1 Talking Point 7 Week in 60 Seconds 8 Consumer Week in China 9 Economy 10 Cross Strait 11 Banking and Finance 13 Environment 15 Society and Culture 11 December 2015 20 And Finally Issue 307 21 The Back Page www.weekinchina.com

Who will bite the bullet? m o c . n i e t s p e a t i n e b . w w w

Hong Kong’s high-speed train to Guangzhou has become a political time bomb

after cost overruns and delays Brought to you by Week in China Talking Point 11 December 2015

Train of events railway row points to changing times in the Pearl River Delta

The through train: China’s high-speed rail network will reach Kowloon by late 2018, after a three-year delay

“ t was not a question of whether 1908, two years before the railway Hong Kong’s status as the premier Ithe undertaking would be an im - between the colony’s Kowloon dis - port in the region. Today Hong mediately remunerative concern: it trict and Canton (now Guangzhou) Kong is feeling the heat again, al - was not a question of whether the first opened. though this time more from rival railway would pay interest on the The trip took four and a half Chinese cities nearby. A century capital expended, or even if it would hours, or five times the journey time ago, the railway construction teams at once pay working expenses. It of the high-speed link now being ran into a series of engineering was a question of preserving the constructed between Hong Kong problems (ditto this time). And in predominance of Hong Kong. It was and ’s provincial capital. another similarity to today, there a question of seeing that the final But what is striking are some of was controversy about the termi - outlet of the main trunk railway of the similarities between a century nus in Kowloon (local officials back P h o t o China should be at Kowloon, and at ago and the high-speed venture then had bought land for the sta -

S o u r c no other place.” today. Back then the railway was tion only to be wrong-footed when e :

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a That was Sir Frederick Lugard, prompted by concerns that foreign the site was changed). g i n e

C Hong Kong’s then governor, speak - powers were increasing their influ - History really does repeat itself, h i n a ing to his legislative council in ence in southern China, threatening it seems. But what does today’s 1

Week in China Talking Point 11 December 2015

high-speed track tell us about where Hong Kong is heading to?

Fury over funding The first phase of the Express Rail Link – carrying passengers between the Chinese mega-cities of Shen - zhen and Guangzhou – opened four years ago. But on the other side of the border, Hong Kong’s contribu - tion to the project is mired in polit - ical wrangling over who should shoulder the bill for delays in build - ing its own section of the line. The railway was supposed to be operational this year but it now looks likely to open in the third quarter of 2018 at the earliest. MTR Corporation – Hong Kong’s railway operator – blames difficulties in bor - ing the tunnels that carry the rail - way underneath the city, as well as cost overruns for the ambitious ter - minus in West Kowloon, a popular A century apart: Hong Kong’s two cross-border railway links residential area for mainland Chi - nese investors and just across the will go back to the government, now faces two crucial sets of ap - water from Hong Kong Island. which owns a 75% stake in the rail - provals: members of the Legisla - The expense has been huge, with way firm. That means taxpayers tive Council – the territory’s the track costing about 16 times as won’t need to foot the bill for addi - quasi-parliament – are expected to much per kilometre as the high- tional funding, while MTR will need decide on whether to accept the speed line between and to raise capital, which should be a funding proposal in February; that , according to the Hong Kong boon for local banks and the local same month MTR minority share - Economic Journal. Most of it is bond market. But adding leverage holders vote on the plan too. being built underground, of course, will also saddle MTR with substan - adding substantially to the bill. But tial debt servicing costs – particu - Will the new line pay for itself? the Hong Kong government is furi - larly if it borrows, as has been Hong Kong’s section of the track is ous with the failure to deliver the rumoured, around HK$30 billion. just 26km long but its symbolism is railway on budget and on time. The knock-on result may be higher outsized in linking it to China’s MTR executives have countered fares for ordinary Hongkongers high-speed rail network, allowing that its contract stipulates that the using MTR’s subway lines. passengers to connect directly via government bears the financial The row comes at a time when Guangzhou to Shanghai and Beijing. risks of construction delays. And on the 42km Hong Kong-Zhuhai- However, when the railway was November 30, the government Macau Bridge – due to connect the first mooted, it was presented to agreed to provide additional fund - territory directly with the western local taxpayers more for its eco - ing not exceeding HK$84.42 billion bank of the Pearl River Delta– is nomic value. This was framed not ($10.9 billion). That should get the also set to miss its completion date only in terms of the jobs created C r e d railway finished, although it consti - by at least a year (completion is during its construction, but also i t :

A d a tutes a HK$19 billion increase on now not expected till the end of the boon that would result from p t e d

f the HK$65 billion approved by the 2017). Part of the hold-up is because vastly reducing the travel time be - r o m

C territory’s legislators five years ago. an artificial island is showing signs tween Hong Kong and Guang - r e a t i v e In exchange MTR will pay a spe - of subsidence. Again more public dong’s major conurbations. The

C o m

m cial dividend to shareholders, most money is required. full line will stretch for 140km be - o n s of which – also about $19 billion – Meanwhile the Express Rail Link tween Hong Kong and Guangzhou, 3 Week in China Talking Point 11 December 2015

with stops in the cities of Shenzhen and along the way. It will take just 14 minutes to travel between Hong Kong and Futian station in Shenzhen, while the journey to Guangzhou will be cut in half to 48 minutes. These shorter journeys will de - liver about 42 million hours of saved time each year, transport bosses reckon, contributing towards the HK$87 billion in economic ben - efits estimated over the railway’s first 50 years in operation. Opponents of the railway say Work in progress: a photo of Kowloon Station (taken this morning) hefty ticket prices and large num - bers of commuters will be needed A shared immigration facility in on unified border control at the to justify its construction costs. Pas - Hong Kong would be unprecedented: high speed train project. But oppo - senger trips on trains between the current line to Guangzhou has nents of the plan immediately Hong Kong and Guangzhou num - separate immigration controls and cried foul, warning that it would bered 4.48 million in 2014, says the although one of the newer road contravene the “one country, two Hong Kong Economic Journal. Even crossings does have shared facilities, systems” principle. Yuen says that if half of these people switch to the they were built on mainland Chinese the arrangements can be designed faster express, it could take 75 years soil, not in Hong Kong. in a way that won’t contradict to recoup construction costs. The alternative option is passen - Hong Kong’s autonomy over cus - ger checks at control points in toms procedures . But his detractors Political resistance too? Kowloon and Shenzhen, where the are asking whether immigration The thorniest issue at stake lies at railway crosses the border. But, as officers from the mainland will the planned West Kowloon termi - afore stated, this would erode block people from travelling to nus: how to arrange the customs much of the savings in travel time, China based on criteria mandated and immigration procedures for and thus undermine the economic in Beijing (despite performing passengers. benefits of the project. their duties on Hong Kong soil The current plan is to put both The debate about how to manage where no legal objection to right of sets of border formalities at the ter - the border controls comes at a time travel could apply). minus in Hong Kong’s Kowloon. when more Hongkongers are sensi - Then there are the wilder fears This is a decisive part of the Express tive to what they perceive as Chi - that the co-location decision is a Rail Link’s value proposition – be - nese encroachment on their city’s Trojan horse for deeper meddling cause it means cross-border com - way of life. with Hong Kong’s guarantees muters will spend a lot less time This kind of sentiment con - under the Basic Law. “If the Chinese going through immigration. tributed to the spread of the Occupy authorities are given the legal That sounds like a fairly mun - Central movement last year (see power to enforce laws [in Hong dane decision but the co-location WiC244) and the subsequent street Kong], Hong Kong peoples’ rights proposal risks contravening the protests that rocked the city. The re - will be abused in some way or an - Basic Law – the constitutional doc - bellious mood resurfaced this year other. And our whole system is ument of Hong Kong. when local legislators rejected pro - going to be in chaos,” predicts Al - Under the Basic Law officials from posals for a fuller election of Hong bert Chan, one of the local legisla - are prevented from Kong’s leader, the Chief Executive, tors opposing the plan. working in official roles across the because they object to Beijing’s in - border. Article 18 prohibits the exer - sistence on screening the candi - The bigger picture: the Pearl River cise of Chinese law in the territory, dates (see WiC287). Delta’s growing pains for instance, while Article 154 gives Last week Hong Kong’s Secretary Earlier this year the World Bank re - Hong Kong autonomy over immi - of Justice Rimsky Yuen told media ported that the Pearl River Delta gration and customs procedures. that consensus had been reached region of Guangdong had over - 4 Week in China Talking Point 11 December 2015

