward in the internationalisation of China’s currency. The The National Audit Office accused China Investment three-year bond, issued by the International Finance 5Corporation, the world’s fourth-largest sovereign Corporation, raised Rmb500 million ($80.27 million) wealth fund, of mismanagement just seven years after and was priced at a yield of 2%. HSBC acted as sole lead its inception. The top auditor said in a report that be - manager. Proceeds will be used to provide funding for tween 2008 and 2013, CIC made 12 overseas investments climate-friendly projects related to renewable energy that faced losses or potential losses because of “derelic - and energy efficiency across developing economies. tion of duty, inadequate due diligence, a lack of post-in - vestment management and other problems”. Some other investments also suffered from irregularities in the hiring of external managers.

Henan’s provincial education authority admitted 6that at least 127 students had cheated in the college entrance exam by hiring other people to take the gaokao , China’s equivalent of the SAT, on their behalf. In order to cheat test-takers were given fingerprint films of P h o t

o the students whose places they were filling to fool the

S o u r fingerprint recognition devices that validate students’ c e :

R e identities at exam halls. A separate investigation is also u t e r s A major shipping alliance was blocked by Beijing taking place in Hubei. n 6 Week in China M&A 20 June 2014

Bringing home the bacon KKR and other private equity investors in new pork powerplay

“ an is the only animal which panded relatively slowly in recent Mconsumes without produc - years. It set a goal of raising 10 mil - ing,” Old Major tells his fellow pigs lion pigs per annum, but it is still as they plot to overthrow the tyran - several million short of that goal,” nical Farmer Jones in George Or - says Soozzhu.com analyst Feng well’s classic novel Animal Farm . Wenhui. But the allegory could apply to COFCO Meat currently raises 1.5 the world’s biggest pork eater, million pigs a year, but it does so at China, which consumes far more of a much higher cost than in the US, the meat than it produces because which benefits from lower corn its industry is so inefficient. Last prices (50% of hoggery costs). year, for example, the country Pork farming can be volatile. bought thousands of hogs from the In search of porcine profits Prices are shaped by long invest - US, and imported a further $703.5 ment cycles and can struggle with million of fresh American pork, ac - Asia, Hopu Investment Manage - corn feed costs, the weather, disease cording to the US Meat Export Fed - ment and Boyu Capital are all com - and government policy. eration. (For perspective: America ing on board as strategic partners. China’s pig industry is also noto - accounts for only 20% of China’s It is yet another example of a rious for its health standards. Farm - pork imports, estimates the US De - state firm embracing the mixed ers routinely chuck diseased ani - partment of Agriculture.) ownership concept (something that mals into rivers to avoid the costs In recent years, one of Beijing’s WiC first discussed in issue 230) – of disposing of them properly (see policy priorities has been to im - here to enhance COFCO Meat’s cor - WiC186). China Daily flagged an - prove its food sufficiency by indus - porate governance and help it grow other example in Sichuan in which trialising agricultural production. It into a much bigger player. two men were paid Rmb2,400 ($385) hopes that the days of the family pig COFCO and Hopu, which was set a month to remove about 16 car - in its sty are numbered, although up by the banker Fang Fenglei, al - casses a day from a reservoir. Many the challenges of introducing mod - ready have a track record of working slaughterhouses operate illegally ernised pig farming to a country together. The two teamed up in too. The government has forced where 58% of farms still produce 2009 to purchase a 20.3% stake in 18,571 of them to close since 2008 just 49 pigs per year are daunting. Mengniu Dairy and in April this but further consolidation would In the US, 76% of hoggeries have year they did the same again to pur - help the industry to progress fur - more than 5,000 pigs. chase a 51% stake in Noble Group’s ther. The top five players only hold Since Ning Gaoning became agribusiness. an 8% market share compared to the chairman of state-owned behemoth KKR is also linked to the duo 70% equivalent in the US. COFCO ten years ago, he has been through its 2009 investment in The Chinese government also overhauling the group’s food pro - China Modern Dairy Holdings, in hopes to persuade more of its citi - cessing, manufacturing and trading which Mengniu bought a 26.9% zens to buy chilled pork from su - businesses. Last week, a 70% stake in stake last year. permarkets rather than freshly COFCO Meat was sold to a group of Local analysts tell CBN that slaughtered meat from wet markets. P h o private equity investors for $270 COFCO will dip into its $10 billion Packaged meat accounts for just 14% t o

S o u million. “The barn’s doors are finally war chest to pinpoint suitable M&A of consumption in China (67% in the r c e :

S open,” is how newspaper CBN re - targets to increase pig production US) and Beijing wants to increase h u t t e r acted to news that Kohlberg Kravis six-fold over the next seven years. consumption of chilled meat to 20% s t o c k Roberts (KKR), Baring Private Equity There is work to do. “COFCO has ex - by 2015. n 7 Week in China Auto Industry 20 June 2014

The slow lane Homegrown cars lose out to foreign rivals

hen foreign carmakers like HSBC’s analyst for the sector. cars over the last two years, partly at WGM and Volkswagen were The assault they face is three- the expense of its American rival GM. first allowed to set up shop in pronged. Firstly, the stronger joint The Japanese are having a harder China, they were forced to partner ventures are starting to produce time. Despite regaining some of the with local manufacturers. The lower-end models at competitive business lost to consumer boycotts longer-term goal was to encourage prices like the VW Santana, the Buick two years ago (see WiC270), Japan’s the production of locally-designed Excelle and the Skoda Rapid. Addi - premium brands don’t appeal to cars. But the plan has backfired. As tionally, some of the larger local au - wealthy Chinese as strongly as mar - we noted in WiC165, business has tomakers like Beijing Auto and ques like Range Rover or BMW, sug - been so good that the largest Chi - Changan have managed to launch gests The Economist. Even Toyota’s nese car firms haven’t needed to some more attractive models of boss Toyada Akio has admitted that plough their own furrow, concen - their own, funded by the cashflow Japanese cars lack “story, narrative trating instead on harvesting the from their joint-venture businesses. or history”, the magazine noted last fruits of their joint ventures. Each And finally, Chinese consumers are week. has become dependent on sales of starting to shift towards higher price Meanwhile Japan’s carmakers al - overseas brands. Almost nine out ranges, which is damaging for the ready struggle to win over Chinese of 10 cars sold by Shanghai Auto purely domestic operators, which consumers. A little over half of last year came from tie-ups with tend to compete at the lower end of 40,000 respondents to a Sanford General Motors and Volkswagen, the market. Bernstein survey said they would for instance. Contrastingly, China is gushing never buy a Japanese car on patriotic “It’s like opium. Once you’ve had cash for the international carmak - grounds, the Wall Street Journal has it, you’ll get addicted forever,” He ers. GM’s joint ventures produced reported. Guanyuan, a former minister, net income of $595 million in the But how does Beijing get back on lamented two years ago. “So many first quarter, for instance, compared track in encouraging a genuinely years have passed and we don’t with $100 million from the rest of competitive roster of domestic cars? have a single brand that can be its international operations. Volk - One option is to call a halt to the competitive in the auto world. I feel swagen’s contribution from China joint ventures, allowing the foreign red-faced.” has been similarly weighty. Last companies to buy out their Chinese After peaking at 31% of the mar - year’s operating profits from its partners. Without their share of ket in 2010, domestic brands have partnerships were reported at €9.6 profits on the foreign models, the been on a downward trend ever billion ($13.06 billion) out of €11.7 state-owned manufacturers would since. The latest data shows that billion worldwide, the Financial struggle financially. But at least this they are still stuck in the slow lane. Times says. would encourage greater consolida - While the total market grew again in Aside from profits shared on tion among the homegrown groups, May, rising 8.5% to 1.9 million vehi - China sales, the foreign carmakers forcing them to focus on producing cles, sales of Chinese cars struggled charge royalties on their brands and better models of their own. to keep up, growing at 5.4%. shared technology, and sell key com - Of course, the move might also It is China’s independent produc - ponents to their Chinese partners. help privately-owned automakers ers – firms like Geely, Great Wall, Volkswagen continues to do best like Great Wall and BYD, since they

