1 Talking Point 5 The Week in 60 Seconds 6 China Ink Week in China 7 Energy and Resources 8 China Consumer 9 Banking and Finance 11 Chinese Models 23 March 2012 14 Society and Culture Issue 143 19 And Finally www.weekinchina.com 20 The Back Page

Chinese play monopoly m o c . n i e t s p e a t i n e b . w w w

y b g u in US, Europe and Japan take China to WTO over its restrictions on rare earths exports o k y n o a t B s t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Talking Point 23 March 2012

Export more, please Why a dispute over Chinese rare earths exports has gone to the WTO

This is what they are fighting about: a rare earths mine in Jiangxi province

ast Friday something rather un - near monopoly of rare earth met - In fact, the row over rare earths Lusual happened. A farmer in als and its decision to restrict their supply often takes on a deeper, po - Sichuan was bitten by a wild panda. export. Last week, they finally took litical undertone. For example, “I am fortunate to have been bitten action by filing a complaint with when Japan and China were in dis - by China’s national treasure,” joked the WTO. pute over the sovereignty of a series Liu Yunkang, before adding more of islands in 2010, Beijing’s point of seriously, “I used to think pandas Why the dispute? leverage was to impose an embargo were docile”. China accounts for a huge share of on the sale of rare earths. The image of a biting panda will rare earth production (97% is the fig - It worked. Japanese industry was resonate with policymakers around ure often mentioned). There are 17 horrified and Tokyo eventually the world, not least because the of these metals, with names like backed down, releasing the Chinese iconic bear is so closely associated scandium, yttrium and prome - trawler captain who had sparked with China itself. After all, foreign thium, and they are used in the the diplomatic incident (see officials are becoming increasingly manufacture of everything from WiC80). concerned about some fairly ag - iPads to fighter jets. But it wasn’t just Japan that suf - P h o t

o gressive Chinese tactics – most es - That means that their price and fered as a result. Also a major con -

S o u r pecially in trade-related matters. their availability has become a cern for the US and the Europeans c e :

R e The latest trade issue to worry concern for industrialists around was that Beijing used the crisis to re - u t e r s the US, Japan and Europe is China’s the world. duce the total amount of rare earths 1 Week in China Talking Point 23 March 2012

that could be sold abroad. This was viewed by China’s critics as serving two purposes. First it would give Chinese manufacturers preferential access to supply. Second, it would drive up the prices of the metals that were sold overseas, to the ben - efit of Chinese miners. Did that happen? Pricing data can be hard to pin down because the earths are mined in small quantities and sales are usually private. But according to newspaper The Australian, rare earths miner Lynas estimates that prices for lanthanum oxide, which is used for applica - tions like polishing glass, reached more than $110 a kilogram in the Best Sovereign Bond House Best Trade Finance Bank second half of 2011, from an average of $4.88 in 2009. Similarly, the cost of dysprosium, a material used in smartphones, also shot up dramatically. By last July, export restrictions had seen its international price rise tenfold on a year earlier. The US Defence Depart - ment has published a series of Best Debt Arranger Best Loans Arranger longer term estimates too, suggest - ing that rare earths have surged be - tween four and 49 times in US dollar terms since 2001.

So why act now? China’s export quota for rare earths was set last year at 30,184 tonnes. Rather than raising it this year in a Best Dim Sum Bond House Best Project Finance House nod to international partners, poli - cymakers (somewhat defiantly) have left it unchanged. The timing of the new WTO case seems to have been spurred by the outcome of another complaint to the trading dispute body. In late Jan - uary, the US, the EU and Mexico won a landmark verdict against Best Bank for Execution Best Arrangers of LBO China, which was then instructed to Across Markets Financings drop its export restrictions on raw materials like bauxite, magnesium and zinc. According to Reuters, the Chinese government has said it “deeply re - 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 grets” the ruling but will abide by it HSBC Bank USA, NA. 12-025 (China had appealed against an ear - 2 Week in China Talking Point 23 March 2012

lier verdict, but lost). That precedent opened the way to launch a similar case on rare earth restrictions, with US president Barack Obama saying export limits on the metals need to be lifted. In a statement to reporters at the White House, Obama added: “Amer - ican manufacturers need to have ac - cess to rare earth materials which China supplies. Now if China would simply let the market work on its own, we’d have no objections.” Of course, this is an election year in the US, and the president has much to gain from being seen to tough it out with the Chinese (Obama warned that he will not allow other countries to get away with "skirting the rules"). “China is always a hot topic dur - “We’re making great contributions” says China’s Chen Deming ing US presidential elections,” com - ments the Oriental Morning Post. The minister of industry and in - China’s change of strategy on ex - “Various trade measures taken formation, Miao Wei, then told Xin - ports was in issue 13. At the time, against China have a direct link with hua that in the past China’s mining the topic was largely ignored by this year’s election.” of rare earths had been “out of con - Western media but we cited plans Earlier this month Congress also trol”. Not only had the environment by National People’s Congress dele - passed measures allowing the Com - been damaged, the previous rate of gate Zhou Hongyu to revolutionise merce Department to slap higher exploitation had threatened to ex - the industry. duties on Chinese goods deemed to haust reserves within 30 years. Zhou explained why China benefit from unfair subsidies. As WiC has reported before (see needed a a change in industrial pol - And this week, tariffs were also WiC115), other countries have rare icy, saying explicitly that rare earths imposed on the import of Chinese earths too but have been reluctant exports should be reduced to solar panels said to be receiving to mine them. 30,000 tonnes annually (which is subsidies. Last year the US spent Indeed, one reason China ac - actually the quota this year). $3.1 billion buying solar panels counts for such a huge proportion His plan was also to consolidate made in China. of global supply is that California the hundreds of small players into closed down its own mines when three or so heavyweight miners to Back to rare earths, and China’s environmental regulations made “bring high profits and allow the case for the defence… them uneconomic. sustainable development of China’s The riposte from Chinese officials “Compared to countries also rich rare earth resources; and ensure was that their rare earths policy is in rare earth resources, but refusing China retains a long term grasp over “in line with WTO rules”, reported to mine them, China is now provid - rare earth pricing power.” the Beijing Times. The newspaper ing 31% of its reserves for more The implementation of Zhou’s cited Chinese Ministry of Com - than 90% of the world’s supply of plan is ongoing but much work has merce spokesperson, Shen Danyang, rare earths, making great contribu - already been done in weeding out who said that China had no inten - tions to the supply and stability of the smaller miners. The big players tion of curtailing free trade or pro - the world’s rare earth market,” that have emerged – akin in rare tecting domestic industries. Chen Deming, the minister of com - earth terms to BHP, Rio and Vale in P h o t

o Instead the aim was to “protect merce, insisted. iron ore – are Baotou of Inner Mon -

S o u r the environment”, and ensure that golia, Jiangxi Copper, China Min - c e :