taken Tokyo as the world’s largest urban area in size and population. Planet China Its population of about 42 million Strange but true stories from the new China exceeds that of either Canada, Aus - tralia or Argentina. Plus it is also a pioneer for many of the policy pri - GAS PANIC. On roads around the city of Dongying old ladies are frequently orities of the Chinese government, seen towing six foot long balloons filled with natural gas (see photo below). It including accelerated urbanisation, goes without saying that this is extremely dangerous: a single spark, or industrial upgrading and environ - contact with a cigarette, and the balloons could blow up, likely killing the mental clean up. dama (as old retired ladies in China are known) and those nearby. Still, the Another part of the plan is practice goes on because of the proximity to the country’s second biggest deeper integration between the re - oilfield, Shengli – and the access it offers local residents to bag free natural gion’s cities, with each capitalising gas (small amounts of which are produced at the oilfield, though not enough to make production commercially viable, meaning the oil company is happy on its respective strengths. In the to let householders have it). Shandong TV last week interviewed one local blueprint Hong Kong serves as the dama with a gas balloon in tow. She told the reporter that everyone in the financial and professional services surrounding villages bikes home their fuel in a similar . Asked if she hub. Guangzhou is home to Guang - thought it was dangerous, she replied “Of course it is!”. However, as dong’s political leadership and the Shandong TV concluded: “because the gas is free, many residents opt to focal point for its heavy industry, ignore the danger. Meanwhile worried passers-by compare it to carrying a with upgraded manufacturing in bomb on their backs”. sectors like chemicals and automo - tives. Shenzhen’s mantle is more as the tech capital and hardware hub, and as a spillover centre for Hong Kong’s logistics and services. Cross-border transportation in - frastructure, such as the Express Rail Link and the Hong Kong- Zhuhai-Macau bridge, could foster faster integration of Hong Kong into a “one-hour economic zone”, according to Southern Metropolis Daily. One of the biggest consequences could be in the real estate market, where home prices in Hong Kong in bridging these cross-border will help Chinese firms to attain are still substantially higher than transport links. But chances are, as experience for their future expan - comparable units in nearby areas in the Apple Daily suggests, pressure sion in Europe.” Guangdong. (The expectation: more from Beijing must have been For Hong Kong, adjusting to the and more younger Hongkongers – mounting behind the scene. integration process is anything but priced out of the local market – will The Guangzhou-Shenzhen- straightforward, and involves a buy a home across the border and Hong Kong railway, Xinhua also move from its past as a gateway to commute, much as office workers notes, should serve as a showcase China to a future in which it has to do between places like London and project for China to export more of reconfigure its role. the Home Counties. The Financial its infrastructure capacity, which As WiC has already reported, Times has already reported on an is part of Xi Jinping’s “One Belt, some Hongkongers are unsettled by increase in such property transac - One Road” gameplan. “This will be the changing relationship with the tions this year in Shenzhen, where the first high-speed railway to con - motherland, irked by the large P h o t o prices are only about 40% of those nect the Chinese standard [in rail - numbers of mainland tourists ar -

S o u r c in Hong Kong.) way infrastructure] with the riving in the city (see WiC235) and e :

I m

a So far the central government European standard [which is being the impact of Chinese buying in the g i n e

C has shown no sign of impatience adopted by Hong Kong],” the news local property market (see WiC170). h i n a over Hong Kong’s repeated delays agency reported last month. “This But Hong Kong’s fundamental 5 Week in China Talking Point 11 December 2015

challenge is how to maintain its in - But there is opposition to Shen - way in 2023, we are still late. If we fluence and prestige at the southern zhen’s plan from Guangzhou, delay more our tourism and logis - extremity of one of the world’s which is championing a new spe - tics sectors will suffer.” most dynamic areas. Like other cial zone in nearby Nansha as a The runway plan has stirred up a cities, it hopes that new roads, shipping and manufacturing hub series of judicial reviews prompted bridges and railways will generate (see WiC304). It says that a new by local opposition to the proposal. new opportunities to prosper. bridge would limit navigability in Already the projections look daunt - In fact, much of the investment waters near Nansha and that any ing. Previously given a price tag of in transport infrastructure is a link must be built as an underwater HK$86 billion, the latest estimate is proxy for rival ambitions in the re - tunnel instead, despite protesta - that the runway expansion could gion. One of the strategic advan - tions in Shenzhen that the bridge cost HK$141 billion if it is to be com - tages of the new bridge to Macau will have a clearance height that pleted by 2023 (much of the bill is and Zhuhai is that it will provide a won’t impede any shipping lanes. down to costly land reclamation). new way of connecting Hong Kong There is similar tension between Legislators like Yiu argue that – with the western landmass of some of the airports in the region. despite the cost – Hong Kong sim - Guangdong, for instance. Currently, Comments last week from Yiu Si- ply cannot afford to wait. But the all of its land links to China run wing, a Hong Kong lawmaker repre - more immediate priority for Yiu through Shenzhen, a city that is senting the tourism sector, were and his colleagues will be the mas - much more of a rival than it was in typical of the mood, as he backed sively over-budget MTR bullet train the past. the local aviation community in line. The political rhetoric should Shenzhen, on the other hand, has calling for more flight capacity. start to ramp up as we get closer to been lobbying for permission to “We can see our neighbours in the February vote. There will be build a bridge of its own to Zhong - the Pearl River Delta expanding many local politicians who will use shan across a narrower stretch of the their airports and we are still talk - the high-speed rail track as a means Pearl River. Presumably, this would ing about a third runway,” he com - to cause further embarrassment to steal some of the thunder of Hong plained to the South China Morning Beijing and the Hong Kong govern - Kong’s bridge to Zhuhai. Post. “Even if we complete the run - ment. We’ll keep you posted… n

Western values

The New York Times visited a resort community this week where more than 1,000 families were living the ‘American Dream’. The surprise was its location: around 20 miles north of the Great Wall of China, and a 90- minute commute to Beijing. Welcome to Jackson Hole, or ‘Hometown America’ (as its known in Chinese). Designed to look like an American frontier town from a couple of centuries ago, it has a wooden church and streets with names like Route 66. The developer, Ju Yi International, claims that 90% of the 1,500 homes are places in China. In the city, you can live in a place for sold (they start at $625,000 but the fanciest – which years and never know the person who lives across the have vineyards attached – are priced as high as $8 hall from you.” The developer said the decision to build million). Residents are drawn by the sense of a ‘little America’ had nothing to do with politics, only that I l l u community and Americana on offer. One 42 year-old it had already exhausted other options, namely s t r a t i o homeowner told the New York Times: “America European-themed residential complexes. n : w

w represents wilderness and freedom, and also big Still, the New York Times cannot lay claim to having w . b e houses. America is cool.” ‘discovered’ Jackson Hole. A quick web search shows n i t a e p Another told the paper: “This place may not be Foreign Policy profiled the place in late 2011 and The s t e i n

. exactly like America, but it’s definitely not like a lot of Atlantic wrote about it last year. c o m

6 Week in China The Week in 60 Seconds 11 December 2015

Exports drop again The major news items from China this week were...

