1 Editor’s Note 2 Talking Point 6 The Week in 60 Seconds 7 China and the World Week in China 8 Property 9 China Consumer 10 Banking and Finance 11 Economy 12 Agriculture 13 January 2012 13 Environment 14 Society and Culture Issue 134 17 And Finally www.weekinchina.com 18 The Back Page

Investors find the glass half empty 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 Chonging Brewery’s failed vaccine sparked a market sell-off – and what o k y n o a t B s it says about the shortcomings in China’s fund managment industry 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 Editor’s Note 13 January 2012

The year that was WiC’s 2011 predictions: how did we do?

n our 88th issue – published in December 2010 – we looked back at eight of the Ibig themes that we’d tracked since the inaugural issue of Week in China. That was the easy part. We also took a stab at that oh-so-dangerous of arts: prediction. We listed ‘8 Things to Watch in 2011’. In the interests of accountability, how did we do? Our first and last predictions were the most accurate. Our opener: we forecast “Why 2011 could be the year property prices finally fall”. This turned out to be true. And our last ‘thing to watch’ was also prescient: “China mulls options for North Korea after Kim Jong-il”. The Dear Leader died just before Christmas, reawakening the debate about how Beijing deals with its unpredictable neighbour. We also honed in on the importance of the Chinese market to multinationals, talking about how a rising number of firms will make more money in China than in their home markets. Yum Brands (owner of KFC and Pizza Hut) re- mains the poster-child for this theme. It stepped up its China presence later in the year with its acquisition of local hotpot chain Little Sheep (take a look at our December Focus Issue on the Magnificent Seven to see some of the other international firms cashing in on the China market). Another of our predictions didn’t take tremendous foresight, we have to admit. We forecast increased volumes of offshore yuan bonds (issued in Hong Kong and known as dim sums). A total of Rmb189 billion ($30 billion) was raised in 2011, versus Rmb42 billion in 2010. (For more coverage of the Rise of the Renminbi, see the Focus issue section of our website.) We were also correct that high-speed trains were an area to watch – but not quite for the reasons we envisaged. We foresaw controversy as China sought to sell trains and track abroad, as foreign manufacturers launched patent in- fringement suits. Not so: but China’s bullet trains became one of the year’s biggest talking points after the tragic Wenzhou crash in July. Likewise we also warned of potential trade conflict between the US and China. While there was plenty of noise on this front – particularly from sec- tions of the US Senate – saner heads prevailed in 2011. Even so, President Obama’s exclusion of China from the Trans-Pacific Partnership in November points to es- calating annoyance in Washington at Chinese trade policies. The two areas that we identified that were less topical in 2011 than thought? Lit- tle of note happened in China’s electric car industry (as a result of which self-pro- claimed industry leader BYD saw its stock price get smashed). And likewise our guess on the pending reform of the urban household regis- tration system – something which disadvantages migrant workers in big cities such as Beijing and Shanghai. Reform is still pending as we write... Photo Source: Shutterstock As to this year? At this stage we’ll stick to saying it will be harder to predict than 2011. But we’ll be writing plenty of stories over the next few weeks that point to the bigger themes ahead. Issue 88 can be downloaded from www.weekinchina.com, in case you are inter- ested in reading more. n 1 Week in China Talking Point 13 January 2012

Drowning their sorrows Debacle over Chongqing Brewery’s failed vaccine rattles fund managers

No longer under wraps: investors took fright when brewery revealed vaccine shock

“ hat calls for a Carlsberg” is a differ. One fund – Dacheng Fund saw the brewer’s share price more Tmarketing tagline currently Management – says it will push for than double. The stock then went doing the rounds at the Danish the dismissal of the Chongqing into overdrive after June 2005, brewing giant. brewer’s chairman Huang Minggui at when approvals were received But news from one of Carlsberg’s a shareholder meeting on February 7. from the State Food and Drug Ad- major investments in Chongqing “Chongqing Brewery did a bad ministration to begin the second over the last month might have job disclosing information and it stages of research. It kept on ris- Copenhagen-based bosses calling did nothing to cope with the (share ing: last year alone it was up al- for something a little stronger. price) crisis, which has severely most 50% to peak a little above This follows days of catastrophic harmed our investors’ interests,” a Rmb83 (a stellar return in a lack- trading in the stock of Chongqing Dacheng spokesperson insisted. lustre year for Chinese markets). Brewery, with the company’s share In fact, optimism for the vac- price crashing by more than two- What’s the background to the cine remained pretty much unbri- thirds. share price collapse? dled until the very last moment. Carlsberg has since assured in- Back in October 1998, Chongqing Financial magazine Capital Week vestors that it has “full confidence” Brewery spent Rmb14.4 million on points out that the stock was up in the brewery management in a 52% stake in Jiachen Bio-Engi- more than 18% in the final two Chongqing, where it has been the neering, also from the Chongqing days before trading was sus- Photo Source: Reuters largest investor since upping its municipality. Jiachen then began pended, in preparation for a stake by $379 million in June 2010. clinical research on a hepatitis B much-anticipated statement on But a group of very annoyed insti- vaccine, and enthusiastic news the clinical trials in December. tutional investors in China begs to flow on the prospects for the drug What then followed was a huge 2 Week in China Talking Point 13 January 2012

shock for investors. On December and reports too that the China Se- identified 20 of the largest funds 7, the Shanghai-listed company re- curities Regulatory Commission holding Chongqing Brewery’s shares. vealed that, after more than 12 (CSRC) has said it will “consider in- In fact, there are media reports years of work to produce the vac- vestigating” the case. that the brewery’s slide has trig- cine, the clinical trials had not been Soon afterwards, one of the gered fund redemptions of at a success. Chongqing Brewery’s brewer’s directors admitted to sell- least Rmb14 billion ($2.2 billion) share price plunged by the 10% ing company stock shortly before so far, with the collapsing price daily limit for nine subsequent the release of the trial results. But creating a scramble among port- trading days, descending to according to eastmoney.com, he folio managers to sell other stocks Rmb28.45 by December 22. also insisted that this was only to to meet redemption calls from jit- Further trading was then sus- rectify earlier share purchases tery clients. pended until Tuesday this week. But made erroneously by his wife. Dacheng was again at forefront, the hiatus was to little avail: the according to 21CN, with companies stock was again withdrawn within a The wider impact? including Laibao Hi-Tech, Aisino couple of hours, after triggering the It wasn’t just Dacheng who was hit, and Kangmei Pharmaceutical all 10% decline rule. says 21CN Business Herald, which has suffering weighty declines from

