Week in China

1 Talking Point 6 Week in 60 Seconds 7 Economy 8 Internet and Tech Week in China 10 Healthcare 11 Banking and Finance 12 China and the World 15 China Tourist 16 China Consumer 14 February 2020 17 Society and Culture Issue 482 19 And Finally www.weekinchina.com 20 The Back Page Masked nation

How is China’s government and economy coping with the spread of Exclusively the Wuhan virus? sponsored by Week in China Talking Point 14 February 2020

Dealing with disaster How is China coping with the coronavirus outbreak?

Chinese President Xi Jinping on a community tour in Beijing this month

he SARS outbreak nearly two plause and was taken as a sign of with a key post on the CPC’s Central Tdecades ago wasn’t simply a more accountable governance Committee.) public health crisis. For the Com - under new Party boss Hu Jintao, Nevertheless the CPC threw its munist Party of China (CPC) the epi - who took over in November 2002 as full political weight into averting demic presented a severe political the SARS virus started to spread in the 2003 crisis. Wang Qishan, now crisis that threatened its ruling le - southern China. China’s vice president after retiring gitimacy. More importantly it helped to as the anti-corruption tsar in 2017, In early 2003, amid mounting in - calm public anger, although Meng was parachuted in from Hainan, be - ternational concern and domestic would make a return to ministerial coming the new Beijing mayor. disquiet, the CPC sacked Meng rank five months later when he was Wang immediately put stringent Xuenong, who had only been ap - appointed to oversee a multi-billion quarantine controls in place. A new pointed as Beijing’s mayor three project to channel water from hospital was built in the Chinese months earlier. He was blamed for southern to northern China. (Later capital in just seven days. Timely failing to handle the way informa - he was named acting governor of updates of the situation were re - tion about the disease and its Shanxi province, but fired less than layed to the public, as well as the in - P h o spread was being reported to the a year later for mishandling deadly ternational community. The SARS t o :

R e public. mudslides. Incredibly he made an - outbreak was soon brought under u t e r s Meng’s departure won loud ap - other comeback in 2010, this time control. 1

Week in China Talking Point 14 February 2020

How much of that sounds famil - iar? Since December last year an - other type of coronavirus has been wreaking havoc in China. In some ways the virus in question – named Covid-19 by the World Health Or - ganisation (WHO) this week – is pre - senting an even bigger threat. Has China learned from its previous ex - perience?

The latest update Covid-19 has proved far more con - tagious than SARS. The latter in - fected more than 8,000 people worldwide, mainly in mainland China and Hong Kong, over an eight-month period. For Covid-19, the local govern - ment in Wuhan first announced 41 confirmed cases in late December yet by this morning the total had jumped to 64,627 across China. For - tunately the latest strain of virus has a lower fatality rate. But its more rapid spread means more in - Coronavirus patients being rushed into hospital fections. While SARS killed nearly 800 (or roughly one in 10 infected), day in a row as of Wednesday. the virus from spreading further. Covid-19 has led to over 1,486 That has healthcare specialists Since the beginning of this deaths so far (of which only three speculating that the outbreak could month, the number of recovered are outside mainland China), equat - be about to reach an inflection patients has outpaced the death toll ing with a death rate of about 2.3% point where the number of con - as well. As of today, almost 6,000 of those infected. firmed cases starts to drop – at least people had been discharged. This Hubei is at the epicentre of the outside Hubei. implies a recovery rate of close to pandemic. The province has re - A month ago many were warning 10% and compares with just 1.3% of ported over 1,426 deaths so far. The of a nightmarish scenario in which cases in late January. Healthcare of - Hubei government said on Thurs - the viral infection would spread un - ficials also predicted this week that day that 36,719 patients are still re - controllably as hundreds of mil - the proportion of discharged pa - ceiving treatment in hospital, and lions of people rushed home to tients might go higher thanks to “re - 1,685 of them are in critical condi - spend the Chinese New Year, which inforced measures” that combine tions. began on January 25. Western treatments with traditional Confirmed cases have been re - The Chinese government seems Chinese medicine. ported in other countries although to have succeeded in preventing the number of locally transmitted this from happening, thanks to a When will the crisis come to an infections is low. slew of unprecedented measures. end? That included the complete lock - “I hope this outbreak or this event Are there any positive signs? down of a dozen of the most popu - may be over in something like In an encouraging signal, experts lated cities in Hubei, including its April,” Zhong Nanshan, head of the from the WHO noted this week that capital Wuhan. The Spring Festival National Health Commission team the spread of the virus has not been holiday period was also extended tackling Covid-19, told Reuters in an P h o accelerating outside Hubei. In fact, for nearly a week (some local gov - interview this week. t o :

R e the number of new infections out - ernments outside Hubei extended The epidemiologist won fame for u t e r s side the province fell for the eighth it even longer) in a bid to prevent combating the SARS epidemic and 3 Week in China Talking Point 14 February 2020

many Chinese put great store in the 83 year-old’s comments. Based on recent events, as well as forecasts, government action and AI-assisted data assessment, Zhong predicts that the number of con - firmed cases could peak in mid or late February, followed by a flatten - ing off in new infections, and then a gradual decline. But in a separate conference call with the Global Times this week, Zhong qualified his more optimistic tone with a warning that the situa - tion in Wuhan was still very chal - lenging. Indeed, on Thursday dramatically bigger numbers were released for newly confirmed cases of infection as Hubei changed its di - agnostic criteria (to be more in line with that used in the rest of the Zhong Nanshan: hopes new infections will peak this month country). The new method saw sus - pected patients added – i.e. those country like China. Various street- tor-General Tedros Adhanom Ghe - that were clinically diagnosed based level Party organisations (like the breyesus, after a two-day trip this on symptoms but who’d not yet one previously responsible for re - month, during which he was in - tested positive using lab kits – and porting breaches of the One-Child formed how the Chinese were con - this added 14,840 new cases on Policy) have also helped to make the structing two new hospitals in Wednesday alone. (This morning unprecedented quarantine more ef - Wuhan from scratch (see page 10). Hubei reported 4,823 new cases, a fective. So much so that Bloomberg Xi Jinping also gave a rallying cry fairly steep drop.) noted in a news article last week last month calling on all the Party that “China sacrifices a province committees inside companies and Is China’s political system well [Hubei] to save the world from coro - local governments to make “an all- placed to tackle the crisis? navirus”. out effort to tackle the outbreak The CPC’s political bosses have Such drastic action is made pos - based on the directions of the Party termed the fight against the out - sible by China’s so-called “nation - leadership”. break as “the people’s war”. Chinese wide system”. This designation No wonder then that private sec - President Xi Jinping, for one, has enables the central authorities to tor firms and business tycoons have started to make more public ap - get the wider machinery of govern - been rushing to offer support to cri - pearances, wearing a surgical mask. ment to work collectively on plans sis-stricken areas (see page 8). “The outbreak is a major test of or objectives, often with a massive China’s system and capacity for gov - dedication of manpower and other But weaknesses have been ex - ernance, and we must sum up the resources. A prior example of the posed too? experience and draw a lesson from ‘nationwide system’ kicking into The CPC’s leadership has also ad - it,” the seven-man Standing Com - high gear was the rescue and relief mitted to “shortcomings and defi - mittee of the Politburo said in a mission initiated after Sichuan ciencies” in the response to the statement last week. province was hit by a deadly earth - Covid-19 outbreak. A rare mea culpa One argument is that China’s po - quake in 2008. from the Politburo Standing Com - litical system is better suited to con - The result is an ability to concen - mittee this month acknowledged taining the spread of a viral disease. trate the country’s resources on that the country’s “emergency man - For instance, the complete lock- tackling major problems in times of agement system” needed to be im - P h o down of Wuhan, a logistics hub with crisis. “I have never seen, in my life, proved. t o :

