1 Talking Point 6 Week in 60 Seconds 7 Economy Week in China 8 Cross Straits 9 Internet and Tech 10 China and the World 11 Banking and Finance 13 Chinese Consumer 14 Energy and Resources 26 April 2013 15 Society and Culture Issue 190 18 And Finally www.weekinchina.com 19 The Back Page Not without conditions m o c . n i e t s p e a t i n e b . w w w

Calling a halt: why China’s antitrust bosses are flexing their muscles

in international M&A Brought to you by Week in China Talking Point 26 April 2013

Strings will be attached International M&A deals now face a formidable hurdle: China

ong stretches of China’s com - What’s the background to the Lmercial history have been about latest antitrust cases? defending domestic monopo - Beijing has granted approvals lies rather than worrying for two high-profile deals this about anti-competitive be - month. First to get the green haviour. The manufacture of light was Glencore’s $30 billion silk was protected on pain of takeover of Xstrata. The deal death, for instance, with the had proved challenging from threat of a grisly end for any - the start, living up to its Everest one caught smuggling silk - codename (John Bond, depart - worms out of the country. ing chairman of Xstrata, and Si - That stopped the trade from mon Murray, who chairs Glen - arriving on the fringes of Eu - core, are both said to be rope until the middle of the mountaineering enthusiasts). sixth century, when two There was even last-minute Nestorian monks brought silk - drama, when former British worm eggs to the court of the leader Tony Blair was called Emperor Justinian in Byzan - in to bridge differences be - tium. tween Glencore and the It was the same for Qatari Investment Author - paper, invented by the ity, a leading shareholder Chinese but kept hid - in Xstrata, over price. den from foreign eyes According to the until 751 AD, when the British media, the two Ottoman Turks de - sides were brought to - feated a Tang Dynasty gether at a midnight army. Among the spoils meeting at Claridge’s, the of war was a small group London hotel, with Blair of Chinese papermakers, who pocketing a fee of $1 mil - were marched to Samarkand lion for his role in break - and forced to reveal their craft. ing the impasse. Much later there was the Glencore made its origi - demise of China’s tea monopoly, nal offer to take over Xs - when the British employed an ad - trata last February, although venturous botanist to smuggle the bid didn’t get approval seedlings into India to break the from shareholders until Novem - Chinese grip on the hugely popular changing, with China’s antitrust reg - ber. But the longest wait of all – 15 drink (see WiC57). ulators growing increasingly promi - months – was for China’s antitrust P h o t o In each case, China’s imperial nent overseas too. As multinationals team to announce its own re -

S o u r c court was anxious to protect its in - seek their approval for mergers and sponse. That finally came last week, e :

I m

a terests. But its efforts were largely takeovers, China’s decisionmakers as an approval but with conditions. g i n e

C focused within its own borders. In are becoming more ambitious in Glencore must sell its $5 billion Las h i n a the modern era, that emphasis is their reach than ever before. Bambas copper project in Peru and 1

Week in China Talking Point 26 April 2013

the new entity must supply a mini - mum of 900,000 tonnes of copper to its Chinese clients for each of the next eight years. At least 200,000 tonnes of this total will be priced at an annual benchmark level. Then this week there was news that China’s Ministry of Commerce (Mofcom) was also approving Japan - ese trading house Marubeni Corp’s $5.6 billion purchase of US grain merchant Gavilon. Again, fairly stiff conditions are being imposed with Mofcom insisting that Gavilon and Marubeni must maintain separate, independent trading units when selling soybeans to China, with strict firewalls to prevent any exchange of market information.

So Chinese regulators are flexing their muscles? Although other government agen - cies are involved in policing anti- monopoly rules inside China, Mof - com has taken the lead in reviewing international mergers that may im - pact on the Chinese market, under an Anti-Monopoly Law that came into effect in 2008. Of course, few multinational businesses will want to rile the au - thorities in Beijing if they are plan - Merger proved turbulent for Xstrata’s departing chairman, John Bond ning to boost sales to Chinese consumers. But China’s regulators even if they have a relatively minor look similar to Chinese approval of have also set the benchmarks for effect on the Chinese market or in - a takeover by Russian potash firm triggering antitrust reviews rather volve companies lacking significant Uralkali for its compatriot Silvinit low, requiring that any “business assets in the country. two years ago. At the time Mofcom concentration” with $63 million in Aside from the number of deals claimed the merger threatened to annual China sales, as well as $1.5 undergoing review, there is also a push up prices for potassium chlo - billion in global revenues, must be sense that the Chinese can be more ride, so it stipulated that the new submitted for regulatory approval. demanding than other antitrust entity must continue selling to Chi - Inevitably, this means that many regimes in applying conditions to nese buyers in the same way as be - multinational acquisitions will transactions. fore, with prices established by the need to be reviewed and last year Glencore’s experience is one ex - “customary negotiation process”. alone there were 201 notifications ample, with both types of condi - Two acquisitions in the hard disk from companies wanting clearance, tionality applied: structural (in the drive sector – Seagate’s purchase of (about the same total as the year be - divestment of the Las Bambas mine) Samsung’s HDD business, and fore). and behavioural (in the stipulations Western Digital’s buy-out of Hi - P h o t

o It also means that Mofcom is as - that copper be sold at pre-deter - tachi’s disk drive unit – were also

S o u r suming a much more prominent mined quantities and within a pre- approved with more onerous con - c e :

R e role in international M&A than be - agreed pricing structure). ditions than many had anticipated, u t e r s

fore, applying the rule to takeovers In particular, the pricing rules with both purchasers required to 2 Week in China Talking Point 26 April 2013

Finally got the go-ahead to buy Xstrata: Glencore’s chairman, Simon Murray

“hold separate” their acquisitions, and treat all original equipment “This is extremely low for a mar - maintaining them as independent manufacturers in a non-discrimina - ket threshold,” a source told the FT. competitors with standalone sales tory manner. “This case is about China securing and pricing. access to resources at a fair price; it This was another case of the Chi - It’s not just market economics at has nothing to do with antitrust.” nese authorities going further than work? their counterparts in Europe and No, there’s a sense that politics So China’s rulings have different North America. The Seagate-Sam - trumps economics in some of Mof - motives to reviews in the US or Eu - sung transaction saw no remedies com’s decisions, and that there are rope? required by the US or EU competi - other factors being considered, in - Much of China’s antitrust approach tion authorities, while the EU re - dustrial policy among them. draws on similar legislation in the quired only minor remedies in the These realities reappeared in the West in assessing market concen - Western Digital case. media discussion of the bids from tration, as well as its impact on mar - Then in May last year Mofcom Glencore and Marubeni this month. ket access, technological progress was once again the only antitrust Noting that the takeover of Xstrata and pricing for consumers. authority to impose conditions in didn’t seem to raise the same level But the Chinese have also added clearing a deal, this time for of concern about potential market further criteria that allow for more Google’s $12.5 billion bid for phone abuse with other regulators, the Fi - of an industrial policy edge to their maker Motorola Mobility. After ex - nancial Times highlighted that the decisionmaking, especially a clause pressing concerns about the new combined share of copper sales by requiring an assessment of how a combination of Google’s hugely Glencore and Xstrata to Chinese merger or takeover might impact P h o t o popular Android operating system buyers looks relatively small (a little on “national economic develop -

S o u r c and Motorola’s extensive portfolio less than 18% of imports in 2011 – or ment”, as well as a loosely-defined e :

I m

a of tech patents, Mofcom added pro - well below the 30-35% level that typ - stipulation that allows for consider - g i n e

