1 Talking Point 6 The Week in 60 Seconds 7 China and the World 8 China Consumer Week in China 9 Aviation 10 Economy 11 Energy and Resources 13 Banking and Finance 14 Internet and Tech 17 February 2012 15 Property Issue 138 16 Society and Culture 20 And Finally www.weekinchina.com 21 The Back Page Chongqing’s arresting news m o c . n i e t s p e a t i n e b . w w w

y b g u in He brought down gangsters and earned the nickname ‘Robocop’. But last week he fled o k y n o a t B s to the US consulate. What the fall of Wang Lijun means for China’s leaders... t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Talking Point 17 February 2012

Fair cop? The mysterious fall of Chongqing deputy mayor signals a power struggle

“ e haven’t entered the deep Wwaters yet,” Wang Lijun told the New York Times last year. A few months later, Chongqing’s deputy mayor and former police chief finds himself in very deep water indeed. Up to his neck in it, in fact. In WiC129 we warned that Wang – nicknamed ‘Robocop’ and lauded in the national press for his role in a corruption crackdown in Chongqing that saw 1,500 arrested – would have to navigate the politi - cal depths with care. The loquacious cop said he knew so too, allegedly telling friends that he was like a piece of gum, and that once his po - litical masters got bored chewing him, they’d spit him out and he’d end up flattened under a shoe. That proved prescient. Last week Wang was apparently under deten - Former police kingpin and deputy mayor of Chongqing, Wang Lijun tion in Beijing. The scandal is po - tentially huge, offering a rare the Chongqing authorities. After the international press. glimpse into the backroom power - hours of standoff, Wang left the con - From Robocop to runaway rene - plays that are characterising the sulate. But by now China’s weibo – gade in not much more than a week, lead up to the selection of China’s the country’s Twitter-equivalent – Wang’s sudden downfall has led to top political body this year. was awash with rumour. Had Wang all sorts of speculation, especially been seeking asylum in the US? about its impact on the fortunes of A quick review of the events of the The first official announcement his erstwhile boss, Bo Xilai, the pow - last two weeks… on the situation came the follow - erful Party boss of Chongqing. It’s been a tumultuous few days for ing day, with confirmation that As we pointed out in our Talking Wang. First the news on February 2 Wang was on “vacation-style” leave Point in issue 131, a favoured way for that he had been re-assigned from for treatment for stress. But that political rivals to hobble one other his more active duties to a lesser po - night Bloomberg reported that in China is by purging their under - sition. Netizens sensed immediately Wang had flown to Beijing in the lings. Theories about why Wang was that something serious was hap - company of a senior official for at the US consulate have also mush - pening in China’s largest munici - state security. Century Weekly has roomed – one has him in negotia - pality, although no one predicted since suggested that Wang is in the tions with US officials about the events of four days later, as custody of the Central Commission Tibetan affairs, another sees him re - Wang made a dash for the US con - for Discipline Inspection – the vealing damaging information P h o t

o sulate in Chengdu. Party organ that takes on cases of about senior political figures.

S o u r Once there, he was surrounded senior-level corruption. The article c e :

R e by a large group of police, many sent was soon spiked by the censors but What did he say to the Americans? u t e r s from across the provincial border by not before the news had reached They’re not saying. At a State De - 1 Week in China Talking Point 17 February 2012

partment briefing, spokesperson self-preservation. By staying there imagery was lost on no one. De - Victoria Nuland elected to stick to for over 24 hours (but leaving vol - spite the furore, it was business as the facts she had at hand. untarily) he turned himself into an usual, as Bo welcomed the visiting “There’s been unusual reporting international issue. Those taking dignitary. about all of this,” she told journal - this view tend to view Wang as the ists. “So just to reaffirm for you, that wronged party and theorise that, in So it’s all about Bo? he walked out, it was his choice.” the circumstances, it was a smart How Bo emerges from this debacle move. After all, since the authorities is really the crux of the matter. He’s What are the scenarios being dis - didn’t know what he might have left hardly made a secret of the fact that cussed? with the Americans, they’d have to he aspires to top political office, For anyone with an interest in con - be more cautious in handling him. and has a realistic chance of mak - spiracy theories, this is fertile While the rumours grew, Bo ing it onto the Politburo’s Standing ground. WiC takes the view that the showed little public sign of being Committee later this year – the truth may never emerge about fazed. He even hosted Canada’s powerful nine-person body that Wang’s case, and at this juncture al - Prime Minister Stephen Harper runs the country. most all of the rumour is conjec - during his trip to Chongqing. The The consensus of political ana - ture. But nevertheless some plausi - ble scenarios have been widely discussed on weibo . One interpretation is that this was an inevitable falling out be - tween two deeply ambitious men. Both Bo and Wang are more than comfortable in the public eye, with a keen awareness of their personal images. Wang – Bo’s political junior – has also been actively courting media attention through potential book and film deals (including a ‘Godfather’ style movie about his life). These ambitions may have brought him into direct conflict with his boss. Only a couple of days before Wang’s fall, the Chongqing Daily reported a warning from Bo that “certain people” were too inter - ested in their own “individual per - formance”. They would do better to focus “on work on behalf of the In the future, issuers masses,” Bo suggested. Another theory is that Bo was will need to be explorers. no longer happy with the anti-cor - In challenging markets you have to look beyond old, familiar ruption investigations Wang was ways. HSBC’s Debt Capital Markets teams have a track record of creating innovative structures and delivering landmark deals. conducting. Cross border and cross discipline, we connect investment Yet another view: his investiga - banking advice with financing solutions – to help our clients tion by the Party’s discipline body is navigate the future. There’s a new world emerging. linked to a corruption case sur - There’s more on debt issuance at www.hsbcnet.com/dcm rounding the police chief who took over from Wang in Tieling in Liaon - ing province. Other users of weibo have 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 posited that Wang’s visit to the con - and SIPC, and HSBC Bank USA, NA. 11-094 sulate was really a calculated act of 2 Week in China Talking Point 17 February 2012

is actually selected more via a top- Former president Jiang Zemin down process, says Li. Newcomers was a princeling. Upcoming presi - are ‘pulled up’ after discussion dent Xi Jinping (who ran vibrant Fu - among current Standing Commit - jian, Zhejiang and Shanghai tee members, who push for their formerly) and current vice-premier preferred candidates. Wang Qishan are the two most In the past this has looked like prominent princelings on the cur - an orderly process, notes Bruce rent political roster. Gilley, a professor of political sci - Crucially, Bo Xilai is also a ence at Portland State University. princeling. The top role of President is picked The other main grouping is the out well in advance to minimise “populists” and includes the current controversy when the time comes president Hu Jintao, current vice for change. Then the additional premier Wen Jiabao, and his likely roles are allocated among the elite, successor Li Keqiang. through an extended period of As a general rule, the populists signalling and negotiation. are more likely to have less-privi - Bo Xilai: Chongqing model Rivalries in the race for power are leged family backgrounds, spend - rarely visible. But this time around, ing much of their careers in the lysts like Cheng Li, a senior fellow at they are becoming a little more ap - inland provinces and often coming the Brookings Institution, is that parent. to prominence via the Communist this year’s handover is going to be Youth League (hence they are more fractious than usual. And Bo is a focal point in this? known colloquially as the tuanpai Li points to a variety of reasons It looks like it, with Wang Lijun’s or ‘league faction’). Many have for this in a review published in the detention a sign of the underlying made their names in Party roles in most recent edition of The Wash - tensions rising to the surface. By ington Quarterly. promoting himself aggressively in Firstly, because of retirement age the public arena (above the back - Keeping track rules, at least seven of the nine room horse-trading of previous Standing Committee elite will make Standing Committee elections) Bo In last week’s Talking Point we way for newcomers this year. Im - has made enemies beyond those discussed China’s economic relations with Germany, as well portantly, it is also the first han - targeted in his anti-corruption as Sany’s recent acquisition of dover in which the generation of drives in Chongqing. Putzmeister. Spiegel this week revolutionary leaders who served It’s important to understand that reported that angry workers at under Mao is no longer represented. those who get onto the Party’s top the Swabian firm – which makes Nor is there an obvious “paramount body represent factions. The com - concrete pumps – are “in a state leader” on the scene in the style of plexity of these factional webs is of shock” that the Chinese have Deng Xiaoping (even after his for - huge but Li at the Brookings Insti - purchased the company. “The mal retirement from office, Deng’s tution reckons that power in China Putzmeister takeover could personal authority was tremen - is concentrated across two informal become a blueprint in which dous; see WiC136 for an example coalitions in particular. China uses German know-how from his 1992 Southern Tour). On the one side is the “elitist” to transform itself from a low- After Deng, first Jiang Zemin and faction, often drawn from families cost manufacturer into a high-tech economy,” comments then current president Hu Jintao descended from veteran revolu - Spiegel. It cited the verdict of the have both needed to govern tionaries, and usually from the bet - head of the local union IG Metall through more of a consensual style, ter-off coastal provinces. These are in Esslingen that the acquisition shaped by the leadership decisions the so-called “princelings”, with a is “a disaster for industrial of the nine-person Politburo Stand - more market-friendly policy policy”. Union leader Sieghard ing Committee. agenda that prioritises GDP growth. Bender even described the deal P h o t o Nominally voted for by members They are more disposed towards as a “Gotterdammerung” – a