And now the recriminations? Larger institutional investors have been making the most noise, espe- cially Dacheng, which owned Chongqing Brewery stock for nine of its fund products. Of course, a drug vaccine project sounds like an unlikely investment for a brewery to make, although Enid Tsui, writing on the FT Alphav- ille blog, points out that the vac- cines are yeast-based, so at least offer a little common ground. Similarly, Hepatitis B is a major problem in China. Various studies suggest that a tenth of the popula- tion is infected – so if a vaccine could be developed, it would have tremendous commercial potential. (Foreign Exchange) (Financing) (Trade) Any hope of that looks like being dashed in Chongqing, as the brew- ery’s research programme will “al- Renminbi spoken here most certainly end in failure,” We help clients trade RMB globally, find competitive and diversified funding sources and manage currency risk. reports the Global Times. For more information, visit www.hsbcnet.com/rmb Unsurprisingly, this is going down badly with owners of the stock, who feel that they have been blindsided by management, with no indication that the trial’s process was so close to collapse. Worse, there are suspicions that a few insiders may have got wind of

the bad news in advance. Caixin Renminbi (RMB) is currently not freely convertible and conversion of RMB through banks in Hong Kong is subject to certain restrictions. Clients should be reminded of conversion risk in RMB products. In addition, there is a liquidity risk associated with RMB products, especially if such investments do not have an active secondary market and their prices have large bid/offer spreads. RMB products in Hong Kong are denominated and settled in RMB deliverable in Hong Kong, which represents a market which is magazine has suggested that sev- different from that of RMB deliverable in Mainland China. For individual clients, conversion of RMB is subject to the daily limit in Hong Kong, the clients may have to allow time for the conversion of RMB from/to another currency of an amount exceeding the daily limit. eral institutional investors cashed 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 HSBC Bank USA, NA. 11-087 out close to the peak price per share, 3 Week in China Talking Point 13 January 2012

the domino-selling effect as it sought to raise cash. The Securities Times agrees that the case has Planet China wider ramifications and could Strange but true stories from the new China force a rethink among investment managers, especially those who have been too concentrated in riskier shares in an effort to chase above market returns. There has also been criticism that the higher risk projects that fuelled the run up in Chongqing Brewery’s price are better suited to specialised private equity outfits than suppos- edly more cautious mutual fund providers. Should industry professionals have continued buying into a com- pany that was trading at a price-to- earnings multiple of 108 times – TALL STORY.According to a new report by the Council on Tall Buildings more than a little speculative com- and Urban Habitat, China will be home to 10 of the world’s 20 tallest pared with Chongqing Brewery’s skyscrapers by 2020. It will also house some of the world’s quirkiest peer group? structures. Longtime readers of WiC will recall the odd shape of the CCTV Building (known by Beijingers as ‘The Underpants’, see issue 3), and Bigger picture: difficult times for likewise our story about an Anhui hotel shaped like a ping-pong paddle fund managers... (see WiC101). Putting aside some of the chal- News broke last week that Chongqing wants to join the fray, with a lenges of corporate governance for strangely shaped building of its own. As seen in the architect’s illustration, asset managers, another key con- the proposed skyscraper on the south bank of the Yangtze river cern has been the poor perform- resembles two Chinese characters. Scheduled to begin construction next ance of the A-share market, which year, the 280-metre high complex will pay homage to China’s writing system. Both characters (identical except for their respective sizes) mean hasn’t provided much of an envi- ‘people’. Linguistic experts sourced by website China Smack add that the ronment for fund firms to grow manner in which the characters are sited together also resembles another and prosper. character: the ‘qing’ in Chongqing’s name. This isn’t just about rocky global Of course, netizens have been quick to pan the design as ridiculous. market conditions – fund managers One said it reminded him of the prow scene from the movie Titanic, while gripe that IPOs have flowed on a another said it was a waste of money and clearly the brainwave of an feast-or-famine basis, and that egomaniacal government official. there has been further downward At a more practical level, one blogger pointed out a possible pressure on stocks thanks to state- commercial problem: who would want to rent the space around the owned firms’ releasing their erst- building’s ‘crotch’? while non-tradable shares onto the market. Companies and business owners may have done well, but in- sets under management have also savers to consider a more conserva- vestors have suffered. been shrinking, and they were tive range of investment options As a result the fund management down by a further 12% to Rmb2.19 (better the selection of a blue-chip industry remains in a state of ar- trillion last year. Long-only funds fund than punting your cash on a rested develoment, with the latest have been overtaken by trust firms third apartment in Erdos, or a flut- Photo Source: China Imagine data (from KPMG, for 2010) show- and bank wealth management divi- ter on a warehouse full of garlic in ing a ratio of mutual funds under sions, which have been yielding Jilin, for instance). management to bank deposits at higher returns. But to get more investment in 3.3%, compared to 143.4% in the US. This is a problem for policymak- company bonds and stocks in- Since reaching a peak in 2007, as- ers, who would like to encourage vestors will need convincing that 4 Week in China Talking Point 13 January 2012

their funds are professionally man- And this time around? a “liquidity drain” of over Rmb1 aged and capable of generating reli- HSBC wonders if the latest meeting trillion from investors’ pockets. able returns. could also turn out to be a “potential “With new regulations in place Hence asset managers will be game-changer” in the longer run (es- this could change,” predicts Sun. hoping stocks will get a boost from pecially in conjunction with changes One specific measure getting fur- the latest meeting of the five-yearly made at the top of the three leading ther discussion is the creation of a Financial Work Conference, which regulatory agencies last year – see new body to support short-selling. convened last week. That’s because WiC128 – and signs of monetary pol- The new Centralised Securities the conference – the subject of a re- icy heading in a pro-growth direc- Lending Exchange will make shares search note from HSBC’s equity tion, see WiC133). Admittedly, this is available to qualified fund man- strategy team – has previously been a more positive response than most agers, says the Financial Times, with influential, with China’s equity of the international media, which shares sourced from banks, insurers markets rising strongly (by 15-20%) was disappointed at the lack of con- and fund management firms. That after three earlier meetings. crete measures announced. sounds promising. It will allow for Each proved to be more than But HSBC anticipates renewed hedging, as well as offering more of talking shops: the 1997 gathering focus on the “dismal” performance a chance to earn returns when mar- saw announcements of a wave of of Chinese stocks. According to kets are under-performing. It is also banking reform; 2002 welcomed a Steven Sun, HSBC’s Head of China strongly rumoured to have the new banking regulator as a separate Equity Strategy, the A-share market backing of the new head of the se- body to the People’s Bank of China, has neither rewarded investors curities regulator, the CSRC. as well as the creation of the Central with capital appreciation or divi- Meanwhile, Sun expects some Huijin Investment Company (see dend income. For example, in the respite for weary local fund man- WiC62); and in 2007 the formation period between 2006 and 2010 he agers: he forecasts Shanghai’s com- of China Investment Corporation notes that A-share stocks paid posite index will rise 25% this year. was announced, as well measures Rmb1.7 trillion in dividends but That will be especially welcome designed to boost the corporate also raised Rmb2.8 trillion in new news for those licking their wounds bond market. capital. Sun says that amounted to from the vaccine debacle. n

Dragons unite!

