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1 Talking Point 6 Week in 60 Seconds 7 Economy 8 Energy and Resources Week in 9 Banking and Finance 10 M&A 11 Internet and Tech 13 Chinese Model 14 China Consumer 17 March 2017 15 Rail and Infrastructure 16 Society and Culture Issue 358 20 And Finally www.weekinchina.com 21 The Back Page Ins and outs a n i h C

e n i g a m I

Shi Lirong retires from ZTE in a management reshuffle that followed

a US government decision to fine the company $1.2 billion Brought to you by Week in China Talking Point 17 March 2017

Just fine ZTE’s record penalty in the US draws muted response in China

Washington woes: ZTE promises to put thousands of staff through export-control training

“ f people know you have the big condemning the Chinese firm for a 283 shipments of controlled items Ibazooka, you probably don’t have “brazen disregard of our laws as in - to North Korea with knowledge that to use it,” Wilbur Ross, Secretary of sulting as it was dangerous”. the shipments violated American Commerce in the Trump adminis - After weeks of testy relations export laws. tration, told Bloomberg last week. since Donald Trump took office, the As part of the settlement, ZTE will Ross was talking about how to announcement seemed likely to also plead guilty to two other win trade wars without firing a trigger another round of Chinese charges of obstruction of justice shot. But just two days earlier the 79 protests. Yet the response was sub - and making false statements to fed - year-old billionaire had pulled the dued and ZTE accepted its punish - eral investigators, according to a trigger on one of the most signifi - ment meekly. What is the plea agreement released by the US cant punishments ever of a Chinese background to the case? Justice Department. company by the United States gov - In response the company has ernment. What is ZTE admitting to? agreed to pay the largest ever fine ZTE, China’s second largest tele - The -based manufacturer levied against a non-financial insti - com equipment firm behind has accepted the main charge that it tution. , has been zapped with a conspired to evade an embargo Apart from $892 million in im - record fine of almost $1.2 billion, by against supplying, building and op - mediate penalties, the Chinese tele - three government agencies in erating large-scale telecommunica - com giant is on the hook for Washington. tions networks in Iran using equip - another $300 million, suspended P h o “With this action, we are putting ment and technology originating in over seven years, during which it t o :

R e the world on notice. Improper trade the US. must host an independent compli - u t e r s games are over with,” Ross warned, It was also involved in a further ance monitor. 1

Week in China Talking Point 17 March 2017

How has the fine been accepted in China? When we wrote about the imposi - tion of sanctions last year – which prevented American companies from trading with the Shenzhen- based firm (see WiC317) – we re - ported on the frustration of the Chi - nese authorities, including comments from a foreign ministry spokesperson, that was “op - posed to the US citing domestic laws to place sanctions on Chinese en - terprises”. There were warnings too that the case was likely to damage Sino-US relations, although senior government officials have said lit - Reshuffled: Yin Yimin (left) takes Xianming’s role as chairman tle in public about the resolution of the situation last week. were restarted the following year, ZTE’s president before the allega - Wang Yi, the minister of foreign despite assurances to law enforce - tions of the illegal trading with Iran affairs, did refer to it in response to ment officials that the company was and North Korea were first reported, a question about American protec - no longer in breach of the ban. At has become chairman. tionism by reporters at the National the same time ZTE was hiding docu - ZTE also announced last month People’s Congress this month, but ments from the forensic accounting that Shi Lirong, a non-executive di - only in a relatively neutral manner. firm that it had hired to conduct an rector and ZTE’s boss in the period “Are you referring to the news external investigation, and as late as in which the illegal sales were made, about ZTE today?” he queried. “I last year it was running a special had retired. Shi was demoted last want to tell you that the Chinese team to destroy evidence of its ac - year when Zhao took over. government has always opposed tivities wherever it could. unilateral sanctions. But we always With the US government on the Beijing wants to focus on the big - ask Chinese companies to obey the verge of punitive action last year, ger picture? laws of the countries they are doing Zhao Xianming was appointed as The muted response in China so far business in.” ZTE’s chairman and president was a contrast to the tougher talk in Otherwise not much was said and (equivalent to chief executive) with Washington, where Ross seemed to it was the same in the Chinese news - a mandate to reach a settlement. relish his role as the new sheriff in papers, suggesting that the media Last week Zhao put out a concilia - town, despite the origins of the ZTE has been instructed to steer clear. tory statement on confirmation of investigation in the Obama era. In the past the press has de - the fine, acknowledging that the “Those who flout our economic scribed the treatment of ZTE as part company had been at fault but sanctions and export control laws of a long-running attempt to pre - pointing out that it had learned will not go unpunished – they will vent China’s firms from getting a from the experience by creating a suffer the harshest of conse - more commanding grip of the compliance committee and putting quences,” he insisted. American telecom market. thousands of staff though export- Then he laid down the gauntlet, One reason for the recent reti - controls training. saying that he couldn’t imagine cence is that ZTE was caught red- Zhao also highlighted “significant that the Chinese government was handed and it couldn’t deny that it personnel changes” since the inves - unaware of what was going on at didn’t know that it was breaching tigation began and this week there ZTE. But China’s leaders have cho - American export controls. It started was another reshuffle when the sen not to respond, holding fire per - shipping routers, microprocessors chairman and chief executive roles haps as they prepare for the first and servers to Iran in 2010 but called were separated for the first time. round of formal meetings with P h o a halt when Reuters published an ar - Zhao has resigned as ZTE’s chairman their American counterparts. t o :

R e ticle in 2012 about violations of the so as to focus on the other role as , the Chinese president, u t e r s trade embargo. Incredibly, sales president. Yin Yimin, who served as is reported to be travelling to the US 3 Week in China Talking Point 17 March 2017

in the first week of April to meet Trump for the first time, when he Planet China will be hosted at the tycoon’s Mar-a- Strange but true stories from the new China Lago estate. Secretary of State Rex Tillerson is due to visit China even earlier, arriving in Beijing tomorrow. COLLECTIVE BARGAIN. South Korea’s Jeju is usually a hotspot for There was a rocky start to the Chinese tourists. But when the Costa Serena cruise ship docked at the Trump administration’s relations resort island this month, all of its 3,400 Chinese passengers refused to with Beijing after the new president disembark. The boycott came amid tensions over Seoul’s decision to seemed to be contemplating a install the THAAD missile defence system. The refusal left the Jeju tour guides as well as the drivers of 80 shuttle buses with nothing to do. But change to Washington’s longstand - the decision has been cheered across Chinese social media. “Don’t tell ing commitment to the ‘One China’ me we won’t stand up together,” one internet user wrote. policy (see WiC349). However, some cooler heads soon discovered that the Chinese tourists The mood has improved since were in fact staff of a direct-sales firm from Hunan called Resgreen. As Trump affirmed his commitment to with several other companies in China it is seeking to exploit the THAAD the status quo in a telephone con - row to boost its own profile. “The company has now made a name for versation with Xi last month. Soon being patriotic,” a netizen noted, adding that by not disembarking in Jeju afterwards Chinese Foreign Minister it probably also saved money by not having to spend on food, Wang Yi met Tillerson at a G20 gath - entertainment and Korean gifts for its staff. ering in Germany, praising him as “a good listener and communicator”. Wang also spoke pragmatically after it was first announced last year. on the day the penalty was an - about ties between the two super - Beijing may also have chosen to nounced to cancel out 80% of its powers last week, when he said that steer clear of commenting further cost, Bloomberg has reported. he believed they “could rise above on the case because of the clear evi - But its corporate customers may old ideas, open new horizons and dence of law breaking. Nonetheless, have been concerned by the threat build a more robust and mature re - the Chinese are unsettled by what facing ZTE and the uncertainty lationship”. they see as American efforts to en - seems to have slowed the com - Indeed, the speedy approval of 38 force their laws outside its own bor - pany’s push into overseas markets. new trademarks requested by ders. It’s also the case that the Two years ago its international rev - Trump’s business interests in China Chinese may not be quite as acqui - enues were more than half of sales have been identified in some quar - escent if there is a repeat perform - but they declined during the inves - ters as evidence of a Beijing charm ance for Huawei – the world’s tigation, falling to 44% last year. offensive, after Trump spent years biggest telecommunications equip - Hence the intent on clearing the trying (and failing) to grab back the ment maker – which was also sub - air in Washington at a time in which rights from earlier claimants of his poenaed by officials from ZTE wants to focus on selling more famous name. Washington last summer for docu - of its networks to companies and “For this many marks to all sail ments covering the export of Amer - governments outside China. It also through to preliminary approval ican tech to Iran, North Korea, wants to make headway towards be - this quickly, with nary an issue in Sudan, Syria, and Cuba. The findings coming the number three seller of sight, that is unheard of to me and I of this investigation are yet to be an - smartphones worldwide, after sell - have been doing this for 16 years,” nounced. ing nearly 62 million handsets last Dan Plane, a director at Simone IP year. Services, a intellectual How hard will the fine hit ZTE? As we reported in WiC317, ZTE property firm, told the It more than wiped out last year’s had pivoted away from sales of Morning Post. “I wish my clients’ ap - profits when ZTE took a provision routers and switches towards plications would be dealt with half on the potential fine, booking a loss phones in the American market, as expeditiously and graciously.” of $342 million for the year. But in - where it has been frozen out of the Of course, there was a more prag - vestors seem relieved that the situ - more lucrative networking business matic spirit in some of the handling ation has finally been resolved. The since 2012. The threat of retaliatory of Washington’s case against ZTE as company’s shares have risen more action seemed to have blown a hole well, including the five reprieves on than 15% since the settlement, surg - in its strategy of prioritising new the implementation of the embargo ing enough on the Shenzhen bourse phone launches to American cus - 4 Week in China Talking Point 17 March 2017