S o u r of the Party’s Central Committee – business interests and more skilled German expression that usually c e :

R e the 350-strong political body sitting in areas like foreign investment, implies downfall. u t e r s below it – the Standing Committee trade and economic policy. 3 Week in China Talking Point 17 February 2012

organisation and propaganda. to hem in Bo in his own power base mittee). Li Yunchao (currently Their own agenda is more inclusive reckons Epoch Times. head of the Party’s Organisation than that of the princelings, speak - In China, it’s never that simple... Department) and Liu Yuanshan ing up for migrants and the rural The other key point is that the (director of its Propaganda Depart - poor, and pushing for inland princelings and the tuanpai have ment) are also hoping to be con - provinces to catch up with their tended to counterbalance one an - firmed in top jobs. richer coastal cousins. other’s influence on the Standing That leaves three Standing Com - Committee, as well as the senior mittee slots available, one of which Where does Bo fit into all of this? positions in the ranks immediately Bo Xilai hopes to secure. The other Bo is hard to categorise. He’s a below it. two may go to Wang Yang, Guang - princeling who sent his son to Ox - This has worked well enough in dong’s Party boss and Shanghai ford and Harvard. But he’s also the past, with both sides learning to Party secretary Yu Zhengsheng (see pandered to the Party’s leftists work with the other. Their skill sets WiC113). with his ‘red’ campaigns (encour - But events of the past few days aging the singing of Maoist revo - could see a reshuffling of alliances. lutionary songs). With his crack - down on corruption he has also The potential outcomes from become figure of national promi - Wang’s case? nence – appearing more like a One is that Wang reveals informa - Western politician in seeking to tion from Chongqing that damages win over public opinion. You can’t Bo personally, probably resulting in argue with success: he has led a a failed Politburo bid. municipality of 32 million and At this stage, Bo seems to be presided over strong economic gauging his position and he hasn’t growth (see WiC77). commented publicly on Wang’s de - There’s something else that parture to Beijing. Fortunately for makes him unique. Given his pres - him, Chinese press coverage of tigious background, he was a can - Wang’s fall has been limited to offi - didate to be China’s next leader. It cial statements issued through Xin - came down to Bo versus Xi Jin - hua. But more disturbingly for Bo, ping, some analysts believe. In the speculation about the case on weibo event, the relationships of the Xi Wang Yang: Guangdong model seems to be have been conducted in family beat out those of Bo (his fa - much more unrestricted manner. ther was hardliner Bo Yibo). Xi’s are complementary, says Li, and de - Presumably, Bo would have pre - victory was signalled when he was spite representing different con - ferred a clampdown – but others elevated to the Standing Commit - stituencies both groups are seem happier to let the story run. tee in 2007 and Bo was sent off to committed to the same goal: One other outcome, thinks the Chongqing. However, Bo’s dra - achieving social and economic sta - Wall Street Journal, is that the case matic activities there soon made bility under the Party’s leadership. could see “the end of the Chongqing clear that he still viewed himself Yet now, with the political han - model”. Chongqing’s development as a political force to be reckoned dover fast approaching, the balance plans have been more statist in their with, in spite of losing out to Xi. at the heart of political power seems grand visions (lots of infrastructure Those that now pursue Wang – to have been dislodged by politick - spending and big targets for urban - perhaps inviting him to dish the ing between rivals for the top jobs. ising the rural poor). They have also dirt on what he knows about how What is the likely outcome? On been populist (huge amounts of af - Chongqing is governed – may want the princeling side sits Xi Jinping, fordable housing) and notionally to settle scores with Bo. The goal: to Wang Qishan (currently in charge of more socialist (all that red propa - cut him down to size. trade and finance) and Zhang De - ganda on TV). The governing style In fact, Phoenix TV has reported jiang (who holds the energy, indus - plays up the benefits of strong, cen - P h o t

o that Hu Jintao has effectively re - try and transport portfolio). tralised authority, for example in

S o u r placed Wang as Chongqing police For the tuanpai Li Keqiang is ex - delivering quick results in disman - c e :

R e boss with one of his own loyalists, pected to become premier (like Xi tling Chongqing’ criminal gangs. u t e r s Guan Haixiang – a move designed he is already on the Standing Com - Critics of Bo and Wang say their 4 Week in China Talking Point 17 February 2012

success has often come at the ex - pense of due legal process (a chilling thought for those who can recall the Planet China ‘fast justice’ of the Mao era). Strange but true stories from the new China The contrasting model on offer is said to be in Guangdong, and run DATE WITH THE POLICE. Police forces are normally on the lookout for by Wang, one of Bo’s rivals for a criminals, but in Chengdu the local constabulary is looking for love instead. Standing Committee position. It According to Mop.com, one district station got into the Valentine’s Day spirit recently by posting photos of single men from its local squad online. has more emphasis on the free This soon got the attention of netizens, and last week five of the officers market, with less of a role for plan - made themselves available for interviews on Sina Weibo. The officers are all ning and central control. There’s listed as being in their twenties with heights, weights and other vital less talk of red songs and more of a statistics included for the perusal of interested female parties. One of the hint that the media should be al - men is a 27 year-old traffic cop. His Valentine’s message to all the single lowed greater freedoms. The model ladies? “I can’t change the world, but I can change the traffic outside the is also an economic success story, third ring road.” He’ll be fighting the girls off with lines like that… but more thanks to the entrepre - neurial flair of the private sector. It is also supposedly the flag-bearer Of course, the situation is much take in the next decade – a more for a more liberal approach that more nuanced than this – it always laissez-faire approach or en - gives greater emphasis to the rule is in China. But at a time when re - trenched state capitalism – is up of law. Events in the village of formers have also been making a for debate. How the situation with Wukan (see WiC133) have even seen lot of noise about the anniversary Wang and Bo develops in the com - freer elections of local officials in of Deng Xiaoping’s Southern Tour, ing weeks might point to which response to discontent. the direction that China might view is in the ascendancy. I

iPads seized in China!

Apple is the leading foreign brand in China. That’s according to Brand China 2012, a survey of 21,000 consumers carried out by Nikkei BP Consulting. As if to confirm as much, Apple’s boss Tim Cook this week revealed that the US tech titan earned $13 billion in China sales last year. We chronicled the rise of Apple’s China business in our last Focus issue ( The Magnificent Seven ). And in the article ( How to succeed in China without trying ) we pointed out that the firm seemed to have come late to protecting its trademarks in China. That is now starting to look like a serious error. Proview (Shenzhen) is now suing Apple for selling the iPad in China, stating that it owns the trademark, their sales list. Most serious of all, the Financial Times and seeking both an apology and the payment of says the legal battle could even threaten the export of damages. China-assembled iPads, with Proview requesting that (As for Apple it claims to have won a case against customs officials seize shipments before they leave Proview in Hong Kong.) Chinese ports. Earlier this week, the Hubei Youth Daily reported All in all, this could prove costly for Apple, and a I l l u s t r hugely ironic one given its protectiveness of its own a that a government inspection team had begun t i o n :

confiscating iPads from shops in the city of brand worldwide. As for Proview – a Taiwanese w w w

. Shijiazhuang after Proview filed a restraining order. electronics firm – it knows Apple has plenty of cash and b e n i t a Netizens then pointed out that Amazon’s China site no doubt will be trying to get hold of some of it in a e p s t e and retailer Suning appear to have taken iPads off settlement. i n . c o m

5 Week in China The Week in 60 Seconds 17 February 2012

Coming to America The major news items from China this week were...

Chinese Vice-President Xi Jinping spent Valentine’s 1Day at the White House and judging from the red car - pet treatment, the US is treating the visit very seriously. No previous Chinese vice-president has received a 19- gun salute or enjoyed an Oval Office meeting with a US president. President Obama criticised China’s crack - down on dissent, and its close relations with countries like North Korea and Iran. He also complained about growing instances of intellectual property theft and the persistent undervaluation of the China’s currency.