The renminbi closed on Tuesday at its lowest level 1in four years against the dollar. The PBOC set the on - shore rate at Rmb6.4078 to the dollar; it later closed at Rmb6.4179. The offshore rate closed at Rmb6.4919. The new softness of the renminbi is thought to indicate that investors were gauging China’s willingness to let the currency decline. The currency is expected to weaken even further next year; this week HSBC lowered its 2016 year-end prediction from Rmb6.6 to Rmb6.7 against the dollar.

Beijing issued its first ever “red alert” over air pollu - 2tion on Monday. The alert was scheduled to run from Agricultural Bank boss Zhang Yun stepped down 7am on Tuesday until noon on Thursday. During the alert, schools are advised to close, outdoor construction a stake in Didi Kuaidi) were blocked, for the third time is banned, and industrial production is limited (for more this year. Tencent maintains the Uber accounts were in on this story see page 13). violation of WeChat’s terms and conditions.

China’s foreign trade declined for the ninth consecu - Postal Savings Bank of China, a member of China Post 3tive month, dropping 4.5% year-on-year in November. 5Group, raised Rmb45 billion from a private fundrais - Exports were down 3.7% to Rmb1.25 trillion ($204 billion) ing session held ahead of a planned IPO. The private ses - and imports fell 5.6% to Rmb343.1 billion. sion enticed 10 firms, including Tencent, Ant Financial and China Life, helping the Chinese lender shift 17% of Didi Kuadi has formed alliances with ride-hailing its stock ahead of a planned IPO. 4services Ola, Lyft, and GrabTaxi – which operate in India, North America, and across Southeast Asia respec - Zhang Yun resigned from his role as president of tively. The partnership will allow users to book taxis 6Agricultural Bank of China (ABC) last Friday, citing from all parties through any one of their apps. The al - “personal reasons”. Early last month, media speculated liance is in clear opposition to Uber. This same week, that Zhang was facing corruption allegations following Uber accounts on WeChat (run by Tencent, which holds his unexplained absence from work. A source told Caixin Weekly that Zhang’s resignation is related to the investigation of ABC’s Shenzhen branch head Xu Tao, who was probed in April for taking bribes.

China’s biggest metal trader China Minmetals Corp 7will acquire state-owned engineering and mining firm China Metallurgical Group. The two enterprises, with combined sales of roughly $96 billion in 2013, will form a new listed company, the details of which are as P h o t

o yet unannounced. Following the acquisition, “China

S o u r Minmetals will increase its reserves for metal ores in - c e :

R e cluding copper, zinc and nickel, and gain market share u t e r s China’s currency slid to its lowest level in four years in the steel market,” Bloomberg reports. n 7 Week in China China Consumer 11 December 2015

What lies beneath China offers firm support for luxury sales

n pre-Communist China a corruption campaign has been help - Iwoman’s outerwear was strictly ing luxury companies such prescribed according to her rank. as Agent Provocateur, La Perla and But her underwear was not and Calvin Klein. Unable to flash expen - Qing Dynasty courtiers often sive watches and designer handbags, sought to express their individual - upwardly mobile consumers are re - ity through the (bellybands placing logo mania with inconspic - : Victoria's Secret model made from , an ancient form of uous consumption. This represents bra) worn under their robes. Many a complete change from earlier Other top 10 selling brands in were richly embroidered with Man - trends where successful brands China include international firms darin ducks (to signify loving cou - were those that targeted the outer such as ’s and Ger - ples) and geckos (to ward off evil layers. As consultant many’s Triumph. la - spirits). Angelito Tan tells Jiemian.com, bel La Perla also recently opened a Back then flat chests were con - “Sales of high end lingerie were flagship store in Hong Kong, bring - sidered graceful and the dudou limited for a very long time by the ing the number of its outlets in aimed to compress rather than in - fact that underwear is worn next to China and Hong Kong up to 14. flate a woman’s natural assets. In to - the skin and not for show.” All eyes are now on Victoria’s Se - day’s China the opposite is the case. However, a new generation of cret, which has had a troubled his - Bra cups are moulded and even in - strong, independently minded Chi - tory in China thanks to a bizarre dis - clude side boning to thrust the nese women are buying expensive tribution issue (explained at length breasts closer together. lingerie as a way to underline their in WiC230). It opened its first stores The Western concept of ‘lift and individuality. “Their purchasing in China earlier this year. The group separate’ sometimes has no mean - power is a strong force in the mar - pioneered the use of Asian models ing in China where many women ket,” Tan comments. back in 2009 when Chinese super - want their to ‘lift and nestle’. The lingerie market has been a model Liu Wen became the first East Global lingerie manufacturers have highly competitive one. No single Asian woman to walk the catwalk at been slowly learning to adapt to lo - company dominates. According to the Victoria’s Secret fashion show. cal tastes. Mintel’s research Aimer, a domestic However, as the Washington Britain’s Agent Provocateur, for brand, has the largest market share Times reports, the group has so far example, first entered China in the on about 3.6%, while Euromonitor left its “signature push up bras and early 1990s. However, according to a believes the industry leader is Hong frilly ” behind and is only recent article by NetEase Finance it Kong-listed (see WiC242 selling beauty accessories locally. failed to understand the difference for our profile of the bramaker) with The newspaper suggests this re - in Chinese body shapes and with - a similar market share. flects a strategy to crack the Chinese drew a few years later. In October Regina Miracle, the market “without stepping on any Now it is back with seven stores Shenzhen-based supplier for top culture or social land mines in a across the country and plans to brands such as Victoria Secret and country that has more utilitarian open a further 20 over the next few Calvin Klein, also went public in tastes in lingerie and underwear”. years. CEO Garry Hogarth recently Hong Kong and has seen its share Meanwhile for lingerie makers, told reporters that its Chinese sales price almost double. As of this week guessing what Chinese women will P h o t

o have exceeded the company’s fore - Regina Miracle’s market value want next remains tricky. The du -

S o u r casts by 25% this year. stands at $1.8 billion, meaning its dou , for example, has been making c e :

R e The Wall Street Journal has also chairman Hung Yau-lit is worth $1.1 a comeback as underwear and even u t e r s speculated that the ongoing anti- billion, reports Bloomberg. as a fashion item in its own right. n 8 Week in China Economy 11 December 2015

New year calls Slower growth in 2016, but mainland pundits predict stocks to rise

aking predictions on China’s sistent negative output gap,” he told Mvolatile stock market can be a investors. thankless endeavour. This time last According to CSSN, a news web - year the Shanghai Composite Index site run by CASS, the afore-men - (SHCOMP) had rebounded 30% in tioned think tank, the central gov - three months to return to the ernment is acutely aware of the risks 3,000-point level (see WiC264). Do - of an economic slowdown. As a re - mestic brokerages were bullish sult more stimulus measures are about the prospects for the A-share likely to be announced following the market in 2015, especially China Central Economic Work Conference Merchants Securities and Guotai later this month. In fact, speculation Junan, which were predicting that has been rife that the leadership in the index would climb above Beijing will focus on measures to 10,000 (its all-time high was 6,124 cheer property investors and home - in October 2007). owners, such as making mortgage But the Chinese Academy of So - interest payments tax deductible. cial Sciences (CASS) looks to have CSSN also notes that Chinese Pre - made one of the best calls (for the ‘Less is more’, he says mier Li Keqiang has penned an arti - second year in a row). Having cor - cle in The Economist’s ‘The World in rectly predicted a surge in 2014, the go into 2016 with a fairly upbeat 2016’ publication to outline “China’s State Council’s think tank forecast outlook. But the mood is much economic blueprint” for the year that stocks could reach 4,000 more cautious compared to where ahead. points and possibly even hit 5,000 it was last December,” Shenzhen “Despite moderation in growth, this year. Economic Daily notes. the Chinese economy is moving in The SHCOMP indeed reached This year’s rollercoaster perform - the desired direction of stronger do - 5,000 in June but only stayed there ance in the Chinese markets has mestic demand and innovation. for a few sessions. After reaching a been chastening for investors, espe - One by-product is a fall in the rele - high for the year of 5,178 on June 12, cially those who came late to the vance of indicators such as power the index plummeted nearly 30% in party and bought into the boom just consumption, rail-cargo volume 14 trading days (see WiC288). before the crash. And adding to the and new bank credit in gauging eco - “The bull market came quickly mood of investor caution as 2015 nomic performance. Yet this transi - but went even quicker,” Shanghai ends is a more pessimistic outlook tion from ‘bigger is better’ to ‘less is Securities News opined at the time. on the Chinese economy. more’ is a good thing,” Li writes. So what about 2016? In the HSBC has generally taken one of The Financial Times agrees that fourth quarter, Chinese stocks have the more optimistic positions on Li and his colleagues are trying to traded largely in a range around China’s growth prospects in 2015 but “shift from an economy led by in - the 3,500-level. Guotai Junan now this week the bank’s chief China vestment and exports to one driven sees the SHCOMP trading between economist Qu Hongbin sharply re - by consumer demand”. But the 3,200 to 4,500 next year (a some - vised his GDP forecast for 2016 to newspaper adds that “with its room what more conservative guess than 6.7% growth from 7.2%. for manoeuvre reduced by weak P h o t