tomers. All the same, ZTE has man - ZTE’s wider business, estimating The San Diego chipmaker is a key aged to get to number four in that American parts accounted for partner with ZTE in the rollout of smartphone sales in the US, as much as 15% of its bill of materi - China Mobile’s testing programme reports, despite the investigation als last year. The share will be for 5G networks in five Chinese slowing its progress in key areas like greater for 5G technology, where cities, which was announced last product development, where the phones will be faster and more so - month. And ZTE has just an - temporary purchase permits have phisticated than 4G standards. ZTE nounced a new partnership to use prevented it from making long- has just showcased what it is de - Intel’s baseband equipment that term investments in innovation. scribing as an industry-first smart - powers the same 5G networks. None The Economic Observer went fur - phone that taps into this ultrafast of these collaborations would have ther in arguing that ZTE would have connectivity, allowing for speeds 50 a future without the settlement been forced to give up on most of times faster and enabling new fea - with the US authorities this month. the mobile phone market without a tures like panoramic video quality, This is just the kind of situation settlement, because it depends on fast-caching of music and movies, that is spurring the Chinese to de - its American partners for most of and ‘instant apps’ that won’t even velop more sophisticated chip-mak - its core processors. Its recently re - need to be installed. ing capacity of their own (see leased flagship phone, the Axon 7, is Of course, Qualcomm is a key WiC357) in the hope that it will re - a case in point – it’s powered by a player in the same revolution and duce their reliance on overseas pro - Qualcomm Snapdragon chip. ZTE’s prototype phone is reliant on ducers. But right now their leverage Other analysts have said the another of its newest Snapdragon is limited, as ZTE is discovering to same about the dependencies in processors. its considerable cost. n

Flying to the promised land

In the past few years WiC has the two countries grew by 24% in repeatedly commented on the 2016. There is a lot of Chinese growing trade and investment ties investment in Israel and the top between China and Israel. First hotels here all have special there was the acquisition of local packages and service standards food giant Tnuva by Bright Food set up for the increasing numbers (see WiC240), then news of Hong of wealthy businessmen and Kong billionaire Li Ka-shing’s women coming from the mainland. investments in Israeli tech firms There is also significant traffic (see WiC302), and then last going the other way, with large January the debut Sino-Israeli Israeli business chambers visiting investment summit held in Beijing China on a regular basis for (see WiC309). At this event an cooperation talks or further Israeli government official investment.” described the pair as “perfect Bailey says Cathay will operate partners – Israel is a little country which had to innovate the route using its new Airbus A350 aircraft, and will link to survive. If China brings the market, we can supply from Hong Kong into 20 Chinese cities via sister airline the talent.” . Aside from business travellers, Bailey Recognising this state of affairs will notes there has been an increase in Chinese tourists to launch a direct route between Hong Kong and Tel Aviv Israel, attracted by the historical sites. next week, with the inaugural flight on March 23. Cathay will be banking on new routes like this I l l u Jonathan Bailey, Cathay’s country manager for Israel, proving a success as the airline has struggled over the s t r a t i o told WiC: “From a Cathay perspective, this burgeoning past year from increased competition. On Wednesday it n : w w relationship between China and Israel was a key factor reported an unexpected net loss of HK$575 million ($74 w . b e

n in launching the route. The One Belt One Road Initiative million) for 2016 – its worst year since the 2008 i t a e p has sparked a lot of business between Israel and China, financial crisis, and sharply down from a profit of HK$6 s t e i n

. and the figures show that accumulated traffic between billion in 2015. c o m

5 Week in China The Week in 60 Seconds 17 March 2017

Ant faces bidding war The major news items from China this week were...

Ant Financial’s plan to purchase US money-transfer 1firm MoneyGram has been spiked by a higher bid from Kansas-based epayment provider Euronet. The lat - ter’s $1 billion bid is about 15% higher than the offer from Alibaba’s sister firm. According to Bloomberg, Euronet’s CEO believes his company’s offer is more likely to be ap - proved by regulators. Ant Financial said it “remains highly committed to the consummation of our merger with MoneyGram”.

AIA Group’s chief executive and president Mark 2Tucker has been selected by HSBC to take over as the bank’s chairman this coming October. Tucker will MoneyGram: a takeover target of Ant Financial succeed Douglas Flint, who has served as chairman since 2010. facturer CRRC. Construction began last month and is due to finish next year. China’s central bank has pledged to make a more 3“convenient and friendly environment” for foreign has won a contract from the city of Xiamen, investors in its bond market, easing access to the $9 tril - 5Fujian province, to provide cloud services to a gov - lion domestic bond market. Meanwhile, Chinese Pre - ernment department. Its winning bid asked for a contract mier Li Keqiang said in a news conference in Beijing that fee of just Rmb0.01, beating substantially higher quotes China will begin a pilot programme this year to allow from five other parties, including China’s three state- foreign investors to buy mainland bonds via Hong owned telcos. “It’s quite apparent that Tencent’s inten - Kong’s capital market. tion is to win the bid first and then to later get profitable value-added services through this contract,” an industry Caixin Weekly reports Foshan, a manufacturing hub insider told Caixin. 4in Guangdong province, is planning to develop the world’s first hydrogen-fuel-cell-powered commuter Sources told Reuters that Fosun Pharmaceutical is train network to help improve local air quality. It is being 6planning to bid for German drugmaker Stada, which developed by a unit of state-owned rolling stock manu - is already being pursued by two private equity groups offering to pay roughly $3.8 billion. Neither company has confirmed the reports, with Stada’s chairman telling news source Handelsblatt, “I’ve also only read about it up until now”.