C visos including that Google provide ically triggers antitrust action in Eu - ation of “other factors as defined by h i n a Android on a “free and open basis” rope or the United States). the State Council Anti-Monopoly 3 Week in China Talking Point 26 April 2013

Planet China Strange but true stories from the new China

IN HOT WATER. We’ve all forgotten to turn the taps off once or twice. But in Jilin City in China’s northeast, one man did so quite deliberately – and for the entire winter. Hsu Wen is the sole remaining occupant of a building that real estate developers would like to demolish. His fear was that sub-zero temperatures would lead to the water pipes freezing, which would have been a boon to the developers who hope he’ll quit living there (Hsu says he stayed on because they’ve offered him too little cash for his apartment). So he devised a novel solution. He left the hot water taps on for 24 hours a day throughout the winter months and channelled the flow out of his window to heat the uninsulated water pipes running down the side of the building. Given the icy weather, the scheme had spectacular results: a frozen waterfall descending from his top-floor flat down to street level (see photo). All in all, Hsu says, the plan has been a success: “The weather is warmer now so there is no danger of the pipes freezing – although I think it might take a while for the waterfall to melt.” The incident has gained widespread media attention and led local government officials to pressure the developers to come to terms with Hsu. “I understand the developers may be prepared to make me a better offer now – I hope so. It is very lonely here in my apartment with nobody else around,” Hsu confided.

Enforcement Authority”. terprises will be able to argue their despite making up a huge chunk of In moving beyond the more clas - case against mergers among their marginal demand. Although its sical criteria shaped by market eco - foreign suppliers and competitors. combined presence in copper supply nomics, Mofcom is carving out a Additionally, the Glencore and to China is relatively benign, Glen - wider remit. According to a review the Marubeni deals are in the com - core’s bid for Xstrata may have suf - published by Daniel Sokol, an asso - modities sector, a fertile area for an - fered by association, with the ciate professor of law at the Univer - titrust action as far as the Chinese Chinese determined to limit further sity of Florida, this philosophy is are concerned. situations in which they have little particularly distinct from the Marubeni’s bid, already cleared influence over the prices being de - United States, where consumer wel - by the competition authorities in manded by global vendors. fare is the standard for deciding Europe and the United States, seems Almost all of China’s state-owned whether action should be taken. Un - to have caused more anxiety in energy or commodity heavyweights like the Chinese, in the American re - China, the world’s top soybean im - are trading partners of Glencore or view process there is no formal porter, because the merged entity Xstrata, 21CN Business Herald recognition of factors like the im - currently accounts for about a fifth warned last month, so the tie-up pact on other companies in the sec - of its grain imports. As soybeans be - will have been judged as likely to tor or the effect on the industry in come an increasingly important have a significant impact. And some general. feedstock (reflecting China’s grow - of the other warnings in the Chi - The Chinese make no apologies ing appetite for meat and dairy), pol - nese press have sounded familiar, for applying their own rules and icymakers will not have wanted to reviving memories of the proposed they look most likely to do so in in - see further concentration in supply. tie-up between the Australian iron dustries classed as ‘strategic’ by pol - There may well have been similar ore operations of BHP Billiton and icymakers (areas such as concerns about the Glencore deal. Rio Tinto three years ago. The move P h o t o next-generation information tech - WiC has reported how industrial cus - was bitterly opposed by the Chinese

S o u r c nology, bio-technology, advanced tomers for raw materials like iron steelmakers before being dropped e :

I m

a equipment manufacturing and ore in China have grown frustrated in 2010. Nonetheless, the broader g i n e

C new-energy vehicles) or in sectors in at their inability to wrest lower experience of negotiating with the h i n a which the largest state-owned en - prices from international suppliers, iron ore miners has been a jarring 4 Week in China Talking Point 26 April 2013

one, with CISA, China’s steel trade ing pains. One of the grumbles in - process is supposed to work, as well association, failing to get a better ternationally is that a review from as more timely updates on how deal for its members. That has left Mofcom takes much longer than in cases are progressing. Without the Chinese more watchful in the other countries, often delaying transparency, there is always going sector, especially with companies deals by many months. That’s to be suspicion about what is going like Glencore, which seems deter - probably because the antitrust on behind the scenes. mined to become the “Goldman agency is understaffed, although Another gripe, says Sokol at the Sachs of mega commodity trades”, its relative inexperience may also University of Florida, is the relative International Finance News warned mean that it opts to go slow to see lack of detail in Mofcom’s final rul - last week. how other jurisdictions handle ings, giving the impression that the matters first. regulators want to “operate within Still, context is important… Others claim that the slow pace is a black box”. But that’s not wholly At the end of last year, Mofcom had due to the political stipulations in unexpected, he suggests, as other handled 533 antitrust reviews and the process, which mean that Mof - antitrust regimes also try to limit 517 had been approved without con - com has to gather a wide range of some of the transparency in their ditions. And although a small group views from other stakeholders. decisionmaking, because they want of takeovers have seen remedies re - Rather than reviewing a filing ac - to leave more room for maneouvre quired, there has only been one out - cording to a clearly defined set of in future. Further, the expectation right refusal so far, Coca-Cola’s bid parameters, officials can struggle to is that Mofcom will start to offer for Huiyuan Juice four years ago coordinate their response, espe - more detail on its findings as it gets (see WiC7). cially when a number of parties are more experienced in delivering Since then there is also a sense pressing for their own interests. them. Indeed, the 15-page ruling on that Mofcom has been adapting to Hence outsiders have called for the Glencore-Xstrata deal was its its new role, albeit with a few grow - more clarity on how the review most substantial yet. n

The Cecil Rhodes of China

In his lifetime Cecil Rhodes made a fortune from million from corporates. He thinks he can raise diamonds. But he is better remembered for another $100 million within six months. bequeathing a chunk of his wealth to endow the Schwarzman says his purpose is to “foster a Rhodes Scholarship in 1902, with the goal of win-win relationship of mutual respect” bringing the world’s top overseas students to between China and the West. He reckons study at Oxford University (usually for two the West must develop a more “nuanced” years). Since inception, around 7,000 foreign understanding of China in the coming students have experienced Oxford’s dreaming decades and that the new spires thanks to Rhodes’ Tsinghua scholars should largesse (including former be well placed to US president, Bill Clinton). “interpret what’s One American who happening in China and didn’t cross the Atlantic maybe even influence was Steve Schwarzman. behaviour”. The private According to the New equity tycoon says there York Times, Schwarzman will around 10,000 applied for a Rhodes students sent to China within Scholarship in 1969 while at Yale, but failed to get “a lifetime” and if well chosen, there could even be one. Now, it appears, he is doing the next best thing. future US president among them. I l l u s

t The Blackstone founder and billionaire has created his Should that be the case, “we can really make a r a t i o n own Rhodes-style scholarship. But this time it is to difference,” says Schwarzman. The scheme’s : w w

w send talented foreign students to Tsinghua University advisory board is certainly full of political . b e n

i in China. Schwarzman has put $100 million of his own heavyweights, numbering Tony Blair, Nicolas t a e p s fortune into the scheme and secured a further $100 Sarkozy, Condoleezza Rice and Henry Kissinger. t e i n . c o m

5 Week in China The Week in 60 Seconds 26 April 2013

Maritime dispute resurfaces The major news items from China this week were...

A 53 year-old Taiwan businessman has contracted the 1H7N9 strain of bird flu while travelling in mainland China, Taiwan’s Health Department said on Wednesday. It’s the first reported case outside mainland China. The man was hospitalised after becoming ill three days after returning from Suzhou on April 9. Earlier this week China’s health authorities said the H7N9 virus has spread to a new area after eastern Shandong Province confirmed its first case of infection.

