1 Editor’s Note 2 Talking Point 6 The Week in 60 Seconds 7 China Consumer Week in China 9 Agriculture 11 Telecoms 12 China Tourist 13 Auto Industry 15 Cross-Strait 1 April 2011 16 Property Issue 101 17 Society and Culture 21 And Finally www.weekinchina.com 22 The Back Page Li & Fung: the only way is up m o c . n i e t s p e a t i n e b . w w w
y b g u in Supply chain powerhouse warns prices for Chinese manufactured goods must rise o k y n o a t B s t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Editor’s Note 1 April 2011
Special April Fools’ Day issue
ast week was something of a milestone for WiC as it was the publication of our L100th issue. Since our launch in February 2009, we have published well over 2,000 articles, which we hope have enhanced your understanding of China. That’s because this week we intend to put that understanding to the test. As most readers will be aware, there is a longstanding tradition in Western me - dia of running a fake story on 1 April i.e. April Fools’ Day. Given that this week’s WiC falls on that date, we’ve decided to include an April Fools’ story (i.e. one we’ve made up and that isn’t true). However, to make it more interesting we’ve also included a series of articles that, while true, will strike many readers as highly implausible. Regular readers of WiC will have become aware that China generates a number of such stories! So are you smart enough to spot the fake? We’ll give away an iPad2 to a reader who can spot which was the real April Fools’ story. Entries must be received by Thursday April 7 and must state the headline of the article which you think is our fabrication. Send your entries to:
Those that get it right will be entered into a lucky draw, and the winner will receive an iPad2.
We’ll let you know which was the actual April Fools’ story in the next issue.
Good luck,
Steven Irvine, Editor
Competition rules: One winner will be drawn at random from the list of those answering correctly. He/she will receive an iPad 16GB. All entries must be received by midnight Hong Kong time, Thursday April 7th. The winner will be notified within 3 working days. The competition is open to signed-up subscribers of WiC only. WiC's decision is final. No correspondence will be entered into.
1 Week in China Talking Point 1 April 2011
Stuff’s about to get pricier Li & Fung says era of cheap Chinese manufacturing is over. Is it bad news?
The boss of this factory will need to pay more to get more workers like her...
“ he biggest topic on the minds Hence Rockowitz’s analogy: Face- impact of higher salaries for Chi- Tof everyone in this business is book connects people but Li & Fung nese workers. Li & Fung executives that higher prices are really here connects factories and retailers, with did something similar, in talking to stay,” Li & Fung president Bruce a business model based on placing about the price pressures in their Rockowitz warned attendees at client orders among its 15,000 sup- own business. last week’s company results pres- pliers, and then shipping them the The current news cycle kicked off entation. finished items. in mid-summer last year, following Li & Fung started out trading So, when its top executives warn a series of strikes and subsequent porcelain and silk in 1906. But in of new era of higher prices, it is wage hikes. Two companies – Fox- more recent times it has proven one worth paying attention. conn and Honda – bore the brunt of of the biggest winners in the gar- press attention, and both appeared gantuan growth of China sourcing. Blame wage increases? to buckle to worker demands, offer- With ‘the China price’ sweeping all Clearly, there are other factors too, ing salary increases exceeding 20%. Photo Source: Reuters before it, so Li & Fung has become like higher commodity prices. But It wasn’t just a case of high-pro- one of the biggest suppliers of most of the headlines recently (in- file employers forced into greater clothes, toys and furniture to retail- cluding a few of our own, admit- generosity. China’s 31 provinces ers worldwide. tedly) have concentrated on the boosted their minimum wage levels 2 Week in China Talking Point 1 April 2011
by 24% last year, according to Yin Weimin, the country’s minister for human resources and social secu- rity. Six provinces have already topped up the threshold again this year, and the central government is targeting an increase in minimum pay of 13% a year through to the end of 2015, Yin says. The sense is that this is not a cyclical thing. Li & Fung talks about changes in the wage environment meaning an end to 30 years of low prices for manufactured goods. Still, only a year or so before re- ports of the wage spiral began, the narrative was somewhat different, with news of 23 million migrant workers laid off as a result of the global economic crisis. Most then trudged back to their home provinces and many of those who stayed in work had their pay frozen. This has led to suggestions that the flurry of recent rises is more a case of wages playing catch-up. Recent research from HSBC is also more circumspect in reviewing whether wage inflation is really breaking new ground. Announcing minimum wage in- creases is not the same as delivering them, suggests Qu Hongbin, HSBC’s chief economist for Greater China, particularly when close to 70% of the workforce is employed in small or medium-sized private firms (where mandatory minimums are not always going to be rigorously applied). Local governments have so many targets to meet that enforcing the wage rules may not top their priorities, either. Further, Qu believes that much of the talk of wage inflation torpe- doing Chinese cost competitive- ness is overplayed. Yes, wages have increased, especially in the manu- facturing sector (there’s less sign of similar increases in service in- dustries, HSBC notes). But fixating on factory wages in absolute terms misses the bigger picture on the 3 Week in China Talking Point 1 April 2011
price of Chinese goods. Industrial output in the last 18 months has Planet China grown faster than wages, meaning Strange but true stories from the new China that the unit of labour cost re- quired to produce each unit of out- put has actually fallen. NEW MENU. Clever gimmick or another indicator that the days of cheap labour are becoming a thing of the past? Beijing’s Yaoqin restaurant has got In laymen terms: productivity is local media attention with a high tech solution that has seen a downsizing of improving faster than wages are its waiting staff. And as the Oriental Morning Post excitedly reports, it rising. involves the iPad. Diners are now presented with Apple’s tablet instead of a paper menu. The iPad menu has pictures (delicacies include pickled shrimp But bigger picture: what about and foie gras eggs) and helpful information, such as the number of calories labour shortages? in the dish. The restaurant says it has used the new system for six months One of the key themes to the wage and seen diner numbers increase 20% as a result. The newspaper reports inflation story is that China is run- that other restaurants around the country are following suit, with cost ning out of workers. Where once reduction the main goal. A catering industry insider reckoned that it costs there were millions seeking factory Rmb10,000 per year to use paper menus, which need to be frequently jobs, now recruitment is said to be updated, reprinted and replaced. Although an iPad costs Rmb3,000, it has more of a challenge. Towns and fac- the advantage that it can be updated as and when required at no cost. tories are waging PR campaigns to attract newcomers (see WiC96) but even so, more migrants than ever ing about Arthur Lewis, who won a It depends where you look… are opting not to return to the as- Nobel Prize for a 1954 paper that Certainly, it seems to be a more sembly line after holiday (see suggested developing countries can mixed picture than the bolder head- WiC50) festivities. grow their industrial sectors for lines allow. Mixed enough, in fact, One response for the bigger em- years without wages going up much, for human resources minister Yin ployers is to move inland in search as long as they have plenty of sur- to offer two rather different sound- of lower-cost workers. Again it’s plus agricultural labour to add to bites on the labour market in the Foxconn in the news, with two mega the workforce. space of a few days. plants under construction in Henan But when rural supply peters out, At last month’s NPC Yin told the and Sichuan. Another is to leave industrial wages soon begin to rise media throng that China’s shortage China altogether and last month sharply. Academics first started of workers had become a “structural Bloomberg presented figures from talking