R e Chinese resources were mined sus - You read it first in WiC… metals and Chinalco (see WiC81). u t e r s tainably. Our first mention of rare earths and Industry insiders says a little 3 Week in China Talking Point 23 March 2012

longer is needed for the consolida - tion process. Planet China So what’s going to happen? Strange but true stories from the new China Not much, that is, in the short term. The 60-day process for the two sides TRAVELLING IN STYLE. Phileas Fogg, or should we now say Phileas to reach an agreement is now un - Fong? Jules Verne’s famous character once wagered that he could travel derway. If there is no resolution, the around the world in 80 days (and proceeded to do so in the novel of the WTO will establish a panel to reach a same name). Now China’s rich are being offered the same opportunity by decision, which may take as long as travel agency Ctrip. According to Shanghai Daily, the trip will cost Rmb1 million per head, with only 15 slots available. two years. But for Chuck Schumer, a While the travellers will pass through 20 countries, their route differs to US senator and long time critic of Fogg’s, including excursions to places like South Pole which would China’s trade and currency policies, definitely have lost the Englishman his wager. Of course, at such a heady this is too long to wait. He is sug - price, it will be luxury all the way – again a differences to certain legs of the gesting “faster ways” to assert lever - English gent’s voyage. age than relying on the WTO, in - Ctrip describes the price as “reasonable” given the quality of the service cluding blocking financing for that will be on offer and the firm is confident of selling all the berths. “The Chinese mining projects through number of billionaires in China is booming every year, and there is a great the World Bank and even halting potential market,” says company director Fan Min. Chinese-funded mining projects in - side the US. In the meantime, China will con - miners may well have gained such a against China. He says that under tinue to control supply, and try to large share of the rare earths market the WTO’s so-called ‘exception use that power to keep prices high. that the loss of export controls be - clauses’, rare earth exports can be As mentioned earlier, the current comes less of an issue. The compa - restricted on the grounds of envi - export quota is unchanged, which nies themselves would be able to ronmental protection. will do little to appease China’s frus - dictate their output – much as OPEC But Gong may be missing the trated trading partners. does in oil. point. This dispute is probably And the outcome? As with the Besides, Gong Baihua, a legal going to be less about the legal earlier case involving bauxite, China professor at Fudan University, says niceties and more about the politi - could lose. But by then its Big Four the latest WTO case may not go cal backdrop... I

Lin moves into fifth gear

Steve Jobs regularly described Apple products as “insanely great”. Now it sounds like Volvo might try “Linsanely great” for its sales effort in China. On Monday, Volvo announced that the New York Knicks basketball sensation Jeremy Lin had signed on as brand ambassador. The Swedish-built but Chinese- owned car firm sees Lin as a great fit. As described in WiC139, he’s become hugely popular in China where Volvo’s owner Geely hopes to ramp up sales. The chairman of Volvo’s China operations, Freemen Shen told the Wall Street Journal that “Lin is the I l l u s t r pride of the whole Chinese population” and that connection between me and Volvo. But both of us a t i o n :

Volvo saw him as part of the carmaker’s “brand are striving to be better and smarter at what we do w w w

. rejuvenation”. and to do it our own way.” b e n i t a The Harvard graduate says of his new How much Lin will earn from the deal was not e p s t e endorsement deal: “You may not immediately see the disclosed. i n . c o m

4 Week in China The Week in 60 Seconds 23 March 2012

Higher prices at the pump The major news items from China this week were...

The price of petrol is to be raised by about 6% and 1diesel by 7% in the second round of increases this year. The move is aimed at helping local refiners cut heavy losses. Global oil prices have been high because of international political tension with Iran, one of China’s main suppliers. Analysts said the move was also a sign that the government is less concerned about stirring inflation.

HSBC has agreed to subscribe to $1.71 billion worth of 2new Bank of Communications shares as part of the mainland bank’s placement to replenish capital. The move will keep HSBC’s stake in the state-run lender at its Hands up if you’d like to launch a rocket current 19.03%. “Maintaining our stake in BoCom rein - forces our position as the leading foreign bank in main - mid-April ahead of an international nuclear summit in land China and is consistent with our strategy to deploy Seoul. This comes on the heels of a deal in which Py - capital in faster-growing markets,” said HSBC’s chief ex - ongyang promised to forgo such activity in return for ecutive Stuart Gulliver. desperately needed food aid. Chinese diplomats reacted to the news in a displeased tone, expressing “concerns Searches for Bo Xilai are being blocked on weibo , and worries” about the rocket plan. 3China’s Twitter-equivalent. Even though Beijing seems to have first allowed online discussion of the con - Chinese property developers have been tapping the troversial politician – who was replaced as Chongqing’s 5bond market in recent weeks, highlighting a surge in boss last week – it is now cracking down on searches for investor appetite for the sector even as the country’s his name. Bo grabbed national headlines with a high-pro - housing market appears to continue to deteriorate. Agile file crackdown on organised crime, as well as promoting Property, KWG Property and Shui On Land have issued a ‘red’ Maoist culture (see WiC142). total of $1.7 billion of bonds between them this year and more of their peers are expected to follow suit. New Kim, but old nuclear ruse. North Korea an - 4nounced that it will launch a “working satellite” in Authorities in Beijing have said they will need extra 6time to approve Google’s pending purchase of Mo - torola Mobility. Other major governments have ap - proved the deal, which was announced last August. But China’s anti-monopoly regulator has been much slower to grant its consent, with rumours that it may be drag - ging its feet because Google is the acquirer.

At Starbucks’ annual shareholder meeting this week the head of its China and Asia Pacific busi -

P 7 h o t

o ness, John Culver, said that China will become Star -

S o u r bucks’s second-largest market after the US by 2014. c e :

R e The company expects to have more than 1,500 stores u t e r s China set to be its second biggest market in China by 2015. I 5 Week in China China Ink 23 March 2012

Flights cancelled

Chinese airlines may have shelved as many as 55 orders for Airbus aircraft, worth more than $14 billion to the European firm. The EU’s carbon tax is getting the blame.

What the Chinese press says The key issues What the foreign press says

The 21CN Business Herald noted that the country’s Turbulent times for The UK’s Guardian newspaper agreed that the economic planner, the National Development and Airbus in China? “spectre of a trade war looms large”, reporting too Reform Commission (NDRC) had cancelled orders for that Airbus is now blaming the EU’s proposed tax for Airbus aircraft. These could cost the European firm falling Chinese orders. It cited the gloomy more than $14 billion in lost sales. “Even if the airline assessment of Louis Gallois, boss of EADS – the has signed contracts with manufacturers, the aircraft company that owns Airbus – that the Chinese cannot be imported without the approval of the embargo was a “retaliation measure”. NDRC,” agreed the Nanfang Daily. Bloomberg then reported that Airbus still hoped Zou Jianjun, a director of the Air Transport EU officials would be able to negotiate a solution to Services Institute, said the decision to target Airbus the crisis, especially as the plane maker had already was deliberate. China has the fastest growing begun construction on 25 of the aircraft in aviation market in the world. By cancelling orders, question.“There is clear evidence of a developing policymakers were showing their “dissatisfaction trade conflict that should drive government to take with the EU carbon trading system”. action,” Airbus spokesman Rainer Ohler said. “Aircraft have long lives and when a campaign goes to the competition, recovery can take many, many years. A suspension today can turn into lost orders and lost jobs for years and years.”

