Peter Fuhrman, a Tech Investment Banker in China, Analyses Oneplus

1 Talking Point 7 Week in 60 Seconds 8 China and the World Week in China 9 Internet and Tech 10 Property 11 Cross Strait 12 Telecoms 15 Economy 17 July 2015 16 Society and Culture Issue 290 18 And Finally www.weekinchina.com 19 The Back Page

In too deep? m o c . n i e t s p e a t i n e b . w w w

The government tries to rescue China’s investors,

but what does that mean for the future of market reforms? Brought to you by Week in China Talking Point 17 July 2015

Margin of error Chinese investors have learned just how dangerous margin trading can be

Nail-biting period: another volatile week for China’s A-share market

here were signs last weekend innovative, benefit the people’,” a ures might mean for China’s longer- Tthat the reverberations in new text message informed the term policy agenda. China’s stock market were starting campus. to reach some of the country’s most The same stipulations might well What have the authorities done to respected universities. be directed to China’s stock market stem the rout? Confidence boosting was the regulators, following a brutal few The theme of our Talking Point a order of the day, according to an weeks for investors. The situation couple of issues ago was investor email sent to students before a on Chinese bourses has been bleak, confusion. The market had turned graduation ceremony at Tsinghua, with shares in Shanghai down for the worse, but government agen- telling them to “follow the instruc- about a third on their mid-June cies were sending out seemingly tion and shout loudly the slogan, peak, and the Shenzhen board contradictory signals. But as stocks ‘Revive the A-shares, benefit the falling further. More than $3.5 tril- plunged further, the message be- people; revive the A-shares, benefit lion of value has evaporated. The came more unified.The intervention the people’,” the Financial Times re- market has since stablised, with the began with the authorities encour- ported. key Shanghai Composite Index hov- aging people to buy shares, and Later, the university countered ering around 4,000 this week. moved on to ordering others to stop that the email was an inside joke As the smoke clears on the first selling them. P h o t o and that it hadn’t been approved phase of the crisis, WiC looks at how The People’s Bank of China had

S o u r by the faculty. “Our official slogan the government has responded to already lowered benchmark interest c e :

R e is now ‘Actions speak louder than the wildfires of the last month, be- rates, relaxed reserve requirements u t e r s words, shoulder responsibility, be fore asking what the rescue meas- for banks and injected liquidity into 1

Week in China Talking Point 17 July 2015

Under pressure: CSRC boss Xiao Gang

the market. Then curbs on broker pended from trading. ing their prices sharply upwards. loans were loosened, as the central The CSRC has also banned share- bank ploughed cash into China Se- holders with stakes of more than 5% Has the government been too curities Finance Corp, a state-run from selling for the next six heavy-handed? firm that lends money to people to months, threatening punishment More seasoned stock-pickers say buy shares on margin. State-owned for anyone who violates the edict. Beijing has overreacted and that the brokers were pressured to commit The measures stopped the worst reversals are a healthy dose of real- publicly to buy stocks until the of the selling. The Shanghai Com- ity for a market that rose more than index rallied. Central Huijin, the posite Index rose from its recent 150% in the year before the bubble controlling shareholder of major low of 3,507 points last Wednesday burst. Even after the dramatic falls, state banks, also pledged to raise it to close this Monday at 3,970, up share prices are only back to levels stakes in index heavyweights such 13.2% over three trading days. set in March. as ICBC and Bank of China. More of the stocks in the trading Other regulators have also inter- The search for culprits – real or halt have started to come back on to vened in moments of market panic imagined – began in earnest. Offi- the market, although 700 were still in the past. The Hong Kong govern- cials complained market manipu- frozen as of Wednesday. But one of ment bought shares to fight off lation by foreign investment the early outcomes of the suspen- short-sellers in 1998, and the Secu- banks. sion was panic selling of shares not rities and Exchange Commission The CSRC, the securities regula- embargoed by the regulators, even banned short-selling on some US tor, and even the police threatened of better established performers. stocks 10 years later. During the to hound down “malicious” short- “Originally, many investors wanted same crisis in 2008, the Bush ad- sellers. to hold blue chips. But since so ministration launched its $700 bil- Meng Qinfeng, the vice minister many small caps are suspended lion asset relief programme, of public security, reported that his from trading, the only way to re- although that was designed to stop investigative teams had found early duce risk exposure is to sell blue companies from going kaput, evidence of “trading firms involved chips,” explained Du Changchun, an rather than to rescue an index. in illegal manipulation”. analyst at Northeast Securities. Washington, mind you, took ac- Meanwhile the IPO window had To counter this selling pressure, tion at a time when a total financial P h o t o been closed to stop new shares state-owned buyers swung into ac- collapse seemed eerily imminent.

S o u r being issued; while about half the tion, snapping up shares in heavy- Comparisons with China today c e :

R e firms on the two main boards in weights including PetroChina and seem stretched in this regard. The u t e r s

Shanghai and Shenzhen were sus- China Construction Bank, and send- growth figure for the second quar- 3 Week in China Talking Point 17 July 2015

Punting and punning: the market downturn was given the nickname the ‘Great Fall of China’

ter came in this week at 7%, which Roger Xie, an equity strategist at been written about how small the was ahead of consensus forecasts. HSBC, has suggested that the trad- market is in comparison to China’s Most analysts question whether ing halt is buying time for com- economy and how, apart from the the share market downturn is pany bosses who had executed hidden shadow banking margin, going to poison sentiment across stock pledges, which are loans se- the spill-over effect of a precipitous the economy at large. cured against shareholdings in fall is quite limited,” the former As Qu Hongbin, HSBC’s chief their firms. There was an average of banker suggests. economist for Greater China, has 424 new pledges a month this year, “But perhaps the government pointed out, less than 15% of Chi- with committed equity reaching can see the real level of borrowing nese household assets are invested about Rmb2.4 trillion of market by listed companies that is secured in stocks, and consumption tends to value. against their shares. Perhaps they be driven more by income rather These company insiders risk hav- can see that there is actually a far than perceptions of overall wealth. ing to cough up more collateral for greater risk of contagion into the “In a nutshell, the wealth effect ap- their loans when markets fall, mainstream banking sector and pears quite hard to pin down, and in which is why they were desperate to this is the reason for their sudden any case is very marginal,” he con- get onto the sidelines during the panic.” cluded last week. worst of the rout. Fears of financial contagion also “The A-share trading halt be- This was more about credibility look overstated, with few signs of fi- comes a way to avoid further price than crisis? nancial stress spilling into other declines to lose their stock rights,” Another interpretation of the gov- areas of the economy. Money mar- Xie explains. ernment action is that senior fig- ket rates and corporate bond yields But a longtime reader of WiC ures in Beijing lost their nerve as the have stayed steady, and parts of the made another point by email this markets went into meltdown, fear- P h o t o property market are even enjoying week, speculating that many of ful of the political repercussions.