in earnest about China’s problem” and was spreading from the Japan External Trade Organisa- pending Lewisian moment about the manufacturing zones in the tion to argue that China’s wages five years ago. Plenty more are now eastern coastal areas to central and now occupy the “middle range” of joining the debate. western China. Asian labour costs. So are we there yet? Some ques- But a week later at the China De- Average monthly pay for the tion whether China’s rural worker velopment Forum, Yin was more fo- most recent data (now more than a surplus is fully depleted, including cused on the need to create jobs: year old) shows Shenzhen ($235) and Kam Wing Chan at the University of “There is a workforce surplus of Shenyang ($197) still far below Washington. Last year, Kam esti- about eight million people in rural Seoul’s $1,220 or Taipei’s $888. But mated a rural working-age popula- areas and 24 million urban people the two Chinese cities were also well tion of close to 490 million. He waiting to be employed.” above the $100 earned in Ho Chi assumes a low labour force partici- Yin’s eight million rural surplus is Minh City or the $47 in Dhaka. pation rate of 75%, subtracts about some way from Kam’s own much Correspondingly, Li & Fung says 150 million workers needed to sus- larger calculation, of course. But China is now responsible for only tain China’s agriculture at current even at this low figure, the People’s 25% of its clothing sourcing, as technology levels, and then another Daily expresses concern. “China’s Bangladesh and Vietnam rapidly 80 million working in non-farm job market is oversupplied,” it gain share. jobs in townships. Even if stimulus warns. The employment situation is campaign spending has created an- “very serious”. So, an irreversible trend? other 30 million jobs, Kam argues, So which is it – feast or famine? More likely it’s the Lewisian Turning that still leaves a rural surplus of There is no authoritative assess- Point, say economists. They’re talk- well over 100 million workers. ment that WiC has seen. But clearly, 4 Week in China Talking Point 1 April 2011
there is not the endless flow of curate to say China’s young labour more cash in their pockets. workers once remarked upon as in the countryside is exhausted,” Li & Fung anticipates something China’s great competitive advan- Wu Guobao at the Chinese Academy similar, and is undertaking a strate- tage. And where supply is showing of Social Sciences told CBN. “A large gic shift to become less dependent greatest strain, says Zhang Zheng, number of young people choose to on the China-outbound trade. an academic at Peking University’s stay at home.” Clients in the US and Europe cur- Guanghua School of Management, rently make up 90% of its customer is among those best suited to the But isn’t this part of a plan? base, says Rockowitz. But he expects fast-paced, repetitive work of fac- True: higher wages are a policy ob- many more Asian clients to emerge tory assembly lines. jective for the Chinese leadership. over the next three years, as the This “golden age group” of 35 Pay has not kept pace with increases company builds out much more of year-olds-and-below is now just in GDP in recent years. Companies, a two-way supply pipeline. As part about “used up”, Zhang told China rather than their employees, have of those efforts, the company has Business News this week. been the ones cashing in on the been investing heavily in its China- It’s here where news of strikes blockbuster growth. based distribution capability which and wage concessions has been President Hu and Prime Minister now covers 150 cities. most prominent. And it’s also here Wen have tried to redress some of But the more negative scenario for where some of the biggest prob- this, and they also want to see more the rest of us? The end of an era of lems loom ahead, as the one-child economic development in the Chi- cut-price consumer goods, with policy begins to bite into the dwin- nese interior, to close some of the toasters, televisions and tablet PCs all dling pyramid of China’s working wealth gap with the coastal zones. starting to cost more. Pessimists population. There are warnings Similarly, international investors warn that Chinese wage increases are that the supply of twenty-some- now scan the news for signs of bur- bound to feed through into higher things could fall by 30% over the geoning Chinese consumer demand. prices for exports. And at precisely next 10 years. The idea is that this will become a the wrong moment: coupled to the Aside from fewer potential work- new engine for global growth, and increased Chinese appetite for com- ers, there is also less willingness also allow for a realignment in the modities, this will stir top line infla- among migrants to accept low-pay international economy that will see tion in Western economies, at a time factory employment, especially as China export less and consume a when growth prospects are far from living costs rise in the cities faster great deal more. Clearly, that is more inspiring. than wages, and more options be- likely to happen if millions of Chi- Perhaps it is the end of an era, come available at home. “It’s not ac- nese are being paid more, and have after all. n
New poll: China’s scary
China has long been associated in the Western psyche with the panda bear, a creature that you’d be hard pressed to call intimidating. However, that may now be increasingly out of sync with the popular mood. A new BBC global poll (which surveyed 28,000) has found that many in the West are expressing alarm at China’s rise, and a majority of those polled in the US, France, Canada, Germany and Italy expressed negative views about China’s growing economic power. The BBC said Who’s afraid of the big, bad panda?
Illustration: www.benitaepstein.com that this number rose significantly over an identical poll it did in 2005. The broadcaster blames the “psychologically unsettling” recession in the West for in all five African nations surveyed. “Across the the changed perception – with China now seen less as developing nations polled, positive views of China an opportunity, and more a threat. were more numerous than negative ones – with the By contrast, it reports, China scored very positively exception of just one country, Mexico,” says the BBC.
5 Week in China The Week in 60 Seconds 1 April 2011
Hu calls for peace The major news items from China this week...
PC maker Lenovo has thrown down the gauntlet to 1US-firm Apple, when it began marketing its rival tablet computer – LePad – this week. The device is so far only available in China, and follows the successful path already set by Lenovo’s LePhone, an iPhone challenger. The company plans to sell 1 million of the tablet PCs in China this year.
China’s largest bank, ICBC has lent $98 billion to 2local governments since 2008, the bank’s Chairman Jiang Jianqing has told the Financial Times. That means as much as a tenth of the bank’s loans are tied up in local government projects that many believe don’t have the cash flow for repayment. Jiang said he Up, up and away: Air China announced record profits didn’t think the loans posed a systemic risk to the banking system, and that loans would return to nor - African trade with China speeded up last week as mal levels within three years. 4Moller-Maersk subsidiary Safmarine announced it was adding three more China port calls to its container Another of the big-four lenders came out with some shipping business with the continent. The move is ex - 3unequivocally good news for shareholders this pected to shave at least a week off transit times, and will week. Newly listed Agricultural Bank of China revealed support the movement of manufactured goods and that profits were up 46% on the back of stronger rural some raw materials. In other African news, CNOOC paid branch performance. “Around three years ago, 70-80% $1.47 billion for a 33% stake in Tullow Oil’s Ugandan of our branches at the county level and below were loss- fields. They are expected to eventually produce 200,000 making but now 96% of these branches are making barrels per day, the equivalent of 4% of the amount of money,” Xiang Junbo, chairman of ABC, told the Finan - crude China imported last year. cial Times. “This has been a life-changing, fundamen - tal transformation.” State-owned carrier Air China has reported company 5profits more than doubled to more than $1.8 billion last year, as record numbers of Chinese took to the sky.
It’s not often you get to mention John Lennon and 6Hu Jintao in the same sentence, but the Chinese leader this week said “Give peace a chance”. He was re - ferring, of course, to Libya. He told visiting French pres - ident, Nicolas Sarkozy that China favoured a ceasefire.