The EU continues to seek Chinese financial support 2for the eurozone. Though not committing to a Xi Jinping meets Obama in Washington bailout, China did pledge to continue to buy eurozone debt and maintain its euro currency holdings, central Social-networking site Renren saw its stock tumble bank governor Zhou Xiaochuan said this week, under - 4this week after it released preliminary results show - lining the broad support among the Chinese leadership ing an expected operating loss in the fourth quarter due for Europe in its hour of need. The news boosted cur - to increased investment and consolidation expenses at rency markets and stock markets on Wednesday. its video-sharing website. Worse, Renren said that it doesn’t expect to be profitable this year as it focuses on Apple’s iPads may soon be disappearing from Chi - building up its business. Renren stock tumbled more 3nese stores following a court ruling against the US than 6% in after-hours trading. firm in a trademark dispute. According to NetEase Tech, some local resellers have had their iPads confiscated The Chinese state banks have been told to roll over after little-known Taiwanese firm Proview, which regis - 5loans taken out by provinces and municipalities as tered the trademark in China in 2001, petitioned a part of the 2009/10 stimulus campaign. According to of - Shanghai court to stop Apple from using the iPad name ficial statistics, local government debt had grown to a in China. Apple claims that Proview assigned it the daunting Rmb10.7 trillion by the end of 2010, more than trademark rights for the iPad as part of an earlier deal. a quarter of GDP.

The city of Wuhu in Anhui province has suspended 6plans to ease restrictions on buying property locally, after the central government signalled its displeasure. The news lead to selling of property stocks more widely, on investor sentiment that government shows no sign of wavering on the current real estate curbs, 21CN Busi - ness Herald reported. Shares of Vanke, China’s largest listed property developer, fell 1.9%; Poly Real Estate, the second biggest, tumbled 3.1%. P h o t o

S o u r The World Gold Council said China would “likely” c e :

R e surpass India as the world’s biggest buyer of the u

t 7 e r s Apple’s tablet in a trademark dispute in China metal this year, buying more than 900 million tonnes. I 6 Week in China China and the World 17 February 2012

Winning Iowa China’s next leader goes back to Muscatine

BA executives probably cannot cent TV ad during the Super Bowl, Nbelieve their luck. In the space which featured a Chinese girl in a of a week they’ve had two massive paddyfield. In the commercial, slam dunks with the China audi - Hoekstra attacked his Democrat op - ence. The first was courtesy of Je - ponent Debbie Stabenow, with the remy Lin, and the ‘Lin-sanity’ Chinese girl saying in broken Eng - provoked by his performances for lish: “Thank you, Michigan Senator the New York Knicks (see Red Star). Debbie Spenditnow. Debbie spends The second came on news that so much American money. You bor - Xi works the room China’s next leader, Xi Jinping will row more and more from us. Your also make history by watching an LA economy gets very weak. Our’s gets with a local farmer who recalled Lakers match. Famous courtside very good. We take your jobs. Thank that the boy used a bucket for a fans like Leonardo DiCaprio and Jack you, Debbie Spenditnow.” toilet, survived on a porridge diet, Nicholson will have to make room... All rather ridiculous stuff, but the and even lived for seven years in a In fact, the vice premier will be fact that the ad was run at all shows semi-cave. the first senior Chinese leader to at - that China needs to work on its im - “He ate bitterness like the rest tend an NBA game and t he image of age with a broad swathe of Ameri - of us,” the farmer recalled. Xi at the basketball could prove can society. Xi may have slept in a cave in iconic in much the same way that A large part of Xi’s trip seems to Liangjiahe but his sleeping arrange - the shot of Deng Xiaoping wearing a be about doing just that. ments were also a source of interest cowboy hat once grabbed the popu - Americans got their first look at for journalists when they re - lar imagination. China’s next president as he posed searched his previous visit to Iowa More conventionally, Xi’s tour to for photos with President Obama in 1985. On that occasion he was part Washington started out this week at the White House. And if they of a Hebei farming delegation, with an address to Congressional gleaned nothing else, they’ll have which stayed with local families in and business leaders in which he de - noted body language a lot more re - the town of Muscatine. The 31 year- scribed the relationship between the laxed than that of current leader, old visitor slept in a child’s bedroom two countries as “an unstoppable Hu Jintao. Unlike Hu, Xi even gives featuring Star Wars wallpaper and river that keeps surging ahead”. the impression that he can smile Star Trek toys. He got a slice of real Rhetorical flourishes exhausted, and laugh without scripting. American life, says Eleanor Dvor - Xi also said the interests of China The trip also gave the US me - chak, who put him up. and the US were intertwined and dia a chance to discuss Xi’s back - Brief though his 1985 trip was, it called for greater strategic trust, re - ground. He’s the son of Xi probably gave Xi more insight into ports the BBC. Zhongxun, one of the revolution - the American heartland than any Well Xi might, for these are sensi - aries who helped Mao come to Chinese leader before him. That’s tive times for Sino-US ties. Military power. But as the Washington also likely why he insisted that Mus - and economic friction has been in - Post pointed out, this is no simple catine be on his itinerary for his cur - creasing (as chronicled regularly in story of privilege. In 1962 Mao rent trip. In a smart PR move he WiC). For a number of American purged Xi’s father, who spent the even spent an hour in the living P h o t

o politicians China is the default vil - next 16 years “in disgrace”. At 15 room of the Landes family, another

S o u r lain in world affairs. Xi was sent to Liangjiahe, a village of those he stayed with. c e :

R e Looking for an example? Take in central China, ‘to learn from “To me, you are America,” he told u t e r s I Senate candidate Pete Hoekstra’s re - the peasants’. The LA Times spoke his hosts. 7 Week in China China Consumer 17 February 2012

Selling a lifestyle Why Starbucks can afford to raise prices in China

ack in 2008, Starbucks in the and rising real estate costs. BUS spilled the business beans The top-up adds to prices that are rather embarassingly, closing 600 already higher than their equiva - stores in acknowledgement that the lents in the US. As a benchmark, a A sippable status symbol company had expanded too aggres - tall latte now costs $4.20 in Beijing sively. Part of the problem was store versus $2.85 in New York, which siders say Starbucks has taken density, with rival outlets cannibal - sounds odd given that most operat - longer than companies like Yum ising one another’s business. An - ing costs should be lower in China. Brands to tailor its offering to a Chi - other issue was store location, with Still, industry observers reckon nese audience, it has now begun to too many subprime locations where the increase will do little to dent the offer a wider range of drinks. Tea is locals weren’t prepared to pay Star - popularity of Starbucks in China, at the forefront, says Shaun Rein of bucks prices. where it recently opened store num - China Market Research Group, How might these lessons apply ber 500 (located in Beijing). recognising the country’s tea-drink - in China, where the plan is to reach “I see little or no impact to Star - ing culture. 1,500 stores by 2015, three times the bucks sales,” says Doug Young, on There are other differences in current level? his Business Blog. “In fact, I could the China operating model. Star - In density terms Starbucks has even see the opposite, with even bucks has noticed that about 90% plenty of scope for new store open - more consumers flocking to Star - of orders are consumed on the ings and the company is already bucks for coffee in order to show the premises (the US average is about reaching out beyond places like world that higher prices won’t de - 20%). So it has been offering more Shanghai and Beijing, by pushing its ter them from pursuing the yuppie in-store food and seating options presence to smaller cities like Lang - lifestyle that Starbucks represents.” than in other markets. fang in Hebei province. It helps that Chinese customers The caveat to less take-away busi - Of course, not everyone is going come to Starbucks in search of more ness is that revenue per square me - to be able to afford a latte in Lang - than a hot drink. Sipping on a Star - tre is significantly lower than in fang, where per capita GDP hovers bucks cup is seen as a status symbol, North America. Troy Alstead, Star - slightly above $3,000 a year . Clearly and proof of a sophisticated bucks’ chief financial officer, told Starbucks bosses believe that de - lifestyle. Consumers are willing to analysts that sales per outlet is at mand in Langfang will be strong pay a premium, regardless of least a third lower in China. But Star - enough to sustain the new outlet. changes in price, says Zou Deiqiang, bucks manages to offset some of the And there is similar confidence for a professor studying consumer be - shortfall by charging more. Al - China in general, with the coffee haviour at Fudan University. That’s though the chain generates a lower chain announcing in late January because the value they derive from volume of sales per store in China, that it plans to raise prices nation - such goods contains intangible ele - its outlets are usually more prof - ally because of higher operating ments that are not easily quantifi - itable than those in its home mar - costs. All coffee drinks will increase able. “A lot of people can’t really tell ket. Operating margins in Asia (the by Rmb2 ($0.32, or about 10%). good coffee from bad,” Zou told the financial data isn’t broken down by “We understand this has an im - China Daily. “If they hold paper cups region) were 34.6% in 2011 versus pact on our consumers,” acknowl - with a Starbucks logo, it gives them 21.8% in the US. P h o t

o edged Caren Li, a Starbucks spokes - the illusion that they live better than As long as customers in Langfang