P Chery and BYD Auto (which don’t among the foreign firms. Further don’t depend on the joint ventures h o t o

S have state ownership and lack an in - back, Ford has been making ground, for income. If they can survive long o u r c e ternational partner) – that are get - almost doubling its share in sports enough, China’s independent pro - :

C F P ting the worst of it, says Carson Ng, utility vehicles and larger passenger ducers might prosper yet. n 8 Week in China Property 20 June 2014

Lacking fizz Wahaha struggles with mall experiment, as shoppers demand more

hinese tycoons rarely lack con - Cfidence in their abilities. Al - most 20 years ago fridge manufacturer Li Shufu decided he was going into the car industry. Why be daunted, he told his friends and family, when car making didn’t look like much more of a challenge than putting together four wheels and a sofa? Li went on to create Geely, which bought Swedish icon Volvo four years ago. Zong Qinghou, China’s best- Family firm: Zong Qinghou with his daughter Zong Fuli known drinks billionaire, showed similar chutzpah in announcing cal consumers. But there were diffi - have admitted that Wahaha was that his beverage firm Wahaha – culties from the start. The first man - poorly prepared for the challenges which like Geely also hails from agement shake-up came within 12 of managing malls. The business Hangzhou – was diversifying into months and this year Wahaha was conceived with more of a focus shopping malls. changed direction again, converting on real estate returns, an internal “Commercial property is simpler much of the mall into a children’s source told Southern Metropolis and easier than managing a bever - education centre. Daily. The plan was to invest heavily age company,” he told China Real Es - Zong denies that the problems in the first few projects, hype them tate Business News at the time. in Hangzhou mean that Wahaha is up and then syndicate a massive Two years on, Zong’s optimism is going to give up on its new busi - round of investment in 100 more being called into question by a ness line. But the company’s crit - shopping centres over the following falling-out between Wahaha and its ics say that the beverage firm is out five years. landlord Zhejiang Zheou Properties of its depth. But just two have opened so far: at its flagship mall, Waow Plaza. “Wahaha isn’t capable of discov - the troubled venture in Hangzhou, The trouble started with a dispute ering and promoting new clothing plus one more in Changsha. over rental payments earlier this brands from Europe,” Liu Hui, a retail Wahaha’s difficulties won’t come year, reports Want China Times. Wa - consultant, told Southern Metropolis as a surprise to Yu Xianglai at the haha told its landlord it would be Daily. “The truth is that most of the China Shopping Centre Develop - pulling out of the lease, which had brands are from factories in Jiangsu ment Association, a trade body. He been signed for a 16-year period. It and Zhejiang, so the positioning has says that mall projects generally looks like the dispute may end up in been changed quietly.” proceed on a ‘fifty-fifty rule’”. Half the courts as Wahaha is alleging that Wahaha is also said to have of the ventures announced to the the break-up has been forced by rushed into the new business area press haven’t started construction, Zhejiang Zheou’s failure to meet its without adequate preparation, Li Yu believes. When building does be - contractual commitments. Lei, another retail analyst, told the gin, only half the malls open for P h o t

o When Waow Plaza was launched Global Times. Li added the firm business. And for those that start

S o u r Wahaha bosses talked about a mall picked a location for Waow Plaza trading, only half make a profit. c e :

R e strategy based on introducing up- that isn’t popular for socialising or “In other words, the success rate u t e r s and-coming European brands to lo - shopping. Even company insiders for shopping centres in China is 9 Week in China Property 20 June 2014

probably about one-eighth,” he says. That doesn’t seem to have dis - couraged the developers. More than half of the mall space under con - struction in the latest 180-country survey from CBRE, a global real es - tate firm, is happening in China. Shanghai alone has more shopping centre space in the pipeline than the 86 European cities in the survey combined, the study noted in April. Yuan Yafei, the boss of Sanpower – which recently bought the UK’s Wahaha’s mall hasn’t impressed shoppers House of Fraser stores – told the Fi - nancial Times that 2,500 new shop - trips overseas. erage choices all contribute to a ping malls will open in China in the One sweet spot for the mall own - more vibrant shopping experience, next three years. ers is fast-fashion brands like Zara, rather than a soulless visit to a vast This comes at a time of slowing Gap and H&M. They have been in emporium. retail sales growth. An increasing growth mode, surpassing their store China Entrepreneur points to the share of business is moving online opening goals last year, the Knight joint venture between Swire Prop - in China too, from 0.6% of the total Frank report says, in contrast to the erties, a Hong Kong-listed devel - in 2007 to a forecast of 8.5% this 65% of luxury retailers who didn’t oper, and Sino-Ocean Land, one of year, according to CECRC, a research meet their new store targets. China’s largest property firms, as firm. In fact, e-commerce bulls have Changing trends are also forcing one example of this newer trend. even been predicting that bricks- a rethink about how shopping cen - INDIGO joined Swire’s first mall in and-mortar operators are heading tres are designed. Out go the huge, Beijing, Taikoo Li Sanlitun, two for disaster – Alibaba’s Jack Ma is out-of-town and standalone malls, years ago. Both are mixed-use proj - one of those who thinks online sales traditionally anchored by older- ects in premium areas, combining could soon surpass those made in style department stores. More shopping with cinemas and bou - shops (although the internet titan favoured are smaller developments tique hotels, as well as office space wasn’t sure enough of his case to in premium locations, sometimes in INDIGO’s case. bet on it with Dalian Wanda’s Wang based around ‘mini-anchor’ concept The key targets for the malls are Jianlin, after they argued about the stores which offer a range of goods middle-market shoppers with a topic on TV – see WiC182). to carefully identified groups of im - taste for “light luxury and fast fash - Faced with the lower prices and age-conscious shoppers. ion brands”, China Entrepreneur greater convenience of shopping on - Flagship outlets from the fast- says. More curious about fashion line, mall owners are rethinking how fashion brands are welcome addi - than many premium-luxury shop - to target the next generation of cus - tions too because their product pers, these customers are ready to tomers. Because average purchases ranges are more affordable and spend more than the mass market. on the most popular sites like Tmall change more frequently. This gen - But they also want more of a shop - are about Rmb200 ($32.11), internet erates higher footfalls, especially ping experience, so Swire’s malls sales threaten lower-end malls more from younger shoppers. have been designed with a focus on than most, says another retail study Most of all the new generation of architecture, layout and engage - co-authored by architecture firm malls is looking to provide a more ment. Shopping space has even Woods Bagot and international real - engaging visit for its customers, been sacrificed for indoor gardens, tor Knight Frank this year. with a broader shift to more ‘expe - parks and piazzas. The idea is to cre - But over-dependence on luxury riential’ shopping that encourages ate a neighbourhood feel that visi - goods tenants can be a risk for mall repeat visitors. That means creating tors can enjoy as a day out. Guy owners too. The anti-corruption brand loyalty to the mall and not Bradley, Swire Properties boss in P h o t