Few Chinese will have heard of the village of Llanfynydd in Carmarthenshire (and even fewer will be able to pronounce it). But that may change on news that a property developer is planning a £50 million resort there, with the goal of luring 20,000 Chinese visitors a year. According to the Western Mail, the plan is to turn an 1830s tower into a luxury hotel, with additional wood cabins and timeshare homes on site. The man behind the project is Tommy Li, the boss of real estate developer Maxhard. He says that most and not just by the British. tourists from China are familiar with England and The Financial Times reported recently that China Scotland, but “not many” know of Wales (or its Telecom has just done a deal to launch a UK mobile weather, presumably, which is a bonus...) phone business, under an agreement with Everything Fortunately, a councillor for the village told the Everywhere (the British operations of France Telecom and Western Mail that locals were very much in favour of Deutsche Telekom). The plan: to offer Chinese language- Illustration: www.benitaepstein.com the plan. “We have lost our two pubs and we have based mobile services, tailoring its services to the needs lost the local shop,” says David Jones, who fears the of the growing Chinese population in the UK. That will village will die without new investment. include visitors – offering competitive tariffs to the The rising number of Chinese tourists to the UK is 600,000 Chinese who reach Blighty every year and want now being viewed as a wider business opportunity, to call home.

5 Week in China The Week in 60 Seconds 13 January 2012

Mickey Mouse numbers The major news items from China this week were...

The Chinese government is expected to set its eco- 1nomic growth target at the 7% level for 2012, says Japan’s Nikkei newspaper, below the 8% outlook in place in recent years. It has been argued previously that an 8% increase in GDP is necessary for employment and social stability. But the authorities are expected to lower the target this year to reflect downside risk, especially the European debt crisis.

US Secretary of the Treasury Timothy Geithner has 2been in Beijing, on an Asia trip including a formal visit to Japan. According to a First Financial Daily report, one of Geithner’s goals is to seek support from Beijing and Tokyo on sanctions against Iran (see page 7). Mickey dances towards profitability in Hong Kong

Hong Kong Airlines, a subsidiary of Hainan Airlines, A Beijing court has accepted a lawsuit filed against 3has confirmed an order for 10 Airbus A380 aircraft at 5Apple by a group of Chinese writers alleging unau- a list price of $3.8 billion. With the new aircraft due to be thorised downloading of their work through the US com- delivered from 2015 onwards, the carrier says it will in- pany’s App Store. The group, which includes well-known troduce long-haul services to destinations including writers like Han Han and Li Chengpeng, is demanding Paris, London and Sydney. compensation of $1.9 million for copyright violation.

The Brazilian unit of French oil and natural-gas com- Google is not giving up on the China market, after 4pany Perenco will sell a 10% stake in five offshore 6all. Two years after pulling out of the search engine blocks in the Espirito Santo Basin to state-run Sinochem. business, the Wall Street Journal reported that the US The deal marks the growing presence of Chinese com- search giant is once again hiring engineers, salespeo- panies in Brazil, especially in offshore oil and natural- ple and product managers to introduce new services for gas exploration. Chinese consumers. In particular Google is aiming to capitalise on its fast-growing Android operating system for mobile devices, as well as targeting online advertis- ing and product search services, which have been grow- ing in China.

Hong Kong Disneyland said its annual loss narrowed 7from $92 million to $30.5 million last year due in part to a 13% increase in visitors. Attendance during the fiscal year rose to 5.9 million visitors from 5.2 million. The per- centage of visitors from China also rose to 45% from 42%. The theme park has reported a net loss every year Photo Source: Reuters since it opened six years ago, partly due to lower-than- expected visitor figures. It has announced expansion plans to lure more visitors; but faces worrying future “You again”: Tim Geithner returns to Beijing competition from a Disneyland park in Shanghai. n 6 Week in China China and the World 13 January 2012

Straitened circumstances As pressure on Iran mounts, China looks to diversify its oil supply

hreats by the Iranian govern- the second phase of a gas field proj- Tment to block the Strait of Hor- ect in South Pars. CNOOC has also muz have taken the war of words withdrawn from a gas project and between Tehran and Western lead- Sinopec has postponed the starting ers to a new level. date for work on an Iranian oil field. Some are confident that it is a These delaying tactics have not case of Iranian bluster. “Do I really gone unnoticed. Last summer, the think that they’re going to go ahead National Iranian Oil Company and try to shut the Straits of Hor- threatened to hand the CNPC proj- muz?” Dennis Ross, President ect to domestic contractors if Obama’s former special assistant on progress was behind schedule. Iran told Bloomberg. And it is not just energy compa- “I do not. They will be the ones nies limiting their operations in who suffer the most from that.” Iran. Huawei Technologies said last But Beijing isn’t taking any month that it will reduce the scope chances. Accounting for around 10% Hot topic: Iran’s oil exports of its own business in the country, of its crude imports, Iran is the third blaming an “increasingly complex largest oil supplier to China. Hence three major energy suppliers this situation”, reports Bloomberg. its concern about a worsening polit- coming week, with a tour of Saudi (Huawei may view this as a way of ical situation over Hormuz, as well Arabia, the United Arab Emirates winning favour in Washington as a greater effort to diversify Chi- and Qatar. No doubt each will be where it wants to portray itself as a nese supply. happy to help move Chinese orders good corporate citizen.) The process has already started. away from Iranian suppliers. Not that the Chinese will want to At the end of last year, Sinopec and Wen will leave for the Middle East be pushed into a corner on Tehran Iran failed to reach agreement on just days after receiving US Treas- (just as they’ve shown little inclina- credit details for a larger contract. ury Secretary Tim Geithner in Bei- tion to bow to international pres- As a result, Sinopec reduced its jing, in a trip seen as part of a US sure over North Korea). The Global crude oil purchases in January to diplomatic effort to pull in wider Times also reaffirmed this week that 285,000 a day, approximately half support for stricter sanctions Beijing is opposed to “unilateral the amount purchased in the same against the Iranians. sanctions”. In fact, some think period last year. Officials in Beijing will also be China’s recent moves to cut expo- That particular dispute suggests aware of the risk to their interests sure to Iran’s oil is all part of a clever the smaller order stems from com- should sanctions be tightened. Chi- bargaining strategy. Should the US mercial disagreements. But another nese firms have signed $120 billion and the EU announce sanctions, the state-owned oil company, Zhuhai worth of oil and gas contracts with Iranians will have few choices but Zhenrong, has also halved its im- Iran – deals that could be jeopar- to sell their oil to the Chinese, re- ports of Iranian crude to 120,000 dised by a worsening situation. ports the Financial Times. Beijing barrels a day, suggesting that other In the interim, Chinese compa- will then expect a hefty discount. Chinese companies may be reduc- nies have been putting further One Geneva-based trader told Photo Source: Reuters ing their exposure to Iran as a mat- large-scale projects in Iran on hold. the FT this week that he had little ter of course. China National Petroleum Company doubt that the Chinese would be So it is probably no coincidence (CNPC), the gas-and-oil parent to looking for a deal. “The only ques- that Premier Wen Jiabao is visiting listed PetroChina, last year delayed tion is about price,” he suggested. n 7 Week in China Property 13 January 2012

