1 Talking Point 5 The Week in 60 Seconds 6 Media Week in China 7 Energy and Resources 8 Economy 9 Banking and Finance 11 Internet and Tech 13 China and the World 27 April 2012 14 China Consumer 15 Society and Culture Issue 147 17 And Finally www.weekinchina.com 18 The Back Page Don’t cry for me, Sinopec www.benitaepstein.com

Memories of Evita? Argentina nationalises YPF and Beijing dodges a $15 billion bullet

Brought to you by and Markets HSBC Global Banking Week in China Talking Point 27 April 2012

Last tango in Beijing? As Argentina seizes control of YPF, China avoids an M&A catastrophe

“ o one in their right minds” will Nwant to invest in Argentina now, warned Felipe Calderón, Mex - ico’s president, after Buenos Aires nationalised YPF earlier this month. One reason for his fury: Mexico’s state oil giant Pemex holds a stake in Spanish energy firm Repsol, YPF’s erstwhile owner. But Calderón might need a gentle reminder that Mexico was one of the first to nationalise its own oil sector, grabbing assets from the US and the British to form Pemex in 1938. The US ambassador at the time predicted a buyer boycott and that the Mexicans “would be drowned in their own oil”. But a re - taliatory blockade failed with the onset of the Second World War and the nationalisation is now remem - Thanks goodness we didn’t buy: China’s Wen with Argentina's Kirchner bered fondly enough in Mexico, with a civic holiday. tration may not even have been of its commodities. aware that Repsol was close to sell - Last year, Sinopec made its first How about in Argentina today? ing to Sinopec. Caixin magazine re - foray into Argentina, buying Occi - This time it’s less about the British vealed “late-stage” discussions only dental Petroleum’s assets for $2.5 and Americans than the Spanish and a few days ago, with the rumour billion. Local policymakers were the Chinese. Prior to seeing YPF na - that Sinopec had signed a non-bind - complimentary. “The vision that tionalised, Chinese oil major Sinopec ing deal to buy YPF for $15 billion. the Chinese have is to go forward was reportedly on the verge of buy - But the Repsol may have held off on without worrying too much...the big ing the company from Repsol. Now presenting the terms to the Argen - North American, British and Span - the situation is unclear. tine government. ish energy firms are more selective Speculation about the timing of about where they invest in the How is Sinopec involved? the nationalisation nevertheless world,” former energy secretary The more cynical types sniff an Ar - still abounds. Another take on how Emilio Apud explained to Reuters. gentine plot to grab YPF and sell events played out: did President But whether Sinopec would have Repsol’s former stake to Beijing. Af - Cristina Fernández de Kirchner been more cautious had it grasped ter all, unlike Repsol, the invest - hurry it through to avoid having to that full nationalisation was on the ment-crazy Chinese would surely seize an asset from the Chinese policy agenda is an unknown. Chi - put their cash into opening new oil themselves? nese companies have grown more P h o t

o fields, as Buenos Aires had been de - It has a plausible ring to it: Kirch - sensitive to political risk as they in -

S o u r manding of the Spanish firm? ner could ill afford to alienate the vest in far-flung locations. Last c e :

R e A flaw in this analysis is the spec - Chinese, now a leading lender to Ar - year’s experience in Libya was chas - u t e r s ulation that the Kirchner adminis - gentina and a major buyer of many tening, for instance, with the rebel 1 Week in China Talking Point 27 April 2012

government threatening to pe - nalise Chinese companies for Bei - jing’s apparently pro-Gaddafi stance in the early days of the revolt. Back to Argentina, and any in - vestment in YPF looks increasingly problematic. Repsol has already warned that it will take legal action against anyone attempting to invest in the nationalised firm. It is also Sinopec’s leading partner in Latin America, following the sale of 40% of its Brazilian arm to the Chinese for $7.1 billion in 2010. Relations would surely take a turn for the worse if Sinopec looked to be profit - ing from Repsol’s Argentine debacle. Best Local Currency Bond House Best Trade Finance Bank But won’t Argentina be keen on some kind of deal? Perhaps: although it looks politically awkward for Kirchner to sell a chunk of YPF back to a foreign firm so soon after taking control of the company on national interest grounds. “Our model is one of recovering Most Innovative Team of the Most Innovative Investment sovereignty,” Argentina’s president Year – Sovereign Advisory Bank for Sovereign Advisory told reporters this month, although her administration has been careful to add that it doesn’t necessarily in - tend to run YPF as a purely state- owned entity. Planning Minister Julio De Vido was sent out on a tour of foreign oil firms last week, partly as a reassurance mission but also to Best Arranger of Loans for tempt potential partners, said Ar - Corporations/Financial Best Arranger of Loans Institutions gentine media. As of last weekend, there had been no dialogue with Sinopec. “But that doesn’t mean that we won’t have contacts in future,” De Vido explained.

The other obstacles to Sinopec’s fu - ture involvement? Best Bank for FX China’s domestic media have been Best Bank for FX Forwards Structured Products talking up the common ground in Sino-Argentine relations. After all, both nations are developing coun - tries, says China Securities Journal, and both like to find ‘government’ HSBC operates in various jurisdictions through its affiliates, including, but not limited to, HSBC Bank plc, authorised and regulated by the Financial solutions to problems. Services Authority, The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (USA) Inc., member of NYSE, FINRA and SIPC, and HSBC Bank USA, NA. 12-027 But that ignores the usual Chi - 2 Week in China Talking Point 27 April 2012