Good news for smaller businesses, with Far East Hori - zon becoming the first Chinese leasing company to
P 7 h o t
o list in Hong Kong in a $658 million IPO. Far East provides
S o u r equipment financing for small and medium-sized com - c e :
R e panies. (SMEs often find it difficult to raise funds from u t e r s Has lent $98 billion to local governments Chinese banks) . n 6 Week in China China Consumer 1 April 2011
Yum increases its slice American restaurant giant sees huge growth of Pizza Hut chain in China
“ have lunch at KFC twice a week it was one of Pizza Hut’s most popu- Ibecause there’s always one close lar items in China, says Global En- by. But when I’m out on a date and trepreneur. But the magazine also want to impress a girl, I take her to says it was a loss-making item on the Pizza Hut,” says Su Yi, a 28 year-old menu, with Rmb32 ($4.80) charged lawyer in Beijing. for a single visit to the salad bar. As a Before you call the man a cheap- result, frugal customers took to skate, you should know that Pizza building “salad towers” to maximise Hut in China bears little resem- their bowl (wedging cucumbers blance to its US counterpart. The round the side was a favoured ploy). decor is modern, with atmospheric Apart from leading to waste, Yum lighting and cushioned booths. The also felt this behaviour failed to fit fare on offer is also different. Cus- with its high-end positioning. tomers can choose from a 106-item Pizza Hut also tries to pull in menu that even includes French- business with a nod to Western cul- style escargot. ture. It has lured diners at Christ- “Pizza Hut is the cheapest of the Literally queuing round the block mas with seasonal fare, decorations cheapest restaurants in the US, but and employees dressed as Santa. At in China, it is seen as a classy, up- chains, but management revealed Easter, Pizza Hut employees don scale place for dining,” Shaun Rein, that Pizza Hut recorded same-store bunny ears and kids paint eggs in managing director of the China sales up 14%, the best performer of the restaurants. Even Halloween re- Market Research Group, told the its brands in China. ceives the Pizza Hut treatment: cus- New York Times. Pizza Hut’s strategy is to go after tomers can decorate pumpkins, says The pizza chain – which is owned younger, more sophisticated diners the Wall Street Journal. by Yum Brands – now does about as in the country’s big cities. “For many Pizza Hut has some foreign com- much business at lunch as it does at customers it is their first experience petition. Papa John’s, the world’s dinner, and afternoon tea is also with Western food,” says Sam Su, third-largest pizza chain by sales, hugely popular. As a result, outlets who heads Yum’s China division. had opened 155 restaurants across in China are also at least twice as And to appeal to local tastes, Pizza 32 cities as of September 2010, and profitable as their counterparts in Hut offers Western food with Chi- plans to double that number to 300 the US, says 21CN Business Herald. nese characteristics. To go with your over the next three years. With Pizza That helped Yum China to overtake Super Supreme deep-crust, you will Hut still the clear industry leader, its rival US division as the biggest find more exotic dishes like teriyaki Papa John’s says it will step up its driver of operating profit last year. octopus and quail egg (Rmb15) or franchising efforts to grow store Until recently, much of the focus Japanese-style vegetable tempura numbers. That starkly contrasts on Yum Brands had centred around (Rmb35). For steak lovers, the chain with Yum, which has preferred to KFC, China’s largest fast-food chain offers grilled sirloin for Rmb49. focus more on building a wholly- with more than 3,000 stores. But To enhance its more upmarket owned network of restaurants. Photo Source: China Imagine with more than 500 restaurants in image, the company has also But like Pizza Hut, Papa John’s is 130 cities, Pizza Hut has also become dropped the all-you-can-eat salad hoping that a menu that adapts to an important contributor to Yum’s bar, one of its signature offerings in local tastes will help too. business model. The company does other parts of the world. That will How about pizza with pork not disclose sales for individual disappoint many regular visitors as knuckle and pineapple? n 7 Week in China China Consumer 1 April 2011
Not to all tastes A fast food chain makes big bucks from duck neck
he Chinese are known for their Zhou himself has put plenty of Tsense of adventure when it thought into his business model. comes to what they eat, even for Most companies selling duck neck items that would soon find their are franchise operations. Zhou, how- They eat it all the time... way into waste disposal in many ever, believes that success depends countries. on consistency in quality and serv- try, says Private Economy News. Indeed, some animal parts – re- ice. So he has chosen to manage his Still, the biggest headache for jected by Western consumers – en- own stores, exerting full control of Zhou is copycats. According to the joy much more respected status. So their operations. Manager’s Daily, there are now sev- it is with chicken feet and another The strategy brought problems as eral stores claiming the Zhouheiya local favourite, yabozi, or duck neck. well as opportunities. First Zhou had identity in Guangzhou even though Duck neck is a common local to invest in developing his own pro- the company has yet to open an out- street food, where it is chopped cessing facilities. In 2006, the com- let in the city. Zhou complains that into small pieces and packed in pany invested in three food-pro- combatting the fraudsters is a com- plastic bags. cessing centres in Wuhan, Jiangxi plicated task, as the barriers to entry But it can also be a lucrative busi- and Shenzhen to supply the grow- make it particularly vulnerable to ness. Zhouheiya, a Hubei-based firm ing chain of Zhouheiya restaurants. counterfeiting. His main strategy is that specialises in selling varieties Zhou also implemented an enter- to open new stores at a faster pace, of the delicacy, recorded Rmb400 prise resource planning (ERP) sys- and then to keep his customers by million in sales last year. That tem to track sales and inventory demonstrating the superior quality brought it to the attention of do- across his store network, something of his product. The plan is to in- mestic private equity firm Tiantu relatively unusual for most busi- crease the number of stores to 400 Capital, which recently invested nesses of similar size. by 2012, using the cash raised from Rmb60 million in the company. Zhou’s foresight paid off. With his private equity investors. He is Zhouheiya was founded in 1997 its uniformed workers and famil- also talking about a listing by 2015. by Zhou Fuyu, who still runs the iar decor, Zhouheiya now delivers That looks like a pretty rapid pace company today. Using his own duck duck neck that tastes the same in for expansion, given that it has neck recipe, Zhou opened his first Hunan as it does in Beijing. Mar- taken almost 15 years to get half way store in his home city Wuhan. The keting its meat as tasty and healthy, to the new target, and one risk must shop began drawing crowds from Zhouheiya appeals to office work- be that Zhouheiya loses some of the early on. Capitalising on the oppor- ers, especially women. That is centralised oversight that has tunity, Zhou opened seven more somewhat different to the standard helped the brand to stand out. stores within the province. customer base for yabozi, which is Not so, says Zhou, who promises As with many small businesses, more male, and often beer-drinking. to remain fully focused on the de- along with expansion came But the problem with the self- tail. He says that this will help him headaches. Zhou admits to South- managed model is a much slower win his war with the copycat duck- ern Weekend that he lacked educa- expansion rate. Zhouheiya’s neckers too. tion, and could only get so far with biggest duck neck competitor “You can’t replace the tyres for a Photo Source: China Imagine a can-do attitude. Zhouheiya has Juewei Yabo has now opened 3,000 sportscar with those of a tractor,” he grown to more than a 1,000 em- stores in over 20 cities in just six tells Private Economy News, “and I ployees, and Zhou hired new man- years by recruiting franchisees. insist that every part of the process agement to help him cope with the Zhouheiya, on the other hand, has is perfect. Not many counterfeiters expansion. only 200 stores around the coun- can do that.” n 8 Week in China Agriculture 1 April 2011
Ding Lei brings home bacon Internet entrepreneur has ambitions to revolutionise pig farming