At a confirmation hearing, Donald Trump’s pick for 7US trade representative Robert Lighthizer told sena - tors, “I don’t believe the WTO was set up to deal effec - tively for a country like China and their industrial policy. [We have to] find a responsible way to deal with the P h o problem by creating some new tools.” Meanwhile, Pres - t o :

R e ident Trump and President Xi Jinping are reported to be u t e r s Lighthizer: negative views on China industrial policy planning a meeting in April at Mar-a-Lago. n 6 Week in China Economy 17 March 2017

Fake news back in headlines over counterfeits

n the struggle to defend Shang - cannot deal with the challenge Iganling Mountain in 1952, two alone and it wants the government Chinese soldiers sacrificed them - to draft laws which make counter - selves in the battle to hold off the feiting a much riskier proposition. American forces. One was said to Ma said Alibaba had employed Ma: treat them like “drunk drivers” have used his body to block ma - data techniques to uncover 4,495 chine gun fire, while another potential fraudsters in 2016, but off its online platforms. burned to death without a word, re - that only 469 were held to account Ma’s rival Richard at JD.com is fusing to give up the location of his and of those, half received fines less much more scathing. In 2016, he comrades. than Rmb10,000 ($1,449). compared his platform’s policy of Or did they? The heroics from the “There is a lot of bark around one strike and you’re out with Al - Korean War feature in school text - stopping counterfeits, but no bite,” ibaba’s three or four strikes. He books, but in recent years there have he complained. “This reality only flagged Alibaba’s stance on counter - been questions about how genuine encourages more people to produce feiting as akin to “killing your par - the stories really are (even produc - and sell fake goods.” He added that ents and then asking for mercy on ing a court case, see WiC341). the punishments must be more se - the grounds of being an orphan”. So it may have been a more apt vere, calling for penalties “as tough It isn’t just a Chinese problem: metaphor than Jack Ma intended as those for drunk driving”. Amazon is building a system that when the Alibaba founder sug - The call to arms was taken up by forces vendors to prove they have gested that his company is fighting other business leaders. Xiaomi’s Lei trademark permission before list - on the Shangganling frontline in the Jun and New Hope’s Liu Yonghao ing on its site. Still, Alibaba realises battle to defeat counterfeiters. likened counterfeiting to a cancer that it needs to bare more teeth. In Alibaba’s warrior language may eating away at society, and January, it launched its first-ever also be news to some of the world’s founder Liu Chuanzhi suggested civil case against vendors said to be leading brands, which have regu - that tougher laws could eradicate selling fake Swarovski watches. Last larly accused it of failing to do the tumour in three years. week, it launched a second action more to counter sales of fake Zhang Mao, director of the State against a pet food producer. goods. Last May, brands led by Administration for Industry and More of Ma’s critics will need to Michael Kors, Gucci and Tiffany re - Commerce, told an NPC press con - be convinced. Bharat Duke, the boss signed their International Anti- ference that the government is go - of Singapore-based Strategic IP Info, Counterfeiting Coalition member - ing to strengthen intellectual prop - tells Forbes that half of the products ships after the board proposed erty laws. But Alibaba’s call for a on are fakes or infringe IP in Alibaba for membership, forcing review can be judged in two main some way. And last year the US that body to back down. ways. On the one hand, it may have Chamber of Commerce estimated Ma says the criticism is unfair been backed into a corner. In De - that the counterfeit goods market and he flagged Alibaba’s anti-coun - cember, the US government put Al - in China was equivalent to about terfeiting efforts in a ibaba’s C2C site, Taobao, back on its 1.5% of the country’s GDP. post timed to coincide with the an - “notorious markets” list and previ - In Ma’s message urging greater nual National People’s Congress ous allegations about fake goods punishment he was perhaps think - (NPC), which concluded last week. have also had a detrimental impact ing of a line from My Motherland , a All the same, it was his strongest ac - on Alibaba’s share price. Yet it could famous song from the 1956 film P h o knowledgement yet that Alibaba has also be a sign that Ma thinks Alibaba about the battle at Shangganling. “If t o :

R e a problem with fakes. is strong enough to weather the the wolves come, those who greet u t e r s His message was clear. Alibaba short-term hit as it forces the fakers them have big guns.” n 7 Week in China Energy and Resources 17 March 2017

A tale of two smelters Short-sellers question Hongqiao’s vastly superior performance to Chalco

luminum Corp of China rial alumina worth Rmb6.1 billion A(Chalco) is one of the worst- between 2007 and 2015, and that it performing state firms of recent had under-reported the production times. Over the five financial years costs of self-produced alumina by between 2011 and 2015, it ran up Rmb2 billion between 2012 and 2015. Rmb22 billion ($3.3 billion) of red As a result Emerson claimed the ink. By comparison, its private sec - true value of Hongqiao’s shares was tor rival China Hongqiao seems to HK$3.1, or about 60% less than when be operating its aluminium the report was published. smelters on a different planet. Since Investors were listening and its Rmb5.2 billion IPO in Hong Kong Hongqiao’s share price dropped in 2011, it has been very profitable, more than 8% before trading was while its state counterparts suffer suspended. The company fired back from overcapacity and falling that Emerson and its partners could prices. Hongqiao has reported earn - Shandong billionaire: Zhang have short positions in the com - ings of almost Rmb26 billion over pany’s stock, adding that the report the last five years and it achieves authored website is still online). contained “error of fact, misleading them on annual revenues roughly a However, the doubters were back statements and unfounded mali - quarter of Chalco’s. this month, this time in the form of cious accusations”. It also threat - Hongqiao is the sister firm of the a damaging report by a research ened legal action. Shandong-based textile-to-power house called Emerson Analytics. Besides Hongqiao’s promise of a conglomerate Weiqiao Group, Chinese firms that have listed detailed rebuttal, investors will soon founded by Zhang Shiping, one of overseas have been the target of in - receive its annual results for 2016, the coastal province’s richest men. It dependent research outfits many after the firm’s previous forecast has benefited from connected trans - times before (most famously when that full-year profit was likely to actions with its sister companies – Muddy Waters went after Sino-For - climb 70% from the Rmb3.6 billion notably buying cheaper electricity est). The research reports are usu - generated in 2015. The improve - from Weiqiao (see WiC152 on how ally followed by aggressive short- ment, it said, was because prices for Zhang took on the mighty State selling. But in a study titled ‘China aluminium products have in - Grid). Energy is the main cost for Hongqiao – Electrifying Margins to creased. smelters, generally estimated to be Absurd Levels’, Emerson questioned But Hongqiao still needs to work at least a third of operating ex - how self-generated electricity could on reviving investor confidence. As penses. work such magic in a faltering sector of this week its share price had sta - But can these deals alone explain (Chalco also runs a number of power bilised in Hong Kong, buoyed by a Hongqiao’s vastly superior per - plants, it noted). wave of buying from mainland Chi - formance over its state-run rival? After talking to former staff and nese investors through the Shang - In November last year, a website poring over industry data, Emerson hai and Shenzhen stock connects. called Hongqiao Exposed ques - concluded that the Shandong firm That contributed to Hongqiao’s tioned whether Hongqiao had made could have understated the true cost market value of HK$52.7 billion, or proper disclosures of its connected of its electricity generation by 40%. about 10 times projected 2016 prof - P h o transactions and, worse, inflated its It made other allegations too, in - its. But by comparison Chalco is t o :

I m

a profits. A month later the company cluding that Hongqiao had received worth HK$75.6 billion, trading at a g i n e

C put out a detailed statement refut - external subsidies from related par - lofty price-to-earnings ratio of 260 h i n a ing the report (the anonymously- ties for the supply of the raw mate - times. n 8 Week in China Banking and Finance 17 March 2017