S o u r an upturn. these pledges could be at risk of im- The theory is that the central c e :

R e Some of the dangers may be ploding, which could then trigger a government promoted the rally u t e r s harder to discern. For instance, wider financing crunch. “Much has willingly over the last year, hoping 4 Week in China Talking Point 17 July 2015

that stronger share markets would help with an overhaul of state-run Planet China firms, allowing the more indebted Strange but true stories from the new China enterprises to refinance with new equity, and thus avoid loan defaults or asset restructurings. Now in its sixth season, the US drama The The state newspapers joined the Good Wife has entertained viewers with unusual courtroom cases. But the cheerleading effort and millions of Qianjiang Evening News reckons it has a Chinese legal case that would top any American court settlement. Earlier this month a judge was baffled when investors responded (see WiC264), a suit to recover a Rmb100,000 loan was settled within seconds of both turning to shares at a time when the parties entering the courtroom. The sum had been lent by a man surnamed property sector wasn’t generating Li who turned up at the hearing with his young daughter. He was suing Hu the same returns of a few years ago. Cheng, a Shanghainese who had guaranteed the loan on behalf of his They were helped by rule brother, whose business had defaulted. Hu was initially reluctant to honour changes making it easier to borrow his guarantee – having told the judge in advance that he thought his brother for investment, a practice that was had forged his signature on the loan agreement. However, when he walked banned until five years ago, but into the courtroom and saw Li’s daughter, his mood immediately brightened which started to boom in earnest as he asked her if she had a boyfriend. On discovering she didn’t Hu from last June. Margin financing showed her a photo on his smartphone of his own 29 year-old son – also tripled to 9% of tradable stock value single. He then turned to the judge and said “Let’s drop the case. I will shortly before the crash, although definitely repay the money on behalf of my brother and I will give another Rmb100,000 as dowry. Li, let’s become in-laws!” The Qianjiang Evening investors then began unwinding News says that Li’s daughter has agreed to meet Hu Cheng’s son, with a their positions in response to the view to becoming his wife. And the paper says that as a show of good will, initial falls in the market. Margin Li wrote off the interest Hu owed on the loan… loans from brokerages are said to have fallen significantly from a peak of Rmb2.4 trillion on June 18 to transformation under Xi Jinping. shipbuilding and local government Rmb1.4 trillion at the end of last “The distinctive characteristic of debt, you can brush a lot of stuff week. this bull market is not that of a spec- under the rug and you don’t know The regulatory response has ulative market but rather a confi- what’s going on.” been fluid, cracking down on grey dence market,” the China Securities Despite his styling as a strong- market financing but encouraging Journal, an adjunct of Xinhua, ad- man leader, Xi has said nothing in margin lending from regulated par- vised its readers breezily last year. public about the market turmoil. ties. Commentators say that the fi- “The deepening of reforms and the But Russell Leigh Moses, a China- nancial authorities are trying to expansion of opening-up has re- based academic, thinks that Li Ke- find a balance between encourag- leased an enormous dividend that qiang, Xi’s number two, is more ing fund inflows in the short run is sufficient to support a long-term, likely to be damaged by the slump and promoting deleveraging over steadily rising bull market.” because he has been more outspo- the medium term. That makes it easier to see the re- ken in calling for faster financial “It’s like a flood on the river- cent reverses as a reputational reforms. “While China’s leadership banks,” Zhang Qi, an analyst at bloody nose for the Xi administra- puts a strong emphasis on pre- Haitong Securities in Shanghai told tion – and certainly the most visible senting a united front, the stock the Financial Times. “If the water setback so far for a government that market slide could well exacerbate surges to a high level, you can’t has been regarded as much more existing policy differences, leaving channel it away all at once. If the purposeful than its predecessor, led Li and his allies to explain why the water retreats too fast, it may wash by Hu Jintao. sorts of reforms they have been away the lowlands.” “The thing about the stock mar- starting to implement didn’t stave The bull market that started a ket is that it’s easy to see,” Patrick off the recent skid,” he told the year ago had been built on the back Chovanec, chief strategist at Silver- Wall Street Journal. of Beijing’s policy agenda, which crest Asset Management and an ex- was said to be fostering a new world perienced China-watcher, told Vox The wider implications of Beijing’s of economic opportunity. As stock World last week. “When prices go response to the slump? counters ticked higher, they became down, you see them go down. In The bosses at MSCI Emerging Mar- a barometer for the promise of property and steel and iron ore and kets Index will feel vindicated after 5 Week in China Talking Point 17 July 2015

their decision not to incorporate is what the intervention signals for viduals won’t be coming back to the Chinese shares into their global Beijing’s commitments to make its stock markets for a while. benchmarks just a few weeks earlier capital account more fully convert- What made this market crisis (see WiC284). ible, and for its ambitions for the worse was margin financing – There will also be questions renminbi to be included in the IMF’s which had been introduced to bring about the short-term prospects for basket of Special Drawing Rights China more into line with global the Stock Connect scheme, a key re- currencies later this year. norms. Interest in margin financ- form from Xi’s administration that This month’s measures fly in the ing had been tepid till the A-share has offered foreign investors new face of much of what has been market turned bullish. In those access to mainland Chinese equi- promised about a more open mar- conditions its usage became wide- ties. ket, and may prompt a slowdown in spread to leverage up returns. Offi- The ‘northbound’ channel of the spread of the renminbi interna- cial data for margin financing Stock Connect – which brings over- tionally. Of course, that will be of lit- volumes rose with each month and seas money into Shanghai – has reg- tle concern to the millions of by March it had already become ob- ularly fallen short of its daily quota first-time investors who were still vious to some analysts the danger cap. That hints that international in- signing up for trading accounts this could pose. When the market vestors were aware of the risks of when the stock craze was peaking began to fall swiftly, many in- going long in the Chinese markets. just a few weeks ago. vestors watched in horror as mar- They have also been net sellers of According to a widely quoted sur- gin financing worked against them shares via the same scheme for vey from China’s Southwestern Uni- and amplified their losses. most of the last two weeks. Mean- versity of Finance and Economics, Of course, banning margin fi- while speculation about the debut more than two-thirds of the new- nancing is not the solution. But of a second Stock Connect channel comers hadn’t made it through having learned a bitter lesson in re- between Hong Kong and Shen- high school and almost 6% were il- cent weeks, the average Chinese in- zhen’s bourse could well recede in literate. This group will have shoul- vestor may well use margin the current climate. dered some of the worst of the financing less recklessly from now Another bigger-picture question losses and, presumably, those indi- on. I

Light relief

The last time a Hong Kong firm took control of a manager Alain Perrin, who is now coaching European football club, things soured for both China’s national football squad, Sochaux won sides. Birmingham was relegated from the the Coupe de France (France’s top cup English Premier League while its Chinese owner tournament) in 2007. However, the club was Carson Yeung is now serving jail time for money relegated to the second division last year, laundering (see WiC229). with Peugeot redirecting its sponsorship cash That hasn’t dampened the aspirations of LEDUS, to car racing and tennis. a LED lightmaker listed in Hong Kong and a unit LEDUS is keen to emphasise that, of Zhejiang-based lighting giant Techpro. like Peugeot, it wants to own LEDUS last week finalised an $8 million Sochaux for decades . “We are deal to take over FC Sochaux from here for the long term, We are carmaker Peugeot, making the not traders. We want to keep its French second-division club the first culture and continue its in Europe to fall under Chinese history,” LEDUS boss Li Wing I l l u s control. Sang said in a press t r a t i o

n Sochaux was set up by Peugeot conference. : w w

w in 1928 as the first professional The goal, according to Li, is . b e n football team in France. The club has spent a record “to make Sochaux an international brand to reach i t a e p s 66 seasons in the French top-flight. Under former out to numerous markets”. t e i n . c o m

6 Week in China The Week in 60 Seconds 17 July 2015

A “hard won” 7% The major news items from China this week were...