o its forecast last year). This kind of “We expect that the slowdown in global demand and skittish in -

S o u r range looks to have become the demand will be faster than the vestors, Beijing will need luck as c e :

R e market consensus among stock an - slowdown in the supply potential well as judgement to continue the u t e r s alysts. “Most domestic brokerages of the economy, resulting in a per - process”. n 9 Week in China Cross Strait 11 December 2015

A sequel for Spielberg? A film studio faces scrutiny – despite goodwill in Taipei over spy exchanges

n May 1960 an American U-2 spy American producer behind Holly - Iplane was shot down over the So - wood blockbusters like Iron Man 3 . viet Union. The aircraft’s pilot was Mintz is the chief executive of DMG, later allowed to return home in ex - a Los Angeles-based media firm change for Rudolf Abel, a KGB agent that’s been grabbing headlines in captured by the US. Taipei thanks to a deal to buy a 61% The story will be familiar to stake in ETTV, a leading tele - those who have seen Steven Spiel - vision network, from private equity berg’s Bridge of Spies . But just as firm Carlyle for $600 million. the Cold War thriller hit cinemas in A hefty investment from an October, discussions on another spy Spies swapped across the Strait too American firm in Taiwan would nor - swap were taking place across the mally be welcome. However, a com - Taiwan Strait. Taiwan’s public areas. It cut both mittee overseeing overseas acquisi - The exchange became public af - ways: the China Times estimates tions on the island has pointed out ter an announcement by both sides that there are still more than 100 that DMG’s partner in China, DMG this month. However, Taiwanese Taiwanese agents imprisoned on Entertainment & Media, is listed in media had earlier reported that the the mainland. Shenzhen and has been an active island’s spies were returned in mid- The most senior mainland spy movie producer on the mainland. October, just ahead of the historic held in Taiwan, and the one that According to Taiwan’s Apple meeting between Chinese leader Xi Beijing wants back most, is Lo Daily, which cited a statement from Jinping and Taiwanese leader Ma Hsien-chen, the Taipei Times be - the island’s foreign investment reg - Ying-jeou in Singapore (see WiC303). lieves. The 57 year-old double agent ulator, co-founder of DMG Peter Beijing released Zhu Gongxun was formerly head of communica - Xiao is said to have links with the and Xu Changguo. Both men were tions and electronic information at People’s Liberation Army (PLA). colonels in Taiwan’s military intelli - Taiwan’s army command head - The deal is now hanging in the gence bureau. Caught on the main - quarters, and he is believed to have balance. The governing party, cur - land in 2006, they were given life been recruited by mainland Chi - rently led by Ma Ying-jeou, says Tai - sentences for espionage. nese agents thanks to a “honey trap” wan must embrace much needed In return Taiwan gave parole to operation (in which a seductive foreign investment. But the DPP is mainland spy Li Zhichao who, be - woman was used to obtain com - accusing Ma’s KMT of trying to force fore his arrest 16 years ago, was a promising sexual video footage – through the sale before Taiwan’s Hong Kong resident. so as to blackmail him into turning presidential election next month The exchange is a product of the over secrets). (when the DPP is expected to win “mutual goodwill delivered by the Nevertheless the history of seven comfortably). Ma-Xi meeting,” Ma’s spokesman decades of clandestine warfare has - Meanwhile, more mainland Chi - Charles Chen told Taipei Times. “He n’t been erased by the release of nese M&A looks to be in the pipeline [Ma] also hopes that both sides’ three captured agents. Especially in elsewhere in the film industry, with good-intentioned interactions can Taiwan’s pro-independence camp – the Financial Times reporting this be continued and lead to more con - led by the Democratic Progressive week that Viacom may sell a stake in crete results in the future.” Party (DPP) – where the mistrust of its Paramount studio to Alibaba. The P h o t

o Such a cross-Strait exchange was mainland-linked personnel – non- Chinese internet giant is reportedly

S o u r unimaginable in the 1960s. Huge Chinese included – remains en - in talks to acquire Hong Kong’s c e :

R e posters warning “Beware of Com - trenched. newspa - u t e r s munist Spies” were plastered across Bad news for Dan Mintz, the per too. n 10 Week in China Banking & Finance 11 December 2015

Investors get Jinzhou jitters China’s city commercial banks are rushing to list in Hong Kong

he city’s name means colourful Tprefecture, but the Hong Kong flotation of the largest commercial bank in Jinzhou has appeared noth - ing but drab. B ank of Jinzhou raised about $800 million in its initial public offering last week but only after the -based lender had attracted one of the worst investor receptions in recent years, with just 4% of the retail tranche covered. Bank of Jinzhou, alongside Bank of Qingdao and Bank of Zhengzhou, has been rushing to go public in Bank of Jinzhou raises $800 million and a lot of eyebrows Hong Kong before year-end. The trio of city commercial banks are all try - In fact, Bank of Jinzhou had un - backed them was the shares of ing to recapitalise after a few years successfully applied to list in Shang - Hanergy, a company suspended of extremely rapid loan growth. hai in 2011, as China’s own stock reg - from trading since May (see Nationwide, figures from the ulator (the CSRC) questioned WiC303 on how quickly Hanergy banking regulator the CBRC show whether it was making loans to SOEs has been losing its shine). The solar that city commercial banks’ assets so the latter could buy back their firm remains under investigation rose 24% to Rmb21.2 trillion ($3.3 tril - own bad debts and clean up Bank of by financial regulators. lion) in the 12 months ending Sep - Jinzhou’s balance sheet. The lender Bank of Jinzhou is a “showpiece tember. This is far higher than the had replied that only a “very limited” of all the ills of city banks in main - 9.9% increase recorded by the big amount of lending did not meet reg - land China,” SCMP concludes five lenders over the same period. ulatory requirements. Institutional investors also shied The fear is that this credit expan - Where the Hong Kong IPO is con - away from the IPO. As one fund sion has not been matched by cerned, journalists have been manager tells WiC: “These city com - equally careful due diligence. More - querying how the bank was sud - mercial bank IPOs are a total waste over, the nature of small regional denly able to halve its Rmb9.4 bil - of time for us right now because of banks means many of their loans lion exposure to troubled solar the regulatory requirement to price are concentrated in a few local com - panel maker Hanergy just ahead of them at book value or above.” panies. As of September, city com - its listing. As the SCMP explains, With the exception of the mercial banks averaged non-per - the bank was “miraculously” able Shenyang-based Bank of Shengjing, forming loan ratios of 1.44%, up 33 to find, “two ‘independent’ main - the largest city commercial bank basis points from last year. land financial institutions which listed in Hong Kong, the whole sec - Bank of Jinzhou had a lower than purchased Rmb2 billion of expo - tor is trading below their projected average NPL ratio of 0.99%. However, sure at face value.” Hanergy itself 2016 book values. in a heavily critical editorial, Hong also repaid a further Rmb2.6 bil - Nevertheless, both Bank of P h o t o Kong’s South China Morning Post lion. Jinzhou and Bank of Qingdao were

