1 Talking Point 6 Week in 60 Seconds 7 China Consumer Week in China 8 Cross Strait 9 Internet and Tech 11 Auto Industry 13 Banking and Finance 15 China and the World 21 February 2014 16 Society and Culture Issue 226 19 And Finally www.weekinchina.com 20 The Back Page

Only a matter of time? m o c . n i e t s p e a t i n e b . w w w

Another trust product narrowly avoids default. Will Beijing

keep bailing out the troubled sector? Brought to you by Week in China Talking Point 21 February 2014

Searching for redemption This year’s big debate: will Beijing allow a trust product to default?

Another week, another bailout: this time a potential default by Jilin Trust was averted by Beijing policymakers

ne of the odder encounters for garet Thatcher regularly derided Issued by investment trust firms OEdward Heath in China was Heath’s outdated solutions to and distributed by the banks, these with a biology student. The former Britain’s economic problems and WMPs have multiplied in recent British prime minister was at a those in her circle would dismiss his years in large part because they cocktail party in Beijing in 1983 critiques of her bolder reforms (WiC have offered returns far in excess of when the student approached him can imagine them remarking bank deposits. The problem? A and asked in halting English: “Do ‘That’s just Ted talking rubbish number of them seem to have done you talk old rubbish?” again’). A one-term prime minister, little more than make questionable The bizarre exchange came about Heath ended his parliamentary ca- loans to shaky borrowers. Last thanks to David Tang, the Hong reer in a permanent huff, feuding month just such a product (sold to Kong entrepreneur. In the early with Thatcher from the back- ICBC clients) almost defaulted, 1980s Tang gave English classes to benches. Proud and prickly, the stu- saved only by a last-minute rescue the first batch of Ph.D students at dent’s linguistic faux pas must, at (see WiC223). Peking University that were being best, have produced a grimacing Many now fear that other WMP groomed to study abroad. To im- chuckle from Heath. defaults are inevitable and that they prove their language skills, Tang But what link is there between an will soon start to erode confidence would take them to drinks recep- 1980s Beijing cocktail party and the in the financial sector. This would tions and encourage them to talk to gatherings attended by today’s Chi- be no small issue given the esti- foreign attendees in English. ‘What nese financial elite? Ironically, a lot mates of WMP volume. Ratings about?” they would ask. “Oh, any of the conversations are also about agency Fitch thinks Rmb13 trillion P h o t o old rubbish,” Tang had replied. rubbish – or more specifically the ($2.1 trillion) have been issued with

S o u r c The biology student took Tang’s country’s wealth management at least 40% of the notes set to come e :

I m

a advice literally and – insofar as products (WMP) and the threat that due this year. Disaster scenarios in- g i n e

C Heath was concerned – may have their toxic contents pose to the clude a liquidity crunch and a tidal h i n a hit a raw nerve. His successor Mar- banking system. wave of bad debt with the banks hit 1 In the future, finance will help new growth flourish.

There are grounds for cautious optimism in the real economy — but creating sustainable growth always needs careful encouragement.

New income streams should be built on opportunities that have longevity and new solutions prepared for technology that will continue to evolve.

In this era of transparency, HSBC is working with clients to help create conditions in which businesses can flourish.

By connecting the developed and the developing world, we can help you protect and cultivate real growth — and so create that success that lasts.

There’s more on the future of finance at www.hsbcnet.com/growth

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 21 February 2014

hard as the contagion spreads. And according to Xinhua, it organ- Industry spokespersons like the ised a restructuring to stave off de- China Trustee Association, which fault. The 21CN Business Herald has promotes the use of wealth man- also reported that three (unidenti- agement products, has tried to fied) local companies would be in- strike a more confident tone, telling vesting Rmb3 billion in Liansheng reporters last month that asset and CDB would advance Rmb2 bil- quality is “quite sound and sys- lion of additional capital in ex- temic risks are impossible”. change for a 50% stake in the miner. But privately China’s regulators The Financial Times noted it was won’t be quite as confident – know- “the second time in less than a ing the shadow lending sector rep- month that Chinese financial insti- resents what Dick Cheney might tutions have rescued shadow bank once have termed as a ‘known un- products”. known’. That is to say, the financial authorities are acutely aware of the What’s next? problem but struggle to assess its It looks like a case of two down, but full magnitude. It is this sense of several trillion more redemptions uncertainty that has contributed to to go. “The good news,” the Wall decisions to prevent defaults from Part of Xing’s dowry for daughter Street Journal points out, “is that in- occurring. The preferred tactic has vestors are getting reacquainted been to cobble together a bailout. lent Blessing Project that was res- with risk”. For example, one metric Of course, a credit market with- cued. It had loaned cash to the Lian- now being more closely monitored out defaults isn’t normal. The cur- sheng Group, a troubled coal pro- is CDB’s own cost of funding. The rent system depends on what might ducer from Shanxi province. In a New York Times says this is a num- be termed ‘the Beijing Put’ – a belief note to investors last month, the ber worth “watching carefully” as in- that the government won’t let any product’s backer, Jilin Trust warned vestors are evidently growing more of the WMPs fail. Ergo investors feel that few opulent blessings were worried about the bank’s credit pro- safer buying the instruments, re- forthcoming. Instead the product file. Yields on its long-term yuan- gardless of the credit risk of the bor- was going to default on Rmb100 denominated bonds have spiked rower. Like the better-known million ($16.43 million) of notes on “about 50% in the past year, from ‘Bernanke Put’ – the Fed’s commit- February 19 because Liansheng was about 4% to almost 6%”, the news- ment to easy money propping up struggling to repay Rmb30 billion paper warns. the stock market – the assumption in other debts. According to Japan’s Nikkei, signs is that the financial authorities will All of this would have been dis- of unease are showing up in the do whatever is necessary to keep the tressing to clients at China Con- wider bond market too. “Concerns markets and the economy from struction Bank, which had sold the over potential defaults on high-yield going down. In China the put has product through its branches. financial products are making Chi- basically allowed investors to buy (Alert readers will recall we’ve nese companies put some debt is- products that yield far more than mentioned Liansheng before, but in sues on hold due to wary investors. bank deposits, but seem to have the a somewhat different context. Its Since January, nine companies have same kind of state guarantee. boss Xing Libin grabbed nationwide postponed or cancelled issuance The question in China is whether headlines in 2012 when his daugh- plans for a total of Rmb5.75 billion in the Beijing Put could be under ter got married. As we described in bonds and commercial paper.” threat... WiC144, the elaborate wedding in- How about broader concerns for cluded a ‘dowry’ of six Ferraris for the banking sector? Caijing maga- Bailouts galore... the new son-in-law and a ceremony zine says that official data from the The latest evidence is that the gov- reputed to cost Rmb70 million.) regulator signals that the non-per- P h o t o ernment’s commitment to avoiding However, investors were once forming loan ratio has risen to 1% in

S o u r c defaults still holds. That’s because again saved from disaster. Lian- aggregate. Ambrose Evans- e :

I m

a another trust product has been sheng’s main creditor is the state Pritchard, a bearish commentator g i n e

