1 Talking Point 5 The Week in 60 Seconds 6 Banking and Finance Week in China 8 China Consumer 9 Economy 11 Energy and Resources 13 China and the World 24 February 2012 14 Society and Culture Issue 139 17 And Finally www.weekinchina.com 18 The Back Page

A new Chinese hero? m o c . n i e t s p e a t i n e b . w w w

y b g u in Why Beijing’s in a quandary over Jeremy Lin’s heritage o k y n o a t B s t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Talking Point 24 February 2012

China feels the Lintensity Why Zhejiang, Taiwan and the US all lay claim to basketball hero Lin

All the right moves: Jeremy Lin has rekindled interest in the NBA in China with his performances

he first time that she watched costing Yu just Rmb4,460 ($708) for straight wins, scoring more points TJeremy Lin on television, Yu the trademark rights till 2021. in his first five games than any Minjie, a small business owner in Forbes magazine has suggested that debutant since 1976. Wuxi, thought she might be onto the Jeremy Lin brand is already That has stirred Chinese pride, es - something. This was two years ago, worth $14 million and expects it to pecially in Taiwan (Lin is Los Ange - but Yu told the Modern Express be worth a whole lot more. les-born of Taiwanese immigrant that she was already so impressed Mrs Yu’s investment looks like a parents). Pictures of the new NBA with what she saw from Lin that pretty smart one... icon have made the front pages of all she applied for a trademark imme - the Taiwanese newspapers. Local diately. She was granted domestic So what’s with all the Lin hype? malls have also taken to broadcast - rights to ‘Jeremy S.H.L’ (the initials “Linsanity” is the Western media’s ing Knicks games to customers stand for Shuhao Lin). More impor - preferred label, with the New York around the clock. P h o t

o tantly, she secured the accompany - Knicks’ point guard exploding in Not to be bested, the people of

S o u r ing Chinese characters for the popularity in less than two weeks. Zhejiang province have also been c e :

R e basketballer’s name. After February 4, when Lin made his claiming affinity with Lin, as the an - u t e r s That now looks like a bargain, debut, he led his team to seven cestral home of his maternal grand - 1 Week in China Talking Point 24 February 2012

mother. To back up the claim, a local newspaper has been posting photos from Lin’s visit to his mother’s hometown last May. Lin is also proving to be wildly popular across China in general. He already has more than 2 million fol - lowers on his Sina Weibo, China’s Twitter-like equivalent. And on Taobao, the leading e-commerce site, Lin’s Knicks jersey (bearing his num - ber “17”), as well as assorted T-shirts and sweatshirts were soon selling out – and that included the counter - feit versions too.

But the Chinese media is being careful with its Lin coverage? Despite Lin’s popularity, there has been uncertainty about how best to Best Bank for Best Bank for FX report on the breakout star. Xinhua Corporate Clients Structured Products has lauded Lin’s educational back - ground (he graduated from Har - vard), citing his academic success as a possible advantage on court. The Global Times has also praised Lin’s hardworking and humble de - meanour, saying that he embodies Confucian values. But state media gets more un - comfortable mentioning Lin’s Dim Sum Bond House Bond House of the Year of the Year parental background and CCTV sems to be keeping the references to Taiwan to a minimum, dodging the question of Lin’s heritage by identi - fying him as “ethnically Chinese”. For his part Lin has tried to steer clear of controversy by giving the nod to the full range of his Chinese heritage. “It’s humbling, a privilege and an honour. I’m really proud of Best Offshore RMB Best International being Chinese, I’m really proud of Bond House Bond House my parents being from Taiwan,” Lin told one interviewer, in a comment crafted as carefully as the 1972 Shanghai Communiqué. Lin will do well to stay out of the political limelight, if Yani Tseng’s experience is anything to go by. In 2010 controversy broke out when Tseng, a Taiwanese golf prodigy and HSBC operates in various jurisdictions through its affiliates, including, but not limited to, HSBC Bank plc, authorised and regulated by the Financial Services Authority, The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (USA) Inc., member of NYSE, FINRA and SIPC, and world number one female golfer, re - HSBC Bank USA, NA. 12-005 portedly rejected an offer of $25 mil - 2 Week in China Talking Point 24 February 2012

lion from a Chinese company to change her citizenship to mainland Chinese. Along similar lines, Xinhua Planet China published an article last week sug - Strange but true stories from the new China gesting that there were “increasing calls” for Lin to do something simi - TIME WARPED. When China’s entertainment watchdog banned the genre lar and give up his US citizenship. of time-travel drama last year (see WiC98 for our article on Gong, one such Why? To become a Chinese citizen show), it said it was doing so in order to prevent belief in the occult from in time to play for the national team spreading. At the time people scoffed but it seems that SARFT’s thinking at the Olympics this year in London. might not have been so far off the mark. Last week, a teenager from the northeastern province of Liaoning was Another issue for state media to lucky to survive after she was dumped in a field, unconscious, in sub-zero ponder is how to handle Lin’s de - temperatures, having been scammed out of Rmb1,800 by two women vout religious belief, especially his offering to send her back to the Qing Dynasty. The teenager had become habit of praising his “Lord and Sav - obsessed with the idea of time-travel after watching shows such as Gong and iour, Jesus Christ” in post-match in - hoped that, like the heroines of similar programmes, she too would find love if terviews. As The Economist she went back in time, the Northeastern News reported. Instead, the women magazine also noted this week: “[In gave her a mixture of wine and sedatives before dumping her outdoors when China] one doesn’t usually see ath - she feel asleep. The girl awoke two hours later. There was no Prince Charming letes thanking God for their gifts; leaning over her. And her mobile phone had gone. their coach and Communist Party leaders, yes, but Jesus Christ the Sav - iour? No.” featuring brief comments from a successful Asian players are a rare Lin is a “trickier fit” for Beijing’s New Yorker applauding him for his sight in the NBA. In fact, there have propagandists, the Financial Times religious faith. But the Chinese sub - only been three other players of agrees. “His Christianity is perhaps titles didn’t tally with the spoken Chinese descent, Yao Ming being more awkward for China’s atheist word, translating the phrase as “I the best-known. Communist rulers. While Beijing of - love him for praising his team” and Of course, Yao was brought up in ficially sanctions some churches, it omitting the religious reference. Shanghai. By contrast, Lin is the first frowns on the spontaneous profes - American-born player of Chinese sions of love for God that pepper Meanwhile, over in the US… ethnicity in the 65-year history of Lin’s postgame comments.” With Lin’s meteoric rise to star - the NBA, although it is still his Chi - As the FT also reported, CCTV did dom comes the inevitable back - nese descent that has been coming air a news report on Lin last Monday lash, if for no other reason than in for most comment. Professional boxer and current welterweight champion Floyd May - weather first stirred debate by sug - gesting that Lin was getting attention more because of his eth - nicity than for his accomplish - ments. Then last Saturday, the sports network ESPN provoked a storm after an ethnic slur appeared on its website following the Knicks defeat to the New Orleans Hornets. The headline – which alluded to a “chink in the armor” – was soon pulled down. ESPN issued a formal apology before firing the writer and sus - P h o t

o pending a television anchor who

S o u r used the same phrase on the air. c e :

