1 Talking Point 6 Week in 60 Seconds 7 Auto Industry Week in China 8 Rise of the Renminbi 9 Aviation 10 Energy and Resources 11 Telecoms 13 Economy 1 February 2013 14 Society and Culture Issue 180 19 And Finally www.weekinchina.com 20 The Back Page Apple boss in China makeover? m o c . n i e t s p e a t i n e b . w w w

With Apple’s shares in a slump, Tim Cook looks to China for growth

Brought to you by Week in China Talking Point 1 February 2013

Tim Cook’s Chinese whispers Is a deal with China Mobile the answer to Apple’s share slump?

China in his hands: Tim Cook on a visit to China, which he says will soon be Apple’s biggest market

“ he only companies that report feeling a little miffed that the news cisions ahead. The most important? Tbetter quarters pump oil,” was greeted with an 11% slump in Whether to broker a possibly game- Apple’s chief executive Tim Cook the Apple share price. In fact, the changing deal with China Mobile. boasted to colleagues last week, company’s stock has been in decline after announcing the company’s for months – mostly on fears that So why is the share price down? latest results. its days of supercharged growth Sellers of Apple’s shares argue that In fact, Apple’s $13.1 billion profit may be behind it. revenues failed to meet market ex - was the world’s fourth best, with There are, of course, still some pectations for the third successive only Gazprom, Shell and Exxon- bulls out there, and the über Apple quarter. Gross margins also showed Mobil enjoying better quarters in fans remain steadfastly hopeful the signs of substantive decline, while corporate history. stock will eventually hit $1,000. But unit sales of 47.8 million iPhones Charged with what many onlook - as Tim Cook has probably realised, came in below expectation too. Al - ers regard as the almost impossible getting the stock heading back in though the quarterly profit of $13.1 P h o t

o task of taking over from Steve Jobs, that direction looks increasingly de - billion set a new record, it was only

S o u r Cook delivered the record profit in pendent on Apple delivering big marginally up (by $14 million) on c e :

R e Apple’s most recent fiscal quarter. sales growth in China. To pull this the previous period. u t e r s So perhaps he can be forgiven for off Cook has some big strategic de - Apple stock is now down more 1 Week in China Talking Point 1 February 2013

than a third from its most recent high of just over $700 last Septem - ber. Its boosters are fighting back on two main fronts. In the short run, the analyst community is being blamed for overhyping their revenue and profit forecasts (a piece in Fortune magazine sug - gested that “Apple’s analysts did worse than the company this quar - ter”). But the other response is that, in the longer term, it’s unrealistic to expect Apple to keep on delivering growth at recent levels, as the law of large numbers is bound to have a braking effect. Michael Moritz, chairman of in - Regional Bond House Dim Sum Bond House vestment firm Sequoia Capital, said of the Year of the Year something similar in the Financial Times on Monday, warning that it was hard for such a huge company to keep growing quite so fast. Attacking the “mewling and mindless pandemonium” of the company’s critics, Moritz also pointed out that if Apple were a Singapore Equity House Best International of the Year Bond House country, its revenues would rank it 45th in GDP terms, above Pakistan and New Zealand. “Almost enough to make you think Apple should have a seat in the UN,” he quipped.

How about China’s contribution? Revenues from China were cele - Best Local Currency Best Offshore RMB House Bond House brated as a highlight, and for the first time Apple broke out the data for a new Greater China sales terri - tory – which it defined as China, Hong Kong and Taiwan. Perhaps that was because the re - sults were the best ever, with sales of $6.8 billion – 67% up year-on- year, much faster than the global Best Export Finance RMB House of the Year Bank in Asia-Pacific average. Sales of iPhones also dou - bled in the quarter. Apple now looks fully focused on the China market, after a long pe - riod in which the country seemed a lesser priority (see our Focus Issue The Magnificent Seven for a fuller HSBC operates in various jurisdictions through its affiliates, including, but not limited to, HSBC Bank plc, authorised and regulated by the Financial Services Authority, The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (USA) Inc., member of NYSE, FINRA and SIPC, and discussion). HSBC Bank USA, NA. 13-0002 As WiC has also reported before, 2 Week in China Talking Point 1 February 2013

Steve Jobs never visited China in an But isn’t Apple choosing margin billion over its fiscal 2012 period official capacity but Cook made his over market share? tells a very different story. China second visit in less than a year last Asked during the earnings call Wireless reported profits of just month, telling the local press that whether Apple should be selling under $20 million in its own most he expects China to overtake the cheaper smartphones, Cook ap - recent earnings announcement, for United States as Apple’s largest peared to reject the idea, claiming the first six months of last year. market soon. “I cannot accurately that he had no interest “in revenue Nonetheless, there are unsub - predict when that will happen, but I for revenue’s sake”. stantiated rumours that Apple is have no doubt that it will,” he told Phil Schiller, senior vice presi - working on a lower-priced phone it Sina, an internet news portal. dent of marketing, told the Shang - will launch in the coming months. hai Evening News something Not that Cook said anything to con - Any clouds on the horizon? similar recently, saying that Apple firm this during the earnings call, Despite the record revenues, Apple’s won’t develop cheaper phones to but he did highlight that Apple has a critics say it is locking itself out of grab market share. history of offering different prod - the fastest-growing area of the Chi - ucts at different price points, citing nese market by refusing to offer the release last year of the iPad mini. lower-price smartphones. He also insisted that the Californian Much of last week’s media cover - firm has never feared cannibalising age picked up on this concern, usu - its product portfolio, with the launch ally citing a December report from of the iPhone cutting into iPod rev - market researcher IDC, in which enues, and sales of the iPad displac - Apple dropped from third to sixth in ing some for the MacBook. smartphone sales, behind rivals like The counterview is that Apple Samsung, Lenovo, Huawei and ZTE. will struggle to develop a smart - Because most of the unit growth phone priced low enough to pick up in China is coming at the lower end significant new market share – and of the market, IDC estimates that that it would be foolhardy to even Apple’s market share fell to 4.2% in try, because of the impact on prof - the quarter ending last September, Coolpad, even cooler price? its. Company guidance is already from 5.8% in the same period a that higher sales volumes for the year earlier. But with new smartphone sales iPad mini this year will pull down The concern is that Apple is pric - in China expected to reach 240 mil - gross margins across the company. ing itself out of the market, as more lion by the end of 2013, the question Launching lower-priced iPhones and more Chinese opt for cheaper is whether Apple can afford to ig - would accelerate the decline. handsets, many of them running on nore the entry-level market. One alternative is to keep prices Google’s Android. Steven Millward, writing at the where they are but make payment Aside from its better-known Tech In Asia blog, warned that doing an easier undertaking. Apple’s re - competitors, Apple was outsold so might see Apple repeat the early cent launch of China payment plans too by China Wireless Technolo - error in software strategy that made is an attempt to do just that: cus - gies, whose Coolpad handsets each Mac OS into a fringe platform, tomers wanting to buy products retail for about Rmb700 ($112). dwarfed by the widely used Win - from its online store can now pay in Prices for the iPhone 5 start at dows. Will it miss out on the millions up to 12 monthly instalments, on an Rmb5,288, and even former insid - of potential customers who can’t af - interest-free basis. The service, ers say that the gap should be a ford to pay out two or three months’ which is offered to holders of China wake-up call for the company’s salary for the latest iPhone, he asked? Merchants Bank credit cards, also al - management. Apple “needs to Cook’s likely response is that lows for payments over longer peri - adapt to where the growth is,” one - Apple is trumping its smartphone ods (up to 24 months), although in time chief executive John Sculley rivals in revenue and profit com - this case interest charges apply. told Bloomberg last month. “It’s parisons, and so has little reason to got to learn how to sell products descend to their level. Despite trail - What would a low-price iPhone that are priced for the price point ing China Wireless, the maker of the mean for Apple’s brand? that the emerging middle class in Coolpad phone, in market share, The other risk in lower pricing is the Asia can afford.” Apple’s net income of almost $42 potential for damage to Apple’s ca - 3 Week in China Talking Point 1 February 2013