Realty bites Darwinian times for China’s property developers

esperate times call for desper- “Developers of high-end apart- Date measures. So Greentown’s ments have a greater need to main- latest asset sale makes you wonder tain strong cashflow rather than rely just how frantic company bosses on loans, compared to ordinary de- might be getting. velopers. That’s why Greentown Since September, the Hangzhou- with a high leverage ratio has severe based developer has been in the financial strains,” says Liu Yuan, a news for its financial troubles (see senior research manager at broker- WiC124 and 128). In December com- age Centaline China Real Estate. Blue period for Greentown pany chairman Song Weiping, a foot- Industry observers say all devel- ball fanatic, decided to put his opers face tough times ahead as real nancial help to the cash-strapped favourite possession – his soccer estate prices will continue to decline developer through loan guarantees club – up for sale. And to stay afloat, in the first half of this year, before and other forms of supportive fi- Greentown is also selling land to gradually stablising in the second. nancing. raise cash. Greentown’s supporters say it has In mid-December, state-owned After selling half of its stake in enough of a land bank to weather Hangzhou Binjiang Real Estate Bund 8-11, a prime site on Shang- the crisis, with 40.7 million square Group announced that it would be hai’s riverfront, to Fosun in Novem- metres of land reserve as of June 30 guaranteeing an entrusted loan of ber, last month Greentown of- last year. But the problem is that Rmb430 million that Greentown floaded its remaining ownership to much of it was acquired close to the had contracted with ICBC. A month SOHO China for Rmb4 billion ($633 peak of the market in 2010. In- before, CIC, China’s sovereign wealth million). vestors are also less impressed with fund, signed up to a joint venture Last week, Greentown announced land bank data than previously – with Greentown, which was taken that it had sold 51% of a smaller proj- and more interested in hearing as a show of confidence in the be- ect in Jiangsu to Tianjin-based prop- about contracted apartment sales leaguered firm (see WiC132). erty developer Sunac for Rmb51 mil- and cash collection ratios. Meanwhile, there are probably lion in cash, and China Business The question being asked is some bargains out there for those News reports that the company is whether problems at developers like in a stronger capital position. In De- also thinking about selling further Greentown could lead to a series of cember, SOHO China’s chairman plots in Shanghai and Hangzhou. defaults. Most analyst think that un- Pan Shiyi told reporters that his Bei- For the Jiangsu sale Greentown likely: local governments don’t want jing-based property company had a made the rationale clear: it was look- developers to go bankrupt because war chest of Rmb20 billion (in cash) ing for a cash-rich partner to de- they have depended on the prop- and was looking to buy land from velop the 222,600 square metre erty sector for growth. cash-strapped rivals, even as the block in Wuxi. Hence there are rumblings that property market softened (the com- According to its half-year report, the Zhejiang government is looking pany’s strategy for taking advan- Greentown’s debt to equity ratio to throw Greentown, the province’s tage of other developers’ financial stands at 163%, topping all the listed largest developer, a lifeline. Accord- weakness was first raised by WiC in Chinese property developers. It also ing to the National Business Daily, issue 17). Pan looks like he’ll have earned bottom score of just one in this would not take the form of a di- plenty of buying options. For now, 100 in a recent credit risk assess- rect capital injection; instead the the Beijing-based developer will be ment from StarMine, a Thomson local government would call upon pleased to have got a foothold on Reuters investment service. state-owned companies to offer fi- Shanghai’s iconic Bund. n 8 Week in China China Consumer 13 January 2012

The toast of China Demand for Moutai’s liquor sees its profits grow fastest in country

ike sex, drugs and rock ‘n’ roll, cently as the winning company in Lboozing, shopping and gambling its “Most able to earn money in make for a well-tested trio – espe- 2011” report, ranking it top in cially if they can all be offered at the China by profit growth. same place and at the same time. In the first three quarters of And in 2011, the Chinese spent 2011, Kweichow Moutai made heavily on all three, perhaps more Rmb6.57 billion in net profit, a fig- so than at any time in history. ure that the newspaper expected WiC last week reported on 2011’s to reach Rmb9 billion ($1.42 billion) astonishing revenues at Macau’s for the year. If forecast correctly, gaming tables. that’s an 80% rise on 2010. Equally impressive are the sums It has been a rapid ascent. Ji Ke- being spent by Chinese tourists on liang, Kweichow’s recently retired duty free shopping for luxury boss, once vowed that his moutai items. In the first 11 months of 2011, can get VAT rebates on their pur- should be available to everyone the Chinese became the world’s chases, making them tax free. That (“Let ordinary people drink biggest consumers of duty free makes a trip to Paris as much a fi- Moutai!” was the slogan – see goods, according to Global Blue, a nancial thrill as a romantic one. WiC65). tax refund and shopping services And as we noted in WiC133 last With the price of a bottle of pre- provider based in Switzerland. week, there also seemed to be more mium Moutai now at Rmb2,000, Manelik Sfez, vice-president of than a few Chinese beating down that looks unlikely. But the more global marketing at Global Blue, the doors at London’s post-Christ- expensive it becomes, the more said it was “driven by China’s grow- mas sales season too – which the Chinese elite want to buy a ing prosperity and its appreciating Global Blue also singled out as a bottle, Southern Weekly says, and currency.” favoured shopping duty free desti- rapid growth in demand means What were their favoured buys? nation. premium Moutai is getting harder Louis Vuitton, Chanel, Gucci, But one luxury item still being to find. Hermés, Cartier, Dior, Burberry, purchased more at home than In December a bottle of the dis- Prada and Rolex – in that order. abroad also features in the shop- tillery’s 1958 Moutai was auctioned The Chinese shoppers ac- ping splurge: the Chinese baijiu for Rmb552,000 (at that price it’s counted for 21% of global tax-free brand Moutai. hard to credit that Mao’s Long purchases, ahead of the Russians Last week, the release of this year’s March revolutionaries poured the at 15% and shoppers from Japan, Top Ten Gifts for the Chinese Luxury liquor on their wounds). the US, and Indonesia, who each ac- Consumer by the Hurun Report even Of course, all this is good news counted for 4%. identified Moutai as the fourth most for the town of Moutai itself, where In terms of locations, Paris was valuable luxury brand after Louis the ‘grain wine’ is made. It is home the major beneficiary that was Vuitton, Hermés and BMW. to 40,000 residents, half of whom cited by Global Blue. Hurun’s rankings valued work in the town’s liquor business. Why the surge? One factor that Moutai’s brand at $12 billion. And Thanks to those fast-growing prof- we have noted before is that Bei- the rapidly increasing consump- its, starting salaries at the local dis- jing still levies high taxes on im- tion of high-end Chinese liquor is tillery now reach Rmb70,000 per ported goods sold within Chinese probably why Southern Weekly year – a very generous wage for an borders – and when in Paris they also chose Kweichow Moutai re- inland province like Guizhou. n 9 Week in China Banking and Finance 13 January 2012