S o u r c blasted the territory’s stock market The SCMP asks who would have able to complete their fundraising e :

I m

a regulators for letting the IPO go been generous enough to take up from Hong Kong’s primary market, g i n e

C ahead because of questions about these loans at no discount to face while Bank of Zhengzhou is mid- h i n a the bank’s loan book. value when the collateral which way through its own flotation. And 11 Week in China Banking & Finance 11 December 2015

as WiC went to press, the two banks, as they believed the munic - lenders were both trading margin - ipal government had sanctioned ally higher than their offering the scheme. prices. One depositor, Tian Rongfu, tells Paradoxically, a perkier IPO looks Beijing News he invested all the gov - to be that of Postal Savings Bank, ernment compensation he got after which could surprisingly prove to being relocated to make way for the be one of next year’s hottest new of - Three Gorges Dam. He recalls when ferings. It recently added China Life he went to an introductory meeting, and Tencent to the list of major local government approvals were very firms that were investing in its prominently on display. mega-IPO, raising $7 billion from However, it took only three years what the Wall Street Journal called “a Caution: loan sharks in area for the first FFO to go under. And in star-studded roster of investors”. It January 2013, reports began to means that at least 70% of its $10 The UN designated 2005 the year spread that the Yancheng FFO was billion offering is already cornered of microcredit in a bid to encourage having financial troubles, Yan and by powerful Chinese corporations. governments to set up favourable many others rushed to get their regulatory environments. money back. It was no longer avail - China followed one year later able. Officials at the institition had with its own guidelines as part of invested 90% of the FFO’s deposits its ‘New Socialist Countryside Cam - in a property project in Anhui Bitter harvest paign’. As Reuters reports, the doc - province. They claimed to have been Debt traps for rural ument was pretty vague and left it defrauded by their joint venture microfinance schemes to local governments to improvise. partners. In many cases a group of at least 10 As cracks emerged, it rapidly be - “ redit is a human right.” So said farmers could set up a credit coop - came apparent the FFOs had a very CMuhammad Yunnus, the Nobel erative to make small agricultural unclear legal status. They were clas - Prize winning founder of Grameen loans after applying to their local sified as ‘private non-profit enter - Bank. It has become his most re - authority. prises’, which meant they should peated quote over the past two The first ever FFO appeared in not have been engaging in money - decades as the motto of microfi - Yancheng city of Jiangsu province making activities. Moreover, since nance: the movement which has as a pilot for the rest of the country they were not banks their clients helped millions of the world’s most to follow. Beijing News recently re - were not covered by the CBRC’s de - impoverished people gain access to visited the city, interviewing one posit insurance scheme. financial services. FFO agent, Yan Chungyuan, outside Both Yan and his fellow deposi - However, these days Yunnus the shuttered doors of his former tor, Tian, blame ineffective govern - nearly always adds a rejoinder after workplace, now heavily covered in ment supervision for the ensuing saying it, arguing that the move - dust. The newspaper says word of mess. Officials from the agricultural ment he popularised has become their arrival quickly spread, prompt - department also admitted to Beijing too commercialised and lost sight ing hundreds of farmers to show up, News they were simply not quali - of its original aims. In a New York waving their deposit slips. fied to handle the scheme given Times op-ed he warned: “Poverty Yan tells Beijing News he in - their lack of financial expertise should be eradicated – not seen as a vested Rmb135,000 ($20,927) of his (Many FFOs had been duping the de - money-making opportunity.” own savings in the FFO. However, in partment with two separate bank In China, his words have proved an all too familiar tale from the accounts – a legal one that could be particularly prophetic. Millions of world of Chinese finance, the supervised and an illegal one, which farmers have seen their savings agents were soon being financially was often channelling funds into wiped out as a result of investments incentivised to collect money from property projects). in rural financial institutes known would be depositors who were, in As Yunnus himself once said of P h o t

o as ‘farmers financial cooperatives’ turn, being offered interest rates of the problems in the sector he

S o u r (FFOs), which were set up in the a up to 12%. Few questioned rates spawned, “I never imagined that one c e :

R e decade ago as China’s answer to that were four times higher than day microcredit would give rise to u t e r s Grameen Bank. those on offer from commercial its own brand of loan sharks.” n 12 Week in China Environment 11 December 2015

A tough problem to mask Red alert in Beijing as Paris talks reach decisive moment

he ‘Mandate of Heaven’ is a Chi - Tnese concept about the right to rule that dates back many millen - nia. And worryingly for China’s cur - rent leadership when Beijingers looked towards those same heavens this month they didn’t see a lot: throughout much of December the capital’s skies have turned eerily dark as thick blankets of smog de - scended, leading to school closures and cars being ordered off the road. On Monday the city issued its first ever red alert for air pollution. The timing of this onset of grey miasma could not have been more germane – it would have been one of the last things President Xi Jin - ping saw of his country as his plane took off for Paris where he attended global climate change Red alert: Beijing issues first ever air pollution alarm this week talks (that remain ongoing). It was almost as if the heavens lution and China’s carbon emis - ceremony on November 30 – when were reminding Xi of the ancient so - sions – the latter being the central PM2.5 hourly levels in Beijing cial contract: rule wisely and you issue Xi and other world leaders reached 40 times the World Health will remain in power; fail to meet discussed at COP 21 in Paris. Organisation’s recommended limit the needs of your people and you Coal is the dirtiest of the fossil fu - – Xi admitted the past three decades will be unseated. els and China – the world’s biggest of rapid economic growth had In the past natural disasters were carbon polluter – relies on it to pro - “taken its toll on the [Chinese] envi - a sign that the emperor, or the ‘son duce two thirds of its electricity. ronment” but he stressed that China of Heaven’, had lost his mandate. It’s no coincidence that the smog was now taking the issue seriously. But, of course, the smog that de - returned to Beijing this year when “China is making vigorous eco - scended on Beijing last week was the weather began to get cold and in logical endeavours to promote not a natural disaster, at least not response power stations fired up to green and low-carbon growth,” he entirely. meet demand for heat. said. “We have the confidence and Weather and geography did play This encapsulates China’s central resolve to fulfill our commitments,” a role in trapping the pollution over problem in respect to air pollution he added. Beijing but the high levels of PM2.5 and climate change – how does a His tone and indeed his presence particles – the smallest and most government carry on improving marked a change from the Chinese hazardous type – were locally gen - people’s livelihoods, or keeping attitude at the last United Nations P h o t

o erated from car emissions and coal- them warm in the winter, whilst climate change talks in Copenhagen

S o u r fired power plants. also reducing the longer term threat in 2009. On that occasion China c e :