t’s been two years in the making, Ibut Ding Lei’s ambitions for per- fect profits with pork finally seem to be getting off the ground. The billionaire internet entrepre- neur first announced back in 2009 that he would show the country how to farm pigs organically, in the wake of the milk powder scandal. Now, with the papers full of tainted-pork stories, he’s back with news on his promised venture. Phase one – get- ting the farmland for his pig farms – is now complete. Ding’s commitment to pig farm- ing has often been questioned. Some pooh-pooh it, saying that he isn’t doing much more than raise stock for his family’s consumption. Others have seen it as a way to draw attention to his web portal, NetEase. But Ding insists otherwise; that he will bring about a “revolution” in the way that China farms pork. What caused the initial delay in Pondering how to clean up China’s food industry: Ding Lei his plans? Compensating farmers for their land and dealing with other Pig farming is no niche business in But if he’s successful, Ding’s land purchase issues was a long China, which is already estimated to farm could go some way to chang- process, Ding told the China Daily. raise half the world’s pigs. But the re- ing that reputation. “Our goal is to His team also spent time investigat- cent scandal over the illegal additive build a NetEase pig farm that can be ing pig farming methods in Europe, clenbuterol (known colloquially as replicated in other places rather the US and in China itself. ‘lean meat powder’ because it pro- than be just a one-shot deal,” says One thing Ding’s team won’t have motes muscle development at the ex- Ding’s assistant Zhou Jiong. “In the missed in their travels: intensive pig pense of fat) has further damaged the farm, we will achieve precise con- farming, often relying on antibiotics industry’s reputation (see WiC100). trol of temperature and humidity, and hormones to boost animal bulk. “It’s really a big problem,” analyst so that pigs live in a most comfort- The largest hoggeries also generate Pan Chenjun told the Associated able environment.” huge amounts of manure, which Press. “It’s not reported frequently Reportedly, the farm will also can pollute waterways and neigh- so people sometimes think it’s not a only use organic pig feed and will Photo Source: China Imagine bouring land. big issue but actually it’s quite wide- avoid growth-stimulating antibi- Water pollution from pig farms spread” (see issue 61 for WiC’s earlier otics. “We can even trace which pig even saw the industry banned from warning on clenbuterol, and how our meat comes from,” Mao Shan, the southern city of Dongguan two athletes were blaming dope test re- the project’s general manager, told years ago. sults on their sausage diets). Kyodo News Service. 9 Week in China Agriculture 1 April 2011
Li thinks the milk will be popular with consumers, since human milk contains nutrients that are benefi- cial for the body’s immunity, as well as the central nervous system. It could also appeal to wealthier consumers. “In ancient China, only the emperor and the empress could drink human milk throughout their lives,” comments Li. “It was believed to be the height of opulence.” The GM herd was issued with a bio-safety examination certificate last year, and lab tests over the next two years from the Department of Agriculture will determine if it’s safe to sell to the public. Still, Li fears that bureaucracy could slow the com- mercialisation of the new product, and that it could be 10 years before it reaches supermarket shelves. Ding reckons he can improve on this method of husbandry... Just as well, some sceptics might counter. As regular readers of WiC Ding claims he will share the have been inspired: other internet will recall, China’s track record in farm’s design and working practices entrepreneurs. Chen Yizhou, chair- traditional dairy is pretty dreadful. for free online, in a bid to encourage man of Oak Pacific Interactive (the In 2008 dairy farmers were revealed best practice behaviour elsewhere. company that owns social network- to be adulterating their product “NetEase wants to present a safe, sci- ing site Renren.com), and Liu Qiang- with melamine to improve profits. entific production model that will dong, boss of 360buy.com have both The resulting powder killed six in- not lose money,” he explains. “The announced agriculture projects too, fants and made 300,000 more ill. model is open and can be replicated, in pork and rice respectively. Since then additional cases of so it is absolutely possible to pro- melamine contamination have mote it in China.” resurfaced sporadically. In the long run, the company Rather than launching new milk says it hopes the farm will help strains, the industry might be better farmers improve their techniques, Mother’s milk advised to get more of its core prod- as well as lead to guarantees in food Fancy a pint of human milk? ucts in order. Besides, it will be a ma- safety for shoppers. jor challenge to convince a general It’s a lofty goal and one that as China invented ‘mothers’ public long since inured to official needs the Zhejiang-based farm to Hmilk’? The nation’s scientists announcements that China’s milk prove its own performance first if are forecasting that human milk is safe to drink. The scepticism others are to follow. Whether the could be sold in supermarkets in as shows no signs of subsiding. We re- 10,000-pig, 80-hectare, university- little as two years. ported in WiC95 that Macau saw a designed farm can turn a profit is Xinhua reports that a herd of 200 run on milk powder over Lunar New still an open question (construction cows has been genetically modified Year, as the shelves were emptied of is yet to start). It certainly won’t be to produce dairy that contains the the foreign brands that Chinese cheap to operate, so it’s likely to be a characteristics of human milk. Li mothers trust to be safer. premium product. There are plenty Ning, a scientist from the Chinese In that respect, a ‘cutting edge’ Photo Source: China Imagine of other questions too. Will Ding’s Academy of Engineering told the dairy product resembling human reputation for tech excellence and China Daily the new technique milk but derived from complex bi- commercial savvy translate into would mean “healthy protein con- ological processes might struggle trust when it comes to food? tained in human milk is affordable to convince all but the bravest of But one group that may already for ordinary consumers.” shoppers. n 10 Week in China Telecoms 1 April 2011
No longer faking it The end of an era for Chinese ‘shanzhai’ mobile phone manufacturers?
or as little as $6, you will soon be more mainstream under the K- Fable to turn television-watching Touch label. It now ranks third in into a 3D experience. Even better: domestic handset sales, behind those over-sized 3D specs may soon Nokia and Samsung. be designated for the dustbin. Technology is moving against At least that is the claim from the shanzhai too. “When it comes to 2G, makers of a prototype smartphone shanzhai makers are no longer com- device unveiling a display function petitive in terms of technology or that converts 2D videos into 3D for price,” says Kevin Wang, director of the naked eye. iSuppli’s China research. “There is The inexpensive chip, containing now little room for innovation. So if technology pioneered by Tsinghua Knock-off Vertu, called ‘Veptu’ the prices are similar, consumers University, will soon be integrated would rather buy branded products, into televisions made by Foxconn atek, a semiconductor company which have better quality and come and Haier, says the Shanghai Daily. from Taiwan, developed a turnkey with guarantees.” It sounds a little unlikely? Mo- circuit board that could integrate And while shanzhai models are bile phones are more often at the the functions of multiple chips in- still on offer in lower-end smart- forefront of China’s shanzhai de- expensively. That offered start-ups phones based on the 2G chips, they bate (a phenomenon we wrote a new low-cost platform. By 2009, have struggled in the 3G market, about in the very first issue of WiC of the 750 million mobile phones because Mediatek has had less suc- in February 2009). The argument in use in China, about one in five cess in developing chips that run is well-versed. Chinese companies were shanzhai, according to indus- on the newer technology, says don’t respect IP like they should. try research. Global Entrepreneur. That means less incentive to invest At the time, forecasts on the So as more mobile subscribers in R&D. And that results is less spread of shanzhai sales must have switch to 3G networks – China added home grown innovation. made depressing news for genuine 10 million new 3G subscribers in But if some counterfeit handsets brands. But perhaps the fears were February, bringing the total to 56 are anything to go by, shanzhai en- excessive. Estimates of domestic million – the likelihood is that they deavour need not always preclude sales for counterfeit handsets last will also upgrade their shanzhai the creative instinct. Their names year show a huge decline on the year handsets to brands capable of com- might sound familiar (how about a before, falling to 24.2 million from municating in a 3G world. HiPhone or a Blockberry?) but 33.2 million in 2009, says the market Hence the need for a rethink on China’s shanzhai sometimes de- research firm iSuppli. strategy, and many shanzhai manu- serve more than their copycat repu- Why? It seems that many con- facturers now export their goods tation. Some have added quirky fea- sumers may be becoming more dis- overseas to markets such as India, tures such as dual SIM card support cerning as far as counterfeit prod- Indonesia, Brazil and Russia. Close (which allows the operation of two ucts are concerned. It helps too that to half of shanzhai handsets are now phone numbers on a single device). the price gap between shanzhai and destined for export, analysts think. Others have incorporated made-in- the real thing has begun to shrink. There, too, the shanzhai firms China essentials, like built-in ciga- Nokia’s basic second-generation have added their innovative touch. rette lighters or ultraviolet scanners phone now costs $20. In Kenya, for instance, China-made to detect counterfeit cash. Some shanzhai operators have handsets feature images and quotes The shanzhai phone industry also turned away from their roots, from the country’s favourite son, found its feet in 2005, after Medi- like Tianyu, which has gone much Barack Obama. n 11 Week in China China Tourist 1 April 2011
Batty concept City in Anhui to open hotel shaped like a ping-pong paddle