Rich pickings We profile Oriza – the pre-IPO investment firm behind SF Express

F Express is known as an ex - Asian financial crisis.) A direct in - Spress courier but since its back - vestment firm was set up to funnel door listing on the Shenzhen stock much-needed capital to tech start- exchange last month, it has been ups at the park. In 2011 this was con - delivering something else: one of solidated into the Suzhou Venture the most stellar stock perform - Group (SVG) and the firm eventu - ances, even by Chinese standards. ally became today’s Oriza. The company’s shares climbed In 2010 SVG partnered with the the 10% daily limit for five consecu - China Development Bank to set up a tive sessions after its quasi-IPO. At Rmb60 billion fund of funds. It was one point last week, it was worth the first state-backed fund of funds, Rmb300 billion ($43 billion), more helping to drive capital into indus - than the trio of China’s leading air - tries defined as strategic (or, in some lines combined. That prompted one cases, companies handpicked by lo - of the “Rich List” compilers to crown cal governments). Other funds SF boss Wang Wei as Hong Kong’s Oriza invested in Wang Wei’s firm flocked around it for capital. “It was richest man, deposing Li Ka-shing the pier that all venture capital (Wang is a resident of the city). Oriza has pulled off other land - firms wanted to park at when they Such a strong market debut is the mark deals that have other funds were raising funds,” 21CN reports. stuff of dreams for investment feeling envious. In 2015 it teamed up Oriza has now been restructured bankers. But which pre-IPO in - with China Media Capital (founded into an investment holding firm vestors have prospered most? by China’s Li with assets totalling Rmb41 billion. To get the ear of the low-key Wang, Ruigang, see WiC218) to establish And according to 21CN, despite its it helped to be a government-backed CMC Holdings, the pioneering pri - origins Oriza takes on an entirely investor. In late 2013, SF sold a 24.5% vate equity fund in the now-boom - market-oriented approach in iden - stake to a number of state firms for ing sports and culture sectors. CMC’s tifying its investment targets. Rmb8 billion. China Merchants seed money totalled Rmb10 billion “It is important to maintain a grabbed most of the attention, as in - (both Alibaba and Tencent have con - good relationship with local gov - dustry insiders speculated on the po - tributed too) and local media out - ernments but we always say no to tential synergies between SF and its lets describe it as “the kingmaker in projects that could jeopardise our Shenzhen neighbour’s logistics em - China’s sexiest industry”. reputation,” a senior partner told pire. But SF’s blockbuster IPO has CMC’s local investments have the . also put an influential investment been lower key but it did grab inter - The company tries to hold true fund into the spotlight. Oriza Hold - national headlines by investing in to some of its roots, convening the ings was another of the lucky few to Manchester City, and in Hong Kong annual “1,000 Start-ups Contest” at cut a pre-IPO deal with SF. At the by buying a third of terrestrial to identify time, it valued the courier firm at broadcaster TVB. local tech entrepreneurs. Further Rmb32 billion, suggesting that Oriza’s origins can be traced back afield it has also set up a venture Oriza could exit with a staggering to 1994, when Singapore’s then capital unit in Silicon Valley, in - 10-times gain today. But that doesn’t leader Lee Kuan Yew signed a deal vesting in more than 30 American P h o look like happening: 21CN Business with the Chinese government to start-ups since 2015. Time will tell t o :

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a Herald reported this week that Oriza jointly develop the Suzhou Indus - if there is another SF Express jack - g i n e

C is sitting on its 6.37% stake and may trial Park. (Singapore disengaged pot investment in its now diverse h i n a increase it. from the project in 1999 after the portfolio. n 9 Week in China M&A 17 March 2017

Closing credits Wanda drops latest deal; capital controls blamed

ollywood is a place where Locker . The Hollywood Reporter says Hdreams are supposed to come another $1 billion financing agree - true. But that’s no longer the case, it ment between Film Group seems, for one of China’s richest and Huahua Media with Paramount Wanda loses the Golden Globes men, Wang Jianlin. Pictures is in danger too. His efforts to scale the heights of US claim that and Chinese efforts today. “Japan is the US entertainment industry suf - Wanda’s original bid for Dick Clark a strategic ally of the US and a fered a setback last Friday after a $1 was unsolicited and accepted only democracy committed to free ex - billion deal to purchase Dick Clark when Wang made owner Todd pression,” it wrote. “China, by con - Productions collapsed. Boehly an offer he couldn’t refuse. trast, is adversarial and ruled by a The Hollywood Reporter says According to The Wrap, industry dictator, Mr Xi, who has a declared Wang’s Wanda Group was forced to players regarded the acquisition as global propaganda agenda based on relinquish the bid because of Chi - “wildly overvalued”. Boehly’s former the idea that ‘Chinese art will fur - nese government efforts to rein in employer, Guggenheim Partners, ther develop only when we make capital outflows, and the Financial had purchased Dick Clark and a foreign things serve China’.” Times reports that similar con - number of other brands including Dick Clark is very much a cultural straints may make it impossible for The Hollywood Reporter and Bill - icon in the US. It produces the Chinese firms to match last year’s board magazine for $370 million in Golden Globes and the New Year $220 billion of announced out - 2012. They were spun into Boehly’s show beamed live each year from bound M&A deals this year. ownership vehicle in 2015. Times Square ever since the Ameri - Owen Chan from law firm Hogan But cost has never bothered can Bandstand host set the company Lovells says the government is not Wanda before. Last January, it paid up in 1957 at the beginning of the only “halting live deals” but also $3.5 billion for Jurassic World ’s pro - rock n roll era. “forcing companies to go back and ducer Legendary Entertainment. It Will Wanda be back? Wang has review acquisitions that have al - also spent $2.06 billion on Europe’s said he wants to buy a ‘big six’ Hol - ready been approved”. Odeon and UCI cinema chains and lywood studio. But it is looking in - Comments by China’s central $1.3 billion on Carmike Cinemas in creasingly unlikely, especially as the bank governor Zhou Xiaochuan im - the US. The latter acquisitions were US-China Economic Security Com - ply that Wanda’s bid was less wel - bolted onto AMC Entertainment, the mission recently recommended that come than most. At a press confer - US cinema chain that Wanda pur - Congress change legislation govern - ence last Friday, Zhou told reporters chased in 2012. They are now the ing foreign investment to cover all that the government “has encour - country’s biggest distributor: a fact, industries, including media. aged domestic enterprises to ac - which persuaded lobbyist Richard Some Chinese companies have quire foreign companies to improve Berman to push for Congressional set up co-financing deals with Hol - exports and technological expert - oversight of Chinese media invest - lywood studios, which don’t involve ise. However, some entertainment ment. “The issue of censorship in equity investment (Wanda has one and sports club investments aren’t China isn’t my concern,” he tells The with Sony Pictures). But this cross- valuable and they’re causing foreign Wrap. “But if you control distribu - cultural partnership isn’t generat - governments concern. These trades tion, you control what the retail ing the box office returns the Amer - aren’t necessary.” market sees.” ican studios were hoping for. And Recent casualties include copper In October, the Washington Post as the Hollywood Reporter says, P h o producer Anhui Xinke’s proposed also penned an editorial on the dif - “China’s government doesn’t want t o :

R e $350 million acquisition of Vintage ferences between Japan’s Sony buy - more American films; it wants more u t e r s Pictures, which made The Hurt ing Columbia Pictures in the 1980s and better films back home.” n 10 Week in China Internet and Tech 17 March 2017

A vehicle for domination Will China rely on US technology giants for driverless cars and AI?

hat might you get by cross - Wing BB-8 with Xavier? The an - swer isn’t a mash-up between characters from Star Wars and X- Men , but a self-driving car. For many people the idea of be - ing driven around by their own ve - hicle feels like . But the race to commercialise the first driverless car is all too real and Nvidia Corp says it will have its first autonomous model on roads within a year. It is billing its new chipset Xavier as the world’s first AI super - computer chip, and BB-8 is the name of its test vehicle. Nvidia boss Huang Jen-hsun holds the Xavier computer chip Nvidia’s share price has almost quintupled since July 2015 and Har - car with the intelligent brain that ac - the semiconductor industry for vard Business Review voted its Tai - tually drives the car”.) two decades. But the greater chal - wan-born founder Huang Jen-hsun All four of these firms are Amer - lenge is how to prosper in sectors as the world’s most effective tech ican – not something that plays well likely to set the pace in the coming CEO last year (the next Asian in the in China, which has ambitions of its decade, particularly self-driving business rankings was Hon Hai’s own to lead the world in self-driving cars and data centres deploying Terry Gou at 40). and electric cars. deep learning, a form of artificial Based in Silicon Valley, Nvidia de - But perhaps the more pressing intelligence (AI). signs the kind of application proces - question is whether Chinese firms The underlying technology for sors that are bringing self-driving can get to the front in making the these new applications is based on cars closer to reality. But the race to kinds of chip that provide these cars developing high-performance com - be first is intensifying, with NXP with their brainpower. puting (HPC), generating a speed and Semiconductors – its main com - Last week we examined the processing power that will smash petitor – in the process of being ac - progress that China has made in Moore’s law into smithereens. quired by the world’s leading chip eroding American dominance of the And here the Chinese are some designer for mobile phones, Qual - semiconductor sector. In the manu - way back, with industry titans like comm. facturing of chips (through much- Robin Li, founder of Baidu, China’s Also in contention is Intel, which increased capacity at foundries) Chi - leading search engine, more than has just announced that it is spend - nese firms are starting to have an aware of how far they are lagging ing $15.3 billion on Israeli road sensor impact. But when it comes to de - behind. group Mobileye as part of its own signing the chips – especially the Baidu itself is partnering with push into self-driving cars. The plan higher-end performers – they are state-owned Beijing Auto in the is to combine Intel’s processors with further behind. push for self-driving vehicles, and a Mobileye’s driver-assist platform. (In - Most of the Chinese efforts to car equipped with Baidu technology P h o tel’s chief executive Brian Krzanich close the gap have focused on chips is set to debut at the Shanghai auto t o :