chet, as millions of less affluent cus - tomers start to take ownership of its products. In a market more brand-obsessed than most, Apple enjoys luxury sta - tus. For example, according to the Chinese Luxury Consumer Survey in the latest Hurun Report, the brand was the second most popular choice for those giving gifts to men, up from the fourth place last year. (It couldn’t beat the mighty man- purse, with Louis Vuitton taking number one spot.) Much of that lux - ury reputation is derived from its higher price and, to a lesser extent, the scarcity value of owning some - thing that others aspire to. In the same way that it would be a surprise to see Louis Vuitton trying to sell millions of new bags at a fifth of the price of its core offering, Apple will be thinking carefully Coming to a screen near you: China’s smartphone battle about the dangers of sullying its higher-end appeal by selling Entrepreneur, a business magazine, mats that make playing games or cheaper products. saying that 1,500 different smart - watching videos easier, as well as al - After all, it was only a year ago phones have now been launched in lowing more space for typing in that sales at its flagship store in Bei - the Chinese market, many of them Chinese characters. jing had to be halted, when unruly at the lower end. There were even “Since I got a big screen Galaxy crowds came close to rioting at the reports in the Economic Daily this Note [a Samsung phone], I have debut of the latest iPhone. In April, week that the Taiwanese parent of never thought about changing it. Xinhua picked up on more disturb - Master Kong, a leading instant noo - The time for small screen phones ing evidence of ‘Apple obsession’, dle brand, will be next to join the has gone,” one business executive when a 17 year-old from Hunan sold fray. The news isn’t as surprising as told a reporter from Tencent’s news one of his kidney’s to raise funds to it first sounds (Samsung began life site this week. buy the firm’s latest gadgets. It put as a noodle producer). But it also Huawei’s Ascend Mate now has a a rather dark spin on Apple’s ‘must makes Apple’s preference for pre - 6.1-inch format, the largest yet for a have’ appeal. mium prices more understandable. smartphone, further blurring the Cook acknowledged the power of boundary between phone and the brand last week too, in his be - Focus elsewhere… tablet. But Apple sounds more cau - lief that many customers who buy What else might Apple do in China? tious. Asked about the case for one Apple product end up buying One option would be to offer a fuller larger screens, Cook said that the more, in what he described as the ‘family’ of products across different iPhone 5’s 4-inch screen is large “halo effect”. formats. Samsung shipped 37 dif - enough, especially with a retina dis - Of course, the same logic could ferent phones in a variety of sizes play offering “the most advanced be applied to a new sales strategy last year, according to Karen Haslam quality in the industry”. for smartphones, encouraging the at the Macworld UK blog, but Ap - More likely is that Apple will try purchasers of lower-priced models ple’s preference has been to build to get its future products quicker to to gravitate towards more expen - marketing buzz around less fre - market. During his trip in January, P h o t

o sive products over time. quent releases. Cook visited the Ministry of Indus -

S o u r But Apple must query where it Screen size is one area where try and Information Technology c e :

R e should position itself in such a some of Apple’s main competitors (MIIT) and Doug Young, author of u t e r s crowded marketplace, with Global have won plaudits, for larger for - YoungChinaBiz blog, surmises that 4 Week in China Talking Point 1 February 2013

Apple is trying to improve ties with with China Mobile, the host carrier dard). But others suspect Apple’s the regulator so that it can speed up to 710 million subscribers or two- bosses have decided to wait it out. the release of its new products, after thirds of China’s mobile phone mar - Rather than bet on this older tech - delays of weeks or months on previ - ket, as well as the majority of its nology, Apple is waiting to build an ous global launches. current 3G users. iPhone compatible with China Mo - The problem, Young says, is that Cook met with the telco’s chair - bile’s new 4G network, which could the longer it takes the authorities to man on his trip to China last month launch later this year. approve the release of the latest but the speculation about the poten - That could make sense from sev - iPhone, the more smartphones will tial tie-up between the two compa - eral perspectives. China Mobile’s 4G be sold running on Android, includ - nies has been dragging on for years. standard is viewed as a huge techni - ing those made by local manufac - Subscribers to 3G services tend to be cal improvement on the flaky 3G turers like Huawei and ZTE. better off, ergo a deal with China Mo - technology the government forced it As part of the charm offensive, bile would be a huge positive in snar - to adopt (see WiC174 for an explana - Apple is also considering the estab - ing sales for Apple too. tion of why even the telco’s manage - lishment of a new research and de - But signs of a final agreement ment is keen to move to 4G as fast as velopment centre in the Chinese have been fleeting. China Mobile possible). Sensibly priced, it looks a capital, says Beijing Evening News. may be trying to drive a harder bar - fair bet that faster and better-func - In doing so, Cook would be follow - gain than Apple is accustomed to ac - tioning 4G will convert existing 3G ing other US technology firms like cept. It also requires the iPhone to be users (China Mobile’s own, plus Microsoft and Intel, which have compatible with its domestically de - those on rival networks). opened similar facilities in China. veloped 3G network, a request that It could also have a ‘leapfrog’ ef - A third area for Apple to improve the US firm has previously declined. fect, encouraging a bigger chunk of is its distribution. As part of this ef - (Samsung has adapted its own hand - the telco’s current 2G subscribers to fort, company executives have high - sets for the proprietary standard, make the switch too. In other words, lighted the increase in the Apple’s which has 88 million subscribers). 4G could trigger demand for huge own retail stores to 11 from six over Of course, there would be both numbers of new smartphones – and the past year, with the number of financial and technical costs t0 a compatible iPhone could be a huge premium resellers also doubling to adopting the standard (the engi - beneficiary. more than 400 shops in China. neers in Cupertino could be con - That’s exactly the scenario that More significantly still, Apple cerned that the iPhone doesn’t run would get analysts excited about needs to resolve its negotiations as well on China Mobile’s 3G stan - Apple’s growth again… n

Running out of breath

Beijing’s ‘air-pocalypse’ grabbed international headlines two weekends ago (see WiC178) and the quality of the capital’s air plunged again this week. On Monday the US embassy in Beijing reported its air quality index reached 350 – bad news when anything over 300 denotes ‘hazardous’. Clearly these are not great conditions for children, and especially not for those who play sport. In fact, the city’s awful air has led some international schools to think creatively about how students can play sport without damage to their health. The Financial Times reports that the International School of Beijing has just built two “pollution domes” containing six

I tennis courts and a small football field. In both cases the l l u s t r a domes pipe in filtered air that’s safe to run around in. A PE t i o n :

w teacher from the school told the newspaper that the domes w w .

b were built after it was calculated that 39 of the 180 days in the e n i t a last school year were too badly polluted for students to play e p s t e sports in the open air. i n . c o m

5 Week in China The Week in 60 Seconds 1 February 2013

Firm but fair, Xi claims The major news items from China this week were...

Xi Jinping made his first published speech on foreign 1policy since taking over as leader of the ruling Com - munist party in November. In his speech, Xi said China will never compromise on what it considers its “core in - terests” and “legitimate rights” but that it would not “pur - sue development at the cost of sacrificing other country’s interests”. Xi also asserted that Beijing remained com - mitted to the multilateral trade system and participating in global economic governance.