hina is taking its love of table Ctennis to a new level. The city of Huainan in Anhui province is plan - ning to build a 150-metre tall hotel designed in the shape of a ping- pong bat. But why a table tennis racquet? As it turns out, “a ping-pong racquet has a perfect architectural shape for a hotel,” Jin Chang, director with Huainan Municipal Bureau of Sports told the China Daily. What he means is that the top of the building (the grip, in racquet parlance) will be designed for sight - seeing. The paddle part of the struc - ture will house guest rooms and con - ference facilities. The Ping-Pong hotel, which will cost Rmb300 million to build, shows how hotels are keen to make a PR splash these days, if they want to stand out from the growing crowd. We reported in issue 98 that many hotels in China face a glut of empty rooms, after a surge of in - vestment in the last few years. But the sports-loving Huainan The alien is saying “This racquet’s unbelievable” government didn’t stop there. In ad - dition to the ping-pong attraction, Rmb300 million to build but is has signed agreements with China other sports-themed buildings are good for nothing. I think it’s better Sports Industry Group, to bring under construction. According to not to waste money,” says Li, a sporting events of an international Xinhua, these include an American Huainan local. standard to the local stadiums in the football-shaped main stadium, a Beijing has urged local govern - years ahead. volleyball-shaped swimming pool ments against wasting money on Whether the Ping-Pong hotel will and an indoor venue shaped like a vanity projects (see WiC60). But local also manage to draw the crowds re - football. The whole project will cost officials often turn a deaf ear. mains to be seen. One potential mar - up to Rmb2.8 billion ($427 million). The Huainan government insists it keting tactic? Perhaps Huainan could Residents of Huainan are less en - has much nobler motives, saying the promote its new accommodation as
P thusiastic about all this themed con - purpose of the sports-themed struc - a place of ‘pilgrimage’ for the mil - h o t o
S struction. The Ping-Pong hotel is tures is (naturally enough) to pro - lions of ping-pong fans across the o u r c e first in the firing line. mote a sporting lifestyle in the city. country (for more on China’s obses - :
C F P
“This building costs more than In support of that claim, Huainan sion with table tennis, see WiC15). n 12 Week in China Auto Industry 1 April 2011
Tired out South Korean giant Kumho forced to apologise and recall its tyres in China
n the 1999 movie Fight Club, the stripped the supply,” an industry ex- Ilead character has the macabre ecutive told the magazine, “so man- job of calculating whether the ex- ufacturers naturally wanted to pense of a recall for faulty vehi- work with large scale firms.” cles is likely to outweigh the But increasing competition, potential cost of future lawsuits. and the rising cost of core inputs Similarly grim accusations like steel and rubber, have put were levelled at South Korea’s pressure on tyremakers. That Kumho Tire earlier this month, may have been part of what mo- after a CCTV investigation tivated the Kumho executives claimed that tyres from the to cut corners in Tianjin. company’s Tianjin plant have We wrote last week about the been made with too much recy- knock-on effects to China’s sup- cled rubber, and were prone to ply chain caused by the recent early failure. The claims featured earthquake in Japan. But the ef- prominently on a CCTV show that fect on the auto industry of a con- airs in mid-March each year, on sumer backlash against market World Consumer Rights Day. leader Kumho could also be compli- Kumho initially denied the re- cated. Carmakers that have relied ports, but then changed its stance previously on the Korean firm – in- after an internal investigation. Wheel of bad fortune: Kumho cluding Shanghai GM, Beijing China boss Lee Han-seop apolo- Hyundai and Shanghai Volkswagen – gised on national television and one in Changchun are operational. will have to scramble for alternative said that those responsible had Kumho is now looking to recover tyres in the quantities that they need. been sacked. “We have decided to in a market in which it gets roughly The Kumho case may also make it call back all the faulty tyres made a quarter of its global sales, and tougher for China’s “retread” mar- by the factory,” Lee told CCTV. “We where it has also built up a 23% mar- ket to get further traction. We wrote also pledge to deal with customer ket share since starting up in 1994. in WiC82 that tyres with recycled complaints regarding tyre quality “During the slump in the global content were being sold in greater in a timely manner.” auto industry in 2009, China be- volume, although many drivers How far the recall will go, and came the only growth point for ma- were still hesitant because of safety whether it will be enough to salvage jor foreign tyre companies,” ex- concerns. Kumho’s image, remains to be seen. plains EO. “Foreign firms now have But the Economic Observer argues at least 70% of the market for tyres that the problem wasn’t an isolated used in passenger cars.” one, with complaints about Kumho Kumho’s previous edge: it was focusing on early wear and tear in seen as a reliable brand, but cheaper Dead battery the tyres in question, as well as cases than the likes of Michelin and More bad news from BYD? of deeper product failure. Goodyear. It helped also that the The 10 million-tyre a year Tianjin firm had built capacity early enough 011 isn’t shaping up to be a partic- plant has now had its operating li- to cope with the boom in car sales 2ularly good year for Shenzhen- cence suspended and is out of action, that has followed. “Over the last two based BYD, and we’re only a few but two other plants in Nanjing and years, demand for cars has out- months in. 13 Week in China Auto Industry 1 April 2011
The firm’s earnings have collapsed, 400,000 in 2009) dealers went on a storm) has been pushed back to its shares are down two thirds from hiring frenzy. In the final tally, only 2012. And there is no follow up their Warren Buffett-inspired high, 520,000 were sold. model yet for its F3 sedan. Pushing and rumours of staff layoffs abound. Company employees who still the F3 at ever-lower prices has also Commentators are saying that the have their jobs aren’t being spared alienated dealers and destroyed once-charmed carmaker may have the pain, with Southern Metropolis margins (see WiC81). overextended itself. Weekly also reporting that wages are The result: fourth quarter profits “In some regions, two-thirds of down by two thirds. Workloads are last year were down 94%, to just sales staff have been cut,” writes up, too. “Work that had been done $13.7 million. Southern Metropolis Weekly. But BYD by two people now is done by one,” But chairman Wang Chuanfu is denying claims that it has reduced Zhang Teng, a company employee wouldn’t be drawn on the chances of the size of its 200,000-strong work- told the magazine. being abandoned by his famous force. “We’ve had no layoffs,” con- As a result, employee enthusi- backer. “Buffett visited us last year,” tends BYD spokesperson Wang Jian- asm has dipped. “When the market he told reporters, “and we don’t jun, “we still have a shortage of staff was good, we were the pioneers,” know how he thinks about us now.” and all departments are recruiting.” says Zhang, “now that it’s bad, we That doesn’t sound like the So what’s the truth? Industry an- are orphans.” most stirring rallying call. But it’s alyst Jia Xinguang says BYD is deal- As we’ve noted before, the main by no means clear that BYD is a ing in semantics, as many of the reason BYD has stumbled is that it spent force. sacked salespeople are hired by deal- hasn’t been able to deliver new The company is coming out with erships, not BYD itself. When the models to deadline. The 2009 a new SUV later this year (the S6), company announced sales targets launch of its all-electric E6 (which and if it arrives on schedule it may of 800,000 last year (up from was supposed to take the US by yet turn fortunes around. n
Who’s Hu: Huang Zelan Profiles of China’s business leaders
Heavy metal old but deep in debt, and having failed to pay Huang Zelan has been working the land all his wages for months. Huang borrowed from the life. Born to a rural family in Gannan, a bank, laid off staff (streamlining the workforce mountainous area in southern Jiangxi province, from 18 departments down to two) and began to he started doing farm work when he was 11. It invest in new equipment. In 1996, he rented the wasn't until 1984, when he was 29, that Huang county's metallurgical and chemical plant (he found a better way to turn a profit from the subsequently bought it in 1999) allowing him to earth. Gannan has a reputation as a tungsten process more of the raw materials that his firm hotbed and when Huang saw others making was digging up. This meant he could produce money from the local mineral resources he value-added alloy and carbide products, which he started searching for tungsten himself, in rather now exports to more than 20 countries. primitive prospecting-style. Need to know It's all mine In 2000, Huang established Chongyi Zhangyuan In 1989, Huang began to upscale his operations Tungsten Products. A year later and it was as the county government was starting to lease transformed into a private enterprise that some of its mining sites. Huang promptly raised integrated the entire production process – from Rmb5,000 (a larger sum at the time than it mining, through smelting and on to the sale of the sounds today) and used it to start excavating the Huang: metal magnate finished product. Guantian mine. He managed to become a In 2009, Zhangyuan's operating income was successful local businessman. Rmb1.07 billion, with a net profit of Rmb118
Photo Source: China Imagine million. And last year, the company went public in Shenzhen, Growth raising Rmb559 million, which helped to cement Huang's position The next step was to take on another challenge. In 1994, when the as the richest man in Jiangxi. local government leased the larger Taoxikeng mine, Huang again With a fortune worth Rmb10 billion, Huang came 85th on the bid for the project. His new charge was in dire straits: 100 years- 2010 Hurun Rich List.