R e has described it as a merger of “the for PCs and mobile phones, the two show in April. But last week u t e r s intelligent eyes of the autonomous platforms which have dominated Bloomberg quoted from a docu - 11 Week in China Internet and Tech 17 March 2017

ment that its boss Li has prepared “cloud-to-car” mapping system for for the government, which calls for self-driving cars. subsidies and unified regulations to NXP Semiconductor has just an - speed up development of domestic nounced that it is collaborating with semiconductor skills. “The majority Geely Auto, based in Hangzhou, to of our country’s laws and policies tailor its chips to Geely’s needs. simply aren’t suitable for the devel - Another area where more high- opment of self-driving cars,” he performance computing is required complained. is data centres, where artificial in - Nvidia is one of the leaders in telligence programmes demand high-performance computing be - massive amounts of processing cause of its expertise in graphics A Nvidia-driven test vehicle power. State investment in sectors processing unit chips (GPUs), which earmarked as strategic such as Big were first used in computer games. tunity for some of the country’s Data analytics and the Internet of These chips deploy parallel process more deep-pocketed firms to take Things might help here. Nvidia has calculations (multiple cores per - advantage of the tumult in the in - also estimated that a third of the forming simultaneous tasks) at dustry by partnering with the new cloud centres around the world al - much greater speed and energy ef - challengers to Intel and Qualcomm, ready using AI applications are ficiency than traditional computer and even snapping up relative new - based in China, where companies processing units (CPUs), which take comers like Nvidia. One problem is like Alibaba and Tencent are estab - on one task at a time. Traditional that the price tags will be punish - lishing mega data centres for cloud computers can perform multiple ing and it’s not clear which of the and machine-learning services. processes by multi-threading but at next-generation chipmakers is go - But again, interest from the Chi - much slower speeds. And that mat - ing to triumph. And the greater ob - nese firms is more as the end users ters for self-driving cars, where cam - stacle is that Western governments than manufacturers of the chips eras and sensors are transmitting are already wary of letting their themselves. Advanced Micro De - data to GPU-based chipsets, which prized assets fall into the hands of vices, one of the challengers to Intel either steer the cars themselves or Chinese firms. in chips for servers, is working with warn human drivers of dangers. A deal with a Chinese suitor Alibaba to improve graphics pro - These new applications, called might hold out the prospect of eas - cessing at its cloud-based data cen - Advanced Driving Assistance Sys - ier access for the chipmaker to the tres and AMD has also paired with tems (ADAS), need to process vast Chinese market. But the same offer Tianjin Haiguang Advanced Tech - amounts of data – Nvidia’s leading doesn’t seem to have worked in se - nology to develop server chips cus - chipset has 7,500 gigaflops of pro - curing tech transfer in the latest tomised for the Chinese market. cessing power compared to 200 gi - chips for smartphones, so it’s hard It hopes these chips will address gaflops for a standard Intel proces - to see why it might succeed in dri - some of the data security concerns sor in a desktop computer. verless cars. of the Chinese government. For the China’s semiconductor firms sim - Indeed, the global chipmakers same reason Qualcomm has signed ply aren’t capable of competing at may not even need to chase growth a deal with the Guizhou govern - this level. After all, its smartphone in China quite as aggressively in ment for a joint venture called makers continue to rely on foreign some of the newer applications, Huaxintong Semiconductors which chips for the manufacturing of most where they have more scope to will create customised server chips of their models, particularly higher- make their first fortune at home. too. Guizhou may be one of China’s end phones. And if Chinese chips In the meantime the Chinese poorest provinces, but it has forged aren’t up to the task of streaming firms that are going to rely on the a niche hosting data centres for video or downloading apps on a next-generation chips are trying to some of China’s biggest companies phone, they aren’t going to be able assess their options by partnering including the three telcos and Baidu to deliver the kind of processing with the companies that produce and Alibaba (the latter has based its power that keeps a car on the road. them. Nvidia is working with Baidu cloud computing development But how about making it their on a plan to roll out a commercially there). In true Chinese style, the P h o mission to catch up quicker on GPUs available self-driving car, for in - provincial government has been t o :

R e than CPUs, employing a leapfrog stance, and last September the two building a new town – Bainiaohe u t e r s strategy? Perhaps there is an oppor - companies paired up to create a Digital Town – to house them all. n 12 Week in China Chinese Model 17 March 2017

Numero uno How did Oppo become China’s top smartphone maker

or a long time, Xiaomi shunned Fadvertising, saying that by cut - ing the spending on commercials, it could pass those savings down to consumers by keeping the overall price of its high-spec phones down. Instead, Xiaomi relied on the star power of founder Lei Jun – dubbed China’s Steve Jobs – to create online buzz for its new products and at - tract new customers through social media. But now Lei’s had a change of heart as Xiaomi’s market share in China continues to shrink. Its share in 2016 fell to 9.5%, ranking it in fourth place. The smartphone maker is changing tack accord - ingly by tapping local celebrities like Wu Xiubo and to en - dorse its products. It has also opened over 50 bricks-and-mortar stores and invested heavily in of - fline advertisement, with its ads spotted everywhere from buses to subways and malls. It’s certainly no coincidence that it was the same strategy that pro - Smart moves: Oppo has taken the top spot, but for how long? pelled the growth of its biggest ri - vals Oppo and Vivo (the two smart - entrepreneurs (see WiC42), in Dong - guarantees and rebates for when phone makers were founded by the guan, Oppo made its start by focus - they completed a sale. The company same entrepreneur but operate in - ing on making cheap handsets to now has over 200,000 points of sale dependently). Even though the two sell in smaller Chinese cities and in China. companies are little known outside overseas markets like Eastern Eu - That strategy helped secure its China, they lead its smartphone in - rope and Southeast Asia, where growth in the sector: “A few years dustry with 16.8% and 14.8% of the smartphone penetration was lower. ago, smartphone sales were highest market’s sales, respectively, says re - To target those customers, Oppo in first- and second-tier cities, where search firm IDC. Oppo has also stuck with the traditional bricks- consumers shopped online fre - moved slightly ahead of Huawei, and-mortar strategy. It struck exclu - quently. However, more recently, which had a 16.4% share. sive distribution deals and worked the biggest consumer has shifted to P h o with a group of resellers to reach the rural countryside, which t o :

I m

a Never heard of Oppo? customers in small cities. To moti - brought about a revival for physical g i n e