China’s maritime surveillance ships have chased 2away a group of Japanese vessels from disputed is - lands in the East China Sea (they are called the Diaoyus On patrol: Chinese marine surveillance ships by Beijing and the Senkakus by Tokyo). The Chinese fleet forced the Japanese fishing boats out of waters Has Huawei given up on its quest to sell telecom net - surrounding the islands, the State Oceanic Adminis - 4work equipment in the US? “We are not interested in tration said. China protested about the presence of the the US market any more,” Eric Xu, executive vice-presi - 10 boats carrying about 80 Japanese activists into wa - dent, announced at the company’s annual analyst sum - ters near the islands. mit this week, according to the Financial Times. However, according to Caijing magazine, company offi - Confidence in the Chinese economy appears to be cials quickly retracted the remark, saying Xu had been 3fading, with fund managers selling for eight consec - misinterpreted and the firm would not quit the US. utive weeks. According to data provider EPFR Global, fund firms took $3.1 billion out of Chinese equities The Ministry of Information and Information Tech - through the period ended April 17, after putting in $3.6 5nology (MIIT), the telecoms regulator, has said it will billion in the eight weeks before that. Only 13% of the in - no longer play the role of mediator between China Mobile vestors surveyed this month expect China’s economy to and Tencent in the row over the popular WeChat service. strengthen over the next 12 months. Instead, authorities say they will let the market resolve the matter, said Sina Tech. Analysts say the turn of events could signal that China Mobile is preparing to back down in the case, following widespread criticism that it’s trying to scapegoat Tencent for its own lacklustre performance.

The Shanghai court has overturned SOHO China’s 6Rmb4 billion ($648 million) purchase of an interest in a prime commercial site in Shanghai, marking a vic - tory for rival Fosun in a legal battle between the two property firms. The two have been locked in lawsuits over the parcel of land near Shanghai’s Bund area since P h o t

o December 2011, when SOHO agreed to buy the stake

S o u r from Greentown and Zendai, Fosun’s former partners. c e :

R e SOHO and the previous owners have all said they will ap - u t e r s Pan Shiyi: setback in Shanghai for SOHO peal against the court’s decision. n 6 Week in China Economy 26 April 2013

Political donations In the aftermath of the Ya’an quake, new spotlight on charitable giving

or Chen Ying what was sup - based entity) drew controversy Fposed to be the happiest in 2011 following coverage on - day of her life, soon became line of a young woman who one of the saddest. Chen was claimed to work for the charity. scheduled to be married on Sat - Guo Meimei soon became urday, reports Sina. Instead the known as ‘Red Cross Girl’ and Ya’an TV anchor rushed to the the photos of her lavish lifestyle epicentre of the city’s earth - led to suspicions that donations quake, broadcasting news of to the organisation were being the natural disaster in her wed - misused. The Red Cross of ding dress. China issued denials, but the The 7.0 magnitude quake hit scandal ran deep, with the per - Sichuan’s Lushan County hardest, Chen presents in wedding gown ception that it was yet another cor - and although less severe than the rupt government body. disaster that struck the province in phrase in its weibo posting. Following the latest quake, online 2008, it still caused 193 deaths, more Foreign companies were likewise commentators were making much of than 12,000 injuries and enormous using weibo to publicise their dona - the fact that donations to the Red damage. Like his predecessor Wen tions. Notably Apple offered Rmb50 Cross seemed to be drying up. One Jiabao, China’s premier Li Keqiang million to help those in the earth - (unconfirmed) datapoint circulating was quickly on the scene, as were quake region. Then Samsung Elec - online is that Rmb11 billion was do - 18,000 military personnel sup - tronics posted on weibo just over an nated to Red Cross after the 2008 ported by helicopters. Li was soon hour and a half later, donating Sichuan earthquake, but the public’s vowing to build a better Ya’an (not Rmb60 million and offering its given it just Rmb30,000 this time. to be confused with revolutionary “deepest condolences”. Lawmakers in Hong Kong hotspot Yan’an; see WiC178). But the most chat online was seemed similarly inclined when News of the disaster was soon about how the country’s richest ty - asked to approve a HK$100 million spreading via Sina Weibo, the coun - coons were making their own do - ($12.8 million) grant in the wake of try’s Twitter equivalent, with the nations. For example, real estate de - the current crisis. A welter of legis - Ya’an City Group using weibo to re - veloper Pan Shiyi (followed by 15 lators spoke up against giving quest donations of items like blan - million people on weibo ) said he money directly to government offi - kets “for victims we have yet to find”. was giving Rmb5 million to the One cials, such that the meeting con - Weibo was also in use by corpo - Foundation, a charity founded by cluded without a vote. rates keen to show their support. actor Jet Li. Shi Yuzhu of Giant In - "What China lacks is not money China Unicom’s local office advised teractive and the founders at Al - but rather clean government," said on its weibo that all calls and text ibaba and Tencent were also vocal Claudia Mo, one of the legislators. messages in the area would be free in saying they were giving their “Our trust in those provincial gov - during the disaster period. Chinese- cash to Li’s charity too. ernments has gone bankrupt.” owned Volvo was also prompt to re - Netizens were quick to point out After the 2008 quake, the Hong spond, donating Rmb20 million the significance: that people like Pan Kong government donated $1.2 bil - P h o t o ($3.23 million) and also caused a were snubbing the Red Cross of lion to victims of the disaster. But

S o u r c spike in the usage of the phrase China, a charity administered by the news that a school funded by the e :

I m

a ‘feng yu tong zhou ’ (which trans - government. As we reported in donation was then bulldozed to g i n e

C lates as ‘together, in the same WiC113, that organisation (which has make way for luxury apartments h i n a storm-crossed boat’). It used the nothing to do with the Geneva- sparked indignation last year. n 7 Week in China Cross Strait 26 April 2013