14 Week in China Cross Strait 1 April 2011
“I want to be alone” New visa rules to allow mainland Chinese to visit Taiwan on their own
ross-straits relations are blos- Csoming, if tourist numbers are anything to go by. Before the launch of regular direct flights be- tween mainland China and Taiwan in 2008, there were just 100,000 mainland tourists visiting Taiwan each year, according to the Finan- cial Times. But last year China be- came the biggest source of tourists for the island, with over a million visitors. That took them past Japan, for decades Taiwan’s leading visitor group. Taiwan wants to attract more mainland spenders, so the govern- ment is planning to relax restrictions to let Chinese visitors travel to the island as individuals. Right now, the number of mainland tourists is Follow me: till now mainlanders have had to go to Taiwan in groups capped at 3,000 per day, and visitors must be part of a tour group. they escort. If anyone in the group sociation of Travel Agents. “They Shanghai and Beijing are the first doesn’t make it on the return trip, can do the night markets and the two cities taking part in trials of the the deposit is taken as penalty. small stores, not just souvenir new scheme, which are due to be- The debate now is to determine shops. It’s an advantage for the gin in the second quarter of the year, the deposit expected of individual wider Taiwan economy.” says Shao Qiwei, director of the Na- travellers. “A major obstacle is that The 22.7 million Chinese tourists tional Tourism Association. Beijing is asking Chinese tourists to that visited Hong Kong last year The original ban on individual put down a deposit, the amount of puts the Taiwan numbers in a little travel was prompted by mutual sus- which has yet to be decided, before context. Many make the trip to picion: Taiwanese that Chinese spies their visits,” said a Taiwan official. Hong Kong in organised groups, too. might tour the country under Industry observers believe that But the city has suffered recently tourist cover, and Chinese that more the new scheme won’t have much from a reputation for extremely than a few of its nationals would at- of an immediate impact (only a re- cheap packages in which travel tempt to defect. Since 2002, 187 stricted number of individuals will agencies then herd visitors into ex- mainland tourists have gone AWOL, be allowed to visit Taiwan in the ini- pensive stores in exchange for a cut says Xinmin Weekly. Not a huge tial phase). But most agree that the of sales. If the tour groups don’t play number, although it has increased potential economic benefits of Chi- ball, things can get rough. Earlier quickly since Chinese tourists were- nese tourism will be huge over the this year, a Hong Kong tour guide Photo Source: China Imagine first permitted to travel directly to longer term. and two Chinese tourists were ar- the island in 2008. “Individual travellers can go to rested for brawling outside a jew- Currently Taiwan travel agen- every corner and spend their ellery store. The reason? The tour cies have to pay up to $3,400 as de- money,” says Anthony Liao, stand- guide was angry at their refusal to posit for each Chinese tour group ing supervisor with the Taipei As- buy anything. n 15 Week in China Property 1 April 2011
Air of superiority Tycoon sees opportunity in Scottish highlands
eep in a glen, just north of (about 30 million vehicles have been DSpeyside is Corrievorrie. It’s added to roads in the capital in the home to a small whisky distillery, a past three years alone). pub and some fine salmon fishing. “One businessman told me he Until recently this rustic Scottish was thinking of sending his wife and hideaway was a place few would children abroad to protect their have heard of. health,” Wang told the Beijing Eco- Then the Chinese arrived... nomic Gazette. “That’s when I Forget oil, Scots have new export China National Chemical and thought about bringing First World Gas Export (CNCGE) has settled on air quality to our homes.” environmentalists, who say it Corrievorrie as the location for its Wang had been to Scotland the blends into the landscape. Once op- new factory. previous summer and knew that erational in August, it will distill air CNCGE – which was founded in many Chinese associated the high- into specially-designed cylinders. Shandong province in 1994 – is now lands with Britain’s royal family go- They will then be sent on container China’s biggest seller of methane ing to Balmoral. ships to China. gas to households. But entrepre- “It’s a place where Queen Eliza- CNCGE reckons there could be neurial boss Wang Xu Fan sees a new beth and Prince Charles go for its massive demand for its newest opportunity: bottling pure Scottish purity, naturalness and clean air. All product – given China’s air quality air and selling it to China’s elite. Chinese know that because it is seems to get worse by the year. And Wang has already struck deals something that appears in our that’s an exciting prospect for those with luxury apartment complexes school textbooks,” Wang notes. in Corrievorrie. “There’s nae much in Beijing, Tianjin and Shanghai to He settled on Corrievorrie after employment round here,” says lo- pipe Corrievorrie’s air through their commissioning a study to find the cal resident Jessie Johnston. “The vil- central air-conditioning units. Rich best balanced air in Scotland. He took lage contains about 290 folk and the residents are willing to pay a pre- samples from 10 locations around Chinese say the plant will create jobs mium for this service, Wang claims, the country and even asked focus for 200 of us. The wages are twice as they seek to insulate their fami- groups in Beijing to give their verdict. what Mr Dodd pays me at the fish lies from the chronic air pollution “It’s like a whisky,” Wang told the and chip shop.” besetting so many Chinese cities. Gazette. “You have to get the right The air purifier market in China WiC has written in previous is- blend. The Chinese seem to particu- is worth $2.9 billion per year, and sues about alarming rises in asthma larly like the 21% oxygen content of Wang expects his product to appeal and other respiratory problems in Corrievorrie. On the other hand they to the wealthier segment of the China. So it is no surprise that those were much less enthusiastic about country’s newly rich. “They want the who can afford it want to breathe the air we sampled from less elite best. Our sales pitch is basically: purer air at home. areas like the Gorbals.” drink Chateau Lafite, breathe Scot- Wang – already ranked 89th on Wang plans to brand his product tish air,” Wang boasts. Chinese rich lists with a fortune es- simply as Sugelan – the Chinese The comparison is apt in finan- timated at Rmb1.1 billion – first had name for Scotland – and has cial terms. For a 3,000 square foot Photo Source: Shutterstock the idea of bottling Scottish air bought 30 hectares of land on the apartment, it will cost around when dining with friends. They all outskirts of the village to begin bot- Rmb1,000 per hour to fully venti- complained about how the air qual- tling. His factory, now nearing com- late with Sugelan. ity in Beijing was deteriorating as a pletion after a $120 million invest- If all goes well, Wang says a Hong result of booming car ownership ment, has even impressed local Kong IPO could occur next year. n 16 Week in China Society and Culture 1 April 2011
Barbie marries, but not Ken Controversy as billionaire guest leaks photos at high society wedding
hen Barbie Hsu was asked if Wshe was willing to marry restaurant tycoon heir Wang Xi- aofei, the Taiwanese actress must have decided that a simple “I do” was insufficient. Barbie’s ardour clearly runs much deeper – wedding guests heard her profess “I extremely do” in marital commitment. Grammatically a bit off, although we get her point. Hsu’s declaration, along with pic- tures of the highly publicised wed- ding, grabbed headlines last week. But it seems the newly-weds were not altogether pleased with all the attention. The ceremony, which was held in Hainan, was supposed to be a private affair, and those fortunate enough to land invitations had to present their ID before being granted access to the ceremony. Most celebrity reporters returned empty-handed from Hainan due to Hsu’s media restrictions. So imagine the newly-wed’s sur- Upset that wedding images were leaked: Barbie Hsu prise when they discovered that pic- tures of Hsu walking down the aisle the leak, accusing Zhang for failing ous occasion for Hsu’s fans. were appearing on weibo (China’s to ask their permission before post- “It is no big deal posting (the pho- Twitter-equivalent) within minutes ing the material on his weibo. Wang tos) for fun. I stopped when I was of the ceremony finishing. told reporters he was particularly told to. I don’t think I have done any- As it turns out, Charles Zhang, the furious that Zhang had brought a thing against the law or wronged chief executive of Sohu, one of the reporter as his date so she could se- my friends,” Zhang said in his state- country’s largest internet portals, cretly shoot the event from their ho- ment. “I will neither admit to any posted a virtual ‘live broadcast’ of tel room, in addition to his own cov- wrongdoing nor apologise.” the event from camera-phone erage of the event. But Taiwan’s China Times re- footage uploaded to his microblog. “I really regret inviting Mr Zhang ported last week that the couple are Anyone who wanted to watch the to my wedding,” Wang confided to considering taking legal action over Photo Source: China Imagine ceremony just had to register for the thousands of followers on his the “infringement of their privacy Sohu’s service. own weibo. and reputation”. Soon the finger pointing started. Zhang, meanwhile, denies he’s Are they overreacting? Maybe. Hsu and Wang (who’s from Sichuan) done anything wrong, saying sim- But critics say there are practical say they were shocked to discover ply that he wanted to record the joy- reasons behind the move. The 17 Week in China Society and Culture 1 April 2011