C bailed out this week. This time it was goliath China Development Bank in the UK’s Telegraph newspaper, h i n a

the Songhua River #77 Shanxi Opu- (for more on which see WiC189). thinks there could be a lot more bad 3 Week in China Talking Point 21 February 2014

news to come. “Total credit has jumped from $9 trillion to $23 tril- Planet China lion in four years, an increase equal Strange but true stories from the new China to the entire US banking system,” he warns, adding that George Soros fears that there could be a “run” on BREAKING HEARTS. Many of Shanghais sweethearts were in for a bitter China’s state banking system akin disappointment last Friday, reports the BBC, after their efforts to get two seats together at local cinemas were thwarted by an anti-Cupid. The man in to the Lehman bust. question had started buying up odd number seats at Shanghais cinemas so that couples could not buy seats together. He took his campaign online and Other views? soon others were following his lead. Their target was seats at Beijing Love One longtime WiC reader – formerly Story, a movie promising to be particularly popular on this biggest of date an investment banking chief in nights. The man and his online accomplices managed to achieve their goal Hong Kong – sent us a long email at cinemas around Shanghais fashionable Xintiandi dining district. He later on the topic from London. He said told newspapers that hed orchestrated the campaign to wreak revenge on that he’s met a variety of Chinese romance, having been dumped by his own girlfriend last year. businesspeople and officials in the British capital recently and they all talked at length on the subject of China a remarkable ability to delay to expire. Xia Bin, a counsellor of whether a default would be allowed the pain. the State Council, said recently to occur. “So if that is the plan (and the fact that individual financial institu- “It occurred to me,” he wrote, they blinked and bailed out China tions should be allowed to default “that the question we all ought to be Credit Trust might give one pause as long as they do not pose a threat asking is: can China’s economy sur- to think that it could well be the to overall financial stability, re- vive in its current form without the case) then how could they be plan- ports Caijing. ‘government put’? In other words, is ning to solve the issue? At the World Economic Forum, Li China’s economy today so depend- “I had always thought the obses- Daokui, also told Bloomberg: “A ent on the implied government sion with 7% growth was about pre- controlled default is much better guarantee of all government, quasi- venting unemployment and than no default.” The Tsinghua pro- government and SOE debt that it is achieving the target of doubling fessors, a former central bank ad- impossible for the ‘government put’ the size of the economy this viser, said that controlled losses will to fail?” decade. But it occurs to me that “let future investors know that the “If the answer is ‘yes’, then the there may be a third reason for the trust products are not risk free”. talk of default is misplaced as it can- obsession – that they need to main- The same theory is shared by Fan not be allowed to happen. If the an- tain relatively high growth to en- Gang, a professor at the Peking Uni- swer is ‘no’ then default is inevitable. able them to grow their debts away versity HSBC Business School and I suspect the answer is ‘yes’. China’s (however slowly). If the interest also a former member of the central economy is too dependent on the rate is 5-6%, you need growth bank’s Monetary Policy Committee. ‘government put’ at this point in its greater than 5-6% to shrink the At a Hong Kong conference for development and so, for now at debt over time.” global investors the prominent least, the market is massively mis- Of course, this muddle-through economist said he believed the gov- pricing the risk of default. strategy would require further ac- ernment was seeking out a “good “That is not to say there is not a tion in hoovering up the financial default case”. He then elaborated: huge problem in the system, but detritus of the past five year’s lend- “They want to pick one that can rather that unwinding this problem ing binge. As we pointed out in teach the market a lesson but where is not going to be the rapid process WiC223, one institution that could the blame should not go to the local which many offshore analysts seem help with this is Cinda, the ‘bad government. A Ponzi scheme type to think. These analysts forget that bank’ that listed in Hong Kong in of case would be good. They also a closed capital account, an absence December. want the case to be containable (in of aggressive hedge funds, a com- But some senior figures from terms of its contagion).” plete lack of derivatives which China have been making contrary would enable shorting and a system noises about the muddle-through When was the last time the Beijing where government banks are owed approach, suggesting it might be Put was tested? money by government SOEs gives better if the Beijing Put is allowed In fact, high-profile defaults have 4 Week in China Talking Point 21 February 2014

been permitted previously, not least tinue to emanate from that sector. shadow banking sector under in 1999 when banks and interna- According to consultancy Cnbene- greater control. tional investors were badly burned fit, there are 19 coal-related WMPs There was also speculation that by the Guangdong Investment due to redeem this year. the spike in bank lending indicates Trust (better known as GITIC: no- that the banks are moving off-bal- tably, it was also a trust firm). In- Any moves to fix the problem? ance sheet lending via WMPs back vestors had bought GITIC’s debt China’s banks surprised analysts onto their books after attempts to products thinking they were im- with their January lending num- crack down on the practice. plicitly guaranteed by the central bers: making Rmb1.32 trillion of In mid-February the PBoC also government in Beijing and were new loans, or nearly three times De- released new policy guidance ban- shocked when it defaulted. China’s cember's level (and a four-year high ning banks from issuing WMPs and current anti-corruption tsar Wang for January data). using the proceeds for proprietary Qishan was sent to Guangzhou to That seemed at odds with state- trading. fix the mess (see WiC176). But on ments from the People's Bank of As the Wall Street Journal com- that occasion China’s economy was China late last year that the econ- ments: “The central bank’s move – much smaller and the immediate omy is facing a longer-term period which follows other regulatory ac- impact of the default was of less of deleveraging. But the PBoC also tions aimed at cutting risks in concern to the wider world. That reported that lending by trust com- China’s financial system – repre- would be less true today. panies had fallen to Rmb104 billion, sents further evidence that au- The opportunities for a default half as much as a year earlier. thorities are taking seriously the meanwhile are legion. Ping An Se- One interpretation is that the country’s debt load, especially curities reckons “coal mines’ trust central bank is loosening credit to funds raised outside banking products are the weakest link”, and limit the chances of an abrupt channels.” For now, at least, the Bei- so periodic default scares may con- slowdown as it tries to bring the jing Put lives on. 

The rover’s return

“Hi, is anyone there?” Last Thursday morning a weibo account penned from the point of view of Chinas first lunar rover, Yutu, crackled into life once again. It had been 19 days since scientists last had contact with the exploratory vehicle, whose name means Jade Rabbit in Mandarin. Because of an earlier malfunction there were fears that it had not survived the two-week- long lunar night. But the latest message, followed a few minutes later by a short bulletin from state news agency Xinhua, gave Yutus fans new hope that the rover might complete its mission. Later in the day a spokesman for the space programme confirmed that Yutu was National Defence, the government agency functioning again – albeit in a limited way. responsible for the rover, although officials there “Youre alive!”, “We love you little Bunny!”, “The denied it. whole nation is behind you!”, were just some of the Some netizens even seemed to believe that the 30,000 responses posted on Yutus account over the messages were coming from Yutu itself, using

I remainder of the day. technology similar to Siri, the personal assistant on l l u s t r a There was also new speculation about who was iPhones. But in the end the truth turned out to be t i o n :

responsible for these first-person messages which much more prosaic. On Monday Sina Weibo w w w

. seemed to be part human, part rabbit and part announced that the account was run by Guoke, a b e n i t a computer. The obvious answer was the State website specialising in technology news and e p s t e Administration of Science, Technology and Industry for operated by Xinhua. i n . c o m

5 Week in China The Week in 60 Seconds 21 February 2014

Vive la France, says Dongfeng The major news items from China this week were...

Struggling French carmaker PSA Peugeot Citroen has 1sealed a long-awaited rescue deal in which its found- ing family cedes control. China’s Dongfeng Motors, the second-biggest domestic automaker, and the French government will each invest about $1.1 billion in return for 14% stakes. Should the deal be approved, the Peu- geot family’s 25.4% stake will be diluted to 14%, match- ing that of the other leading shareholders. The deal will also reinforce Peugeot’s JV with Dongfeng, promising increased production, a new research and development centre and expansion into Southeast Asian markets.