C Founded in 2009 by Duan Yong - vate its distributors to provide bet - stores,” says Liu Qicheng, an indus - h i n a ping, one of China’s most colourful ter service, Oppo offered margin try observer. “Since the last quarter 13 Week in China Chinese Model 17 March 2017

of 2016, most of the handset up - next three years (currently it has 50 grades came from the rural areas. outlets). also So while shoppers flocked to Oppo reported that Xiaomi will sell smart - and Vivo outlets, Huawei could only phones powered by its own proces - watch on the sidelines. Oppo and sor, called Pinecone, within a Vivo have essentially monopolised month. This will pit it against the rural market.” Huawei in an expensive R&D arms Liu reckons that only 10% of race, as its bigger rival has also de - Oppo’s sales were made online. veloped its own processors. Nevertheless, the company works Worse, Chinese consumers have with e-commerce sites in a differ - shown little loyalty to phone mak - ent way. “How we view e-commerce ers. In fact, Tech in Asia, a blog, says firms is that they serve better as a the country has seen four different platform or middleman for users handset brands take the top spot in to understand our products better. the past five years. It is more a promotional tool for IT Times, a tech portal, notes: us,” says Oppo. Singh: endorsing Oppo in India “The reason China’s smartphone in - dustry has taken off in the past few How to stand out from the com - the company also made sure to in - years is because of technological petition? clude product placements during breakthroughs and excellent prod - What consumers remember most the episodes to engage consumers uct quality. Attaching too much im - about Oppo is its high-profile ad - subliminally,” says Liu. portance to or blindly expanding vertising campaigns. The company Oppo focuses most of its adver - distribution channels is missing the was one of the first smartphone tising expenditure on promoting bigger picture. The real secret to makers to advertise on primetime its flagship high-end smartphones, staying relevant is through innova - television, buying coveted slots at which are useful in attracting tion and constantly upgrading the CCTV, the state-run broadcaster. young shoppers to its outlets and technology.” More recently, it paid to be the title presenting the image of being cut - Nikkei, the Japanese newspaper, sponsor of the reality TV hit series ting-edge and high-tech. After shop - says Oppo’s use of in-house produc - Running Man (see WiC259). pers have arrived at its retail stores, tion gives it an advantage in engi - Oppo has also tapped A-list Oppo’s sales staff will often close neering new innovations. celebrities like Mi (see page 16) sales by offering more affordable Meanwhile, Oppo is ready to ex - and Korean heartthrob Song Joong- (and lower tech) options, says Elec - pand beyond China. The smart - ki to endorse its smartphones. Hol - fans, a tech blog. phone maker has expressed ambi - lywood star Leonardo DiCaprio, too, Knowing its target market, Oppo tion in cracking the India market, was the spokesperson for its flag - has catered to local trends. For in - where its rival Xiaomi has made ship phone back in 2011. stance, the company’s flagship headway in recent years. It has built Even though Oppo primarily phone the R9, which sells for a factory in India able to produce competes in China, the company Rmb2,799 ($405.5), has sold over 10 up to 100 million smartphones a was one of the biggest advertisers million units since it launched in year and last week announced a at this year’s Academy Awards on US the middle of last year. One of its five-year deal worth $160 million to network ABC. Those who watched biggest selling points was a dual- sponsor the Indian cricket team. the live broadcast would find Oppo’s pixel Sony IMX362 sensor that al - The company has also signed up ace ad in virtually every commercial lows users to take better selfies, an cricketer Yuvraj Singh as a brand break. important feature for China’s ambassador. Sky Lee, Oppo’s boss “What makes Oppo stand out selfie-obsessed consumers. in the country, told : from the competition is that it “Cricket in India isn’t just a sport, knows how to connect with young The road ahead… it’s also a way of life, a culture, even consumers: which is through Competition is about to get more a religion.” celebrities, trendsetters and popu - intense. Xiaomi recently announced Watch this space to see if this re - P h o lar TV series… But it doesn’t merely that it will open a chain of about deployment of its China marketing t o :

R e just splurge on the title rights. On 1,000 bricks-and-mortar stores un - strategy helps Oppo to grab the top u t e r s the shows where it has won these, der the Mi Home banner over the spot in the subcontinent… n 14 Week in China Rail and Infrastructure 17 March 2017

Big bay area Beijing’s new Pearl River Delta plan announced

hina has been working to con - operating in the third quarter of Cnect itself to the world with in - 2018. But the thorniest issue – how frastructure projects. No state firm to arrange the customs and immi - has looked better positioned in this gration procedures for passengers – regard than China Communication is still unresolved. To make the $10 Construction Corp (CCCC): the billion railway economically viable, essence of Chinese leader Xi Jin - it’s essential to co-locate Chinese ping’s Belt and Road blueprint is al - customs, immigration and quaran - Zhang Dejiang: Shenzhen warning most engraved on its company tine facilities in Hong Kong’s terri - name. In recent years CCCC has been tory. The arrangement would save would like to integrate the territory taking on new highway and railway cross-border commuters a lot of further into the fabric of the coun - projects in countries including Rus - time but it would also require law try. Chinese Premier Li Keqiang re - sia and Kenya. However, the com - enforcement by mainland officials vealed in his annual policy report pany’s reputation has just suffered a inside Hong Kong, and thus risk this month that Hong Kong is a key blow closer to home in Hong Kong. contravening the territory’s consti - part of his administration’s plan to The Hong Kong-listed firm dis - tutional document, the Basic Law forge a “city cluster in the Guang - closed in a stock exchange circular (see WiC307). dong-Hong Kong- Greater this month that the territory’s anti - Internationally, co-location bor - Bay Area”. corruption officials had raided its der controls are a common feature Li’s new term echoes the famed office to execute a search warrant. for cross-border railways such as the Bay Area of San Francisco and was The probe is related to one of its ex - Eurostar linking Paris to London. In likely coined to have an upbeat ring. ecutive directors and a share place - fact such arrangements are already But other leaders have taken a more ment back in 2008, CCCC said, in place at Shenzhen Bay, though in hectoring tone with the territory in though no one has been arrested. this case it is the Hong Kong offi - the past week. Zhang Dejiang, It is not known how the investi - cials who exercise the jurisdiction China’s third-ranked official, told a gation will unfold. But Hong Kong on mainland soil. However, making Hong Kong delegation that the city has proven to be a jinxed destina - a reciprocal arrangement for the Ex - should “seize the opportunities” tion for some of China’s more am - press Rail Link has proven to be that Beijing has offered the city. If it bitious infrastructure projects. much more controversial, as many fails to do so he warns Hong Kong’s The 42-kilometre bridge linking are sensitive to what GDP will be overtaken in two years Hong Kong and Macau to Zhuhai, for they perceive as Chinese encroach - by Shenzhen (a fishing village just instance, is set to commence opera - ment on their way of life. three decades ago). tion in December, but only after re - A couple of senior officials from Such words will do little to ease peated delays because of a legal chal - Hong Kong visited Beijing this week, tensions in Hong Kong itself, where lenge in Hong Kong, construction hoping to sort out the legal frame - anti-mainland feeling has surfaced problems and going over budget. work for co-locating customs. The repeatedly in the last two years. For Take also the high-speed railway con - Hong Kong government said it the city’s younger, pro-democracy necting Hong Kong to Shenzhen and hopes to make public its plan before activists the Greater Bay idea is un - . (CCCC is involved in July 1, when the territory’s new chief appealing. On the contrary, they both projects.) The Express Rail Link executive (to be elected this month) want Hong Kong to be kept more has run into stiff political resistance takes office. separate from the rest of China. But in the former British colony, result - By that time Hong Kong will also with the city so dependent on the P h o ing in protracted delays and massive be marking the 20th anniversary of mainland’s economy other t o :

R e cost overruns. its return to Chinese sovereignty. Hongkongers recognise the upsides u t e r s The bullet line is expected to start And it would seem Beijing leaders of greater integration. n 15 Week in China Society and Culture 17 March 2017