celebrity couple has been trying re- cheesy soap operas. But they will be cently to mollify the Taiwanese able to re-educate themselves in press, which has been threatening a Seeing red classic tunes like The East is Red. media blackout on Hsu for her per- Why there’s no more Reaction around the rest of China ceived favouritism towards their advertising on Chongqing TV has been bemused, to say the least. A mainland Chinese rivals. And that’s typical comment is by microblogger also bad news for Wang’s company, urn on Chongqing Satellite TV Fairy Xiao Yin: “Chongqing Satellite South Beauty. The restaurant chain Tand you would be forgiven for TV has actually stopped broadcast- has plans to expand into the Taiwan thinking that you’d been trans- ing commercials! I feel frightened market very soon, says the Shang- ported back in time to the 1960s. about this news. Can the wheel of his- hai Daily. It’s unlikely that you’ll see any tory really reverse?” It looks like Zhang is the one get- other drama aired but a show called The initiative is the brainchild of ting the biggest benefit, with many Mao Anying – a new biopic about local Party boss Bo Xilai (the son of suspecting a publicity stunt calcu- Mao Zedong’s son who died fight- one of Communist China’s so-called lated to bring attention to Sohu’s mi- ing against “imperialists” on the ‘Eight Immortals’, Bo Xibo – one of croblogging service. Although Zhang Korean peninsula. those who helped Mao turn China was mum on the number of new Most Chinese TV stations these ‘red’ in 1949). Bo junior’s campaign users signing up to watch the wed- days are rabidly commercial, chas- to get the Chongqing masses ding broadcast, the dispute has ing the advertising dollar for all its singing red songs has been going on brought a lot of attention to Sohu’s worth. But as of March 1, such capi- for more than a year. But the radical service, which has lagged behind talist running dog behaviour was changes on local TV mark a signifi- competitors in attracting users. Mar- purged from Chongqing TV. In- cant upping of the ante. ket leader Sina Weibo has more than stead, during primetime hours It’s getting talked about too be- 80 million registered users. Social networking giant Tencent’s QQ mi- croblog claims even more (at least 100 million) although industry ob- servers say that number could be overstated. Sohu’s platform, how- ever, has only 10 million. In the last few months, competi- tion between the different portals has become more intense. In Febru- ary, Sina Weibo kicked off a gift- sending promotion during the Spring Festival in which users who- successfully invited their friends to open accounts could take part in a lucky draw for gifts. Up to 2.6 mil- About to burst into song? lion users signed up in one week. Sohu, too, says it is planning to (7.30pm till 11pm), advertisements cause Bo is one of the few regional spend millions of dollars on a cam- have been banned in favour of pub- politicians to have national name paign in first-tier cities to boost its lic service announcements remind- recognition. He grabbed headlines own subscriber base, Beijing Morn- ing viewers of an erstwhile revolu- – in China and abroad – for his first ing Post reported. tionary spirit. And according to big campaign: to purge, jail and ex- But Zhang’s ploy may have back- Xinhua, a new series of programmes ecute the triad gangsters living it up fired. “This is so obvious. Charles called Red Song Every Day will air in the western Chinese city. The PR Zhang attempted to use this whole primetime to instruct the munci- he earned for this – casting him as a thing to market his Sohu mi- pality’s 32 million residents on how sort of Chinese Eliot Ness – was Photo Source: Reuters croblog,” says a weibo user by the best to revive the stirring lyrics of largely benign. And for some Chi- name of Leah Su Yue. The irony is the Maoist era. nese he took on a vaguely heroic that most people are discussing the Viewers of this patriotic channel aura, just as his habit of giving press controversy on rival Sina’s Weibo. will get fewer dating shows and conferences seemed to present him 18 Week in China Society and Culture 1 April 2011
more like an American politician tion for the red-fest. As the leading the nation’s powerful Standing than other senior leaders in China. foreign historian of the Cultural Committee next year. So he may be So what explains Bo’s red cam- Revolution, Roderick MacFarquhar hoping his patriotic endeavours will paign, for which he has earned more puts it in his excellent book Mao’s endear him to the hard-leftist fac- in the way of ridicule from netizens Last Revolution: “Of China’s major tion that still retains a voice within and commentators? industrial centres, Chongqing was the Party, and is more disposed to Bo says that his initiative is a among the worst affected.” In 1967 Mao’s legacy. “spiritual endeavour” and his use of the city was close to civil war, Mac- Meanwhile over in Anhui, there’s red culture is designed to “firmly Farquhar points out, as Red Guard an entirely different sort of TV con- build up the socialist core value sys- factions fought with those loyal to troversy brewing. According to the tem in every heart”. the Party’s more established figures. Guangzhou Daily the province now According to the Beijing News, Writes the historian: “According has as many as a 1,000 TV channels Bo’s deputy, Mayor Huang Qifan, has to a postmortem conducted by the operating illegally in rural areas. gone further in his advocacy, com- Party centre in 1970, the fighting on They’re set up with very basic equip- paring red songs, ballets and dramas one particular construction site in- ment by local entrepreneurs and re- to the works of Shakespeare. Huang volved close to 10,000 combatants play pirated content. “The stations said these songs mustn’t be forgot- ‘employing virtually every conven- make money from rogue advertisers ten, and that young people are dis- tional weapon available [tanks, mo- marketing shoddy medicines or pes- covering that singing is inspirational. bile artillery and anti-aircraft guns]’ ticides,” reports the newspaper. The campaign to ‘sing, read, tell and ‘resulted in the death or Apparently many have survived and inspire’ has been conducted in wounding of 1,000 class brothers, not only by offering local officials a a style worthy of Mao himself. Chi- and the destruction of vast cut of their profits but also because nanews.com says that local officials amounts of state property’.” they eschew political content. Pure- are boasting 128,000 screenings of Bo won’t be as keen to draw on minded Bo would take umbrage on red culture material, with 93.4% of this particular cultural legacy, no both accounts. the population having seen at least doubt. But his campaign probably one show. Apparently, 94.7% of has two purposes. First off, for some those have expressed ‘satisfaction’ of the local population, there is in- with what they saw. deed a nostalgia about the revolu- Presumably the offending 5.3% tionary era. In a country where in- Beijing restricts have retreated to their preferred come inequality strains the social “hedonist” ads obsession with Lady Gaga. fabric, there are many who associate The timing of the red campaign the songs and drama of the former Luxury goods firms banned will not be lost on Party historians. It era with a purer age, when corrup- from billboards in capital was 45 years ago this summer that tion went largely unmentioned and Mao began his Cultural Revolution. more egalitarian goals prevailed. urveyors of luxury goods rarely That makes it all the more ironic On a more personal level, Bo will Pget dragged into political dis- that Chongqing is the current loca- also have an eye to being elected to course. That more than suits the re-
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19 Week in China Society and Culture 1 April 2011