o campaign has taken the steam out just the stores themselves. Pop-up China, says the goal is to avoid

S o u r of luxury sales, while many more retail, art exhibitions and perform - “huge, empty spaces”. It will open c e :

R e affluent shoppers prefer to pur - ance spaces, cinemas and ice rinks, similar malls in Chengdu later this u t e r s chase the most expensive brands on plus a wider range of food and bev - year and in Shanghai in 2016. n 10 Week in China Healthcare 20 June 2014

The Putian phenomenon How a city in Fujian came to dominate Chinese private healthcare

ust across the strait from Taiwan, JPutian is best known to execu - tives at Nike and Adidas as a major manufacturing base for knock-offs of their shoes. (Alibaba even warns buyers on its business-to-business platform to show caution when dealing with the city’s suppliers.) But aside from suspicious-look - ing sneakers, Putian’s entrepreneurs are also some of China’s most active investors in private hospitals. As of October last year, 10,877 private hos - pitals were reported nationwide. Of the total, at least 8,000 were run by Putian entrepreneurs own around 8,000 private hospitals Putianese, according to data from the National Health and Family come back so many turned to me. primetime, people started lining up Planning Commission. More than My remedy was very effective, and I outside the door. It was worth the 60,000 residents in Putian are also became more and more famous,” investment,” one of the largest hos - engaged in the medical and health - Chen told the magazine. pital owners, Zhan Guotuan, told care industries. “Not one hospital As Chen became well known, he The Founder. owner from Putian has had a med - started taking on pupils. Soon they Putian businessmen now own ical background or knows how to were treating all kinds of ailments about 80% of China’s private hospi - treat patients. But they have single - albeit with their limited medical tal network, but they generally keep handedly transformed the private knowledge. Then they stumbled a very low profile. Few have spoken hospital industry,” an industry in - into another bucket of gold: treat - publicly about their business inter - sider told Oriental Outlook. ing sexually-transmitted diseases. ests and most companies are pri - Putian got its start in hospitals Even as late as the 1990s, many vately-held so exact ownership de - thanks to Chen Deliang. In the early public hospitals refused to treat tails are sketchy. 1980s Chen came up with a remedy such diseases. But even if they did, Zhan, for instance, is widely be - for treating scabies – a painful and many patients were too embar - lieved to have invested in over 30 infectious condition caused by rassed to seek assistance. This cre - hospitals, although his exact hold - mites that was widespread at the ated a lucrative niche for Putian’s ings aren’t clear. time. To make his living, he travelled medical practitioners, says South - Even within the same business around town selling his homemade ern Weekend. Soon physicians were empires, it can be difficult to trace cure for as little as Rmb1 per bottle. opening clinics across the country, ownership of individual hospitals. “It was after the Cultural Revolu - boosted by their promises of confi - One reason is that if one hospital tion and the country was just open - dentiality and discretion. was exposed for medical malprac - ing up. The hygiene situation was They were also one of the first tice, it would not hurt the reputa - P h o t o terrible and people’s knowledge groups to advertise medical treat - tion of other medical institutions in

S o u r c about healthcare was also very lim - ments on TV and radio broadcasts. the same company, reckons South - e :

I m

a ited so skin infection was very com - “We were treating less than a hand - ern Weekend. g i n e

C mon. Many patients went to the ful of patients every day but after But Zhuo Chaoyang, another Put - h i n a hospital but the infection would we started advertising during ian businessman, has built the An - 11 Week in China Healthcare 20 June 2014

gel Hospital in Chengdu into a high- gins and that can be performed at for treatments that had previously profile hospital for obstetrics and relatively lower risk. Fertility treat - been government-controlled. gynecology, says the China Daily. ment, plastic surgery and dental But Putian’s businessmen could Chen Xinxian, another Putian-based care are popular. More importantly, face some serious competition tycoon, has established the Sacred these sectors aren’t normally in - themselves from the country’s prop - Pearl Dental chain of clinics. In No - cluded under the national medical erty developers. Earlier this year, real vember last year, Putian’s Weng insurance system, so patients tend estate giant Vanke announced that it Guoliang combined with Liu Yong - to choose private hospitals that spe - is opening three children’s hospitals hao, chairman of New Hope Group, cialise in these categories. in Guangzhou, Shanghai and Shen - a leading agribusiness company, According to Bain, the consul - zhen. It says it plans to include hos - and Feng Lun, chairman of the real tancy, China’s healthcare industry pital facilities in some of its residen - estate company Vantone, to form will more than triple to $900 billion tial developments in the near future The Strategic Alliance for the Med - by 2020 from $275 billion four years too. Another developer, Evergrande ical and Healthcare Industry of ago. The central government also Group, will soon be building private China, aiming to become the lead - wants more private capital in the hospitals as well, under a coopera - ing hospital and healthcare man - sector to increase the supply of med - tion agreement with Brigham and agement corporation. ical services. Private hospitals could Women’s (BWH), a major teaching The private hospitals founded by also help with the reform of public hospital at Harvard Medical School. Putian residents do share some hospitals by increasing competition. BWH will provide management and characteristics. They tend to target In April, the State Council gave pri - medical personnel for facilities to treatments that have higher mar - vate hospitals the right to set prices be built by Evergrande. n