China Economic Weekly says the tax will cost Peter Liese, a member of the European Parliament, Chinese airlines Rmb800 million ($127 million) a Anger over the carbon tax… suggested a potential compromise: if China launched year. Given that China-EU trade is worth Rmb3 trillion its own emissions trading scheme, “we could annually, a full blown “trade war” over the issue exempt flights from China to the European Union”. might seem an overreaction, but “this is a matter of But Tony Tyler, director general of IATA, wants a principle”, the magazine insisted. ‘global’ solution instead. Tyler notes: “Europe’s China National Radio also slammed the tax as a unilateral and extra-territorial emissions trading “selfish act of unilateralism” and argued it was system is clearly not acceptable to non-EU designed more to raise revenue rather than protect governments.” the environment. The BBC says that delegates from 26 countries The Global Times agreed, suggesting that the EU have now agreed to oppose the scheme, with the has coveted the “huge profits” of China’s aviation Moscow Times reporting that the Russian industry since the onset of the European debt crisis. government may be one of the first to follow the The newspaper added that there was a strange Chinese and pass legislation that forbids flag carrier P h paradox in the EU selling aircraft to Chinese airlines Aeroflot from paying the EU tax. o t o

S but then taxing them heavily for operating them. But the EU’s climate chief Connie Hedegaard o u r c It warned too of the wider financial consequences struck a defiant note in the Financial Times this e :

R e if fewer Chinese tourists visited Europe as a result. week: “You can’t threaten a trade war just because u t e r s you don’t like European legislation.” I

6 Week in China Energy and Resources 23 March 2012

Pipes, but not of peace Hostile takeover could create a gas giant. But will it break monopoly law?

hinking about the years leading stood as a small fish eating a large Tup to the global financial crisis, one,” a China Gas executive told M&A bankers tend to go misty eyed. Capital Week. Between 2005 and 2007, at least $1.6 In 2010, China Gas had total as - trillion worth of leveraged buyouts sets of HK$30.9 billion, compared were completed, says research firm to ENN’s HK$23.1 billion. Preqin, as cited by Bloomberg. ENN says it will finance the pur - All of this came to an abrupt end, chase through a combination of bank when the credit that fed the deals loans and its own cash. Rating agency dried up. Moody’s was cautious, noting that But are there signs that the buy - ENN’s debt would “significantly in - out boom could be back in vogue at crease” although only a “minimal state energy giant Sinopec? amount of cash flow” would be Alongside private gas company China Gas feels the pressure added, reports Bloomberg. ENN Energy Holdings, Sinopec has That presupposes the initial bid been working on a HK$25.5 billion for more than 25% of the national proves enough for the takeover to ($3.3 billion) offer for China Gas total, well ahead of the 9.4% share go through. China Gas shares closed Holdings, a gas pipeline operator. held by its nearest rival, reports in Hong Kong at HK$3.76 on Mon - The bid values the target at 11.3 Guangming Daily. day, significantly higher than the times earnings, the highest valua - The newspaper also voices con - offer price. If more needs to be of - tion for a cash acquisition of a cerns that the creation of such a fered, one option is for Sinopec to pipeline or gas company since large company could be anti-com - increase its own share of the bid. 2006, according to Bloomberg. petitive, and the Ministry of Com - But its participation in the buyout Offering shareholders HK$3.50 merce has started an assessment of is already controversial. Why? Be - a share, ENN will pay 55% of the to - whether the deal falls foul of China’s cause China’s market reformers see tal, with Sinopec covering the rest. monopoly laws. the gas sector as one of their success The potential acquirers see dif - An anti-trust ruling is not the only stories. Since deregulation in 2002 ferent benefits in the deal. For potential hurdle. There is also oppo - there has been a welcome infusion Sinopec, it is an opportunity to sition from staff at China Gas, where of private sector competition. move into downstream gas distri - 5,500 employees have signed a peti - Sinopec’s attempt to enter the gas bution at a time when it is signing tion against the buyout. Nor is the distribution market is viewed as an - up for long term natural gas con - China Gas board very keen, having other example of guojinmintui (‘the tracts overseas. continued to object to “a totally un - state advances as the private sector Plus there’s the prospect of grab - invited hostile takeover” since re - retreats’), a trend where government bing business from a major rival. Up jecting the first bid made late last firms push their way into industries to 80% of the gas pumped into year. This week it was still expressing at the expense of their private sector homes by China Gas is sourced from its opposition “in the strongest rivals. That makes the timing par - PetroChina. Completing the deal terms” on news that the bidders ticularly interesting. In recent weeks would put Sinopec in a better posi - were extending the deadline for ne - support for the guojinmintui policy tion to become the main supplier. gotiations to mid-May. seems to have dwindled, with the P h o t

o For ENN, the buyout is about cre - China Gas executives seem espe - market reform faction regaining

S o u r ating a domestic gas powerhouse. cially miffed by ENN’s involvement. some of the political initiative (see c e :

R e The combined company would have “ENN controlling China Gas is not WiC140). That could make it harder u t e r s 77 piped gas networks, accounting acceptable because it can be under - to get the deal approved. I 7 Week in China China Consumer 23 March 2012

Sporting chance Will investors in London buy into Lin Huoyan’s Chinese apparel firm?

ondon’s Alternative Invest - sports apparel business has finally Lment Market (Aim) does not come to an end. Consumers, espe - seem like the most obvious place cially in major cities, are turning to for a Chinese sportswear company casual wear and this is where money to raise money. But Naibu, the Chi - can be made, not sportswear,” says nese sportswear company, is doing Tan Heng Hong, research analyst at just that. The company has picked Access Asia. Aim for its initial public offering, That hasn’t deterred another Fu - says The Sunday Times, a British jian company from trying its luck, newspaper. albeit as a retailer rather than a Naibu is the first Chinese sports - sportswear maker. Fujian New wear company to list on the junior Huadu Supercentre, an operator of board and says it expects to raise up supermarkets and department to £50 million ($79.3 million) in an stores, announced last week that it IPO planned for April. The company had signed a franchise agreement says the move will help fund its ex - with Intersport, the Swiss sporting pansion at home and also help to goods retailer. The Chinese group raise its international profile. plans to open the first series of In - Founded by Lin Huoyan in Fujian Another sportswear firm is to list tersport stores from mid-2013 province, the sportswear maker says across 10 provinces. it is as tenacious as its name implies WiC and other media, the company According to National Business (nai means persistence and en - has run into trouble in its high Daily, New Huadu will manage the durance, while bu means pace and growth sprint to take on Nike and day-to-day operations at the Chi - method). Adidas in the local market (see nese franchise, while Intersport, one According to company sources, WiC93). of the leading global distributors for Naibu’s products target teenagers Since last year Li Ning has been Adidas and Nike, will be responsible and are available in 3,000 retail trying to shift excess inventory for merchandising and negotiation outlets in 21 provinces across the through steep discounting. But low - with the sportswear labels. New country. ering prices has made it difficult to Huadu told the newspaper that it That translates to a 1.4% market differentiate itself from more down - expects to open as many as 100 share in the Chinese sportswear market domestic rivals like Anta and stores by the end of 2018. market, says the Guardian. Peak Sports. Cracking the retail market is not Based on WiC’s soundings, Naibu In the first half of last year, Li going to be an easy task, either. is far from a household name and Ning’s revenue fell 4.8% and its More recently, Gome Sports, a sport - will have to show plenty of persist - profits slumped 50%. In January, ing goods chain backed by Gome - ence in the increasingly competitive private-equity giant TPG and Sin - Electrical Appliances, China’s sec - sportswear industry. gaporean sovereign-wealth fund ond largest retailer, closed its Investors on London’s Aim Government of Singapore Invest - sporting goods stores after just one should also be aware that Chinese ment Corp offered financial assis - year of operation (see WiC136). sportswear firms have been strug - tance by purchasing $119 million in “Competition in the sportswear