Lot of hang ups China Mobile gives up Taiwanese acquisition

ack in 2010, the Hong Kong- fixed-line telecoms operators. Blisted battery maker China So was the deal doomed to fail? Far EasTone bid now aborted Strategic led a consortium hoping Yes and no. Just two weeks ago WiC to acquire Nan Shan, one of Tai - reported that ICBC had become the ture. (Huawei has tried to lobby wan’s largest life insurers, from an first major Chinese bank to an - against the ban. Meanwhile the ailing AIG. But the $2.5 billion deal nounce a cross-strait tie-up, paying company sent out mixed messages soon flashed up red on the radar of $680 million for 20% of SinoPac Fi - this week when a senior executive Taiwanese regulators, who were nancial. It was the first time a Chi - talked about “abandoning” the US suspicious that the buyers were nese firm had been permitted to in - market, a claim the firm’s spokes - backed by mainland Chinese vest in a Taiwanese bank. people later retracted.) money. China Strategic repeatedly China Mobile’s experience looks Interestingly, the collapse of denied any mainland China con - different. Although Beijing and China Mobile’s bid for Far EasTone nection but the deal was rejected by Taipei have signed a series of trade got minimal coverage in China. the Taiwan government. agreements lifting tariffs and al - Most of the major news portals ded - Fast forward to today, and cross- lowing for equity stakes in sectors icated very little space to the story strait relations are still tinged with previously closed to both parties, although one that did mention it, distrust, despite closer economic the collapse of the telecom deal the Beijing Times, tried to play up ties between Taipei and Beijing. No points to the difficulties that remain the positives. great surprise, then, that China Mo - in closer integration between the Despite the deal being dead, the bile announced last week that it has political rivals. newspaper pointed out that there is given up on its four-year wait for “Things are more complicated in still the potential for a strategic tie- approval to buy a 12% stake in Far the telecom industry,” says Parker up between the two companies. Far EasTone, Taiwan’s third-largest mo - Wu, a fund manager at Agriculture EasTone says the two carriers are bile carrier. Bank of Taiwan. “The government is now exploring the potential of vir - The two companies first signed a bit more cagey about Chinese in - tual network operation (VNO), the proposed $545 million tie-up in fluence in those companies as they which lets carriers lease out capacity 2009, a year after Taiwanese presi - possess personal information and on their networks to third parties dent Ma Ying-jeou came to power that becomes a matter of national who then sell telecom services un - with a pledge to improve relations security. Taiwan and China’s rela - der their own brand names. The with China (see WiC17). At the time tionship isn’t that close yet.” premise is that VNOs are less sensi - of the deal, WiC expressed scepti - Of course, this is not the first tive because they don’t require that cism that it would get done. After time China’s telecom firms have the third parties are granted licences all, if Taiwan’s authorities were wor - faced paranoia about the potential to access the equipment used to op - ried about interest in the finance for overseas M&A laying the foun - erate networks. sector from China Strategic, they dation for cross-border snooping. Despite the failure to close the were even more likely to be freaked Back in October a US congressional much-delayed deal, the two compa - out by China Mobile, the mainland’s committee barred Chinese net - nies also signed an updated agree - largest state-owned telecom carrier. working equipment giants Huawei ment to cooperate on retail chan - China Mobile says the deal is off and ZTE from selling to American nels, products, content and cloud because of unmet “conditions”. networks because it was worried services, Far EasTone spokeswoman An official at Far EasTone said that the move could provide op - Alison Kao said. “We will resume the those obstacles included Taiwanese portunities for Chinese intelligence talks [on a stake sale] with China regulations barring Chinese invest - services to tamper with US Mobile when Taiwan law allows,” ment in the island’s mobile and telecommunications infrastruc - Kao told media. n 8 Week in China Internet and Tech 26 April 2013

Game for anything “China’s Facebook” – Renren – changes direction

acebook listed in May 2012, with partly because marketers cut back Fan IPO price of $38 a share. Now spending amid uncertainty over it hovers around $26. But its stock China’s economic outlook. But in - performance is still a lot better than dustry observers say a bigger chal - Renren: ready to play that of its Chinese clone Renren, lenge for Renren is the intense com - which went public in May 2011. petition from Sina Weibo, China’s NetEase underwent a similar trans - Granted Renren initially saw its Twitter-equivalent. While the num - formation in the mid-2000s after stock rise as high as $21.93 – or al - ber of weibo users has kept growing, its original SMS and portal busi - most 57% above its $14 IPO price. Renren’s new sign-up rate has been nesses faltered. Internet portal Sohu But the website couldn’t sustain much slower. Though it gained 31 now derives the majority of its rev - those dizzy heights, and investors million new users in 2012, Sina enue from online games too. soon bailed out of the social net - Weibo added more than 150 million But analysts say the gaming in - working stock: it now trades near its users in the same period. dustry has its dangers. As the US all-time low of $2.80. Renren has other problems too. Its gamemaker Zynga has discovered, Not surprisingly, there was a lot daily-deal site Nuomi continues to gaming hits now experience much of hype surrounding Renren when bleed cash. The Groupon-like offer - shorter life cycles as fans race off to it went public (it raised over $743 ing took in $16.1 million in revenue try the latest craze. To retain users, million from eager fund managers). last year, not enough to offset its Renren will have to come up with Investors saw it as a way to buy a $25.2 million in operating costs. new offerings much more fre - Facebook-like company, and in a Worse, the company has a stake in quently. And it will also have to work double-whammy potentially get ac - lossmaking video-sharing site out how to monetise its users more cess to the more than half a billion 56.com. So while Renren’s revenues aggressively on their mobile plat - Chinese internet users off limits to were up a little under half to $176.1 form. Renren reckons 80% of its Mark Zuckerberg. million last year, costs increased users will log in from their mobile But two years on and the busi - faster. That meant operating losses device this year. ness looks to have taken a different widened to $91.7 million from $30.2 But while Renren seems to want direction from its US role model. million in 2011. to become less like Facebook, Chi - Entrepreneur, a magazine, says Renren is now betting more of its nese internet titan Tencent is mak - that Renren calls itself a social net - future on online gaming. Sina Tech, ing the opposite move. Its social net - working site but that, in reality, it a portal, reported that it is planning working product Qzone saw its own offers little social networking. The a major push into mobile gaming in number of active users increase by company now generates the major - particular by developing titles that 9% year-on-year to 603 million (as ity of its revenue from online run on Google’s Android operating of the end of 2012). Weixin Mo - games, which reached $90 million system, which powers the majority ments, a new feature within Ten - in sales last year, an increase of 113% of Chinese smartphones. A Renren cent’s hugely popular mobile mes - from a year ago. That’s a sharp con - executive also told reporters that saging application Weixin (see trast to Facebook where online the company will sign up more part - WiC188) is also enjoying rapid user games have become less important ners to help promote its titles rather adoption rates. in overall revenue terms. than doing everything itself, a strat - Yet Renren’s decision to switch Meanwhile Renren’s revenue egy aimed at growing the business more of its focus to online gaming from advertising actually went more quickly. could still turn out to be the right down last year, falling 9.7% to $53.8 Renren wouldn’t be the first Chi - call: Tencent generates half of its million. Renren’s chief financial of - nese internet firm to seek to trans - own revenue through similar prod - ficer Huang Hui explains that’s form itself through online gaming. ucts, after all. n 9 Week in China China and the World 26 April 2013

Power broker Pakistan to buy Chinese nuclear reactor

ith North Korea’s nuclear it would not try to exploit treaty Wmachinations dominating loopholes once again. the headlines in recent months, it is Comments from China’s foreign easy to forget that China has an - ministry suggest that this might other atomically-ambitious friend happen. “Cooperation between on its borders, albeit much further China and Pakistan does not violate Don’t watch The China Syndrome to the west. relevant principles of the Nuclear Pakistan, partly thanks to China’s Suppliers Group,” spokesperson an editorial in the Indian Express help, has long enjoyed the nuclear Hong Lei said last month, adding insisted this week. capability that North Korea so des - that recent projects were “in com - China’s foreign ministry denies perately craves. But it is also reach - pliance with the international obli - any incursion in the region, al - ing out once more to its “all gations shared by both countries”. though it was not as forthright weather” ally, this time with the Part of the reason that China feels when asked about the sale of the nu - hope that China’s nuclear support able to assist Pakistan is that the US clear reactors to Pakistan. will help alleviate its crippling elec - brokered an NSG waiver allowing In - According to the CNNC website – tricity shortages. dia – Pakistan’s arch rival – to gain which has listed the Karachi Nuclear Last week Lü Huaxiang, vice-pres - access to nuclear markets in 2008. Power Plant as a potential customer ident of China’s National Nuclear India, which has also refused – the ACP-1,000 model is a pres - Corporation (CNNC), all but con - to sign the NNPT, insists on its right surised water reactor, 85% of which firmed recent stories in the Ameri - to hold nuclear weapons in order to is manufactured in China. can and Pakistani media that the protect itself against Pakistan and, China has exported smaller reac - company will be providing two do - to some extent, against China too. tors before but has generally been mestically-designed reactors for India’s inability to protect the prevented from selling larger ones Karachi’s aging nuclear power plant. northeastern state of Arunachal abroad because they have been “We have acquired the first ex - Pradesh during a border conflict classed as too similar to US and port contract for a self-developed, with China in 1962 was a major im - French designs. advanced nuclear reactor and we are petus for New Delhi pushing for - CNNC is currently building two working on other deals,” Lü told lo - ward with its own nuclear weapons ACP 1,000 reactors in Fujian cal media. programme. province’s Fuqing. “Our domestic CNNC and China’s foreign min - And this week there have been re - plant will be a reference for foreign istry has been careful not to men - ports from Indian sources that Chi - customers,” Lü said, adding that the tion Pakistan by name on the deal nese forces have established a new Chinese design is 10% cheaper than because the South Asian nation has - camp 10 kilometres inside Indian- similar models produced by US com - n’t signed the Nuclear Non-Prolifer - controlled territory in a disputed panies. D espite its price advantage, ation Treaty (NNPT). This makes any area known as Aksai Chin. CNNC doesn’t want to be viewed as contract technically illegal under the “New Delhi should send a strong the low-cost option though and conditions set by the Nuclear Sup - message to Beijing that it is not deal - hopes to get International Atomic pliers Group (NSG), an anti-prolifer - ing with an India of 1962. Simulta - Energy Association approval to ex - ation group that China has been a neously, it should step up its pre - port to Europe and North America P h o t