Who’s Hu: Zheng Yaonan Profiles of China’s business leaders

Zheng Yaonan has a job that some might franchising the Cosmo Lady brand. By envy. He spends more than half of his the end of 2013 the company had built working day watching women shop for a nationwide network of around 5,000 lingerie. Dubbed “the man who understands franchise outlets, as well as women most”, the 39 year-old is set to 721 self-managed stores. become a billionaire for getting to know what Zheng’s goal: to make Cosmo Lady women want. the first local bra brand with 10,000 retail outlets. The marketing effort has Getting started been huge. In 2012 Cosmo Lady made Born in 1975 in Fujian, Zheng failed to get Taiwan model and actress Lin Chi-ling into university after leaving high school. its image ambassador (pictured next to Instead he went to Shenzhen with just the entrepreneur in the photo) and Rmb500 ($80) to his name. He started out as Zheng made good use of Lin in recent a security guard at a Walmart store, where weeks as he embarked on taking his he watched how the retailer managed its company public, bringing her to stocks and served its customers. After saving roadshows to meet investors. enough money to open a small shop selling cosmetics, he Cosmo Lady will list in Hong Kong next week in an offering switched to socks, only to realise that a neighbouring store had a that could raise as much as HK$1.8 billion ($230 million). If much higher turnover selling lingerie. In 1998, he founded Cosmo successful, Zheng’s 65% stake will be worth about HK$5 billion. Lady and began distributing female underwear. Zheng expanded even in dire times. For example, Cosmo Lady Need to know added nearly 50 shops in 2003, somewhat counter-intuitively at a Zheng may not have gone to university but he knows the value of time when the Chinese economy was savaged by the SARS a good education. He has attended the Cheung Kong Graduate outbreak. In 2009 he invested in production facilities just as many School of Business, an institution founded by Hong Kong billionaire other factories were being hit by the global credit crisis. But in Li Ka-shing that’s an increasingly popular place for local business P h o

t doing so Cosmo Lady was transformed from a distributor into a executives to learn and network. o

S o more integrated lingerie maker. One lesson he didn’t need to learn at business school: Zheng u r c e :

likes to take his female staff to stores and have them pose as I m a g Big break customers so that they can check whether service is up to scratch i n e

C Zheng then unleashed another aggressive expansion by as well as watch the buying behaviour of other shoppers. h i n a

12 Week in China China Consumer 20 June 2014

Spring time Local brands want to lure richer consumers away from drinking Evian

vian’s “Roller Babies” campaign flagship airline (5100 gets its name ter facility in Mohe, Heilongjiang, E– which featured roller-skating from the altitude of its source, a Ti - much to the dismay of environ - infants – holds the Guinness World betan glacier – see WiC97). mentalists. They are objecting to the Record as the most-viewed online Another high-end water brand is plant’s location in an idyllic spot advertisement. In case you’re won - Kunlun Mountains. It is owned near the border with Russia, dring, it has more than 65 million by beverage giant JDB, and says one of the increasingly rare views to date. But it was just the lat - it collects its water from even places where the sky is still est in a long line of Evian ads fea - higher up (6,000 metres) in clear enough for a decent turing babies, says Michael Aidan, mountains in Qinghai view of the Northern head of marketing at Danone Wa - province. Lights. ters, Evian’s owner (the first was ran Over the last seven Currently, most of in 1935). Why the linkage? The mes - years, China’s share of China’s spring water is sage is that drinking Evian makes the global bottled wa - drawn from Tibet and “you feel young”, Aidan replies. ter market has dou - Qinghai. But glaciers Whether Evian really helps you bled. But in per capita in Changbai Mountain feel more youthful is hard to prove, terms it is still some (in Jilin province) and but the brand is much admired by way below the interna - Tian Shan (in Xin - Chinese shoppers, that’s for sure. It tional average. Con - jiang) are also being costs about Rmb6.5 ($1.04) a bottle sumption per head of tapped as more com - in most supermarkets, while many the population is about panies look for new more generic water brands sell for a fifth of that in the US supplies. Time Weekly no more than Rmb1 each. But the so there’s still plenty of says that other prop - price hasn’t deterred better-off con - room for growth, pre - erty developers are sumers: Evian controls over 25% of dicts Forbes China. scrambling for exclu - China’s premium bottled water That explains why sive rights to other gla - market. Demand for premium wa - even property develop - ciers. Local govern - ter is growing 40% a year too, or ers are getting into the ments are keen on the three times the rate of the mass water business. As WiC revenues too, includ - market, says Time Weekly. reported in issue 233, ing the Jilin govern - One reason for the rise is public Evergrande began bot - ment, which has even concern about water pollution. “You tling its own spring wa - stated in its provincial don’t dare drink the tap water in ter last November. Dalian work report that promot - China,” says Hope Lee, a Euromoni - Wanda, too, has teamed up with Leg - ing local spring water will be one of tor analyst. end Holdings (the parent company its biggest initiatives this year. Moreover, brands have become of Lenovo), China Oceanwide and One upshot: the interest from de - savvier at courting consumers. One Dalian Yifang to invest Rmb11 billion velopers is driving up prices for land of the best examples is 5100 Tibet in a premium water label. with access to springs. Glacier Spring Water, the domestic Other developers have taken “Natural spring water is on the bestseller among premium waters, heed, including Beijing Baihuan, a verge of extinction, so of course we which grew its sales 15% in 2013 by mid-sized property firm, which has have to rush to hoard as much land signing major deals with China Rail - also diversified into the water busi - as possible,” says Liu Wei, the sales ways, the operator of high-speed ness. Since 2009, it has invested manager of Arctic Spring,which is trains, and Air China, the country’s more than Rmb200 million in a wa - owned by Beijing Baihuan. n 13 Week in China China and the World 20 June 2014

Hillary’s China syndrome What does Clinton have to say about Beijing in her new memoir?

f the 2016 US presidential elec - Ition were to be decided on the preferences of book reviewers, Hillary Rodham Clinton would probably lose. Reaction to Hard Choices has been tepid, to say the least. UK newspaper the Guardian notes “the critical consensus is that it’s a snore”, while CNN’s Ana Navarro describes it as “50 shades of boring”. Edward Luce of the Fi - nancial Times calls it a “dull affair” and advises readers to steer clear of its 600 pages. As he puts it: “Re - viewers read Hard Choices so that you don’t have to.” Clinton’s latest book was released last week WiC too leafed through the mem - oir, though we stuck to reading the tered the Oval Office (on a par per - made an excellent impression”. parts of the book that relate to haps with President George HW A more interesting encounter is China. Clinton’s views on the Chi - Bush who spent 14 months in the “heated discussion” that Clinton nese are clearly important, as there China as the US envoy in the Gerald reports with Jiang Zemin at a White is a strong possibility she will be Ford administration). House dinner in 1997. As First Lady, America’s next commander-in- Since much political calculation she learns how prickly Chinese lead - chief. In the book she discusses Sino- has gone into this book, that’s prob - ers can get when Americans veer US relations and hints at how her ably the conclusion she is steering onto topics deemed to be China’s own China policy might be a bit her readers (and potential voters) to internal affairs. more aggressive. The former Secre - arrive at. Two years earlier Clinton had tary of State also shares a few anec - Thus the memoir traces Clinton’s made her first trip to China to speak dotes about China’s leaders. interest in the country back to 1972, at the Fourth World Conference on Indeed, WiC was struck by the fact when she and Bill rented a TV so Women. It was a “profound experi - that she has met all four of the ma - they could watch coverage of ence”. Her speech dealt with free - jor figures who have ruled China Richard Nixon’s trip to China. dom and human rights and was since the death of Mao Zedong. “We tuned in every night to watch blocked from broadcast. As she de - There cannot be many people who scenes of a country that had been clares, “I felt the heavy hand of Chi - can make this claim. blocked from view our entire lives. I nese censorship” although she may Which is not to say that Clinton was riveted,” she recalls. not have been that surprised given ever declares herself a China ex - Her next mention of China is at she also admits to deploying “more pert. However, after reading the the governor’s mansion in Georgia pointed words than American diplo - chapters about China it is hard not in 1979. She and Bill are guests at a mats usually used, especially on Chi - P h o t