P gling with slowing orders, rising ex - convertible bonds. industry as a whole is cutthroat. Be - h o t o

S penses and inventory problems. Li Ning’s problems reflect broader fore you enter the market you really o u r c e Take Li Ning, China’s flagship difficulties within the sportswear need to think about survival,” Ma :

C F P sports brand. As documented by sector. “The high-growth era of the Gang, an industry observer, warns. I 8 Week in China Banking and Finance 23 March 2012

Two-tier credit Default fears shaping debt markets

n terms of size, the Chinese bond HSBC believes that while the Imarket seems to be growing at a credit markets remain risk averse to healthy pace. Last week, Securities this group of firms, the banks will Daily reported that 28 brokerages have to step in to fill the gap. have underwritten 106 bonds year- “Despite their stretched levels of to-date, raising a combined capital, banks are likely to lead the Rmb190.5 billion ($30.23 billion), way in lending to weaker borrowers 159% more than in the same period such as SMEs and LGFVs from less last year. The average deal size also developed areas until the credit grew to Rmb1.8 billion, from Rmb1 crunch in the capital markets eases.” billion over the same timeframe. But this does not mean that debt capital is being evenly dis - tributed across borrowers. Con - cerns are also rising over the pos - No longer sibility of a default, which is The central bank is watching... appreciated having an impact on where in - vestors are putting their cash. words, companies with good credit Trade deficit points to evi - At the forefront of the problem is standing) have tightened, while the dence of yuan at fair value? Shandong Helon, a fibre firm that spreads on bonds with lower ratings looks as though it might be the first are 40% higher than in 2008, when residential hopeful Mitt Rom - issuer in China to default on a cor - they reached their previous high. Pney has already made clear his porate bond. The company has lost This is fostering a two-tier bond own approach to US policy on the its investment grade credit rating market or – as HSBC puts it – mar - renminbi. On the first day of a Rom - and, as of mid-February, it had ket of “the credit haves versus the ney presidency, China would be de - missed Rmb526 million in repay - have-nots”. clared a “currency manipulator” – ments. The fear now is that it might The ‘haves’ are typically entities one of the strongest terms available not honour repayment of a owned or sponsored by the govern - to policymaking lexicon. Rmb400 million bond scheduled to ment. They now account for more If Romney does get the top job, mature next month. than 85% of bonds issued and pay the Chinese will be ready to counter China’s first default on domestic around 300bps less to borrow than such allegations. Indeed, they are al - debt would shock the market. If it their less privileged counterparts. ready suggesting that claims that were to happen, investors will no The ‘have-nots’ are more likely to the renminbi is undervalued no longer be able to rely on the as - be privately-owned, usually small longer hold up under scrutiny. sumption that the government will and medium-sized enterprises Their evidence? Officials have step in to prevent the worst from (SMEs), or are backed by poorer local been pointing to the most recent happening, especially as Shandong governments, including local gov - trade data. In February, China Helon is a state-owned company. ernment financing vehicles. posted a $31.5 billion trade deficit, The result, according to HSBC re - Of course, many of these ‘have- its largest in more than a decade. search, is that “a flight to quality” is nots’ are in desperate search of “This trade deficit is a positive P h o t

o already underway. This can be seen funding, with private sector compa - sign that the renminbi exchange

S o u r in diverging credit spreads. Since nies in general still facing a struggle rate is close to its equilibrium level,” c e :

R e late last year, spreads on bonds with to secure financing compared to Yi Gang, deputy governor of the Peo - u t e r s a double A rating or above (in other their state-owned peers. ple’s Bank of China, said at the Na - 9 Week in China Banking and Finance 23 March 2012

tional People’s Congress, reports the the currency to appreciate, towards 2010, reports the Financial Times. Financial Times. efforts to liberalise the currency Nonetheless, HSBC is still predict - The Chinese New Year celebra - regime in general and create a more ing that the renminbi will appreciate tions make February a volatile flexible trading environment. by 3% against the dollar in 2012, al - month for capturing economic data. The trend towards equilibrium though the forecast is based partly To get a more accurate picture, it (or ‘fair value’ for the renminbi) on expectations that the dollar itself helps to look at January and Febru - also suggests a bigger role for mar - is going to weaken. ary combined. And in the first two ket mechanisms: “generally speak - Is Romney going to take much months of 2012, there was a $4.2 bil - ing, as the renminbi exchange rate notice of the ‘equilibrium’ debate? lion trade deficit, still nearly five gets closer to the equilibrium point He’s rather busy out on the cam - times the deficit recorded during the market supply and demand paign trail at the moment, of course. over same period last year. should take a greater role,” said But he might point to the fact that The figures led HSBC to concur Zhou Xiaochuan, governor of the China has run monthly trade that the “renminbi is closer to equi - central bank. deficits before (and that it ran a sur - librium value than ever before”. The renminbi is up about 24% plus over full year 2011). Also, the “This structural change in China’s against the US dollar since 2005, ris - numbers show China in occasional balance of payments has profound ing 5% last year. Many now expect its deficit on a global basis. In its trad - implications for the currency,” appreciation to slow. So far this year, ing relationship with the US, China HSBC continues. In particular, poli - the renminbi has stayed pretty flat, always shows a surplus, giving Rom - cymaking emphasis will start to having earlier this month had its ney plenty of tub to thump if he shift away from measures allowing weakest run against the dollar since needs to. I