R e And that’s where there is a of global warming? sent Premier Wen Jiabao to negoti - u t e r s strong connection between air pol - Speaking at the COP 21 opening ate. However, during key meetings 13 Week in China Environment 11 December 2015

he vacated the room leaving Xie Zhenhua, special envoy on climate change, to remonstrate with West - ern leaders. The jist of his argument was that developed countries are largely re - sponsible for global warming and international emission caps were another tool to stop China’s eco - nomic rise. The argument was not altogether unreasonable but Xie – who is still China’s main negotiator on climate change – became known as the man who shook his finger at President In full gear: a paramilitary policeman dons a mask Obama and China was widely blamed for having sunk the talks. liners don’t want to see China em - representatives have tried to water This time China comes to the barrassed on the world stage. down proposals for a system that table with more confidence and a So what is China pushing for at would compel nations to report car - greater motive to participate and these talks? bon emissions and climate change drive change. Just before the talks Within hours of this week’s WiC plans to the UN – and likewise a started the Ministry of Science and being published there should be a fi - clause that would force it to update Technology put out a report saying nal agreement. In the run up to emission-reduction pledges every China is being affected more than the talks China committed to stop - five years from 2020. other countries by rising tempera - ping carbon emissions growth in More broadly China, along with tures and sea levels. It said that soil 2030 and hinted that with help India, looks to be resisting a move erosion and erratic rainfall will lead from the West it could bring that to aim for a 1.5 degree (centigrade) to crop failure and a loss of food se - date forward to 2026 or 2023. cap on global warming by the end curity. It also warned that the coun - China can also now lay claim to of the century – a move introduced try’s eastern seaboard – its economic producing 24% of the world’s re - by the low-lying island of Tuvalu as powerhouse – would be threatened newable energy – a figure that well as Bangladesh and supported by rising waters. could feasibly rise to 42% in the by the US. Yet aside from all this there are near future. On Wednesday French Foreign domestic political reasons for why In many ways China leads the Minister Laurent Fabius presented the Chinese government may be world in tackling climate change. the final 29-page draft of the agree - keen to get an agreement in Paris. But China still sees itself as a de - ment to delegates. Around 750 dis - As The Economist pointed out veloping nation and Xi Jinping puted terms or phrases had been in - last week: if 195 nations at COP 21 made it clear in his opening address corporated or removed, he said, and come together and commit to ac - at the Paris talks that he believes de - about 250 remained. tion that will cap global warming it veloped nations should shoulder a After the report came out the will help China’s top leaders push greater proportion of the burden Chinese delegation said it would through much needed economic re - when combating climate change. ‘consult’ with other nations. forms – namely, shutting wasteful He also appeared reluctant to ac - “Tonight will be a sleepless night,” and polluting steel plants and coal cept terms that might limit China’s Xinhua quoted Xie as saying. pits so the economy can transition short term room for manoeuvre. “It Meanwhile in Beijing the air on to a more service-based growth. is imperative to respect differences Thursday cleared.“The red alert in Just as with joining the World among countries, especially devel - Beijing has been lifted,” Xinhua an - Trade Organisation or the renminbi oping countries, in domestic poli - nounced on its official weibo feed. being included in the International cies, capacity building and eco - That said, Beijing wasn’t the P h o t

o Monetary Fund’s special drawing nomic structure. A one-size-fits-all worst hit. Anyang in Henan faced

S o u r rights basket, a deal in Paris would approach must be avoided,” he said air pollution three times worse, says c e :

R e strengthen the hand of those push - According to reports in the Fi - the New York Times, with the index u t e r s ing for reform because even hard - nancial Times this week Chinese reaching the top of the scale: 999. n 14 Week in China Society and Culture 11 December 2015

Box office heist Why the remake of Hollywood cult classic opened in China 3 weeks before US

sia has given Hollywood some Aspectacular remakes – The Seven Samurai became The Magnif - icent Seven , Infernal Affairs became The Departed . Now comes the $120 million-budgeted remake of Kathryn Bigelow’s 1991 cult classic Point Break . And Warner Bros has decided that China has become so important that the film has been re - leased there a full three weeks be - fore it debuts in the United States. Driving the early release was the movie’s Chinese co-producer, DMG, whose high-profile co- founder Wu Bing was very much in evidence at the movie’s launch in Beijing last week. Point Break took $12 million in its opening three days in China, and DMG will be hoping that once the popular blockbuster The Martian ends its run, that it can build some impetus at the box office. However, reviews have not been great. The South China Morning Post, giving the film one and a half stars, says it “struggles mightily to Surf’s up: new role created for Palmer in Point Break remake replicate the original’s guilty pleasure”. mer, became an actress in the 1990s was in patriotic epic The Founding Wu focused on the action ele - and starred in a number of Jackie of a Republic (released in 2009 to ments of the movie during the pro - Chan’s kungfu movies. Then in 1993 commemorate the 60th anniver - motional tour, knowing these will she formed DMG, which stands for sary of the Party’s 1949 coming to likely be popular with Chinese au - Dynamic Media Group, with New power) and since then it has been diences. “This remake can’t be Yorker Dan Mintz and analyst Peter involved in many US movies, in - thought of in early nineties terms. Xiao. Its original business focus was cluding Looper and Iron Man 3 . The extreme stunts in the 2015 ver - advertising, with clients that in - Wu and DMG look to have sion created a complete visual and cluded Nike and Volkswagen, helped get Point Break the red-car - audio concept. It represents a new However, DMG later moved into pet treatment in China. No other level of film technology and ac - film financing and distribution (see Hollywood movie has opened in P h o t

o tions,” she told a Chinese news con - WiC147 for our first profile of DMG). the country so far ahead of its US

S o u r ference. In a further diversification it began release. Penguins of Madagascar c e :

R e Wu, a former medal-winning running cinemas and exhibitions. opened 12 days ahead of its US de - u t e r s gymnast and synchronised swim - DMG’s first movie investment but ( Iron Man 3 also hit Chinese cin - 15 Week in China Society and Culture 11 December 2015

emas ahead of American ones). when only domestic movies are per - So is the plot the same as in the Why the haste? Point Break ’s De - mitted on the big screen. US-made nineties original. Not quite. The fo - cember 3 opening gives the movie Point Break qualifies thanks to its cus of this Point Break ’s heists is to three weeks to take advantage of a being a co-production with a Chi - carry out The Ozaki 8, a series of period in which no new foreign nese entity. eight different trials – involving movies will show (the annual 34- Competition will be sparse, with different natural forces. Still in the film quota for foreign imports has wily producers knowing that no script: the same proto-hippie mus - been used up – indeed, the latest other major locally-made release is ings about nirvana and conquer - Star Wars movie won’t appear in scheduled until December 18 when ing nature. The earlier movie’s fo - Chinese cinemas till January). De - Wanda’s The Ghouls – starring Shu cus on surfing is supplemented cember is also typically a month and – screens. with the addition of a range of

World of Weibo: Blue moon, Red cash

Prior to this year the ‘hall of fame’ at Britain’s National given Citic Capital, owner of that club, is also part of the Football Museum only had seven foreign players: Ossie consortium investing in CFG,” Tencent Sports notes. Ardiles, Dennis Bergkamp, Eric Cantona, Thierry Henry, Some media outlets have even suggested that the Patrick Vieira, Gianfranco Zola and Peter Schmeichel. Beijing-based football club could be sold to CFG for Understandably eyebrows were raised when Sun about $300 million. Jihai was inducted to join this illustrious list (in the “We need a big team to compete with Guangzhou ‘special’ category) in October. The Manchester-based Evergrande Taobao. The [CSL] museum said it reflects the achievements of the is getting boring,” a netizen writes, referring to the fact Chinese defender, who played 130 games for that Guangzhou Evergrande has won the league five Manchester City between 2002 and 2008, in promoting years in a row. English . However, the Daily Mail The impact of the CMC-CFC pairing is being felt in reported that “once the bosses knew the Chinese were Hong Kong too, with fans sharing reports from British coming [a reference to President Xi Jinping’s recent media that CFC could create a new team that might visit] they decided to put a Chinese player in the hall”. be based in Hong Kong and yet compete in the CSL. Sun’s induction has now acquired even more sense But given the recent friction between Hong Kong following another Chinese tie-up courtesy (again) of football fans and their mainland brethren (see Manchester City. The English football club’s owner sold WiC295) this may not be such a bright idea. “Man City a 13% stake in City Football Group (CFG), the parent is going to be the most hated team in Hong Kong,” a firm of Man City (which also owns New York City FC and Hong Kong fan suggests. Japan’s Yokohama Marinos), to a Chinese consortium led by China Media Group (CMC) for £265m ($397 million). The move values CFG at $3 billion, on par with City’s old rival Manchester United. Manchester United claims it has more than 100 million fans in China. But with the blue side of Manchester now partly owned by a powerful Chinese state firm, the ‘noisy neighbours’ are just getting noisier. “Chinese capital has now converged with oil money from the Middle East. Is there any club more tuhao [a term for ‘new money’, see WiC217] than Manchester City?” a netizen writes on Man City’s official weibo page. “It will put to rest any more rumours about the Chinese taking over Manchester United,” another internet user added. P h o t o There is also speculation that a Chinese football