R e a population of over 11 million, this kind of mobilisation,” said Other aspects of the handling of u t e r s might have only been possible in a World Health Organisation Direc - the crisis are being queried both at 4 Week in China Talking Point 14 February 2020

home and abroad. The foremost question: whether the authorities alerted the public to the dangers of the virus in a timely enough fash - ion. Anger about how the govern - ment initially responded has also deepened as a result of the death of Li Wenliang. The Wuhan-based doc - tor sought to warn people about the potential dangers of the Covid-19 but was reprimanded by police in early January for “spreading ru - mours” about the virus. Li died last week having been in - fected by Covid-19. According to Reuters, even Zhong Nanshan was reduced to tears in talking about Li during an interview. “The majority of the people think he’s a hero of China,” Zhong said. “I’m so proud of Li Wenliang: died last week, after warning of virus threat him, he told people the truth, at the end of December, and then he gest that the delay in publicising trated in the upper echelons and passed away.” the danger was not entirely his there is reluctance at local level to However, the Global Times fault. “Because it is an infectious report bad news or encourage warned in another article on disease, and we have the infectious whistleblowing. Wednesday that Zhong’s tears were disease prevention law to regulate Curiously the domestic media being “twisted and politicised by information disclosure, as a local has also been silent over the fate of some as a challenge to the Chinese government after we have the in - the country’s annual political jam - authorities”. The 83 year-old’s re - formation, we can only reveal it boree, due next month. The Na - sponse to Li’s death, the newspaper after approval,” he explained. tional People’s Congress (and its explained, was simply an outburst consultative arm, the CPPCC) usu - of emotion by a frontline medical More heads will roll? ally meets in the capital at the start worker under immense pressure. Hong Kong’s South China Morning of March, bringing 4,000 bigwigs to For the time being the local au - Post reported on Thursday that Ma Beijing. It's exactly the sort of mass thorities in Wuhan and Hubei are had been replaced as the Wuhan’s gathering that is being cancelled bearing the blame for the region’s top official. Even higher up the food elsewhere in the country due to the predicament. Wuhan’s mayor Zhou chain, the Party Secretary of Hubei coronavirus crisis but dropping the Xianwang is a particular target, province has also been ousted over NPC would be unusual and embar - since telling state broadcaster CCTV his “botched response” to the health rassing – it hasn’t been cancelled in late January that his administra - crisis, the newspaper said. since the Cultural Revolution (it was tion had failed to reveal informa - He is being replaced by Ying even held in March 2003 at the tion about the outbreak in a timely Yong, previously Shanghai’s mayor. height of the SARS outbreak). manner. Ma Guoqiang – who till Ying is considered to be “a close This time some analysts think it Thursday outranked Zhou as ally” of President Xi, the SCMP com - will be delayed as it would be awk - Wuhan’s Communist Party boss – mented. ward for the country’s leaders to fol - also appeared on the programme to China’s ‘nationwide system’ has low the normal agenda of setting take some of the responsibility turned out to be efficient in con - out the country's achievements at himself. “I feel ashamed of myself,” taining the worst of the outbreak, the annual event. But others pre - Ma said. “If we had taken strong Hong Kong’s Singtao Daily con - dicted that Xi might choose to press measures earlier, the situation cludes. But the initial spread of the ahead with the meeting if the infec - would be much better.” virus has again exposed the flaws in tion figures are showing signs of Both officials offered to resign the country’s ‘top-down’ political improvement, allowing him to de - although Zhou then seemed to sug - culture, where power is too concen - clare victory over the epidemic. n 5 Week in China The Week in 60 Seconds 14 February 2020

A new boss for Hubei The major news items from China this week were...

Shanghai Mayor Ying Yong has been appointed as the 1new Party boss of Hubei, replacing Jiang Chaoliang, Xinhua reported. The province and its capital Wuhan has been at the epicentre of the ongoing Covid-19 out - break, which has affected nearly 60,000 and claimed more than 1,300 lives. Wuhan’s Party chief Ma Guoqiang has also been removed.

Political shockwaves were also felt in Hong Kong, 2which experienced months of unrest last year. Zhang Xiaoming, director of the Hong Kong and Macau Affairs Office, will be replaced by Xia Baolong, the vice chairman of China’s top political advisory body, the CPPCC. Zhang Ying Yong, ex-mayor of Shanghai now boss of Hubei will become a deputy to Xia. cos as Germany’s ruling party is likely to stop short of a The Ministry of Finance gave the Chinese economy 5G ban on Huawei, Reuters reported. 3another boost by approving the early sale of Rmb848 billion ($122 billion) in local government bonds. So far The US Justice Department has charged four mem - this year, a total of Rmb1.85 trillion of local government 5bers of the Chinese military with stealing the per - bond quota has been allocated ahead of schedule, Xin - sonal information of 145 million Americans. The quartet hua said. allegedly hacked into the computer networks of the Equifax credit reporting agency in 2017, the indictment The annual Mobile World Congress in Barcelona has alleges. The Chinese authorities have denied the charges. 4been cancelled after a slew of top tech firms includ - ing Facebook, LG and Sony pulled out of the four-day The parent firm of China Life Insurance, China’s conference amid fears over the Covid-19 outbreak. The 6largest life insurer, is working with investment world’s largest telecoms trade show was supposed to banks on a backdoor listing plan for its key businesses start on February 24 and was predicted to attract in Hong Kong, Bloomberg reported. The state-owned 100,000 attendees including a large delegation from heavyweight now has Rmb4.5 trillion worth of assets on China. Yet there is still some good news for Chinese tele - its books, spanning property, insurance and asset man - agement.

More good news for the Hong Kong bourse as Geely 7Automobile said it is in talks to merge with Volvo Cars, which was acquired by Geely’s unlisted parent firm from Ford Motors in 2010 for $1.8 billion. The combined entity could either go public in Hong Kong or Stock - holm, the company said in a stock exchange filing.

Singapore’s sovereign wealth fund GIC has acquired 8LG Twin Towers, the South Korean conglomerate’s P h o iconic headquarters in Beijing, for Rmb8 billion, the t o :

R e Straits Times reported. LG withdrew from China’s smart - u t e r s Mobile World Congress event cancelled due to virus phone market two years ago. n 6 Week in China Economy 14 February 2020