Who’s Hu: Tao Huabi Profiles of China’s business leaders

Tao Huabi, 65, was born in Tanmei, a small town in Demand began to grow. Orders came in from other Guizhou province. She never attended school, was cities too. In 1997 the plant’s staff grew from 40 to widowed at 20 and became a rickshaw driver, before 200. saving enough from various jobs to open a Today, Laoganma is a leading chilli oil brand in the restaurant selling homemade rice noodles in 1989. food industry. Besides chilli oil, Tao has developed around 10 new product lines such as tofu in chilli oil Getting started and hotpot condiment. Machine-based production Tao’s ‘restaurant’ was in reality only a stall, located lines have also replaced manual operations, next to a vocational college. But her low prices and increasing her scale of production. Her factories turn homemade cooking attracted plenty of students. She out 430,000 jars a day and her products sell in more made the noodle sauce herself, mixing sesame, chili than 30 countries. and oil. In 1994 she expanded her business to a Recently, as a delegate to the National People’s nearby highway, giving truck drivers a jar of her chilli sauce for Congress (China’s parliament), Tao spoke to the media and free if they ate in her restaurant. The word got out through the claimed that Laoganma’s sales had “exceeded Rmb3.1 billion trucking network. Soon people were coming to the restaurant just ($490.8 million) over the last three years, and that the company to buy bottles of Tao’s sauce. had paid Rmb800 million in tax”. Through her substantial In 1996 Tao moved into the chilli oil processing industry and purchases of the local pepper crop she also reckoned she had Guiyang Nanming Laoganma Special Flavour Foodstuffs plant was helped lift two million farmers out of poverty. set up. Initially, there was no mechanical production line. All the The local government is now pushing Tao to consider an IPO, sauces were hand-made, even though employees complained that but she has declined so far: “I don’t know about IPOs at all. I only slicing the peppers was damaging their eyes. Tao worked do the things I know how, like making better sauces.” alongside them. “Imagine they are just apples,” she told them. “Then your eyes won’t sting.” Need to know Tao says her management philosophy is to treat company staff as Growth family. The firm provides free food. On their birthdays employees At first Laoganma chilli oil was sold only to noodle restaurants gets a bowl of noodles – made by Tao herself.

P nearby. Although production volumes were small, there was still Due to her lack of schooling, the self-made lady had to be h o t o

surplus supply. To find new clients, Tao carried baskets of chilli taught how to sign documents. When she was finally able to write S o u r c sauce to supermarkets and eateries across the city of Guiyang. her own name, she invited all her staff for dinner to celebrate. e :

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10 Week in China Chinese Models 23 March 2012

China annoints video king How Youku beat Tudou – a new column looking at China’s emerging giants

ouku and Tudou have been de - Yscribed as the Coke and Pepsi of China’s online video world. So the announcement last week that the fierce competitors planned to merge came as a surprise to many. To hear Victor Koo, the chief ex - ecutive of Youku, China’s top on - line video site, tell it: “[The deal is] to establish a clear and dominant leadership in the online video sec - tor in China.” To that end, his company is buy - ing Tudou, the number two, in an all-share transaction. After the deal – reckoned to be worth $1.1 billion – Youku share - holders will own 71.5% of the com - bined company, and Tudou share - holders 28.5%. That outcome – skewed in favour of Youku – suggests a victory for Koo in the video wars.

Some background Demand for online video is grow - ing quickly in China, where young Victor Koo’s Youku has merged with main rival people prefer the fare on offer on - line to broadcast television. That is Also increasing is the cost of con - funded web giants like Baidu and also one of the explanations for tent. Unlike YouTube, which relies Sohu into the online video market. why Chinese internet users spend on user-generated material, Youku According to research firm twice as long on online video than and Tudou either buy or produce Analysys International, Youku ac - netizens in other countries . the majority of their own content. counted for about 22% of online Advertisers follow accordingly. In And it has been getting more ex - video advertising revenue in the the last quarter, Youku’s revenue pensive, often due to the wider fourth quarter of last year, while rose 103% to $49.1 million. Tudou’s group of competing sites bidding Tudou had a 14% share. But Sohu went up 70% to $26.5 million. up programme prices. Youku, for and Baidu were closing in with 13% Although revenues have been instance, saw its content costs tre - and 6.9% respectively. growing, costs have been rising ble last year, to Rmb243 million As the new challengers grab P h o t o faster. The biggest drain is band - ($38.5 million). share, the rivalry between Youku

S o u r c width, for which the online video and Tudou became more acrimo - e :

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a companies pay China Telecom and More competition nious. The two have been locked in a g i n e

C China Unicom, the state-owned Youku and Tudou have also had to legal battle over copyright issues, h i n a fixed-line telecoms operators. respond to the entrance of better- both accusing the other of improper 11 Week in China Chinese Models 23 March 2012

Writing on the wall? Merger leaves Wang’s Tudou as junior partner

use of exclusive material. Just last better: in the same period revenues trading below its offering price. month there were reports that rose 103% while operating expenses All of this matters to the final out - Youku had filed a fresh lawsuit went up by 108%. come, which is an all-share deal. against Tudou, again alleging copy - When the time came for deal ne - right infringement. gotiations, Youku would have been a Pros and cons With profitability still elusive, little less desperate. Presumably, both sides will call a consolidation was an obvious next Timing also worked in Youku’s halt to their legal squabbles, ending step. In fact, there was speculation favour when it beat Tudou to become their distracting dispute. last spring that Youku might acquire the first Chinese video website to be Joining forces should also help Tudou although nothing materi - listed in the US, raising $203 million. the two to reduce costs and increase alised, says 21CN Business Herald. Investors were excited: after the IPO advertising prices. Analysts also speculated that it was in December 2010, Youku’s market Youku’s Hong Kong-born Koo only a matter of time before Tudou value shot up to $60 a share, the best told analysts that the new entity will became a target for a deeper-pock - first-day performance for a US-listed have “the most comprehensive con - eted rivals like Tencent and Baidu. IPO since 2005 (somewhat less eu - tent library, the most advanced phorically, it now trades below $25). bandwidth and the strongest mon - Youku outmuscles Tudou Tudou’s road to IPO was far from etisation capability in the sector”. As both companies look similar, smooth. Although it eventually Indeed, in terms of the range of why does Youku seem to have listed in August last year, the deal drama, film and sports content that emerged as the senior partner in the was delayed for a crucial period by a the pair now offer, it is probably bet - deal? Probably because it was the lawsuit filed by the former wife of ter to think of the duo as China’s better financed of the two. Youku’s leading shareholder Gary Wang. largest on-demand TV station. cash and cash equivalents stood at The final timing meant the Tu - Being able to bid together for new $586.8 million as of the end of last dou IPO wasn’t met with the same content from Hollywood or sports year, compared with $138.5 million enthusiasm that greeted Youku’s, rights will be beneficial too. at Tudou. Of the two firms, Tudou and it raised much less at $174 mil - Koo also says the new combina - was also struggling more to control lion. Share price performance since tion has the largest user base. The P h o t o its operating costs, which were es - has been weaker, too. Unlike Youku, numbers are big. In December

S o u r c calating. Revenues were up 70% in Tudou’s stock was down from its Youku had 263 million unique visi - e :

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a its most recent results, but costs in - IPO price the first day it started trad - tors, reports the Wall Street Journal. g i n e

C creased by 119%. For Youku, ex - ing. When the news of the merger In the same month, iResearch h i n a penses were being managed a little was announced the site was still thought that Tudou had 227 million. 12 Week in China Chinese Models 23 March 2012