China’s statistics bureau reported GDP growth of 7% 1for the second quarter. That was bang on the annual target, but above consensus expectations, renewing the debate about the reliability of China’s official data. A spokesperson for the National Bureau of Statistics in- sisted the GDP figures weren’t inflated and the improvement was “hard won”. Still, the news had little impact on China’s stock markets. On Wednesday, when the growth figure was announced, Shanghai’s Compos- ite Index still dropped 3%.

In June, China recorded a 3.4% year-on-year drop in 2passenger car sales, the first decline in more than two years. The China Association of Automobile Manufac- turers (CAAM) has also cut its growth forecast to 3% from Under scrutiny: Tsinghua Unigroup bids for Micron 7% for this year. Amid the slowdown, total inventories of passenger cars rose to more than 50 days of sales in May, State-owned Tsinghua Unigroup has presented Amer- above CAAM’s warning threshold of 45 days. In recent 4ican chipmaker Micron with a takeover bid valued at years, sales to Chinese drivers have contributed as much $23 billion, or $21 a share. If successful, it would be China’s as half of global net profits at the biggest carmakers. biggest bid for a US company (the previous record holder was the $7.1 billion purchase of pork producer Smithfield The People’s Bank of China updated regulations this by Shuanghui International, which was renamed WH 3week permitting central banks, supranational insti- Group). Even if Micron agrees to sell itself to Tsinghua, the tutions and sovereign wealth funds to access the inter- proposed takeover is expected to face tough scrutiny in bank bond market without the need for pre-approval Washington on national security grounds. and quotas. Investors need only submit a filing of their plans to the central bank. The loosening of restrictions Sales at Yum Brands, parent of KFC and Pizza Hut, fell on the bond market is the latest step in Beijing’s efforts 54% in the second quarter, with sales at those stores to entice more long-term institutional investment into that have been open for more than a year declining 10%. its capital markets. The decline was an improvement from the first quarter, when revenues from established stores fell 12%. To boost its performance in China, which accounts for half of its sales globally, Yum has unveiled Atto Primo, a higher- end Italian restaurant, located on Shanghai’s Bund.

Water collected from Danjiangkou, a major reservoir 6that supplies drinking water to Beijing and nearby cities, has been found to contain lead 20 times the max- imum safe level set by the World Health Organisation. P h o t o The Beijing government has previously said that the

S o u r water receives extensive treatment at processing plants, c e :

R e so the water in the reservoir does not necessarily reflect u t e r s Car sales in reverse for the first time in two years the quality coming through household taps. I 7 Week in China China and the World 17 July 2015

Anger in Ankara Relations with Turkey strained over Uighurs

ntil last summer the train scended on the embassy in Ankara. Ujourney between Turkey’s cap- And that may have been it, had ital Ankara and the country’s sec- China not, five days later, persuaded ond city, Istanbul used to take Thailand to repatriate 109 Uighurs Anti-Chinese sentiment in Turkey seven hours. Today it takes three that Xinhua said were illegal immi- and a half thanks to a high-speed grants. The men and women – who Iraq, the chief of the Ministry of rail connection built by a Sino- were shown on CCTV with black Public Security’s Criminal Investi- Turkish consortium and funded by sacks over their heads, handcuffed gation Department, Tong Bishan Chinese loans. to Chinese police officers – were al- told Reuters over the weekend. He The plan is to build more track, leged to have travelled overland said 13 of those repatriated had com- eventually linking the Mediter- from China in the hope of making it mitted acts of terrorism or had es- ranean country to Chinese President to Turkey. caped detention and the others had Xi Jinping’s new Silk Road. Earlier in the month Turkey ac- been brainwashed into becoming But one potential obstacle in all cepted 173 people from Thai camps “cannon fodder”. He accused Turk- of this is China’s Uighurs – a Muslim claiming to be Turkish citizens, and ish officials in Southeast Asia of pro- minority that speaks a Turkic lan- it had intimated it would take more. viding “fake travel documents” so guage and lives largely in the west- The Turkish governments con- they could reach their destination. ern region of Xinjiang. Many Turks demned Thailand’s repatriation of All of which will mean there is a feel a deep connection with the the Uighurs to China and human lot to talk about when President Re- Uighurs. rights groups warned the deportees cep Tayyip Erdogan visits Beijing China says it is helping to develop were returning to a “grim” fate. later this month. In 2009 Erdogan resource-rich Xinjiang in order to So in Ankara and Istanbul angry described the plight of Uighurs as give Uighurs better opportunities. mobs once again attacked the Thai “a kind of genocide”, but more re- The Uighurs, who number about 10 and Chinese missions. cently has said he would rather million, accuse the government of Needless to say China was less Turkey joined the Shanghai Coop- trying to wipe out their culture and than impressed with the violence eration Organisation than the Euro- limit the ways in which they can and the “meddling”. It denied cur- pean Union. practice their Islamic faith. During tailing Uighurs’ religious freedoms After the recent violence he said: Ramadan – which ends today – such and issued a travel warning to its “Incidents that we never want to see accusations resonate throughout citizens currently in Turkey. and which we will never condone the Muslim world, including in After the second round of vio- took place.” It was probably not as Turkey. Thus on July 4, in response lence the Chinese foreign ministry strong a condemnation as China was to a news report that Uighurs were warned that “certain forces” who at- looking for but it was lot better than being prevented from observing the tempt to “undermine our security that offered by Devlet Bahceli, leader holy month, young men affiliated and stability under the pretext of of the Nationalist Movement Party. to the Grey Wolves, the youth wing the so-called religious and ethnic is- When asked why the Grey Wolves of Turkey’s Nationalist Movement sues … will not prevail”. New limits had mistakenly attacked South Ko- Party, attacked two tourist groups on growing beards and wearing veils rean tourists, he simply replied it and a restaurant they believed to be are designed to stop the spread of was hard to tell them apart from Chi- Chinese in Istanbul. (Chinese state extremist and non-native forms of nese because they “both have slitty media said the original Ramadan re- Islam, it says. eyes”. He looked even more ridicu- port was based on fake online ru- The Uighurs who want to leave lous when it emerged that the Chi- mours.) China are doing so because they nese restaurant attacked by the The next day a larger group de- wish to join jihadists in Syria and Wolves belonged to a Uighur. I 8 Week in China Internet and Tech 17 July 2015