o member of since 2004. China has paredness to take on China in case it in future. It has also publicised the

S o u r found ways of selling nuclear tech - shows any sign of belligerence now fact that Argentina is said to be con - c e :

R e nology to Pakistan since then, but or in future. Preparing for a military sidering the ACP 1,000 for a new nu - u t e r s most NSG members had hoped that conflict is the best way to avoid it,” clear project. n 10 Week in China Banking and Finance 26 April 2013

The gathering storm After wave of arrests, is Wang Qishan finally cleaning up the bond market?

hen Wang Qishan heard the Wnews of Lehman Brothers’ implosion on September 14, 2008, he was leading a trade delegation to Washington. As the former head of one of China’s big four banks, Wang immediately told his colleagues they should get back to Beijing to get ready for a global credit crisis. The former vice-premier would later head a State Council taskforce set up to tackle the aftermath of the financial meltdown. Wang was no stranger to debt troubles. Almost a decade before Lehman’s blow up, he was sent to Guangdong to clean up GITIC, a An arrest at CITIC Securities sends shock waves through bond market provincial investment vehicle whose default on dollar bonds had caused department – had also been “taken han”, the magazine said. foreign banks to panic. Wang would away by police for personal rea - The alleged malpractice seems to fix the situation and later crises, sons”. This was an even bigger revolve around a complex tech - earning him the nickname of the shock: CITIC Securities is one of nique known as “substitute hold - ‘fireman’. China’s biggest investment bank ing” in which a fund manager trans - Now China’s new anti-corruption and its 38 year-old fixed income fers a portion of his bond portfolio tsar has returned to familiar turf: a head had earned plaudits as the to a counterparty account. Not only purge of the debt market. ‘king of the bond market’. The does this help in skirting regulatory Skim through any of China’s fi - Global Times said Rmb4.2 trillion limits on leverage, in some cases it nancial newspapers in the past fort - ($680 billion) of bond trading went can also window-dress trading per - night and the commonest headline through CITIC Securities under Yang formance. has been “Bond Market Storm”, with last year. But what triggered police activ - prominent coverage given to the According to the Securities ity were revelations about so-called troubles of a series of heavyweight Times, a newspaper run by the Peo - “Class C” accounts (the variety held players. ple’s Daily, at least two other senior by an individual rather than an in - To begin with, Shanghai-based bond market executives have been stitution) suggesting that executives Wanjia Asset Management said last arrested for flouting regulatory were diverting trading commissions Wednesday that its fixed income rules. One of them worked for Qilu or gains to themselves and their head was under police investigation. Bank, a regional lender. families. The announcement came after days The arrests weren’t “isolated Scandals over Class C accounts of intense speculation, not least be - cases”, the Century Weekly com - aren’t new. Back in 2010 they also cause Wanjia is one of the biggest mented, but part of a crackdown on came to public attention, when P h o t

o unlisted fund houses. malpractice that has “angered the Zhang Rui, a senior Ministry of Fi -

S o u r Later that day CITIC Securities highest authority”. The flurry of nance official (who had overseen c e :

R e said Yang Hui – the executive direc - probes is a result of a “thorough in - government bond auctions for 12 u t e r s tor of its own fixed income trading vestigation ordered by Wang Qis - years) was caught sending text mes - 11 Week in China Banking and Finance 26 April 2013

sages to bidders. It was subsequently the heart of Beijing’s financial dis - to Reuters, outstanding bonds found that Wang had made Rmb40 trict. Rumours soon spread. “People amounted to nearly Rmb24.4 tril - million of illegal gains via bond suggested Wang committed suicide lion at the end of March, up from trading in a Class C account. because of hefty losses in gold trad - Rmb17.7 trillion in 2009. Local newspapers are now specu - ing. I don’t think so. It’s the bond The fundamental issue, accord - lating that the subsequent probes market, rather than the gold market, ing to Lu Lei, president of the have revealed so many abuses of that is going to implode,” the Hong Guangdong University of Finance, Class C accounts that Wang is deter - Kong Economic Times cited an un - is that regulation has failed to keep mined to stamp out the practice. Ac - named financial official as saying. pace with the growth in size and cording to the state media, the The resignation this week of Bank complexity of the bond market. crackdown will escalate to “unimag - of Nanjing’s president Xia Ping fu - That may be changing. The Peo - inable breadth and depth” in the elled similar speculation. The lender ple’s Bank of China held a meeting coming weeks. China Securities said Xia’s new posting is with an - this week with senior commercial Journal is also forecasting that “a other regional bank in Jiangsu banking executives, the Economic bigger storm is coming and bigger province. But 21CN Business Herald Information Daily has reported, to fish will be caught”. isn’t convinced, especially as Bank discuss tighter internal controls on In fact, Wang’s clampdown is be - of Nanjing has been one of the most bond trading. ing used to explain a series of un - active traders in the interbank bond Again, the warning was of tumul - usual incidents. Last week, Wang market. “Will the flurry of debt mar - tuous times ahead. “The entire grey Shiqiang, the 60 year-old chairman ket scandals spread to Bank of Nan - chain of vested interests in the bond of China Jianyin Investment Securi - jing?” the newspaper queried. market will be sucked into the regu - ties’ supervisory board, plunged to Parts of China’s bond market latory storm,” the China Securities his death from an office building in have been on a bull run. According Journal predicts. n

Who’s Hu: Sun Guangxin Profiles of China’s business leaders

Sun Guangxin, chairman of Guanghui Industry Investment and began to develop contacts in an oil industry that would become dubbed as “Xinjiang’s richest man”, has a few things in common Xinjiang’s economic driving force. He started trading oil with Rabiya Kadeer, previously thought to be the wealthiest exploration equipment and parts and by 1992 his 17-person firm woman in Xinjiang. Both rose from humble origins, riding on accounted for one sixth of oil equipment trades in Xinjiang. Beijing’s efforts to modernise the area. Both have Sun expanded into real estate in 1993, building tamed parts of Xinjiang’s rough geography into some of the tallest buildings in Urumqi. His company massive property portfolios. But the big difference is Guanghui Industry remains the biggest developer in that Kadeer, a former legislator and erstwhile Xinjiang as well as the biggest privately-controlled exemplar of China’s multi-ethnic harmony, is in energy firm, with upstream assets in natural gas exile. Sun has proven far better at cultivating his and oil exploration. political connections. As Sun’s enterprises grew, he employed many former senior army officers within company ranks. Getting started In the Communist Party organisation set up within Sun was born in 1962 in Urumqi, where his the company, he also let other Party member enjoy Shandong-native father was working as a cobbler. positions senior to his own (Sun only became the He joined the People’s Liberation Army straight out Party secretary at the company in 2011). Forbes of school but left before he was 30, starting his own now ranks Sun at 14th in its latest China Rich List business in 1989. According to James Millward’s Eurasian with a net worth of $4 billion. His personal fortune would be Crossroads: A History of Xinjiang , Sun’s seed money included a bigger, had he not distributed 25% of Guanghui’s equity to other $400 demobilisation reimbursement and reportedly a $50,000 senior management. loan secured via a Japanese cotton deal.