R e But then Fox Sports columnist u t e r s Jeremy Lin’s commercial potential is vast Jason Whitlock made an even 3 Week in China Talking Point 24 February 2012

crasser remark (this one anatomical, and managing to be both sexist and racist at the same time) on Twitter. Neither episode did the US media much credit, especially following the controversy over the Deb - biespendit election ad a few weeks ago (see WiC138). The ad for Repub - lican Senate hopeful Pete Hoekstra – aired during the Superbowl – was immediately attacked for its racial angle. Even fellow Republicans con - ceded it was likely to alienate Amer - ica’s own Chinese community. By demonising Chinese (on prime time TV) it was a setback for race rela - tions in the very country that in - You da man, Jeremy: a fan in Taipei vented political correctness. basketball and to grow the NBA in orange and blue with the player’s Who’s the biggest winner in Lin’s China in a very short period,” says name embroidered on the side. Pre - rise? David Shoemaker, chief executive viously Nike has launched special Probably the NBA. Following the re - of NBA China, adding that the edition shoes for star players like tirement of Yao Ming, Lin’s sudden league plans to bring Lin to China Kobe Bryant, LeBron James, and emergence couldn’t be better timed this summer. Michael Jordan. for the NBA’s commercial team, Nike, too, will hope to cash in on Adidas plans to sell its own Lin - which now regards China as its the Linsanity. The company is re - sanity jersey in 6,700 stores in biggest overseas market. portedly designing a new sports China, thanks to a deal it has with “What we’ve seen, the huge en - shoe especially for Lin, says Sina the NBA. The Wall Street Journal thusiasm and the frenzy around Je - Sports. Nattily named the Nike Hy - says it shouldn’t infringe on Mrs remy is just serving to act as a fur - perfuse 2012 Linsanity PE, the shoe Yu’s local trademark, as it will use ther catalyst to grow the sport of will feature New York Knick’s iconic his English name. I

Keep our milk white, not red

Leave our cows alone was the message sent to China from New Zealand this week. Thanks to a growing taste for milk (and scandals miring local dairy producers), the Chinese are interested in buying dairy farms abroad. Wealthy property developer Jiang Zhaobai accordingly made a $164 million bid for 16 dairy farms in New Zealand, via his firm Shanghai Pengxin. It got government approval but divided opinion among Kiwis. A consortium of local businessmen made a counter-offer and filed a court action to block the sale. surprise, I hadn’t read the Overseas Investment Act in that I l l u s t r The judge ruled in their favour, on the basis that there way”. Those who supported the sale say it would have a t i o n : was greater benefit if a domestic consortium bought the promoted wider Chinese investment. Those who oppose it, w w w . b bankrupt properties than a Chinese one. A spokesperson wrote AP, believe farmland “needs to stay in the hands of e n i t a e for Pengxin told the Associated Press the ruling was “a big New Zealanders if the country is to remain prosperous”. p s t e i n . c o m

4 Week in China The Week in 60 Seconds 24 February 2012

The economy’s still slowing The major news items from China this week were...

The preliminary HSBC China PMI score was 49.7 in 1February, compared with a final reading of 48.8 for January (readings below 50 indicate contraction from the previous month). February is the fourth straight month of contraction. Qu Hongbin, HSBC’s chief China econo- mist, warned in a note that despite the “marginal im- provement” from January – helped by a rebound in production following the Lunar New Year break – the economy “remains on track for a slowdown”.

China Telecom, China’s smallest carrier by subscriber 2numbers, will start selling Apple’s iPhone 4S on March 9. It will be the second Chinese operator to offer Apple handsets on contract deals. Analysts said the new The Universe concept car shown by Volvo in Shanghai arrangements should see an increase in iPhone sales, though don’t forecast it will be a game-changer for Apple. company status. Alibaba Group is offering HK$13.50 a However, the introduction of the device at China Telecom share for the stake it doesn’t already own, 46% above stores will help the carrier attract more 3G users. where the stock last traded on the Hong Kong exchange.

Foxconn, one of Apple’s biggest manufacturing part- Geely announced on Wednesday that it will establish 3ners, announced that it has raised the basic salary of 5a 50-50 joint venture with its Volvo unit to set up a assembly line workers in Shenzhen by 25%, reaching China-only brand. The move was in response to regula- Rmb2,500 ($397) a month, as of February. The move tory obstacles to manufacturing the Swedish brand in comes as the non-profit Fair Labour Association per- China. Under current rules, Volvo is considered a foreign forms on-site inspections, as requested by Apple. carmaker despite being wholly owned by Chinese inter- ests and needs a local partner before it can begin manu- Alibaba Group announced that it is paying as much facturing in the country. 4as $2.5 billion to buy out minority shareholders of publicly-traded Alibaba.com, its business-to-business por- Hundreds of property owners protested at the office tal. The Chinese group, which owns 73% of Alibaba.com, 6of Poly Real Estate in Shanghai’s Baoshan District said the move would free it from “the pressures” of listed after the developer was said to have cut the average sell- ing price of units at one of its projects by as much as 20% for new buyers, said the Shanghai Daily. Existing owners say they paid an average price of Rmb19,000 per square metre in the fourth quarter last year but that fully deco- rated units at the complex are now sold at an average of Rmb17,000 per square metre.

Vice-President Xi Jinping wrapped up a three-day visit to Turkey on Wednesday. During his stay, his delega-

Photo Source: Reuters 7 tion signed a three-year currency swap deal, as well as a slew of business agreements. According to Xinhua, the Chinese team of more than 100 business executives An increasingly ‘private’ guy: Jack Ma of Alibaba signed deals worth about $4.3 billion. I 5 Week in China Banking and Finance 24 February 2012