Premier Wen Jiabao called for action to alleviate the 2country’s air pollution problems, the highest-level acknowledgement yet of the hazardous air quality Our core interests won’t be compromised, says Xi across many parts of China in recent weeks. The smog is still dense after hitting record levels in mid-January. Wen Wanxiang Group, China’s biggest auto-parts maker, said that China “should take certain and effective meas - 4won approval from the Committee on Foreign In - ures to accelerate industrial restructuring, and push for - vestment in the United States to buy most of the assets ward energy conservation and emissions reduction.” of A123 Systems, a bankrupt electric car battery maker backed with US government funds. A123 is also the Chinese banks have rolled over at least three quarters owner of 91 patents for sensitive military and space bat - 3of all loans to local governments due to mature by tery technology. Wanxiang acquired most of A123’s au - the end of 2012, according to the Financial Times. Local tomotive, grid and commercial business assets for about governments borrowed heavily from banks to fuel $256.6 million (see page 7, for more on electric cars). China’s stimulus programme during the global financial crisis and are now struggling to generate the revenue to Meanwhile, China Cosco, the country’s largest ship - pay them back. Total outstanding loans were Rmb9.2 5ping company by fleet size, said it expects to report a trillion ($1.47 trillion) at the end of 2012. At the end of large net loss for 2012, the second year of losses in a row, 2010 they had reached Rmb9.1 trillion. The implication which suggests an imminent downgrading of its ren - is that the vast majority of loans due over the past two mninbi-denominated A shares by the Shanghai Stock years have simply been extended. Exchange. Under China’s listing rules, the two domestic stock exchanges are entitled to put a company’s stock in the “special treatment” category if it posts losses for two consecutive years. Last year Cosco posted a net loss of Rmb10.4 billion ($1.7 billion).

Caterpillar’s fourth-quarter earnings fell 55% amid 6claims of accounting misconduct at a unit of ERA Mining Machinery, which Caterpillar acquired last year. Caterpillar had already warned investors that it would take a $580 million write-down related to the P h o t

o purchase of the Chinese firm, which makes roof sup -

S o u r ports for mines (see WiC179). The US firm has alleged c e :

R e that ERA engaged in a multi-year accounting fraud be - u t e r s Cosco: heading for ‘special treatment’? fore it was bought last June. n 6 Week in China Auto Industry 1 February 2013

Saab set to sizzle? Swedish brand in green relaunch – but China sales targets look like a stretch

n late January, Shanghai ex - since General Motors decided to Iperienced a landmark dispose of it in 2008. moment: Qian Jun, a local Saab’s new owner is Na - resident, received the keys tional Electric Vehicle for his new Roewe E50. (Nevs), a Chinese entity According to the Shang - that rescued the Swedish hai Daily Qian became the firm from bankruptcy in proud owner of the city’s August. The latest plan is first fully electric car. to relaunch Saab as a The vehicle, which was made lo - maker of electric cars tar - cally by SAIC, has a range of 180km, geted at the Chinese mar - which Qian says is fine for him, as ket. But Bloomberg says the suc - his daily commute is just 20km. kicked in, Qian paid Rmb130,000. cess of the project hinges on whether He’s also lucky that his place of work Plus there was the further saving on China’s ambitious targets for green – the Shanghai International Auto - the Shanghai licence plate. car sales come to fruition. mobile City in suburban Jiading – is The city’s only electric car dealer Nevs is betting that they will. one of 12 locations in the metropolis – Gaozhan New Energy Vehicles – “China realises the need to meet the with a charging station. says it has orders for a further 230 climate challenges through electric Shanghai has been making ro - cars and will deliver them by March. vehicles,” Mikael Oestlund, a com - bust efforts to promote green cars But as car industry blogger and pany spokeman told the US news lately. One key initiative: those who author Greg Anderson points out, it agency. “The business plan is well purchase electric vehicles can get is still far from clear that enough thought-out and completely realis - their licence plates in a day and vir - Chinese consumers are interested tic,” agreed Trollhaettan mayor Paul tually for free, paying just Rmb125 in buying green vehicles. Aakerlund. ($20). In contrast, drivers of gas-guz - Last year only 12,791 battery-pow - Perhaps the mayor is right, al - zlers must join the licence plate auc - ered and hybrid cars were sold in though the sales goals look pretty tion. The bids in last month’s auc - China. Admittedly that is 52% more aggressive. The Chinese firm fore - tion saw the average price for a than the year before but Anderson casts it will be selling 120,000 bat - Shanghai plate soar to Rmb75,000 still labels it as “inconsequential” tery-powered Saab sedans a year by (up from an average of Rmb50,000 when weighed against the 19.3 mil - 2016 – a massive multiple on the in 2012). lion vehicles purchased in total by meagre number of green vehicles For those who want to drive stan - the Chinese last year. sold in China last year. dard cars, a Shanghai plate now Anderson adds that the govern - One crumb of comfort for Saab is costs as much as a mid-range sedan ment has pushed back some of its that it will have Qingdao – popula - (Shanghai Daily compares the li - targets for the sales of green cars. tion 8.7 million – on its side. That’s cence fee to a Geely MK-II, which For example, it had originally envis - because the coastal city purchased a sells for Rmb75,000 too). aged there’d be 500,000 of them on 22% stake in Nevs this month for Policy incentives are bringing the roads by 2011; that goal has now just over $300 million, reports down the total ownership costs for been delayed to 2015. Bloomberg. green vehicles. For example, the One city that will be hoping that Should sales of Saab’s electric ve - sticker price of Qian’s Roewe E50 is the target is met is Trollhaetten. It hicles reach targets, the agreement Rmb234,900. But after central and is home to Saab, a brand that has envisages a second company factory local government subsidies had gone through financial trauma opening in Qingdao. n 7 Week in China Rise of the Renminbi 1 February 2013

Betting on Qianhai Outlook for new zone prompts property punts

n November 1986, Shenzhen renminbi – to go global (see WiC157). replace many people’s American Ihosted China’s first female How is that going to work? The dream, especially those who want bodybuilding contest – a radical honest answer is that nobody is quite to make a career in financial serv - undertaking when you consider sure. But the speculation is that busi - ices.” that no one had donned a bikini in nesses inside the Qianhai zone will As of mid-January, seven domes - public since before Mao came to enjoy special privileges in cross-bor - tic fund houses and four private eq - power in 1949. der capital flow. If things go well, the uity firms had obtained approvals Shenzhen went on to pioneer arrangements might then be ex - to set up offices in Qianhai, with an - much more important events as the tended to other parts of China – just other ten in the queue. test venue for many of Deng Xiaop - as Shenzhen’s pioneering of export But Qianhai’s development is ing’s free market reforms. China’s processing activity eventually spread still at an early stage. Forex regula - current leader Xi Jinping is well to the rest of China. tions and investment rules are yet aware of the city’s significance too. In a landmark deal last week, 15 to be ironed out. His late father Xi Zhongxun was one banks in Hong Kong (including In the meantime –like many Chi - of the key advocates of “special eco - HSBC) signed an agreement to offer a nese cities with ambitious planning nomic zones” like Shenzhen. Xi sen - combined Rmb2 billion ($320 mil - blueprints – real estate has become ior visited the city for his first in - lion) in cross-border loans to compa - the most obvious proxy to invest in spection trip in 1978 and would nies in Qianhai. “What is big is the Qianhai, including the stocks of later live there for most of the final government is taking a hands-off ap - Hong Kong-listed firms with land years of his life. proach for the first time and allowing reserves in the special zone. When Xi junior made his own lenders and borrowers to make their For example, shares in Shenzhen first official trip outside Beijing last own deals,” chief economist Wang International, a thinly-traded logis - month, he also chose Shenzhen. To Jianhui with Southwest Securities tics and property firm with 380,000 be precise, he chose to go to Qianhai, told the China Daily. square metres of industrial sites in a 15 square-kilometre special zone Says China Business Journal: Qianhai, surged more than 40% in a earmarked for bolder reforms, “Qianhai will offer the biggest and single trading session last week. One which has been hived off from the most direct channel for freer forex piece of broker research is valuing main city. flow in and out of China, especially the firm’s Qianhai real estate at Special zones are no longer quite for bringing renminbi back into the HK$74 billion ($9.5 billion), way in so special these days, with more mainland, offering lower financing excess of its HK$15 billion market than a dozen experimental areas in costs for Chinese firms and higher value. Even smaller firms with tiny China. But does Qianhai now de - investment returns for holders of portfolios on the fringes of the zone serve to be considered more special offshore renminbi.” are being hyped as “Qianhai plays” than most? The Shenzhen government is by speculators. The answer is a cautious yes. showing no shortage of ambition, Investors might be advised to Qianhai is located a stone’s throw saying that it wants Qianhai to be - show caution, until the plans be - from two of China’s most important come the “Manhattan of the Pearl come more concrete. Others, like the areas of financial and economic ac - River Delta” and promising tax in - Shenzhen Special Zone Daily, are tivity: Shenzhen itself, and the spe - centives to lure international firms much more bullish about Qianhai’s cial administrative region of Hong and financial professionals. The ul - prospects, claiming that “it has the P h o t

o Kong. But more significantly, the timate goal, according to Wang central government’s blessing to try