Rich ratings TV drama proves a sensation – it has been watched 30 billion times online

he may have first become fa - Smous as an actress, but more re - cently, has become better known as the “Goddess of the New Third Board”, an over-the-counter bourse in Beijing. That’s because Ji - axing Media, a production com - pany she partially owns, has seen its market value soar after the release of Yang’s latest hit show Eternal Love . Since its debut on Zhejiang Satel - lite TV and Dragon Satellite TV, Eter - nal Love has dominated ratings. When the series concluded last weekend, it had accumulated over 30 billion views on online video platforms (plus more than 4.3 bil - lion tweets on Sina Weibo), cement - ing Yang’s status as one of the most bankable stars in the country. The 58-episode historical drama is based on a popular novel by the same name, telling a tragic love story that spans three lifetimes. In addition to Yang, it also stars Tai - wan’s Mark Chao and newcomer Dilraba Dilmurat. So what makes the show so popu - lar? China Business Journal reckons that the novel had already built a large fan base amongst younger Actress Dilraba Dilmut, who was talent-spotted by TV megastar Yang Mi women of the post-1980s and 1990s generation. Additionally, critics find ing the show. I now understand why at Rmb5 billion, or over 200 times the drama irresistible because of the every TV series Yang is in ends up its valuation three years ago when sharp writing and strong production becoming a big hit,” another wrote. Yang took control. values (the series reportedly cost as Taking advantage of the buzz, Ji - The meteoric increase in market much as Rmb300 million to make). axing Media, one of the investors value is hardly coincidental. Yang For most people, Yang’s star power behind Eternal Love , announced acquired the controlling stake in Ji - is the selling point. “Yang Mi is stun - plans early this month to raise as axing through an investment vehi - P h o ningly beautiful. Her every wink much as Rmb275 million ($39.84 cle registered in Tibet with her two t o :

I m

a every smile just makes my heart flut - million) worth of new shares on the managers. Jiaxing cashes in on her g i n e

C ter,” one netizen gushed on weibo. New Third Board. The offering star power to raise its profile in the h i n a “I spent two days binge-watch - would value the entertainment firm entertainment industry. The com - 16 Week in China Society and Culture 17 March 2017

pany has produced hit shows that “costs little but has a big payoff”. ability is being recognised,” says starred the actress such as Transla - Take Dilraba. The 24-year-old star - Sohu, a portal. tor (see WiC330) and The Witness . let from has become a The strategy has translated into In addition to being the face of Ji - household name after appearing as big financial gains. According to its axing, Yang also helps recruit new the second lead in Eternal Love . Next, unaudited financial results for the artists to the production firm. It’s a she will play the leading role in the past year, Jiaxing made over win-win scenario. The up-and-com - series Pretty Li Hui Zhen – also pro - Rmb320 million in operating in - ers gets to be involved in projects duced by Jiaxing – which will be come, up 120% from a year ago. Net that are almost guaranteed to at - aired on Hunan Satellite TV. profit, too, is expected to reach tract attention thanks to Yang’s rep - Dilraba has also been selected to Rmb120 million, up 46%, says Secu - utation. And Jiaxing gets to build up replace actress-model in rities Daily. its own roster of new stars. the hit reality TV series Running Nevertheless, analysts have ques - In fact, half of the cast in Eternal Man while the latter takes maternity tioned whether these financial re - Love are actors managed by Yang’s leave. sults merit such lofty valuations. firm, and as their agency Jiaxing “The ability to spot and nurture The company is nonchalant on this also collects commission from its talent has given Jiaxing a competi - issue: “At Rmb5 billion the valuation artists on future jobs. This business tive edge in the industry. It also is not unrealistically high. In fact, model, says Lanzhou Morning Post, shows that Yang Mi’s leadership we believe it is very reasonable,” says

Red Star: Mou Cong

Mao Zedong famously espoused, “Women hold up half the sky”. But perhaps Mou Cong has the muscle to take on the burden all by herself. Earlier this month she became the first Chinese woman to win the Arnold Classic Amateur international bodybuilding championship. Mou took the title for best figure and best physique in this year’s under 167cm category for women, besting 15 other competitors. The 32 year-old’s achievement also meant she became the first Chinese woman to be awarded membership of the International Federation of Ready to hold up half the sky? Bodybuilding and Fitness (IFBB).

Chinese dream to come. She urged them, “Come out! Come and join Mou began bodybuilding 10 years ago, and in 2012 the competition! There are actually so many won the women’s Asian Bodybuilding Championship exceptional bodybuilding athletes in our country.” in the category for women over 165cm. She has also Last year, a number of female bodybuilders made a undertaken three years of mixed martial arts training, stir when the Hangzhou Sports Administration making her a formidable nühanzi (a Chinese term for accepted female competitors for the first time in 10 a woman of strong character). years of running bodybuilding championships. Pictures Following her victory Mou had a few motivational of them spread online, but with the unflattering words for her admirers: “Life has no dress rehearsal. If description “King Kong Barbies”. you have a dream, chase it, because realising your The nickname surfaced again alongside stories of dreams is the purpose of life.” Mou’s victory, though generally netizens offered praise P h for her achievements. Posting a link to the story on its o t o :

I m Heavy lifting weibo feed, the People’s Daily even offered its a g i n Mou also predicted more Chinese women will join her congratulations to Mou for making history as a e

C h i n on stage for bodybuilding championships in the years Chinese female bodybuilder. a

17 Week in China Society and Culture 17 March 2017

a spokesperson, adding that cash from the latest funding round will go into TV and film production. Yang’s success in the capital mar - ket is now the envy of her peers. , who was going to sell her production firm to Talent Me - dia for up to Rmb1.3 billion (see WiC322), saw the deal unravel after the Shenzhen securities regulator demanded that Talent re-evaluate the price because the valuation was unreasonable. Similarly, actress Liu Shishi, who sold her stake in a TV production company to Baofeng Technology in a share swap, saw her fortune tank after shares in the internet firm fell Old buildings make way in Beijing by half within two months of the deal closing. National Business Daily officials to shut small businesses ran shops on her block. reckoned that she had a paper loss deemed illegal). I n a testament to Already 13,000 such busi - of as much as Rmb154 million. Chen’s cooking it hasn’t deterred nesses have gone and another “Fan Bingbing and Liu Shishi’s her customers, who now climb in 16,000 are targeted for closure in the stories show that making a quick and out of by way of a ladder. Every remainder of the year. Meanwhile buck in the stock market could seat was full during a recent lunch 350 wet markets have also been sometimes be met with a tragic end - hour. “We’ll hold on as long as we shifted out of the city. ing. However, what sets Yang apart is can,” she says. “We have nowhere Low-rise blocks like the one that she really is one of the hardest else to go.” where Chen works are popular with working actresses in the industry. Chen is not alone. Across Beijing’s migrant workers because they aren’t Through her sharp investment and low-rent spaces, informal businesses zoned for commercial use, which business acumen and strong work are being shut by the thousands as means rents are lower. They also ethic, she managed to be the one the capital gears up for a massive re - have the advantage of being in small who saved the industry’s face in the vamp under the Jing-Jin-Ji project communities that require afford - financial markets,” says Sohu. (see WiC231). able restaurants, shops and services Health and safety is the reason like hairdressers. the authorities give for most of the Another area popular with infor - closures but the real motive is some - mal businesses is among the hu - thing else: reducing the population. tongs in the city centre, which are Mass migration Beijing currently has 21.7 million the capital’s remaining historic al - Beijing clears out unwanted people – 3.7 million more than a cap leyways. residents to reduce population the local government set in 2005. After officials bricked up the Environmentally speaking the shops on a lane near the Forbidden or eight years Chen Zhongshen city can’t cope – it is short of 1.5 bil - City recently, many shopkeepers Fhas run a small, inexpensive lion cubic metres of water per year. tried to keep going by posting sales restaurant on the ground floor of a So the plan is to move people assistants on the kerb outside to residential building in east Beijing. and businesses out to an expanded, attract customers and hand goods She sells tasty, home-cooked interconnected area which covers to shoppers. dishes that are a hit with taxi drivers Beijing ( Jing ), Tianjin ( Jin ) and the Fine if you are selling cold drinks, and low-paid office workers. surrounding province of Hebei ( Ji ) – less successful if you are selling sex But in January the government hence the name Jing-Jin-Ji . toys, as one reportedly was. P h o bricked up the front of her shop, First in line are Beijing’s 8 mil - It feels like the passing of an era, t o :