Bear market Why healthcare firm Guizhentang’s IPO faces a boycott

“ omeone told me, if you have ever more than 20 years ago. Sheard the screams of a black bear “Collecting bile is like turning on when it is having bile extracted, it is a tap. It’s painless, natural and sim - the most tortured sound you will ple. I didn’t see bears suffering in hear in your life,” noted Jack Ma, the process,” Fang told Caijing. “Af - founder of the Alibaba Group. ter the bile is extracted, bears can In fact, Ma is petitioning to stop still drink milk and honey and have live bile extraction from bears and fun on the farm.” has banned bear bile products on It all sounds rather idyllic. Per - his e-commerce platforms Alibaba haps Mr Fang could book himself in and Taobao. for a weekend mini-break. Ma also plans to start a charity Others are less convinced. Xie through Taobao dedicated to saving Zhang, an activist from Beijing, black bears. “Say no to the IPO!” countered: “The place is a living hell The latest campaign against bear- for those bears. Don’t trust the so- bile extraction began when Guizhen - gruesome. Traditionally it involves called ‘painless method’ of bile ex - tang, a Fujian-based company whose the insertion of a catheter into the traction. The hole in the bear’s ab - main business is selling bear bile, an - bear’s abdomen, which is then domen that is exposed to the air will nounced it would be seeking an IPO drained periodically. Needless to say, inevitably cause pain and lead to in - this year. the procedure causes great discom - fection, which is why bile farmers The company added that it hopes fort and infection. have to inject a lot of antibiotics.” to raise funds to more than double Anger toward Guizhentang’s IPO In an effort to win the PR war, its bear workforce (if you can call it plan has also sparked more than Guizhentang this week invited 70 that) from 470 to 1,200. 14,000 posts on Sina Weibo, some of journalists to one of its farms. The The news was soon picked by ani - which have demanded a boycott of South China Morning Post noted mal welfare groups, including the the stock offering. “They have no re - the bear was silent while the bile was Beijing Loving Animals Foundation. spect for life, so what does it matter extracted, but said many members Last week it submitted a petition to if they have money? Demand laws to of the media remained sceptical. the Securities Regulatory Commis - protect animals, demand laws to China has almost 100 bear bile sion signed by 72 public figures, in - punish those who mistreat them,” farms with more than 10,200 black cluding Ding Junhui, a wellknown one netizen wrote. bears in captivity, according to the snooker player and Chen Danqing, a But last week Guizhentang fought Beijing Loving Animals Foundation. respected painter, objecting to back, saying that animal rights Nevertheless, the public concern Guizhentang’s IPO plan. groups have exaggerated their on news of Guizhentang’s bear bile Bear bile is prized in traditional claims. Company bosses told the plan does at least reflect wider pub - Chinese medicine as an antidote to China Daily that current extraction lic interest in animal welfare in muscle ache, fever, joint pain, mi - methods are “easy and not hurtful”. China. Animal rights have also graine and hangovers. Its propo - Fang Shuting, the head of the gained more attention elsewhere nents even claim it can help with China Association of Traditional Chi - with public figures like basketball poor eyesight – and Guizhentang nese Medicine also stood behind the star Yao Ming and actress Barbie

P identifies bile as the key ingredient pharmaceutical firm, claiming that Hsu speaking out against shark fin h o t o

S in eye drops that the company has the extraction of bile is humane and consumption, as well as other cus - o u r c e been selling for more than 10 years. that the footage seen by netizens of toms that many view as cruel or en - :

C F P But the extraction process is extraction methods dates from dangering species. I 6 Week in China Banking and Finance 24 February 2012

The new broom Listing in China might be about to get a lot easier

he workings of the IPO ap - improve the delisting system, Tproval process is rarely a topic cracked down on illegal market ac - to get the pulse racing, except, per - tivities and sought to develop the haps, for owners of privately-held corporate bond market. That indi - businesses who are excited by the cates an approach that favours prospect of getting very rich. “openness, fairness and impartial - But the topic was up for discus - ity,” the newspaper believes. Reform-minded: Guo Shuqing sion in the Chinese media last week, If Guo is able to push major on rumours that the new boss of the changes to the IPO approval process School (CEIBS) also noted that stock market regulator is in the it would be a huge step. He can ex - changing the current set up would mood for serious reform. pect plenty of resistance. A CSRC of - help to make the market fairer and Apparently, Guo Shuqing – who ficial told the newspaper: “Guo’s re - more efficient, as well as strike at was made chairman of the CSRC form initiative will face an corruption. Xu also dismissed the (China Securities Regulatory Com - enormous amount of opposition, idea that the current system is nec - mission) last November – dropped a particularly from officials whose job essary for quality control. “From the bombshell at an internal meeting it is to approve IPOs.” market today, we can see that sys - recently by asking whether there But outside the CSRC, Guo’s ideas tem does not guarantee the quality even needed to be an IPO approval have more supporters. Market par - of listed companies. And with a lack system in place. ticipants and academics have been of good listed companies, stock in - Under the current arrangements airing their own views in the social vestors cannot make any money – the CSRC has sole responsibility for media. “Can we cancel the IPO ex - instead they act only as stepping deciding which companies are al - amination and approval system? stones for the ‘insiders’ in their lowed to list on China’s A-share mar - Yes, of course,” insisted Wang Ran, game of speculation.” ket. In theory this is to ensure that the CEO of eCapital, on his personal Xu’s colleague Liu Shengjun also companies granted the right to sell weibo . “Chairman Guo proposes a reckons the current approval sys - stock to investors meet suitable stan - very good and urgent measure.” tem is detrimental. Liu, who is vice- dards. But in practice it has tended to Liu Jipeng, a professor with the president at CEIBS Lujiazui Interna - favour state-owned companies over China University of Political Science tional Financial Research Institute, successful private sector firms, lead - and Law also wrote: “The IPO is - commented: “The so-called stan - ing to distortions in how capital is al - suance committee should be can - dard set by the issuance examina - located across the domestic econ - celled and the responsibilities [for tion committee forces large num - omy. It also gives the responsible selecting the companies] should be bers of excellent companies such as parties at the CSRC an enormous taken by sponsors and underwrit - Tencent to list overseas, so that do - amount of power. In the past that ers who are paid with high salaries.” mestic investors have no chance to has sometimes been abused (for the In other words, rather than regu - share in their growth.” case of Wang Yi, see WiC62). late who can list, the market should Liu then added that if members of The Economic Observer says Guo be left to decide. the committee are really so adept at – who previously ran China Con - Xiang Songzuo, a finance expert picking which companies should struction Bank – favours market at Renmin University agrees: “A cap - get access to capital first, they should forces over government interven - ital market where the government is leave the CSRC, set up a private eq - tion, describing him as a “coura - trying to suppress risk can never be uity outfit and “make a fortune”. geous” reformer. international or innovative.” Liu’s view: “In a healthy market Since taking on his new role Guo Xu Xiaonian, a professor at China any business can be listed, there is has launched a series of measures to Europe International Business only an inappropriate price.” I 7 Week in China China Consumer 24 February 2012