S o u r central government has indicated Jinxia, liaison director of the Qian - anything when it comes to financial c e :

R e that it wants Qianhai to be a new hai Administration Bureau, is that innovation and reforms.” u t e r s testing ground for its currency – the “working in Qianhai will gradually Only time will tell. n 8 Week in China Aviation 1 February 2013

Final call Beijing’s second airport moves a step closer, at a cost of over $11 billion

t was a case of first the smog and ing broader permissions for civilian Ithen the snow for Beijing’s long- traffic, with the military still re - suffering air passengers last month, stricting passenger flights into nar - after hundreds 0f flights were ei - row air corridors. In a report on the ther cancelled or delayed due to the same issue in WiC83, Zou Jianjun, a wintry conditions. professor at the Civil Aviation Man - But at least it sounds like the agement Institute, complained that chances of an on-time departure for the military was holding onto the Beijing’s travellers might improve in bulk of airspace for its own use. future, after reports in the Chinese Think of it like tollgates, Zou con - press that the capital city’s second cluded: “There are 10 lanes on the airport is moving closer to reality. road but seven gates are closed.” The media coverage suggests almost 82 million passengers a year. The new airport will be built close that the Rmb70 billion ($11.24 bil - The Chinese media seemed un - to the smaller Nanyuan air termi - lion) second airport will include six fazed by the news, with the general nal, despite speculation that objec - runways for civil aviation, plus an sense that Beijing needs more than tions from the Central Military extra one for the military’s exclu - one airport to match peer cities like Commission had been holding up sive use. At full capacity, it will be New York, London, Paris and Tokyo. the plan. “The biggest obstacle to ap - able to handle 70 million passen - There is a little local rivalry too: proving the airport is a dispute gers annually. There’s a 37-kilome - Shanghai has two airports. about distribution of airspace be - tre rail link in the master plan too, But one area of concern for tween civil and military use,” Zhu to carry passengers directly into HSBC’s analysts is that the new in - Wenxin, an official in charge of con - Beijing South Railway Station. vestment plan looks like costing struction at the new site, reiterated The announcement in a newspa - three times as much as Beijing’s to the China Times. per linked to the Civil Aviation Ad - most recent flagship terminal, Beijing has aspirations to become ministration of China (CAAC) im - which was built in advance of the much more of an international plied that the State Council had 2008 Olympics. Nor is there much travel hub. Although passenger vol - given its blessing for the new hub detail on how the project will be umes have grown quickly, much of to be built on land between the funded by the various parties, which that has come from domestic southern suburb of Daxing and include the Beijing city government, flights. Bosses want a greater share neighbouring Hebei province. the Hebei provincial government of international traffic and starting Flights should begin by 2018. and the CAAC itself. A third query is in January this year new rules came Under discussion for at least four whether the new site will be able to into effect granting 72-hour visa- years (WiC first mentioned it in is - generate sufficient returns. One free stays for transit passengers sue 96), the proposals prompted a possibility, says HSBC, is higher fees from 45 countries. long struggle between interest for airline customers. But airport executives haven’t groups desperate to win the project But policymakers will need to do been helped by a substantial loss of for their locality, as well as the in - more than cut the ribbons on the Japanese business due to the cur - evitable flurry of real estate specula - new facilities. Currently, runway ca - rent row over disputed islands (see tion in areas said to be shortlisted. pacity is the main bottleneck in Bei - WiC179). At least 15% of flights to and It also follows passenger frustra - jing, with the authorities even en - from Japan have been cut as a re - tion with delays at Beijing’s current couraging smaller airlines to fly into sult, and passenger numbers on the airport, now the world’s second nearby Tianjin and Shijiazhuang in - remaining flights have fallen by al - busiest after Atlanta, and handling stead. A particular priority is secur - most half. n 9 Week in China Energy and Resources 1 February 2013

Provocative steppe Why Shenhua may avoid Mongolian dispute

o wonder people are choking ment in Ulan Bator is seeking to play power structure this is how things Non the air. The news this week off Chalco – an aluminium behe - often tend to work. is that China is now burning almost moth – against state-owned Shen - So Shenhua’s management was as much coal as the rest of the world hua, China’s biggest coal miner. probably as surprised by the shut - combined (3.8 billion tonnes, or 47% The ambassador told the newspa - down order as almost everyone else. of the worldwide total, according to per that his government was talking China Business News says it is the US government data). to Shenhua, having been unable to first time that the environment As a result, China’s coal imports reason with Chalco. Comments the ministry has applied such a rule to a are soaring too, up by nearly a third Journal: “Mongolia may be hoping “mega state-owned project”. to 220 million tonnes in the first 10 Shenhua, which is in the running to The plant in question uses coal months of last year. The average develop the western half of Tavan as a substitute for oil in producing price paid for this coal was $103.30 a Tolgoi, will work to resolve the im - raw materials for plastics. But to do tonne, according to customs data in passe with a focus on gaining good - so requires large amounts of water: the Chinese media. That sum will will in its bid for the project.” Deloitte’s latest Chemical Quarterly be of interest to the Mongolian gov - But the timing of the Mongolian points out that China’s early coal- ernment, which is currently in dis - gambit isn’t ideal. Why? Shenhua is to-olefins projects consumed 40 pute with a major Chinese firm over probably worried by how interven - metric tonnes of water per metric the price of Mongolia’s coal exports. tion on its part might look in Bei - tonne of olefin produced. Unfortu - The row is the result of a coal- jing – especially if it’s seen as sabo - nately the parts of China with the for-loans deal signed last year be - taging another SOE’s contract. most coal (Inner Mongolia and tween Mongolian miner Tavan Tol - That’s because Shenhua is still Shanxi, for example) are struggling goi and Chalco, a Chinese smarting from recent punishment with water scarcity. Updated envi - state-owned enterprise. The $350 by the Ministry of Environmental ronmental rules – devised in coop - million deal capped the price of the Protection, which has penalised the eration with the National Develop - Mongolian coal Chalco received at coal giant for the unauthorised ment and Reform Commission – $70 a tonne. A new Mongolian gov - opening of a new plant. The imme - state that new coal-to-olefin proj - ernment now say the price is too diate fine was puny (just ects must reduce water usage by low and they are threatening to Rmb100,000) but the regulators in 75%. Unless Shenhua can demon - cancel the arrangement. Beijing also ordered that the facil - strate its facility hits this target, ap - The Mongolian ambassador to ity halt production. It’s the stoppage proval to reopen may face delays. Beijing told the Wall Street Journal that really hurts. The Economic Observer calcu - that the price the Chinese are pay - The project in question is a lates that the ongoing shutdown is ing is “unacceptable in the sense of Rmb17 billion ($2.73 billion) coal- costing Shenhua Rmb4 million per normal international trade”. But to-olefins facility in Inner Mongo - day (the stoppage order was re - Chalco representatives shot back lia, which opened 18 months ago ceived January 22). that objections to the terms of the without receiving the requisite ap - Shenhua’s public chastisement is deal were “baseless”, constituted “a provals from environment offi - illustrative in suggesting that its po - unilateral breach of the contract” cials. That may sound an odd litical capital is not quite as strong and could lead to “unlimited mone - course to take, but Shenhua may as many thought (for more on the tary damages”. have calculated that it could fi - company, see WiC167). P h o t

o So far, so straightforward. How - nesse the regulations, using its It also implies that it will tread

