1 Talking Point 5 The Week in 60 Seconds 6 China Ink Week in China 7 Economy 8 Healthcare 9 Banking and Finance 10 Property 11 China Consumer 12 Telecoms 13 May 2011 13 Society and Culture Issue 106 16 And Finally www.weekinchina.com 17 The Back Page Net returns m o c . n i e t s p e a t i n e b . w w w y b g u in What does Beijing’s web clampdown mean for China’s internet IPOs? o k y n o a t B s t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Talking Point 13 May 2011 Dollars and censors Should IPO investors be nervous about government’s internet crackdown? If you want to get foreign investors to subscribe to your internet IPO show them photos like this... he world’s first internet bubble lations on the web – concerned from Phoenix New Media (a content Tbegan to inflate in August 1995 about the net’s potential to foment provider for internet, TV and mo- with the listing of the web browser, social unrest. In these circum- bile phone firms) and Jiayuan.com Netscape. Jim Clark – the company’s stances could internet business (an online dating site). major shareholder – later confided models be harmed? Should foreign Youku, China’s leading internet to author Michael Lewis that investors still be buying? TV platform, has also been in the Netscape’s hugely successful IPO news, announcing it plans to raise “made anarchy respectable”. Full steam ahead, for investors… $600 million via a secondary of- There are some who feel the That seems to be the message from fering in the coming weeks. world’s second internet bubble is the US, where at least 17 Chinese in- Youku’s listing last December was frothing away, and this time it’s in ternet or tech firms will try for an one of those to trigger the recent China. Sky-high valuations, no prof- IPO this year, according to iChinaS- flurry in IPOs, which still shows lit- its and huge first day trading gains tock.com. tle sign of abating. are again on the cards, but there’s a Two Chinese firms managed it difference this time round: unlike last week: social network Renren Hang on, isn’t there a clampdown Clark, the Chinese government has (clumsily but successfully, see underway? Photo Source: Reuters Source: Photo no interest in ‘anarchy’ whatsoever. WiC105) and NetQin Mobile, a China has long put restrictions on In fact, just as the latest crop of maker of internet security software how its internet functions. But the Chinese internet firms list in New for cell phones. situation has got tighter – at least, York, Beijing is imposing new regu- This week there were two more, from the perspective of those who 1 Week in China Talking Point 13 May 2011 view the web as an open platform. the regulator as a souped-up ‘Big than the small print on the role of The blocking of sites like Face- Brother’, policing the web against the State Internet Information Of- book and Twitter first began in dissent. But Xinhua bristled at the fice, it would seem. 2009, shortly after the Xinjiang interpretation, seeing only a thinly That’s a pragmatic response. riots. But efforts to restrict access to veiled attempt to “tarnish the After all, those money managers numerous international websites image of China”. Instead, the new who bought into the earlier IPOs (and to block mention of particular entity is charged with dealing with have watched their investments news stories) are said to have the “current bad environment” on- flourish in spite of censorship. stepped up again this year, follow- line, the news agency insisted, in- Most of the top Chinese internet ing events in North Africa and the cluding problem areas like fake stocks are already listed in the US, Middle East, where social media is information, obscene material and including Sohu and Netease (which purported to have played a role in online gambling. censor their own information serv- stirring unrest. ices) and Youku (which censors its Much of the evidence is anec- What role for foreign investors? video content too). dotal. A wider range of sites is said Fund managers are much more Another star performer is Nas- to have gone on the forbidden list, bothered by China’s growth metrics daq-listed Sina which, thanks to its and more terms have been identi- fied for blocking. The providers of virtual private networks (services that allow users to sidestep many of the restrictions of the Great Firewall by routing traffic through servers beyond Chinese borders) have also been complaining of more in- stances of disruption. More widely reported was Google’s claim earlier in the year that its Gmail service had been hacked by a sophisticated team based within Chinese borders. Google alleges that the email accounts of local activists were targeted. A new sheriff in town, too? Something more concrete was an- nounced on the policy side last week – the creation of the State Internet Information Office, a new agency to coordinate online rulemaking and enforcement. Previously, oversight has been fractured across at least 14 separate entities, leading to overlap and dis- pute (see WiC38, for one example). The new agency is tasked with streamlining the administration of China’s web world, and refocusing ef- forts on the supervision of content. That includes becoming the lead party to “investigate and prosecute websites for violating the law”, something that foreign media has been quick to pick up on, viewing 2 Week in China Talking Point 13 May 2011 Reuters wonders if social network- ing sites like Renren are more at risk of running into trouble, and whether official constraints could undermine some of the sector’s commercial potential. The risk factor section of Ren- ren’s recent prospectus pointed out that it will be operating in a heavily regulated environment, for in- stance, in which it is required to prohibit content that “impairs the national dignity of China”, or that is “socially destabilising”. In fact, Renren mentioned the word “regulation” nearly 300 times Joe Chen (pictured centre) displays his powerful social network in its securities filing, Reuters notes. (For comparison purposes, Skype Twitter-like Weibo service, has seen eignty, it would soon become a used the same term only 170 times its stock surge 260% in the past major point of contention. in its prospectus, seen by Reuters year. It employs 700 staff to censor earlier this year). its users’ content. Stock-pickers like the status quo? But concerns that prospects But if investors themselves won’t Internet stocks have never been for might be suffocated in red tape rock the boat, might the regulators the faint-hearted. But with the re- look overblown. The most success- in the American capital markets be cent China IPOs a strong case can be ful incumbents – those like Baidu, made to make more of a stir them- made that fund managers are buy- Sina and Tencent – have all learned selves? That seems to be the back- ing into something that they do not to work within the official rules. drop to an open letter sent by US understand. Pessimists say this Indeed, doing so can lead to huge senator Richard Durbin to Baidu could later become all too apparent commercial opportunity, espe- CEO Robin Li last week, urging him if newly listed players see their busi- cially if you are first to grab a lead- to do more in areas like freedom of nesses hit when they do something ing position. Then, the restrictions expression and privacy. to earn official rebuke. In particular, on foreign entrants can help to Further, Durbin warned that he is working on legislation that will re- quire Chinese technology compa- nies to protect human rights or face Planet China penalties – and that Baidu will be Strange but true stories from the new China subject to such legislation because its shares are traded in the US. GOLD STANDARD. American rappers looking for the ultimate in bling may Needless to say, Durbin’s corre- have to make a trip to China, or more specifically, to Nanjing. According to spondence drew immediate rebuke the Yangtze Evening Post, the city recently unveiled the world’s first ‘gold- from the Global Times, in an edito- plated’ bus. rial that again rejected any notion As with many things in modern China, it’s a marketing gimmick. The of the internet as a “boundless city’s Baoqing Shangpincheng jewellery store approached the local bus company with the idea as a way to raise awareness of its brand, paying media”. There could never be a one- Rmb200,000 to cover the vehicle with gold foil. size-fits-all approach, it warned, as There were mixed reactions. A 24 year-old white collar worker said the China’s policy priority would al- golden bus had left a deep impression and she’d definitely go to the store ways be the “grand scheme of social to buy jewellery. But 47 year-old Li Jiaxing said on sunny days the glare management”. was too harsh on the eyes, and he viewed it as a form of “light pollution”. Photo Source: Reuters Source: Photo At this stage, quite how any pro- The city’s traffic department sides with Li: it worries the bus will cause posed legislation could work is un- accidents, either through the glare from the gold foil blinding other drivers clear.