S o u r woman, adding that the increases those who don’t drink Starbucks.” are ready to pay more than those in c e :

R e reflect a combination of higher Localisation has also been im - Los Angeles, the China growth strat - u t e r s I wages, increasing commodity prices portant. Although some industry in - egy will likely prosper. 8 Week in China Aviation 17 February 2012

Can beggars be choosers? EU infuriates China with new carbon tax, but still asks for bailout billions

his week the president of the ing that airlines refusing to pay will TEU Herman Van Rompuy and be fined €100 per tonne of carbon Jose Manuel Barroso, president of emission. the European Commission, were Tony Tyler, the head of IATA (the both in Beijing to meet Chinese International Air Transport Associa - leaders. Their dilemma: what tone tion), told Dow Jones that the Chi - to strike at their meetings in the nese airlines now find themselves Chinese capital. in “an impossible position”. Come On the one hand, the two arrived January 1, they are faced with the cap-in-hand, requesting Chinese as - prospect of breaking the law either sistance for a eurozone bailout fund in Europe or in China. (Premier Wen Jiabao stuck to his for - Securities Daily reports that this mula of vague offers of help but no means that litigation is likely, with concrete commitments). China’s four biggest airlines – in - On the other hand, Van Rompuy EU levy: turbulence ahead? cluding flag carrier Air China – plan - and Barroso will have been re - ning to sue the EU over the emis - minded by Wen that this is a two- a number of other non-EU coun - sions tax, probably in a German way relationship and that ‘friends’ tries) is that the Europeans plan to court. Chai Haibo, a senior official seeking help should be willing to re - levy the tax not only on distances at the China Air Transport Associa - turn the favour. flown within its borders, but for the tion, says the lawsuit is unlikely to The context here is the EU’s new entire journey. That means that a be a success but is more a strategy to carbon tax on the aviation indus - Chinese airline flying to a European ratchet up the pressure on the EU. try, which has sparked Chinese ire. destination will be taxed even for For its part, the EU has insisted The new tax is due to come into ef - the part of its journey that goes that it won’t back down, although it fect on January 1, but the State through China’s own airspace. is “ready to discuss the scheme”, Council has already ordered Chi - “The scheme constitutes an in - says the BBC. nese airlines not to pay it. fringement on the sovereignty of Of course, if the eurozone does “Domestic airlines have been other countries,” continues the want China’s aid on a bailout, it banned from complying with the China Daily editorial. “It does not seems likely that Beijing will be European Union’s scheme to im - conform to international legal prin - looking for a wider quid pro quo – pose charges on carbon emissions ciples that each state has complete and the shelving of the carbon tax from flights to and from Europe,” and exclusive sovereignty over the will surely be high on its list. reported the China Daily. The airspace above its territory.” Until then it seems that China’s newspaper added that the levy In practical terms the China Air airlines see deadlock as the more was “an unreasonable charge”, of - Transport Authority thinks the likely outcome, and Air China has fering evidence of the “hypocrisy levy will cost Chinese airlines lowered analyst expectations for its and condescending manner of the Rmb17.6 billion ($2.79 billion) over financial performance next year. EU lording it over the rest of the the next eight years, and add about “Air China’s degree of interna - world.” Rmb300 to the price of each ticket tionalisation is relatively high,” con - The levy – which is designed to to an EU country. cludes Li Xuerong, a senior fellow P h o t

o tax producers of greenhouse gas – According to Xinhua, 35 countries with CIConsulting. “It has relatively

S o u r forces airlines flying into the EU to now oppose the tax, including the more international flights, so the c e :

R e buy tradable carbon credits. What US and Russia. But the EU has taken carbon emissions plan will increase u t e r s has stunned the Chinese (as well as a tough line with opponents, warn - its operating costs.” I 9 Week in China Economy 17 February 2012

Should bankers be executed? Outcry may see private lender avoid death penalty

favourite saying during the increasingly lax, why are we so ACultural Revolution was that hasty to take away a young life for a “wrongly killing a hundred people crime that does not deserve death?” is better than letting a single guilty Han Zhiguo, director of Beijing In - one escape.” In the case of Wu Ying – stitute of State and Fortune wrote a young woman currently on death on his weibo . row for “illegal fundraising” – the It should be no surprise that Wu public mood seems to be a little comes from Zhejiang, the province more sympathetic. that has seen most of the highest Wu’s story is well known. From a profile private lending scandals. first job at a hair salon, she built up Wenzhou, a free-wheeling entre - a beauty parlour empire, becoming prenurial city in the province, is the sixth richest woman in China Looking for a reprieve: Wu Ying said to be at the heart of many of (as ranked by the Hurun Report). the lending networks. As a result But her fortunes began to unravel and especially the severity of the Chen Derong, a leading Party offi - when she got involved in a private sentence. A major complaint is cial in Wenzhou, has even taken to lending network in Zhejiang, her that Wu seems to have been sin - defending its reputation. Speaking home province (see WiC104). She gled out for punishment. Even at a forum in northern China, Chen was arrested in 2009, convicted for some of those who lost money in said the city was being “demonised” “fraudulent fundraising” and sen - Wu’s lending scheme think the for its prominence in the informal tenced to death. sentence is too harsh. “There are lending market but that without Economic and non-violent so many investment companies, “private finance” there would have crimes account for nearly a fifth of and if this is a crime then half the been “no market economy in Wen - capital offences in China, reports the people in this field should be sent zhou, nor would have there been Wall Street Journal, although au - to jail,” one creditor told China En - Wenzhou entrepreneurs,” reports thorities have been reducing the trepreneur magazine. the Zhejiang Daily. number of offences on the death Wu’s supporters also say that – Neverthless, the risks of an un - penalty list. by treating her as a fraudster – the regulated system of private debt Of course, this all comes too late authorities are ignoring the wider were highlighted again last week, for Wu, who has already appealed un - realities of the private lending busi - following the collapse of another successfully against her sentence. ness, which has grown to substantial loan network in Wenzhou. Police But there is growing public pres - proportions as an essential source have arrested Dong Shunsheng, the sure for the sentence to be looked at of finance for many small and chairman of Liren Education Group, again, preferably in a new province. medium-sized businesses. for an illegal borrowing scheme that The case now goes to the Supreme “The Wu Ying case is the product raised at least Rmb2.2 billion ($350 People’s Court for final approval, with of the private finance market,” ac - million) over the last nine years, re - China’s highest judicial body saying knowledged Wang Wei, a respected ports Caixin. This is the largest pri - on Tuesday it will treat the case “with financial commentator. vate lending case to come to light caution”, a situation the BBC de - Another criticism is that a gov - so far, Caixin calculates. scribed as a “rare gesture”. ernment official would not have re - Certainly, the loans involved in P h o t

o No doubt Wu will be hoping that ceived a similar sentence. “Capital Dong’s case exceed those that led to

S o u r it is more than a token effort. punishment should be given out Wu Ying’s sentencing to death. c e :

R e There is plenty of criticism over with extra care. While the sentenc - Dong must now be praying that u t e r s the way the case has been handled, ing of corrupt officials has become he doesn’t suffer a similar fate. I 10 Week in China Energy and Resources 17 February 2012

Panda diplomacy pays off Chinese and Canadian relations have never been better. Why? Oil

tephen Harper eats his greens. SHis mother will be very pleased to hear it. And so were watching Bei - jingers last week, as the Canadian prime minister tucked into a plate of local vegetables. In fact, Harper deserves special merit. Jiemo dun – Chinese cabbage topped in local mustard with a spicy kick – is not to everyone’s taste, so onlookers were suitably impressed when he not only ordered the dish but also seemed to enjoy eating it. Equally noteworthy, the adven - turous eater coped well with dou zhi , “You get me, plus a pipeline”: Harper’s wife Laureen holds baby panda a pungent, rotting soy juice that’s also a local favourite. ‘goodwill’ ambassador to China – demand has been crucial. All in all it was a world class dis - Mark Rowswell, the popular Man - Don Kayne, CEO of CanFor, play of ‘stomach diplomacy’ for darin-speaking Canadian (see Q&A Canada’s second largest lumber Queen and country, epitomising on next page) who is known locally producer, told the Toronto Star that Harper was more than willing as Dashan. that without it, CanFor would to engage with China on his latest In return Harper got the red-car - have closed 15 sawmills (at a cost trip to the country. pet treatment, said the Toronto Star, of 5,000 jobs) after the US hous - It wasn’t always so. In the early securing frontpage coverage in the ing market crash. Canada has now days of his administration, the Chinese media and enjoying a series surpassed Russia as China’s top Canadian PM riled Beijing with crit - of high-level meetings. supplier of softwood timber, and ical remarks about its policies on Even Canada’s zoos felt the love, expects exports to double within human rights and such like – to with the promised gift of a couple of 10 years. such an extent that China Daily pandas (see Q&A). Indeed, the key message to come once described relations with More importantly, the delega - out of Harper’s trip was that Canada Canada as “cool-to-icy”. tions also signed a foreign invest - has plenty of natural resources still This time around Harper has ment protection agreement – a deal to sell – and sees China as a key cus - “learned to apply a gentler touch,” that had eluded both nations for tomer. As Harper told his Chinese was the verdict of Canadian Busi - two decades and which Harper counterparts: “We have abundant ness magazine. called “historic”. supplies of virtually every form of “I make it my habit when I’m in Relations between the two coun - energy. We want to sell our energy to another country not to say anything tries are on the up. Since 2009, the people who want to buy our energy. publicly critical of that country,” Chinese tourist arrivals in Canada It’s that simple.” Harper now notes. have risen 25%. Chinese investment This was a none-too-subtle dig at Harper brought five government in Canada has reached $14.1 billion Washington, which last month re - P h o t

o ministers, six lawmakers and a over the same period. jected plans (on environmental