China has surpassed India as the world’s biggest con- Dongfeng is buying 14% of France’s Peugeot Citroen 2sumer of physical gold. It imported 1,066 metric tonnes of the metal to India’s 975 metric tonnes in 2013, recently posted a loss of $92.9 million for the last fi- says the World Gold Council. Last year Chinese demand nancial year. for gold bars, coins and jewelry soared by 32% to record levels as the price of gold slumped 28%. In India, con- China’s economic planning body said this week sumption increased by 13% but further growth was 4that American chipmaker Qualcomm is suspected curbed by import restrictions aimed at curbing the of abusing its market position, which could lead to country’s current account deficit. fines of up to $1 billion. The NDRC said it had received complaints that the chipmaker was charging higher Hong Kong-listed oil trader Brightoil Petroleum has prices in China than it did in other countries. The 3agreed to buy American oil and gas company NDRC says it is in talks with another American tech- Anadarko Petroleum Corp’s China unit for $1.1 billion. nology company, InterDigital, which develops patent Brightoil, which is based in Shenzhen, first entered the technologies for wireless devices and networks, about upstream gas business in 2009 and now has two natu- a possible settlement in another anti-monopoly in- ral gas projects in the Xinjiang Tarim Basin in north- vestigation. western China. But it has been struggling to make a profit from its oil trading and storage operations, and China’s largest internet firm by market capitalisation 5Tencent is reported to be spending $500 million on a 20% stake in Dianping, the country’s most popular restaurant review site, in an effort to strengthen its lo- cation-based services. According to Sina, the acquisition will let Tencent tap into Dianping’s almost 100 million monthly active users who rely on the website for reviews and discounts for food and entertainment (for more about Tencent, see page 9). P h o t o HSBC’s preliminary China Manufacturing PMI fell to

S o u r a seven-month low of 48.3 in February, compared to c e

: 6

R e a final reading of 49.5 in January. The contraction sug- u t e r s Customers flock to buy gold accessories gests a weak start to the year for manufacturers.  6 Week in China China Consumer 21 February 2014

Saucy performance Two of the hottest recent IPOs are for firms making soy sauce

t the 1915 exposition celebrat- Aing the opening of the Panama Canal, there were two unexpected winners at the event’s wine contest. Two Chinese varietals came home with gold medals: one was moutai, a grain-based liquor produced in Guizhou; the other was cooking wine made by Huzhou Laohenghe, a soy sauce maker founded more than 130 years ago. Both tipples have enjoyed differ- ent fortunes in more recent times. Kweichow Moutai became the best- performing stock during former Tasty profits: Laohenghe has been selling cooking wine for 130 years President Hu Jintao’s 10-year term, enjoying a 3,500% rally (see WiC172). more seasoned sauces are always especially of solid, reputable brands Laohenghe’s cooking wines, mean- the better ones.” rather than some of the duds that while, have toiled as a more unsung Laohenghe’s stock market suc- have got permission to list in the contribution to the national palate. cess isn’t a one-off. Another soy past. Investors are jumping on the But investor tastes seem to be sauce maker, Foshan Haitian gained consumer staple bandwagon, the changing. Thanks to Xi Jinping’s 30% on its first trading day in Wall Street Journal agrees, as de- austerity drive, the share price of Shanghai last week. The 300-year mand for some of these less glam- Kweichow Moutai has plummeted old firm’s Rmb3.8 billion ($634 mil- orous products is expected to bene- more than 40% since 2012. Lao- lion) offering was the second- fit from China’s push for growth henghe’s market value has climbed largest since the primary market re- through domestic spending rather by about the same amount in the opened this year. Within seconds of than exports or investment. last month after going public as the its trading debut, Haitian’s share “Investors favour fast-moving Honworld Group in Hong Kong at price was up by the bourse’s 44% consumer goods like Haitian at a the end of January. first-day limit. time when the economy is slowing Laohenghe is the largest manu- Haitian’s heritage dates back to because they offer steady earnings facturer of cooking wine in China the Qing Dynasty, when it was growth,” an analyst from Huatai Se- with a 13.5% market share in 2012. formed from a group of sauce brew- curities told the newspaper. According to Euromonitor, the mar- ers in the southern city of Foshan. The Hang Seng Indexes Com- ket is going to grow at an annual According to its listing prospectus, it pany, which compiles Hong Kong’s rate of 20%, reaching Rmb10 billion is the biggest soy sauce maker in the key stock indices, underscored the ($1.65 billion) in five years time. Lao- country with a 20% market share. trend last week by announcing that henghe’s other products range from Aside from domestic rivals such as Mengniu Dairy will be added to soy sauces to bean curd but all are Laohenghe, it competes with the Hong Kong’s benchmark next naturally made using traditional likes of Hong Kong’s Lee Kum Kee month. China Coal Energy, the coun- P h o t o techniques, according to the com- and Japan’s Kikkoman. try’s second-largest coalminer, will

S o u r pany. This explains much of their Local investors seemed happy to make way. The reshuffle comes after c e :

R e appeal, says Hong Kong Economic bid for Haitian’s stock, flushed with an 80% gain in Mengniu’s market u t e r s Times: “For most consumers, the the chance to buy IPOs once more, value over the past 12 months.  7 Week in China Cross Strait 21 February 2014

Good meetings China is in dispute with many neighbours, but Taiwan relations improve

decade and a half ago the Tai- also lacked tangible results. But Awan Strait was regarded as one again it offered the opportunity to of the world’s most dangerous po- make conciliatory noises and hint tential flashpoints. at future progress (including a pos- Today, it looks like a calmer spot, sible ‘official’ meeting between Xi albeit in a region seething with and Taiwan’s current president and diplomatic tension. KMT chairman, Ma Ying-jeou). The latest evidence was two meet- Xi, who alarmed many Taiwanese ings between Taiwanese and main- last year by saying that “a political land Chinese delegations which took solution could not be put off indef- place this week and last. initely”, this time praised the is- The first was deemed the more land’s “lifestyle”. diplomatically significant – the high- Was this a pledge to safeguard its est-level encounter between cross political structure, some wondered, straits officials in 65 years. The sec- or more a complimentary refer- ond followed in a matter of days, enece to its social security system? with an unofficial visit by Lien Chan, All of which is in marked contrast the honorary chairman of Taiwan’s In the spotlight: Wang Yu-chi to worsening relations between ruling Kuomintang party. China and some of its other neigh- “From low frequency to high fre- historic ties. It ended with an agree- bours in recent months. quency, from interparty exchanges ment to open representative offices As WiC last remarked in issue 221, to official meetings, these develop- on each other’s soil. Doubtless that Beijing and Tokyo have descended ments show the continual improve- is why Nanjing, the burial place of to shrill denunciations of one an- ment of deep and peaceful cross Sun Yat-Sen and once the Chinese other as Lord Voldemort – the evil straits relations,” the Global Times capital under the KMT, was chosen wizard in the Harry Potter stories. wrote in an editorial this week. as the location for the rendezvous. Earlier this month Xinhua branded The People’s Daily said that dia- One of the more symbolic parts Philippine President Benigno logue between the mainland and of the meeting saw China’s Zhang Aquino a “disgrace” for comparing Taiwan – which Beijing regards as a refer to Wang using his title of “min- China to Nazi Germany. renegade province – had “got off to ister” – something that wouldn’t Compared to that, cross straits re- an inspiring start in the Year of the have happened in the past because lations look positively fraternal. Horse”. of the sovereignty implications. The In his latest visit, Lien and his So what actually happened at media in China said Zhang was re- wife were presented two Xiaomi these meetings to warrant such ex- flecting the respect between the two smartphones by Beijing’s Party chief uberance? In reality, very little. sides but was quick to point out that Guo Jinlong. Manufactured on the The first confab was in Nanjing “content not titles are what really mainland with technologies and was attended by Wang Yu-chi, matters in a conversation”. brought in from Taiwan, Xiaomi is head of Taiwan’s Mainland Affairs That position was reinforced by the viewed as a successful case of cross Council, and Zhang Zhujun, the fact that no official titles or flags were straits cooperation. head of the mainland’s Taiwan Af- placed on tables when the two sides Inscribed on the back of the spe- P h o t o fairs Office. The three-day meeting sat down together. cial gifts, there are nine Chinese