Watching the ratings It’s not just in Europe that credit downgrades are on the rise

he Chinese bond market started Tthe year with a false alarm. On the first trading day of 2012, the of- ficial clearing house posted on its website that it “had not received sufficient funds from the issuer”. This related to a coupon repayment for a Rmb5 billion ($791 million) bond issued by Anshan Iron and Steel, reports the Financial Times. It looked as though China was about to experience its first default on a AAA-rated bond. “I was shocked to hear the news,” Trouble at mill? Anshan says default was just a misunderstanding a fund manager told 21CN Business Herald. “After all, Anshan is a central smaller corporates to access credit. greater say in deciding fund alloca- enterprise [i.e. controlled by the Large institutions usually buy debt tion,” reports the China Daily. state], and if it has a cash crisis, that is rated AA or higher, and face A good soundbite: although com- other corporate bonds may have restrictions on the amount of panies might not always like what greater problems.” lower-rated bonds they can pur- the market has to say. Take GHATIC, In fact, Anshan was good for the chase. “SMEs generally do not meet for example, a firm building high- coupon payment, with the scare the standards for issuing bonds in- ways, airports and tourism facilities said to result from a misunder- dependently,” Gu Jihua, a bond in- in the western province of Gansu. It standing between it and the clearing vestment manager, told Shanghai is rated AA+ by Dagong, yet its debt house. By the end of the day, there Securities News. “If they are not is pricing closer to AA. was a new announcement saying repackaged, their individual rating “The pricing of these bonds one that the debt had been settled. is generally below BBB+.” level lower than their rating to some But investors did not have to wait But the DG default will probably extent reflects the effectiveness of long to see another company in real make these consolidated bonds a the market,” a fixed income re- trouble. The next day, Beijing DG harder sell to investors. DG was also search director at a brokerage told Telecommunications Equipment downgraded this week to CC by CBN. “Gansu is a relatively backward announced that it was unable to re- Dagong Global Credit Ratings, along economy with large amounts of pay principal and interest on a with two other issuers in the bond debt. The information is not trans- Rmb40 million bond, reports which (went down to BBB-). parent. It seems that everyone is Shanghai Securities News. The China’s bond market is growing quite sensitive to the risks.” bond’s guarantor was then forced to rapidly – up 52% to Rmb2.58 trillion This looks like becoming a bigger meet the issuer’s obligations. ($408 billion) in 2011, according to theme as investors become more Although the size of the default Thomson Reuters – but it is still sceptical about credit outlooks. In- was small, the news was significant hard for SMEs to get access to deed, while Anshan didn’t default, as the payment was a component of credit. Premier Wen Jiabao this 21CN reports the ‘shocked’ fund Photo Source: Reuters a bigger bond made up of the debt week called for the financial sector manager it quoted is still bearish: of 13 small and medium-sized com- to do more to support entrepre- “Ratings downgrades and a higher panies. This financing option had neurs and small businesses, pledg- proportion of bonds with a lower rat- been designed as a new route for ing to “allow market forces a ing will be a long-term trend.” n 10 Week in China Economy 13 January 2012

Problems in the jeans Why the ‘denim capital’ of China is suddenly lacking zip

t was 140 years ago that a Nevada explains it has a cashflow crisis. It’s Itailor called Jacob Davis sent a let- not hard to see why: in the three ter to dry goods merchant Levi months after the factory opened, Strauss asking for a business part- the company received overseas or- ner. Davis had come up with a new ders for just 8,000 pairs of jeans. way to make jeans, using rivets to Changshuncheng is not an iso- strengthen the pockets. The next lated case – a broader crisis faces year they secured the patent, and Jun’an and other parts of Foshan. the iconic Levi’s brand was born. Problem one: volatile cotton When the original concept was prices. Till last March prices had pitched to Levi Strauss in San Fran- soared – peaking at $4.84 per kg. cisco, he would never have envis- That led to frenzied buying among aged that a whole town in China jeans factories – at toppy prices. Cuts in Jun’an would become dependent on his Many were then caught out when hard-wearing trousers. prices for the raw material plunged tomers switched their orders to But that is the situation in Jun’an. 58%, reducing the value of the cot- cheaper Vietnam. It now has more than 2,000 denim ton they’d hoarded. Jun’an’s denim crisis is sympto- factories, turning out 200 million Problem two: rising costs – and matic of a broader problem faced in pairs of jeans annually; 80% of not just for cotton. The complaint Guangdong by many other Chinese which are exported at a sales value is that customs clearance fees have exporters. For example, the South- of Rmb10 billion ($1.58 billion). All doubled, with jean shipments now ern Metropolis Daily reports that told, Jun’an gets over 45% of its taxes taking 20 days to clear customs Nanhai’s biggest toy factory has laid from the denim industry. rather than eight. Labour costs are off 1,000 workers over the past four However, as the National Busi- also up by a double digit percent- months. Prior to 2008, the Zhong- ness Daily points out, that over-re- age, thanks to a hike in the mini- mei plant was exporting 20 con- liance on denim clothing is now mum wage (see WiC101 and 96). tainers a day – that’s been steadily proving problematic. China’s Minimum wage levels in nearby reduced to 10. Meanwhile a shoe “denim capital” is “trapped in an in- Shenzhen are slated to rise another manufacturer in Huizhou noted dustry crisis” due to rising costs, 15.9% this year. Exacerbating prob- that foreign orders are down 20% labour problems and falling de- lems is an appreciating yuan, which versus this time last year. mand from the West. has also hit margins on exports. That leads to a narrative in which A journalist from the newspaper Problem three: less foreign de- the ‘workshop of the world’ seems to visits Foshan Changshuncheng Gar- mand. The National Business Daily be struggling. A survey of 749 small ment (Jun’an is part of the city of spoke to a manager in the sales de- and medium-sized exporters in Foshan in Guangdong province). partment at Jun’an Haizilan Gar- Nanhai found that 37% had no or- The factory opened last May, with a ment Factory, which exports most of ders at all for the first half of the capacity to turn out 900,000 pairs its jeans to Europe and the US. “For- year, and that many had mothballed of jeans a year. But since early De- eign denim orders fell by half in production while they waited for cember Changshuncheng has been 2011,” he reported. CCTV has given the situation to improve. Photo Source: Reuters in crisis. The boss has absconded, bigger picture numbers, suggesting The survey’s author, the Nanhai owing Rmb510,000 in wages. Work denim exports from Jun’an fell by Inspection and Quarantine Bureau, is now suspended. 17.5% last year. Partly that’s because offered an understated conclusion: The general manager of the firm some of the town’s foreign cus- “The situation is not optimistic.” n 11 Week in China Agriculture 13 January 2012