S o u r ever, the Wall Street Journal also re - connections in Beijing to outrank carefully in the Chalco negotiation c e :

R e ports that the Mongolian strategy (and outflank) the environmental – for fear of risking further ire in u t e r s has an added nuance: the govern - bureaucrats. In China’s Byzantine Beijing. n 10 Week in China Telecoms 1 February 2013

The network news While Huawei pays staff big bonuses, ZTE is reporting a record loss

n Boeing’s bitter rivalry with Air - Huawei surpassed Sweden’s Eric- Ibus, it always seems that when sson last year to become the largest one manufacturer is up, the other is telecoms equipment maker by rev- down. The recent grounding of Boe - enues (ZTE ranked fifth). Pole posi- ing’s Dreamliner on safety concerns tion is useful. “Industry rankings are marks the latest twist in this com - important, especially when the tele- petitive dynamic. At stake? A repu - coms industry is in a downturn, as tational hit that could damage many mobile carriers choose to Dreamliner sales and spark a mi - work with the first or second largest gration of orders back to Airbus. Of equipment supplier. The lower the course, not so long ago the roles ranking the less advantage there is,” were reversed when it was the Euro - Xiang Ligang from CCTime, an IT pean manufacturer experiencing portal, told China Business News. technical problems with its own The main reason for Huawei’s flagship, the A380. lead is that it is more competitive The rivalry between Huawei and outside China. Since 2005, it has ac- ZTE is not an exact parallel but it Still not satisfied: Ren Zhengfei celerated its expansion, including has some broad similarities. The going to markets that rivals like Er- two Shenzhen-based telecom vestors to expect its biggest annual icsson and Nokia Siemens had tradi- equipment companies are fierce loss since going public in Hong tionally shunned. By 2006, Huawei’s competitors around the globe. In Kong in 2004 – spilling red ink of sales in Africa were already exceed- many instances they bid head-to- about Rmb2.9 billion for the whole ing $2 billion, for instance. Much of head for contracts: success for one year. ZTE attributed its dire per - this initial sales push was based often means disappointment for formance to lower revenues and de - around a reputation for lower cost the other. clining margins, blaming the weak products. But since then Huawei’s But there’s at least one key dif - economic climate for lower contract reputation has grown. It has ad - ference: where Boeing and Airbus fees and project delays. vanced more confidently into more have each enjoyed periods of pre- Huawei also acknowledged the developed markets too, including eminence over recent years, in the tough conditions, accepting too that Europe, where it is involved in sup- telecoms rivalry Huawei seems to its revenue had grown well below it plying more than half of the 4G tele- have led ZTE far more consistently. own earlier target. coms networks announced so far. And recently, Huawei has been en - “Things change, when we made Two-thirds of its sales now come joying much more than just an edge, the prediction we didn't know where from markets outside China. with announcements about the the global economy would go for the ZTE was slower to expand inter- prospective earnings of the two com - rest of the year,” a company nationally. And to close the gap on panies last month suggesting a spokesman told media. Huawei, it then offered steeper dis- widening gap between the two firms. As if to rub it in the face of its em - counts to lure mobile operators. It Huawei’s forecast was that its rev - battled rival, Huawei also an - has enjoyed success in winning con- enues for 2012 would go up 8% to nounced that it will be paying out tracts in Asia and Africa too, but of- Rmb220.2 billion, with net income Rmb12.5 billion in staff bonuses – ten at lower margins, which have P h o t

o rising 33% to Rmb15.4 billion ($2.5 news of which had envious employ - hurt the bottom line.

S o u r billion). ees from ZTE complaining to China “Two years ago ZTE’s market ex- c e :

R e But in its own preliminary fore - National Radio that they “just don’t pansion was very aggressive, sign - u t e r s cast last month, ZTE warned in - see a future” with their employer. ing contracts despite very harsh 11 Week in China Telecoms 1 February 2013

terms and huge credit risk,” Yu Bin an analyst with Frost & Sullivan, excited about China’s migration to from Analysys told China Business told Bloomberg. “Its handsets are 4G technology, an upgrade that Journal. “At the time, we predicted doing quite well and it has main - will require billions of dollars of that ZTE would run into trouble. It’s tained its telecom equipment investment. like training without any strength share… Overall, its revenue channels China Mobile is currently tri - but only relying on steroids. It’s just are wider than ZTE’s.” alling its homegrown 4G standard not sustainable.” Still, Huawei has faced obstacles of TD-LTE before a national rollout, al - Also a challenge for ZTE, its arch its own. In the US, it has made little though the government is yet to is - rival has extended its lead in the headway in network sales due to sue 4G licences. Still, the prospects mobile handset business, a segment Washington’s suspicions about its al - for Huawei look good. This year in which ZTE has historically out - leged links to the Chinese military. alone, the telco is forecast to spend performed. In the fourth quarter of Despite an extensive lobbying and PR as much as Rmb40 billion on prepa - last year, Huawei shipped 10.8 mil - campaign, it failed to convince a Sen - rations for the new network. lion units of (mostly low-end) ate committee in October that the al - ZTE has also been lobbying hard smartphones, or 4.9% of global mar - legations are unfounded. In the latest for 4G business and it beat bidders ket share, behind only Samsung and move to quell concerns, the com - including Ericsson and Huawei to Apple, says research firm IDC. pany’s CFO Cathy Meng (also the construct China Mobile’s 4G trial In comparison ZTE ranks fifth, daughter of founder Ren Zhengfei) networks in Beijing and Shanghai. controlling a 4.3% share (Sony is has vowed to be “more open and Liu Peng, vice president at ZTE, number four). transparent with stakeholders”, an - hopes that early entry into the TD- “Huawei has a better long-term nouncing that Huawei will disclose LTE sector will lead to greater mar - outlook (than ZTE) because it has more information about its share - ket share in the future. Indeed the telecom equipment, enterprise holding structure. China’s 4G spend will be so big, it and handsets business,” Jessie Yu, Back in China, Huawei says it is should return ZTE to the black. n

Who’s Hu: Gong Hongjia Profiles of China’s business leaders

Born in 1965, Gong Hongjia would later become a Big break leading angel investor in the Chinese technology When asked about his reputation as China’s sector. But at school he showed few signs of leading angel investor, Gong says he may not be being tech-savvy, preferring literature to science. the best, but that he might have made the biggest After scoring full marks in composition in his profit from a one-off deal. In late 2001, he university entrance exams, Gong planned for a invested Rmb2.45 million for a 49% stake in career as a reporter. But he says that he was then Hikvision Digital Technology. At the time, Gong offered a place at the Hangzhou University of saw the investment more as a means to help out Science and Technology, in part because he was some college classmates. But Hikvision now good at throwing the javelin. Knowing the makes 60% of China’s video surveillance university’s strong reputation, he accepted. systems, enjoying a market capitalisation of nearly Rmb60 billion ($9.63 billion) as of January Getting started 2013. In a list compiled by Hexun – ranking the wealthy according Gong graduated in 1986 with a degree in computer science and to market values of their stockholdings – Gong’s 22% stake in started his own business, trading electronic goods in southern Hikvision was worth Rmb13.8 billion last year, a 6,000-fold return. China. Driven by a desire to produce a homegrown brand to compete with Japanese radio makers, Gong founded Tecsun Need to know General Electric in 1994. By selling much cheaper radio sets to Confessing that he doesn’t count himself among the smartest of younger Chinese consumers, Tecsun broke the dominance of the technocrats, Gong says that he prefers to invest in start-ups Japanese brands and grew into China’s largest radio maker. founded by people without the most polished CVs. Gong then ventured into venture capital and has since founded But he is bolder when it comes to enticing the brightest talents or invested in at least 15 technology start-ups. Some of his more to join his companies. Trying to secure the services of an