Factory stoppage Samsung supplier shuts down in Suzhou

n its corporate website BKE&T, The warehouse, which stocked the the plant’s prices, selected its sup- Oa screen manufacturer and a raw materials to produce the com- pliers and purchased all of its out- supplier for Samsung, describes its pany’s TVs and smartphone display put. At its height the plant had been employees as fearless and full of panels, had suddenly been cleared operating 24 production lines and passion. Both attributes have been on June 19. employed 1,000 staff. Earlier this very clearly on display over the past The situation was only resolved year, this had been whittled down month after the company’s Chinese after a group of employees indulged to just four production lines. workers decided they would not in a spot of boss-napping, holding Another employee informs take their plant’s closure in Suzhou four South Korean managers China Times the plant had been lightly. against their will. A local labour bu- recording a gross margin of 8%, al- Their South Korean employers, reau then intervened and negoti- though almost two thirds of this meanwhile, demonstrated the com- ated a termination plan, which will was being repatriated back to Ko- pany’s maxim of ‘speedy manage- see employees receive one month’s rea in the form of a technical sup- ment’ having suddenly disappeared salary for every year they have been port fee. He also complained that a few weeks earlier. employed. the plant had to pay depreciation As Caixin Weekly and China Both news outlets have also been fees even though most of the Times have both reported, the com- reflecting on the bigger picture in equipment, which had been pany’s HR department posted a respect to the closure. Was it due to shipped in from Korea, was already leave notification on June 24, in- poor local management, or a sign very old. forming the plant’s 600 workers of wider difficulties within the Sam- A Samsung representative tells that production was being tem- sung Group? Like so much of cor- Caixin Weekly the closure of one porarily halted as the company had porate Korea, BKE&T has a compli- foundry does not signify wider trou- no orders. It said production would cated lineage. Its parent, Bokwang bles at the group even though its resume at the earliest on July 6 after Group, houses a number of Sam- Chinese mobile phone shipments the general manager returned from sung spin-offs and is run by Hong were only 9.3 million units during Korea with new orders in hand for Seok-gyu, brother-in-law of Sam- the first quarter, 54.8% down on the its TFT-LCD screens. sung chairman Lee Kun-hee. same period last year. During the However, the employees decided According to a filing with the Ko- second quarter, Samsung Electron- to take the unexplained departure rean Stock Exchange, BKE&T sub- ics also posted its seventh straight of BKE&T’s legal representative mitted a restructuring plan with the profit decline, with revenues com- and CFO as a more accurate indica- Korean courts on June 17 after run- ing in 8% below analysts’ estimates. tor of what was to come. So they ning up losses because of a sudden Since the middle of March the stock began demanding compensation “market drop for the products of its has slid 18.5%. outside a second Samsung plant in main customer Nokia”. Recent events do not play well the Wujiang Industrial Park. Sup- Both Nokia and Samsung have for Samsung’s stated grand plans pliers, who had been owed money seen their margins and revenues for China where it ranks as one of since December, also joined them. threatened by cheaper Chinese ri- the country’s largest foreign in- Caixin Weekly and China Times vals such as Xiaomi, ZTE and vestors. As recently as January, its agree that in retrospect the warning Huawei. In the premium section of Greater China president Zhang signs had been there for a while. the market, Samsung has also been Yuanyi was telling Guangzhou BKE&T has been barring its mid- losing out to Apple since it started Daily the group planned total in- dle-ranking Chinese executives selling large screen iPhones. vestments in the country of $30 bil- from attending management meet- BKE&T’s Chinese employees tell lion by 2030, up from $16.8 billion ings since the middle of last year. Caixin Weekly that Samsung set all in 2013. I 9 Week in China Property 17 July 2015

Flat denial Why homeowners are tearing up sales contracts

ust over a year ago, those looking secondary housing market also re- Jto sell their property in China ceived a boost with a policy that ex- couldn’t wait for the ink to dry on empted individuals from taxes if the contracts. Now, many are in- they had owned their property for stead reneging on sales agreements. more than two years. (Previously, Shenzhen property: surging again Southern Metropolis Daily re- sellers were exempted from such ports that back in March, Xie Guoyi, taxes only if they owned the houses buyer. The rogue agent and their a seller in Shenzhen, put his apart- for at least five years.) partner pocket the 10% penalty pay- ment on the market. He eventually With the secondary housing mar- ment. agreed to sell it for Rmb3.5 million ket heating up, the number of legal Take the experience of a woman ($564,520). disputes has also been on the rise surnamed Cheng. Originally she The problem: home prices in as sellers back away from deals. Ac- sold her flat to a buyer for Rmb2.4 Shenzhen have since gone from cording to the Shenzhen People’s million. Even though it was less strength to strength. Xie was Court the number of disputes about than what she was expecting, she shocked to find out two months second-hand properties has more told the newspaper that the agent later that the market value of his than doubled over the past year. kept pressuring her to take the deal. home had gone up to Rmb4.8 mil- Yi Yucheng, a lawyer in Guang- Eventually she relented and ac- lion. So he called the banks to cancel dong province, told the CBN news- cepted a deposit of Rmb50,000, the deal and told the purchaser he’d paper that the volume of cases he’s which was less than the 10% stan- had a change of heart. seeing of sellers backing out on con- dard (the ‘buyer’ claimed that he was Needless to say, the buyer was tracts has gone up over 10 times. in the middle of selling his old less than pleased. They eventually Cancelling the deal means not only house so it was all he could afford). agreed to pay a bit more but a fight returning the deposit – typically After she accepted the cheque, the broke out between the two parties 10% of the agreed purchase price – agent continued to bring other buy- when they met up at Xie’s place to but also paying the same amount ers to view the apartment till one of- discuss the terms. A local policeman to the buyer as a penalty for pulling fered her Rmb2.6 million. Tempted had to intervene using pepper spray out. Then again, many sellers still by the price increase, Cheng decided to break up the brawl. The main ca- think it is worth it, given the price to back away from the existing offer. sualty was the buyer’s baby, who al- rises that have ensued. It wasn’t until the deal closed that most choked on the pepper spray. “Many sellers are breaching the she began to suspect that she might Similar cases have become in- contract because the increase in have fallen victim to the agent’s elab- creasingly common in Shenzhen, price on the property has far ex- orate set-up. where home prices have been going ceeded the amount of penalty stip- “The fact that the agent contin- up for six consecutive months. The ulated in the contract,” says Yi. ues to bring people to look at the average price of new homes in Shen- But Southern Metropolis Daily apartment means that he clearly zhen reached Rmb31,865 per square reckons that property agents have knows the first buyer has no plan to metre as of the end of May, 21% also been fanning the flames. Many ever go through with the deal. And if higher than in January. unscrupulous agents have gone as property prices continue to go up, Analysts attribute the resurgence far as to get a ‘fake’ buyer to submit the price difference between the two to a series of supporting measures a bid for the house and convincing doesn’t affect his commission too P h o t o from the central government, in- the seller to accept the offer. When much. This way [betting that the

S o u r cluding the State Council’s lowering the property price goes up, the seller would break the contract], he c e :

R e of the downpayment ratio for sec- agent talks the seller into breaching makes even more money,” Cheng u t e r s ond homes to 40% from 60%. The the contract and selling to a real surmises. I 10 Week in China Cross Strait 17 July 2015