S o u r

c team could be the next addition to CFG’s worldwide e :

R e network. “Beijing Guoan FC is the most likely candidate u t e r s

16 Week in China Society and Culture 11 December 2015

other extreme sports. At the time China’s Soviet-style Instead of Keanu Reeves in the sports system came in for a lot of lead role we get Australian actor criticism and it pledged to do more Luke Bracey as up-and-coming FBI to help former athletes find work agent Johnny Utah, while Patrick and adapt to normal life after years Swayze’s philosopher-king-cum- of institutional existence. surf-dude Bodhi is played by Yet the case of the 27 athletes has Venezuelan actor Édgar Ramírez. yet again turned the spotlight on The movie also features Teresa the hukou system, which links ac - Palmer, Ray Winstone, and Delroy cess to government services to the Lindo. It took 221 days to shoot, in person’s place of registration – of - part because it uses real effects ten the same place they were born. rather than computer-generated The system, introduced in the imagery. 1950s, was intended to control the Bracey joined Wu, Mintz and oth - movement of people. The idea: that ers at the movie’s lavish red-carpet Pondering his hukou prospects there would always be enough farm - launch in Beijing, while DMG en - ers to feed the population and just sured that heavy TV promotion ment fee on the grounds they were enough people in the cities to do showcased the film’s high-octane not Beijing residents. non-agricultural work. snowboarding, motocross and wing - The 27 men and women came to Ironically, even as governments suit flying scenes. Beijing as children and teenagers at have pursued a policy of rapid ur - Wu Bing said she is not worried a time when the city wanted to at - banisation, the system has re - that the extreme sports concept will tract the best sporting talent. mained in place – albeit with modi - dilute the story, saying the new ver - The athletes say they were prom - fications. sion was “a very moving tale about ised sizable payouts when they re - As of last year, people are no love and friendship”. tired and, in some cases, also a longer classified as urban or rural, Meanwhile her firm is undertak - hukou . But when they were released and most provinces no longer insist ing its own corporate acrobatics as it from their duties in their mid-twen - a farmer gives up land rights in their seeks to buy a stake in Eastern ties neither was forthcoming. village if he wants to transfer his Broadcasting Corp. To do so, DMG Getting a Beijing hukou has be - hukou to a town or city. will have to persuade Taiwanese reg - come much harder. And only those This is important because many ulators that it has no links to China’s with a hukou can receive retirement of China’s 170 million migrant work - military, reports Variety (for more pay from the city’s sports authori - ers are farmers and they view their on this acquisition and its sensitiv - ties. land as a safety net – a way of feed - ity, see page 10). “I relocated to Beijing hoping to ing themselves in an economic get a local hukou and go to college. downturn or if life in the city does - Now it turns out I can’t even get my n’t work out. retirement fund without being reg - The government’s goal is to get istered here, ” Xie Lili the former 100 million people currently regis - Retired promise captain of Beijing’s female boxing tered in rural areas to transfer their Athletes grab headlines as team tells Tencent News. hukou to towns or cities by 2020. they fight for Beijing hukou A typical payout would be in To facilitate this, small urban cen - the range of about $15,000, the tres have been instructed to do away hat is the toughest prize to Global Times said, a modest sum with restrictions on accepting new Wwin in Chinese sport? Turns given most of the athletes earn al - people, and larger conurbations out it is getting a Beijing hukou or most nothing while competiting have introduced a points system to ‘household registration’. and often retire with injuries and attract the people they need. A group of athletes who repre - health problems. Bigger cities have also started sented Beijing at national competi - The dispute is reminiscent of a providing migrant workers with P h o t

o tions (against other Chinese cities case a few years ago when a former temporary residence permits so

S o u r and provinces) are threatening to gymnastics star Zhang Shangwu they can access basic social services c e :

R e sue the city’s sport authorities for was found begging on the streets outside their place of registration. u t e r s now refusing to pay their retire - in Beijing. The permits also count towards any 17 Week in China Society and Culture 11 December 2015

hukou application, alongside tax payment records, home ownership and doing a useful job or possessing a useful skill. Crucially cities with under 5 mil - lion inhabitants have been told they cannot place excessive demands on people who want to register there. Yet the situation in the first tier cities – where a third of the popula - tion does not have local hukou – is totally different. The government is trying to curb population growth in the bigger Bo’s businessman: Xu Ming (1971-2015) died in jail last Friday conurbations like Beijing and has said such cities will only give out details were a house he’d purchased knowledge about the nefarious hukou on “the basis of [the city’s] for the Bo family in France and his nexus that exists between busi - overall load bearing capacity and so - bankrolling of Bo junior’s foreign nessmen in China and senior offi - cial and economic requirements”. education. cials. His connections went beyond Sadly for athletes already past Xu built his -based con - Bo and as high as Zhou Yongkang, their medal-winning days, Beijing glomerate Shide up with the help of the disgraced former security tsar might decide it doesn’t need them Bo, who was both mayor of that and an ex-Standing Committee after all. northeastern city and then gover - member of the ruling Politburo. The nor of the province Liaoning in same netizen adds that the size of which Dalian is located. Thanks to the bribes mentioned in anti-graft Bo, Shide got access to choice pieces trials held so far were small, com - of land and government contracts, pared to informal estimates of more Grave sentence and even bought the city’s football than Rmb1 trillion in corruption Bo Xilai ally dies in jail, a year team. At one stage he was estimated that has occurred in recent years. before scheduled release to be China’s eighth richest man, Few would have been better placed says the BBC, worth Rmb14 billion. than Xu to cite bigger figures and ike Icarus, he was the man who But his fate was entwined with perhaps bring down some major Lflew too close to the sun. In this that of his boss, and his fall from business tycoons with new claims. case that sun was the princeling Bo grace was swift. That said, he got a But though Tencent’s news web - Xilai, and the man who fell to earth more lenient sentence: while Bo got site first broke the story, it did not was businessman Xu Ming. a life term, Xu was due to be released suggest there was any evidence of However, for those hoping there from his cell next year. That is, until foul play. were any more revelations yet to his unexpected heart attack ended Local journalists are among those emerge about the tycoon’s crooked the possibility of his walking free. disappointed that Xu will take to the relationship with Bo, those hopes That’s led some netizens to question grave so many secrets and unan - looks to have ended last Friday the suspicious timing of his death. swered questions. One issue re - when it emerged Xu had died – aged Indeed, it is not clear whether there porters had hoped to quiz him on just 44 – of a heart condition while was even a post-mortem. (after his release) was the exact sta - in prison. Sohu Finance contacted some of tus of the villa in France. He’d Xu was detained in early 2012 at Xu’s former executives at Shide and claimed in court it belonged to the the same time as Bo was purged, they said they’d never heard that he Bo family, and if that were so the and later testified in both the trials had any heart problems – though Global Times had proclaimed it of Bo’s wife (found guilty of mur - he was overweight. They added that should be confiscated by the Chi - P h o t o dering a British businessman) and they were surprised to hear he’d nese state. However, the Chinese

S o u r c Bo himself. In the case of the latter, been cremated so swiftly (within courts were unable to recover the e :

I m

a Xu turned up and admitted he’d two days of the heart failure). property which was sold for $8.5 g i n e

C paid Rmb21 million ($3.25 million) One blogger speculated that Xu million last year. Who pocketed the h i n a in bribes to Bo. Among the salacious retained a dangerous amount of money remains a mystery. n 18 Week in China Society and Culture 11 December 2015

Ask Mei: Are Chinese netizens witty?