nese motivation for investing in overseas oil: to secure crude for ex - port (sometimes to be sent back to Planet China China itself). Strange but true stories from the new China That seems to fly in the face of statements coming out of Buenos HOT AIR? As the 12th Beijing Auto Show Aires about using YPF to secure self- kicks off this week, a record 1,125 sufficiency in oil. That might also be vehicles will be on display from a factor in why Brazil has been more carmakers. But one model that won’t be of a focus for China’s oil invest - in the exhibition hall is made by Tang Zhenping, a farmer from the suburbs of ments than Argentina to date. Beijing. According to the Beijing Evening Alongside the Repsol tie-up, News he has built a wind-powered sports Sinopec has paid $3.54 billion to car capable of travelling at 140km per Portugal’s Gaip Energia for a 30% hour. The inventor says he spent stake in another deep-sea project Rmb10,000 and laboured for three months to come up with his homemade off the Brazilian coast. design. Tang follows in a long-line of rural inventors that are building Nor is there any guarantee that a everything from robots (see WiC59) to submarines (see WiC147). His wind- bid for YPF would go through any - powered vehicle comes with a battery too, although Tang says he ran out of way, says the Financial Times. It ex - money to add a roof. If he can gather more capital, Tang’s next priority is to hibits CNOOC’s failure to secure add two solar panels to the back, to complement the car’s green BP’s stake in Argentina’s second- credentials. The inventor says that he hopes a car firm takes an interest and largest oil producer, Pan American upgrades his idea. Time to move over, Elon Musk perhaps… Energy, as evidence. The bid for Pan American, made by Bridas Corp, a venture co-owned target of Sinopec’s, not least be - for oil-backed financing. An earlier by CNOOC, broke down in Novem - cause China is thought to possess $10 billion loan was offered as a ber last year. Recriminations swiftly rich reserves itself. credit line for railway investment, followed, with BP suggesting that “Shale gas and shale oil are very to cover payments to Chinese com - CNOOC had failed to secure the req - critical resources for China’s fu - panies (see WiC70). uisite regulatory approvals. ture,” Fu Chengyu, Sinopec’s chief Inevitably, Chinese financial as - CNOOC has since blamed BP for executive, told reporters in March. sistance looks critical for countries the deal’s collapse. But the deci - “Unconventional gas will be a key struggling to access the global mar - sion to pull back also came less investment area for Sinopec and a kets. That’s a particular issue for Ar - than two weeks after Kirchner had critical area for us for production gentina, Ecuador and Venezuela: all ordered energy and mining com - [in the long term].” three of whom face interest rate panies to repatriate export rev - Still, given the commercial sensi - spreads well above those of similar- enue, in a bid to slow capital flight tivities surrounding foreign share - sized Latin American economies. from South America’s second- holdings, Beijing might choose to By comparison, Chinese terms biggest economy. rely more on a loans-for-oil policy as on Argentina’s $10 billion borrow - an alternative to direct investment ing seem to have been less onerous: Is Beijing more likely to become in Argentina. China Development Bank charged Argentina’s lender of last resort? This tallies with a recent report 600 basis points over Libor, well Against this more negative outlook, from Inter-American Dialogue, a below the 935 basis point spread on there is also plenty of excitement Washington-based think tank, Argentine sovereign debt. that Argentina could be home to which highlights how China’s policy The common refrain has been massive hydrocarbon resources. banks have provided $75 billion of that China will then extract its pound That’s especially true of its Vaca loans to Latin America since 2005. of commercial flesh elsewhere, espe - Muerta shale field, potentially the Venezuela, Brazil, Argentina and cially by locking in a crude oil supply P h o t o world’s third-largest. Ecuador have secured 91% of the at long-term discounts.

S o u r c The investment required to ex - funds on offer, with China Develop - But the Inter-American Dialogue e :

I m

a tract large volumes of shale oil will ment Bank and China Exim Bank report could find little evidence of g i n e

C also be huge, of course. But fortu - serving up the majority of loans. this happening in practice. When a h i n a

itously, the shale sector has been a So far Argentina hasn’t signed up bank like CDB commits capital, yes, 3 Week in China Talking Point 27 April 2012

the recipient of the loan pledges to Caps on prices hurt most when closely. New rules have been intro - export hundreds of thousands of the international oil price spikes, duced allowing tariffs to be adjusted barrels of oil a day. But China isn’t agree HSBC’s Paul Spedding and when the 22-day moving average of getting its crude on the cheap, as Kevin Lian, in a research piece pub - crude increases by more than 4% on the contracts usually stipulate that lished last month that identifies a its previous price move. Prices were market prices are paid for the oil. decade of declining margins for the raised on March 20 by 8% after the Chinese oil majors. average climbed more than 10%, Why else might Sinopec be cau - WiC has written too about grip - HSBC notes. tious? ing from Sinopec and its peers on But China’s oil majors are still Before grabbing back YPF, Argentina the domestic pricing regime, in - dissatisfied and grumble that the blamed Repsol for allowing the cluding high-profile disputes with increases aren’t being enforced as company’s oil production to fall by the NDRC – China’s top economic fully as the rules require. more than a fifth in the decade to planning agency – on how best to Despite this, HSBC thinks more 2010. But the Spanish firm has calculate refining losses due to petrol price hikes are unlikely until countered that the real reason for price-capping (WiC132), as well as Beijing feels it has fully conquered the decline is political, with price the persistent efforts of Sinopec the nation’s inflation problem. Pol - caps and export taxes making fur - bosses to influence the public de - icymakers are more likely to act ther investment uneconomic. bate on why fuel prices should be al - too when international oil prices Of course, the irony here is that lowed to rise (WiC96). are lower. Sinopec faces something similar in Sinopec continues to argue that Fresh from this frustrating expe - China, where the price of petrol is domestic fuel prices are unsustain - rience with price controls at home, also capped. That’s even been a fac - ably low, especially as the pricing it’s all the more puzzling why tor in its push to move upstream, as mechanism was introduced at the Sinopec was interested in buying well as into international markets. end of 2008 when crude had YPF at all. The Argentine govern - The impact of the caps became dropped to below $40 per barrel. Oil ment after all sets a $42-per-barrel evident again in March when prices remain above $120 today. cap on the price of crude sold to its Sinopec executives reported an In response the NDRC has said own refineries. That makes it tough Rmb35.8 billion ($5.7 billion) annual that the current scheme is moving for YPF to make money. loss in its domestic refining opera - towards a set up in which gasoline Kirchner may in fact have done tions (although overall net profit and diesel prices track the price of Sinopec’s shareholders a favour by was still up 1.4% to Rmb71.7 billion). international crude much more derailing its acquisition. I

Mayors go for Mandarin

With the London’s mayoral election looking tight, the two main candidates have both opened Sina Weibo accounts to try to connect with the city’s sizeable Chinese community. The current mayor, Boris Johnson was the first to get in on the act opening his account on April 12. But his habit of simply reposting English messages from his Twitter account grated with many. One weibo user summed up the general mood when he wrote, “Go home if you can’t write in Chinese”. Similar criticism has been levelled at Ken Livingstone, the challenger, who joined weibo on April 22, although at I l l u s t r least he was astute enough to post one of his first mes - A Mandarin-speaker, one of Rudd’s first posts was a a t i o n : sages in Chinese. confessional about how many Chinese characters he had w w w . b But if either men want a lesson in how to do it right then forgotten. Other personal and self-deprecating com - e n i t a e they should take a look at the new weibo page of former ments have already gained Rudd more than 130,000 fol - p s t e i n Australian Prime Minister Kevin Rudd. lowers and counting. . c o m

4 Week in China The Week in 60 Seconds 27 April 2012

Apple’s big slice of China The major news items from China this week were...

The Greater China region (including Hong Kong and 1Taiwan) accounted for a whopping $7.9 billion of Apple’s sales for the quarter, or a fifth of its $39.2 bil - lion in revenue. That surge came largely on the back of a fourfold jump in iPhone sales. Buoyed by the strong results, Apple’s stock went up almost 9% to $610 per share on Wednesday.