S o u r was largely about building confi- This week’s meeting between Xi characters that read: “The mainland c e :

R e dence between the two sides and Jinping and Lien – they met as party and Taiwan join hands to earn the u t e r s talking up their shared cultural and heads not as state representatives – world’s money.”  8 Week in China Internet & Tech 21 February 2014

Route to success Alibaba and Tencent fight over online maps and taxi bookings

ne of the biggest rebukes for OJohn Woo’s historical epic Red Cliff was the choice of Lin Chi-ling to play the role of Xiao Qiao, wife of military general Zhou Yu. The com- plaint? That her voice was distract- ing, too high-pitched and squeaky. So perhaps it was a little surpris- ing that AutoNavi later tapped Lin as the voice for its mapping applica- tion. AutoNavi is a Chinese service similar to Google Maps. When switched on, the voice of the Tai- wanese actress is soon prominent. “Hi, I’m Lin Chi-ling,” it announces. “Are you stuck in a traffic jam again? Don’t worry, I’m here to relieve your stress…” Jack Ma seems to be a fan too. Last year the Alibaba Group, which Ma runs, bought a 28% stake in AutoN- avi and it announced last week that it plans to spend $1.11 billion to pur- chase the remaining shares. Listed on Nasdaq, AutoNavi told Securities Times that the bid will be considered but that its board is yet to make a final decision about ac- cepting the offer. Over the past year e-commerce gi- ant Alibaba has spent more than $2 billion taking stakes in smaller com- panies or buying them outright. Its purchases include social media sites (a stake in Sina Weibo) and asset management firms. Last month, Al- ibaba and a private equity firm set up by Ma also agreed to take a ma- P h o t o jority stake in Citic 21CN for $170 mil-

S o u r c lion, saying that it will build a phar- e :

I m

a maceutical data business using the g i n e

C little-known information technol- h i n a ogy firm. “Hi, I’m Lin – where would you like me to take you?” 9 Week in China Internet & Tech 21 February 2014

Still, the Financial Times reckons that there is “madness” to Ma’s method. “Alibaba is rushing to shore up areas of weakness ahead of a hotly anticipated initial public of- fering this year… Revenue growth has been slow because of competi- tion and the fact that the company already controls 80% of the e-com- merce market in China,” says the newspaper. Mobile is the main reason for Al- ibaba’s purchase of AutoNavi, it seems. By taking control of the country’s most popular mobile mapping service – as of the third quarter last year, AutoNavi had 171 million users and a 31.3% share of the market – Alibaba will be able to challenge Baidu Maps. Equally it will bolster its efforts to challenge its major rival Tencent, which paid $448 million for a 36.5% stake in another Chinese mapmaker called Sogou last year. Ma: Alibaba’s founder wants to gain full ownership of AutoNavi Another important considera- tion: buying AutoNavi could help when it comes to really giving the e- night Kuaidi Dache was raising its Alibaba tap into O2O commerce – commerce firm substantive help in rebate again, this time to Rmb13. or the online-to-offline audience. its mobile efforts, it doesn’t look Again, it’s all about the battle for Industry observers say that con- very likely,” was the conclusion of market share in the mobile world. sumers will increasingly use smart- Time Weekly. “The taxi-booking app is a critical phones to point them to nearby The rivalry between Tencent and piece in the two companies’ mobile shops and services. Encouraging Alibaba is relentless. strategy. Not only does it link to the them to do so requires user-friendly This week two taxi booking apps mobile payment system, it also maps (in the same way Apple has called Didi Dache and Kuaidi Dache, paves the way for their offline busi- purchased a slew of mapping com- backed by Tencent and Alibaba re- ness. If the taxi software becomes a panies to try to challenge Google), spectively, started a price war, says profitable business model, the com- with the further hope being that Oriental Morning Post. panies can then extend into other users will then make purchases on On Tuesday Didi Dache, which is areas like car rental and other hiring Alibaba’s mobile payment system connected to Tencent’s WeChat, services. They can take orders on- Alipay Wallet. raised its subsidy for taxi fares line and deliver services offline,” But analysts question whether from Rmb10 to Rmb20. That means Wang Jian from Analysys Interna- the deal will give Alibaba the boost passengers will get a discount of up tional explained to Time Weekly. in mobile that it needs to compete to Rmb20 off the fare if they use And in signs that another front is against Tencent’s hugely popular the service, while cab drivers will opening up in their battle, this week mobile messaging application get an additional cash reward of Tencent announced yet another ac- WeChat. Rmb5 or more on the fare for each quisition. This time it is paying $500 “It is difficult for Alibaba to com- trip booked through the mobile million to acquire a 20% stake in Di- pete against WeChat. Just like Sina app. The move came less than a day anping, China’s most popular P h o t o Weibo, which generated traffic for after Kuaidi Dache – linked to Ali- restaurant review website. The pur-

S o u r Taobao and TMall [Alibaba’s e-com- pay Wallet – offered rebates for chase will give Tencent access to its c e :

R e merce sites], AutoNavi may help Al- users up to Rmb11. 100 million users. u t e r s ibaba grow top line revenues but Not to be outdone, by Tuesday Over to you, Jack.  10 Week in China Auto Industry 21 February 2014

Unlocked vehicle Will Youngy boss take profit on his huge BYD stake?

ondon’s minicabs are reflective Lof China’s growing business in- terests in the British capital. London Taxis, builder of the boxy black cabs so synonymous with the city, is owned by Chinese automaker Geely after all. But following London Mayor Boris Johnson’s pledge to cut taxi carbon emissions to zero by 2018, its flagship model the TX4 may soon face competition from another ve- hicle – this time one that is made in China. This week BYD launched Lon- don’s first ever all-electric taxi fleet. It has provided 20 electric minicabs to fledgling private hire firm Thriev, less than two months after deliver- ing London’s first fully electric buses. While US rival Tesla primarily tar- gets high-end consumers, BYD has been focusing its electric future on BYD will work with ABB to build a new network of charging stations public transport. By the end of June the Chinese hybrids. Nevertheless the showcase nese government’s renewed efforts firm had more than 1,000 electric projects do help to enhance BYD’s to promote new energy cars to buses or taxis running in Chinese brand name worldwide, making it tackle dramatically worsening air cities. It has also been promoting one of the more obvious partners pollution in its cities – have put the trial operations in overseas cities. for foreign firms with an eye on the company’s stock back on investors’ Pilot programmes for its electric ve- new energy revolution. radar. hicles have launched in the US, For example, BYD has a joint ven- BYD’s Shenzhen-listed shares re- Canada, Germany and likewise in a ture with Daimler in China. And ear- bounded more than 80% in 2013. variety of countries in Southeast lier this month, Swiss-based electric And following another 30% gain so Asia. equipment maker ABB announced a far this year, its A-shares have But not many of these schemes partnership with both companies to surged to an all-time high this have resulted in meaningful con- supply fast-charger techology. week, reaching a market capitali- tracts. According to press reports, the sation of Rmb112 billion ($18.5 bil- For example, Green Tomato Cars, agreement “will result in the world’s lion), having listed in the southern P h o t o London’s second-largest minicab op- largest fast-charging network for Chinese city three years ago.