Tudou has also said that 5.2 billion The two companies also know pay rises, with speculation that videos were watched on its site in that profitability looks unlikely for there was minimal consultation December alone – double the figure the foreseeable future. with Koo before he made his com - for the previous year. mitment. Insiders say Wang’s move Despite its scale, the new combi - What’s next? was designed to show his new boss nation is not going to dominate the For the time being, the merger is that he was still in control at Tudou, sector. “After this merger there are mostly taking place at boardroom despite the takeover (for a profile of still too many players in the indus - level. The two sites will continue to Wang, who has climbed Mount Ever - try,” Michael Clendenin, managing function as separate entities est, see WiC84). director of Shanghai-based RedTech (Youku.com and Tudou.com will ex - If true, it doesn’t sound like an Advisors, told Reuters. “These are ist as they are, both under separate auspicious beginning for the newly- not small, insignificant players. So URLs). merged firm. Doug Young, author even though this is a step in the That means a series of compet - of China Business Blog, says an im - right direction in terms of consoli - ing or overlapping interests, espe - mediate priority for Koo is to decide dation, there’s still a long way to go.” cially in the licenced TV and movie how to rein in Wang. “The compa - Bill Bishop, an independent ana - content that the two sites have al - nies didn’t say how much of a role, if lyst based in Beijing, agrees that the ready purchased. any, Wang will play at the new com - deal may not be the game-changer Despite this, the two companies pany. But I suspect he may try to that some believe: “This creates say the merger will help save up to stay and run Tudou as his own fief - China’s biggest video site, but it $60 million a year in costs. dom, which could cause problems doesn’t create a YouTube – they still Will more savings be possible? over the longer term,” he warned. have less than a 50% market share.” Reportedly, the Tudou chief execu - Then again, the merged entity’s (Google-owned YouTube has an es - tive, has already told his own staff new name – Youku Tudou – proba - timated 800 million unique users that there won’t be any layoffs. More bly suggests Koo is in the driving per month.) than that, Wang has promised them seat. I

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13 Week in China Society and Culture 23 March 2012

Basket case Attendances are up at Chinese basketball games, but so too are riots

iC has covered the wave of W‘Linsanity’ hitting the NBA in recent weeks, thanks to the explo - sive performances of point guard, Jeremy Lin. Over in China, the domestic bas - ketball league seems to be suffering from a plain old bout of madness – or at least some pretty unrelenting fury, as far as the Shanxi Brave Drag - ons are concerned. The flashpoint came during the recent semi-final between the Drag - ons and the Beijing Ducks. The best- of-five series turned ugly in match four at Shanxi’s home stadium in Taiyuan, in what Dalian Evening News calls “the longest, most serious fan disturbance this season”. The chaos began 54 seconds from Duck eyes Dragon, warily the end of the game, when Beijing was awarded a crucial free throw. a Shanxi fan that Beijing’s star vailed 110 to 98, reaching the final In an extraordinary move, player, Stephon Marbury had against defending champions Shanxi’s owner then rushed onto pushed him over as he left the sta - Guangdong Southern Tigers. the court to berate the ref heat - dium (a claim Marbury later re - But the riot in Taiyuan has left edly. This stirred the already futed). a black mark on the season. Just as volatile home fans who began to “Marbury should come out to with Chinese soccer, it mars the pelt the Beijing players with ciga - apologise,” the Shanxi fans image of professional sports in the rette lighters, bottles and other as - screamed at the Ducks players, who country. sorted debris. were cowering inside. Shanxi’s owner Wang Xingjiang When the match restarted five Such was the situation that one – a steel magnate – was unrepentant minutes later, Beijing converted its Beijing player posted a cry for help about his own role in the fracas, and free throw penalty, winning 102 to online. “They’ve besieged the bus, also objected to the Rmb60,000 100, and tying the series two thrown stones, yelled non-stop, beat fine received by the Dragons for the games each. the players… half an hour after the bad behaviour of their fans. But the Ducks did not antici - end of the game we are still sur - “We will certainly not give in to pate that a “larger storm” was rounded,” he wrote on Sina Weibo, this punishment and will appeal,” waiting for them, notes the Dalian China’s local Twitter-equivalent. Wang said. “We should blame the Evening News. After nearly an hour, police rein - referee and he should bear the con - P h o t o The departing Ducks soon found forcements arrived and the Beijing sequences.”

S o u r c their team bus surrounded by a team was able to drive away from According to the Legal Evening e :

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a mob of angry fans, who shouted the stadium. News, the Brave Dragons have been g i n e

C abuse and threw rocks. The crowd’s In the last game of the series – the definitive bad boys of the sea - h i n a ire was made worse by a claim from held on Sunday – the Ducks pre - son. Out of 12 teams censured this 14 Week in China Society and Culture 23 March 2012

“We want Marbury”: Shanxi’s fans surround the Beijing Ducks’ coach, preventing it from leaving

year, a quarter of the fines were in - advertising deals, the clubs have not the country. Protest leader and re - curred by Shanxi. The newspaper been able to find enough alternative spected elder, Lin Zulian, was elected also thinks the team has got away revenue sources to break even. village chief by a landslide 6,205 of with a “light fine” this time, espe - That means that the teams rely 6,800 votes (there are 8,000 regis - cially as it “interrupted a game and on deep-pocketed owners like the tered voters in the village.) attacked a visiting team”. fiery Wang Xingjiang for their sur - In contrast, just 1,200 people will The basketball editor of Sports vival. vote for Hong Kong’s new Chief Ex - Weekly, Yang Yi, agrees the fine was Of course, that’s not unlike most ecutive on March 25. too “soft” and won’t discourage of the clubs in the top European soc - iSun Affairs, a Chinese language Shanxi or others from similar ex - cer leagues. magazine, drew up a detailed info - ploits in future. There’s one difference, though: graphic comparing the two situa - But while tougher action might neither Chelsea’s Roman tions, and contrasting billionaire have been wiser in the long run, Abramovich or Manchester City’s voters of Hong Kong like Li Ka- stiffer financial penalties could Mansour bin Zayd Al Nahyan has shing and Lee Shau-kee with prove devastating for many of the stormed onto the pitch to remon - Zhuang Songkun and Zhang teams in the CBA (Chinese Basket - strate with match officials. Bingcha, fisherman and farmer re - ball Association). At least, they haven’t done so yet... spectively in Wukan. That’s because, as the Nanjing It’s an ironic situation. Why have Daily reports, all the clubs are suf - the authorities allowed in Wukan fering financial losses. The newspa - what is not yet permitted in Hong per reckons every team lost at least Kong – an election based on much Rmb10 million this season. The Wukan way wider, local suffrage? The problem? The clubs have An election in a Chinese village Some believe that Wukan shows spent huge sums to bring in talent symbolises much more that sections of the Chinese leader - from America’s NBA to jazz up the ship, particularly the more politi - league, signing stars like Beijing’s ong Kong wonders if it will one cally open-minded southerners led Marbury. Rmb645 million has been Hday be eclipsed economically by Guangdong party boss Wang spent on players versus just by neighbouring cities in mainland Yang, is ready to experiment with Rmb100 million five years ago. China. But has the enclave of 7 mil - real, albeit local, democracy. While attendances have also risen lion just been outpaced politically As Lin, the new village chief who – stadiums on average are now more by a fishing village of 10,000 across must now sort out a host of messy P h o t o than three quarters full – the larger the border? land disputes, said to Century

S o u r c crowds and higher ticket prices have The elections on March 3 in Weekly magazine: “Different voices e :

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a not been enough to offset the big Wukan, after months of violent are good, not harmful for us, be - g i n e