Baidu, which also announced its results this week, of - 2fered a different story. Even though the company said profit and revenue both grew about 75% in the quar - ter on the previous year, investors weren’t impressed, sending shares down 10% in after-hours trading. Rev - Ten-gallon hat diplomacy: South Sudan’s Salva Kiir enue growth had actually slowed from the previous quarter’s 82.5% gain. out to General Mills for a stake in French yogurt maker Yoplait last year. It was also outbid by Wilmar Premier Wen Jiabao has been in Europe this week. He for CSR’s sugar unit, Australia’s largest producer in 3largely steered clear of direct commentary on Eu - 2010. Reports suggest a Weetabix deal would be worth rope’s debt crisis as he toured the region. But Wen did around £1 billion ($1.6 billion). highlight longstanding trade concerns in a subtle re - minder of what Beijing wants in return for helping to China pressed South Sudan and neighbouring Sudan bail out the eurozone. He reminded his hosts that China 5to exercise restraint after South Sudan accused Khar - expects Europe to grant it the status of a full market toum of attacking villages, oil wells and troops on its economy, lift a ban on weapon sales and ease curbs on side of the border. Khartoum said it was only attacking high-tech exports to the country. rebels on its own territory. South Sudan’s president Salva Kiir Mayardit (see photo) was in Beijng this week, on a Private equity firm Lion Capital is exploring the visit to secure financing for an oil pipeline that his gov - 4sale of UK cereal maker Weetabix to China’s ernment would like to build through Kenya to a port on Bright Food, the Sunday Times reported this week. the Indian Ocean. One of China’s largest food conglomerates and backed by the Shanghai government, Bright Food lost Chinese car buyers flocked to the Beijing Interna - 6tional Automotive Show this week to catch a glimpse of the latest car models. The annual event kicked off on Monday with a record 1,125 vehicles vying for attention, making the Beijing event the world’s biggest auto exposition. And judging from the vehicles on display, Chinese car buyers still have a thing for bling. The more garish and gothic, the more likely a car would be prominently showcased. P h o t

o In one of the more unusual student newspaper

S o u r scoops, the Harvard Crimson printed a statement c e 7 :

R e from Bo Guagua. In it, the son of Bo Xilai (ex-Chongqing u t e r s Can I give you a lift? Beijing’s Auto Show opened boss) denied reports he’d driven a Ferrari. I 5 Week in China Media 27 April 2012

People watching State-owned newspaper IPO surges

ike many unlikely stories from exceeding the $950 million market Lthe media world, this one began capitalisation of the New York Times with Rupert Murdoch. (hitting a valuation of $1.53 billion). As told by Bruce Dover in Rupert Post-IPO, People.com.cn has Murdoch’s China Adventures, the about 15 large shareholders, with grizzled press baron was desperate the People’s Daily retaining almost to enter the Chinese market. 80% of the stock. Not surprisingly, Worth more than New York Times One of his strategies was to rub the buyers of the offering were up close to the People’s Daily and in mainly state-owned firms, such as ties, including mobile networks. late 1996 Dover – then Murdoch’s China Mobile, China Unicom, China The People’s Daily enjoys other top representative in China – was Telecom, Sinopec and Bank of privileges too, reports Time Weekly. tasked with demonstrating his com - China. Unlike the average institu - It can count on a willing range of pany’s online strategy to the state- tional investor, they were probably government customers (the IPO run newspaper. less fazed by the offering’s pricing, prospectus shows that the largest The Chinese bosses were partic - at 46 times earnings. procurer of information from the ularly impressed by their tour of PE ratios were probably less im - site is none other than the Ministry the New York Times website, and portant in this case than ‘taking one of Finance). And helpfully it seems they approached Dover the next for the team’. Indeed the IPO’s ‘suc - to have negotiated a holiday on cor - week, suggesting that Murdoch cess’ was surely never in doubt, as porate taxes until 2013, too. might lend them a webmaster, as the listing is being seen as a blue - Advertising is, however, the well as a $45,000 server, to build print to inspire China’s other state- main source of income. Almost their own website. related media and cultural firms. 62% of people.com.cn’s operating “I ran the concept of ‘assisting’ Beijing’s hope is that by giving revenue comes from ads. And People’s Daily with its online efforts them access to stock market capital, you’ve guessed it: many of these past Rupert and he wholeheartedly the state media will respond to prod - advertisers are state-related too, agreed,” writes Dover. “I just never ding to expand both at home and such as the rail ministry which has told him we were paying for all the abroad, perhaps even projecting a spent aggressively to promote development, and we somehow little of China’s ‘soft power’ as part of high-speed rail. managed to hide it in the books.” the bargain. Foreign firms are also clients: Courtesy of Murdoch’s money Regular perusers of People’s Time Weekly says the kudos of being and manpower, the People’s Daily Daily content may well query this the most ‘authoritative’ govern - site went live on January 1, 1997. as cloud cuckoo land, given the ment source lures top brands from Fifteen years on and Rupert may generally underwhelming reaction abroad (in 2010 Toyota spent over regret not asking for an equity to much of its material. But the Rmb8 million on advertising on the stake. When the People’s Daily website does enjoy some enviable site). Many in the local press now listed its website division – Peo - advantages. It goes without saying think the portal will set out to chal - ple.com.cn – last week the IPO gave that it gets the news first when the lenge privately-owned sites like Sina the news portal a market valuation government makes an announce - in seeking to become the ‘China Mo - of $872 million, or three times the ment. Although these scoops don’t bile’ of news websites i.e. the domi - amount first envisaged. always rank as compelling (the Al - nant platform. Not bad for what the Wall Street banian delegation greatly enjoyed The rumour is also that Xinhua, Journal had soon christened the ‘Ini - its tour of Tianjin’s tractor facility another stalwart in the state media tial Propaganda Offering’. And on its etc), they do allow for fee genera - ranks, could be next up to test the first day of trading it opened up 75%, tion in selling content to third par - stockmarket. I 6 Week in China Energy and Resources 27 April 2012

Reforms in the pipeline In a breakthrough, a private company will start importing oil from Russia

ipeline politics were top of the “At that time, Heilongjiang had Pagenda this week as South several private enterprises that Sudan President Salva Kiir Mayardit wanted to cooperate with Russian arrived in Beijing to seek Chinese oil companies, but due to political support in a dispute on an oil sup - intervention they all failed. Xinghe ply route with its neighbour Sudan. Energy was only one of them,” an Dressed resplendently in a ten- oil insider told CBN. gallon cowboy hat (apparently a gift The project was shelved and from fellow oilman George W Bush), Xinghe Energy had to wait another Salva Kiir has been proposing what eight years until it received the nec - he sees as an equally elegant solu - essary approvals. Now they have fi - tion to the current conflict: China nally arrived from five major de - pays for an alternate route for South partments including the NDRC, the Sudan’s oil through Kenya instead. Ministry of Commerce and the Min - It puts China in a spot, as estab - istry of Foreign Affairs. lishing an alternative is likely to rile Ready to pump soon... There could be more deals to fol - authorities in Sudan, a longtime ally. low, as a number of other oil firms But last year, it was an oil pipeline year as the world’s biggest listed are also planning to import Russ - closer to home making more posi - producer of oil. By comparison, the ian oil. Zhao Youshan, chairman of tive news, with the opening of a latest project involves a veritable Heilongjiang Longqiang Group, has 1,000-km-long supply line from the minnow – privately-owned Heihe said that direct access to Russian oil Russian town of Skovorodino to Menglan Xinghe Energy. is one of his own priorities, reports China's northeastern city of Daqin. Industry insiders say the move is CBN. Zhao’s oil import company, Intended to transport 15 million a significant one, as a privately- Jianghai Company, has already tonnes of crude oil annually be - owned firm is making a dent in the signed a deal with a large Russian tween 2011 to 2030, the project was state monopoly for importing oil. supplier to import 50,000 tonnes the centrepiece of a $25 billion loan Despite its small size, Xinghe En - annually, which will be sold in programme to the Russians in what ergy benefits from its location just petrol stations. Hu Jintao called a "milestone" in en - below the Amur river (known in Chi - China’s oil majors will be moni - ergy cooperation. nese as Heilong Jiang) that forms toring these developments closely, Also developed to reduce reliance the border between China and its with CNPC (the holding company on railway transport for importing Russian neighbour. But this deal has for better-known PetroChina), oil, the venture now has a rival, al - been a long time in the making. The Sinopec and CNOOC having main - beit a much smaller one. local government in Heihe City in tained a dominant position domes - This follows news of a Rmb7.8 bil - Heilongjiang province has been try - tically, in part due to preferential lion ($1.2 billion) investment in three ing for nearly a decade to promote treatment in areas like imports. Al - pipelines transporting a further five cooperation between its local oil though Xinghe Energy’s new million tonnes of oil a year between companies and counterparts over pipeline is relatively small in scale – Russia and China. the Russian border. In 2004, officials the project’s five million annual ca - There’s an important difference submitted a proposal to China’s pacity is a fraction of the 253 mil - P h o t