Supply runs dry As China catches pneumonia, the world coughs

uch has been said about place. That’s sensible but there M‘Made in China’ goods in re - doesn’t seem to be a standardised cent years but the world is now find - approach to how this should be im - iPhone production in limbo ing out what happens when the plemented, leading to confusion in world’s biggest factories go into Shenzhen last weekend when offi - rea's Hyundai Motor and Kia Mo - deep-freeze, thanks to the Covid-19 cials were said to have told Foxconn tors suspended production at all virus. that another of its assembly plants their plants due to a lack of auto Workers were supposed to be re - had to stay shut because of the risks parts from China-based suppliers. A turning to work in China as of Mon - of infection. few days later there was a partial re - day after the government extended Foxconn put out a partial denial sumption but only because of plans the public holiday for the Year of the the following day, although the to import substitute parts from Rat by an extra seven days, as well as statement noted that employee companies in Southeast Asia. commanding companies across 17 safety was its top priority and that it How straightforward is it to cities and provinces to stop opera - would only restart production once source alternative suppliers? Obvi - tions until February 9. inspections were completed. ously it’s easier to sign a new con - Yet for millions of migrant work - Commentators generally agree tract with a textile factory than to ers trying to get back from their that the impact on international set up a supply chain in semicon - hometowns hasn’t been an easy trade is going to be greater than dur - ductor parts. Looking at the data on task. Even if they can get tickets for ing the SARS outbreak in 2003 be - US imports from 238 countries, van trains and buses, they must navi - cause supply chains are much more der Linde also points to industries gate a series of medical protocols globalised and China now has a where the Chinese are the dominant and quarantine cordons on their more central role as an engine of producers, making it more of a chal - journeys. “It’s like Europe in me - global growth. That means that it’s lenge to find alternative partners. dieval times, where each city has its not just consumers that won’t be Buyers of goods like toys, cutlery, checks and crosschecks,” Jörg Wut - getting some of their goods in the tools and mobile phones are going tke, the president of the European typical way. Companies around the to have more of a problem but other Chamber of Commerce in China, world face a more immediate crisis industries should find it a little eas - told the New York Times this week. because they aren’t getting the parts ier to find substitute producers That has helped to create situa - and components they normally re - (tyres from Korea and Thailand, for tions like the one at Foxconn’s mas - ceive from China. example, or food oils and rubber sive assembly plant in Zhengzhou, Firms that run the leanest opera - from Indonesia). where only 10% of the workforce tions from ‘just in time’ inventory A final question is whether the was reported to be available for duty are more at risk, points out Herald disruption might have a longer- as the week began. Analysts were van der Linde, Asian head of equity term impact on China’s position in soon predicting a supply shortage strategy for HSBC, who published a the global supply chain. Van der for Apple, Foxconn’s biggest client. research piece on the impact of the Linde says it’s too early to tell, al - Companies have been struggling virus outbreak on Asia’s supply though industries where China’s to get formal approvals to restart chains earlier this week. share of global exports was already work because local officials fear for The car industry is particularly showing signs of decline are more at their jobs if they aren’t being seen exposed because Hubei accounts for risk. In that context, some of China’s to stop the virus from spreading. about 9% of China’s automotive sec - market share of items such as ply - P h o Firms are being made to sterilize tor, including many components wood, camping gear, furniture, t o :

R e their workplaces and show that that are exported overseas. That was footwear and apparel could be lost u t e r s they have epidemic controls in apparent last Friday when South Ko - more permanently, he thinks. n 7 Week in China Internet and Tech 14 February 2020

A collective effort Alibaba wins admirers for its efforts to fight the virus outbreak

he devastating earthquake that DingTalk (an app for business com - Tstruck Sichuan in 2008 changed munication); and special consulta - attitudes towards corporate social tions at AliHealth. responsibility (CSR) in China. The Other tech giants have con - disaster claimed 70,000 lives and tributed as well. Huawei finished the left more than five million people construction of 5G base stations in homeless. But at least $1.5 billion in Wuhan in just three days as part of donations were made by the busi - an infrastructure project to support ness community amid an unprece - two new hospitals (see page 10). Ten - dented call for national solidarity. cent, an archrival of Alibaba, has of - CSR efforts weren’t measured fered its cloud computing services purely in monetary terms, however. to medical researchers that are Sany Heavy Industry was one of the working on vaccines to curb the companies widely acclaimed for its virus and it’s also supporting devel - part in the relief campaign. Images opers that launch mini apps on of its excavators and cranes doing Keeping supplies moving WeChat assisting the effort (for in - the rescue work made Sany much stance, apps that help individuals to more of a household name across city’s “unsung heroes” of delivery make donations). The company’s China and c ompanies have been ac - staff at courier firms such as online game and video platforms tive again in the effort to contain Cainiao, YTO and STO (all affiliated have also played a crucial role in the coronavirus outbreak that with Alibaba or heavily dependent containing the disease – by keeping started in Wuhan late last year. on it) got to work, says China Youth people entertained while they stay One of the brands that has Daily. indoors (there are said to be at least emerged as a leader this time is Al - Tackling such supply bottlenecks 60 million people in lockdown in ibaba. “All to Wuhan. Let’s do it!” the has offered an opportunity for Al - Hubei province, for instance). internet giant wrote on its official ibaba to showcase the strengths of Nevertheless, Alibaba’s initiatives weibo on January 25, the first day of its ecosystem. It has launched a to tackle the outbreak seem to have the Chinese New Year (of the Rat). global sourcing platform to bring earned most media mention – The tech company announced that medical supplies directly to cities something that should bode well for it would spare no effort in fighting laid lowest by the outbreak and tried the brand in the longer term. In the the outbreak, as well as setting aside to keep its operations running on case of Sany, company chairman Rmb1 billion ($145 million) to pur - the ground, despite the situation. Liang Wengen spent a brief period chase medical supplies. Hema, Alibaba’s retail network for as China’s richest man shortly after Alibaba has turned its attention fresh food, promised to operate the 2008 Sichuan earthquake. At to ways that it can help in fighting around-the-clock, even in Wuhan. In one point, he even seemed on the the crisis. For instance, getting new one widely reported case, it even brink of making political history as supplies into locked-down loca - came to the rescue of a zoo in the the first private sector tycoon to be - tions has presented a huge prob - city, following reports that the ani - come a member of the ruling Polit - lem. At one point much-needed mals were starving to death. buro (see WiC123). Alibaba’s founder items such as face masks and med - Besides this Alibaba has offered Jack Ma is already one of the coun - icines were shown to be stacking free services across its platforms, try’s richest men. His firm now P h o up in warehouses in Hubei but not such as educational livestreaming basks in kudos across China’s social t o :

R e finding their way into Wuhan, over Youku (see page 19 for more on media for showing its pervasive u t e r s ground zero for the crisis. Then the this topic); access to the cloud at ecosystem is not just about profit. n 8 Week in China Internet and Tech 14 February 2020