Root of problem Chinese ginseng industry loses out to Koreans

hina has been using ginseng only true variety. Some experts say fall. Last year the Changbai Moun- Cmedicinally for centuries. Dur- there are some medicinal differ- tain, a region in Jilin province that is ing the first years of the Qing Dy- ences between Korean and Chinese the world’s biggest producer of gin- nasty, smallpox was rampant and ginseng. As cited in Chinese Herbal seng, exported over 3,000 tonnes of for the victims ginseng was thought Medicine: Materia Medica, Chinese the herb to Korea. Industry ob- to be the only cure. As a result, thou- ginseng is said to have milder en- servers say the import volumes are sands began making the trip to the ergy-boosting effects, so it is usually much higher than officially stated: northeast of the country to try their better suited for young children, the a lot more is smuggled out of the hand at finding the oddly-shaped elderly and the ill. country to avoid duty. roots in the wild. Korean ginseng, on the other Last year KT&G also announced Today ginseng is farmed com- hand, is often said to be more po- that it is investing Rmb800 million mercially, and is suited to sandy soil tent and not as well suited for every- ($126 million) in a ginseng process- and colder, drier climates. Jilin day use. ing plant in Changchun city, the cap- province remains the biggest source But why the price difference? The ital of Jilin, to process 2,000 tonnes of the Chinese variety of the plant challenges facing China’s ginseng of ginseng annually, with an annual (also often referred to as ‘Asian Gin- producers are the same as those fac- output value of Rmb1 billion. seng’), which is said to have a variety ing a host of other domestic indus- The Chinese farmers aren’t al- of benefits including stress relief, tries: questionable product quality, ways enthusiastic about Korean in- energy enhancement and even im- excessive competition, weak brand- terest in their domestic crop. In proved potency. ing, low pricing power and meagre 2010, when ginseng prices reached But despite China being the old- earnings abroad. their historic high, a number of Ko- est ginseng producer, South Korea All of these are an outcome of an rean buyers who had made advance has long dominated the global mar- extremely fragmented market: one payments to Jilin farmers refused ket for ginseng products. Though report says there are over a thou- to accept delivery and cancelled China produces nearly 70% of the sand registered ginseng processors their orders, contributing to price world’s ginseng, its export revenue in China (which means the actual drops in the following months. is only a tenth of that of South Ko- number is a lot higher in all likeli- “They [the Koreans] have a great un- rea, says the China Economic hood). derstanding about the ginseng busi- Weekly. South Korean firms are also ness in China. To a certain extent, Both at home and abroad, Chi- much more conscious about gin- you can say they control the ginseng nese ginseng struggles to compete. seng’s business value. Companies market here. But they don’t follow In 2010, Korean ginseng cost like KT&G have developed advanced the rules of doing business in Rmb100 per kg, compared to only technology to process the ginseng China,” one ginseng dealer Rmb15 per kg for Chinese varieties. plant into a range of health supple- lamented, adding that Korean buy- Chinese consumers are some of ments and skincare products. The ers are usually “sneaky”. the biggest customers of Korean Koreans also promote their own gin- Still, the Securities Times admits ginseng, bringing it home by the seng as a luxury product, with more that Chinese producers have a long suitcase. attention to packaging and distri- way to go before the local ginseng To cater to growing demand, bution. industry reaches requisite scale, and Photo Source: Shutterstock KT&G, Korea’s largest ginseng and They have been so successful that can start to invest in brand and tobacco company, even opened a demand for Korean ginseng is far product. flagship store in Shanghai in 2010. exceeding supply. That’s leading to For that to happen, widespread Though widely disputed, Koreans some Korean firms quietly import- consolidation will have to happen, claim that their own ginseng is the ing from China to meet the short- the newspaper concludes. n 12 Week in China Environment 13 January 2012

Clearing the air Government succumbs to public outcry on data

as the population of Beijing For five years, environmental Hjust experienced another authorities in Beijing have secretly “People Power” moment? measured PM 2.5, Xinhua reports. In a turnabout decision, the gov- But they haven’t publicised their ernment last week said it would be- findings, and even resorted to ask- gin reporting figures on fine partic- ing the US embassy in Beijing to ‘Slight pollution’: you be the judge ulate air pollution, or PM 2.5, the make its own Twitter feed of PM main cause of haze in the city (it 2.5 measurements unavailable to added that officials wanted to meet refers to particles less than 2.5 mi- local citizens. public expectations, Xinhua re- crometres in diameter). The embassy refused and its data ported. Doubts still remain about the ac- has consistently suggested pollu- The change is not restricted to curacy of the planned readings. A tion levels far worse than the gov- Beijing. Tianjin and Hebei provinces, trial reading on Tuesday recorded a ernment’s official assessment the Yangtze River and Pearl River PM 2.5 reading of 300, the Beijing (which was based on PM 10, bigger deltas, two major municipalities and News reported, while an independ- particles, as well as a laxer meas- all provincial capitals will also re- ent monitor at the United States em- urement scale). lease PM 2.5 data this year, the gov- bassy recorded 500 (the maximum On the worst days of choking air, ernment has confirmed. measurable level). the embassy’s “hazardous” levels In 2015, cities below provincial But at least there is a commit- were classified by the government capital level will follow suit. ment to releasing fuller data. China rankings only as “slight pollution”, The Xi’an study, which its authors aims to reach levels of 75 in PM 2.5 a matter of growing anger in Bei- say is the first of its kind looking at scores, although the World Health jing (see WiC126). More people be- PM 2.5 and mortality in the develop- Organisation recommends annual gan to refer to the embassy feed, ing world, found a “significant” cor- averages of 10, while acknowledging often via local pickups (Twitter is relation between pollution and ill- levels are likely to be higher in de- banned in China.) ness in surrounding populations. veloping nations. Last October, the public mood People are now hoping for action, Even the China targets look like tipped, after two months of heavy not just information. being some way off in many parts of pollution hit the city. Weibo, China’s “It’s definitely a step forward in the country. In a rare five-year study popular microblogs, exploded in improving the city’s air quality, on Xi’an published this month by complaint. Pan Shiyi, a well-known even though the capital is not doing the prestigious Environmental property developer (see page 8), con- as much as some of the other Health Perspectives journal, the ducted a survey that showed 98% of cities,” Wang Qiuxia, a researcher at daily average was 182. Beijing air was over 42,000 respondents wanted Green Beagle, an environmental also poor at 122, while Shanghai’s the true PM 2.5 information publi- protection group based in Beijing, was a little better at 55. Industrial cised as soon as possible. told Xinhua. Shenyang recorded 75, the study The government seems to have “It is absolutely a good thing that found. bowed to the pressure. the government finally plans to PM 2.5 is considered one of the “Just before Spring Festival this make these readings public,” said most dangerous form of airborne year, the capital city will start re- Yang Yanli, a 25 year-old Beijing ac- pollution. A mixture of fossil fuel leasing data about the amount of countant. Photo Source: Reuters combustion, chemicals and dust, tiny particulate matter that is de- “I hope they’ll take measures to the fine particles can enter the tected in the air,” Xinhua said on improve the air, such as shutting bloodstream via the lungs, pene- January 7. down the companies that are the trating the brain. Liu Qi, Party chief for Beijing, worst polluters.” n 13 Week in China Society and Culture 13 January 2012