o as far as the newcomer is concerned: highest economic planning author - lion tonnes of crude imported last

S o u r the pipeline launched last year is op - ity, the NDRC, but it was rejected due year – it might signal that the gov - c e :

R e erated in China by PetroChina, to a preference for the involvement ernment is keener to introduce u t e r s which overtook Exxon Mobil last of larger, state-owned oil firms. more competition in the market. I 7 Week in China Economy 27 April 2012

Not guaranteed Why Shandong Helon is in the financial spotlight

ne of the heroes of Oscar-win - 14 local banks when it postponed Oning Chariots of Fire was Eric the repayment of loans totalling Liddell, the Scottish runner who Rmb920 million. won the 400m race at the 1924 Paris But it is Helon’s habit of getting Olympics. Celebrated in the film for other SOEs to guarantee its debts his speed, determination and prin - that is proving to be the biggest rev - cipled stand, L iddell later died in the elation of the debacle. Chinese city of Weifang at the hands In fact, such guarantees now of Japanese soldiers. His grave is still cover more than half of the com - there today, and is visited by those pany’s outstanding loans, with esti - who want to pay their respects to mates of guarantees exceeding one of the world’s more famous Rmb1 billion. Problematically these Olympians. parties are “not so reliable”, accord - Earlier this month the little- ing to a Helon insider quoted by known city in Shandong province Global Entrepreneur. firm could have set off a chain re - nearly earned headlines for another Amazingly, the troubled firm action that embroiled other local reason – and for another potential was even able to offer its own guar - SOEs, and caused a local financial fatality of sorts. This time a Rmb400 antees as recently as February. In panic. It seems that officials in million ($63.5 million) bond almost that month – in spite of several Weifang concluded they couldn’t defaulted – the first time a corpo - lawsuits filed against it for post - allow this web of loan guarantees to rate bond would have done so in poning its own loan repayments – unravel – not now, at least. China’s modern financial era. Helon helped Weifang Special Steel Few believe Weifang is a unique Then, on April 16, just as Shan - Group secure Rmb120 million in case, with other cities around China dong Helon was about to make its borrowing, using its credit to guar - likely to face the same problem of highly anticipated default, the local antee the debt. local SOEs cross-guaranteeing their government in Weifang intervened. That was on top of Rmb510 mil - bank debts. As reported by China Business lion of loans it had earlier guaran - Some still claim that Helon News, it did so to avoid a major teed for the steelmaker. should not have been allowed to state-owned firm becoming the first Interestingly, when reporters dodge default. Zhou Ruanfan, vice- casualty in the domestic bond mar - asked what would happen if president of Pengyuan Credit Serv - ket. Weifang officials asked local Helon’s guarantees cannot be hon - ice, told China Business News that it banks to provide Helon with the oured, local entrepreneurs and fi - was a “tragedy” that default had not necessary funds. nancial professionals unanimously occurred. “A bond market with no Helon, one of China’s biggest agreed that “anyhow the circle tolerance for default is certainly im - makers of viscose fibres (artificial would not crash”. That blithe re - mature,” Zhou warned. silk) has been experiencing plenty mark doesn’t inspire much confi - Similarly, analysts were also look - of commercial difficulties. Over dence that loans are being made to ing at the case as the first major test the past six months its corporate SOEs on an entirely prudent basis. for China’s new bankruptcy system. credit rating has been continu - But it might be an accurate obser - Understanding how many cents ously downgraded, and now stands vation. Indeed, the local govern - creditors could expect to get back at CCC. The firm first shocked ment’s bailout of Helon seems to on their Helong dollars would also bondholders when it forecast a net have been a recognition of the have helped in pricing risk in future. loss of over Rmb1.02 billion for the wider implications of default. If it But that, it seems, will have to 2011 fiscal year. It likewise stunned had defaulted on its bond, the fibre wait for another day. I 8 Week in China Banking and Finance 27 April 2012

Location, location, location... Chongqing probe sees local bank shares plummet

ast year, during one of the peri - Lodic spasms of the European debt crisis, China played down hopes that it might help out some of the PIIGS, the eurozone’s most in - debted countries – Portugal, Ireland, Italy, Greece and Spain. The sugges - tion was that Europe needed to get its own house in order first. A year on and observers are turn - ing their attention to the finances of scandal-ridden Chongqing. There are fears that Bo Xilai’s departure may uncover a place similarly mired in unsustainable debt. No longer on speaking terms: Bo Xilai and Wang Lijun “I don’t think it would be a stretch to say that the Chongqing local gov - These new numbers cast doubt most all our local government loans ernment, state-owned enterprises over the claims of Chongqing offi - are backed by sufficient cashflows,” a and state-owned developers collec - cials that the city’s finances are in representative told Reuters. “Loan tively owed Rmb1 trillion ($159 bil - order (see Talking Point, WiC146). quality is excellent, and we have been lion) at the end of 2011,” Victor Shih, The central government needs re - consistently cutting our exposure to assistant professor of political sci - assurance too. Sasac, the govern - higher-risk lending.” ence at Northwestern University, ment body in charge of China’s The bank’s stock then managed told the Wall Street Journal. largest state-owned firms, recently to regain some ground. But its If Shih’s numbers are accurate, it sent out requests to a number of shares started to fall again after it would make Chongqing’s local debt companies in Chongqing, asking released its results for the first quar - equivalent to 100% of the city’s gross them to report on their financial sit - ter of the year. Profit growth was regional product. This would put the uation, reports the Hong Kong slower than in the same period last city on a par with Ireland and Portu - newspaper Wen Wei Po. year, prompting a 4.35% drop in the gal – both with debt at around 105% At the same time, shares in Hong stock on Monday. of GDP – and higher than Spain’s Kong-listed Chongqing Rural Com - CQRC went public in late 2010, 79.8%. mercial Bank (CQRC) plummeted by and analysts at the time highlighted Under particular scrutiny are more than 14% on Monday and its exposure to the rapidly-growing the liabilities of Chongqing’s in - Tuesday last week. Investors may Chongqing economy as part of its vestment vehicles, the entities well have been unnerved by the appeal. But in the current climate used to finance infrastructure and possibility that Sasac’s investiga - this geographical focus is proving other projects designed to boost tions will uncover further irregu - to be more of a curse: “The Bo Xilai economic growth. Since Bo Xilai larities in Chongqing, which could scandal casts a pall over everything took over as Party secretary in translate into non-performing in Chongqing right now,” one ana - Chongqing in 2007, 10 major in - loans at the local bank. lyst told Bloomberg. “The few for - P h o t

o vestment vehicles have more than The bank hit back by claiming that eign investors holding [CQRC] are