The world’s costliest herb? Demand for Tibetan herb drives price above gold

“ ealth is the greatest posses - Collectors need to dig out a small Hsion” wrote Lao Tzu, founding square to gather each specimen of philosopher of Taoism and author plant. Many haven’t been bothering of Tao Te Ching (‘The Book of the to refill their holes, leaving little Way’) and a belief in herbal reme - chance for the grassland to restore dies has always been prominent in itself naturally. The concern is that Chinese philosophies of the body the natural habitat for the plant is and mind. being eroded. One such remedy – cordyceps – If the market for cordyceps col - also has a long history of pharma - lapses, the consequences are likely cological importance and is believed to be felt outside investor circles. by many Chinese to be one of the cost you Rmb600,000, which Over the years, larger swathes of ru - most potent herbs available. equates to $2,963 per troy ounce ral Tibet have become more de - But lately it has been Chinese in - (gold is currently selling for $1,757 a pendent on harvesting the herbal vestors who have shown greatest ap - troy ounce). Demand from China’s remedy as a source of income. petite for cordyceps in an effort to new super-rich partly explains the Daniel Winkler, an expert in Tibetan reinvigorate their investment returns. price increases. ecology, estimates that 60% of rural Derived from a genus of mush - However, there’s also an element Tibetans participate in the fungal room found in the mountains of Ti - of speculation. With property invest - quest, and that the cordyceps crop bet, the herb is the result of a parasitic ment steadily losing its status as a can generate as much as 40% of relationship between the fungus and sure thing, investors have been forced their cash incomes, increasing to 70- the larvae of the ghost moth. Discov - to be more creative with their money. 90% in prime production areas. ered by herdsmen who observed that Alternative assets such as Chinese art, In 2010 sales represented 8.5% of livestock seemed to become more en - liquor and traditional medicine have Tibetan GDP. I ergetic after grazing on the plant, also come in for new attention. cordyceps consumption is said to Of course, WiC has also written strengthen bone marrow and the im - previously about sudden price Keeping track mune system, counter lung disease surges in foodstuffs and how spec - and help with sexual dysfunction. ulators often seem to be involved. In last week’s issue we reported on Canadian prime minister, Stephen Ha Largely unknown in the West, Big profits have been made in garlic rper’s trip to China. One of the key subjects of Chinese consumers value the tradi - (WiC89), cotton (WiC84) and even dialogue was energy – or more specifically, tional remedy as a premium health cabbage (WiC105). Canada selling more of its oil to the product (see WiC39). Many of these speculative booms Chinese. It emerged this week that another But its reputation as a medicinal have proved to be shortlived, and key energy source was discussed too. According to Reuters, Harper has signed a and culinary status symbol is forc - soon subside when supply and de - deal with Beijing that will “make it easier ing prices to new heights. The mar - mand dynamics adjust. Last year, for Cameco Corp and other Canadian ket price for cordyceps (known in the cordycep crop fell slightly in vol - uranium producers to sell nuclear fuel into Chinese as dongchong xiacao ) now ume terms, with supply from Qing - the fastest-growing market for atomic exceeds that paid for gold, reports hai province taking time to recover power”. Harper’s office said the new

P nuclear pact would “substantially increase” h o China Youth Daily. from disruption resulting from the t o

exports of uranium to China – which is S o u In 2005 the cordyceps fungus was Yushu earthquake in 2010. r currently building 27 new r c eactors. e :

S being sold in shops for prices equiv - But longer term, environmental h Previously Cameco was not permitted to u t t e r alent to Rmb60,000 per kilogram. campaigners warn that the cordy - sell to China. s t o c k This year the same amount could ceps harvest isn’t a sustainable one. 8 Week in China Economy 24 February 2012

On the roads Will China regret its infrastructure binge?

‘ appy Birthday To Us’. At least, Hthat’s how it seemed last sum - mer during the Chinese Communist Party’s extensive 90th anniversary celebrations. Over the same period the opening ribbons were cut at three gargantuan infrastructure projects: the high-speed rail link be - tween Beijing and Shanghai; the world’s longest sea bridge, a 26-mile structure connecting Qingdao with Huangdao; and the lengthiest gas pipeline yet, stretching 8,700 kilo - metres from Guangzhou in the southeast to Xinjiang in the north - west. The message wasn’t particu - larly subtle: the Party was delivering Needed a bridge loan: Qingdao Jiaozhou Bay Bridge for the people once again. By contrast, the news last week the new projects time to pay their On paper, the benefits of invest - that the central government had or - own way. Yet the announcement also ment in successful infrastructure dered banks to rollover loans made raises broader questions about the projects are widely recognised, es - to local governments for infrastruc - longer term sustainability of China’s pecially in creating employment, as ture spending under the 2008 stim - economic model, especially as in - well as boosting productivity and ulus campaign was handled in a vestment’s contribution to GDP competitiveness. low-key manner. Maturities on growth has increased substantially in But recent research from Bent much of the debt have been ex - recent years, from 36% in the 1980s to Flyvbjerg at Oxford University has tended by up to four years, as many 50.5% in the most recent decade. suggested that the real returns on projects are not generating the an - Similarly Chinese policymakers infrastructure investment can often ticipated return on investment. have sometimes been lauded for disappoint. Of course, the announcement their farsightedness in allocating so Why? Flyvbjerg’s study of 500 was far from unexpected. Loan much new capital to roads, railways mega projects across 20 countries rollovers have been up for discus - and highways. Frustrated policy found that cost overruns are com - sion for months. Last summer, WiC wonks in the US compare the speed monplace (in his sample, slightly reported on one of the first local and scale of the construction plans more than half came in worse than governments to run into trouble (a in hundreds of Chinese cities to the budget). Average overspend in rail - municipality in Yunnan defaulted sense of political sclerosis hamper - ways was 44.7%, bridges and tunnels on a bank loan because the highway ing longer-term planning in Wash - cost 33.8% more than planned, and that it had built wasn’t generating ington. roads came in 20.4% over budget. sufficient income: see WiC113) and A typical gripe: how can Beijing Further, Flyvbjerg contends that last week’s news seems designed to add almost 200 miles of subway the benefits forecast for completed P h o t

o prevent others from suffering a sim - track since 2001 when the (much projects are often incorrect too.

S o u r ilar fate. more limited) Westside subway ex - Again, transport projects are among c e :

R e The measures have been pre - tension in Los Angeles won’t be the worst offenders, usually as a re - u t e r s sented as stopgaps, designed to give ready until 2036 at the earliest? sult of over-optimistic projections 9 Week in China Economy 24 February 2012