P successful deals include Asiainfo-Linkage, a software company exceptionally talented engineer for Hikvision, Gong got his man h o t o

and one of the earliest Chinese firms to go public on Nasdaq in with a signing-on bonus that the employee would later describe as S o u r

c 2000, as well as the mobile telecom software firm Funinhand. ‘so big I’d never need to work again’. e :

C F P

12 Week in China Economy 1 February 2013

Just not fair Official Gini number is released at last – but the response is sceptical

orn in 1884, Corrado Gini led a these Gini scores have been higher Bdistinguished career as a statis - than the official number released tician, even if his politics deviated last month. One such study, pub - away from the mean to the extreme lished in 2010 by Southwestern Uni - end of the spectrum. Published in versity of Finance and Economics in 1927, Gini’s The Scientific Basis of Chengdu, came out with a score of Fascism was regarded as a weighty 0.61. “10% of Chinese households contribution to right wing thought. hold about 80% of the wealth,” Zhu Fortunately the Italian’s work in sta - Lijia at the China National School of tistics has long outlived his political Administration, told China Times. insights, with his Gini coefficient “Just from this, the Gini coefficient still used as a measurement of in - of 0.61 is more credible.” come disparity. The official numbers are roughly Even China’s National Statistics in line with figures released early Bureau (NBS) recognises Gini’s Mind the gap last year by disgraced politician Bo longevity, it seems, after publish - Xilai, who revealed a 0.46 rating but ing 10 years worth of coefficient perfect equality has a score of zero. declined to go into further detail. data last month going all the way China’s score does suggest a high But putting aside whether the data back to 2003. level of inequality (although it’s not is accurate, what’s more notable is This was the first official release dissimilar to the United States, Bei - that it was released at all. The an - in 12 years, reports the Associated jing might point out). State media nouncement fuels speculation that Press, and follows criticism that the also highlighted that the NBS data the new leadership will push authorities have been holding back suggests the gap peaked at 0.491 in harder on policies to tackle in - on publishing the numbers because 2008 and has declined every year equality and indeed comments of growing tensions about the since. But the findings go against made by Ma Jiantong, director of wealth gap across Chinese society. the widely held belief that the gap the NBS, recognised public dissat - Not so, says the NBS, which has between rich and poor has been isfaction over the issue. blamed the delay on the challenges growing and some commentators “On the one hand, we need to of securing data about the incomes have challenged the latest numbers make the cake bigger, while on the of China’s rich (a complaint shared as fiction. other, we need to do a better job of by the tax authorities, no doubt). “A journalist rang to ask me to sharing it,” Ma noted. To rectify this, the NBS conducted comment on today’s macroeco - The sceptics say that redistribu - a national survey last year to collect nomic figures. I’d have to be crazy to tion will require reforms that col - enough information for a new cal - truthfully comment on false fig - lide with the interests of the richest culation. The end result was pub - ures... to use the words of Zheng members of society, many of whom lished in the middle of last month: a Yuanjie [a popular children’s story are members of the Communist Gini coefficient of 0.474, a score sim - writer], no one would even dare to Party. “People with vested interests ilar to that of Argentina, and above write a fairytale like that,” wrote Xu won’t give up the benefits, so the the 0.4 level warning level that the Xiaonian, a professor at the China government must adopt great po - United Nations says indicates a large Europe International Business litical wisdom and courage to pur - P h o t

o income gap. School, on his weibo account. sue the problem,” agreed Peng

S o u r A Gini coefficient of 1 suggests a In the long absence of official Xizhe of Fudan University in Shang - c e :

R e society where one individual con - Gini data, others have been coming hai, in an interview with the Asso - u t e r s trols the wealth, while a society with up with their own figures. Most of ciated Press. n 13 Week in China Society and Culture 1 February 2013

Sting in the tale The Chongqing blackmail case that won’t go away

Mad Men ’s Joan Harris and Lei Zhengfu: would 5% be enough?

n season five of the 1960s period For years, Xiao’s Yonghuang three charming women in their late Idrama Mad Men , the boss of a Group has been winning lucrative twenties, one of whom was his own major car dealership has a seedy construction deals in the city by mistress, Zhou Hongxia. proposition for ad executives keen filming bureaucrats having sex with Xiao got hold of a contact book to win a lucrative contract. The attractive young women and then for the city’s bureaucrats and got dealer has taken a fancy to Joan Har - blackmailing his prey. So says the girls to start text messaging ris, the buxom office manager of the Southern Metropolis Daily in an ex - them. He coached them to pretend fictional agency, Sterling Cooper haustive article on Xiao and his they worked for one of the city’s Draper Pryce. He tells them that methods. They proved so successful biggest property firms but to tan - winning the account is conditional that Yonghuang’s website once talise the cadres with suggestive on his sleeping with her. Initially in - boasted it had Rmb1 billion ($160.6 language and provocative photos. sulted, Joan is eventually persuaded billion) in assets. But that was be - The plan was to secure a meeting by a major financial incentive: a 5% fore some of the clandestine videos with the middle-aged men in ho - equity stake in the firm. The busi - leaked onto the internet. A stagger - tels like Chongqing’s Hilton. After ness is secured. ing 11 Chongqing officials and SOE an appropriate period of flirting, Mad Men has received numerous bosses have now been sacked for the goal was to get them into the el - awards for its portrayal of 1960s their involvement. evator, and up to a hotel room. American corporate culture. But the Sichuan-born Xiao began his Once there, the officials got more means by which the account was scam in 2008, figuring that sweet - than they bargained for (which is won don’t sound particularly heart property deals and high mar - saying something, given the cir - P h

o unique to the time or the people gin municipal management con - cumstances). Xiao had installed t o

S o portrayed. Indeed, the concept is tracts were the swiftest way to make pin-hole cameras in the girls’ hand - u r c e :

I clearly alive and well in China today, his fortune. bags and these were used to cap - m a g i n such that businessman Xiao Ye But lacking good guanxi to make ture the ensuing action. e

C h i n seems to have relied on it for success deals with Chongqing’s officials he With clear and incriminating a

/

R e at his own construction firm in hatched a plan to lure them into footage, Xiao’s plan advanced to the u t e r s Chongqing. ‘honey traps’ instead. His firm hired next stage: the sting. Southern Me - 14 Week in China Society and Culture 1 February 2013

tropolis Daily reports that he would was Lei Zhengfu, the former Party Chongqing Machinery and Elec - send two male colleagues to burst secretary of Chongqing’s Beibei Dis - tronic, Chongqing International in on the pair when they next met trict (see WiC179). It was video of Trust and Chongqing Land Group. for a tryst. One man would pretend Lei’s rather unimpressive physique The eleven men Xiao ensnared in to - to be the outraged husband, the that first leaked online late last year, tal generated many more sweetheart other an accompanying private de - causing sensation. It then emerged deals around the city (on January 24 tective. As the official remonstrated, that to keep Xiao quiet, Lei had al - the Chongqing Municipal Commit - he would be shown the video. Later lowed Yonghuang Group to win con - tee made their identities public and another man would enter the room, struction tenders for three major confirmed they’d all been fired from saying he was a triad. Xiao would projects in Beibei. The media alleges their posts). then ride to the rescue, saying he that profit margins for the deals ex - The scandal only came to light af - could smooth over the indiscretion ceeded 20%, enriching Xiao. ter a citizen journalist named Zhu with his gangster friends. But only if In 2009 Xiao and his girls went Ruifeng got hold of copies of the his own firm was given access to after a series of bigger fish, including videos. He uploaded the Lei Zhengfu cheap land. the Party secretary of Jiulongpo Dis - tape onto the internet first, promis - One of the first to fall for the trap trict, and the chairmen of ing to dribble out the others so as to

Red Star: Yi Nengjing

Who is she? Yi Nengjing, 43, was born in Taipei and started her career writing and singing Mandarin pop songs. After success as a singer, Yi began acting in films and TV in Taiwan. She then hosted her own TV programme before publishing five best-selling books in Taiwan, including essays, poems and novels.