S o u r c erator, said it had pulled out of a deal electric vehicles”. Like Tesla’s ambi- The company’s Hong Kong- e :

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a this week that would have seen 50 tions in China (see WiC224), the de- listed shares, which were floated in g i n e

C BYD taxis join its existing 500- tails are limited. But that said, BYD’s 2002, are still trading 50% below h i n a strong fleet of mainly Toyota Prius latest initiatives – as well as the Chi- their 2009 peak. But at around 11 Week in China Auto Industry 21 February 2014

HK$42 ($5.40), Warren Buffett is the seed capital – a stake that the Se- months. His BYD stock is all Shen- now sitting on a 400% return after curities Times described as “the best zhen-listed and was subject to a acquiring a 10% stake back in 2008. venture investment ever in China”. 36-month lock-up that expires in In fact, Buffett isn’t the only one According to China Business June. to profit from BYD’s transformation News, Youngy has since expanded According to the Investor Journal, from battery maker to green au- into upstream mining too, as part the market value of BYD’s ‘locked- tomaker. Berkshire Hathaway’s in- of a strategy to build “an integrated up’ stock is now the second highest vestment return has been dwarfed industrial chain” anchored against in the Chinese market. by that of Lu Xiangyang, the cousin BYD’s core businesses. In 2009 the (Great Wall Motors will see its of BYD’s chairman Wang Chuanfu. Guangzhou-based company bought own share lock-up expire in Sep- WiC has profiled Wang before (see 70% of the world’s largest lithium tember – and the current value of one of our earlier mentions in issue mine in Sichuan and it now has in- the stock that is being freed up is 42). But when he was setting up his vestments in projects that carry a Rmb64 billion.) battery venture back in 1995, he combined Rmb180 billion market So investors will soon find out sourced Rmb5 million as startup value. whether Lu’s commitment to BYD capital from his cousin Lu. Buffett has stressed repeatedly is as strong as Buffett’s. In the event Lu and his investment holding that BYD is a long-term play that Lu does take profits, it could see firm Youngy now owns a combined he will hold for the foreseeable fu- downward pressure on a stock 17% of BYD. The stake is worth ture. But for Lu the option to di- whose recent trajectory has only Rmb19 billion or nearly 4,000 times vest opens up in just a few been positive. 

Who’s Hu: Wang Wenyin Profiles of China’s business leaders

For most Chinese entrepreneurs the metal copper is often factory. Amer grew so quickly that Wang had to open a new plant associated with unorthodox bank loans (see WiC103 for our first each year to meet surging orders. report on copper-backed trade finance). Wang Wenyin proves to Wang has timed the boom and bust cycle well. After the 1997 be an exception. He has built the biggest privately-owned Asian financial crisis Amer expanded into the copper cable market. copper-wire business in China. During the 2003 downturn, Amer capitalised on falling land prices to acquire bigger production bases in Shenzhen. It also Getting started expanded upstream by taking over smaller copper mines in the Wang was born in 1970 to a rural family country. After the 2008 global credit crisis, in Anhui. After graduating from Nanjing Amer grew its international exposure too University in 1989, he was given a job through the acquisition of copper firms in at a state petrochemical plant in Europe and the US. Shanghai. Not content with a Rmb400 With more than 15,000 staff, Amer’s ($66) monthly salary, Wang went to revenue in 2012 totalled $30 billion. But the Shenzhen in 1993 for a fresh start. low-profile Wang only shot to nationwide When months of unsuccessful job fame last year when Amer was named as hunting reduced his net worth to one of the Fortune Top 500 firms, ranking Rmb10, Wang realised he had to restart 387th worldwide. from the very bottom. Eventually Wang According to the Hurun Rich List, Wang’s joined a Japanese copper wire net worth hit Rmb30 billion in 2013, largely producer as a warehouse worker. His thanks to his 99% stake in Amer. In ability to memorise several thousands material codes impressed comparison, Jianxi Copper, the biggest state-run copper firm, has the bosses. Wang rose through the ranks quickly – seven a market value of around Rmb48 billion. promotions in one year – to become the sales manager. Wang soon felt the glass ceiling. When his boss went against Need to know Wang’s decision to maintain ties with a client with a patchy credit Wang likes collecting antique Chinese furniture and uses them to P

h at the Japanese firm was up. He founded his own plant in 1996 to furnish Amer’s Shenzhen headquarters. o t o

S produce electric wires. That venture would grow into today’s Amer. He likes reading too. o u r c Whenever Wang finds a good book, he orders several dozen e :

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a Big break copies, distributes them to his senior staffs, and then requires g i n e At the beginning Wang worked and lived with his employees in the them to write book reviews.

C h i n a

12 Week in China Banking and Finance 21 February 2014

Born to succeed Chinese media begins to focus on the incredible rise of Anbang Insurance

pecial economic zones have Sbeen a fertile breeding ground for some of China’s most powerful insurers. The first insurance company in China, the Canton Insurance Soci- ety, was co-founded by British firm Jardine in 1805 in Guangzhou, the first Chinese port opened for inter- national trade. Ping An Insurance also found the perfect habitat in Shenzhen, one of the four special economic zones cre- ated in the 1980s. Since then Ping An has gone on to assemble licences in almost every area of the financial landscape (see WiC194). But the me- Growth spurt: in three years it has accumulated Rmb600 billion of assets teoric rise of another Shenzhen in- surer – this one only three years old more than Rmb600 billion ($98.69 “wants a seat on CMB’s board”. – is also earning attention. billion) in assets. By amassing a substantial stake, On December 9 last year more The growth owes much to the im- or possibly taking a seat on the than 1.1 billion shares of China Mer- pressive portfolio of banking shares board of a major lender, analysts chants Bank (CMB) changed hands that Anbang has accumulated over have suggested that Anbang is try- via the Shanghai exchange’s block the past three years, especially its ing to accelerate its expansion by trading system (a platform for trad- 2011 purchase of a 35% stake in deploying a bancassurance model ing large stockholdings at prices ne- Chengdu Rural Commercial Bank for (i.e. using the banks as a distribu- gotiated between seller and buyer Rmb5.6 billion. The regional lender’s tion channel for its insurance prod- within 30% of the previous session’s assets have tripled to Rmb300 bil- ucts). “This is the only way Anbang closing price). At Rmb13.7 billion lion since then. can catch up with other large insur- ($2.3 billion), it was the biggest block By last September, Anbang had ance companies,” the Economic Ob- trade in the history of the Chinese also accumulated a 0.2% stake in server posits. stock market. ICBC and roughly 5% of Minsheng In fact, Anbang is just a brokerage The deal surprised domestic in- Bank. With a combined market value licence away from putting itself on a vestors and soon had market insid- of Rmb12 billion, the holdings rank par with Ping An as a fully-fledged ers scrambling for information Anbang among the top 10 share- financial services powerhouse. Cen- about the buyer. The investor was holders of both banking giants. tury Weekly magazine says that An- soon revealed to be Anbang Insur- In May last year CMB sharehold- bang now has controlling stakes in ance Group, a firm that only ers blocked a board candidate pro- at least six insurers, two asset man- emerged in 2011 as a result of a re- posed by Anbang. Seven months agement firms and a financial leas- structuring that saw a small Beijing- later, Anbang returned with itsjaw- ing firm. It has also offered to ac-