Having a ball Shanghai event struggles to unearth “suitable” Chinese debutantes

or millions of female TV view- Fers, the closest they will come to a debutante ball is an episode of Gossip Girl. In the first season of the hit American TV show, Blair Waldorf and Serena van der Wood- sen are among the privileged Upper East Side ladies to ‘come out’ at New York’s Cotillion Ball. The tradition dates back hun- dreds of years, to introduce girls of upper class background into ‘high society’. And it still goes on, perhaps most famously at the Crillion Hotel in Paris, where Le Bal des Debu- tantes is held. An article in last weekend’s Sunday Times profiled this year’s event, mentioning at- tendees from European royalty like Charlotte of Bourbon, as well as Making an entry: aspiring young ladies tread the tiles in Shanghai blue bloods from Hollywood, in- cluding the daughters of Bruce Zhou Xinfang. and Taiwan (the former educated at Willis and Demi Moore. On Saturday Zhou invited 160 Benenden and Cambridge, the latter Readers have probably guessed guests to the grand ballroom of the the daughter of Taipei’s mayor). where this is going – yes, there is Shanghai Waldorf-Astoria to watch But the remaining 11 girls were now a debutante ball in Shanghai 13 carefully selected ‘debs’ come out. from Europe, giving this first Chi- too, which featured in an article in Zhou had one main problem, nese event a distinctly Western the China Daily this week under the the China Daily says: finding ap- feel. heading “Throwback or future?” propriate Chinese ladies. Appar- Will that change for next year’s It’s a good question from the ently, she found no one on the Chi- ball? Zhou’s comments don’t give Chinese perspective. An exclusive nese mainland who met her cause for much optimism. and extremely lavish gathering for criteria: age 17 to 25, competent in “Ideally I want someone who can posh young girls may seem a bit English, and preferably from a fam- stand out as a Chinese zither player decadent in a country that is no- ily that “had contributed to soci- or a deft embroider, which I think tionally communist. Then again, ety in a certain way”. As the exact- are the most basic skills of Chinese on the flipside, it’s exactly the sort ing Zhou put it, having interviewed fine ladies, besides a clean, up- of thing likely to appeal to China’s a number of local candidates, she standing family and good up- 243 (US dollar) billionaires, as well had to turn down their applica- bringing. However, as it turned out, plenty of its million (and counting) tions. “We would rather go with no- I cannot find someone who can

Photo Source: CFP millionaires. body than someone shoddy,” she even make dumplings.” The organiser is Zhou Caici, a 66 confided rather cruelly. Fortunately, Zhou’s partners for year-old socialite, who is the A couple of ethnic Chinese did the event are also London so- daughter of Chinese opera master make the cut, albeit from Hong Kong cialites – which at least ensures a 14 Week in China Society and Culture 13 January 2012

ready supply of eligible men from Britain (the future Marquess of Ailesbury setting hearts most a flutter this year). Apart from a night of dancing, formality and quaffed champagne, was there any deeper purpose to the proceedings? Zhou told the China Daily that she sees it as a way of introducing English aristocrats to well-off young Chinese women. She says this is not so different to similar events in the early twenti- eth century when “down-and-out English gentlemen travelled over- seas to marry the daughters of American magnates.” Sourcing plummy but hard-up Brits is probably the easy bit. But as Zhou admits, finding suitable debs in the mega-rich Yangtze river delta seems to be a lot trickier. We’ll keep you posted how she fares at next year’s event. What they’re watching in China Historical drama fills gap left by SARFT cull

Readers will recall that China’s TV regulator (SARFT) has ordered a primetime Stamping its cull of racier (and popular) entertainment programmes (primarily dating and re- authority? ality shows), which it deems detrimental to the nation’s moral fibre. And it has got its way, reporting that the targeted shows on China’s 34 satel- Dragon design stirs debate lite channels dropped from 126 to 38 by year end. SARFT’s preference is for cultural dramas, so the timing of the new ordi- he first Chinese stamp to go nance couldn’t have worked out better for the producers of The Legend of Zhen Tinto print was the ‘Large Drag- Huan in the Harem. The historical drama is about court intrigue and has been ons’ in Shanghai in 1878. The broadcasting four episodes a night (on Beijing TV and Film Channel) since its stamps were inscribed “China” in launch in early December. Sina Entertainment says the 76-episode costume Latin letters as well as Chinese drama has been winning the ratings war, becoming the top drama on TV. characters, and denominated in The series is based on a novel penned – remarkably enough – by a college candareens, a unit of weight then student as an antidote to her studies. Wu Xuelan wrote it in 2006 and many used to describe a unit of imperial say it recalls not only the Chinese classic The Dream of the Red Chamber (see currency. WiC77) but also the writing of novelist Eileen Chang (author of Lust Caution, Centuries later, another dragon see issue 2). stamp is making headlines. Annually Wu says she wrote the book because Chinese history is too often written the China Post issues a new com- about men. Her series seeks to dramatise female psychology instead – and the memorative stamp for the corre- plot focuses on the concubines of the Qing imperial court. sponding year’s Chinese zodiac char- Might SARFT have been outwitted here too? Sanlian Life Weekly reports that acter and this year is no different. Photo Source: China Imagine protagonist Zhen Huan becomes increasingly “calculating and ruthless” with Last Thursday the new Chinese each episode, as she eliminates her rivals “step by step”. Sounds a little like a postage stamp for the upcoming reality show, perhaps? And even the focus on concubines has another spin: Year of the Dragon was released maybe it fills a little of the vacuum left by the demise of the dating shows? (the Lunar New Year begins on January 23). 15 Week in China Society and Culture 13 January 2012