Poor optics Wuhan’s top tech firms downplay virus impact

i Jinping has visited Wuhan manufacturer of 3D NAND memory Xtwice since taking over as chips, and Xinxin Semiconductor China’s paramount leader. One of Manufacturing, which produces Optic cables at a factory in Wuhan his stopovers on both trips was a NOR flash and CIS chips, claimed vast district in the city known as that their factories were still run - shortages of both labour and key Optics Valley. In 2013 he affirmed ning and that their products were components as a result of mandates the elemental importance of sci - still being shipped through special designed to limit the contagion’s ence and technology to China’s channels, thanks to their strategic spread. In the face of these chal - prosperity, which paved the way for importance to China’s chipmaking lenges, top display suppliers in the setting-up in Optics Valley of ambitions. China have informed our experts Yangtze Memory Technologies, a Yangtze Optical Fibre and Cable, that a near-term production decline Rmb24 billion ($3.43 billion) chip which produces a fifth of the world’s is unavoidable,” Hsieh noted, fore - plant. Optics Valley was also the wires for carrying data, stressed that casting that capacity utilisation for place where Xi declared China’s am - its factories could also continue to liquid crystal display fabs across the bitions for technological self-suffi - run too, thanks to a high degree of country could fall by more than a ciency two years ago – a move that automation in its production. fifth in February. followed a US ban on the supply of Huagong Tech, a supplier of opti - Other companies in the Optics chips and other components to tele - cal modules to Huawei for 5G net - Valley are experiencing similar dis - com equipment firm ZTE (see works, also told investors that the ruption, with some considering WiC406). coronavirus would cause at most a shifting their production elsewhere. The capital city of Hubei province seven-day delay in product delivery, “Assuming the epidemic is not actually has three development and that its inventory in Shenzhen widely spread outside of Wuhan, zones but Optics Valley is the one would ensure supply for a month. the supply chain of the optical com - primarily tasked with incubating Some of these firms are report - munications industry can be par - advanced technologies including ro - edly invoking their special status at tially moved to Shenzhen. Should botics, semiconductor manufactur - policy level to keep their factories the epidemic worsen, more cus - ing, 3D printing and biologic medi - open. Certainly, more automated tomers will switch to Taiwan for cine. In the last few years, it has been production lines will be paying a procurement,” predicted Taiwan’s Wuhan’s biggest draw for invest - major dividend too in negating the United Evening News. ment, thanks to companies such as need for larger numbers of workers. Launched in 2001, Optics Valley Schneider Electric, Huawei, Fox - On the other hand, parts and mate - was originally an optoelectronics re - conn, Xiaomi and Lenovo. With the rials inventories will surely be com - search base linked to Huazhong Uni - zone’s GDP growth at 10.8% in the ing under strain, with Wuhan’s rail - versity of Science and Technology, first half of 2019 – well ahead of the ways and river ports still out of an institution also known for edu - city’s overall number – Optics Valley action. cating many of Huawei’s engineers. is viewed by local officials as Other companies aren’t report - Two decades of aggressive invest - Wuhan’s best shot of being elevated ing business as usual. Panel manu - ments and generous policies to lure to tier-one city status (alongside the facturers such as BOE, Tianma and tech talent have transformed the likes of Shanghai and Shenzhen). TCL’s China Star Optoelectronics zone into a more diverse industrial So when the coronavirus struck Technology, which have five facto - hub. Among the country’s 169 high- Wuhan, some of the biggest com - ries between them in Wuhan, are all tech zones, it is ranked fourth in P h o panies based in the Valley scram - feeling the pinch, according to terms of competitiveness and inno - t o :

R e bled to downplay the impact. Both David Hsieh, senior director at IHS vative capability, according to Tech - u t e r s Yangtze Memory Technologies, a Markit. “These factories are facing nology Daily, a state media source. n 9 Week in China Healthcare 14 February 2020

Emergency room Media celebrates new hospitals, netizens less so

atching a hospital being built As readers will know, eight W– however rapidly – wouldn’t healthcare workers had tried to generally be seen as a spectator draw attention to the virus long be - sport in normal situations. fore the authorities formally recog - One of Wuhan’s new hospitals But when you are cooped up in nised the outbreak, but they were your family apartment sheltering reprimanded and made to sign act so efficiently”. It added: “China’s from a new and deadly virus, things statements of self-criticism by institutional advantages shine at take on a new significance. Hubei police. such critical moments.” Which is why tens of millions of Just under a month later, on Janu - Of course, China’s existing health - people tuned in to watch the live ary 23, the Wuhan government an - care system is generally over - feed of two huge hospitals being nounced the construction of Hu - stretched, even in ordinary circum - built at a frantic rate in Wuhan – the oshenshan – a thousand-bed hospital stances. As WiC has pointed out epicentre of the novel coronavirus on the banks of Zhiyin Lake. A day before, the country is chronically outbreak. later it announced the building of short of doctors, nurses, midwives The broadcast’s feeds – hosted by Leishenshan – another huge hospi - and anaesthesiologists. The way that state channel CCTV – became so tal that was later enlarged to 1,600 its primary healthcare system is or - popular that viewers began giving beds – all built within 11 days. ganised, most people go to hospitals the diggers and bulldozers their The speed of construction has if they are sick rather than a clinic. In - own nicknames. A favourite cement been impressive. The two facilities deed, such is the overcrowding in mixer was dubbed the “Big Roller” aren’t field hospitals but solid, well- Wuhan’s hospitals that they became and a flatbed truck hauling heavy equipped structures made from pre - major sources of infection. A study construction supplies was “Brother fabricated panels. Inside they fea - of 138 corona-virus patients pub - Red Bull”. ture air filtration systems, lished by the Zhongnan Hospital of CCTV utilised an app to offer car - high-speed data sharing and on-site Wuhan University last week found toon depictions of the vehicles so labs. On completion Huoshenshan that 41% of patients had actually people could vote for their was transferred to the control of the contracted the disease as a result of favourites. The outright winners People’s Liberation Army, which “human-to-human hospital-associ - were the little yellow forklift trucks provided 1,400 medical personnel ated transmission”. Some victims which zoomed about the busy sites to staff it. Leishenshan is run by were medical workers, others were like determined bees. civilian doctors, the majority of patients recovering from surgery or But what for some was a heart - whom were dispatched from Liaon - receiving treatment for cancer. ening symbol of the nation’s all-out ing province. Meanwhile other netizens were resolve to defeat the virus was for Unsurprisingly, the state media shocked when several hospitals in others a sign of how the authorities was keen to pick out the positives Hubei province had to put out an had been woefully slow to react to in the situation. Xinhua described emergency call over the internet for the epidemic in its early stages. the rapid emergence of the hospi - basic equipment such as masks and “If this government had taken ac - tals as a “miracle”, while the People’s protective clothing. tion earlier this wouldn’t be neces - Daily celebrated the “indestructible “This is another reason young sary,” fumed one angry weibo user. and indomitable spirit of the Chi - people don’t want to study medi - “Only in China” was another com - nese people”. It added that the coro - cine,” said one critic, referencing the mon refrain. Short form for: “Only navirus emergency was demon - low pay as well the risks of being P h o in China can we build a thousand- strating the “strength of China’s stabbed that the medical profession t o :

R e bed hospital in 10 days, but only in national governance system” and can face even in ordinary circum - u t e r s China do we ever need to.” that “no other country is able to re - stances (see WiC478). n 10 Week in China Banking and Finance 14 February 2020

Capital injection Which healthcare stocks are benefiting from the coronavirus crisis?

erhaps no single drug is more Porton Pharma’s stock rally was Passociated with its manufac - further fuelled by its involvement turer’s success than Bayer’s Aspirin. in the production of Darunavir, an Developed by German chemist HIV drug that a research team at Felix Hoffmann to alleviate his fa - Zhejiang University has identified ther’s rheumatism, the painkiller as another potential cure for the has been sold as an over-the- new coronavirus. Developed by counter tablet since 1915, generating Johnson & Johnson, Darunavir ac - massive profits and transforming counted for 18% and 14% of Porton’s the business orientation of the erst - revenues in 2018 and 2019 respec - while dyestuff manufacturer. Is Gilead’s Remdesivir a cure? tively, according to ThePaper.cn. Today, in the face of the novel Other investors are betting on coronavirus outbreak, pharmaceu - a randomised and placebo-con - drug distributors, online pharma - tical companies are looking for a trolled study. The experimental cies, medical equipment suppliers new miracle drug. Two weeks ago a drug has demonstrated good antivi - and diagnostic devices makers – all traditional Chinese medicine ral activity against the SARS and of which have been experiencing a known as Shuanghuanglian – con - MERS coronaviruses in earlier cell surge in demand since the outbreak cocted from three types of plants – and animal experiments, according became widespread last month. became a commercial hit following to Gilead’s chief medical officer Mer - Shares in Shenzhen Mindray Bio- a report by the People’s Daily that dad Parsey. Medical Electronics, China’s largest the herbal remedy could “inhibit” Suzhou-based BrightGene says it hospital devices maker, are also up the coronavirus. The news even will now focus on manufacturing 30% since the beginning of this year. sparked panic-buying of moon - the drug but that it doesn’t expect With about 60 temporary hospitals cakes, a delicacy typically eaten dur - the move to have much impact on already being built in 20 provinces ing the Mid-Autumn Festival, sim - its financials this year. A main rea - across China (see page 10 for more ply because some versions are called son is that it lacks the intellectual on the pair opened in Wuhan) Min - shuanghuanglian in Mandarin. property rights to make the drug or dray’s sales are expected to surge by No surprise then that China’s the official approval to roll it out in a third in the first quarter, according stock market punters have been the Chinese market. That means to the South China Morning Post. quick to react when a company that any production of Remdesivir Its diagnostic test kits – of which claims that it is ready to supply a will be booked as a “social donation”. there is a severe shortage – are more scientific remedy. BrightGene Another company that is benefit - viewed as a key income driver. Bio-Medical Technology saw its ing from Gilead’s innovation is Por - Zhende Medical and Allmed Med - Shanghai-listed shares spike 20% on ton Pharma, which has been pro - ical Products, two leading produc - Wednesday, after saying that it had viding contract development and ers of surgical masks and medical started mass-producing the active in - manufacturing services to Gilead protective gear, have also seen their gredients for synthesising Remde - for Remdesivir since 2015. On Feb - shares jump as much as 128% and sivir, a leading candidate (developed ruary 7, the Chongqing-based firm 165% respectively this year. Mean - by America’s Gilead Sciences) to treat announced it had received orders while companies including BYD, the contagious disease. from Gilead to support the produc - Foxconn and Sinopec have set up The news came a week after tion of Remdesivir, leading its Shen - production lines for mask-making P h o Gilead began clinical trials of zhen-listed shares to soar 77% when in a bid to fill demand for a product t o :