S o u r large business delegation with him Canadian exports to China are grounds) for a Canadian oil pipeline, c e :

R e on his latest visit. He also an - also in an upswing, especially in the Keystone XL, which would have u t e r s nounced the creation of a new natural resources, where Chinese connected the oil sands of Alberta to 11 Week in China Energy and Resources 17 February 2012

the refineries of Texas. tomer: Oliver also says that the pledged to invest $300 million, re - Plan B? A pipeline to the Pacific country’s oil sands projects require ports FinanceAsia. coast: a $5.5 billion project backed foreign investment too. “We simply All told, Harper’s visit to China by, among others, Sinopec, one of don’t have enough capital in was clearly intended to tighten com - the Chinese oil majors. The likely re - Canada,” he told Bloomberg. mercial ties. For the US, there was sult: a greater proportion of Cana - Dealmaking is already well un - also a more reproachful subtext: dian oil shipped to the Asia-Pacific. derway. This week Sunshine Oil - that if it blocks proposals like the Currently, 97% of Canada’s oil ex - sands launched its Hong Kong IPO, Keystone XL pipeline, Canada will ports go to the US. But Joe Oliver, with the Canadian firm planning to find other export markets. minister of natural resources, ex - raise as much as $606 million to fi - This interpretation was not lost plained to China Economic Weekly nance oil sands projects in Alberta. on the Chinese media either. that China is an integral part of The cornerstone investors are none “Canada intends to sell China oil to Canada’s energy export diversifica - other than Sinopec and the China ‘warn’ the US,” was the way that CBN tion strategy. And not only as a cus - Investment Corp (CIC), who have summed it up. I

A source of goodwill Canada’s newly named goodwill ambassador to China, Mark Rowswell talks about Stephen Harper’s recent visit and how he views his own new ambassadorial role

Was there a more positive tone on this One Bowl restaurant near my home. I told the trip? advance team it was under a post office and Yes, I think so. But what I would say is that was very ordinary and typical. They thought it the relationship between the two countries is fitted the bill: it’s decorated in Beijing-style and big and complex and is much more than the has been there 16 years. relationship between two governments. I have to say it was all pretty down to earth. There’s a narrative to these things. When the Ordinary Beijingers were dining in the Conservatives came to power in 2006 the restaurant while we ate there. general narrative with China was negative – at least for the first three years. The How much did it cost? turnaround was Prime Minister Harper’s first It was Rmb274 for three people. I covered it visit in December 2009, which broke the ice. because there is a custom in China that if you That was a meeting where everyone said let take someone for lunch in your neighbourhood, bygones be bygones. you pay for it. The PM said he’d get his staff to This visit was held in a much more pay but I insisted. It was relatively costly positive light, i.e. sending the message that because we had quite an expensive tea and things were moving in the right direction. The some desserts. Without those it would have big achievement of this trip is we’ve set a positive narrative for been about Rmb50 per head ($7.93). Canada-China relations. Harper tried all the food. And I was told yesterday the restaurant will bring out a new dish called Harper’s Sliced Pork, What were the highlights of the trip? based on the fact he liked dipping the meat in the mustard of the I guess everyone will remember the pandas. Canadian prime jiemo dun [see main story]. So a new dish was created! ministers have been trying since the early seventies to get pandas! There’s a story that Pierre Trudeau donated four beavers What does the role of goodwill ambassador involve? on one of his trips to China, with the hope of getting pandas in When the press release was being put together it made it sound return. But it never came off. So getting these pandas has been like I’d been hired for the position. In fact, I’ve just been named. It an aspiration for Canada-China relations for 40 years! [ Two is an honour, and a recognition of what I’ve tried to do for the pandas will be lent to zoos in Toronto and Calgary for five years, twenty-something years I’ve been working here. During the four arriving next year .] days of the visit I was cultural adviser and guide to the prime For me personally, the highlight was lunch at the noodle minister. Now he and his entourage are gone I am back to doing restaurant. That was the event I was most heavily involved in what I’ve always done – trying to serve as a bridge between east

P organising. I’d been told by the PM’s planning team that they had and west, whether as a TV host, an educator or a comedian. It’s a h o t o a lunch slot and would like to eat somewhere local. I originally title that never expires. So it’s a really nice recognition.

S o u r suggested some bigger, more tourist-friendly restaurants but the c e :

I m advance team vetoed them, and asked where I would personally For previous articles WiC has written about Mark ‘Dashan’ a g i n eat. So I half-jokingly said I’d go for noodles at the Home of the Rowswell’s experiences in China see issues 6 and 83. e

C h i n a

12 Week in China Banking and Finance 17 February 2012

A new type of Chinese junk The authorities are looking to introduce junk bonds

he Predators’ Ball was a lavish made to entities connected with Tevent held by Drexel Burnham China’s local governments. Under Lambert in the 1980s to promote its the terms of the latest announce - fastest-growing product: the junk ment, city treasurers will be allowed bond. Quite what Michael Milken, to roll over their bank loans into head of Drexel’s bond department, longer repayment periods. The thought of the naming of the event move is a consequence of the stim - goes unrecorded. Later indicted on ulus package launched to fend off 98 counts of racketeering and fraud, the financial crisis, which lumbered Milken never liked the term ‘junk’ local governments with Rmb10.7 itself, arguing for something more trillion of debt, much of it borrowed wholesome. “Junk bonds? There’s a from banks via local financing ve - better name for the bonds that fuel hicles (first mentioned in WiC in is - 95% of American business,” he sue 48). A substantial chunk of this griped. “Perhaps something like Never liked ‘junk’: Milken debt needs to be repaid by the end Corporate Growth Bonds. Or State of the year, hence the urgency. Development Bonds. Or Job Cre - 40% of net assets), meaning that The roll over measure is effec - ation Bonds”. debt market growth is set to slow. tively an admission that local gov - Regulators in China will now be Junk bonds are also expected to ernments are unable to pay back mulling similar presentational is - offer more of an opportunity for un - many of these loans over the shorter sues, as they push to introduce high- listed, small and medium-sized com - term. Much of the borrowed capital yield debt (or ‘junk bonds’) in their panies to gain access to credit. went into infrastructure projects, own capital markets. Of course, a potential downside many of which are yet to generate With a credit rating below in - is that defaults will become a more sufficient returns. vestment grade, junk bonds pay a common occurrence. Investors will “We are not talking about a cash - higher return to offset the greater also need to conduct more research flow problem. We are talking about a risk of default. But the CSRC, the se - on the creditworthiness of the com - big cash shortfall problem,” Zhu Ning, curities regulator, and the Shang - panies they wish to invest in. To ad - of the Shanghai Advanced Institute hai Stock Exchange are both heavily dress both concerns, the Shanghai of Finance, told the Financial Times. promoting the idea of junk bonds, Stock Exchange recently made the The scheme is expected to give reports Caijing, which thinks that distinction between ordinary and local governments more time to get the bonds could come onto the professional investors. Only the on top of their debt. market as early as this month. Oth - professionals will be able to buy Another lesson has also been ers say that this is too optimistic, junk debt, while ordinary investors learned in the process: that it’s and that the CSRC will spend more will be directed towards assets as - probably better (i.e. more transpar - time ensuring investor support for sumed to hold much lower risk, ent) to encourage local govern - a successful launch. such as government debt and high- ments to issue bonds rather than In recent years, China’s bond grade corporate debt. borrow from banks. “Five or 10 market has grown rapidly, with the In addition, junk bonds will be years from now, local governments amount of corporate debt issued in kept out of the inter-bank market. will borrow very, very little from P h o t

o 2011 double that of 2010. But most Meanwhile, debt repayment is banks. Their debt structure will be