o to conclude that should she be dinner to honour Deng Xiaoping, nese soil”.

S o u r elected in 2016, she is likely to be who was undertaking a diplomatic Clinton made her second trip to c e :

R e better-informed on Chinese affairs tour of the US. China’s paramount China – alongside Bill and daughter u t e r s

than most of those who have en - leader she says “was engaging and Chelsea – in 1998. She would not 14 Week in China China and the World 20 June 2014

visit again for a decade. Her China frequent-flyer points were mostly racked up during her time as Secretary of State, when she was suddenly in charge of managing America’s most important bilateral relationship. In her four-year term Clinton says she made a dozen or so trips to China, as well as meeting the Bei - jing leadership at various summits elsewhere. She knew she had to get to grips with a country that had leapfrogged in importance since her Having met Deng, Jiang and Hu, Clinton adds Xi to her list husband’s presidency. Indeed, the Obama administration was now we both shared a strong interest in Another source of tension is dealing with Washington’s largest maintaining stability in Asia and democracy. As she observes: “It’s not creditor and an economy that would around the world and in ensuring a secret that the epicentre of the an - become the world’s second biggest the steady flow of energy and trade. tidemocratic movement in Asia is soon after her appointment. Yet beyond these shared interests, China.” In a speech delivered in Mon - Early in the book she shares some our values and worldviews often di - golia she took a line that seems al - of her thoughts on the complexity verged… All this made for a difficult most tailored to irk Beijing, by argu - of the Sino-US relationship. balancing act,” she admits. ing that the one-party model is “The rise of China is one of the Among these divergences: hu - ultimately flawed. As she told the au - most consequential strategic devel - man rights, as well as disputes in dience in China’s northern neigh - opments of our time,” she writes. “It the South and East China Seas and bour: “You cannot over the long run is a country full of contradictions: over how best to handle North Ko - have economic liberalisation with - an increasingly rich and influential rea. In fact, the North Koreans were out political liberalisation.” nation that has moved hundreds of a particular source of frustration in In fact, Clinton seems at pains to millions of people out of poverty, Clinton’s dealings with Beijing. portray the toughness in her ap - and an authoritarian regime trying When the Cheonan was sunk in proach to the Chinese government. to paper over its serious domestic 2010, international experts con - For example, after accepting the challenges, with around 100 million cluded that the South Korean vessel State Department job she says she people still living on a dollar or less had been hit by a North Korean tor - made an immediate policy decision: a day. It’s the world’s largest pro - pedo. Although the UN Security “We would not sacrifice our values ducer of solar panels and also the Council condemned the attack, she or our traditional allies in order to largest emitter of greenhouse gases, points out, “China blocked the nam - win better terms with China.” with some of the world’s worst ur - ing of North Korea directly or a There are revealing anecdotes ban air pollution. Eager to play a ma - more robust response. Here was one pointing to her her more combative jor role on the global stage but de - of China’s contradictions in full diplomatic style too. One occurs termined to act unilaterally in view. Beijing claimed to prize stabil - during the drama over Washing - dealing with its neighbours, China ity above all else, yet it was tacitly ton’s nightmarish lurch towards a remains reluctant to question other condoning naked aggression that default on its federal debt last Octo - nations’ internal affairs, even in ex - was profoundly destablising.” ber. In Shenzhen, she meets her treme circumstances.” She is also scathing about Bei - main counterpart in the Chinese Economic ties had let to a mutual jing’s approach to territorial dis - system, Dai Bingguo, a State Coun - dependency, but during her time in putes in places like the South China cillor. By now they have met many office it also became increasingly Sea: “China was becoming what I times before, and Clinton is coming clear to Clinton that there were a called a ‘selective stakeholder’, pick - to the end of her tenure. She writes P h o t

o growing number of areas where the ing and choosing when to act like a of the encounter: “The Chinese were

S o u r two powers disagreed. responsible great power and when following our political dysfunction c e :

R e “We were deeply invested in each to assert the right to impose its will with a mix of bewilderment, con - u t e r s

other’s success. As a consequence, on its smaller neighbours.” cern and anticipation… Dai seemed 15 Week in China China and the World 20 June 2014