S o u r doubled their liabilities to Rmb346 its loan book is in good shape, and rushing to sell as a result.” c e :

R e billion, the WSJ reports, based on that it has been reducing its expo - Other Hong Kong-listed compa - u t e r s its own research. sure to local government debt: “Al - nies with exposure to Chongqing, 9 Week in China Banking and Finance 27 April 2012

such as property developer CC Land icant damage to our company.” or the Sichuan Expressway Com - Shide then refuted this, saying pany have also suffered from falling it was working with the Party and share prices since the Bo scandal government organisations on started to take hold in early March. “positive measures” and that the “Shide Group as a whole was still in the normal conduct of all of its businesses”. The statement added that Shide In denial was perfectly capable of solving the Shide denies financial trouble “various problems facing us” (pre - sumably including the detention of he ‘Bo Xilai economy’ is under its boss) and warned against the Tstrain, and not just in spreading of rumours online and in Chongqing, the municipality he ran the media. until recently. Bo’s connections to But it seems unlikely that specu - Shide’s boss: Xu Ming Dalian and its companies are also lation about Shide will ebb away being probed. soon. There is a growing sense that alternative punishment. It has also In WiC145 we described how busi - the sprawling firm may have secured sent the case back to Wu’s home nessman Xu Ming was detained for access to loans on account of its province of Zhejiang for a retrial, a ‘economic crimes’ on the same day founder’s connections to Bo. Now it move that could result in a lighter as Bo’s removal as Chongqing’s no longer enjoys that advantage; punishment. Party boss. His connections to the quite the reverse, in fact. As regular readers of WiC will Bo family were widely reported to If true, Shide will serve as another know, Wu was found guilty of illegal be the reason for his arrest. Since example – much like that of Shan - fundraising and fraud. But much then speculation has mounted dong Helon (see page 8) – that polit - has changed since her original trial. about the financial soundness of ical patronage has led to vast misal - The private lending in which Wu Xu’s conglomerate, Dalian Shide. locations of loans within the Chinese took part might now be legalised too The 21CN Business Herald pub - banking system. (see WiC145). lished an in-depth investigation of Newspapers were unanimous in Shide last Friday, claiming to have their praise of the court’s decision obtained internal company docu - though some cautioned against ments. 21CN said that the firm – making Wu into a hero. which straddles six industries and Try again “This decision reflects the rule of even owns Dalian’s football team – Private lender gets reprieve law and the beauty of humanity,” has run up Rmb10 billion of debt to gushed an opinion piece on the gov - 38 different banks. Anxious bankers t only happens in about 15% of ernment-run news portal are now rumoured to be calling in Ithe death sentences that it re - China.com.cn, without mentioning many of these loans. views, but last Thursday China’s that Wu has lived with the threat of On Saturday this led Shide’s man - Supreme Court awarded a stay of death for over two years. agement to take the unorthodox execution. The beneficiary was Others, including the Global step of releasing a “solemn state - high-profile too: rags-to-riches en - Times, declared it “a victory for pub - ment” about the group’s financial trepreneur Wu Ying, previously lic opinion” after netizens, legal situation. sentenced to death for under - scholars and journalists had all It began: “Some news media’s ground lending. taken up Wu’s case. Netizens were negative reports about Shide Group Wu’s supporters had been hop - thrilled by the news, though a few have caused a great impact to the ing for just such an outcome since still had questions.“It’s not enough company’s normal production and China’s Premier Wen Jiabao told re - that they will not kill Wu Ying. We P h o t o operations; in particular reports de - porters in March that her case also need to examine what roles

S o u r c liberately distorted by the media would be handled “carefully”. [Zhejiang] officials played in this, e :

I m

a that ‘Shide has started bankruptcy The court has done more than and why they want her dead so g i n e

C proceedings’ have aroused a great review her sentence, which would much,” netizen Maodoudou wrote h i n a deal of confusion and caused signif - normally imply life in prison as an on his weibo account. I 10 Week in China Internet and Tech 27 April 2012

Searching case Tencent taken to court over alleged monopoly

t is the classic tale of David taking cent],” he wrote. Ion Goliath. Last week Qihoo 360, “Qihoo hopes that this anti- an antivirus software maker, monopoly lawsuit will elimi - brought a lawsuit against Tencent, nate the abuse…ending the China’s largest internet company by chaos of the internet and purifying revenue, in Guangdong Higher Peo - the environment.” ple’s Court. It remains to be seen whether the The feud between the two began court agrees with Qihoo but indus - two years ago, when Tencent started try observers are paying close atten - bundling its anti-virus software QQ tion to the case. Currently, China’s Doctor with its popular instant mes - anti-monopoly law defines compa - saging system QQ, which has over nies with a market share above 50% Closing sale 600 million users (and whose logo as having a controlling, or dominant, Baidu exits e-commerce is a bescarfed penguin, see above). position, and reserves the right to That trod on the toes of Qihoo, an - refuse or limit business transactions ust because a company has other anti-virus software vendor. with certain counterparts. Jachieved monopoly status in one To retaliate, Qihoo accused Ten - If the court determines that Ten - market (see previous story) doesn’t cent of spying on its customers cent did indeed misuse its market necessarily mean that it will find through QQ, scanning their com - position, it might order the Shen - success elsewhere. puter files and violating privacy. zhen-based firm to separate QQ Just ask Baidu, China’s search gi - Tencent responded by refusing to from its other business initiatives. ant. Less than two years after allow its own users to use QQ soft - That could be hugely damaging for launching an e-commerce platform ware if they had downloaded the the company, whose empire now with Japanese e-commerce leader Qihoo antivirus programme (see spans online gaming, social net - Rakuten, Baidu has announced that WiC86). working and internet shopping. its joint venture Lekutian will be The case – the first anti-monop - It could prove bad news for shutting down. oly lawsuit in the internet sector – Baidu, too. After a court ruling The company blames stiff com - has Qihoo seeking Rmb150 million against Tencent, the search giant petition and a worse-than- ($24 million), in damages. could be the next target. Baidu con - expected performance. It’s certainly a bold move. After trolled 78.5% of the search market The joint venture went live in all, Qihoo is a fraction of the size of in the first quarter of this year, and China in October 2010, with the two its rival: in 2011, Qihoo recorded can sometimes find itself the tar - companies investing a total of $50 $168 million in revenue versus get of public criticism. million to set up Lekutian (Rakuten Tencent’s $4.5 billion. But judging A high-profile case is also being controls 51% of the venture). from the open letter written by Qi - welcomed by some parties. Analysts were reasonably ex - hoo’s chief executive Zhou Hongyi “The internet market in China cited, especially as other e-com - (see Who’s Hu in issue 98) to his has entered the monopolistic com - merce players like 360Buy and Dan - employees, he has a lofty mission petition stage,” says Fang Xing - gdang were successfully raising in mind. dong, the board chairman of Chi - hundreds of millions of dollars in “Most companies only resign nalabs.com, a Beijing-based IT new funds for aggressive expansion themselves to enduring Tencent’s thinktank. “The government ur - of their own. abuse of its status in the market, and gently needs to formulate new The plan was for Baidu to extend the few companies that stand up rules to prevent the abuse of dom - its business beyond search, to scoop can only strongly criticise [Ten - inant positions.” up a bigger chunk of China’s grow - 11 Week in China Internet and Tech 27 April 2012