C increase in costs. Nanjing Daily says protest at illegal land grabs and cor - cause they’re like a mirror from h i n a that, in spite of sponsorships and ruption, have stirred debate around which we can learn a lot.” Century 15 Week in China Society and Culture 23 March 2012

Weekly then wrote: “From this elec - tion, we can see the democratic elec - tion of ‘one man, one vote’ does not exacerbate village opposition, but in large part defuses social anger, eases social conflicts and expresses villagers’ will.” The People’s Daily, the Commu - nist Party mouthpiece, was a little more guarded, saying, “In Wukan, the initial mistake of the local gov - ernment was their failure to address the villagers’ reasonable demands and interests, so that a rational pe - tition escalated into drastic action.” In other words – this was a mess that should never have been allowed to happen in the first place. Hardly an enthusiastic endorse - ment of the electoral process... Yet the days when the People’s Daily sets the media agenda are drawing to an end. Others also seem keener to embrace a more open vot - Dude, I’m worth every penny: Nicholas Tse ing process, seeing signs of hope for more elections in the future. Interviewed by Phoenix TV, Wang blog to complain about the low pay. After all, last week premier Wen Yang himself was careful not to get “Based upon the television audi - Jiabao told the closing news con - swept up in the enthusiastic public ence ratings data, the most conser - ference of the National People’s mood. Wukan was “no innovation,” vative estimate is that over 30 mil - Congress that the country needed but merely “a very solid job in im - lion people tuned in to watch to continue political reforms if it plementation,” he suggested, amid a Struggle . And the last I checked, I was not to stagnate. Society had tense political scene ahead of this earned Rmb800,000 from the show. grown too complex to be run the year’s leadership change. I can do the math: on average each way that it always had been run, But others are wondering where audience member paid me only 3 fen Wen suggested. else local elections might now be (half of an American penny),” Shi “Chinese people are qualified to permitted. That includes in Hong vented in his blog. “So I am de - engage in democracy,” asserted the Kong, where there has been talk of pressed: at 3 fen per person, I worry headline in the China Youth Daily, a universal suffrage for the next about how many people I need to mouthpiece of the Communist elections for Chief Executive, set reach in order to get a full meal.” Youth League (and a power base for for 2017. It’s not the first time Chinese President Hu Jintao) subsequent to scriptwriters have demanded better the Wukan election. compensation. In other countries, “Farmers at the lowest level of so - salaries for scriptwriters generally ciety and with the lowest cultural account for about 20% of the total level have been paying attention to Off script investment in a TV or movie pro - the details of democracy,” mar - Chinese screenwriters have a duction, reckons Yangzhou Evening velled one netizen, cited by the new line: ‘show me the money’ New . In China, this figure is 5% at newspaper. The Youth Daily con - most, and often much lower. P h o t o cluded: “This shows that the Chi - hen Shi Kong, a screenwriter, Actors’ salaries, on the other

S o u r c nese people are qualified to engage received the cheque for his hand, make up the majority of pro - e W :

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a in democracy and those who ques - script Struggle , which became one duction costs. Popular stars can g i n e

C tion the democratic quality of the of China’s most popular TV drama take more than 80% of the total h i n a people can shut up.” series (see WiC18), he took to his budget. Take singer-actor Nicholas 16 Week in China Society and Culture 23 March 2012

Tse (our Red Star in issue 114). Last more junior writers are likely to re - talking about art and boasting that week the newspaper says he ceive only 10% in advance and the they can make an unsurpassed tele - charged Rmb300,000 for each residual amount only after the film vision drama series. The worst thing episode of a TV series, while the has been shot. is that they have little or no under - scriptwriter received Rmb200,000 They are also at the mercy of cen - standing of art. Until they realise the for the entire project. sors. That’s because when the writer script is the most important part of Scriptwriters also complain that finishes a script, the production a story, China’s film industry has lit - more often than not, it’s a struggle company then sends it to the au - tle hope.” to receive what they are owed. Most thorities for review. If the script writers do get an upfront payment does not receive an official ap - for their work but the amount varies proval, the scriptwriter will not be dramatically. Those on good terms paid the remaining balance, says with their producers receive as Beijing Review. Unpopular law much as half their fee upfront. But “This is no way to make a living,” A new detention law is a step Wang Xiaojun, another scriptwriter, backwards for China told Phoenix Weekly. “Everybody Keeping track thinks that it is glorious to be in the oreign businesspeople recall film and television industry. But the Fwith a chill the case of Stern Hu, glory does not belong to the the Rio Tinto employee imprisoned scriptwriter. The actors and ac - in China (see WiC24) for stealing tresses make the most amount of “state secrets”. He’s still in jail today. money, followed by the director… But events last week may have For us, this is a lot of work which made them a little more nervous. gets no appreciation.” That’s because of changes made to So perhaps it shouldn’t come as a the Criminal Procedure Law. The con - surprise that audiences are com - troversial measure was passed by the plaining about the lack of creativity 2,978 delegates at China’s parlia - on screen. ment, the National People’s Congress According to a survey conducted (NPC), with only 160 voting against. by the China Youth Daily, 74% of re - The authorities haven’t seen the spondents said the quality of TV need to explain why the revisions shows and films is deteriorating; to the pre-existing legislation were and 47% thought that was down to required. not enough good scriptwriting. But according to the New York Indeed, as Robert Cain, has ar - Times, the final amendments were gued in his blog chinafilmbiz, one actually a slight improvement on the of the reasons Chinese films fail to draft bill that was published last Sep - Readers will recall that we featured the compete against Hollywood pro - tember and which received more online sensation of ‘Baidu lady’ in ductions is the quality of story - than 80,000 comments during its WiC135, an employee of the internet telling. “You have so many brilliant consultation period. search engine firm who went viral on artists and writers in China, “ Cain The draft version included what weibo after footage appeared of a company fashion show. writes. “Please stop locking them was soon being nicknamed the Netizens thought the woman looked up. Try investing in them instead. ‘disappearance clause’, giving se - like Taiwanese film star and model Lin Let one hundred flowers bloom, curity officials apparent carte Chi-ling, and almost overnight she and don’t cut them down when blanche to hold suspects in secret amassed 300,000 followers on her they do. Good movies need good for up to six months. microblog. She now looks to be cashing in on her 15 minutes of internet fame. The stories and creative thinking.” The final bill that was voted 23 year-old Liu Dong has released her Wang Xiaojun also argues that through last Wednesday was soft - debut song. According to website Tech in producers, directors and investors ened a little. Families now have to be Asia, Liu hasn’t quit her day job at Baidu P need to understand that scriptwrit - informed within 24 hours of a rela - h o t but clearly hopes to be a songstress. She o

S ers are more than wordsmiths. tive’s detention (although they do o u penned the lyrics to the track herself. r c e

: “I attend meetings with investors not have the right to know where It’s called Angry Birds… B B S all day,” Wang laments. “They keep the detainee is being held). 17 Week in China Society and Culture 23 March 2012