R e Remdesivir in Wuhan, where a total the market reopened after the ex - that has little to do with their core u t e r s of 761 patients have been enrolled in tended Chinese New Year break. businesses. n 11 Week in China China and the World 14 February 2020

Domo arigatou An unforeseen outcome from the Wuhan virus: better relations with Japan

ith deaths from the coron - another, alluding to the complexi - Wavirus approaching 1,500, ties of the ancient language. any talk of silver linings from the But not everyone was happy with crisis would be inappropriate. the sudden surge in pro-Japanese But one of the unexpected out - sentiment. comes from events is a thawing of “They killed hundreds of thou - relations between longtime antag - sands in the Nanjing Massacre, I onists China and Japan. cannot forgive them,” insisted one Japan is battling the infection at netizen. “Japan is buying Chinese home – reporting 28 cases on land people’s favour,” warned another. and 175 more on the Diamond Others saw specific self-interest Princess cruise ship moored in in Japan’s actions, claiming that Yokohama. However, its gifting of Tokyo was going all-out to stay on masks and other medical supplies good terms with China in the lead- to the Chinese containment effort up to the Olympics in the Japanese was much appreciated by China’s The ship in Yokohama quarantine capital this summer. media. Also getting comment are On Wednesday the mood seemed smaller gestures such as Japanese week there was a flood of praise for to be switching again, with the pharmacies putting up posters urg - Japan on Sina Weibo after it Changjiang Daily even complaining ing China to “stay strong” or teach - emerged that some of the Japanese that the Japanese use of poetry was ers in Japanese schools telling stu - aid had been delivered with lines of “cruel” and that it should be focus - dents to stop bad mouthing China classical Chinese poetry attached. ing more on showing remorse for at such a difficult time. “The mountain range that its actions during its brutal occupa - An official from Japan’s Ministry stretches from you to me is under tion of China – which it described for Health, Labour and Welfare has the same clouds and rain. The same as an “Auschwitz”. also warned against demonising the moon is shining over our heads, The article was quickly removed Chinese population, saying it is the never be apart, instead in one place and widely criticised on social me - virus that is responsible for the cri - we remain,” read one of the notes dia for being “over the top” and “un - sis, not the people themselves. stuck to a shipment to Dalian. civilised”. On February 5 China’s Foreign “Together we stand, my armours Instead the official line from pub - Ministry formally thanked the are thine!” read another on a deliv - lications like Xinhua is that China Japanese for their “sympathy” and ery to Hubei. and Japan share “deep cultural and “understanding”. The verses were taken from liter - historical roots” that create a “strong “What the virus has done is cruel ary sources such as the Book of brotherhood of interdependence of and will not last. What the [Japan - Songs (written over 2,700 years ago) mutual help”. ese] people have done is touching and the works of the Song Dynasty However, some of the netizens and will be remembered forever,” it poet Wang Changling – illustrating quarantined at home with nothing added. On February 9 Shanxi TV an - the extent of the two nation’s shared to do were still frustrated that nounced it was withdrawing the fi - cultural heritage. Shanxi TV had chosen to pull its Red nal 20 episodes of an anti-Japanese Netizens were impressed. “This Sorghum drama. war drama called Red Sorghum be - has given me a new appreciation “If you are going to take that off P h o cause of Japan’s “unprecedented for Japan,” wrote one weibo user. “I the air maybe you can replace it t o :

R e friendliness to China in its fight am touched by the poems even if I with a high quality Japanese soap u t e r s against the epidemic”. And this don’t fully understand them,” wrote opera,” pleaded one. n 12 Week in China China and the World 14 February 2020

The mask slips Contagion coverage unearths old European stereotypes

hey have yet to cause complete Tpanic but the newspaper head - lines that are following the coron - avirus from one country to the next have stoked plenty of fear. And in Europe, one of those head - lines also shone a light on a dark period of history which many would prefer to forget. France’s tabloid newspaper, Le Courier Picard, got itself into a lot of trouble a few weeks ago when it published a cover photo of a Chi - nese woman wearing a face mask alongside the caption “Alerte Jaune” (meaning ‘yellow peril’). The paper was slammed by crit - ics, including a rebuke from A rarer sight these days: Chinese tourists in Paris Stephane Nivet from the Interna - tional League Against Racism and The character was first intro - The object of their apprehension Antisemitism, who told L’Express duced to early twentieth century was a giant Buddha sitting astride that no editor would have dared to readers by the novelist Sax Rohmer, clouds of fire and smoke. The cap - publish the headline “Black Peril” if who were told to “invest him with tion read: “Nations of Europe join the virus had originated from the cruel cunning of an entire East - us in defending your faith and your Africa. So why was it okay to target ern race, accumulated in one giant homes.” China? intellect…. Imagine that awful being, Some 125 years later, anxieties In truth there have been more ar - and you have a mental picture of Dr about China’s rise are more pro - ticles debating actual or perceived Fu Manchu, the yellow peril incar - nounced than ever. So it is not that racism than actually demonstrating nate in one man.” surprising that they have resurfaced it themselves. Such anxiety, of Novels like these played on fears in some quarters as a manifestation course, is another instance of the about the end of European empires of concern about the virus too. supposedly “woke” behaviour that and the rise of the East. One of the In some cases, the racism has exercises a certain section of West - leading protagonists of anti-Asian been dressed up as satire. The com - ern media commentators. They say sentiment was Kaiser Wilhelm II, mentary which has drawn the most their compatriots would be better who did much to popularise the flak in this regard, including from served talking honestly about the term after commissioning a post - the Chinese government itself, issues rather than worrying about card called Die Gelbe Gefahr (yellow comes from Der Spiegel. offending others. But it was not peril) in 1895. This depicted a Ger - The German news magazine that many decades ago when almost manic-looking angel rallying a managed to offend on two fronts. no one batted an eyelid at the sight group of women representing Euro - At the beginning of this month, it of a Caucasian actor, Christopher pean nations, including the UK’s Bri - published a cover story showing a P h o Lee, playing the evil Chinese mas - tannia and Marianne, the symbol of Chinese man wearing protective t o :