To the victor, the spoils Who actually won the Second Sino-Japanese War?

ounting war casualties can be a eight years of resistance, it was our Cpolitically-charged issue. That is Republic of China forces who led the particularly true in China, espe- fight.” cially when it concerns the nation’s That seems to fit with the claims war with Japan that began in the that Zhou Enlai informed Joseph 1930s. Stalin in 1940 that over a million Regular readers will know that Chinese had died fighting the Japan- China’s TV studio produce a lot of ese before the summer of 1939, but dramas about that struggle. In 2005, that only 3% were CPC forces. In the when China last commemorated its letter Zhou is also said to have recog- victory over Japan in the Second nised that the KMT “united all the World War, only 20 war time dramas forces of the nation” in resisting were broadcast on domestic TV Japan. channels. A decade on and the num- Nonetheless, Xu Yan, a retired PLA ber has at least tripled. And that general, is insisting that the CPC’s means a lot of fatalities: one esti- Mao Zedong’s “new China”, but who contribution was also decisive. mate is that 700 million Japanese was later persecuted as the “No. 1 “Without the CPC forces harassing have died on China’s television rightist”). Citing “figures announced the Japanese army behind the enemy screens over the years (see WiC187). by Japan”, she wrote: “Up to 318,883 lines they could throw everything to But how many soldiers were re- Japanese soldiers were killed by the the main battlegrounds of the KMT,” ally killed in China during the con- KMT army; the Communist army he claimed in the Global Times. flict? This, it turns out, depends who killed 851; and the Soviet Union’s Most of the media has held back you ask... Red Army killed 126,607”. from commenting on such a sensi- The Communist Party of China These very specific estimates tive subject. Indeed, the lack of offi- (CPC) and Taiwan’s Nationalist Party riled CPC supporters. “The KMT cial rebuttals points to how Beijing (KMT) have different views on the wouldn’t have needed to flee to Tai- has softened its stance. After ignor- statistics. During the eight-year con- wan if the Communist army was so ing the KMT’s contribution for flict, the KMT fought the Japanese useless,” one of the more popular years, the CPC has quietly acknowl- and ruled most of the inland areas of comments suggested. edged more of its efforts. Some ne- China that remained under Chinese Countering this were heavy- tizens discuss the topic online, of- control. The CPC largely engaged in weight jabs from Taiwan. Hau Pei- fering feisty opinions. “The KMT’s guerrilla warfare against the Japan- tsun, the former head of Taiwan’s wartime capital in Chongqing suf- ese (fighting “behind the enemy military, told the BBC that the KMT fered heavy bombing by Japanese lines” as the CPC jargon goes). Many should get 95% of the credit for de- air forces. Hardly a shell fell on Mao have argued this gave it much- feating the Japanese. The CPC’s con- Zedong’s base in Yan’an,” one neti- needed breathing space to tribution, the former artillery man zen noted. “You tell me which place strengthen its forces – they later be- suggested, was worth little more saw greater resistance to Japanese came the People’s Liberation Army – than 5%. invasion.” so as to subsequently win the civil “The Chinese Communists will Meanwhile a new report from the war against the KMT. say they were the major force re- State Council this week claims that The subject emerged again this sisting Japan, but that’s a way of the number of Japanese troops killed, month in a weibo post by historian cheating public opinion,” a wounded or captured between 1931 Zhang Yihe (the daughter of Zhang spokesman for Taiwan’s defence (when Japan occupied Manchuria) Bojun, one of the first ministers of ministry also told reporters. “Over and 1945 was 1.5 million. I 11 Week in China Telecoms 17 July 2015

The Shenzhen unicorn Peter Fuhrman, a tech investment banker in China, analyses OnePlus

sizeable quotient of the glaring. Despite having hun- Atechno-hip crowd in the dreds of firms managing bil- US and Europe is counting lions of dollars and employing down the days to the launch thousands of people suppos- next week of the newest An- edly out scouring China for the droid mobile phone by next big thing, the venture cap- China’s OnePlus. It’s called the ital industry has not only failed OnePlus 2 and follows a little to invest in OnePlus, arguably more than a year after the 18 the single-most successful month-old company’s first startup in recent Chinese his- phone, the OnePlus One, went tory, but also been largely un- on sale in the US and Europe. aware of the company’s exis- With barely a nickel to tence. spend on marketing and pro- Since its founding, OnePlus motion, OnePlus insouciantly went from bootstrap startup to dubbed its OnePlus One a likely ‘unicorn’ (a billion-dollar- “flagship killer”, claiming it de- plus valuation) faster than any livered similar or better per- company in Chinese history. formance than Samsung, LG And unlike China’s other uni- and HTC Android phones cost- corns – Xiaomi, Meituan, newly- ing twice as much. The tech media Made to order: OnePlus merged Kuaidi and Didi Dache and swooned, and buyers queued online drone maker DJI Innovations – One- to buy one from the OnePlus web- cast as an online event. OnePlus has Plus is yet to raise a penny of VC or site, www.oneplus.net, the only place manufactured and is giving away a private equity money. that the phones are on sale. In little cardboard virtual reality viewer said OnePlus has racked up a rate of more than six months last year, One- to be as good or better than the ones growth and brand awareness in Eu- Plus sold over one million of them. sold by Google for $20. The viewers rope and the US never seen before The new OnePlus model is ru- have been flying out the door for the from a new Chinese electronics moured to be built around a new last month. manufacturer. Revenues last year top-of-the-line Qualcomm proces- But in OnePlus’s home market of from May through December were sor, and features a larger screen, an China the launch will largely go un- $300 million. This year, sales are on upgraded in-house version of An- noticed. Its market share there is too track to surpass $1 billion, mainly in droid software, and fingerprint small to be accurately measured. the highly-competitive US and Eu- recognition. Price? Around $300. It China has too many mobile phone ropean markets. will be available to prospective buy- brands, both global and domestic. Over roughly the same period, ers, as was the OnePlus One for most All but Apple must beat each an- China PE and VC firms invested over of the last year, on an “invitation- other to a pulp to get sales. So One- $15 billion in 1,300 Chinese firms, only cash-upfront” basis. How to get Plus has mainly stayed away: the many operating in the mobile in- a coveted invitation remains some- company is largely unknown, not dustry, either as manufacturers or thing of a dark art. New OnePlus only to phone buyers but also service providers. Needless to say, owners are given a certain number among the huge venture capital in- not a single one of these startups of invitations to send to whoever vestment community. has performed as well as OnePlus, they please. For the China VCs, missed invest- nor created half as much buzz. The July 27 launch will be broad- ment opportunities are rarely this If China venture capital has a big 12 Week in China Telecoms 17 July 2015