Why is she famous in China? More recently, Yi has spent most of her time on the Chinese mainland as one of the three judges on the primetime talent show China’s Got Talent . The series, produced by Shanghai’s satellite station Dragon TV, has just finished its fourth season.

Why is Yi in the news? Yi recently voiced her support for the journalists at Southern Weekend after their clash with provincial officials over editorial censorship (see WiC177). She wrote on her weibo : “It is too far away from the south. I cannot see the truth over there.” This was her cryptic hint that the chastised newspaper might not prove so outspoken in the future, thought Apple Daily, a Hong Kong newspaper. After the microblog post, Yi soon found her weibo account suspended (a shock for her 7 million followers too). She was later invited to “have tea” with officials, a euphemism for being given a warning for publishing messages deemed inappropriate. More was to follow: the producer of China’s Got Talent then terminated her contract mid-season and the Global Times reports that she’s been banned from appearing in any Chinese media. Earlier, Yang Yi, spokesman of the Taiwan Affairs Office at China’s State Council P h explained that Taiwanese artists need to “abide by laws and o t o

S regulations when they are in China”. o u r c

e Meanwhile, Yi took to her weibo to express her disappointment: :

I m

a “I’m not a radical and I don’t have big ambition. I just didn’t anticipate g i n e

that a few words would disrupt the peace and quiet in my life.” C h i n a

15 Week in China Society and Culture 1 February 2013

expose the wider corruption. A fascinated Chinese press now says that the most surprising aspect of the whole scam is that it took three years to be exposed. But there’s a twist to the entire affair which might explain why. Accord - ing to Southern Metropolis Daily, the compromised Lei suspected the scandal would come out, so in No - vember 2009 told the top leaders in Chongqing what he had been doing. A police investigation followed, and Xiao was jailed. But the affair was then hushed up, and some of the compromised officials were (amaz - Finally, Bond meets his true nemesis: the Chinese censor ingly enough) even promoted. Longtime readers of WiC may see is now being dubbed as China’s “ex - from the version appearing in the where this is going and why a sup - traordinary anti-corruption US, the UK and elsewhere. pressed scandal in Chongqing has woman” for her role in bringing What was omitted? One scene suddenly resurfaced. There looks to down the men and has even been showed a Chinese security guard be - be a connection to Chongqing’s for - nominated on Sina Weibo as ‘per - ing shot by a French hitman. In an - mer (now purged) boss Bo Xilai – the son of the year 2012’. At first glance other section filmed in Macau, Bond objective of ongoing scandal may be that looks like a remarkable case of asks a hostess – played by Bérénice to further taint his time in office, moral confusion from the country’s Lim Marlohe – whether her tattoo during a period in which Bo is await - netizens. But contempt for official - is the result of being forced into ing trial for corruption. Bo’s former dom is the greater factor. One wag prostitution at an early age. While right-hand man Wang Lijun (now made the point by recycling a the scene remains, the Chinese sub - jailed, see WiC166) was in charge of favourite Deng Xiaoping proverb titles have been changed to suggest the police investigation. Moreover that “black cat or a white cat, a cat she is being asked about her mob Bo’s alleged corporate crony Xu that can catch mice is a good cat”. connections instead. Ming (also now detained, see But the scandal has even caught Another key scene is cut entirely WiC145) bought cheap parcels of up with her. On Thursday she was – it sees Javier Bardem’s character land in Lei’s city district in 2010. The arrested for extortion, reports the recall horrific torture at the hands of implication is that Bo kept Lei’s case South China Morning Post. the Chinese authorities. quiet in return for a bit of personal In issue 170, we predicted Bond enrichment. would meet his doom in China. But While the impact of the scandal at that stage we weren’t talking may suit Beijing’s anti-graft bosses, about censorship. Instead we were Chongqing’s surviving officialdom Unscene Bond referring to Skyfall ’s chances of box now looks to be losing patience with Audience annoyed as 007 office gold. Our suggestion was that its enduring scale. The South China movie gets scissor treatment the delay in its China release – com - Morning Post reported this week that ing three months after its global police have questioned the citizen ames Bond has vanquished premiere – meant that most fans journalist Zhu for seven hours and Jplenty of villains in his time. But would watch it on illegal DVDs, he was asked for the remaining tapes. even the British superspy proved rather than go to the cinema. He refused and promises more in - helpless when he faced off against But that problem has been com - criminating video will go online. his toughest enemy yet – China’s pounded by fan annoyance that the Zhu’s feistiness is impressive. But film censors. cinema version has less integrity P h o t

o for Chinese netizens the unlikely Skyfall , the latest Bond film, than the DVD.

S o u r hero (or should we say heroine) of opened in China in mid-January. But “It’s annoying! Every time it’s c e :

R e the affair is Zhou Hongxia, seducer audiences were soon complaining the same!” one netizen wrote on u t e r s of six of the hapless officials. Zhou that scenes seemed to be missing weibo . “We’ve been waiting for this 16 Week in China Society and Culture 1 February 2013

for so long and then they cut it and War”. The newspaper further claims re-cut it!” that some cuts are forced on the reg - “I’d rather watch the pirated ulator because of racism. DVD,” was the verdict of another ne - “Chinese film censors might need tizen, referring to the uncensored to relax a bit more. But if Chinese version. people are portrayed more accu - Some netizens even warned of ul - rately in future, they will surely be terior motives, saying that censor - less busy,” the newspaper ventured ship was being used as a means to hopefully. make foreign imports less attractive Interestingly, Skyfall is the first to audiences. Bond film to experience the censor’s “It’s an obvious move they’ve attention. Industry observers say made to support domestic films,” new trends in Hollywood designed was one typical remark. to incorporate more of a flavour for Industry insiders complain that Chinese audiences are a double- the censors have little respect for edged sword. On the one hand, Hol - the filmmakers’ craft . “Regulators lywood producers want to include should respect the producers’ origi - Chinese elements to lure local audi - nal ideas, rather than chopping ences. But that also means that au - scenes arbitrarily,” Shi Chuan, thorities are more likely to pay deputy director of the Shanghai closer attention. The lack of Chinese Waste not want not Film Association, told Xinhua. But content in Casino Royale and Quan - it’s hardly new for films to be re - tum of Solace explains why Daniel scientist proposed making it a crim - leased in China with scenes consid - Craig’s first two outings as Bond inal offence to waste food. ered politically or culturally contro - went untouched, says Tencent En - “Our country has such a huge versial edited out. In 2007, Lee Ang’s tertainment. population and the arable land is espionage drama Lust, Caution lost So how big an impact is the edit very small if it is divided for each seven minutes of footage for its having on ticket sales? Skyfall has Chinese individual. For years we China release (so many cuts were earned more than Rmb112 million in toiled to increase output … but after made that locals quipped that the the last two weeks, which is re - the food was increased, people film would have been better titled spectable rather than sensational. It wasted it,” Yuan told CCTV. Caution, No Lust ). should still comfortably overtake “Now I am proposing that the Tom Hanks’ Cloud Atlas , which Quantum of Solace (which made government makes people despise debuted on January 31 in China, will Rmb143 million in 2008) to become the waste of food and to treat it like be a huge 40 minutes shorter than the highest-grossing Bond film in a crime.” the version shown in the US, where China. Casino Royale , Daniel Craig’s When Yuan started his career it has a running time of almost debut, earned Rmb92 million. some 60 years ago China struggled three hours. Dreams of the Dragon to feed itself (see WiC126). Pictures, the movie’s China distrib - Today – in cities anyway – food is utor, told news agency China.org.cn plentiful and eminently affordable that the cuts were due to censorship for most. Restaurants line the rules and the interests of the Chi - Food for streets of many city districts centres nese market. thought and China’s ancient culinary culture “I just won’t go to the theatre,” has made a comeback. one netizen moaned. New campaign calls for an end But along with availability, so The Global Times says the edits to waste profligacy has risen too. China is aren’t always out of synch with the now struggling to deal with the public mood. For example, it sug - ow much is too much to leave huge amount of kitchen waste it gests that many moviegoers com - Hon your plate? China may soon produces every day.