S o u r companies with good credit ratings very much in the headlines once almost entirely bonds,” Fan Jian - c e :

R e have already issued as much as the again this week, although in this ping, an economist at the State In - u t e r s regulations will allow (no more than case the loans in question were formation Centre, told the FT. I 13 Week in China Internet and Tech 17 February 2012

Weibo at war How rival web firm is taking on Sina Weibo

ove over Yao Chen, TV host back to the ubiquitous QQ messag - MHe Jiong is now China’s most ing software. followed celebrity on weibo , China’s Tencent has also been looking to Twitter-like equivalent. target the more upmarket audience The 37-year-old television per - by offering smartphone users its sonality now has over 27 million fol - new Weixin Mobile application. The lowers on his Tencent weibo . That’s app allows users to send text mes - I’m so popular: He Jiong 10 million more than Yao, the ac - sages, voice recordings, video and tress with pole position on Sina photos to one another. Already, of croblogging provider, even though Weibo, another microblogging plat - the 80 million smartphone users in they can use nicknames online. form (see WiC50). Television show China, more than 50 million have The impact has been dramatic. host He also surpasses Lady Gaga, registered on Weixin Mobile and 20 Local media has reported that 3 the most followed celebrity on Twit - million are active users, according to million new users registered for ter, by 8.5 million. company sources. That’s an impor - Sina Weibo over the past month, While Sina Weibo tends to get tant breakthrough in pursuing the down from the 20 million a month most media attention, Tencent’s ri - more sophisticated demographic tally last year. val offering Weixin, which means that has often eluded the Shenzhen- That’s bad news for both compa - “tiny letter”, has more users. The based firm. Sina is scrambling for a nies but probably worse for Sina, most recent official data – from Sep - response, releasing its own Weiyou which is being pressed by investors tember last year – showed Tencent messaging application for Android. to deliver more revenue. Previously, with 310 million members, and Sina a “Tencent’s problem in the past Sina has argued that it has held back little way back on 250 million. was that it found it very difficult to on ‘monetisation’ in favour of So what’s the difference between reach the highest-end users,” Simon growth, much as Mark Zuckerberg the two platforms? When it comes Fong, chief executive of Xueqiu, a insisted in the early Facebook years. to user demographics, Sina is more consultancy, told TechRice, a website. A Sina staffer was reported as saying popular amongst white-collar “But now the company has a new that the new registration require - users in top-tier cities. Once people product that is finally penetrating ments are likely to delay the rev - sign up for Sina Weibo, they are that market: Weixin Mobile IM. Look enue-generating plan further, until also much more likely to use the around you, aren’t all your friends the second half of this year. service. Research firm iResearch using Weixin too?” Tencent doesn’t have the same found that upwards of 80% of Chi - Although Sina and Tencent spend problem. With more than $1 billion nese microblog activity takes place most of their time competing, they on its balance sheet, it also has the on Sina Weibo. are finding common ground in the means to fund expansion of its own Tencent’s Weixin, on the other struggle to adopt the real name reg - microblog. Revenue generation is hand, is more popular in small town istration system that Beijing now im - also less of an issue, at least for the China, where its QQ instant mes - poses on all weibo users. The author - foreseeable future. Tencent devel - saging tool is already widely used ities have announced that a trial oped its own weibo because it was by lower-income citizens. Tencent – programme requiring microblog worried that a new wave of social P h o t o China’s largest internet company by users to disclose their identities is networks would lure users away

S o u r c revenue – also offers online gaming, now to be expanded nationwide. The from QQ. “We have no plans to mon - e :

I m

a a web news and entertainment por - requirement is that users who post etise our microblog. We don’t need g i n e

C tal and a social networking site comments on weibo must have reg - to,” a company executive told the h i n a called Qzone, all of which are linked istered their real name with the mi - Financial Times. I 14 Week in China Property 17 February 2012

Good news for landlords As fewer buy properties, rents in Beijing are going up

ne of China’s more controver - taxes and contributed to the so - Osial television series in recent cial security fund. years was Dwelling Narrowness. The aim of the policy is to stop One of the show’s main storylines speculators from other cities buy - followed the difficulties of a white- ing up properties in Beijing. But it collar couple trying to get on the also has the effect of keeping property ladder. Stuck in rented ac - some of the city’s recent arrivals commodation in the middle of a out of the property market, said property boom, they found it in - Zhang, directing them instead to - creasingly difficult to achieve their wards renting. dream of buying a house. Zhongguancun, Beijing’s high- The show’s realistic depiction of tech hub, illustrates the problem. life in urban China made it un - Around two-thirds of the white-col - popular with the authorities and it lar workers in the area are from out - was forced off air before it reached Mao points the way on prices side Beijing, of which 60% are not its finale. qualified to buy property, reports Although the final episode of many renters are still priced out of Beijing News. Dwelling Narrowness was broadcast the real estate market and have no Instead, they rent, competing for more than two years ago, the issues choice but to rent. properties with their relatively high it addresses are still topical ones – Beijing and Guangzhou have ex - incomes. especially for renters in major perienced some of the steepest Blue-collar workers, less capable cities. A recent report by property rental increases because they also of keeping up with rental hikes, are company Homelink says the cost have the highest ratio of residents to then forced to lease property farther of renting in some of the leading residential properties, Zhang Yue, an from their workplace. cities is continuing to grow at a analyst at Homelink told CBN. For the worse-off migrants, rising rapid rate. In 2011, the average That’s because the two cities city costs, including rents, may monthly rent for residential prop - have been absorbing more out-of- eventually lead to a reversal of some erties in Beijing went up by 10.5%, towners than most of their peers. of the people flow to the bigger city compared to annual rate of infla - Beijing has the most: last year, locations. tion of 5.4%. Rents rose by 9% in they accounted for 64% of the city’s “These people have aspirations to Guangzhou. new resident population. live in the city but then realise when Increases in Shanghai were more A growing population puts extra they get there that they can’t afford forgiving at 4.5%, according to the demand on housing supply. Mean - it, so they won’t stay,” Kim Wing report. while regulations introduced last Chan, a professor at the University Part of the problem is that some year in the Chinese capital aimed at of Washington, told AFP. renters are holding off from buy - slowing property price rises for new This suggests that the growth in ing property, hoping that sale homes, has helped turn more peo - demand for rental accommodation prices will be reduced to more rea - ple towards renting. could moderate as migrant workers sonable levels. The rules state that anyone who return home. P h o t

o But even though a correction wants to buy a property in Beijing But with a recent survey suggest -

S o u r seems to be underway – average must have worked in the city for at ing just 4% of migrant workers plan c e :

R e home prices are dropping accord - least one year. They must also to return home to a life of farming, u t e r s ing to a series of different surveys – show that they have paid their it could be wishful thinking. I 15 Week in China Society and Culture 17 February 2012

TV’s unlikely heroine New TV drama breaks taboos in portrayal of post-war turmoil

irst it was time-travel drama. because his own wife Xiao Huan is In fact, SARFT must have deemed FThen game shows and dating unable to conceive. As a sign of grat - some of the subject matter in Little programmes. And now foreign TV itude, Duo He agrees to carry Aunt Crane as rather too sensitive. Al - series are for the chop, too. Zhang’s children. though filming finished in 2010, the On Monday, SARFT announced As the drama proceeds, the Com - series wasn’t given the green light to that it’s banning foreign dramas munists win control of the country. air until this month. But the drama, from prime time schedules (7- From here on Duo He’s life becomes which is broadcast in satellite sta - 10pm). The regulators have also dic - a harder one, yet is sustained by her tions in Anhui and Beijing, has been tated that foreign TV series should good-natured optimism. receiving critical acclaim. Critics not exceed 50 episodes and that Even though Little Aunt Crane is have praised it as uplifting and overseas productions tackling issues primarily a tale about a Japanese wholesome. Unlike similar series like crime and violence, or with “vul - woman, it is also a story about how packed with anti-Japanese senti - gar content”, are also prohibited, China coped with the aftermath of ment, Little Aunt Crane downplays says the Shanghai Daily. the Sino-Japanese War. Addition - the worst of the Japanese brutality Television executives at 34 satel - ally it looks at the dramatic social during the conflict, which mostly lite stations in China have already changes wrought by the transition takes the form of blurry flashbacks. been working overtime to cut do - to Communist rule (the series In fact, many viewers have been mestic entertainment shows (espe - spans 1945 to the 1990s). surprised by how favourably the cially reality TV) from their lineups. Japanese are portrayed. In the series, Now, they will have to turn more the selfless Duo He cleans the house, of their attention to foreign content. cooks meals, carries coal and tends As a result, very few programmes children. Other Japanese characters, actually make the cut. So perhaps it albeit with much less screen time, shouldn’t come as a surprise that are also often depicted as helpful one of the breakout hits on Chinese and generous. television at the moment returns Even though Little Aunt Crane at (yet again) to a tried-and-tested for - times avoids obvious topics – no mat: a costume drama set in the mention of the Cultural Revolution, Sino-Japanese War. for instance – the show is still Little Aunt Crane tells the story of worth watching for a reasonably Duo He (which translates to ‘crane’ balanced presentation of a family’s in Chinese), a young Japanese girl struggle to survive four decades of who lives in Manchuria during political upheaval. the Second Sino-Japanese The story is based on a historical War. When the Japanese re - Sun Li novel by Yan Geling, a high profile treat in 1945, Duo He – played writer whose mother fled Nanjing by starlet Sun Li – is injured and during the Sino-Japanese War. Yan is found unconscious by an elderly is also the author of The Flowers of Chinese couple. War , the book that inspired China’s P h o t o The couple – named Zhang – de - most expensive movie by Zhang Yi -