fat blind spot, it’s for companies like OnePlus. That’s because the industry – which now trails only the US in the number of firms and capital raised – is most comfortable backing local companies that copy online business models from America and then tweak them around the edges to make them more suitable for the China market. OnePlus couldn’t be more different. It is disruptive, not imitative. And it takes a special kind of venture investor to recognise it and then throw money behind this kind of business. OnePlus’s bold idea was to com- pete globally, but especially in the US and European markets, against very large and very rich incumbents Xiaomi has a smaller presence than OnePlus on Facebook and Twitter – Samsung, Google, LG, Motorola, HTC – by building a phone that tar- tomer paid. And it economised on iPhone 6 and Samsung Galaxy S5 in gets their perceived weak spots. As marketing and advertising, typi- many ways”. The New York Times OnePlus sees it, these competitor cally where much venture money called the OnePlus One “fantastic, phones are too expensive, too slow gets burnt. about the fastest Android phone and of middling quality, with An- OnePlus spent a total of about you can buy, and its screen is stun- droid software that is too difficult $10,000 on advertising. Instead, it ning”. TIME Magazine chimed in to customise. poured its efforts and ingenuity into that OnePlus is “exactly how a At the same time, OnePlus has building a mass following on the smartphone should be”, while En- sought to turn the sales model on its three major US social media plat- gadget, the widely-read US technol- head: no retail sales, no carrier sub- forms, YouTube, Twitter and Face- ogy blog owned by AOL, recently sidy, and phones built-to-order af- book. There’s no better, cheaper or rated OnePlus the best phone to buy ter the customer had paid. more difficult way to establish a in the US. That’s likely a first for a Nothing quite like it had ever brand and build revenues than get- Chinese brand. been attempted. But will OnePlus ting lots of praise on these social In Europe, the praise was no less continue its ascent or eventually networks. OnePlus’s success at this uniform and the free publicity no crash-and-burn along with other dwarves anything previously less valuable. Sales of OnePlus once-high-flying mobile brands like achieved by other Chinese compa- barely skipped a beat when the com- BlackBerry and Nokia? Whatever nies. Compared to Xiaomi, OnePlus pany raised prices earlier this year happens, it has already achieved has double the number of Facebook to compensate for the sinking value more with less than any Chinese likes, four times the Twitter follow- of the euro. company competing for market ers and five times more YouTube While OnePlus intends to keep its share in the US and Europe. That au- subscribers. All three [Facebook, focus on the US and Europe, it has gurs well. Twitter and YouTube], of course, re- also launched its phones in India, From my discussions with One- main blocked inside China itself. the world’s second-largest mobile Plus’s 25 year-old co-founder Carl Sales of OnePlus phones also got phone market. Typically, though, it’s Pei, it seems few China-based ven- an immeasurable boost from a done it with a promotion budget ture firms sought out the company string of flattering reviews in some only slightly above $0. and those that did failed to make of the most influential newspapers Xiaomi, too, has made success in much of an impact. Instead OnePlus and tech blogs in Europe and the US. India a priority and is burning opted to run on a shoestring. It cut According to the Wall Street Jour- money like there is no get-out. Un- the need for working capital by nal, the OnePlus One phone is “ex- like OnePlus, it has opted to stay building phones only after the cus- ceptional” and it “beats the Apple out of the US and European mar- 13 Week in China Telecoms 17 July 2015

kets. But in India, it has stum- dollar-plus valuation and bil- bled, and is now relegated lion-dollar revenue run-rate as mainly to the lower end of the a very lean outfit, OnePlus is market than OnePlus. As of now near to closing its first now, OnePlus is handily out- round of venture finance. But selling Xiaomi. it is planning to raise money To a lot of Indians, Xiaomi is in Silicon Valley, and not from a Chinese device repackaged to a VC firm in China. DJI has look global, while OnePlus opted for a similar strategy, looks and behaves like the op- raising $75 million from Accel posite. For that, no small credit Partners of Palo Alto at an $8 should go to co-founder Carl billion valuation to expand Pei. Of the successful entrepre- sales and production of con- neurs I’ve met in China, Pei sumer and commercial genuinely is rara avis. Ethni- drones. DJI, like OnePlus, is cally Chinese but raised mainly OnePlus relies on online sales channels based in China’s high-tech in Sweden, he first came to hub, Shenzhen. China three years ago. From the be- many of the world’s mobile phone One can see a pattern here. Many ginning, he saw the opportunity to manufacturers and component sup- of the country’s more successful and enter the American and European pliers. It’s easier in Shenzhen than globalised companies prefer to raise markets with a competitively-priced anywhere else to find the parts, the money outside China, either by list- phone with top-of-the-line features people and the assembly lines to ing shares abroad, as Alibaba did last and strong build-quality. Remember bring a mobile phone to market year, or raising money direct from the way Sweden’s Volvo used to se- quickly and cheaply. OnePlus got a US venture firms. US-based venture duce car buyers by offering a high- big boost when a Chinese domestic firms were early investors in Baidu, quality car with not a lot of flash but mobile phone company named New Oriental Education and Ctrip, lots of value-for-money? OnePlus is Oppo agreed to act as its contract all of which went on to become trying something not dissimilar in manufacturer. Pei and his co- multi-billion-dollar market cap mobile phones. founder Pete Lau met originally as companies listed in New York. One-third of OnePlus’s 400 staff, employees at Oppo and some of Why do so many of China’s best including about 50 non-Chinese, are Oppo’s shareholders also put seed companies choose to raise money dedicated to customer service, capital into OnePlus. outside China, despite the fact which mainly means answering Unlike many other young Chi- there’s so much money available emails and responding to com- nese tech companies, including here, as well as valuations that are ments and questions on the com- most of the thousands of startups higher than elsewhere? I have my pany’s website and forums. This is backed by China’s VCs, OnePlus also theories. But one thing is indis- another core thing OnePlus does neither sought nor received any kind putable: being local hasn’t conferred better than any company I know in of help from the local, provincial or much (if any) advantage to China’s China, helping to establish a new national government. Just about any venture capital industry. sense in the US and Europe about young company with a five-page Being China’s “hidden unicorn” what Chinese firms can do. Not just business plan in Shenzhen can apply clearly hasn’t done OnePlus much a maker of cheap manufactured for free or discounted office space, harm. It has revealed, though, some goods, OnePlus has a clear and pow- cash grants and other handouts. It of the blinkered vision at China’s erful brand identity, and it knows makes getting into business easier, venture capital firms. how to create a zealous following but can often dull the appetite to live Peter Fuhrman is chairman and among college-educated, tech-savvy by one’s revenues rather than gov- founder of Shenzhen-based invest- 20-30 year-olds in San Francisco, ernment favours. But I’ve yet to ment banking and advisory firm Berlin and London. meet a senior government official China First Capital (he’s also a WiC While unknown in China, One- in Shenzhen who’s ever heard of reader). He and his firm have no Plus almost certainly wouldn’t have OnePlus, let alone one that knows business relationship with OnePlus, gotten off the drawing board any- that it’s a local company on track for although he uses a OnePlus One where else. Its home base of Shen- $1 billion in revenues this year. phone. He’s hoping to land an invite zhen is the manufacturing base for Having reached a likely billion- to buy a OnePlus 2... I 14 Week in China Economy 17 July 2015