R e termind, Dr Fu Manchu. Lee played Republican France, behind the gear and a surgical mask under the u t e r s the role throughout the 1960s. Christian cross. headline “Made in China: wenn die 13 Week in China China and the World 14 February 2020

Globalisierung zur todlichen Gefahr cluster after flying in from a busi - wird [when globalisation becomes ness trip to Singapore. a deadly threat].” Yet if there is a common refrain This was accompanied by an edi - across the European newspapers it’s torial in the magazine – which was less focused on racism and more supposed to be ironic – in describing about a lack of trust in Chinese gov - Chinese people as “yellow-skinned ernment pronouncements relating slit eyes”. to the virus. It asked: “Why do they all have to There is also a degree of exasper - spoon bat soup, bite the heads off ation about the way European gov - snakes and bathe in fresh rats blood ernments have handled the situa - at their markets?” tion. Comments and contributions The Chinese government on the social media coverage high - launched an official complaint and light that many people don’t under - the state media published a num - stand why there aren’t more travel ber of scathing editorials. restrictions, for instance. “I find it “Certain Western media outlets The controversial cover hard to understand why we are ad - and officials are generating a ca - vised not to travel to certain coun - cophony out of prejudice, rumours, Chinese tourists tested positive in tries when they can still come to us,” discrimination and racism,” warned Rome. Since then, it has suspended wrote one in Le Figaro. Xinhua. commercial flights between Italy In this kind of context, specula - It highlighted the Der Spiegel ar - and China and launched a toll-free tion spreads quickly too. The most ticle specifically. However, many of number for worried citizens. One read article in the Deutschland the comments from the magazine’s rang up to ask whether it was safe to Kurier over the past week relates to readers were similarly disgusted, wear T-shirts made in China (it’s un - a secret document reportedly pre - calling out the inherent racism in clear if this was an act of mockery or pared by Germany’s Federal Min - the coverage. a serious question). istry of Health. It is said to examine Europeans, particularly those of Italy’s La Repubblica newspaper the potential health threat from mi - Asian descent, have also responded has also published articles high - grants rescued in the Mediter - by launching a different kind of lighting discriminatory action ranean, “carrying disease in abun - virus: a social media one. In Ger - against Asians. This included a bar dance to Germany”, then spreading many, it is called Ichbinkeinvirus near Rome’s Trevi Fountain, which it rapidly from their temporary ac - and in France Jenesuispasunvirus , put up a sign barring Chinese commodation. for instance. tourists until it was forced to take it Meanwhile, Der Spiegel has re - In Italy, a young man called Mas - down. Chinese restaurants in Milan lated the tale of an unnamed Ger - similiano Martigli Jiang made the are reportedly deserted as well, forc - man politician who ran into a group same point by standing in a busy ing one local newspaper to run a of Chinese visitors in the Bun - Florentine square, sporting a face Q&A explaining that the ingredi - destag’s parliamentary buildings. mask and a blindfold. Next to him ents are sourced from Italy and are The politician could see the visi - was a sign that read: “ Io non sono therefore safe. tors were going to ask for a photo un virus: sono essere unamo: lib - In Holland, a petition of com - and that they would probably want erami dal pregiudizo ”, or in English, plaint garnered 30,000 signatories to shake his hand. He wondered “I’m not a virus: I’m a human: erad - (and counting) after a radio DJ joked what to do. Could he ask if any of icate the prejudice”. that if people don’t want to get the them were from Hubei? He decided Jiang said he was surprised by virus they should stay away from that he couldn’t and willingly shook how many people took off his mask Chinese food. their hands. But he then raced off and embraced him. Florence’s Over in France, one of Le Figaro’s to the nearest bathroom to wash his mayor also called on residents to social media commentators took a own hands as quickly as possible. embrace Chinese tourists to show different stance, pointing out that The German publication came

P solidarity in fighting the virus. in his country “a single Englishman to a clear conclusion. If there is one h o t o :

D On the flip side, Italy was the first has done more damage than legions thing spreading faster than the e r

S p European state to declare a state of of Asian tourists,” referencing the virus itself, it is the fear of catch - i e g e l emergency on January 31 after two British skier who infected an Alpine ing it. n 14 Week in China China Tourist 14 February 2020

Sometimes the house loses Macau imposes half-month casino ban amid coronavirus outbreak

uch was the clamour to get into als, rather than in larger groups. It Sthe Sands Macao on opening isn’t going to get the same kind of night in May 2004 that many of the boost once it gets the all-clear signal casino’s doors were ripped off their this time. hinges. The scenes this week in the Macau’s border with China hasn’t former Portuguese colony couldn’t been closed completely, because have been more different. All 41 of thousands of people move between Macau’s casinos have been ordered the city and the neighbouring mu - to close their doors. The world’s nicipality of Zhuhai for work every gambling capital has effectively day. It also depends on the main - gone into hibernation. land for its supplies of daily neces - Blame the coronavirus, which has sities. However, it was a brave deci - been wreaking havoc across the re - sion to chill the lifeblood of the local gion since spiralling out of control 14 days and 14 nights... betless economy (the casinos provide about in Wuhan in Hubei province about 85% of taxes). 900 kilometres to Macau’s north. in Macau. Wynn Resorts is also los - In other direct action to counter Suddenly, what has made Macau ing $2.5 million a day as a result of the coronavirus threat, Macau’s leg - into such a golden ticket for the the shutdown, Fitch calculated. islature passed a law requiring pas - gaming firms – an inexhaustible At least the casinos have strong sengers on public transport to wear flow of gamblers from mainland balance sheets, pointed out Char - masks, and government officials China (who make up seven in every lene Liu, Head of Gaming Research have been touring urban areas with 10 of its visitors) – is looking more at HSBC. But she warned that it’s too loudspeakers, urging residents to like a fatal flaw in its business early to bottom fish on gaming stay indoors whenever they can. model. stocks, which often overshoot on The lockdown seems to be work - In fact news of the virus had been the downside. It’s also unclear ing, with no new cases of infection hammering the sector for days, with whether the casino closures could reported over the last week. Macau’s a drop of more than 80% in visitor be extended into next month. Even chief executive Ho Iat-seng has also numbers over the Chinese New Year if the gaming resorts reopen on earned plaudits for ordering an holiday week – traditionally the schedule, gamblers may still stay emergency supply of surgical masks busiest time of the year – at the end away if travel seems risky. The eco - as soon as the coronavirus was re - of January. nomic aftermath of the epidemic ported in the city, as well as imple - But with 10 infections reported could mean they tighten their menting a rationing system that has in the few days that followed, the spending as well. made it easier for local residents to Macanese authorities took the dra - After the SARS outbreak in 2003 buy them. “All the masks in Portugal conian step of shutting down the Macau’s casinos quickly motored have been snapped up by us,” Ho gaming sector completely, instruct - back into profit. But that was at a told reporters this month. ing the casinos to shut up shop for time when China’s economy was That contrasts with nearby Hong fifteen days from February 5. looking more robust (Macau’s econ - Kong, where long queues have been Fitch Ratings is predicting a $3.3 omy isn’t in the best of health ei - forming at pharmacies rumoured billion hit to cashflows across the ther, following a 3.2% contraction to have new supplies of masks (the six main casino operators as a re - last year). An even bigger reason for number of infections in the city rose sult, torpedoing American gaming the rapid recovery in 2003 was the this week to 53). There has also been giants like Sands Corporation, which launch of a new visa scheme allow - panic buying of food and toilet pa -