to enjoy dwelling on America’s fiscal embassy staff in Beijing and told woes, adopting a somewhat sar - them to fetch Chen. “In the end it donic tone about our political grid - wasn’t a close call. I have always be - lock. I wasn’t having any of it. ‘We lieved that, even more than our mil - could spend the next six hours talk - itary and economic power, Amer - ing about China’s domestic chal - ica’s values are the greatest source of lenges,’ I countered.” our strength and security… The (The experience did leave her United States had talked about hu - more embarrassed than she let on: man rights in China for decades, “I left my meeting with Dai even across Democratic and Republican more convinced that America had administrations alike. Now our cred - to avoid these self-inflicted wounds ibility was on the line, with the Chi - and get our own house in order.”) nese and also with other countries Another ‘tough call’ gets a whole in the region and around the world. chapter of the book, and must rank The Clintons in Xi’an in 1998 If we didn’t help Chen, it would un - as one of the hard choices con - dermine our position everywhere.” tributing to the book’s title. In this living in the diplomatic compound But she also admits she was tak - case, it involved Clinton’s decision to for an extended period? There was a ing a calculated gamble that the Chi - help Chen Guangcheng, a blind precedent. During the Cold War, Car - nese wouldn’t want the Strategic lawyer who had escaped house ar - dinal Jozsef Mindszenty had stayed and Economic Dialogue to fail and rest in Shandong in 2012. Somehow at the US embassy in Hungary for that, with the Bo scandal fresh in he made his way to Beijing, contact - 15 years. A similar outcome could their minds, Beijing “wouldn’t have ing the US embassy and requesting mar Sino-US relations. much appetite for a new crisis”. protection. But Clinton says the tim - Clinton was also mindful of an - In a section of the book that reads ing of the request couldn’t have other Chinese national who had more like Le Carre than Clinton, she been worse as she was jetting to Bei - turned up at a US consulate – for - describes how Chen is picked up and jing for the Strategic and Economic mer Bo Xilai fixer Wang Lijun. He’d makes it into the American em - Dialogue, a key diplomatic pow- arrived at American offices in bassy. The next step was to contact wow. She learned of this “unex - Chengdu and told consular officials the Chinese authorities. Clinton sent pected crisis” late in the evening about some of the scandals sur - Kurt Campbell, her department’s when her encrypted phone rang at rounding his former boss – albeit it head of East Asian and Pacific Af - home. The embassy in Beijing told was soon apparent he was impli - fairs, to lead the negotiations. His her that Chen was circling the city in cated in much of the wrongdoing opposite number was Cui Tiankai a car, but they figured that his himself (for more background on (who subsequently became China’s chances of walking into the US com - these events, see issues 148 and 204). US ambassador). Predictably Cui de - pound unmolested were virtually A bizarre situation turned threaten - manded that Chen be handed over, nil. However, if an American team ing when Bo’s henchmen from his but Campbell refused. Clinton heard picked him up, there was a 90% Chongqing powerbase surrounded back that this had prompted a 30- chance of getting Chen into the em - the consulate. minute diatribe about Chinese sov - bassy. Clinton was told they had “We couldn’t just hand him over ereignty and dignity, “growing about an hour to make the decision. to the men outside,” writes Clinton. louder and more impassioned” the The narrative makes plain that “That would effectively have been a longer Cui spoke. The Chinese strat - White House aides weren’t enthusi - death sentence, and the cover-up egy at this point was to wear Camp - astic about the situation, but that would have continued.” bell down. “Our team endured five Clinton was allowed to make the fi - Her solution: “We reached out to more negotiating sessions, all along nal call. “It appeared I had to decide the central authorities in Beijing the same lines,” she writes. between protecting one man, albeit and suggested that he would volun - But the Americans came up with a highly sympathetic and symbolic tarily surrender into their custody if a face-saving alternative. What if figure, and protecting our relation - they would listen to his testimony. Chen were permitted to study law P h o t

o ship with China,” she remembers. The Chinese were grateful for our in a university outside Beijing, be -

S o u r Over the next hour Clinton discretion.” fore coming to the US for further c e :

R e weighed up the different scenarios. Having pondered this earlier ex - studies? This proved a break - u t e r s

For example, what if Chen ended up perience, Clinton called back the through. Cui’s superiors grasped it 16 Week in China China and the World 20 June 2014

two had met frequently, and talked But as this episode also illus - not only of politics but also their trates, clashes over different in - family lives (Clinton says she was tepretations of core ‘values’ could touched on an occasion when Dai be a source of friction with Beijing pulled out a photo of his baby should Clinton reach the White granddaughter and said “This is House. And for an idea of a future what we’re in it for”). Clinton administration’s China Now she wondered: “Would our policy, a couple of paragraphs are years of relationship-building pay revealing. off?” “The US-China relationship is still Having told Dai about the “polit - full of challenges. We are two large, ical firestorm” going on back in complex nations with profoundly Washington, Clinton suggested that different histories, political systems Chen be allowed to leave immedi - and outlooks, whose economies and Joking with Wang Qishan ately for an American university. She futures have become deeply en - admitted that this was “moving up twined. This isn’t a relationship that was the best way to defuse the issue the timetable” but argued that it fits neatly into categories like friend and prevent its disrupting the high- “wouldn’t mean a whole new deal; it or rival, and it may never. We are level Strategic and Economic Dia - would simply be a refinement of the sailing in uncharted waters.” logue, which was about to begin. existing agreement.” She continues: “The jury’s still (Cui could still lose his temper, In ordinary circumstances these out. China has some hard choices to mind you. When Campbell gave him linguistic gymnastics might not make, and so do we. We should fol - a shortlist of the universities that have worked, but both knew that Dai low a time-tested strategy: work for Chen might attend in China, the was keen to avoid a potentially em - the best outcome, but plan for diplomat roared: “There’s no way barrassing situation too: that Clin - something less. And stick to our val - he’s going to East China Normal. I ton might raise Chen’s case directly ues… Our defence of universal hu - will not share an alma mater with during her upcoming meetings with man rights is one of America’s great - that man!”) President Hu Jintao and Premier est sources of strength.” But that wasn’t the end of the Wen Jiabao. Clinton’s view of China, mind saga. After being taken to a Beijing “Dai stared at me quietly for a you, is probably a lot more nuanced hospital, Chen changed his mind long while, and I wondered what after four years on the job. She ac - about staying in the country and be - thoughts were racing behind his knowledges that the Chinese get gan telling American journalists he stoic demeanour. Slowly he turned riled by American talk of human feared for his security. to Cui, who was visibly agitated and rights. “They claim the Chinese peo - Back in Washington this caused directed him to try to work out the ple are more free than they have a stir and the White House was details with Kurt,” she recalls. ever been, free to work, to move, to thrown onto the defensive by Re - “I headed off to the Great Hall of the save and accumulate wealth,” she publican attacks that Chen was People for my meetings with the writes, adding, “The Chinese believe “pressured to leave the US embassy senior leaders. True to my word, I did we don’t appreciate how far they’ve against his will amid flimsy prom - not raise Chen with Hu or later Wen.” come and how much they’ve ises”. Clinton says this put her in a A deal was now done for Chen to changed, or how deep and constant tough spot as she tried to come up get a US visa and attend NYU. As they is their fear of internal conflicts and with a new solution. “The Chinese readied to return to the US, Campbell disintegration.” were absolutely incredulous that we asked Clinton: “Do you feel like we’ve But while Clinton’s understand - would seek to reopen a deal they done the right thing?” Her answer ing of the Chinese point of view hadn’t wanted to do in the first was unequivocal: “There are a lot of emerges in the book, it’s her tough - place,” she notes, adding that Cui decisions I make in this job that give ness that gets more emphasis. This simply refused to renegotiate. She me a pit in my stomach. I don’t have is made plain by the uncompromis - decided her only option was to raise any of that here. This is a small price ing formula she concludes with: “We P h o t

o the issue directly with Dai Bingguo to pay to be the United States of have no interest in containing

S o u r whose status as State Councillor America.” China. But we do insist that China c e :

R e ranked him just below the country’s Sound presidential enough for play by the rules that bind all na - u t e r s

vice-premiers. Over the years the you? tions.” n 17 Week in China Society and Culture 20 June 2014