ing e-commerce market. business model that has worked in to get traction and was shut down But reports in the Chinese press Japan but did not adapt it for the last May. were soon suggesting that all was not China market. That is the same So the latest failure has analysts well with the site. And two weeks ago problem with many foreign enter - questioning whether Baidu is going the Southern Metropolis Daily re - prises in China.” to be able to find success outside its ported that the company dismissed Beijing News also says the ma - core search business. Last year the half of its staff, taking the number of jority of the Lekutian’s manage - company quietly shuttered Baidu employees down to just 50. ment was Japanese, with little un - Talk, its microblogging service, Lekutian tried to jumpstart sales derstanding of the Chinese market. which had also failed to compete with a major redesign of the site, in The joint venture was also too with rivals including Sina and Ten - the hope of differentiating itself reliant on traffic from Baidu: “The cent (see WiC138). from its many competitors. The site site has no promotion, no market - Baidu’s biggest overseas invest - sported the tagline “Tokyo Life ing and hence no user loyalty – in ment, a Japanese search site, is also Style” and increased the offerings such a competitive e-commerce in - seen as something of a flop. of Japanese products. dustry it faces a lot of challenges,” No wonder, then, that Doug But critics say that the strategy was the conclusion of China Busi - Young, the author of Young’s Busi - may even have been part of the ness News. ness Blog, has suggested that Baidu problem. Guangzhou Daily reckons Lekutian is not Baidu’s first as - should change its name to Botchdu, that Rakuten itself hasn’t really sault on the e-commerce market. “as this company seems to mess up adapted to the Chinese market: Its first major initiative was a serv - just about anything outside its core “The Japanese firm used the same ice called Youa, which also failed search business”. I

Who’s Hu: Yang Yuanqing Profiles of China’s business leaders

Yang Yuanqing was born in Anhui province in 1964 In 2001, Yang was nevertheless promoted to and graduated from the University of Science and CEO and chairman of Lenovo Group. Ambitious to Technology of China in 1989 with a Masters make Lenovo an international company, he bought degree in computer science. He then joined IBM’s PC division in 2005, a deal that local media Lenovo as a salesman. labelled as “a snake swallowing an elephant”. Post-deal integration was tough, and the global From salesman to president financial crisis didn’t help. Lenovo lost $256 million In his first three years with the firm, Yang wasn’t in 2008, facing its biggest challenge yet. well known. When in 1992 Liu Chuanzhi, the founder of Lenovo, promoted him to be the head Turnover and new plan of a department selling HP’s products many were In 2009 Yang lost his role of chairman, which was surprised. But Yang doubled the division’s sales by taken up once more by returning founder Liu the end of the year, and two years later revenues Chuanzhi. Yang adjusted his marketing strategy, were Rmb300 million, up from an initial Rmb30 million. refocusing mainly on the Chinese market, and concentrating on In 1994, Lenovo decided to make its own PC brands and Yang the most profitable products. was made general manager of the new division. Within a year, It worked. Three years later, Lenovo had turned around. In its Lenovo’s PC sales reached the top three in the domestic market, most recent quarterly results, sales jumped 44% to $8.4 billion and showed an annual growth rate of more than 130%. By the with net income $153 million, up 54% year-on-year. Its market end of 1996, Lenovo PCs were dominating many customer share in China was 35%, a record. segments in the market and Yang expanded into laptops and Last November, Yang regained the chairman role and other hardware devices. announced a $175 million joint venture with Japan’s NEC Corp. To his satisfaction Lenovo also overtook Dell to become the second Setbacks largest PC maker globally. Yang got caught out by internet fever in the late 1990s, and “We are closing in on the top spot in PC sales, the gap is only announced an investment of Rmb200 million to set up new 4%,” Yang told China Times.

P company 365FM. The dotcom bubble burst and the new company In an internal staff meeting he set his sights on battling Apple h o t o

S failed. It was the first time Lenovo was forced to announce large too. Having launched the Lephone and LePad, Lenovo is to launch o u r c scale layoffs. “I’m still hurting,” Yang later admitted, but viewed it its own smart TV in May, beating Apple to market with a product e :

R e as an important business lesson. for the first time. u t e r s

12 Week in China China and the World 27 April 2012

A maritime alliance Chinese investors pile into first Cambodian IPO

y the finish of the first day of and economic strength against Btrading at the new Cambo - the smaller nations individually. dian Securities Exchange on April That means avoiding discussion 18, shares in the country’s first in a forum such as ASEAN, where ever IPO – the Phnom Penh Water the others may try to forge a Supply Authority – had soared by common position, something nearly 50%. that the Philippines has now Stock exchange bosses were de - started to push for more actively. lighted, although by day two they Cambodia “takes a fair atti - seem to have had a rethink. tude” towards the South China “Although the share price was Sea issue, Xinhua remarked ap - allowed to increase 50% yesterday, Look Hu is coming to town provingly, while Reuters also re - daily increases and decreases will be ported that Hu Jintao had used his capped at 5% starting today,” they his wife. It was the first time a Chi - trip to ask Hun Sen not to push for informed investors. That meant nese president had visited the coun - talks on the topic “too fast”. trading was suspended within an try for 12 years and d uring the trip Hun Sen’s pro-China stance is not hour, as the water stock soon Hu and Hun Sen issued a joint com - without its critics in Cambodia, reached 9,750 riel ($2.44), the Ph - munique saying they would where China has not always been ad - nom Penh Post reported. strengthen cooperation in politics, mired as a positive influence. Amid the excitement, Chinese economy and defence. Most notoriously, Mao Zedong website Sohu.com also noted that Specifically, they agreed to dou - armed the Khmer Rouge, which half the investors in the IPO were ble bilateral trade to $5 billion by killed about 1.7 million Cambodians Chinese citizens or of Chinese de - 2017. Xinhua also reported that between 1975 and 1979. During this scent. And with two more IPOs set China has already committed $1.43 murderous period, there are said to for this year – Telecom Cambodia billion of investment into Cambo - have been at least 15,000 Chinese and Sihanoukville Autonomous dia. It has been prominent in roads advisers in Cambodia, and Beijing’s Port – there may be more opportu - and dams, with Beijng the leading support allowed the regime to sur - nities for that share to grow. financier of Cambodia's ambitious vive longer than many anticipated. Like most southeast Asian na - hydropower programme. Eventually, the United Nations tions, Cambodia has a prominent Traditionally, China has bolstered brokered an end to the vicious civil ethnic Chinese business commu - its relations with the Cambodians war and UNTAC then oversaw peace - nity. But whereas other Southeast as a counterweight to Vietnamese keeping efforts, as well as elections Asian nations have been wary of Bei - influence in the region. between 1992 and 1993, as China jing – Vietnam, the Philippines and But Xinhua also notes that Cam - stood aside. now Burma all look for commercial bodia’s present chairing of ASEAN But Hun Sen seized power in an - benefit but also keep a cordial dis - has been beneficial for the Chinese other coup in 1997 and Western tance from the giant to the north – in keeping formal discussion of po - donors withdrew their support. Cambodia’s Prime Minister Hun Sen litical tensions in the South China China returned, taking up much of has been much more enthusiastic Sea off the agenda at the multilat - the financial slack and rekindled in maintaining closer ties. eral organisation. close relations. Earlier this month Hu Jintao spent China is known to want to nego - “China talks less but does a lot,” four days in Cambodia, to be greeted tiate separately with each country Hun Sen told reporters during Hu’s by billboards welcoming him and on the issue, leveraging its political visit. I 13 Week in China China Consumer 27 April 2012