: generates more than 60% of its sales ing the Chinese to visit as individu - per at supermarkets. n 15 Week in China China Consumer 14 February 2020

Coffee plunger Local star Luckin sees stock fall a third in days

he best recipes for stock bub - sold per store each day by at least Tbles need a fanciful growth 69% and 88% in the third and fourth story. Take the South Sea Company quarters respectively. It also inflated in the eighteenth century, whose its net selling price per item by 12%. shares inflated over 10 times in a That allowed it to report profitabil - matter of months on hopes that it ity at “store level” during the third would bring back a vast hoard of quarter – a first for the firm. gold and silver from the Spanish “Luckin knows exactly what in - colonies, despite its modest trading vestors are looking for, how to posi - rights. The fact that it failed to do tion itself as a growth stock with a China in response to the coron - so, and the exposé of fraud, caused fantastic story, and what key met - avirus threat. a tremendous bust, hurting rics to manipulate to maximise in - The Financial Times has also swathes of investors including Isaac vestor confidence,” the report pointed to the impact of the out - Newton. “I can calculate the mo - warned, claiming that its research break on coffee sales as a whole, tions of heavenly bodies, but not team had mobilised more than highlighting last week that global the madness of people,” said the 1,500 people to monitor 620 Luckin coffee futures were down a fifth discoverer of gravity, after running stores and collected nearly 26,000 since the start of the year – driven up £20,000 of losses (equivalent to receipts from customers for its in - largely by fears of slowing coffee $3 million today). vestigation. bean imports from China (which The short-sellers targeting Luckin Investors are divided about the have tripled over the past decade to Coffee have repackaged some of report’s allegations. On February 1 about 65,000 tonnes). these classic themes recently – ac - Carson Block’s Muddy Waters said Until the start of this year, Star - cusing the high-profile unicorn of the findings were “credible” and dis - bucks had been a proxy for growing spinning rosy stories, and calling it closed a short position on Luckin. demand for coffee from the Chi - a “fraud” and a “fundamentally bro - The comments helped to send nese. It reported steady growth in ken business”. In a much-read 89- Luckin’s shares down 37% from a the China market for the three page report doing the rounds on - peak of $50.02. Andrew Left’s Citron months ended in December, with line, the anonymous author alleges Capital – another well-known short- revenues up 13% on the back of a 3% that the Xiamen-based coffee chain selling hedge fund – says the find - increase in same-store sales and a cooked its books to convince in - ings fall short on accuracy, however. 16% surge in store count nationally. vestors that its business reached an Left, who is long Luckin’s shares, told The coronavirus will surely put the inflection point during the third Reuters in a subsequent interview trend into decline – though analysts quarter of 2019. The author con - that the company’s stock price could will be looking at Starbucks’ part - tends that Luckin dangled the double to $60 as China recovers nership with Ele.me, the food and prospect that it would soon dial from the coronavirus outbreak. In beverage delivery platform, to see if down its cash-burning promotions Wuhan alone, it has been forced to worried consumers are calling in and move into profit, helping it jack shut 200 outlets. more orders from home. Delivered up its Nasdaq-listed shares by more Here the perspective is more that orders made up 9% of Starbucks’ than 160% in a little over two Luckin’s stock plunge is down to the Chinese sales last quarter. But even months and raise another $1.1 bil - broader fear of how China’s con - that lowish percentage will face P h o lion through bond sales and a sec - sumer sector is being battered by pressure: if half Starbucks’ outlets t o :

I m

a ondary placement in January. the spread of the virus. After all, have stopped brewing that will slash g i n e

C According to the report, Luckin Starbucks is reported to have closed the number of locations from which h i n a exaggerated the number of items half of its 4,292 stores in mainland online purchases can be fulfilled. n 16 Week in China Society and Culture 14 February 2020

Commercial break Wuhan virus could see wave of failures among struggling film studios

hen production studio WHuanxi Media found out in late January, ahead of the Chinese New Year, that the release of the family-friendly blockbuster Lost in Russia was cancelled because of the coronavirus crisis, it quickly struck a deal with internet giant Bytedance. For Rmb630 million ($91 million), the studio sold the rights to stream the film on Bytedance’s Douyin (also known as TikTok out - side of China), Toutiao and Xigua Video platforms. By January 27, local media was reporting that Lost in Russia had received 600 million views (Bytedance’s three apps were also among the top five most down - loaded on Apple’s China App Store in January, partly driven by the movie’s availability). Last week Enter the Fat Dragon, a Liu Yifei: her Mulan movie has been delayed by Disney due to Covid-19 movie scheduled for release ahead of Valentine’s Day, quickly followed industry has few other revenue op - China, which operates giant screens, suit. The film, which features action tions the situation is more a case of have also dropped 21%, while Bei - star Donnie Yen, struck a similar xue shang jia shuang which means jing Enlight Media, one of China’s deal with iQiyi and Tencent Video ‘adding frost to the snow’, com - largest studios fell 15%. for an undisclosed amount. It will mented National Business Daily. The impact of the virus is also be - cost just Rmb12 for non-subscribers The outbreak all but wiped out ing felt in Hollywood, which is in - (and half that for subscribers) to ticket sales during the seven-day creasingly relying on Chinese audi - watch the film on the two online Chinese New Year holiday – a period ences for growth. Disney has platforms, reported National Busi - that has accounted for 10% of described the epidemic as a head - ness Daily. At a time when cinemas China’s entire annual box office tak - wind for the company, which has across the country have largely ings historically. This year, ticket also closed both its theme parks in stayed shut, releasing a film online sales on the first day of the Chinese Shanghai and Hong Kong. is what the newspaper calls “a strat - New Year were just over Rmb1.8 mil - The studio will likely delay the egy that keeps losses at a mini - lion – less than a hundredth of the release of its much-anticipated re - mum”. same day in 2019 (largely because make of Mulan , which stars actress Some industry observers even be - so many cinemas were closed, to Liu Yifei in the lead role, from lieve that the virus outbreak could prevent further contagion). March to a later month. Pixar’s On - P h o undermine the theatre business Shares of Wanda Film, a cinema ward , which is set for a March de - t o :

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a model, which sees a film playing in operator controlled by billionaire but in the US, will likely be pushed g i n e

C cinemas before making its debut Wang Jianlin, have plunged 27% back as well. h i n a online. But at a time when the film since January 17. Those of Imax Meanwhile, some of the domestic 17 Week in China Society and Culture 14 February 2020