Developing rage Edgy film about illegal land seizures proves hit with China audiences

llegal land grabs are nothing new Iin China. Just last week a group of villagers from Jingbian in Shaanxi protested against a local tycoon, who controls land from a deal struck more than three decades ago between his father and the local government. The original lease was for 15 years, and gave the tycoon the right to use a 10-hectare plot for Rmb1,000 ($160.51) a month, says Hong Kong’s Apple Daily. But 35 years later the billionaire still hasn’t returned the land to the govern - ment, villagers thundered. They have been forced to sit on the side - lines while much of it is sold to property developers for expensive apartments. A film inspired by similar land grabs is doing well at the Chinese box office. Crime thriller Overheard 3 is about the activities of un - scrupulous real estate developers in Hong Kong, battling with villagers in the city’s rural New Territories. But Felix Chong, one of the two di - rectors of Overheard 3 , says the story is not necessarily about Hong Kong. Zhou Xun: stars in Hong Kong thriller Overheard 3 “Be it in Taiwan, mainland China, Australia, Thailand, Malaysia: the The producers of Overheard 3 , the The bet paid off. The film sur - cab driver’s grouse in every place last installment of a trilogy that vived untouched, so much so that was the same – that property prices started in 2009, said that they were some critics have claimed it’s a fur - are too high,” he told the media. “I aware that the mainland’s film cen - ther sign that more artistic freedom always thought it was a problem sors might look dimly on the movie. is being permitted on China’s big specific to Hong Kong, where we “Even though illegal land grabbing screens. It has also struck a chord have this saying cun tu cun jin (an is a very sensitive issue, we were with the mainland audience. Daily inch of land equals an inch of gold).” willing to take the risk because we takings since the end of last month The film, which stars Hong Kong want to do something thought-pro - have been neck-and-neck with the P h o t o actors Louis Koo, Daniel Wu and voking. We want to ask the audience, Hollywood blockbuster X-Men: Days

S o u r c Sean Lau, also features leading Chi - what’s the true meaning of land? of Future Past , reaching Rmb225 mil - e :

I m

a nese star Zhou Xun, who plays a vil - Does it give you a sense of security lion in total. g i n e

C lager leading the fight against the or emotional distress?” Chong told “In the film the scenes of villagers h i n a developers. Beijing Evening News. protesting against the developers are 18 Week in China Society and Culture 20 June 2014

opment of a huge cultural hub in West Kowloon and another major residential project on Ma Wan Is - Group violence land. The prosecution – represent - Is China’s north more prone to ing the Hong Kong government – cults than its south? alleges that Hui was the “eyes and ears” for the developer inside the ate last month Wu Shaoyan government. In exchange for in - Lwent into a McDonald’s restau - sider information, Hui received rant in the northern city of bribes in the form of payments and Zhaoyuan and sat down at a table. loans totaling more than $4.5 mil - As she waited for her husband lion, prosecutors have alleged. and seven year-old son, six people Hui and the Kwok brothers have belonging to an illegal sect known as pleaded not guilty to the charges. the Church of Almighty God ap - During the prosecution, Hui was proached her and asked for her tele - also revealed to have splurged $4,200 phone number. on a dinner at an Italian restaurant When she declined, one of the On trial: Rafael Hui and $5,400 on a Bulgari watch. He group called her a ‘devil’ and or - also had 14 bank accounts and 25 dered his companions to beat her all too familiar to me. Such protests credit cards when he started his term with a steel bar. Minutes later Wu are either taking place or have al - as chief secretary in June 2005. In the lay unconscious on the restaurant ready taken place in virtually every year ended June 2007, his cash with - floor. She was pronounced dead rural village in the country,” one fan drawals and credit card spending ex - later that night. wrote. “And we are just like the vil - ceeded his official income, says the In the days that followed many lagers depicted in the film: helpless prosecutor David Perry. people took to social media to ex - and easily succumbing to the empty “Because of his extravagance, Hui press their shock. How could such a promises of the developers.” was willing to give in to his vulner - violent attack happen in such a pub - “Overheard 3 markets itself as a ability. He was willing to trade what lic place, they asked, and why did no crime thriller but it is ultimately a he had to sell – the fact that he was one step in to help? film about the struggles between vil - the representative of the govern - In footage of the attack, several lagers and developers. In reality, con - ment with power and influence,” people can be seen standing and flict over land ownership has become Perry alleges. watching. “I think the thing that is increasingly common. I particularly The high-profile case has caught most frightening about the like the last scene in the film in the attention of China’s netizens Zhaoyuan case is not that someone which Zhou’s character says: ‘Land is too. Many have expressed surprise died,” writes Cairang Duoji in a com - used for growing things, it’s not for that such a senior former govern - mentary in Beijing News. More, it’s you to sell’,” another netizen wrote. ment official would be put on trial. the indifference of those looking on, The timing of the film is inter - Others are shocked by the case, as - he suggests. esting for another reason. Currently suming that this kind of thing, while In the Global Times, a professor Hong Kong is embroiled in what prevalent on the mainland did not called Zhu Lijia warned that China’s could turn out to be one of the happen across the border. Many rapidly changing society means that biggest corruption cases in the share the view that Hong Kong has people are looking for the kind of city’s history. The trial, which is on - hardly any corruption at all, largely spiritual meaning that the sects going, relates to Rafael Hui Si-yan, thanks to its investigative body, the claim to provide. the former chief secretary in the Independent Commission Against But one thing that no one felt the Hong Kong government, who is al - Corruption, or ICAC. need to question was why the attack leged to have failed to disclose his “Hui is undoubtedly a very capa - had happened in Shandong links to Thomas and Raymond ble government officer… Whether or province. Kwok, the billionaire co-chairmen not he gets found guilty, it exposes For most people the answer is P h o t

o of Sun Hung Kai Properties (SHKP). the dirty dealings between govern - clear enough – that cults are a par -

S o u r While chief secretary Hui was in - ment officials and the property de - ticular problem for northerly c e :

R e volved in two projects in which velopers. This is so disheartening,” provinces. u t e r s SHKP had an interest – the devel - one netizen lamented. “The south has gangsters, the 19 Week in China Society and Culture 20 June 2014