where no similar restrictions have been announced. In fact, marketing executives are already wondering how the ban will be managed in practical terms. So far, media reports have offered little insight, beyond the general consen- sus that terms like “supreme,” “royal,” “luxury” and “high class” will be the first to be targeted by keen-eyed officialdom. That still dodges the wider ques- tion of what exactly will be consti- May need to rely on word-of-mouth advertising in future tuted as hedonistic by the rulemak- ers. Advertisers will wait to see if a tailers, who are much happier sell- more equitable benefits of eco- formal set of guidelines emerges, al- ing handbags than offering their nomic growth (or see our back though WiC suspects that this may views on the political issues of the page’s Photo of the Week: a gold- never happen. moment. plated car). More likely officials will adopt But in China conventional wis- Alternately, of course, you can the “I know it when I see it” line dom often gets turned on its head – just pretend it isn’t happening. And favoured by Justice Potter Stewart and in this case the luxury retailers while the city of Beijing’s edict won’t in his famed 1964 Supreme Court have been drawn into the fray, cour- close any of the income gap between ruling on pornography. tesy of the Beijing city government. rich and poor, it will remove a few of Certainly, some of the category’s That’s because the city authori- the glossier reminders of the in- most committed customers would ties have enacted a ban on billboards creasing chasm between the elite claim similar insight. How else to promoting ‘hedonistic’ lifestyles and many of the poorer sections of explain the urge to spend a month’s and the craven worship of ‘foreign society (as we also mentioned last salary on a pair of shoes or an em- goods’. The restrictions will come week, economist Joseph Stiglitz es- broidered suitcase...? n into force within a fortnight. timates that just 1% of Chinese con- According to the city’s website, trol 40% of the country’s wealth). the campaign is intended to beau- If the Beijing plan broadens into a Keeping track tify Beijing. But a second objective – wider national campaign, it could the encouragement of a “fair and prove damaging to the luxury retail- Last week we mentioned protests in harmonious environment” – is go- ers. After all, China’s appetite for their Nanjing about the cutting down of old ing to be a much higher priority. goods has risen an estimated 16 times wutong trees. After local citizens And that means images of models, since 1998 (to around $12 billion an- mobilised opposition using internet motorboats and the millionaire nually, according to McKinsey). weibo, the city government – which says lifestyle are deemed no longer fit How much of an impact will the the trees need to be uprooted to make way for new subway lines – announced it to be in plain view. new restrictions have? Violators will would call a halt for further consultations Conspicuous consumption has face a token fine of about $4,600 – with the public. But that victory has been been on the rise in China, fuelled by so it looks like indirect pressure followed by yet another defeat for tree the rapid growth of a wealthy elite might have to be applied if the ban lovers, says Shanghai Daily. It reported (at the super-rich level there are now is to prove effective. this week that “shocked locals” woke to discover 37 trees on Maoming Avenue 189 US dollar billionaires, according For those brands that are already had been removed overnight, again to the Hurun Report). well known, much of the mystique because of subway construction. Just last week, we reported on the is already in place. Accordingly, The city’s greenery bureau says they record-breaking $1.5 million paid by they are less likely to suffer from will be replanted elsewhere, but the a Shanxi entrepreneur for a Tibetan the loss of billboard presence. For newspaper pointed out local residents
Photo Source: Reuters were annoyed by the 50 year-old trees Mastiff dog. That’s the sort of head- brands newer to Beijing, it could displacement, as well as the surreptitious line that embarrasses the Chinese pose more of a problem, although manner in which the latest logging had leadership, which has been much most campaigns are conducted in been completed. keener to promote notions of the the print media, TV and online, 20 Week in China And Finally 1 April 2011
It had to come... Chinese cinemagoers excited about 3D porn film
iscussion of China’s innovative front of their 3D spectacles. Shui Dcharacter has filled books and told the South China Morning Post newspaper columns since Cam- that it has always been his dream to bridge academic Joseph Needham turn an erotic movie into 3D. Nor first posed the question in the was it easy. “The love scenes were 1940s. WiC has weighed in too (see very tough,” he complains. “Nor- issue 76). mally you get tired after 15 to 20 Now available in 3D But for those on the ‘affirmative’ minutes, but these actors had to do side of the debate, a bold new argu- it for six to eight hours a day.” theatre seats at a cost of Rmb15 mil- ment has emerged, although not one Not surprisingly the film has an lion. A package on travel website that Needham would necessarily adult-only rating in Hong Kong. But GZ600.cn prices a day trip from have envisaged. In a pioneering mo- it will not show in mainland China Guangzhou to Hong Kong (coach ment in the history of cinematogra- itself, where censors have blocked fare, travel insurance and movie phy, a Chinese director has made the its release. Still, according to Life ticket) at Rmb268 ($41). first-ever 3D pornographic movie. News, Sex and Zen could achieve a Wu Siyuan, chairman of UME In- Sex and Zen: Extreme Ecstasy will be notoriety similar to Ang Lee’s Lust ternational Cineplex – one of released in Hong Kong on April 14. Caution (see WiC2). That film did ac- China’s biggest – is not amused at The Stephen Shiu Jnr-produced tually show in mainland China, but losing potential cinemagoers to ri- film follows the amorous adven- the censor cut so many of the sex val screens in Hong Kong. Others tures of scholar Wei Yangsheng, who scenes that it was jokingly renamed have renewed the call for a film rat- has committed to a life in search of ‘Caution: no Lust’. Chinese tourists ing system. Currently there are no the secrets of erotic pleasure. The travelled to Hong Kong to see the differentiated rating categories (like flick is a sequel to 1991 cult hit Sex uncut ‘steamy’ version. Adult or Parental Guidance), mak- and Zen, and is allegedly not with- Similarly with Sex and Zen the ing it impossible for risqué material out humour. film has already become the talk to make it onto local movie screens. What has got audiences titillated of the Chinese web, and travel For those readers unable to drop is that the big screen will be showing agents in Guangdong are marketing everything and head striaght for all that extreme ecstasy in three di- day-trips to Hong Kong to see it. Hong Kong, Sex and Zen will also mensions. No doubt dedicated Qianglong.com says two travel com- open in Australia and South Korea moviegoers will be hoping to caress panies are so confident of demand this month, and in France, Italy and some of the flesh soon to float up in they’ve pre-booked 150,000 movie Russia in June. n
Suites with soul
“You can come from China and build outstanding bathrooms. But our guests are looking for soul.”
* Francois Delahaye the GM of the Plaza Athénée tells TIME of his strategy to compete with the
Photo Source: CFP influx of new ‘Chinese’ luxury hotels in Paris. Hong Kong-based Mandarin Oriental and Shangri-la have both opened five star hotels in the city, and are looking to cater to Chinese guests by offering dim-sum as well as haute cuisine. Likewise, the Peninsula will open in 2013. Francois Delahaye
21 Week in China The Back Page 1 April 2011
Photo of the Week In Numbers 75 The number of new IMAX cinemas to be opened in China before 2014, after Canada’s IMAX Corp struck a $100 million deal with movie theatre firm Wanda Cinema Line. There are currently 45 IMAX cinemas across the country.
2
Photo Source: China Imagine The number of years before China becomes the world’s largest publisher of scientific research, according to a study by the UK’s Royal Society. The US is the current front- runner.
Gold-plated car in Nanjing gets towed for being illegally parked $17.5 million The price paid at an auction in France for a jade seal that once belonged to the Qing emperor Qianlong. It was reportedly sold to a Chinese bidder. Where is it? 7 Some of the places referred to in this issue The months provincial, city and county governments have been given by the State Intellectual Property Office to shift all of Beijing their computers to non-pirated software, He Hua, the Office’s deputy director, told reporters. China Henan Jiangsu Wuhan Shanghai $9,146 Sichuan Zhejiang Chongqing The price paid for a kilogram of Longjing Jiangxi (Dragon Well) tea this month, according to Xinhua. The drink has been highly regarded in China since imperial times. Shenzhen Hong Kong
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