P Need to know h o t o

Big break Sun once described himself as a workaholic akin to “a donkey S o u r c Sun’s first success, like Kadeer’s, was setting up restaurants. But welded to a stone grinder”. e :

I m he got his next big idea at the dining tables of his eateries. Many But he also spends much of his spare time these days on g a i n

e of his higher-rolling customers were oilmen and officials, and Sun calligraphy and collecting fine Chinese art.

C h i n a

12 Week in China China Consumer 26 April 2013

Hardly a page turner Is Amazon’s Kindle device finally set to launch in China

n 2009, Jeff Bezos, chief execu - no one wants a Kindle e-reader but Itive of Amazon, told a bewildered more that few are prepared to pay for audience that he was separating the online content. The view is that Kindle hardware business from its hardly any e-book platforms will be online store for e-books. “We will able to survive amid rampant piracy. make Kindle books… available on Even today, e-book sales account for the iPhone, and other mobile de - less than 1% of revenues at Chinese vices and other computing devices,” publishing houses, says Huxiu. he declared. “People will pay for good quality What he may not have known hardware, but they won’t pay for then is that just such a business content,” Shaun Rein, managing di - model is probably the only one rector of China Market Research that’s going to work for Amazon in Group, told Bloomberg. China. The Kindle virtual bookstore “If I were Amazon I’d be selling was introduced in the country last Kindling interest: Bezos the hardware, not the content.” December. But the Kindle e-reader To entice shoppers, most of the still doesn’t have a launch date. years after its $74 million acquisition books currently available for down - There have been plenty of false of a local online retailer, the US gi - load on the Kindle bookstore are dawns for the Kindle’s appearance ant’s market share in China stands priced below Rmb10 ($1.61). Chinese in the Chinese market. Earlier this at just 2.1%, trailing domestic firms tennis star Li Na’s autobiography is month tech blog Huxiu was one of like Taobao and 360buy.com by a on sale for Rmb6, for instance, while the latest to break the news that the huge distance, according to statistics Mao Yushi’s bestseller Where Does Kindle device would finally go on from Analysys, a research firm. Chinese People’s Anxiety Come sale on April 16. But more than a Could Kindle change some of that? From? costs just Rmb1. (To get the week later, the Kindle is still It doesn’t bode well for Amazon that content, consumers must download nowhere to be found. no Chinese firm has been able to reading apps for Apple iPads and So what has happened? Amazon build a profitable business around iPhones or through Google’s An - China hasn’t so far commented on e-readers. Hanvon Technologies was droid software.) when the Kindle will finally make one of the first to launch an e- Despite the cut-price market, its debut. Huxiu says that techno - reader in the Chinese market (see competition shows signs of heating logically, Amazon has had a harder WiC118). But due to the lack of avail - up further. Last week Dangdang, time adapting the Kindle for the able content, it has all but disap - which has 50% market share in on - China market because Chinese char - peared from the market. line book retailing, offered almost acters are a lot more complicated to For Bambook, a subsidiary of me - all of its e-books for free in hope of render than the English alphabet. dia conglomerate Shanda, the chal - drumming up interest for its own But the broader speculation is that lenge wasn’t a shortage of content. soon-to-launch e-reader. Its rival Amazon is waiting for government Despite repeatedly cutting prices, 360Buy has followed suit, offering approvals to introduce the device Bambook couldn’t compete with 50,000 e-book titles for nothing. and that Bezos will have to wait other e-reading tablets like Apple’s Meanwhile, Huanqiu.com, the while the authorities complete a iPad. Even Kindle, available for sale online subsidiary of Global Times, is P h o t

o burdensome testing process. on Taobao and imported via the reporting that Amazon’s Kindle de -

S o u r After years of trying to grow in the grey market, outsold Bambook. vice could be officially launched in c e :

R e China market, Amazon should be Other analysts say that Amazon’s China on May 1. But few are holding u t e r s used to this kind of setback. Eight biggest problem in China isn’t that their breath… n 13 Week in China Energy and Resources 26 April 2013

Golden chance Falling gold price attracts mass Chinese buying

arly this year Fujian tycoon Wu about the metal being adulterated But if gold prices continue to decline, EDuanbiao grabbed headlines at home. even strong demand at home is un - when he threw a lavish wedding for Traders reported a similar surge likely to buoy up the Chinese gold his daughter. But what really caught in business. “We were doing about $1 mining sector. Fujian-based Zijin attention was the generous dowry. billion in sales but on Friday (April Mining, China’s largest listed pro - The lucky couple received around 19) it moved to $12.8 billion, and by ducer, was sitting on a gold pile $150 million from the doting par - Monday, it was tremendous – it worth Rmb11.6 billion as of the end of ents, which included four large went up to $20 billion. On the bul - last year. boxes of gold jewellery. lion side, we sold out at the weekend But analysts say Zijin will have to Wu may now be wishing that the – one tonne of gold bars,” reported undergo a major markdown should wedding had been delayed a few Haywood Cheung, president of the prices continue to drop. Over the last weeks, giving him the chance to Chinese Gold & Silver Exchange So - two weeks the company’s stock fell buy his wedding bullion at a knock - ciety, adding that buyers see gold as around 13%. down price. a more stable investment than the “It is undeniable that dramatic Gold has long been a popular stock market. changes in the price of gold have put choice for wedding gifts in Chinese The Nanfang Daily struck a more enormous pressure on the com - culture. That explains why millions sobering note, warning investors pany’s inventory. Although there is of eager parents rushed to jewellery against charging blindly into the no stress at the moment to sell shops last week as prices for the buying frenzy. A piece of gold jew - down the inventory, there is a lot of metal dropped to their lowest level ellery costs around Rmb350 per downward pressure on gold prices. in nearly two and a half years. gram at retailers, the newspaper That means mining firms with gold “A dowry is something you know suggested, while the cost of gold bul - reserves will be forced to substan - you will need and I don’t think lion at a similar weight is only tially mark down their inventory,” there’ll be an opportunity like this around Rmb295. From an invest - an industry researcher told 21CN for a long time,” a woman from ment perspective, buyers should be Business Herald. Zhejiang told the South China careful about what they are buying. However, Zijin says it has no in - Morning Post. Meanwhile, strong demand for tention to lower production. A com - Bargain hunters also took advan - gold from China and India saw pany spokesman told Shanghai Se - tage of the drop in prices, with a record sales over the week, curities News that Zijin’s balance surge in investment in bullion prompting some analysts to claim sheet will also withstand the down - around the country. that prices for the metal have bot - ward pressure on price. “We need to A total of 20 kilograms of gold tomed out. find a way to reduce cost rather than bullion – worth more than Rmb6 “In view of the strong demand for cut down production,” the company million ($970,000) – sold out within physical gold, the possibility of a advised. In fact, the fall in prices two hours on Saturday morning at further substantial plunge is small,” may offer Zijin a buying opportu - Beijing Guohua Department Store, Zhang Bingnan, vice chairman of nity. It and state-owned Shandong CCTV reported. the China Gold Association, told the Gold have been expressing an inter - Hong Kong also saw a huge spike Global Times. est in acquiring smaller, cash- in jewellery sales. Customer traffic Hedge fund manager John Paulson strapped miners. This week Securi - P h o rose by as much as a quarter early concurs (that’s no great surprise, as ties Daily reported that the two large t o