north has cults,” was the way that one weibo user summed it up, and not many people – not even north - erners – seemed to disagree with him. So does this stereotype hold true? Well, to a certain extent, yes. Since the Cultural Revolution most of the cults and heterodox sects in China have emerged in provinces above the Yangtze River (which tradition - ally serves as the dividing line be - tween north and south). The Church of Almighty God, which is also known as Eastern Lightning, was founded in Henan in The attack occurred at McDonald’s the early 1990s by a man named Zhao Weishan, who claimed Jesus The article also said that religious they might be asked for their cash. had come back to earth in the form sects often target ballroom dance “We have pyramid schemes not of a woman named Deng. groups frequented by middle-aged cults in the south. We are only in - Another group known as the Dis - or older women for new recruits. terested if there is the opportunity ciples Association was started in A third and possibly related the - to make money,” wrote one south - Shaanxi in the late 1980s by a ory is that social structures are erner. farmer named Ji Sanbao, who also stronger in the south. This chimes If China’s official version of his - claimed to be Jesus. with a recent study in the journal tory allowed for closer study, a Both groups are banned by the Science that renews the claim that stronger argument might be made Chinese government, along with 12 the south of China is more collec - that cultish behaviour fuelled one other so-called “evil cults”. tive in outlook because rice has been of the world’s most violent upris - So why do cults seem to pick up grown traditionally, while the north ings, the Taiping Rebellion, which more followers in the north? is more individualistic, because started in Guangxi (a region in One theory is poverty and lower wheat is the staple crop. China’s south). levels of education. Although the The thinking is that the coopera - The rebellion – said to have been north as whole does not suffer from tion of the whole village is required responsible for the deaths of as those problems, the provinces in to grow rice because it requires many as 20 million people – has which some of these organisations labour-intensive planting, as well as been portrayed by early Maoist his - have flourished do tend to be worse- relatively complex irrigation sys - torians as a proto-communist up - off. Henan and Anhui in particular tems. Wheat can be grown with the rising against a corrupt feudal class. are signficantly underdeveloped involvement of fewer people, the But what the history books gener - compared to their neighbours. study claims. ally don’t mention is that the rebel - Another theory is that people in “I’m not surprised to see that lion’s leader claimed to be the areas that were more deeply af - most of the cults exist in the north. younger brother of Jesus. His Taip - fected by the Cultural Revolution are People in the villages are bored, ing Heavenly Kingdom went on to more prone to indoctrination. there are no systems in the villages control large parts of southern Again anecdotal evidence ap - that can organise these farmer to China, ruling about 30 million peo - pears to back this up, with elderly get together to do something use - ple at its peak and seeking to replace people often the first members of ful,” an armchair sociologist wrote Confucianism and Buddhism with families to join some of the banned on Sina Weibo, China’s Twitter- its own form of Christianity. organisations. equivalent. Meanwhile the People’s Daily In another Global Times article – Lastly, people from both the weighed into the debtate this week, P h o t

o about families who were worried south and the north have suggested warning its readers against stereo -

S o u r about their relatives – the intervie - that it is the southerners love of typing “People should not be dis - c e :

R e wees were all adult children trying money that stops them from join - criminated on the basis of where u t e r s to extract their parents. ing religious organisations in fear they come from.” n 20 Week in China And Finally 20 June 2014

Wax still works Madame Tussauds opens in Beijing

arie Tussaud created her first convenient for local residents.” Mwax figure – a scuplture of The long wait means that the Bei - the French writer Voltaire – in 1777. jing museum is not the first Tus - Her talents brought her to England sauds in China – others have in 1802, although her first waxwork opened in Shanghai and Wuhan museum wouldn’t open in London (there is also one in Hong Kong). The until 30 years later. Similar patience timing was governed by Tussaud’s have been required in Beijing, partner, the real estate giant SOHO where the latest Madame Tussauds China. It has been involved in the Posing with Brad and Angelina opened last month. “We planned to transformation of Qianmen Street come to Beijing a few years ago,” since 2007, but it lacked overall con - tell the story of China, Williamson Scott Williamson of Tussaud’s par - trol of who tenanted it. That says. Don’t just expect likenesses of ent Merlin Entertainment told Eco - changed last year when SOHO got emperors and generals. Contempo - nomic Weekly. “But the problem planning permission to redesignate raries make the grade too, including was one of timing; i.e when our the site as an ‘international tourism gold medallists from the 2008 Bei - local partner could provide us with and cultural experience centre’ and jing Olympics and internet tycoons the ideal location.” eliminated the shops and busi - like Baidu’s Robin Li. SOHO’s Pan The site selected is Qianmen nesses not in keeping with this new features too (he donated clothes and Street, a popular tourist destination. positioning. Finally, SOHO’s boss spectacles to make his re-creation Unlike much of the Chinese capital, Pan Shiyi was able to offer Tussauds as realistic as possible). it is pedestrianised and features re - its desired site. Although Barack Obama is on dis - stored buildings that give a flavour The new museum has four floors play, as well as a stern-looking of a bygone era. The thoroughfare and features the usual collection of Vladimir Putin and Britain's Queen averages 150,000 visitors a day, al - movie stars and singers. Williamson Elizabeth II, there is no sign of Mao though that figure can surge above says David Beckham is the most Zedong, Deng Xiaoping or the cur - 300,000 on public holidays. popular wax figure at all 16 of its rent president Xi Jinping. “Qianmen Street is an ideal loca - museums across the world, includ - Karl Marx does make the cut, al - tion,” says Williamson, the director ing those in China. But the Beijing though Tussauds told AFP that it is responsible for new markets at Mer - site will add a bit more local flavour “still in discussion” with authorities lin. “There are not only many with a section called the ‘Chinese over including Chinese political fig - tourists, but the location is also very Spirit Pavilion’, which is designed to ures. n

More mills for Mittal?

“It’s good news the government is moving forward with reforms and liberalisation on foreign investment” P h o t o * Lakshmi Mittal commenting to Bloomberg on the possibility that a ban on foreign takeovers of Chi -

S o u

r nese steelmakers may be repealed, as reformers look to restructure the industry. Separately, his Arcelor - c e :

S Mittal has just opened a new plant – a joint venture in Loudi producing higher-end steel for cars, one of h u t t e the more profitable segments of China’s beleaguered steel sector. r Lakshmi Mittal s t o c k

21 Week in China The Back Page 20 June 2014

Photo of the Week In Numbers 12.5% Growth in Chinese retail sales in May, up from 11.9% in April. Separately Premier Li Keqiang has said (again) that Chinese GDP will grow at its targeted 7.5% rate this year.

$467 million The amount that Hong Kong-based investment firm Kai Yuan Holdings will pay

P for the Marriott Hotel Champs-Elysees in h o t o

Paris. The company, which is mainly S o u r

c involved in manufacturing, steel and energy e :

R

e supply, believes it can bring in more u t e r s Chinese customers to improve occupancy

rates at the hotel. How nice of you to come: Queen Elizabeth greets Premier Li Keqiang $20 billion Value of BP’s deal to supply CNOOC with 1.5 million tonnes of liquefied natural gas every year from 2019. The contract with Where is it? the UK’s second-largest energy producer Some of the places referred to in this issue shows that China’s appetite for gas extends beyond the $400 billion pipeline deal signed with Russia last month. Beijing

Shandong 1 in 5 Qinghai The ratio of homes sold but vacant in urban Jiangsu China Xi’an areas, according to a survey by researchers Shanghai Sichuan from Southwestern University of Finance Hangzhou Chengdu Zhejiang and Economics. Market weakness is

Hunan Putian putting pressure on owners of empty Fujian properties as home prices continued to fall

Shantou in May, dropping slightly year-on-year. Zhuhai Hong Kong

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