R e leaving her with only a small win - lion migrant workers – people like and even the Beijing government ac - u t e r s dow (a common way for Chinese Chen and the other migrants who knowledges that many of these 18 Week in China Society and Culture 17 March 2017

shops first popped up as a result of economic liberalisation in the eight - ies and nineties. “Conditions have changed and we need to change with them,” a commentary in Xin - hua said unsentimentally. The Jing-Jin-Ji project is about co - ordinating development so that the areas around Beijing reach similar levels of wealth to the capital. That way people and businesses will move out and the burden is taken off the city. The new area will cover 212,000 square kilometres (the Big city syndrome: long queue at Beijing’s Peking Union Hospital equivalent of two South Koreas) and be home to 130 million people. areas. Zhongguancun – known as iary services follow. The backbone of the plan is high Beijing’s Silicon Valley – has set up Beijing’s target is to cut the pop - speed railways, with close to 2,000 an innovation centre in Baoding, ulation by 15% from its 2014 levels kilometres of bullet train track set to for example. Beijing’s universities by 2020 when most part of the Jing- connect Beijing and Tianjin to eight and hospitals are doing the same: Jin-Ji project will be in place. major cities in Hebei: Baoding, Lang - the thinking being that Beijing is A report in the People’s Daily fang, Tangshan, Qinhuangdao, Shi - what it is because of these skills chronicled the experiences of two jiazhuang, Chengde and Cangzhou. and services. If others had them sisters – one who had stayed in her Some lines have already been too the capital would not be such a family village in Hebei, and the other built such as the Beijing-Tianjin people-magnet. who moved a few kilometres down link and the Tianjin-Baoding line. The government says hospitals the road to an area administered as Eight others will be completed by are a particular draw – over 700,000 part of the Jing-Jin-Ji initiative. 2020. The idea is to have a one- people use Beijing’s medical serv - The sister who stayed behind had hour commute time between most ices every day and many of them are to draw water from a well and navi - cities in the area. New highways from out of town. gate a potholed road. But her sister connecting the cities are also being “We should keep the heart of the had a two-storey house and modern built, including a seventh ring road cabbage and cut away the other plumbing. “I had heard talk about around Beijing. parts,” proclaimed Li Shixiang, vice- integrated development for years. Under the scheme the three ar - mayor of Beijing at a recent press To my surprise, real changes have eas – Beijing, Tianjin and Hebei – conference to discuss the project. A begun to take place in recent years,” have been given different roles. Bei - line regularly repeated in official the sister who stayed behind said. jing remains the national capital, the media is that “Beijing has too many Another tale in the China Daily country’s international face and a functions”. The Jing-Jin-Ji project is explains how some of the space cre - centre for culture and innovation. also a way of creating something ated by the removal of the Zoo Mar - Tianjin will expand its role as a akin to the booming economic areas ket – a massive wholesale clothes busy port, develop advanced manu - around Shanghai (the Yangtze River emporium near the Bejing Zoo – has facturing industries like robotics and Delta) and Guangzhou (the Pearl been leased to a company which act as a model for financial reform. River Delta). makes drones. Hebei will specialise in logistics To show the project doesn’t just “The plan has not only reduced and act as “ecological support” for impact on the poor and powerless, the number of daily visitors to the whole region. One of its key the Beijing government is taking the 10,000 and saved space of about tasks is to stage a successful Winter lead in moving out of the city itself. 163,000 square metres, but also led Olympics at Zhangjiakou in 2022 This year it will leave its offices in to upgrading of the local economy,” (for which another high-speed train the historic heart of the capital and it said. line is being built). move 15 miles east to Tongzhou. Ini - Sadly for Ms Chen, her business P h o To make sure Tianjin and Hebei tially it will relocate 20,000 jobs but looks unlikely to survive as this ‘up - t o :

R e meet these goals money is flowing over time it says that 400,000 peo - grading’ process continues in the u t e r s out of Beijing into the surrounding ple will move, as families and auxil - coming years… n 19 Week in China And Finally 17 March 2017

Taboo subject China’s primary school sex-ed textbook stokes debate

he Chinese government wants health. “When the scientific name Tpeople to have more children of a sexual organ cannot be said (two per family, to be precise). So aloud, how can a child describe a perhaps now is a good time to im - problem or report an assault?” says prove its record on sex education. Beijing Normal University, the But when a mother from book’s publisher. Hangzhou saw the textbook her The nine-part book series is con - seven year-old son had brought sidered groundbreaking because it home last month, she found it so also tackles topics like gender dis - explicit she thought it might be a crimination and same-sex couples. fake. The book called Cherish Life is “Most people are heterosexual, being used as part of a pilot sex-ed but there are also some people who course for primary school kids. It is feel attracted to the same sex. This is picture-heavy and covers topics a completely normal phenomenon. ranging from reproduction to sex - The birds and bees, China-style We can’t discriminate against ual abuse. them,” the book says. It was only in Many parents complained about “It’s such a shame there was no 1997 that China decriminalised ho - the forthright language: “Daddy put book like this when I was young,” mosexuality. In 2001, it was re - his penis into Mommy’s vagina” is a wrote another. “It would have saved moved from an official list of men - line that drew a lot of complaints in a lot of confusion!” tal disorders. particular. Chinese schools have tradition - The need for education is clear. But even as the Hangzhou school ally shunned sex education – pre - Last year China launched its first do - was forced to recall the books, par - ferring to assign the human repro - mestically made tampon. As few as ents elsewhere made a beeline for duction part of the biology 2% of Chinese women use internal their local bookstore to order a copy. curriculum as homework. But as menstrual care because they believe It has since sold out nationwide. more young people have become it is bad for them. “Women often “We are expecting a second baby more sexually active there has been don’t understand their own and I want to explain what is hap - a growth in unwanted pregnancies anatomy,” the manufacturer said. pening to my daughter,” said one of and sexually transmitted diseases. If Cherish Life goes into reprint the millions of people who com - The books are an attempt to pro - perhaps that won’t be the case in the mented on weibo. mote better sexual and mental future. n

Revving up

“Last year we delivered 65,246 units and China once again became our single-biggest market. There is still potential for us to grow here”

* Franz Jung sounds a bullish note to China Daily. The CEO of Porsche China said the German P

h luxury car firm has 96 Porsche Centres in the country and will add 12 more “most of them in o t o :

third- or fourth-tier cities”. W Franz Jung e i b o

20 Week in China The Back Page 17 March 2017

Photo of the Week In Numbers 25% The increase over the same period last year in property sales by floor area for the first two months of 2017. Industrial output in the first two months rose 6.3%, but the surging property sector was the biggest surprise say analysts.

161 The number of human deaths in China caused by H7N9 bird flu during the winter period. Of those, 61 died in February – the

P highest number for that month since the h o t o :

H7N9 strain was discovered in 2013. The R e u t South China Morning Post has called it the e r s worst outbreak since 2009. Hostesses ready to greet arriving dignitaries at the closing session of the Chinese People's Political Consultative Conference (CPPCC) in Beijing $41.5 million The cost of a house in New York’s Upper East Side purchased last week by Huang Guangyu, the founder of Gome, who is Where is it? currently serving a 14-year sentence for graft. Huang was sentenced in 2010 but he Some of the places referred to in this issue and his wife, Du Juan, remain retailer Gome’s largest shareholders. Beijing Hebei Tianjin 42,000 tonnes Shandong The annual production capacity of a plant being built in Shanghai by German

Shanghai chemical company BASF. The factory, Hangzhou scheduled for completion in 2019, is part of a $212 million investment in global Hunan expansion. Herman Althoff, senior vice president of BASF’s performance chemicals Shenzhen Guangzhou Hong Kong division in Asia-Pacific, said China offered Zhuhai Macau “significant growth opportunities, driven by diverse applications”.

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