on passenger usage. Flyvbjerg’s findings are not coun - try-specific but he warns that the scope for error is greater in emerg - ing markets. It also seems reason - able to suggest that Beijing’s na - tionwide stimulus package may have intensified risks in this regard, with a sudden shoehorning of thou - sands of new projects into an in - tense period of investment. In fact, Flyvbjerg suggests that China has spent more on infrastructure in the last five years than in the whole of the 20th century. One of the more prominent Chi - nese critics of some of that infra - structure spend is economic geog - Bullet loan: will high-speed trains service their huge debts? rapher Lu Dadao, a member of both the Chinese Academy of Sciences levels in the US and 17% of those in nesses and individuals are already and the National Planning Expert South Korea. modifying their behaviour to take Committee. And in an interview For Qu, that suggests there is advantage of this new mode of with Caixin magazine late last year, plenty of room for additional in - transportation,” the report con - Lu took aim at the expansion of the vestment. He also points out that cludes. transport network. “It’s mainly China’s railway network (around This looks like good news – offer - about excessively big, redundant 100,000 kilometres in length) is ing evidence that high-speed trains construction and unfair competi - still only similar in size to the US are generating new demand for tion, as well as a lack of coordina - network in the 1870s. Today, US rail - travel and also suggesting that the tion between different modes of ways are 226,000 kilometres in new network may be generating transport,” he warned. length. Again, Qu thinks it’s reason - spillover benefits to the economy Lu then described plans to ex - able to assume that investment in by linking new markets and boost - pand the national expressway to Chinese track will continue to grow ing productivity. 180,000 kilometres as “staggering”, – and productively so. Of more immediate interest to especially as many of the newly- In fact, other studies also suggest the Chinese banks, perhaps, is that built roads in central and western that more of the Chinese rail net - ticket sales could soon be enough provinces are “usually empty, sim - work will start paying its way. In a to start paying down more of the ply basking in the sun”. He warned report released this month, the debt incurred to build the line in too that regional airports were being World Bank’s Beijing office has the first place. “built blindly” with plans for an - looked at the kind of journeys that The authors of the report were other 100 to open by 2020. people are taking on new bullet keen to stress that high-speed rail is But Qu Hongbin, HSBC’s chief trains. For shorter trips, i.e. less than only three years old and that it is too China economist disagrees with 1,000 kilometres, the new trains are early to draw final conclusions. much of this gloomier picture. In a competitive with air travel (some - And that points to the other chal - recent piece of research, he argues thing we first talked about in lenge in assessing many of the that the government shouldn’t be WiC107). High-speed rail is also en - larger infrastructure projects – that concerned about over-investment. croaching on coach travel over sim - the effects could be substantial but In fact, Qu says China should be in - ilar distances. that we may have to wait to see the vesting more as it is only “half way But the more interesting finding true nature of their economic im - through” its transition to a fully ur - is that around half the passengers pact. P h o t

o banised, industrial economy. on high-speed trains are travelling In many cases that might be a

S o u r A key data point is capital stock, on the route in question for the first longer delay than the banks would c e :

R e which stood at about $10,000 per time. like. But in the meantime, the wider u t e r s capita in 2010. This is about 8% of “These trips… suggest that busi - debate will continue. I 10 Week in China Energy and Resources 24 February 2012

Tapped out The biggest threat to China’s growth is water

u Siyi held a press conference tres of water. It also set new water ef - Hlast week and he had grim ficiency targets, particularly in agri - news. Although China’s economy culture, and committed to spend of was growing, he queried how sus - Rm4 trillion over the next decade on tainable growth was likely to be. His water infrastructure. Water price needs to rise says Tan particular focus was water, where Hu The announcement last week re - said that usage had “already sur - ally just expand on that and set out switched to synthetics, and poly - passed what our natural resources guidelines for how targets might be ester prices rose almost 200% too. can bear”. For the Financial Times, it achieved. That hit the industry’s entire bot - was a “stark warning”, all the more Nor was Hu Suyi the first senior tom line. so because of Hu’s job: he’s China’s government figure to admit that vice-minister of water resources. China has a water issue. As early as How bad could shortages get? This week WiC spoke to Debra 2005, his predecessor was publicly The 2030 Water Resource Group – a Tan, a director with China Water stating that water issues would af - consortium including the IFC, the Risk, a non-profit initiative dedi - fect China’s development, if they World Bank and McKinsey – did a cated to addressing the business and weren’t handled effectively. projection on China’s water usage. environmental challenges arising Based on a business-as-usual sce - from China’s water crisis. With the economy still growing at nario, China will need 818 billion cu - Here Tan explains why she thinks a rapid pace, when does this be - bic metres annually by 2030 – that’s that probably the biggest problem come a crisis for the business com - primarily driven by a doubling of facing the Chinese economy is a munity? demand for municipal and indus - shortage of water. The first sentence of the State trial water. But China’s projected Council’s statement last week said supply at that date was just over Were you surprised at the frank “China is facing severe water short - 600 billion cubic metres, suggest - comments of China’s vice minister age, pollution and environmental ing a very large shortage of around of water resources? degradation, posing a major bottle - two and a half times. Not really – the central government neck for economic and social sus - has been focused on water issues for tainable development.” So this is They are worrying numbers… a long time. I was more surprised that happening already. You need to break them down to last year’s Zhongyang Yihao Wenjian Around 96% of China’s electric provincial level to get a measure of (a blueprint on policy priorities usu - power requires water to produce. the real seriousness. China has 11 re - ally translated as the ‘number one So if you’re facing a water shortage, gions with water availability com - central document’) focused on water. you are also facing an electricity parable to the Middle East. For in - That was significant as this document shortage. The fact that we are see - stance, Palestine has annual highlights topics of overarching con - ing more brownouts is ultimately a renewable water resources of 202 cern to the government. In previous problem related to climate change cubic metres per capita, and so too years it had been agriculture related. and water. does Hebei province. That tells you But last year, for the first time, it fo - In fact, water risk is already af - that when you look at it on a per cused on water. In doing so the gov - fecting businesses. The textile in - capita basis, many of China’s ernment was saying the number one dustry has seen profits fall by up to provinces have to really manage worry was water. That policy docu - 22%. Why? Because China is the their water very carefully. The World ment put caps on water usage, saying largest producer of cotton globally Bank says if you have renewable wa - that by 2020 China shouldn’t be us - and droughts have forced cotton ter resources of less than 1,000 cu - ing more than 670 billion cubic me - prices to go up. Lots of people then bic metres per person per year you 11 Week in China Energy and Resources 24 February 2012

Where does the water go in China? The pending shortage in 2030 (billion m3)

Ecological 900 2% 818 Municipal Agriculture 800 13% 62% 133 199 bn m3 700 667 SHORT 586 88 600 554 265 67 75 Industry 500 194 23% 129 139 2030 Supply 400 Municipal 300 Industry 358 372 385 420 200 Agriculture 100 0 2005 2009 2015 2030 2030 Supply

20 years

are below the water poverty line. Are you more confident the prob - means more than triple the current Water shortages then become a se - lems will be tackled now than they price. This is politically and econom - vere constraint on economic devel - were a few years ago? ically challenging. opment, hitting food production Well, at least we finally have policy - and threatening social stability. makers acknowledging the problem. The previous mentality was that But the scariest thing is that these The latest five year plan also added China’s water shortages could be 11 regions in China are not only the six water pollution targets. The goal: solved by grand projects, like the more remote ones like Gansu. Many to regulate against the industrial south-north water diversion. Now are the economic powerhouses like dumping of heavy metals and to the view is changing? Jiangsu, Shandong as well the mu - prevent eutrophication. I do believe they are thinking differ - nicipalities of Shanghai, Tianjin and Researchers are now focusing on ently. The grand scheme of moving Beijing. The ‘water-short’ provinces industrial parks by looking at their the water from the southern rivers and municipalities account for 45% discharge mix. They are doing cost- to the north began a long time ago. of the national GDP. benefit analysis, seeking to address But now the south is experiencing questions like ‘if we need to get am - droughts and river levels are also Aquifers have been depleted too… monium nitrate levels down to tar - falling. Climate change has probably Yes, they have been run down badly gets as per the new five-year plan, rendered the south-north project in the northern provinces in partic - which industries do you need to close unviable. Desalination in northern ular. At the moment northern China or clamp down on?’ coastal cities may offer a more cost- is drawing around 8.8 billion cubic Of course, ultimately you need to effective option, especially if this is S o u r metres per year from aquifers in the see an increase in water prices too. paired with a rise in water tariffs. c e s :