S o u last week, says Chow Tai Fook, the he is heavily invested in the metal), miners are also looking into buying r c e :

S world’s largest jewellery chain. Buy - telling clients that purchases by cen - three gold mines in Western Aus - h u t t e r ers from China prefer to buy gold in tral banks and demand from Asia tralia, put up for sale by Barrick Gold s t o c k Hong Kong because they are worried will support prices in the near term. Corporation. n 14 Week in China Society and Culture 26 April 2013

Out of their depth Drowning at diving show raises concerns about stars’ safety

hile it is no secret that Chi - Wnese audiences love Trans - formers (the most recent iteration of the blockbuster franchise took over $165 million at the local box of - fice), the producer behind the fran - chise appears to know what the Chinese want to watch on the small screen, too. After announcing that Trans - formers 4 will be partially filmed in China, Paramount Studios has also launched a new TV reality show called Transformers 4 Chinese Actor Talent Search . The new competition will pick four winners – two with professional acting experience, two without – for roles in the next Trans - formers movie. Since reality TV exploded onto Chinese screens in 2005 with the singing contest Happy Girls, the genre has spawned hundreds of competition and dating shows. The most popular of all is still If You Are Living proof of the maxim ‘this is going to end in tears’: Li Caihua The One , a dating show that’s been on air since 2010 (see WiC68). But - mother, who is dying of end-stage China’s favourite sports. Zhejiang cooking shows have also got a real - liver disease. “My illness cannot be Satellite TV’s Celebrity Splash China ity makeover, with millions of view - cured without a liver transplant… and Jiangsu Satellite’s Stars in Dan - ers tuning in to watch the Chinese but I cannot afford one,” her mother ger both premiered early this MasterChef on Shanghai’s Dragon explained to the judges, adding that month, featuring celebrities learn - Satellite TV recently. The series saw Zhao had also offered to donate half ing to plunge Olympian-like into the 33 year-old single mother Zhao Dan of her own liver to save her. “My water beneath. Both have done well battle against Taiwanese chef Hong dream is to win the championship in the ratings, although their star- Hongxing to win Rmb1 million to get the prize money for my studded line-ups certainly help. ($160,000), as well as a chance in mother’s medical treatment,” the Celebrity Splash boasts Hong Kong’s the restaurant business. aspiring chef declared. Cantopop singer Charlene Choi and But it wasn’t just Zhao’s cooking Mother, daughter, eliminated South Korean K-pop star Chae Yeon, skills that gained her the MasterChef contestants and television audience the singer Abao and the former P h o t o title. She won over the judges and were soon dissolving in tears. Olympic champion Tian Liang, who

S o u r c the viewers with a better sob story, Now two other reality shows have was brought in as a “consultant”. e :

I m

a says the Financial Times. won national followings, and Stars in Danger has featured celebri - g i n e

C Before the final cook-off, Zhao ap - they’ve resulted in plenty of tears ties including Hong Kong’s Li Cai - h i n a peared on stage flanked by her too. Both are about diving, one of hua and China’s Wang Likun. The 15 Week in China Society and Culture 26 April 2013

show is being made at the National handling the aftermath.” Aquatics Centre in Beijing. Others eschewed the cautionary Some celebrities have done better advice in favour of the moral high than others. Sha Baoliang, a pop ground. An editorial in The Beijing singer, got a full score for his inward News called the shows an “extrava - pike in Stars in Danger , while Tai - gant waste of money” that failed to wanese singer-actor Wu Jianhao also contribute anything new to China’s impressed audiences with his tech - long list of variety formats, which nique, as well as his six-pack are often rehashed from US or Eu - physique. ropean originals (the original for - Indeed, for several contestants, mat for Splash -type programming the competition was an ideal op - is Dutch). “Compared to the profes - portunity to show off their toned sional athletes, it doesn’t really mat - torsos (although the belly fat on a ter how they dive,” viewer Wang few of the divers put a little of the Hongya agreed, before getting to the ‘reality’ back into the format). meat of the matter in her comments There were other talking points to the Economic Observer. too. Li Caihua was eliminated High-five my dive: Charlene Choi “What’s important is when sexy quickly in the first episode but went Korean star Chae Yeon and the on to become the highest trending Qun, who jumped awkwardly from model Cica Chou appear in a low- topic on Sina Weibo after she was the 5-metre board and had to be cut bikini on that springboard,” captured sobbing after a disap - pulled out of the water by life - Wang advised. pointing jump (she landed flat on guards. Similarly, singer Charlene her back in what resembled an in - Choi injured her waist when she hit verted bellyflop). the water in the wrong posture. Li’s swimwear choice – a bathing Singer Han Geng also appeared to suit with as much cutouts as fabric – pass out during one of the re - Taken for a ride was also much discussed by diving hearsals. Did Xi Jinping hail a fans. But another attraction of the “Artists and singers are not ath - Beijing cab? shows is the chance to see nerves letes,” Hong Kong singer Denise Ho fraying among the aspiring divers. wrote on her personal weibo . “How ccording to a documentary se - Li wasn’t the only celebrity to reveal is it possible that they can just re - Aries produced by Phoenix TV, her more vulnerable side. Several ceive a few lessons and compete in a Mao Zedong attempted three incog - have tried to evoke sympathy by sport that requires so much profes - nito walkabouts while Chinese claiming a fear of heights and in one sional training? Diving from 10 me - leader. None quite worked out. De - case an actress even claimed that tres is way too dangerous!” spite his disguise, Mao was easily she hadn’t known how to swim The warning sounded accurate identified. Each time, a crowd prior to the show. Virtually all the fe - when producers of Celebrity Splash flocked to greet him. male divers have burst into tears at released news of the drowning of an During one attempt in 1958, Mao some point during filming. aide of actor Shi Xiaolong, one of and his guards visited a Tianjin Not everyone in the audience is the participants in the competition, restaurant. This provoked a stam - so easily moved. In fact some have during a training session. pede and led to many losing their criticised the shows for over-playing “After the incident, the pro - personal belongings in the crush. the emotion to boost ratings. “If you gramme production crew and the Mao was later told that there was are really going to jump, then jump,” staff on site embarked on a swift res - enough lost property to fill seven New Express Daily instructed curtly. cue operation and brought the in - and a half baskets. “Stop trying to be overly dramatic volved individual to the hospital, Quite why so many diners had and stop the crying.” but after a four-hour attempt he their fountain pens with them is P h o t o Perhaps some of the anxiety is could not be resuscitated and was open to conjecture. Many of the re -

S o u r c justified. On weibo , some netizens pronounced dead,” the message ran. ports from the Mao era are question - e :

I m

a have complained the diving shows “We feel sorry and pained about this able to say the least and historians g i n e

C are putting contestants in danger – accident, and the production team are sceptical about how spontaneous h i n a especially 64 year-old comedian Niu and all parties involved are actively Mao’s wanderings really were. 16 Week in China Society and Culture 26 April 2013