S o u r c cide to bring Duo He back to their mou (see WiC135). e :

I m

a house and nurse her back to health. “Women are the ultimate victims g i n e

C In return, they ask Duo He to be the of war, and these women sacrificed h i n a second wife of their son, Zhang Jian, their bodies for the tender lives of 16 Week in China Society and Culture 17 February 2012

others,” Yan, a 53 year-old former one survivor, pulled out of the rub - People’s Liberation Army officer, ble in the early morning was “Did told the New York Times. “I wrote we win the war?” for all of us to remember together.” Palmer – who lives in Beijing – of - Lead actress Sun seems to agree, fers a plethora of survivor tales. “You saying that even though Duo He ap - wouldn’t believe how fast it was,” re - pears weak and fragile, her resolve calls one. “There wasn’t even to do her best for her Chinese family enough time to get from your bed to is humbling. the doorway.” “Duo He is a role model for me. I Li Hongyi, a nurse in the No. 255 hope that all female audiences Hospital, was working the nightshift watching the show will not be dis - when the earthquake struck. She couraged even when they face all heard a sound that was “like a knife sorts of obstacles in life,” Sun cutting through the sky”. Having ex - claimed. “Like Duo He, we should perienced a quake a decade earlier, believe that even the worst will pass she had the presence of mind to run and have the will to survive.” outside, grabbing hold of the trunk No doubt Chinese TV executives of a tree. The entire hospital col - will also be hoping to see their way lapsed behind her. Li and her tree fell through the latest rule tightening into an open pit. from the television regulator. But that occurred at 3.42am on July 28 Other survivors commandeered paradoxically – given SARFT’s 1976 was a truly devastating event. a vehicle to drive to Beijing and let heavy-handed approach elsewhere – The best estimates put the death the government know what had the treatment of Aunt Little Crane toll at 650,000, with a wide swathe happened. The mayor of Beijing, Wu looks like a step in the right direc - of surrounding countryside liter - De was among those who listened tion i.e. allowing a drama to portray ally flattened. aghast. He had previously been some of the trauma of China’s mod - “Across Tangshan there were Party secretary of Tangshan and, try - ern history. nearly 11 million square metres of ing to assess the extent of the dam - living space; 10.5 million square me - age, used a building built by the tres of it collapsed,” writes Palmer. British as his point of reference. “In the centre of the city, less than When he heard that it was gone too, 3% of the buildings survived.” Wu immediately knew the destruc - A true disaster In fact, the quake was so powerful tion was complete: “Tangshan is Few know the horrors of that in Tianjin – 100km away – 10% gone, just gone…” Tangshan’s earthquake of buildings collapsed and tens of Incredibly, the carnage might thousands also died. have been even worse. That’s be - he 23 seconds of the earth - At 7.8 on the Richter scale, Tang - cause dam walls at the nearby “ Tquake were probably the most shang was not the biggest ever but Douhe reservoir were threatened concentrated instant of destruc - the speed, timing and placing of with rupture soon after the quake tion humanity has ever known,” the quake made it devastating, says hit. Had they broke, the city’s sur - writes author James Palmer. “In Palmer. The epicentre struck at the viving residents would have faced Tangshan alone it did more dam - heart of a poorly-constructed in - a torrent of water. To prevent this, age than either Hiroshima or Na - dustrial city, in the middle of the the local army regiment spent gasaki, more damage than the night. And the energy released by eight hours opening a 50-tonne firebombings of Dresden or Ham - the seismic wave was comparable gate to let water out into an ad - burg or Tokyo, more damage than to 400 times that of the first joining spillway, an exercise which the explosion at Krakatoa.” atomic bomb dropped on Japan, Palmer calls “an astonishing feat For most non-Chinese, little is say the author. of physical endurance and com - known about the Tangshan disas - In fact, many Tangshan residents munal spirit”. ter. In his new book, The Death of initially thought the impact was the Of course, the rescue effort wasn’t Mao: The Tangshan Earthquake and result of a nuclear strike from the just about saving lives. It was also the Birth of the New China , Palmer Soviet Union, with whom tensions about the economy. Tangshan was seeks to change that. The quake were fraught. The first question of home to one of China’s biggest coal 17 Week in China Society and Culture 17 February 2012

mines. Ensuring that it didn’t flood he was digging him out, his own and fall of the Gang of Four. was a government priority – and children died. The article praised his Even for those who know more getting the mine working again was political commitment.” about the era, there are still stories a top priority for local officials. Indeed, the book makes clear in that stun. A couple of examples The book describes many inci - its title that the disaster was also a bear mention. Palmer describes dents of heroism, as people helped politically-charged event. In the past how an incident of public farting in each other to survive. Few at the the deaths of great emperors and the Niulang in early 1976 led to the re - time got to hear these stories, with passing of dynasties were thought sponsible man being charged as a the newspapers offering a diet of to have been signalled by earth - counter-revolutionary. His family propaganda instead. Two days after quakes. In the summer of 1976 Mao were then investigated and a phan - the earthquake, the People’s Daily Zedong was dying; his number two tom rightist conspiracy was con - told the story of Che Zhengming, a Zhou Enlai had died earlier that year. cocted. By now the remote village senior cadre in Tangshan whose son The book also uses the Tangshan was caught up in an advanced state and daughter were buried as their tragedy to tell the story of Mao’s fi - of Maoist paranoia. What started as house collapsed. The girl cried out nal years and the subsequent jock - a passing of wind led to a purge that “Dad, save me!” but the newspaper eying to replace him. For those who saw 1,300 arrests, 263 people tor - pointed out that Che knew his pri - don’t know much about this period tured and 32 executions. ority was to retrieve the local Party of history The Death of Mao is a A second example: the bursting chairman from the ruins of a pacy, well-written primer covering of the Banqiao Dam in 1975, which nearby apartment. the excesses of the Cultural Revolu - illustrates just how much China has Palmer’s acid comment: “While tion, the cult of Mao, and the rise changed. Today, news of a disaster

Red Star: Jeremy Lin

Who is he? microblogging service (versus just over Born in 1988, Lin grew up in Palo Alto, 120,000 on Twitter). California. His basketball career has been That’s great news for the NBA which will anything but smooth sailing. When he have been looking for a way to maintain graduated from Harvard in 2010 he didn’t Chinese interest in the league since Yao make the NBA draft, later joining the Dal - Ming’s retirement last year. las Mavericks for their NBA Summer Judging from comments on weibo , Lin League team in Las Vegas. He only signed may have done just that. “Nice. Since Yao for the New York Knicks this year. Ming retired I haven’t watched much of the NBA, but now they have him – Go Lin Why is he in the news? Shuhao!” one netizen wrote. He wasn’t This time last month, few outside New alone. Even former GE boss Jack Welch was York knew who Lin was. Now the 6-foot- excited enough to write on Twitter that Lin 3-inch point guard is the NBA’s most was “the most exciting thing to happen to talked-about player after leading the New the NBA since [Michael] Jordan.” York Knicks to a series of victories, start - ing with the New Jersey Nets on February Is he Chinese, they ask? 4. Li went on to top that effort with 38 Despite limited ties to the Chinese main - points in a win over the LA Lakers last land (Lin was born in America to Tai - Friday, beating China’s most popular NBA wanese immigrants), his Chinese fans player Kobe Bryant (see WiC17). have been quick to grasp Lin’s ethnic Images of Lin outperforming NBA vet - roots. As China-based blogger Adam erans then went viral on the internet, in - Mr Lincredible Minter has noted, among those now claim - cluding Chinese cyberspace. By the end ing a stronger connection to Lin is a Chi - P h o t of the Lakers game last Friday night, a Jeremy Lin page set up nese basketball fan from Zhejiang province, ancestral home of o