C Hai River Basin, which is lowering h i n a

W water tables and risking salt intru - Is that part of the plan? Putting up Is there tension between what Bei - a t e r

R sion. That’s bad for agriculture and prices? jing wants and what local govern - i s k ,

2

0 creates subsidence too. The country’s economic planner, the ments are prepared to implement? 3 0

W On top of that 50% of ground - NDRC, has indicated that water prices There is. Getting the provincial gov - a t e r

R water in China is not fit for human will go up, but it has not been spe - ernments to execute national pol - e s o u r c contact because of pollution. The cific. The difficulty is that prices have icy is difficult, particularly in wa - e s

G r government knows this is all very to go up a lot to reflect water scarcity ter management where so many o u p ,

N bad news which is why a new na - and to make technologies like de - ministries are involved. The a t i o n a tional groundwater plan has been salination and fuller recycling viable. Zhongyang Yihao Wenjian called l

B u r e formulated. Chinese households currently spend for tighter coordination between a u o f

S Accordingly, no new aquifers are about 0.8% of their income on water departments and says provincial t a t i s t i supposed to be tapped; anyone pro - versus 2%-2.5% in developed markets. governments must “strictly en - c s o f

C posing to do so will have their busi - Given the water scarcity in China, force” all national water policies. h i n a ness permits refused. that should be closer to 3%, which But yes, it’s a challenge. I 12 Week in China China and the World 24 February 2012

Oiling the wheels China is building a new city – in Angola

s a lifelong supporter of Liver - ated from similarly oil-rich Libya. Apool Football Club, Mike Wool - Bilateral ties are lubricated in rich should be happy. He has just oil. By March 2010, Angola had be - received an email confirming his 13 come the largest global supplier of year wait for a coveted season ticket crude to China, shipping more is over. But his chances of getting to than one million barrels per day, Luanda: most costly city for expats any home games look slim. That’s 42% higher than second-placed because seven months ago he Saudi Arabia. Accounting for 2% of and by awarding contracts to Chi - joined the growing number of for - global production, Angola’s low- nese companies. At least $4.4 billion eign workers heading to Luanda, the sulphur product is particularly in in construction contracts were capital of Angola. demand by Chinese refiners for signed last year alone. One ongoing Until 2002, this country of 19 higher-quality gasoline and diesel. project is the huge greenfield site 30 million people had suffered more In 2010, Beijing bought about 45% kilometres south of Luanda, where a than a generation of civil war. But of Angola’s output. $3.5 billion city is emerging. The new since then, oil-rich Angola has been Production also looks set to in - city of Kilamba Kiaxi is the show - one of the world’s fastest-growing crease following announcements piece in a government push to build economies with GDP up an average late last year that BP, Total and Nor - a million new homes. The first of 11.1% a year, according to The way’s Statoil have secured licences phase, due for completion in De - Economist. to explore offshore deposits, which cember this year, will provide hous - The country’s war-ravaged in - have the potential to double An - ing for 120,000 people, with associ - frastructure is straining to support gola’s reserves. ated schools, shops and parks. The such rapid growth – the upshot be - As WiC has reported before (see is - Chinese are prominent once again: ing that Luanda has become one sues 91, 129 and 131) China’s growing state-owned CITIC Construction is of the world’s most expensive presence in Africa is not without its overseeing the work and employs cities for expats (the consultancy critics, especially those who detect a 10,000 Chinese workers on the site. Mercer ranked it costliest for ex - neo-colonial effort to grab the conti - Of course, all those involved in pat employees in 2010 and 2011, nent’s resources. Others have drawn the Kilamba Kiaxi project will be while Woolrich, a geologist, told comparisons with the arrival of hoping that the new city doesn’t suf - WiC that taxi rides of less then 10 thousands of Cuban advisers and en - fer the same fate as the Luanda Gen - miles cost $90). gineers in Angola in the 1980s. But eral Hospital, built by COVEC, an - Still, Angola is desperate to lure the Chinese lack the Marxist moti - other Chinese construction firm, foreign workers. And as with a num - vations of their Cuban predecessors. and opened to great fanfare by Wen ber of other African countries, China Plus they’ve been building roads, rail - Jiabao in 2006. Within four years of has been one of the main providers. ways and airports in places where opening, hospital walls were show - According to a June 2011 report by other foreign firms have feared to ing signs of cracking and serious ero - the Centre for Strategic and Inter - tread. Financial assistance has been sion, and the facility had to be shut national Studies, there are now 50 more forthcoming too, with $14.2 down. The Chinese blamed a faulty Chinese state-owned firms and 400 billion extended in official credit geological survey provided by the private companies operating in An - lines to Angola, at more competitive Angolans, while the locals say the P h o t

o gola, with an associated workforce terms than those offered by Paris hospital design was flawed.

S o u r of up to 70,000 Chinese nationals. Club creditors. Both sides will be hoping that c e :

R e To put that in perspective, that’s Of course, the Angolans are pay - wider bilateral relations turn out to u t e r s I twice the number recently evacu - ing off these loans with oil exports have a more solid foundation. 13 Week in China Society and Culture 24 February 2012

Hurrah for Hollywood American film studios are set to earn a good deal more in China

n the first Matrix movie, there’s among Tinseltown bosses will also Ia scene in which the hero Neo is have picked up after a key an - dodging bullets. “He’s starting to be - nouncement during the visit of lieve,” his mentor observes know - China’s future leader Xi Jinping to ingly. Neo’s enemies then opt to the US this month. The news was throw punches instead. He parries that a long-overdue compromise their blows, deflecting their energy had been reached on a US complaint straight back at them, resulting in to the WTO about limited access to their defeat. Chinese audiences (specifically, on The moment is pure tai chi , a restrictions capping foreign films at term that translates literally as just 20 releases per year). ‘supreme ultimate’ and derives US film executives say that the from a Taoist concept where an in - regulations resulted in a huge loss dividual reaches a state of absolute of potential income for American and infinite potential. studios in China and also fuelled The Chinese have believed in tai widespread pirating through illegal chi’s power for millennia but it took DVD distribution. the 1999 release of The Matrix – as Last March the Chinese had ac - well as the advent of CGI technology cepted the WTO verdict and agreed – for Hollywood to cotton on to its to open the domestic market for true commercial potential. “entertainment goods” (see WiC70). The film took $463 million at the However, as we pointed out in box office. WiC118, the concession proved a lot Playing Neo in The Matrix was less significant in practice because Keanu Reeves, and he’s recently state censors were still limiting the dusted down his martial arts man - Girl of tai chi ? Karen Mok number of foreign releases that ual for his directorial debut. Appro - were being screened. priately enough, it’s called Man of flective of a new commercial real - Last Friday’s announcement was Tai Chi . The Hollywood star is cur - ity: the growing pull of Chinese therefore something of a break - rently in Beijing shooting the film cinema audiences. through. Under the agreement 14 alongside Hong Kong actress Karen Man of Tai Chi is being co-financed additional American films will be Mok and kung fu master Tiger Chen. by China Film Group and Wanda Me - exempted from the annual quota. Man of Tai Chi is also something dia. On the Hollywood side, the back - It was specified they had to be pre - of a first. While director Zhang Yi - ers are Universal and Village Road - mium format films (i.e. 3D or IMAX), mou has made movies that switch show Pictures (which co-produced which was likely a clever compro - between English and Mandarin The Matrix ). And Hollywood Reporter mise on the Chinese side – after all (such as The Flowers of War , see quotes Universal’s boss David Kosse these movies tend to be of the block - WiC135), this is the first time that a as saying that the film gave the studio buster variety and therefore the Western director has sought to do “the opportunity to become further type unlikely to ruffle China’s polit - P h o t o so. Reeves claims a smattering of involved in the Chinese market, as ical sensibilities. They are also – con -