P based property and casualty insurer dropping block trade and China In- quire Shenzhen-based brokerage h o t o

S recapitalised. Anbang then relocated ternational Capital, a local broker- Century Securities. o u r c e

: to Shenzhen and has grown rapidly age, expects it to increase its stake So who are the people driving An-

C F P into a financial conglomerate with in the bank because the insurer bang’s remarkable dealmaking and 13 Week in China Banking and Finance 21 February 2014

business growth? Similar to rumours about Ping An’s steady ascent (a New York Times article in 2012 alleged that its key shareholders include family members of former premier, Wen Ji- abao, a claim that both Wen and Ping An have denied), Anbang is said to have powerful connections too. On its website Anbang says share- holders include state-owned heavy- weights SAIC and Sinopec. But ac- cording to Hong Kong’s Apple Daily, it also owes much of its success to the “red princelings” running the company. One of its board directors, Chen Xiaolu, is the son of Chen Yi, a late PLA marshal and longtime foreign minister. Chen junior shot to interna- tional prominence two months ago Red capitalist: Chen Xiaolu’s father was a PLA marshal for making a public apology to high school teachers that he assaulted years working for an infrastruc- headquarters. Anbang also an- during the Cultural Revolution. ture investment firm in Shanghai. nounced in December that it had es- Times have changed: the New York But since joining Anbang his rep- tablished a 5% stake in Gemdale, one Times now describes him as a utation has soared, albeit with the of the biggest developers in Shen- “business consultant” who “relaxes suggestion that he has been ag- zhen. on golf courses in Scotland and gressive in building up its portfo- This month, the China Insurance southern France and eschews the lio of businesses. Regulatory Commission also dark suits and high-maintenance “The company’s remarkable rise granted Anbang a licence to sell pen- black hair of most affluent Chinese in such a short period of time is sion insurance, making it only the men for casual shirts and a grey largely credited to chairman Wu Xi- sixth Chinese insurer that has been buzz cut.” aohui’s charisma and business acu- permitted to do so. In an interview with Apple Daily men – and his apparent success at According to the Economic Ob- in January, Chen revealed that An- pushing regulatory limits,” the mag- server, there is further crossover op- bang’s chairman Wu Xiaohui is an- azine suggests. portunity into the property market other person of influence. Wu is the Nor are Anbang’s ambitions con- here too. Homes for China’s aging grandson-in-law of Deng Xiaoping, fined to becoming a financial con- population are a new growth seg- although Chen denied that this glomerate. ment in the real estate industry. means that Anbang’s success is Century Weekly says Wu was for- While many developers are too cash- down to its political ties. merly the chairman of Beijing Guo- strapped to capitalise on the trend, “It is impossible if there is no con- tong Gaosheng Investment, many many insurers are keen to double nection at all,” Chen admitted to the of whose major shareholders over- up in winning over older customers. newspaper. “But Xiaohui doesn’t lap with those of Anbang. Both “Providing insurance and homes rely on guanxi. He’s been doing re- firms are heavily invested in both for the elderly is like a sunrise mar- ally well, with his private sector the banking and the real estate sec- ket for the insurers,” the Economic management experience. Many ex- tors. In 2011 two consortiums led by Observer believes. P h o t o ecutives here are actually from Anbang defeated powerful com- All told, Wu’s firm may not be a

S o u r c Hong Kong.” petitors and won the right to de- household name internationally. e :

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a According to Century Weekly, velop two prime commercial sites But if it keeps up its current pace of g i n e

C Wu is in his late forties and comes in Beijing’s central business dis- expansion, it looks like being a h i n a

from Wenzhou. He spent his early trict, adjacent to the iconic CCTV company to watch.  14 Week in China China and the World 21 February 2014

Visa veto Canada withdraws investor residency scheme

n the early 1990s, a phenome- programme, more than 45,000 Inon known as the “astronaut were from China. In the last full year family” was commonplace in Hong of operation, 86% of the applicants Kong. The term was given to people were from China too. seeking to emigrate to another Investment-linked visa schemes Vancouver girl: Miss Hong Kong country who were spending their are common but Canada’s was one time flying back and forth between of the most permissive. Australia’s from Chinese immigrants?” another Hong Kong and their new home- immigration visa requires an in- questioned. land. Oftentimes the husband vestment of $4.5 million in local Canadians complain that Chinese stayed in Hong Kong to support his businesses. The UK sets the bar at arrivals don’t contribute enough to wife and children financially. But $1.7 million. The United States re- their new country. “A significant they would move abroad to hedge quires a $1 million investment number of people made a commit- against the city’s uncertain future leading to the creation of at least 10 ment to reside in Canada as a condi- in the run-up to the handover back new jobs. tion of the programme, but without to China in 1997. The comparisons have prompted actually having the intention to re- Canada was an especially popular the Canadian rethink. Finance Min- side. Any programme that becomes destination for the astronauts. For- ister Jim Flaherty said in his annual subject to abuse and fraud on that eign nationals could obtain resi- budget proposal that “for decades, scale had to be reformed,” reflected dency by loaning C$800,000 (about [the investor scheme] has signifi- Chris Alexander, Canada’s immigra- $730,000 at current exchange rates) cantly undervalued Canadian per- tion minister. interest-free to any of Canada’s manent residence, providing a path- Indeed, Fiona Li, herself a Chinese provinces for five years. Many fam- way to Canadian citizenship in immigrant to Vancouver, told the ilies in Hong Kong took advantage exchange for a guaranteed loan that China Daily that there is widespread of the offer: more than 110,000 peo- is significantly less than our peer discontent among residents about ple secured residency using the countries require.” ‘investor immigrants’ because of scheme in the decade before 1997. Needless to say, the move quickly their limited involvement in local But last week the Ottawa govern- stirred up sentiment in China. “As a communities. “Many of us sup- ment announced that the long- country that is ruled by democracy ported the policy change because standing policy – called the Immi- and governed by the rule of law, the we simply believe it is totally unfair grant Investor Programme (IIP) – recent action of the Canadian gov- if the numbers of wealthy immi- has been cancelled. All pending ernment shows that it cannot be grants are not controlled,” Li said. cases have been rejected (a parallel trusted. Its action is very damaging Sonia Lesage, a spokeswoman for scheme run by Quebec remains to the country’s image and credit,” the Canadian immigration author- open, although it has been capped at immigration lawyer Wang Limin ity, confirmed to the Beijing Youth 1,750 applicants a year, with a max- complained to Southern Metropo- Daily that many of the arrivals from imum 1,200 from any one country). lis Daily. China were making little financial Of course, more recently the “The Canadians are looking down commitment beyond the initial fee. P

h most enthusiastic applicants for res- on Chinese people,” a netizen wrote Investor immigrants were much less o t o