film studios – already wary of fund - costly. The number of people in a they founded more than a decade ing new productions after the tax crew can range from a hundred peo - ago to be China’s equivalent to evasion scandal in 2018 – struggle ple to as many as a thousand. Chen Warner Bros (see WiC34). forward on life support. According Yitao, a TV producer, lamented in a Nevertheless, for some studios, to data from Itjuzi.com, which mon - weibo post: “Each day we are not especially those more specialised in itors China’s internet activity, the working we lose Rmb500,000. I television, the virus has presented a country’s culture and entertainment don’t know how long we can endure partial opportunity. Stay at home industry saw investment funding before shooting resumes.” families are watching more TV and drop by 85% in the first half of 2019 In a letter to employees, Chen video streaming than ever before. to slightly over Rmb8 billion. Lizhi, the chief executive of the Bei - “In the past few years, the overall “After 2019 the industry itself is jing-based studio MaxTimes, supply of the TV drama industry far already suffering from a shortage of wrote: “We anticipate the industry exceeded demand. At present, there funds. The arrival of the epidemic will soon experience a very big cri - is still a large number of dramas in has undoubtedly increased the dif - sis… a systemic crisis. Let’s think the backlog so this is the perfect op - ficulty in financing,” one insider about it, the whole industry just portunity to digest all the series that told the China Daily. lost a holiday period that’s worth have yet to air. Such is the case of Others concurred: “Right now, as much as Rmb10 billion. More - many recent hit shows like Find with a black swan event [i.e. the over, all the production has Yourself and Three Lives , Three coronavirus outbreak], winter has stopped. So that suggests the first Worlds and The Pillow Book ,” the completely set upon China’s film in - half of 2020 is basically ruined. We China Daily noted dustry. Not all of the film produc - believe that in the foreseeable fu - Others are still hopeful that the ers, cinema operators and medium ture, there will be a lot of bank - film industry will swing back into to small cinema chains in third- and ruptcies. And it will affect the life once the virus no longer poses a fourth-tier cities are likely to sur - whole supply chain – from produc - health threat. “Optimistically, after vive the freeze,” predicted New Bee, tion all the way to cinemas. No one the outbreak, it will usher a wave of a film blog. is spared. No shows, no production, audiences that have been starved of While the country struggles to that equates to death,” he warned. entertainment back to the cinema, stop the virus from spreading, TV The embattled Huayi Brothers is which will bring plenty of opportu - and film productions have come to one of the studios at the top of the nities to the film and TV industry a grinding halt. In late January, danger list. The company an - and give cinema operators a chance Hengdian, China’s main filming nounced recently that it had lost as to bounce back. Whoever can sur - centre, announced that all of its stu - much as Rmb3.9 billion in 2019, up vive this ‘ice age’ will determine life dios would close until further no - from Rmb1.1 billion a year before. from death,” reckons New Bee. tice to protect staff and film crews. Also worryingly, the company’s two But at a time when the reputa - The news came shortly after it made founders Wang Zhongjun and Wang tion of South Korean cinema is at an offer of free studio access to pro - Zhonglei have pledged a combined an all-time high – after Parasite be - duction crews working on contem - 92% of their shares in the studio came the first foreign language film porary and sci-fi-themed movies in against loans, which suggests that to win Best Picture at the Oscars – a bid to boost its sagging business. further declines in its fortunes studios in China will be looking on Suspending a production is could see them lose control of a firm with a blend of envy and self-pity. n

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Week in China

18 Week in China And Finally 14 February 2020

Lots of homework Virus crisis brings surge in stay-at-home study

n Mandarin, there is a mix of there was speculation that the on - Ivariations for the word “busy”. line education sector was starting to Slight subtleties in the ‘changing’ struggle. As the paying customers radical can come to mean: “hur - for the education platforms, par - Yu Minhong, New Oriental’s boss ried”, “bustling” or “engaged”. But ents in some cities have been keeping busy is the norm for many turned off by aggressive advertis - Oriental’s 80,000 employees have students in China – and as far as ing campaigns or simply bewil - been diverted towards online in - getting an education is concerned, dered by the wide range of options. struction instead – albeit with com - a coronavirus is no excuse for The industry is much more com - plaints that the company’s servers slacking. petitive than in the past and that led were underprepared for the result - As thousands of schools have investors to drop some of the fringe ing surge in streaming bandwidth. closed their doors, online education players. Concern over unpredictable Despite this, New Oriental On - platforms have been frantically government edicts relating to pri - line’s share price increased by over busy trying to adapt to the sudden vate education spooked some ven - 220% in the week to February 6. Ac - dependence on web-based tuition. ture capitalists too. cording to Sina Finance, that gave it Keen to be seen supporting the But there is nothing like neces - a market value of $18 billion. In 2019 cause, many of the top players have sity to change perceptions and now its revenue was $3.1 billion. been offering free tuition online. the sector’s services are needed One fear over the surge of inter - VIPKID announced at the end of Jan - more than ever. est in the sector is inexperienced op - uary that it would offer 1.5 million Smaller companies offering tu - portunists entering the market. Chu free courses to children aged from ition online for Chinese students Zhaohui, a researcher at the Chinese four to 12. Starting from February from Oxbridge tutors, such as UK Academy of Educational Sciences, 10, “until schools are safely re - Boarding School Admissions, are warned parents not to “blindly fol - opened”, these free classes will be seeing unprecedented interest. low online trends, become swept taught live four times a week. Chil - One Cambridge-based tutor, who away by exaggerated publicity, and dren in Hubei province and the off - works for various Chinese education to seek out reputable, credible and spring of medical workers are being companies told WiC: “The demand stable online education institu - offered priority access, the company for online tuition has soared. Not tions”. said (see WiC378 for our first article only is it ‘prime time’ for UK Inde - But a spokeswoman for VIPKID about VIPKID’s services, which pri - pendent School entry examinations, put a more positive spin on the sit - marily connect teachers in the US but the outbreak has meant parents uation in comments to the South with students in China via stream - are saturating their children’s time China Morning Post. “The influx of ing video). with extra tuition. One consultant users will force online education in - The industry is still relatively messaged me to ask if I have time to stitutions to polish their teaching young, so forecasting the effect of teach for her friends’ company as content and technical capabilities, the Wuhan virus on demand is they don’t have enough tutors to improving the experience and effi - tricky. The China Internet Network meet demand.” ciency of online learning,” she said. Information Center had previously The biggest brands are having to If that starts to happen, the mar - predicted that online education react to the coronavirus crisis in dif - ket for online education services in platform users would reach 305 mil - ferent ways. New Oriental, one of China could grow faster than any - P h o lion in 2020, an increase from 259 the pioneers in the sector, has also one had dared to forecast, even t o :

I m

a million in 2019. This target now suspended its more traditional when more of the country’s schools g i n e

C looks likely to be revised upwards. classroom-based services, for in - start to reopen after the coronavirus h i n a However, before the virus hit, stance. That’s meant some of New comes under greater control. n 19 Week in China The Back Page 14 February 2020

Photo of the Week In Numbers

20% The proportion of clinical trials done by multinational drugmakers in China in 2019, up from 10% five years ago, Reuters reports. The value of deals and JVs between international companies and China-based biotechs soared to above $10 billion last year from $3.2 billion in 2015.

55-66 cents The expected decline in Carnival Corp’s earnings per shares for 2020, says the cruise firm, which has suspended operations from ports in China due to the Covid-19 outbreak. More than 200 people P h o

t aboard its Diamond Princess cruise ship o :

e are currently infected with the disease. u t e r s Fuming workers: staff disinfect an office in Shanghai following the 3.8% China’s fiscal revenue growth in 2019, outbreak of the coronavirus reaching Rmb19 trillion ($2.7 trillion). This rate of growth misses the annual target of 5% and is the slowest since 1987. Caixin Winning the battle attributes the slowdown to tax and fee cuts, and predicts that more state-owned “State capacity and a collective culture are the two uniquely strong assets will be sold off to boost government characteristics of China’s political system and social construct that will coffers. ultimately enable the country to successfully combat this crisis” 17-20% * Shanghai-based venture capitalist Eric Li tells Estimated fall in car sales in China during Lunch with the FT last weekend that the Wuhan the first quarter as a lot of factories face coronavirus is the “medical equivalent of a natural full-scale shutdowns, according to Citic disaster”. Li, who set up his Chengwei Fund in 1999, is Securities. It expects a 15% rebound in one of China’s most high profile ‘public intellectuals’ demand in the April-June period, assuming when it comes to arguing a Chinese perspective in Western forums. the outbreak will be under control by then.

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