S o u r c Chinese blood on his father’s side. well as bring Chinese films to audi - veniently for Hollywood – the most e :

I m

a But the Canadian actor is not a ences all over the world, which is a lucrative. Transformers: Dark of g i n e

C Mandarin speaker. Instead, t he de - priority for Universal.” Moon last summer earned Rmb1.89 h i n a cision to use both languages is re - Interest in Chinese ticket sales billion ($300 million) in China. 14 Week in China Society and Culture 24 February 2012

Hence US Trade Representative about more than trying to get more Ron Kirk welcomed the conces - foreign films onto Chinese screens. sion, saying that it would boost Instead, Dreamworks CEO Jeffrey “one of America’s strongest ex - Katzenberg told the Wall Street port sectors in one of our largest Journal that aim is to produce “sto - export markets.” ries that are made for China by the Industry insiders now predict that Chinese, at a quality that can be ex - US studios will see their share of the ported to the rest of the world.” Chinese box office rise from 13.5% to The new venture, called Oriental 25%. As the Shanghai Daily noted: Dreamworks, hopes to release its “Cheering as loudly as any movie au - first animated film by 2016 and dience, Hollywood and the Obama then plans to produce two a year administration have hailed China’s thereafter. agreement to reduce barriers that Of course, the new arrangements have kept US-made films out of the will mean that the joint venture’s booming Chinese market.” output won’t be classified as foreign The deal’s other significant con - content. That will ensure that quota Oops: Feng Xiaogang cession: US studios will be permit - or no quota, its flicks will have guar - ted to sell their blockbusters anteed access to Chinese screens. general in stock prices on Shenzhen’s through privately-owned enter - ChiNext exchange. prises rather than have to rely on That’s even after it announced that two state-owned agencies for distri - it expected unaudited profits for 2011 bution, as previously. The new pact to top Rmb216 million ($34 million), should help the US firms negotiate Careful what up 45% from the year before. a larger share of takings. you tweet The drop in share price wiped American studios rightly view out Rmb320 million in Huayi mar - China as their number one growth Director hints at retirement ket value. Feng himself owns a opportunity. After all, three new cin - stake in the firm, and it fell Rmb3 ema screens are being added per day elebrities are now well-accus - million in value, comments China in the country, with 20,000 ex - Ctomed to using weibo , China’s Securities Journal. pected to be showing films by 2015 Twitter-equivalent, to broadcast News of his financial misfortune (America has about 40,000). That their inner musings. But as film - seemed to snap Feng out of his means the Chinese box office is maker Feng Xiaogang recently dis - melancholic mood. Soon he he was growing exponentially fast. In 2008 covered, there is a downside to too backtracking. “I am not selfish and it took just $680 million, versus $2.1 much disclosure. Deliberating pub - will do my best to complete my con - billion last year. licly on his dark mood has cost him tract with Huayi Brothers,” Feng “It is tremendous news for the millions of yuan. wrote on his weibo the next day. millions of American workers and On February 8, Feng complained “Please consider complaints on businesses whose jobs depend on of his general fatigue with working my microblog the remarks of a spoilt the entertainment industry,” Chris life on Sina Weibo, where he has child,” he urged. Dodd, president of the Motion Pic - over 7 million followers: “My love ture Association of America said. for filmmaking is becoming weaker In news also timed to coincide and weaker, and I’m more and more with Xi Jinping’s visit to Los Ange - fed up with this life. Maybe it is time les last week, Dreamworks Anima - for me to quit filmmaking.” Jun will fix it tion has announced the formation Clearly, multimillionaire Feng was Top soccer referees jailed of a joint venture with Shanghai Me - having a bad day. And soon enough dia Group and China Media Capital, so were the considerably worse-off nglish football fans are familiar as well as the investment arm of the investor relations people at the pro - with the expression that the

P E h o t

o Shanghai government. duction company Huayi Brothers, a referee is ‘bent’. It’s normally a

S o u r Dreamworks – which owns the long-time partner of Feng’s, which throwaway line, mind you, in - c e :

R e Kungfu Panda franchise – says the saw its share price slide 0.2% over the tended less to impugn the referee’s u t e r s deal breaks new ground because it’s next two days despite a 3.7% rise in integrity and more to castigate a de - 15 Week in China Society and Culture 24 February 2012

cision that fans don’t agree with. following a crackdown on soccer-re - But in China referees really are lated corruption”. bent, it seems, in the sense of The People’s Daily agreed that the morally crooked and corrupt. punishment was fair: referees that Last week a court in the northern once acted as “dignified judges’” city of Dandong found four top ref - were now “discredited prisoners”. erees guilty of taking bribes and fix - However, as Shenzhen Special ing matches. The refs got their very Zone Daily pointed out, 90% of own red cards in jail time and fines. those surveyed in an internet poll The most high-profile of the believed that the final sentencing group was Lu Jun, who represented was “too light”. Like other newspa - China at the World Cup in 2002, pers, it noted too that Lu even man - positioning him as the best of the aged a smile on news of his pun - nation’s refereeing elite. Lu was ishment. even known as the ‘Golden Whis - Golden no more: Lu Jun The crackdown looks set to tle’ in recognition of his perceived spread wider, with China News re - impartiality. football referees have been fiddling porting that two days after the ref - Apparently not. Lu has now ad - results for cash. We’ve reported erees were sentenced, two more of - mitted to taking more than fairly regularly on the problems in ficials were also dealt with. The vice Rmb800,000 of bribes to fix seven the Chinese game (see WiC31 for one chairman of the Chinese Football league games between 1993 and of our favourite cases of match rig - Association, Yang Yimin, was con - 2003, Xinhua reports. He got a five- ging). But we’ve also made clear that victed for taking bribes, receiving a and-a-half year jail sentence and was senior figures (including Hu Jintao 10-and-a-half year jail sentence. And fined Rmb100,000. himself) see the professional league facing even longer behind bars is The other referees received jail as a national embarrassment and Zhang Jianqiang, the former secre - time too. Regular readers of WiC have ordered a clean-up. tary general of the Football Associ - won’t be particularly surprised by Xinhua says that the jailing of ref - ation’s Referee Committee, who got the disclosure that some of China’s erees is “the first important verdict 12 years. I