Putting the boot in Here we go again… another China food scare. This time gelatin

ast week CCTV reported that I’ll just lick my shoes; and if I have a L13 commonly-used drugs flu, I’ll also lick my shoes,” another were being encased in cap - one swiped. sules made from industrial Beijing Daily reported gelatin, which is hazardous to that there are longstand - human health. As it turns out, ing problems in the gela - some factories in Zhejiang tin industry that may were even using leather scraps in end up proving as se - the production of their own gelatin. rious as the melamine And not just for pharmaceutical gel dairy scandal a few years capsules but also for dairy products Once in a pair, now in a pill? ago. The making of toxic cap - like ice cream and yogurt. sules is a hugely lucrative tempta - Industrial gelatin can contain up mitted that fixing China’s product tion. Wang Jingzhong, secretary of to 90 times more chromium than quality problems in the long term the China Chemical Industry Asso - the acceptable edible format. Exces - will depend mainly on the ethical ciation, told Securities Daily that sive consumption of the toxic metal standards of the producers them - pharmaceutical gelatin can cost be - chromium causes cancer and seri - selves, and cannot rely solely on gov - tween Rmb2,000-3,000 a tonne to ous organ damage. ernment inspection. make. Industrial gelatin, on the There is an irony to this – drugs Chen pointed out that these other hand, comes in at a fraction of that are supposed to save lives were firms and their executives must do the cost. coated in a substance that does pre - more to fulfill their social responsi - Others wonder if the country’s cisely the opposite. bility. It is a fair point, as well as an flagship healthcare reforms could The State Food and Drug Admin - unusually honest one. But it will do be partly to blame. Industry ob - istration (SFDA), the regulator, then little to appease Chinese consumers. servers say that drug manufactur - suspended sales of 13 types of drugs Nor will the fact that, like many pre - ers are facing new price pressures last Sunday. They were all con - vious food and drug scandals, this because of initiatives launched in firmed to have excessive levels of one was first exposed by the media, 2008 (see WiC11) which have en - chromium, including 11 Chinese tra - and not the authorities. couraged provincial governments ditional herbal remedies and two Needless to say, consumers to cut prices of so-called essential antibiotics. And they were all made have also grown tired of the drugs. With pharma companies now by Chinese pharmaceutical firms stream of revelations. Many are expected to compete by promising that had purchased gel capsules asking what regulators do all day, lower prices, the accusation is that from small manufacturers in Zhe - with some starting to call for pun - the corollary of dramatically falling jiang province. ishment of the watchdog body for revenues is an increased temptation This week, the drug regulator an - dereliction of duty. to cut corners on costs. nounced to much fanfare that po - Cynicism is widespread. “When That looks a difficult argument lice have successfully detained 45 you throw out one of your shoes to sustain. And it’s hard to disagree people alleged to be producing the today you may find them in your with Chen about moral responsibil - the poisonous capsules. stomach tomorrow,” one internet ity. Ultimately, if pharma executives P h o Meanwhile, Chinese Health Min - user wrote on weibo , referring to are ready to look the other way on t o

S o u ister Chen Zhu said on Wednesday the use of leather in the gels in gelatin boiled from old boots and r c e :

S that the government will improve question. belts, they should be seen as com - h u t t e r inspection of pharmaceutical pro - “In the future if I want a jello I’ll plicit as their suppliers in selling a s t o c k duction. Then again, Chen also ad - just lick my shoes; if I want a yogurt toxic product. I 14 Week in China Society and Culture 27 April 2012

Iron Man emigrates to China Why Beijing’s DMG has attracted the attention of Hollywood

nother tycoon is on his way to AChina, although this one has a gold-titanium alloy heart. According to Disney, the third in - stalment of the Iron Man franchise will be shot within Chinese borders, with a cast including Robert Downey Jr (who plays industrialist Tony Stark in the franchise), Gwyneth Paltrow and Don Cheadle all arriving in the summer. Rumour also has it that one of WiC’s longstanding favourites, ac - tress and fashionista Fan Bingbing, will have a role in the film. This time around Disney is co- producing the blockbuster with Chi - nese media company DMG. Al - though Disney did not reveal how much DMG will invest in the film (nor give any specifics on the plot lines to be shot in China,) industry insiders say DMG’s role will be to scout locations and set up the Chi - nese film units, as well as keep the script from running afoul of Chi - nese censors, and then distribute The next stop for Gwyneth is China the final product. Stanley Cheung, managing direc - ing Group) is a 19 year-old, privately- multinationals eager to establish a tor of Walt Disney China, told a Bei - owned Beijing advertising firm that local presence signed up to become jing press conference last week that has turned film producer and movie DMG clients. the new Iron Man project “is testi - distributor. It is a partnership itself, Mintz’s picked up some high- mony to the importance of this (Chi - between two Chinese shareholders profile campaigns such as for Volk - nese) audience to Disney and the lo - and Dan Mintz, an American. swagen. Soon he was working with cal [industry‘s] capability to deliver Mintz, a freelance commercial di - Microsoft, Budweiser and IBM, as a blockbuster title.” rector, first arrived in Beijing with a well as state-owned firms like Although it isn’t the first time few thousand dollars in his pocket. China Mobile. that a Hollywood studio has linked With his seed money and help from Next, he ventured into filmmak - up with a Chinese partner – last a local producer who eventually be - ing. Partnering with the state-run year, Legendary Entertainment and came his partner in DMG, Mintz set China Film Group (CFG), the coun - P h o t

o Relativity Media both announced up shop as an advertising firm in a try’s biggest studio and dominant

S o u r partnerships with Chinese compa - Beijing apartment. His timing was importer, DMG helped with the pro - c e :