As usual, the launch ons that the Chinese postal of the new stamp drew department needs to be large crowds of collec- more cautious when tors. But the dragon’s choosing a design for the pose has proved unex- stamp because “although pectedly controversial, stamps are small, they rep- with netizens complain- resent the country to the ing the dragon looks too rest of the world”. ferocious and sinister. The controversial Zhang Yihe, a Chinese dragon is already usher- author, also wrote on her ing in good fortune for weibo that she was some of the stamp’s “scared to death” when owners. The Associated she first saw the scales Press has reported that and claws of the red and one scalper was selling a yellow creature. set of 20 for Rmb178 ($28) Another wrote: “I was — much higher than the frightened at my first original face value of look at this dragon. Is it Rmb24. But buyers prob- growling at someone?” ably shouldn’t expect Like the bald eagle for Ameri- Postmen beware massive appreciation in value. Ac- cans or the bear for Russians, the cording to the New York Times, a Chinese have a natural affinity to- historical references from the Qing set of the ‘Large Dragons’ stamps wards dragons. The Chinese race, Dynasty, including a pattern from from 1878 is only worth about the legend goes, is said to be the “dragon robes” worn by Chinese $1,000 at auction today. That’s descendants of the dragon, and it is emperors between 1644-1911. small fry compared to China’s the fifth of the 12 animals in the While the Chinese view the most sought-after Qing Dynasty Chinese zodiac (and the only fic- dragon as an auspicious and grace- stamp: the 1897 ‘Red Revenues’ va- tional animal on the list). ful creature, many in the West have riety (timed to coincide with the For thousands of years, the tended to have a less appreciative introduction of a new national cur- dragon was also a symbol of Chi- view, often depicting them as rency). These rare collectors’ items nese imperial power. Emperors’ malevolent, fire-breathing beasts sell for “hundreds of thousands of flesh and blood were termed that need slaying by a brave knight. dollars” reports the newspaper. n “dragon bodies” and their children Some of the stamp’s Chinese as “dragon babies”. Their formal critics wonder if this cultural dis- dress was the “dragon robe”, usu- connect should be a concern, and Keeping track ally resplendent with dragon em- that the depiction may be sending broidery. more of a message of confronta- In WiC88 we reported on Rolls-Royce’s This year’s stamp designer Chen tion than confidence. bullish forecasts for its China car sales. They have proven correct. Sales of the Shaohua denies that the dragon Perhaps the timing doesn’t help. luxury vehicles soared 60% in 2011, image is too ferocious, saying it is Quarrels with Japan over fishing making it the British-based car firm’s top supposed to represent a “confi- rights and more assertive behav- market worldwide, pipping the US. dent” (but not aggressive) China. iour in the South China Sea has Speaking to the South China Morning In fact, Chen says an imposing created unease about the nature of Post, CEO Torsten Muller-Otvos said: “It was a close race between the US and design is required for such a pow- China’s evolving power, among China. If you asked me in the beginning of erful creature. neighbours that once saw its rise last year which would be first, I wouldn’t “In Chinese culture, the dragon’s as more benign. have bet on China. But they made it, and main responsibility is to ward off Hence writer Zhang Yiyi lam- it’s really astonishing.” China now accounts for 30% of Rolls-Royce sales (it evil, and prevent disasters and basts Chen’s design for lacking po- sold a record 3,538 cars worldwide in bring good luck to people. It was litical sensitivity: “The designer ob- 2011), with the preferred colour for therefore fierce.” viously doesn’t understand China’s interiors being ‘consort red’ (selected by China Post also defended the de- national strategies [on foreign poli- 80% of buyers, who consider it lucky). sign, insisting that it is based on cies].” China News Service also reck- 16 Week in China And Finally 13 January 2012

Nights on the tiles Mahjong starts to gain popularity outside China

er estate claims that her works Mahjong was first brought to Hare the most widely published America in the 1920s by Abercrom- in the world, behind only the Bible bie & Fitch – then known more for Character-building game and the plays of William Shake- its shotguns than its young and speare. At four billion books sold, trendy casualwear. It sold 12,000 media he fell in love with mahjong Agatha Christie is humankind’s sets in that decade before the game’s when he was invited to play it at a best-selling novelist, claims no less appeal faded, as enthusiasm for all dinner hosted by an immigrant an authority than the Guinness things Chinese waned after Mao Ze- from Hong Kong. He was soon de- Book of World Records. dong’s revolution in 1949. scribing himself as “hooked”, Given her popularity, it’s a sound According to the Beijing News, the though he concedes he plays slowly premise that Christie likely intro- game is starting to regain popularity due to the game’s complexity. His duced the game of mahjong to mil- in the US. In late November the first Chinese friends also chide him that lions of her Western readers. It got North American Mahjong Tourna- he often throws away key tiles and its first mention in her 1926 mys- ment was staged. More than 200 destroys their chances of major wins tery The Murder of Roger Ackroyd. contestants participated, albeit for a (at which point they shout ‘bao tian In a key moment in the book (critics prize of just $2,500. The event was tian wu’, complaining of ‘a reckless regard it as one of the toughest of considered enough of a success that waste of grain’). her detective stories to solve) the key the American Mahjong Association Goldstein has since started play- protagonists play the Chinese tile says it will now be held annually. ing mahjong online too. There is a game, while discussing the list of Commonly played by four peo- ‘Super Mahjong’ group on Facebook potential suspects. ple, the game involves a set of 136 with 10,000 fans, where players can The chapter begins: “That night tiles featuring Chinese characters exchange tips and make web ap- we had a little mahjong party… We and symbols. In most variations, pointments to play. used to play bridge. We find players start out with 13 tiles, draw- But while interest in the game is mahjong much more peaceful.” ing and discarding them (like growing and the World Mahjong As- Readers are introduced to concepts rummy). A winning hand requires sociation now numbers 22 countries like East Wind passing, Pung-ing a four melds (these constitute three as members, there is a long way to Green Dragon and laying a Chow. tiles, either identical or of the same go before it reaches the popularity When slow play becomes an irritant, suit but in a run of consecutive that it enjoys in China itself. Miss Sheppard chides: “The Chinese numbers) plus a pair. As one Chinese idiom puts it: put down the tiles so quickly it Oakland-based real estate agent “Nine of ten people play mahjong, sounds like little birds pattering.” Charles Goldstein told the Chinese and the tenth is watching.” n

Taxing China via Walmart

Photo Source: Shutterstock “Walmart isn’t moving to China.”

* Republican presidential hopeful Rick Santorum on a new fiscal plan that he is proposing. He wants to eliminate corporate taxes on American manufacturers but tax retailers at a higher rate – as a means to stop US jobs moving offshore. Rick Santorum

17 Week in China The Back Page 13 January 2012

Photo of the Week In Numbers $160 billion China’s trade surplus in 2011, a decrease of 15% on the year before, reflecting falling export demand.

4.1% China’s consumer price index still rose in December from a year earlier, but slightly less than the 4.2% rise for November, according to data from the National Bureau of Statistics. Photo Source: CFP 235 million The number of passenger trips expected on the rail network over the 40 day Spring Sanitation workers from Zengcheng in Guangdong protest at their Festival travel peak, compared with 221 million last year. That’s a daily average of incomes. The salary slips shows monthly earnings of Rmb1,061 ($168) 5.9 million people on the move. The Lunar New Year begins on January 23. Where is it? Rmb20-100 The cost of a movie ticket in China,

Some of the places referred to in this issue Jilin depending on location. The average price in 2010 was Rmb40.4 ($6.4) compared with Shenyang the $8 in the US. Chinese authorities are Beijing now considering putting a cap on the price of tickets, says Xinhua.

China 1 billion Shanghai The number of condoms that Safedom Hangzhou Chongqing expects to sell in China this year. According to The Economist, the condom maker has produced ‘cutting edge’ prophylactics that are “entirely virus proof”. 80% of Safedom Hong Kong buyers are female.

Hainan

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