The definition of who can be de - 1 and March 11, the press had pub - Shanghai lawyer Zhong Jinhua tained under the new legislation has lished no fewer than 1,108 articles has also written on his weib o that also been narrowed. on the new legislation. the new legislation marks a step Comments CNN: “Under the Xue Manzi, an investor, then used backwards for the rule of law in changes to the Criminal Procedure his Sina Weibo to poll readers on China. Certainly it further distances Law the police will have the authority whether the NPC should approve the China from the English legal princi - to hold suspects for up to six months new law. Of the 10,000 or so who ple of habeas corpus, which has of - at undisclosed locations if they be - voted, 93% thought the controver - fered historical safeguards against lieve them to be involved in endan - sial changes should be “postponed”. unlawful detention. gering national security, terrorism or Even in its toned-down version, The British constitutional histo - particularly serious bribery.” the law offers broad scope for abuse. rian AV Dicey – who popularised the Within China itself, many experts say critics. phrase ‘rule of law’ in the nine - have opposed the new law. Perhaps For instance, Cheng Lei, an as - teenth century – considered habeas most outspoken has been the well- sociate professor of law at Renmin corpus as the backbone of English known criminal defence lawyer University, notes that terrorist ac - life. It was worth “a hundred consti - Chen Youxi, who wrote on his weibo : tivities can be “relatively difficult tutional articles guaranteeing indi - “Those who support this bastard leg - to define”. vidual liberty,” Dicey wrote. islation – no matter how much Likewise, activities classified as In case you’re wondering, Article power they have – will suffer, as will potential threats to national secu - 35 of the 1982 Chinese constitution their descendants.” rity are also rather vaguely drawn. proclaims a few safeguards of its The 21CN Business Herald agreed The fear is that this gives the au - own, including that “citizens enjoy that the Criminal Procedure Law thorities plenty of wiggle-room to freedom of speech, of the press, of had prompted an unusually “heated lock up suspects of their choosing assembly, of association, of proces - debate”, noting that between March for months at a time. sion, and of demonstration.” I

FAST FOOD: For over five millennia, food has been at the heart of Chinese culture. We profile a popular dish: Moo Shu Pork

What is it? In fact, wood moustache meat is Moo shu pork is a dish of northern one of a number of dishes now getting Chinese origin. In the northern provinces a makeover. A new book, The English meat and vegetable dishes are Translation of Chinese Gourmet Dishes, commonly served with steamed bread or has recently provided updated English pancakes instead of rice. Moo shu pork names for more than 2,000 Chinese is also typically served rolled in dishes. Off the menu is ‘Chicken mandarin pancakes (almost like a taco) Without Sex’ (now called Spring with a smattering of hoisin sauce. Chicken), while ‘Four Glad Meat Balls’ The recipe varies. Usually the dish is has become Braised Pork Balls in made with sliced or shredded pork and Gravy. ‘Red Burned Lion Head Braised scrambled eggs, thinly sliced wood ear Pork Balls’ (see Fast Food in issue 12) mushrooms (black fungus), Chinese has been renamed Braised Pork Ball in cabbage and sliced bamboo shoot. The Brown Sauce. ingredients are stir-fried in soy sauce, sugar, cooking wine and sesame oil. Where to eat it? Wu Fu Lou is a popular eatery in Beijing Wood Moustache Meat? that serves moo shu . While you are Expats in China may recognise moo shu there, try the Peking Duck as well. pork as “wood moustache meat,” which Address: 95 Ling Jing Hutong, Xidan is the literal translation that has oftened Street North, Xi Cheng District, Beijing appeared on Chinese menus in the past. (Tel: 86-10-6606-1652).

18 Week in China And Finally 23 March 2012

Up periscope! Unemployed worker enters submarine business

ou have to admire the irre - It also means that – in his sales Ypressible spirit of China’s contracts – the final product has amateur inventors. to be described as a “Seabed Col - Two years ago we wrote about lection Machine”. Wu Yulu, a former farmer with a Undeterred, Zhang thinks the passion for goose-stepping ro - business can work. He says bots. Wu’s reputation spread and seafood entrepreneurs are po - he ended up exhibiting his work tential customers, with reservoir at the Shanghai Expo (WiC59). and dam operators also express - Now it is Zhang Wuyi, a 37 year- ing interest. old laid-off garment worker from Another Zhang – this one Wuhan, who is in the news – this Zhang Ming – is aiming for the time for making submarines, the sky rather than the depths with Wuhan Evening News reports. his own homemade design, a car Zhang works out of a dingy, which comes with collapsable 1980s-era workshop with a “I may be some time” wings . team of 10 others, the newspa - The latest of several amateur per reports. He says the design is According to Zhang’s first cus - aircraft manufacturers to likewise all pretty simple, and mostly a ques - tomer, fisheries entrepreneur Cong make the news, Zhang Ming re - tion of building a solid hull with a Zhijie from Dalian, the submarine cently took to the roads in Sichuan valve system to allow water to enter operates well. Zhang claims he has to try to get airborne. and exit the craft, ensuring that the three other customers lined up and Unfortunately his design didn’t sub can submerge and surface. has received more than a hundred take off as hoped, despite vocal en - Add a functioning steering further enquiries. couragement from a large crowd, mechanism and fins, and his craft Unfortunately, larger-scale pro - the West China City Daily reports. is – more or less – ready for launch. duction looks like being a chal - “The plane only moved at 10 His submarines are now being lenge. Zhang complains that he is miles an hour,” Zhang said. “It’s sold for about Rmb200,000 struggling to find investors to back clear that the engine is not power - ($31,600), with customers putting his fledgling business because ful enough.” Citing safety concerns, up deposits of Rmb20,000 and China lacks technical standards for police then stepped in to stop the paying the balance on delivery. private submarine manufacturers. test flight. I

Crunch time P h o t o

S o u r c e :

I m a

g “China has reached a crucial period in changing its economic model and change cannot be delayed. i n e

C Reforms have entered a tough stage” h i n a

&

R e Vice-Premier Li Keqiang makes the case for bold economic reforms Li Keqiang u t e r s

19 Week in China The Back Page 23 March 2012

Photo of the Week In Numbers 700 The number of computer component suppliers in Chongqing. They are by lower wages and a lower tax rate, says Acer chairman and chief executive JT Wang. He plans to meet local political leaders “to better understand the situation” now that Bo Xilai is no longer running Chongqing.

P $34 billion h o t o

The amount spent on construction of S o u r

c Beijing-Shanghai high speed line, says the e :

R

e National Audit Office. The agency claimed u t e r s there had been, however, “tens of billions

of yuan” in wasted spending. Unusually for March, there was heavy snowfall in Beijing last Saturday

24.3% Samsung’s share of the smartphone market in China, rendering it the most Where is it? popular smartphone maker in the country. Some of the places referred to in this issue The South Korean manufacturer trumped Apple, which has 7.5% share, according to Gartner. Inner Mongolia Beijing

Shanxi 30 million China The number of water purifiers sold in China Shanghai last year, of which 20 million were purchased for home (as opposed to office) Jiangxi use. The industry now enjoys sales revenue Guizhou Fujian of Rmb30 billion ($4.8 billion), according to Guangdong data from the China Water Purification Hong Kong Association.

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