Casting the net Graftbusters broaden search to the sports and cultural sectors

uang Jianhua first made head- the Party’s Central Commission for Hlines in the sports pages a few Discipline Inspection (CCDI) said on years ago. Going by the name Kenny Saturday. in America and Britain, the entre- “It is alleged that Gu had engaged preneur was linked with a takeover in a substantial amount of financial of Liverpool football club. He was fraud to gain control of COPAG, and also believed to have acquired a 15% his reform measures might be used stake in NBA basketball team the as cover for power abuse and per- Cleveland Cavaliers. But a bid for sonal profit seeking,” Xinhua re- Liverpool never materialised, and ported. ESPN journalist Marc Stein reported The Beijing News noted that both that an agreement that would have the sports and cultural sectors re- allowed a group of Chinese in- ceive enormous funding from the vestors to partly-own the Cavaliers state every year. “The CCDI has wasn’t executed either. jabbed the first dagger on the cul- Instead, the distinction of be- Xiao Tian in better times tural sector. Everyone is now spec- coming the first Chinese to own an ulating on who would be the more NBA-affiliated team, Stein wrote, powerful figure in the state’s sports high profile catches,” it reported. went to Sonny Xiao, who bought a industry. A former fencer, he be- Graftbusters are also breaking stake in the Dallas Legends (which is came a bureaucrat, eventually lead- new ground with a purge of the ju- the second team of the Dallas Mav- ing the Chinese national team to its diciary. Xi Xiaoming, the vice presi- ericks). first ever Winter Olympics gold dent of the Supreme People’s Court, Huang and Xiao have had similar medal which was won at the 2002 has also been arrested by the CCDI career paths. Both were born in games held in Salt Lake City. Last for “serious discipline violations”. China and educated in the US. Both September he became a vice-presi- Other parts of the Chinese media have worked in the financial sector, dent too of basketball’s world gov- has reported that the son-in-law of while maintaining interests in the erning body. former central bank governor Dai Chinese sports industry (in areas “The first tiger in the sports in- Xianglong is being detained for such as ticket distribution and pro- dustry is netted,” the newspaper questioning as part of a probe into motional businesses). said. “Expect more scandals from economic and financial matters. But while Huang has spent much the sector to come.” This follows claims in the New York of his life cultivating connections Another major figure was also in- Times in 2012 that the CCDI was with Jewish businesspeople in vited for questioning recently – this looking into the business interests America (particularly in sport, see time in the cultural sector. of Dai’s family, which appeared to WiC29), Xiao’s network is more Until last week Gu Xin was better have made a fortune by investing in homegrown: he is the son of Xiao known as China’s answer to Luciano financial firms over which Dai had Tian, deputy head of the General Ad- Pavarotti. After a successful per- regulatory authority. ministration of Sport of China. sonal career Gu was put in charge Oriental Daily News also sug- Xiao junior was back in the spot- of the China Oriental Performing gested that the alleged investigation light this month after his father was Arts Group (COPAG) in 2010, usher- into Dai could be a curtain-raiser for P h o t o put under investigation for corrup- ing in reforms that turned the danc- further probes into the banking and

S o u r tion. ing group into a profitable business. insurance sector. “This is what you c e :

R e According to Oriental Daily News, However, the 59 year-old is now call the new normal,” the newspa- u t e r s Xiao senior was a respected and the subject of a graft investigation, per said. I 15 Week in China Society and Culture 17 July 2015

Road movies Film producers latch on to Xi Jinping’s ‘One Belt One Road’ plan

hina may have the world’s sec- Cond largest film market but its neighbour India has so far failed to make its presence felt in it. That could be about to change. In one of several planned co-productions between Bollywood and Chinese stu- dios, cinemagoers will soon be treated to Kung Fu Yoga, a movie combining the cultural heritages of two of the world’s oldest civilisa- tions. The co-production deal was signed at the first Silk Road Inter- national Film Festival, which was held in Xi’an last October. As the festival’s name suggests, the Chi- Lin Peng stars in Jackie Chan’s Silk Road movie Dragon Blade nese government is encouraging film-makers in China and elsewhere The director of the teen vampire to try to stay like Switzerland be- to turn to Silk Road themes for in- romance Twilight, Catherine Hard- tween the Huns to the north and spiration. This chimes with Presi- wicke, is planning a movie called the Han Dynasty to the east,” Hard- dent Xi Jinping’s “One Belt, One Loulan. It is set in the ancient king- wicke comments. Road” blueprint which envisages a dom of Loulan, once part of the Silk The opposing sides dispatch land-based Silk Road Economic Belt, Road but which disappeared with- “young, charismatic hot male diplo- as well an oceangoing Maritime Silk out trace about 15 centuries ago. In- mats to try to win her heart and her Road. With the goal of growing terest in the kingdom was triggered loyalty,” she says, using the sort of trade volumes, these initiatives are by the discovery in Xinjiang of the language fans of her Twilight series set to link about 40 economies “Loulan Beauty” – a Caucasian will be familiar with (‘hot’ heroine more directly with China. mummy with Nordic features. meets ‘hot’ vampire, but has loyal- One key to the plan is the freshly The backdrop to the movie is a ties tested by ‘hot’ werewolf). inaugurated China-led Asian Infra- familiar battle between Han Chinese Unlike the Twilight series the structure Investment Bank. But it is and warlike Huns over territorial forthcoming movie will portray real not only about pipelines and rail- dominance, but Hardwicke has historical cultures. Specifically way tracks. Beijing has also set aside loftier notions, saying the $50 mil- Hardwicke says the Silk Road inter- $10 billion as startup capital for the lion China-US co-production would ests her as a melting pot influenced Silk Road Infrastructure Fund. Be- tell an epic love story about a by Persians, Indians, Greeks, Ro- sides investing in infrastructure, princess, with a Western actress mans and Chinese. Filming in Xin- state funding will also be offered playing a descendant of the Loulan jiang and Beijing is expected to start for “cultural exchange projects”, Beauty. next August, with a target release such as films. “It’s this very cool story. We have date of late 2017 or early 2018. P h o t o Hence studio interest in scripts the princess who is in a kind of neu- Hong Kong action star Jackie

S o u r set in parts of the old Silk Road – the tral kingdom at the nexus of the Chan (who is reportedly starring in c e :

R e historic trade route that carried im- Silk Road, Loulan, and she’s trying Kung Fu Yoga) and mainland starlet u t e r s perial China’s exports abroad. to keep the peace and stay neutral, Lin Peng recently had box office suc- 16 Week in China Society and Culture 17 July 2015

cess with Dragon Blade, another ing a patriot, please curse me,” Chan western China, where they become film set on the Silk Road, and which told M1905, the official website of entangled in romance (as well as an- also featured John Cusack and movie channel, CCTV6. tagonism) with local royalty. Adrien Brody as Romans. Chan plays “Seven years ago, I wanted to do But Outcast struggled at the box a regional commander trying to this film. I didn’t make the film be- office. It got poor reviews, but worse, protect China’s borders and sover- cause the government policy wants its Chinese backer, Yunnan Film eignty, with much of the action tak- to protect the Silk Road. I am ahead Group (YFG) pulled the film on the ing place in the western deserts of of them. I hope chairman Xi [Jin- eve of its domestic release in late Xinjiang. ping] gets to watch this film.” September. While no official reason Some critics thought Chan Another major project set on the has been given, sources said YFG should have steered clear of the sen- Silk Road was Nick Powell’s Outcast, was unhappy with the number of sitive political topic of Xinjiang, with Nicolas Cage and Hayden screens made available for the film. where there has been unrest be- Christensen. Outcast also features Despite being a favoured topic tween Uighurs and Han Chinese. two lost Western warriors, in this for Chinese policymakers, it seems However, the star was defiant. “Is it case, two jaded Crusaders who wan- sometimes the Silk Road can be a wrong? If people are cursed for be- der eastwards, finally arriving in rocky path. I