FAST FOOD: For over five millennia, food has been at the heart of Chinese culture. Here we profile a popular dish Jiemo dun

What is it? the best jiemo dun should be spicy but Jiemo dun is a cold dish made of not chokingly hot. Chinese cabbage and mustard. It is especially popular in Beijing and Why has the dish been in the news Dongbei (the northeastern part of the recently? country). Traditionally it is consumed Stephen Harper, Canada’s prime minister, during the Lunar New Year, when holiday seems to have enjoyed it during a trip to revellers tire of greasy food. The crisp, Beijing this month (see WiC last week). As cold cabbage is said to make a great it turns out, Harper enjoyed the flavour of palate cleanser. jiemo dun so much that he even dipped Preparation is simple: put cabbage slices of braised pork into what remained into a colander and pour hot water over of the mustard sauce. well-known for its traditional noodles and it. Then add mustard, rice vinegar and snacks (Tel: 86-10 6765 4321).

P sugar. Put it in a porcelain pot and let it Where to eat it? Another place to enjoy the traditional h o t o

sit for at least a day, so that the cabbage Harper dropped in on One Bowl Home, a Beijing dish is Haiwanjü: 11 Zengguang S o u r absorbs the marinade. restaurant on Pufang Road in southern c Road, Haidian District, Beijing (Tel: 86 10 e :

R

e According to Beijing Evening News, Beijing’s Fengtai district. The eatery is 8837 4993). u t e r s

16 Week in China And Finally 24 February 2012

Poor drivers Rolls-Royce crashes reveal motor insurance flaw

ow do you devise a formula to ity policies only covered a fraction of Hinsure a nation of largely first- the damage and both drivers faced time drivers, who might collide the prospect of selling their homes with anything from a donkey cart to to cover the repair bill, the Oriental one of the world’s most expensive Morning Post has reported. Just don’t hit one sports cars? In the second case, a man named That’s the conundrum that Chi - Liu, a chef from Jiangsu, drove into a Rolls-Royces then dramatically re - nese insurance companies have been Rolls-Royce Phantom outside Nan - duced their financial demands, earn - struggling with since third party jing’s airport. The Rmb1 million of ing praise from their former critics. auto insurance became mandatory damage equated to 41 years of his “The number of rich may have in 2006. salary, the newspaper said. grown in recent years but very few And it’s a question that interna - In theory all drivers must take out of them have heart and responsi - tional insurance firms are going to third-party insurance. But because bility as well as money! Good job!” have to answer too. No doubt they the accident rate is so high, local in - one wrote on his weibo account ap - have some of their best people work - surance firms say they often can’t provingly. ing on a China algorithm. offer comprehensive third-party But others cautioned that this Last week Xi Jinping announced cover. Instead, people buy what they was an outcome of a particular case during his US tour that foreign in - can afford and hope they don’t hit and not a permanent solution for surance providers will be allowed to anything too expensive, an insur - the wider problem. Some even said sell third party insurance to Chinese ance agent told WiC. that it wasn’t always fair to make the drivers. As one of the few insurance For both Liu and Ms Zhu – the sec - richer party absorb so much more of policies that are mandatory in ond person to hit a Rolls-Royce car the cost of accidents. China, the new entrants will be hop - this month – the fallback plan “This time people let it go out of ing that auto cover will help them seems to have been getting public good nature. But we can’t expect peo - snare customers. opinion on their side. Both went to ple to do this all the time,” another But auto insurance is a tricky the media after their accidents and posted on his microblog. “We need field in China, as two incidents this their stories were picked up by Sina to come up with a better way of deal - month show. In both cases drivers of Weibo where they fed into the angry ing with these situations.” low-end vehicles crashed into Rolls- undercurrent often directed at the That is soon going to be some - Royces worth millions of yuan. Un - country’s rich (see WiC136). thing for the likes of AIG and AXA to fortunately, t heir third-party liabil - In both cases the owners of the figure out. I

No surrender, says Mitt

“We should not fail to recognise that a China that is a prosperous tyranny will increasingly pose problems for us, for its neighbours, and for the entire world.”

P Republican presidential candidate Mitt Romney in an opinion piece for the Wall Street Journal. h o t o

In the article he promised again to brand China as a currency manipulator and also warned that he S o u r c will be tougher in trade negotiations. “A trade war with China is the last thing I want, but I cannot e :

R e tolerate our current trade surrender,” he remarked. Mitt Romney u t e r s

17 Week in China The Back Page 24 February 2012

Photo of the Week In Numbers 50 basis points The reduction in reserve requirements for Chinese banks. This is the second time in three months that the country’s central bank has reduced the amount of capital that needs to be set aside as reserves, which now stands at 20.5%. This should allow an increase in bank lending. 5.2 billion The number of video views on Tudou, one P h of China’s largest video-sharing sites, in o t o

S December. That’s almost double for the o u r c

e same period last year. Tudou has also :

C F

P announced that it had 227 million unique visitors in December. A kissing competition held in Hefei in Anhui province. The winning couple locked lips for 2 hours 43 minutes and won a diamond ring 44% The share price increase on news that Wen Yunsong had been named chairman of state-owned China Satellite Where is it? Communications Corp (Satcom). Wen’s Some of the places referred to in this issue father is Wen Jiabao, China’s current premier and Satcom is Hong Kong-listed.

Gansu Beijing 26% Hebei The estimated percentage rise by year-end Shandong Qingdao of bad loans at China’s publicly traded China Jiangsu banks. Bad debt began to rise in the final Anhui Shanghai quarter of last year – for the first time since Zhejiang 2005 according to CICC. 6.4% The drop in Foxconn’s share price after the Guangzhou Shenzhen Hong Kong company announced salary hikes for workers. Analysts predict the pay rises could increase costs by up to $500 million a year.

With 1.3 billion people, 293 languages and an often opaque business culture, China can often seem as mysterious as the Mona Lisa. Our easy-to-search website now helps you to find some of the answers. It contains a growing archive of more than 2,500 WiC articles. And the site has another advantage: subscribers are able to read us on the move each week via their Blackberry or iPhone. To get our weekly email and access the site, you’ll need to go to www.weekinchina.com/welcome/ and sign up. It takes just a couple of minutes to register. Sign up today!

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@2012 Week in China is published weekly by ChinTell Limited, a company based in Hong Kong. All rights reserved. To contact us email: [email protected] 18