R e nies – DMG is a curious case. DMG good. Back in 1990, few locals had duction and marketing of two major u t e r s (which stands for Dynamic Market - Mintz’s production skills and many propaganda films Founding of a Re - 15 Week in China Society and Culture 27 April 2012

public and Founding of the Party. The former was made to mark the 60th an - Red Star: niversary of the People’s Republic in 2009, and the latter the 90th anniver - sary of the Communist Party last year. Shang Wenjie Both films took over Rmb1 billion at the Chinese box office. In 2010, DMG also invested in the do - mestic production Go Lala Go! (see WiC59). Capitalising on his advertising background, Mintz incorporated over 40 product placements in the film (trig - gering moviegoer complaints that the film was overly commercial). Still, it was pretty profitable too; costing Rmb20 million to make but taking Rmb100 million in the box office. “Many US film studios just think of China as a big distribution market, but they don’t understand how to promote and distribute a film, or how the lao baixing (ordinary folks) think,” Mintz told Media and Entertainment Indus - try Reporter, a magazine. “DMG has all the resources and we understand what the domestic market needs. More im - portantly, we know how to get the work done in China.” Insiders also say DMG has an edge when it comes to guiding a project Who is she? “Chinese people need more time to through the necessary government ap - Shang Wenjie, who majored in French at open up to fashion,” she says provals. The company even managed Shanghai’s Fudan University, worked as dismissively of her critics. to get Resident Evil: Afterlife (2010) past an interpreter before gaining national the regulators, something of a chal - fame in 2006 as the winner of the third Why is she in the news? lenge as horror movies are not usually season of Hunan TV’s reality talent In early April, Shang grabbed headlines contest Super Girls . when she transformed herself at a permitted by the censors. major music award show, appearing Small wonder then that Mintz – Why is she famous? first on the red carpet dressed as a who now speaks fluent Mandarin – Shang has since been labelled “China’s fresh-faced 19 year-old only to later seems well plugged-in with local offi - Lady Gaga”, traipsing the red carpet in reappear as a gnarled old woman of 91 eye-catching outfits, face paint, frizzled (see photos above). cials. He often drives around with a hairstyles and even the occasional Readers will note a clever number police escort, threading his way mask. Her antics have earned her inversion at work here. through the impossible Shanghai traf - another nickname — Leiren Jiaomu , But Shang said she had a much fic, says Variety magazine, admiringly. which translates as “Lady Shock”. deeper meaning in mind, telling the Speaking the language is only the “ad - Not everyone appreciates her Chinese press that life goes by very chosen style. Some say her more quickly and that everyone should reflect mission to the show,” says Mintz. The flamboyant attire is selected more on what they will have accomplished on key point is whether “anybody really for the publicity (surely not!). And this earth. wants to hear what you have to say.” others say she’s a copycat, or Others were less impressed by And more of Hollywood might be P h

o shanzhai Lady Gaga. Shang’s attempt to encapsulate the t o starting to listen. China surpassed

S

o But Shang describes her looks as transience of the human condition. u r c Japan as the world’s second largest box e artistic creations that draw from “Did Shang piss off her stylist? Or :

I m a “inspiration and the spirit of owe him money?” one queried on office in the first quarter this year, and g i n e

C experimentalism”. weibo. DMG seems well-positioned to capture h i n a some of this growth. I 16 Week in China And Finally 27 April 2012

Curtain call Watch out for falling glass in Shanghai

f there was a signal moment ported that the first wave of Chi - Iwhen Chinese cities began to nese glass curtain buildings were transform into the shiny, modern reaching the end of their design (and some might add soulless) lives – the period of time that a con - conurbations that one sees today, struction is expected to remain then 1985 might be it. structurally sound without major That was the year China built its maintenance. first ‘glass curtain’ building – the Around a quarter of Shanghai’s Union Friendship Tower in Shanghai. 4,000-plus glass structures are in Intact for now The media of the day described that category, the newspaper said. the new tower as “dazzling” and it The problem is that the mainte - roofs or injuring passersby. became a symbol of China’s mod - nance for such buildings is expen - “The threat of glass rain hangs ernisation drive. sive. Nor is it clear who is legally like the sword of Damocles over our Soon other major cities were put - responsible for completing it: the heads,” Shanghai’s Wenhui newspa - ting up a building, or buildings, like current owners or the original de - per wrote last year. the Union Friendship Tower. Glass velopers. Worryingly it also suggested that became the material of choice for a “Who should be responsible for the problem was not confined to just new legion of urban architects. the large sum? The problem is there, the first generation of glass buildings. Twenty-seven years on and the but there’s no efficient solution yet,” “Companies are not mandated cost of a wholesale shift in urban ar - asked Li Dexiang, a professor at Ts - to buy the more expensive lami - chitectural practice is becoming inghua University’s School of Archi - nated, shatterproof glass as they clear. Experts say that, a esthetically, tecture. are in countries like the US and glass buildings lose their impact The newspaper also said that Japan, and so they opt for the when yet another mirrored tower there has been increased incidence of cheaper tempered glass,” the reflects of its neighbour. High con - glass shards falling from buildings. Deputy Chief Engineer of Shang - centrations of reflective glass can Last year a young woman from hai’s Academy of Building Re - also cause light pollution and alter a Hangzhou lost part of one of her legs search told reporters. city’s climate. after a building’s glass facade ex - With about 85% of the world’s But more worryingly glass build - ploded and fell on her. Other news - glass curtain buildings now con - ings have become a safety issue too. papers have also reported shards of structed in China, it might be time Last week the People’s Daily re - glass burying themselves in vehicle to invest in a hard hat. I

Audi’s ‘Made in China’ ambitions

“We will increase production capacity in China to 700,000 cars a year by 2015” P h o t Audi’s sales chief Peter Schwarzenbauer tells the Wall Street Journal about his aggressive expansion o

S o u

r plans. Previously, Audi forecast sales in China would reach 700,000 by 2020. By comparison, Audi aims c e :

R e to sell 130,000 cars in the US this year. Schwarzenbauer u t e r s

17 Week in China The Back Page 27 April 2012

Photo of the Week In Numbers 22 million The number of people in China that want to move to the US, according to survey results calculated by research firm Gallup. The percentage of Chinese respondents wanting to migrate to the US was the highest. People from Pakistan, Turkey and Thailand were least interested in moving to the United States apparently. P h o t o

S 849,500 o u r c e Cars and trucks that China exported last :

I m a year, up 50% from 2010, according to the g i n e

China Association of Automobile C h i n a Manufacturers. Exports are expected to grow at a similar pace over the next few Posh effort: a special edition Victoria Beckham Range Rover was years. Most of the vehicles are priced well launched at the Beijing Auto Show, by the former Spice Girl herself below $15,000.

$2 billion The amount raised by CNOOC, China’s Where is it? third-largest oil company by assets, in the Some of the places referred to in this issue bond market this week. Thanks to a dearth of dollar bonds, the company was able to sell at much lower yields than expected. Beijing Tianjin Shandong Rmb1,000 ($160) The price of a forthcoming Baidu China smartphone. It’s reported that Baidu, Shanghai China’s leading search engine, is gearing Zhejiang Chongqing up to launch its own 3.5 inch Android Hunan smartphone running on an adapted operating system called Baidu Yi. Foxconn, which also makes Apple’s iPhone, will Guangzhou Hong Kong manufacture the phone.

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

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