World of Weibo: Cooperative behaviour

In the US, potential employers cannot ask questions employees as living human beings, instead it treats about pregnancy, marital status or future family plans them as working tools on the production line”. during job interviews. It is against federal and state In response, it says the new policy is not set in laws that prevent discrimination. stone. In fact, it was merely a draft seeking Over in China, questions about pregnancy and employees’ comment. It also added that a large family planning do get asked in many workplaces. number of female graduates had recently begun And last week a credit cooperative in Henan province working at the firm, and that the policy was drafted in went so far as to demand its employees seek order to avoid all of the women taking maternity leave approval before getting pregnant. Those who at once. conceive a child without permission will be fined. As it turns out, the credit cooperative is not alone in According to the new policy, only married female seeking greater control of its female staff. staff who have been with the company for more than A worker at a different bank in Henan told the one year can apply for a place on the birth planning Global Times that their company questioned schedule. The employee must strictly stick to the birth employees about their pregnancy plans at the plan once it is approved. Those who get pregnant in beginning of every year. Other netizens say their violation of the plan – such that their work is managers also demand to know when they are affected – “will be fined Rmb1,000 ($161)”. The notice planning to have children. also added that women giving birth outside of the “Actually this is very common – having to ask for schedule may have their year-end bonuses withheld. permission before getting pregnant. A lot of banks and After the internal document was leaked online, the hospitals make you do that. Otherwise, who is going company faced a landslide of criticism, with many to do your job when you are on maternity leave?” one netizens complaining that it was being unreasonable. netizen reckons. “Which idiot came up with such a policy?” one Judging from some of the other comments it also netizen wrote. “This is simply inhumane.” appears that Chinese firms are warier of female hires. “So is it implying that if you get pregnant “Some women are pregnant as soon as they start a accidentally you should choose to abort it? That’s job. It’s those people who don’t work hard and use the wrong,” another wrote. “This makes it sound as if a excuse of taking care of their baby that have caused woman can control exactly when she wants to get some organisations to be afraid to recruit women,” pregnant and when she doesn’t,” was a further another wrote. criticism. “A lot of companies don’t like to hire married China Youth Daily also took aim at the Henan women who haven’t had babies,” one netizen bluntly cooperative saying that it “does not regard its asserts.

17 Week in China And Finally 17 July 2015

Ugly ruse Wealthy women fall prey to cosmetic scam

uring the First World War, many women fell prey to the scam – jections were offered. All the proce- DHarold Gillies, a New Zealand- including the wives of top invest- dures were conducted in the suites born surgeon, arrived on the West- ment bankers and senior govern- of a five-star hotel that was turned ern Front and saw many soldiers ment officials. into a makeshift medical clinic. whose faces were disfigured by bul- The cosmetic service producer in Self-described “medical experts”, let wounds and shrapnel. question is headquarterted in Shen- whom the Apple Daily alleged are Gillies, who has been dubbed the zhen. It claims to have five clinics in really conmen, would then persuade father of plastic surgery, developed the mainland with its own profes- the women to buy expensive sup- a technique called the tube pedicle, sional team of surgeons and med- plementary treatments to enhance which involved cutting a strip of ical staff. their youthful appearances. Some flesh from a healthy part of the body Its main line of business? To en- women have been spending as – usually the chest or forehead – and tice wealthy mainland women to at- much as Rmb3 million on the trip. then attaching it to the disfigured tend their medical tours to Hong After a little less than a year in area. Kong that start with an upfront cost operation, the medical group – The Daily Telegraph says that he of Rmb38,000 ($5,100) per head. which is thought to have arranged reconstructed the faces of as many The five-day tour, called “The around eight tours per month – re- as two thousand soldiers during the Luxury Hong Kong Aging-Reversal ceived the attention of Hong Kong’s Battle of the Somme in 1917. Journey,” begins with a physical police. It emerged those perform- An astonishing 20 million plas- check-up and a lot of wining and ing the operations were not li- tic surgery procedures were under- dining. To get the ladies into the cenced to do so. Fake drugs were taken last year, reckons the Tele- spending mood, the organisers also used. Some of the women have re- graph. The practice has also become put together shopping trips around ported bruising on their faces and increasingly popular in China. Hong Kong during the day. rashes on their bodies (one proce- And last week news about plastic In the evenings male models and dure left lips resembling surgery was making headlines yet dancers were hired to keep the Chi- “sausages”). again. nese damas entertained (the mus- The scam has attracted attention Hong Kong’s Apple Daily re- cular men would walk around top- from mainland authorities too. The ported that police in the territory less and posed for photos with the Shenzhen Evening News said that were investigating a plastic surgery ladies, taken on luxury cruises). healthcare regulators are now in- scam that involved a group of The so-called medical procedures vestigating the case. wealthy Chinese damas (middle- take place on the third and fourth So add to the list of fake things aged women). It’s thought that days. Botox and hyaluronic acid in- from China: plastic surgeons… I

Big spenders

“At the Burj Al Arab Hotel, 27% of visitors last year were from China. Sometimes during Chinese New Year, the hotel is almost full of Chinese”

James Mabey, a senior executive with Dubai’s Jumeirah Group tells China Daily that it saw 17% sales growth in its hotels worldwide from mainland Chinese guests. James Mabey

18 Week in China The Back Page 17 July 2015

Photo of the Week In Numbers Rmb20.4 billion The size of China’s box office in the first half of this year. Foreign films again did best, raking in Rmb10.8 billion ($1.73 billion) during the period.

26,300 The number of hotpot restaurants in Chongqing, according to the city’s hotpot

P association. Combined, the restaurants had h o t o

sales of Rmb15 billion and employed S o u r c 500,000 staff. A recent poll of diners by the e :

e same association found that the favourite u t e r s hotpot meat in Chongqing is ox stomach.

Sun block: a woman wears a face-kini mask to avoid tanning as she lies on a beach in Qingdao $200 billion Target market capitalisation for Wanda Group by 2020. The company, which started out as a property developer, wants Where is it? to transform itself into a global Some of the places referred to in this issue conglomerate with divisions that span finance,e-commerce, movies, theme parks and sportings. Xinjiang Beijing

73% China Henan Percentage decrease in Chinese Shanghai steelmaker Angang Steel’s net profits in the Zhejiang first half of the year, a result of tumbling steel prices. Despite cost-cutting and improvements in efficiency, Angang said

Guangzhou Shenzhen net profit will slide to Rmb155 million from Hong Kong Rmb577 million over the same period last year.

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