S

o idency in Canada have been main- on weibo. likely to earn salaries and were pay- u r c e :

land Chinese rather than Hong “This policy has been in place for ing C$200,000 less in taxes over a A s s o c Kongers. The South China Morning so many years and only now did you 20-year period than immigrants i a t e d

P Post revealed that among the think about the issues. Is it because granted residency for their techni- r e s s 59,000 applications pending for the you have collected enough money cal skills, she told the newspaper.  15 Week in China Society and Culture 21 February 2014

Monkeying about Centuries-old classic battles five-day wonder at the New Year box office

obin Li is China’s richest man has made Rmb600 million, which R(calculates Bloomberg) and re- is an impressive haul for a project putedly the best-looking Chinese that took only five days to shoot at a CEO, according to Forbes. Now he’s cost of just Rmb50 million (Oriental seeking new accolades. The founder Daily says the film broke-even be- and chairman of search giant Baidu, fore release, thanks to revenues Li wants to add movie producer to from sponsorships and product his list of achievements. placement). Last week it was reported that In fact, the film was adapted Baidu has teamed up with Korean from Hunan Satellite TV’s hit show filmmaker Kim Jeongjung and Chi- of the same name, which has done nese producer Gary Zhang to start a well in the ratings since first show- new production house called Aqua- ing in October. The reality format men Entertainment. The studio, follows five celebrity fathers who which is based in Los Angeles, has take their children to different des- announced its first project: the 3D tinations around China and com- and CGI-heavy Kong, a sci-fi adapta- pete in a series of tasks (for more, tion of the classic Chinese tale Jour- see WiC213). It seems to have ney to the West. tapped into the family feel-good “It’s a natural move for Baidu to factor: Dad, Where Are You Going enter the film production area at was so popular that many movie- this moment,” says Shao Gang, goers struggled to see it. “We fi- deputy director at Horizon Research nally got tickets on February 2, but Consultancy Group. “It’s the right the seats were not good,” Liu Lu, time for companies to consider in- the mother of a six year-old, told vesting in the content production Winner at box office: Chen Qiaoen the China Daily “But we still en- sector… The need for exclusive con- joyed the film and the audience of- tent has become more and more ur- Chow Yun-Fat, Aaron Kwok and ten roared with laugher.” gent among the online video Chen Qiaoen which raked in more “This movie is the perfect ending providers.” than Rmb300 million ($49.3 mil- to the first season of the show. Then again, the subject matter lion) during its first three days in Thank you to all the fathers and five for Baidu’s new project is hardly theatres, says EntGroup. By late children for bringing us a happy and ground-breaking. Chinese audi- February it had earned over Rmb1 warm winter,” a netizen wrote on ences seem to love Journey to the billion – a pretty good perform- weibo. (The TV version has been West adaptations. Stephen Chow’s ance at a time in which more than downloaded more than a billion loosely-based tribute – Journey to 20 other films were released (see times online, according to Sohu.) the West: Conquering the Demons – WiC218). But critics carp that Dad, Where was the most popular film last year Another winner was Dad, Where Are You Going shouldn’t even be by ticket revenue. And another pro- Are You Going, which premiered on classed as “a real film” because the P h o t o duction inspired it has emerged as the same day as the latest Monkey only difference with the TV series is

S o u r c the biggest winner over the key Lu- King flick. It also broke a record for that it lasts longer and doesn’t break e :

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a nar New Year period last month. the best single-day haul for a 2D for commercials, says Xinmin g i n e

C Journey to the West – The Monkey film, taking more than Rmb90 mil- Evening News. h i n a King, is a 3D spectacular starring lion in its first 24 hours. To date it The producers are “lazy” and the 16 Week in China Society and Culture 21 February 2014

movie is “shoddily filmed with vir- isn’t the first film to be adapted tually no storytelling,” the newspa- from reality TV. In December, per dismissively remarked. Jiangsu Satellite TV moved its Going cold “As far as I’m concerned, it’s just hugely popular singing competition China’s Olympians like putting the reality TV show, shot The Voice of China to the big screen. underperform in Russia in just five days, onto the cinema Audiences weren’t keen, however, screen,” one critic complained. “I and it only took Rmb3 million in re- f diplomatic schmoozing were an think the popularity of such ‘films’ ceipts. Prior to that, an adaptation of IOlympic sport, Xi Jinping might will be harmful to the industry, be- Happy Boys, another singing com- be up for a gold medal. cause when shortcuts like this are petition from Hunan TV, as well as Two days before the 2014 Winter taken, who will bother to make a Let’s Date, another show, also fell Olympics were about to begin in movie that needs major investment flat in the box office. Sochi, the Chinese president broke but generates fewer rewards?” Perhaps Dad, Where Are We Go- with normal protocol by flying to But supporters of the production ing worked because it has a little Russia in apparent support of his rejected such concerns. “Rather than more drama than some of the ear- embattled counterpart Vladimir complaining that the film is no dif- lier efforts. Also likely is that the Putin. ferent from family videos, film- timing was a major advantage, tap- Most presidential trips are makers should think about how to ping into the festive mood over the flagged well in advance. But Xi’s ap- make something like Dad, Where Are holiday period. Certainly. families pearance seems to have surprised You Going which is filled with so seem to have been happy to queue the Chinese public. Many other for- many interesting details and has up for tickets, “even if it means they eign leaders have decided to stay created such vivid characters,” says have to pay for what they can get away from the Winter Olympics writer Jin Hezai. on TV for free,” noted Tencent En- amid security concerns and contro- In fact Dad, Where Are You Going tertainment. versy surrounding a new Russian

Red Star Diao Yinan

Who is he? Born in Xi’an in Shaanxi province, Diao Yinan graduated from the Central Academy of Drama in 1992. He got his first break in the film industry by writing the screenplay for Spicy Love Soup (1997) and Shower (1999), both directed by Zhang Yang, a famous young filmmaker. But Diao has turned his attention to directing in recent years, with two films of his own, Uniform (2003) and Night Train (2007), which premiered at the Cannes Film Festival.

Why is Diao in the news? Diao’s latest film, Black Coal, Thin Ice, has just won the best picture award at the Berlin Film Festival. A mystery set in cold northern China during the late 1990s, it tells the the story of a detective investigating a trail of bloody murders in a factory town. Actor Liao Fan, who plays the detective, also won best actor in Berlin, while Taiwanese actress Gwei Lun-mei is the female lead. “It’s really hard to believe that this dream has come true,” Dieter Kosslick, the director of the film festival in Berlin, told Diao said as he accepted the trophy. Xinhua that Chinese directors today are more honest and open in P h “It represents Chinese cinema – growing in aesthetic strength – their portrayal of reality and “no longer use metaphors to express o t o

S successfully charting a new path between small films made below the truth”. o u r c the censors’ radar and the bombastic hero epics in the booming It remains to be seen when Black Iron, Thin Ice will be shown in e :

I m China. But Guangzhou Daily says it has already got the green light a domestic market,” Berlin’s daily Der Tagesspiegel gushed g i n e approvingly. from censors and will likely reach cinema screens in mid-March.