S o u on Sina Weibo had more than 3 million Lin-related messages. Lin’s maternal grandmother. r c e :

R By this week, Lin also had almost a million followers on Sina’s Apparently Lin is now being called ‘the pride of Zhejiang’. e u t e r s

18 Week in China Society and Culture 17 February 2012

(like last year’s bullet train crash) be a far-from-ordinary couple. fan. Take Zhang Yixin, a 24 year-old quickly spreads, primarily via That’s because Changmao is a ram (and single) filmmaker. He seems to weibo , China’s powerful Twitter- and Chunzi a deer. The two animals have added an aggressive touch to equivalent. The Banqiao disaster re - got “married” at a zoo in Yunnan celebrations of the day in question, sulted in 26,000 deaths (almost all this Tuesday. by organising a singles’ party in his fairly instantly, by drowning) while For media on the hunt for a hometown of Changchun at which 150,000 more fatalities followed in syrupy story over the Valentine participants were required to don subsequent famine and epidemics. Day’s news cycle, their story was a shirts emblazoned with “Couples Go But Mao was intensely proud of his godsend. Apparently Changmao and To Hell”. dam construction programmes. So Chunzi first fell in love when their Other just want to avoid the day the disaster was swiftly hushed up, zookeeper caged them together two altogether. “My parents have says Palmer, receiving no news cov - years ago (fortunately, both are her - arranged eight blind dates for me in erage. “Even now, most Chinese bivores, so any bickering stays non- the last two weeks, and have even have never heard of it,” Palmer goes fatal). Then the zookeeper noticed set one up for Valentine’s Day, which on. “To get a sense of how strange that the pair were proving particu - only reminds me of my bachelor this is, imagine that a natural dis - larly affectionate towards one an - status and leaves me feeling under aster had killed, adjusting for pop - other, with Chunzi licking Chang - enormous pressure,” Sun Lin, a 27 ulation, 12,000 people in the UK in mao’s hair, and Changmao squaring year-old bachelor, moaned to the 1975 – and almost nobody knew up to rival male deer that dared to Global Times. about it today.” approach his doe. Sun is not alone in feeling blue. Today Tangshan has been re - Like all good relationships, there Perhaps that’s because he’s not built, but is no longer as economi - was also a rough patch to be weath - trying hard enough. The Shenzhen cally-important as it once was. ered, after Changmao fathered a Daily has reported that over 40% Awareness of its tragedy has, of lamb with the zoo’s only female of Chinese men dislike celebrating course, been reawakened by Feng sheep. Zoo officials then decided to Valentine’s Day. Why? Mostly be - Xiaogeng’s blockbuster film about separate the couple, presumably to cause it costs them too much the quake, Aftershock (see WiC70). give Chunzi time to talk things money. I The city has also erected a memo - through with her mother. Chang - rial – a wall – to commemorate mao, on the other hand, doesn’t those that perished in the tragedy. seem to have enjoyed the time apart, Keeping track Palmer went to visit it: “Like every - and was even reported to have at - thing in China, it was big, far more tacked the unfortunate mother of Dacheng, a Chinese institutional investor overwhelming and much less inti - his recently-born lovechild. enraged by the collapse in Chongqing mate than its original model, the Then deer and ram were finally Brewery's share price last December, has Vietnam Wall in Washington… But reunited, tying the knot on Valen - failed in its efforts to remove the brewer's chairman, Huang Minggui. the wall is, as far as I know, unique; tine’s Day. As we reported in WiC134, Dacheng it’s the only memorial of a major Someone at the zoo’s PR depart - had called for action after the brewery's disaster in China which lists the ment needs promoting, it seems. share price plummeted more than 60% names of every known victim.” But Changmao and Chunzi were over 10 trading days late last year, It is 300 metres long. not the only couple to feel the following an announcement that a Hepatitis B vaccine that it was developing weight of Cupid’s arrow this week. had failed clinical trials. According to the marriage registra - Fund bosses were furious as the tion website at the Beijing munici - share price had run up on the expectation pal civil affairs bureau, at least of a positive outcome and there had been Doe-eyed girl 1,400 prospective newlyweds made little guidance from management that the Valentine’s Day continues to vaccine project was close to collapse. appointments to register marriages The stock then lost Rmb30 billion grow in popularity in China in urban Beijing — almost twice the ($4.8 billion) in value. number of last year. Although the motion to fire the ike many couples, Changmao Although Valentine’s Day is not a chairman wasn't carried, a proposal for and Chunzi chose an auspicious traditional festival in Chinese cul - the appointment of independent auditors L made by Danish brewing giant Carlsberg day for their wedding: February 14 ture, it has become increasingly – Chongqing Brewery's biggest or Valentine’s Day. popular among young people (see shareholder – was approved. But the two lovebirds turn out to WiC49 and 95). But not everyone is a 19 Week in China And Finally 17 February 2012

Happy families Award for country’s most harmonious home sparks debate

he Chinese ideal of three gener - awarded for “daring to reform”. Tations living harmoniously But attempts to draw up a new under the same roof is one that has set of criteria have sparked contro - endured through the ages. versy after it emerged that the Confucius taught that harmo - AWFC wanted to introduce rules nious families formed the bedrock stipulating that recipients in the of a peaceful and orderly society. “urban” category should own at A hundred years later, his fol - least 300 books and a computer lower Mencius wrote: “If only every - with an internet connection, as well one loved his parents and treated as travel and dine out regularly, the his elders with deference, the whole Beijing News reported. world would be at peace.” Media outlets were soon decry - Required: at least 300 books Even China’s ruling Communist ing the changes as too materialistic Party – which attempted to eradi - and even unobtainable for normal Under the new rules, rural cate many of the country’s tradi - families. families are to be rewarded for tional beliefs when it came to power “Shopping and tourism have “basic hygiene knowledge”, an in 1949 – felt something similar. nothing to do with family har - implicit suggestion that most are In the 1950s the government-af - mony,” Xinhua suggested. dirty. Families who “petition filiated All Women’s Federation of “According to these rules, family without sense” (i.e. register com - China (AWFC) created the Five Good life is for the rich, ordinary people plaints about local government Families award, which lives on to - can forget about it, ” weibo user officials) will not make the award day in Beijing as the Capital Harmo - HappyLiangMinmin agreed. shortlist either. nious Family award. The Guangming Observer also Aside from being clean and The prize, which includes schol - warned that the proposals might quiet, it’s also stipulated that rural arships and pension supplements, “create disharmony by artificially family members don’t “engage in has changed over the years. In the provoking anger at the rich”. superstitious activities, cults or early eighties families could pick up Yet fewer commentators have prostitution, gambling and drug points for “being good at family picked up on the fact that the pro - abuse”. Strangely for the urbanites planning” and later, as the country posed criteria for assessing “rural” no similar criteria are mentioned, began loosening the reins on the families are even more offensive even though the vices are far more state-planned economy, points were and condescending. widely available in cities. I

Market stalled

“We’re hoping that during future President Xi’s visit to the US we will get a greater sense of his attitude towards a transition to a market-based economy. Because for four years or so, that reform project has been on hold.” P h o t o

S o u Christian Murck, president of the American Chamber of Commerce in China shares his view with r c e :

R TIME. For more on this topic, see WiC136 for our article on Deng Xiaoping’s Southern tour. e Christian Murck u t e r s

20 Week in China The Back Page 17 February 2012

Photo of the Week In Numbers $31.9 billion The net selling of China’s holdings of US Treasurys in December, bringing its stake to $1.1 trillion. It is the third consecutive month that China has cut its exposure to American sovereign debt.

10.5% Percentage increase in China’s production of aluminum this year, reaching 21.5 million tonnes, says Chinalco, China’s top aluminum producer. Even though weak

P aluminium prices led smelters to delay the start-up of new h o t o

capacity in January, overall capacity is still expected to S o u r

c grow. e :

R e u t e r s

45 million Lin the zone: one of the many fans of New York Knicks The number of jobs that China pledges to create within three years, says the Global Times. The goal is to bring basketballer Jeremy Lin (see Red Star) urban unemployment below 5%. The plan will also take into account the 20 million new graduates in search of jobs each year. Where is it? $50 billion Some of the places referred to in this issue The amount China’s central bank has transferred to CIC, the nation’s sovereign wealth fund. The $410 billion fund has been pressing for more money to invest. Beijing Hebei Shijiazhuang $6.9 billion The amount that Shanghai Tobacco Group paid in taxes China last year, the most in tax payment for any company in Shanghai China over fiscal year 2011, says First Financial Daily. That Zhejiang Chongqing Wenzhou accounts for roughly 7.4% of China’s total tax revenue.

Guangdong Guangzhou Hong Kong

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