That means that it’s often wise to err on the side of caution when similar incidents are reported for Party bigwigs. That became evident again last week when President Xi Jinping was said to have taken a 26- minute trip through downtown Bei - jing in a taxi. The source of the story was Ta Kung Pao, a Hong Kong newspaper normally considered reliable in its reporting on officialdom (as it’s funded by the Communist Party). That gave the story credibility and soon led to the report going viral on the internet. In the original article, Guo Lixin, a 46 year-old Beijing cabbie, told Ta His usual mode of transport... Kung Pao that two men had hailed his taxi during rush hour on March getting note too as it’s rare for Xin - have been him in the taxi as he has - 1. As they chatted casually about the hua to deny a media report with n’t travelled to Beijing this year. capital city’s smoggy air, Guo such severity. (The last time it hap - So who is telling the truth? Up to claimed that his fare began to look pened was to scotch news that for - this point, no one has come up with remarkably familiar. “Has anyone mer leader Jiang Zemin was dead.) It a convincing explanation for what told you that you look like General meant that propagandists limber - happened. Secretary Xi?” Guo asked, when ing up to trumpet Xi’s common The Apple Daily reported that stopped at a red light. “You are the touch were caught totally wrong- cabbie Guo has since “disappeared” first taxi driver to have recognised footed. Several newspapers were from his home and that his where - me,” the passenger chuckled. forced to pull their front page cov - abouts remain unknown. The Cen - On arrival, the passenger insisted erage of Xi’s taxi escapade. tral Propaganda Department of the on paying Rmb30 for the Rmb27 Ta Kung Pao then published an Communist Party is also investigat - ride and told Guo to keep the apology. But that also stirred debate. ing the case. change. But Guo said he was paid The story was co-written by the pa - Nevertheless, the fiasco has pro - much more in the form of four Chi - per’s Beijing bureau chief, so on - vided ammunition for China’s nese words – “best wishes for a lookers wondered how a veteran newly reconstituted media watch - smooth journey” – written by Xi on journalist at a pro-Beijing broad - dog to justify new censorship rules the back of a fuel-surcharge receipt. sheet could cook up an entirely fic - relating to the media. Xi’s taxi ride soon became the tional series of events related to Two days before Ta Kung Pao talk of China. The BBC said a weibo China’s most powerful man. published the revelations about Xi’s version of the story was forwarded “Is Xinhua playing a hoax on Ta incognito ride, the State General Ad - more than 69,000 times just hours Kung Pao?” one net user asked. ministration of Press, Publication, after being released. Many netizens “Xi’s body double was late so he Radio, Film and Television pub - compared Xi to Qianlong, a Qing had to take a cab?” posited another. lished new directives that included a Dynasty emperor famous for trav - This second theory gained trac - ban on Chinese media posting con - elling incognito. Even Xinhua’s offi - tion when a weibo user called tent online (i.e. on their weibo ac - cial weibo picked up the story, in - ‘Bowenhuaxia’ published two pho - counts) that was sourced from over - cluding a confirmation from the tos of himself, claiming that he was seas media without government city’s transport authority. a Xi lookalike. He added that he had permission. As a Hong Kong publi - But Ta Kung Pao’s scoop soon fell fooled the cabbie into believing the cation, Ta Kung Pao has ‘proven’ P h o t

o apart. On the evening of April 18, Chinese leader was in his taxi. But a such sources can be unreliable. Con -

S o u r Xinhua reversed course and issued girl living in Zhejiang then claimed spiracy theorists therefore see the c e :

R e an urgent clarification warning that that the Xi lookalike was actually her timing of Ta Kung Pao’s public hum - u t e r s the story was fake. That was soon father, and added that it couldn’t bling as all a bit too convenient… n 17 Week in China And Finally 26 April 2013

Pay-per-view Should a village be allowed to charge visitors?

his is how writer Shen Congwen furious about the lack of amenities. Tdescribes the fictionalised ver - But the authorities refused to sion of his actual birthplace back down on the fee and a protest Fenghuang in his much-loved novel from local businesses outside gov - Border Town . ernment offices ended up with the “For 10 years and more the local riot police being sent in. military commander at this provin - Fenghuang’s bosses say the fee is It’ll cost you Rmb148 to visit cial border town had emphasised necessary to reduce the number of maintaining the peace and keeping tourists arriving in the town, as well looked weaker still when 21CN Busi - things as they were. He handled as in managing their environmental ness Herald uncovered that the lo - things quite deftly, so there had impact on the 400 year-old site. cal government had established a never been any unrest. Commerce But some experts have ques - private company called Unitenix to on the land and water never had to tioned their logic, implying that this run the new tourist ticketing sys - stop because of warfare or banditry; is simply another case of money- tem, only 49% of which is owned good order was the rule and people making on the side. “There are by the local government. were satisfied.” many other available measures to The president of the new com - One wonders what Shen – some - limit numbers, such as asking pany Ye Wenzhi also told reporters times likened to William Faulkner tourists to make a reservation a day that only 40% of income from ticket or Anton Chekov for his gentle pas - before their visit or establishing a sales would go to the government, toral descriptions – would make of maximum daily capacity,” Wang leading many to question who Ye recent developments at his river - Jianmin, a researcher at the Chinese was and what his company would side home. Academy of Social Sciences’ be doing to deserve a 60% cut of rev - On April 10, just as the tourist sea - Tourism Research Centre, told the enue from what is technically a pub - son was getting under way in west - People’s Daily. lic site. ern Hunan, Fenghuang authorities Wang added that the argument “Fenghuang is a public resource, slapped a Rmb148 ($24) entrance fee for funds to protect the site was “a why does the government need to co - on all those wishing to visit. lousy excuse” because “tourists pay operate with a private company?” the Shopkeepers and restaurants taxes on accommodation and food Beijing News asked in an editorial. saw a sharp drop in trade and went at tourist sites, so the government “The new charge raises the suspi - on strike, closing their establish - of Fenghuang is guaranteed suffi - cions of the public of a transfer of ments so that the tourists who had cient money”. private property for profit,” it con - forked out the cash for entry were The preservation argument cluded. n

Not all bad, then?

P “Europe has high social benefits and high tax, and this has led to no one working” h o t o

S o u r * China’s richest man, Wahaha tycoon Zong Qinghou criticises the European economic model. Zong c e :

S

h then told the Financial Times that he wants to buy foreign firms that make products that China cannot u t t e

r produce – and that many of these acquisitions will be in Europe. s t o c k

18 Week in China The Back Page 26 April 2013

Photo of the Week In Numbers 4% Percentage growth in Chinese luxury car sales in the first quarter of this year. That is sharply down from the double digit growth witnessed in prior quarters. Some analysts speculate that Xi Jinping’s austerity drive is responsible.

$2.1 billion P h The amount that Australia’s central bank will o t o

S invest in Chinese government bonds, a move o u r c e deepening economic ties between the two :

I m a countries. The announcement from the g i n e

Reserve Bank of Australia comes on the C h i n a heels of an agreement with China to make the Australian dollar and the yuan directly Many car models to choose from: JAC Motors gets some help with a convertible. product launch at the Shanghai Auto Show (car dimly visible on right) 2015 The year that China expects to launch a probe to Mars. It will be the country’s Where is it? second attempt to reach the planet after the probe Yinghuo-1 (along with Russian Some of the places referred to in this issue Jilin spacecraft Fobos-Grunt carrying it) failed to Xinjiang enter Mars’ orbit in 2011, says Science and Beijing Technology Daily.

Shandong China $4 billion Nanjing The size of the order placed by Chinese Shanghai airlines for Airbus A330 jets. The purchase of the 18 planes is China’s first deal with Hunan the European firm since the country got Fujian into dispute with the EU over its aviation Guangdong carbon tax. The Airbus boss says the new Hong Kong order shows the issue has been resolved and is a step towards “business as usual”.

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

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.

@2013 Week in China is published weekly by ChinTell Limited, a company based in Hong Kong. All rights reserved. To contact us email: [email protected] 19