C h i n a

17 Week in China Society and Culture 21 February 2014

law targeting “homosexual propa- ganda to minors”. Xi seemed to have fewer con- cerns. “On a neighbour’s joyous oc- casion it is customary to offer one’s congratulations in person,” he ex- plained, in what was the first visit by a top Chinese leader to a major sporting event overseas. As if to quell the negative reports about slushy snow and shoddy fa- cilities, Xi added that the games would be a “splendid and an unfor- gettable event”. The People’s Daily was in no doubt about the trip’s significance: “This shows that China is interacting with the international community with a major power-oriented diplomacy full What goes up... Chinese figure skaters Pang Qing and Tong Jian of Chinese characteristics… with a more confident attitude and more “If a country doesn’t have a ref- skiers. As WiC goes to press, China’s sophisticated techniques.” eree it is equivalent to losing the chances of getting as many medals Sophisticated techniques were right to speak in the game,” the Xin- as it did in Vancouver in 2010 – also being deployed in the Chinese min Evening News lamented. when it won 11— look slim. media, however, as it sought to down- Not that it has been a terrible Hopes are again riding on the play the low medal count from the showing for all the Chinese athletes speed skaters and the male curling country’s athletes. thus far. team which rather amazingly, given “Before, gold medals signified the On the plus side for Beijing, at the short 15-year history of the sport power of our state and the arrival of least Zhou Yang, the speed skater in China, might take a bronze just as China on the international scene. To- who caused a stir by thanking her the much loved women’s team did day, however, Chinese people have a parents instead of the state sports in Vancouver. bigger dream: that sports will be authorities at the last Winter Sadly that team failed to make it available to all and that people will Olympics, remembered to mention past the semi-finals this time but exercise to stay healthy, not just to Xi Jinping this time when she re- that hasn’t damped chatter about win prizes,” extolled Xinhua. tained her gold. the sport which is referred to as Other newspapers tried a differ- Two other female speed skaters binghu, or ice kettle in Chinese, be- ent tack, suggesting that China took gold in the 500m short track cause of the shape of the stone. might be missing out because it and 1000m long track events, taking “This game is totally in accor- doesn’t have enough internation- China’s medal tally to six, including dance with the Chinese aesthetic – ally-recognised referees to send to a silver for men’s speed skating and elegance and wisdom,” wrote one of the winter events. a silver and a bronze for the aerial curling’s newest fans on weibo. 

Making an impression

“Why is your China business strategy so bad?” P h o t o  Wendi Deng’s first words to Rupert Murdoch, according to an article in the current issue of Vanity

S o u r Fair. Deng wasn’t impressed either by his response too, countering: “That’s not a good explanation. c e :

R Does that satisfy you?” But it certainly got Murdoch’s attention as wedding bells soon followed. e Murdoch and Deng u t e r s

18 Week in China And Finally 21 February 2014

The oldest vice Authorities crack down on China’s ‘Sin City’

n January China’s most popular people most likely to be making a Isearch engine Baidu launched a sharp exit were sex tourists, pimps heat map to capture the massive and call girls. human migration that takes place Tellingly, Hong Kong was the over the Lunar New Year period as most popular destination for those the Chinese head home to see their leaving in the hours following the A police raid in Dongguan families. bust, with 28.5% of all Baidu- What the tech company couldn’t recorded departures heading there. girls they show, squatting, burying have predicted is that it would “Rich Hong Kongers on dirty week- their heads and hiding their faces record another exodus as well – this ends!” guessed one netizen on Sina are seen as the underdogs, humili- one of a much less noble kind. Weibo. Another contributor, per- ated and oppressed. In this con- Just as most people were saying haps offended by trends in anti- frontation between prostitutes and goodbye to families and travelling mainland sentiment in Hong Kong, CCTV, people quickly choose the back to the cities in which they wrote: “Typical: we are portrayed women’s side.” work, state broadcaster CCTV aired as being rough and uncultured but Many netizens also rejected the an undercover report on the sex if Hong Kong people want a good sense of outrage that they felt that trade in Dongguan. On the same day time they suddenly don’t seem to CCTV was trying to evoke, respond- the police began a series of raids on mind that.” ing to news of the crackdown as if it massage parlours, karaoke joints In the three-day crackdown that were a natural disaster. “Hang in and hotels in the city (located about followed, 162 people were arrested, there, Dongguan!” or “We are all 140km from the border with Hong and more than 1900 establishments Dongguan tonight,” were popular Kong in Guangdong province). were “inspected”, local media re- posts on weibo. News spread quickly that Dong- ported, and the campaign will now The city’s government then tried guan’s days as the country’s ‘Sin City’ be carried out in other cities as part to refocus national attention with a were numbered and people began of a wider programme against pros- publicity campaign playing up the packing their bags – an outflow so titution. more wholesome side of urban life: clear and concentrated that Baidu’s Somewhat surprisingly, the news a thriving basketball team; a state heat map was able to capture it. wasn’t wholly welcomed. Although of the art venue for Chinese opera; Baidu only records movement few people defended the vice indus- and factories that make high-end trends, not numbers, so there is no try, there was a feeling that that it electronics. way of knowing just how many peo- will be the women working in the “Cleaning up Dongguan will al- ple fled Dongguan on February 9. industry rather than its ringleaders low business to flourish,” a But one thing is sure: that at a time who will end up as the victims of spokesperson added. when migrant workers should have the clean-up. Several womens’ Perhaps, although another con- been pouring back into this south- groups also complained that CCTV cern is that the crackdown could ern manufacturing hub, plenty of did not blur out the faces of women have a more negative impact on the others were getting out of town. filmed in the undercover report. local economy – to which prostitu- Who were they? Here’s where the Others were angered at what they tion was said to contribute Rmb40 technology behind the Heat Map perceived as CCTV’s superior tone. billion ($6.57 billion) a year. gives a clue. The app logs flows of As the Hong Kong’s Ming Pao news- Noting the campaign, Hong Kong P h o t o people through location-specific paper put it: “People resent the police have also expressed concerns

S o u r registrations on smartphones using moral superiority of anti-vice – in their case that more of the vice c e :

R e the Baidu Maps service. And neti- groups. CCTV is seen as a symbol of trade may cross the border into u t e r s zens were soon concluding that the a powerful system, while the lost their own territory.  19 Week in China The Back Page 21 February 2014

Photo of the Week In Numbers HK$995,000 The price of an alligator skin trench coat that was shoplifted from a Burberry store in Hong Kong this week. The robber took the $128,000 garment off a mannequin at the shop in the Silvercord shopping mall, and calmly walked into the busy street, unnoticed by staff. The heist took less than a minute, according to a police P

h inspection of the video footage. The coat o t o

S did not have a security tag. o u r c e :

I m a g i n e

C 9 million h i n a The number of Chinese who have watched the opening episodes of season two of The more the merrier: construction is nearly done at the world’s largest Netflix’s House of Cards on Sohu, an hotel. The Crown of Beauty in Sanya will boast 6,000 rooms internet portal, since it began airing last Friday.

Where is it? $184 million Some of the places referred to in this issue The amount that Chinese consumers spent on imported olive oil last year, an increase of 9.3% compared with 2012 and up from Beijing just $1 million a decade earlier, says the Wall Street Journal. China imports around 99% of its olive oil as there are few areas China outside Gansu, Yunnan and Sichuan with Shanghai the right conditions to grow olives. Sichuan

Guizhou Rmb12.8 billion Guangdong Total revenues from China’s online video Guangzhou Dongguan Hong Kong market last year, an increase of 42% from a year ago. Hainan Sanya

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