P plained that they felt uncomfort - have to answer that question if Yuan Beijing alone generates around h o t o

S able watching scenes in Big Fish Longping – the father of hybrid rice 13,500 tonnes of kitchen slop daily, o u r c e (2003) because they “defamed Chi - as he is known – gets his way. but only has the ability to process :

C F P nese soldiers during the Korean Last week the revered 82 year-old 800 tonnes usefully each day, ac - 17 Week in China Society and Culture 1 February 2013

cording to a report in the China professionals called IN-33 also of photos showing a banquet hall Daily. The problem is a nationwide launched a campaign called “Finish scraping plate after plate of half- one. For example, the city of Your Plate”. Headed up by an offi - eaten food into a bin. The final im - Chongqing saw its kitchen waste cial from China’s Land Resources age in the series was that of a rise 64% last year, as more citizens Department, the group has got 750 farmer from Gansu, China’s poor - dined out but left food at the table restaurants in Beijing to offer est province, who can only afford on finishing their meals. smaller portions to those who ask to eat meat about 10 times a year. “Kitchen waste has become a pri - for them – since part of the prob - “Images like this should make us mary pollution source and imposes lem in Chinese eateries is dishes de - ashamed,” wrote one person on her serious risks to people’s health and signed for several to share. The Sina Weibo account. “Food is the dif - the environment,” Ren Lianhai a group has also got millions of ference between life and death. It waste management expert told the pledges online not to waste food. should not be ordered simply be - China Daily. Food now counts for as “Even if we could just save 5% of cause people can afford it. We must much as 70% of China’s non-indus - what we waste that would feed four remember there are others that trial waste. million people,” Xu Zhijun, the can’t.” Traditionally kitchen waste has group’s founder told Youth.cn, the China is far from alone in wast - been fed to pigs but large scale recy - website of the Communist Party’s ing vast amounts of food. A recent cling for hoggeries is problematic as Youth League. report by the UK’s Institution of pork often features in leftover meals. Minister of Commerce Chen Mechanical Engineers estimated If it leaks into pigfeed, the risk is a Deming has also waded into the de - that 30-50% of all food produced porcine version of mad cow disease. bate, speaking approvingly at a worldwide is wasted. Inefficient Similarly composting is also a press conference this week about harvesting and logistics is the major challenge, explains Ren, because of schemes launched by Beijing restau - contributing factor in the develop - high levels of oil and salt in Chinese rants to reward diners with coupons ing world. food. Oil prevents oxygen getting if they finish all their food. But in developed countries con - into the food to break it down. The Wasteful banquets raise the issue sumers are more often to blame. For saltiness means that resulting com - of inequality too. Almost 130 mil - example, British households throw post could render land infertile. lion people in China still live below away almost $16 billion worth of So, with China about to go into a the official poverty line of roughly food annually. Due to the require - period of festive excess as the Lunar $1 a day. In stark contrast to the cam - ments of UK supermarkets 30% of New Year approaches, state media is paigns urging an end to wasteful be - vegetables are also discarded because encouraging people to think twice haviour, these families face a strug - of size or appearance. before ordering another dish in a gle to feed themselves adequately. As Minette Marrin in the Sunday restaurant or scraping their left - The gulf between the haves and Times points out, these are figures overs into the bin. have-nots was brought into stark re - “to startle anyone out of their statis - In-mid January a group of young lief this month by a powerful series tics fatigue”. n

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18 Week in China And Finally 1 February 2013

Election climax Why Gansu politics will never be the same again

hile China may be rather makes on the province’s dusty Wprudish about showing sex plateau. on screen, its attitude to actresses “Is it possible we might get an - with careers in eroticism seems other instalment of Erotic Ghost more relaxed, if the case of Diana Story set in Gansu? If so, thank you Pang is anything to go by. CPPCC,” wrote one contributor. Bursting onto the political scene Known as the “divine bosom” for Others pondered the bigger pic - her role in several racy movies in ture, wondering if Pang’s election politics, than politicians having a go Hong Kong in the 1990s, 40 year- might signal looser rules on adult at sex.” old Pang was back in the headlines fare for mainland audiences. Salty comments aside, some last week on becoming a member of “Maybe this means China will have newspapers questioned whether the Chinese People’s Political Con - its own category III industry at last,” Pang and other celebrities are qual - sultative Conference (CPPCC) in the another mused happily. ified for a political role. western province of Gansu. There was also the suggestion “Why are they included? Is it to Representing the Zhi Gong Dang that the recent spate of sex scan - further their own ends or attract in - – one of the eight legally-recognised dals involving Chinese officials of - vestment to their province? The political parties in China other than fers fertile ground for adult film - harm to the work of the CPPCC is the Communist Party – Peng Dan, makers. Many netizens drew huge,” fumed one commentary as she is known in mainland China, mocking comparisons with the piece on the People’s Daily website. said she would use her new role to video released of Chongqing offi - But Pang explained her own in - boost the film industry in the im - cial Lei Zhengfu enjoying himself volvement by saying that her grand - poverished province. with a nubile 18 year-old (see page father had fought for the People’s The former beauty queen further 14) and another common observa - Liberation Army, even participating explained to reporters: “I hope to tion was that – as so many politi - in the Long March in the 1930s. make some investments in Gansu, cians seem to be appearing in sex Despite being born in Hunan and make some more Gansu- tapes – the quid pro quo is that province, Pang has also been play - themed movies.” more erotic actresses should be al - ing up her connections with Gansu, This soon set internet users off lowed to get into politics. including her time spent starring in on a flight of fancy. Some imagined “It’s only fair that the crossover a film set in the province. Pang’s best known films (including goes the other way,” noted one “In the film I even drove a train Erotic Ghost Story: The Perfect weibo wag, approvingly. “To be hon - from Jiayuguan to Jiuquan,” she in - Match , obviously) going through re - est I’d rather see Peng Dan trying sisted. n

Diplomatic restraint?

P “Personally speaking, I don’t think the timing of the decision was ideal.” h o t o

S o u r c In what might be deemed an understatement, Niwa Uichiro expresses concerns about Tokyo’s e * :

I m

a disputed purchase of islands last year that it refers to as the Senkakus and China calls the Diaoyus. Niwa g i n e

was Japan’s ambassador to China till last month. For more on the dispute see Talking Point in WiC179. C h i n a

19 Week in China The Back Page 1 February 2013

Photo of the Week In Numbers $1.5 billion The amount spent by French tyre maker Michelin on its new factory in Shenyang, capital of Liaoning province. The largest Michelin plant in the world, it has an annual production capacity of more than 12 million tyres for cars, trucks and buses, says the China Daily.

P 180,000 h o t o

The number of old vehicles Beijing will S o u r

c remove from city streets in an effort to e :

R

e improve the capital’s air. Vehicle emissions u t e r s are one of the greatest contributors to

Beijing’s pollution. Vision thing: China’s Li Na receives medical attention during her loss to Victoria Azarenka at last Saturday’s Australian Open tennis final 82.6% Percentage of China’s population using mobile phones. With more than 1.1 billion Where is it? mobile users in the country, China has Some of the places referred to in this issue finally broken through the global average for mobile phone usage, which is around 80%. Gansu Inner Mongolia Beijing Hebei Tianjin Shijiazhuang Qingdao $9.7 billion China The size of China’s video games industry, Shanghai up 35% from a year earlier. Online games, Chengdu mobile games and console games Chongqing Sichuan accounted for 94.5% (Rmb57 billion), 5.4% (Rmb3.2 billion) and 0.1% (Rmb75 million) of the market respectively. Shenzhen Hong Kong

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