Most Westerners think we Chinese are too serious, lacking emotions and a sense of humour. Many also think that due to tight government control of the media, it is hard to see the type of political satire that is prevalent in the West. The reality is far from this perception. Yes, you hardly see any political satire in the mainstream media. However, thanks to the popularity of the internet and smartphones, the Chinese have been super prolific and diligent in creating and spreading jokes and political satire on social media platforms such as Sina Weibo (though less so than a couple of years ago) and more recently on WeChat. expensive alcohol, smoking fancy cigarettes and driving Almost on a daily basis I come across writings or smart cars; yet the foreigners switched to eating organic images that poke fun at government policies, Party food, drinking water, riding bicycles and giving up officials, environmental degradation or certain cultural cigarettes all together. Why didn’t they tell us 30 years phenomenon. ago this would be the new trend? It could have saved us Actually, Week in China has been sharing some of all the hardship we’ve endured just to reach the global the best social media humour in its reports since its standard of La Dolce Vita.” inception in 2009. As we approach the end of the year, I Finally, here is a joke that came out shortly after Mark would like to share a few popular internet jokes and Zuckerberg and his wife announced they’d donate 99% hope they will bring you laughter as well as some insight of their Facebook shares to charitable causes. into contemporary Chinese humour. “As we approach the end of the year, there are a lot On food safety: of fraudsters posing as corporate executives and “We Chinese received comprehensive chemistry philanthropists while seeking money and publicity. education from our daily dinner tables: we learned about One such guy called Zuckerberg claimed to be the paraffin wax from our rice, DDVP from our ham, head of Facebook and says he’s donating tens of naphthalene red from our salted eggs, formaldehyde billions of dollars to charitable causes. I wasn’t so from our hotpots, sulphur from our honeyed dates, and easily fooled so I went online and looked it up. It melamine from baby milk powder.” turned out that Facebook is totally illegal and I can’t 结 “When foreigners drink milk they get jieshi (strong, even open their webpage – what a hoax!” [The satire 实 ), when we Chinese drink milk we get jieshi (kidney here: Facebook is banned in China.] 结石 stones, ).” [Note: The last characters of the two The funnier thing is that when I reposted this joke to character words strong and stone are different but their my personal WeChat group, my 80 year-old high- pronunciations are very similar.] school teacher, who had never heard of Facebook On footballers’ shooting skills: replied: “Thank you for warning us. There are indeed a “Those who can score by a powerful kick from 30 lot of fraudsters these days.” I had to explain to her that metres away are German footballers, those who can the joke was poking fun at China’s internet censorship score from 3 metres away through beautiful passing are regime. Laughs all round. Portuguese footballers, and those who can knock over the corner flag in penalty kicks are Chinese footballers.” A native Chinese who grew up in northeastern China, On rapid economic development: Mei attended an elite university in Beijing in the late “When we were little and poor, we only ate simple 1980s and graduate school in the US in the early 1990s. food, drank water and rode bicycles everywhere we Over two decades she has worked in the US, Hong went. We envied foreigners for their rich food, expensive Kong and mainland China, both in the media and with alcohol, fancy cigarettes and smart cars. So we worked two global investment banks, where she has honed her like crazy for the past 30 years just to catch up with bicultural perspective. If you’d like to ask her a question, them. Now, finally we are also eating rich food, drinking send her an email at [email protected]

19 Week in China And Finally 11 December 2015

Relative value News of family ties to Xi Jinping excites Shanghai investors

onfusing the names Obama and since 2014 (Xi Zhongxun, of course, COsama has tripped up quite a was Xi Jinping’s father.) few news anchors in the English-lan - The disclosure intrigued the me - guage media. Several TV channels, dia, with CBN reporting that Xi Yin - for example, stated ‘Obama has ping is a “distant relative” of the Chi - been killed’ during news of the raid nese president and that the two that eliminated the former Al-Qaeda share a great-grandfather. Xi Yin - leader (ABC News, CNN and the BBC ping’s father, in fact, was a cousin of all made the error). Xi Zhongxun. This connection was Four journalists from China more than enough encouragement News Service have just been sus - for investors to pick up Lotus pended for a spectacular blunder Flower’s stock. Within 30 minutes of of their own: reporting on the “res - the Xi announcement, the firm’s ignation” of Chinese leader Xi Jin - shares had surged to hit the ex - ping during his visit to South Africa His ‘distant relative’ caused a stir change’s 10% daily limit. last week. But it was a short-lived spike. This time it was an unfortunate an independent director. It wasn’t a State censors soon stepped in and typographical error. Instead of mistake this time (although typing banned searches for the term “Xi telling readers about a “speech” ( zhi ‘Xi Yinping’ into Google automati - Yinping” on social media. And Lo - ci ) by Xi, the official newswire re - cally reroutes the search to ‘Xi Jin - tus Flower’s shares plunged the fol - ferred instead to his “resignation” ping’, assuming the input is a typo). lowing day after it made public that (ci zhi ). The man in question not only it had withdrawn Xi Yinping’s direc - Worse, other Chinese media out - bears a name strikingly similar to torship. Its chairman made a public lets simply copied and pasted the the Chinese leader but apparently, apology, stressing that the company error into their own reports, com - shares the same blood line. was “absolutely not intending to pounding the gaffe. Filings with the Shanghai Stock cause any speculation”. Adding more confusion last week Exchange show that Xi Yinping was If the appointment was a public - was an announcement from Shang - born in Shaanxi province, in the ity stunt, it backfired, the Beijing hai-listed seasonings maker Lotus sane home town as Xi Jinping. He News admonished. And the whole Flower Gourmet Powder that it had has also worked for the province’s episode cast local investors in a poor appointed a certain “Xi Yinping” as Xi Zhongxun Research Association light too, mused Apple Daily. n

Putting no gloss on it

“The conclusion is that we don’t know what works, which means we should study harder and respect locals” P h o t o

The humble view of Suh Kyung-bae as to which of his cosmetic products sell well in China and which S * o u r c don’t. The boss of South Korea’s AmorePacific told the Financial Times that sales of his cosmetics have e :

S h tripled in China since 2010, driven by brands like Laneige and Innisfree. Forbes recently named Suh as its u t t e r Suh Kyung-bae s Asian business person of the year. t o c k

20 Week in China The Back Page 11 December 2015

Photo of the Week In Numbers 4 minutes The length of a musical chant purportedly circulated by Islamic State this week, sung in Mandarin. This nasheed is a call to arms apparently targeting disaffected Chinese Muslims – although such campaigns might normally be conducted in Turkic or Arabic.

10% The potential decrease of China’s

P workforce by 2040, according to the World h o t o

Bank. The contraction is due to China’s S o u r

c aging population, translating to a net loss e :

R

e of 90 million workers. u t e r s

Some like it cold: university students create an image of Marilyn 250,000 The estimated number of electric cars sold Monroe by clearing snow on a soccer pitch in Jilin province in China this year, making it the world’s largest market for the new energy vehicles. Tellingly, prices paid in China for lithium – a key component of electric car batteries – Where is it? have risen over 60% this year, with the Some of the places referred to in this issue country due to consume roughly 20% of the lithium sold globally in 2015. Shenyang Beijing Dalian 2.02 million Shandong The number of passenger vehicles sold in Qingdao November in China, with sports utility Zhengzhou China vehicles (SUVs) sales prominent. Some Wuhan Shanghai attribute the boost in November car sales – up 18% on the month before –to the heavy levels of smog enveloping areas of the country (consumers apparently believing the air’s cleaner inside a car) whilst others Guangzhou Shenzhen Hong Kong Zhuhai Macau say it’s due to the tax cut on small-engine vehicles, implemented in October.

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