April 2014 by China Newsweek Corporation

To Russia with Love: Xi in Sochi

SOCIETY

City Limits: Population Control

ECONOMY

Full Charge: Tesla in China

The struggle for supremacy in China’s booming mobile commerce industry ¥20 www.newschinamag.com

Volume No. 068 March 2014

INTERNATIONAL

EDITORIAL

Published by China Newsweek Corporation Publisher: Liu Beixian Executive Director : Liu Beixian

Addressing air pollution needs a comprehensive approach

Editor-in-Chief: Wang Xiaohui Editorial Office Managing Editor: Zheng Zhonghai Advisor: Liu Dizhong Senior Editor: Yang Yi Copy Editors: Jack Smith, Alex Taggart Lead Writers: Yu Xiaodong, Li Jia Editors: Wang Yan, Yuan Ye, Xie Ying, Sun Zhe, Du Guodong First Reader: Sean Silbert Address: 5th Floor, 12 Baiwanzhuang South Street, Xicheng District, Beijing, China Post Code: 100037 Tel: 86-10-88395566 Fax: 86-10-88388045 Email: readers@newschinamag.com www.newschinamag.com Art Department Art Director: Wu Shangwen Art Editor/Designer: Zhang Dawei Publishing and Development Office China Newsweek Corporation President: Wang Xiaohui Chief Executive: Fred Teng Publishing Associate: Zhang Tianli Tel: 1-212-481-2510 Fax: 1-212-481-2503 Address: Suite 1101, 15 East 40th Street, New York, NY 10016, USA Email: readers@newschinamag.com Toronto Office Director: Lai Hailong Address: 51 Halstead Drive, Markham, ON Canada L3R7Z4 Tel: 1-905-604-6150 Fax: 1-905-604-6170 Email: canada@newschinamag.com Marketing Director: Wang Chenbo Account Manager: Ren Jie Tel: 86-10-88388027 Circulation Manager: Yu Lina Tel: 86-10-88311834 Advertising Director: Gao Weiwei Tel: 1-212-481-2510 Marketing Promoter: Jerry Meng Tel: 1-212-481-2510 New York Office: Wang Yongzhi, Ruan Yulin, Li Yang Washington Office: Wu Qingcai, De Yongjian Los Angeles Office: Mao Jianjun San Francisco Office: Liu Dan Houston Office: Wang Huan London Office: Zhou Zhaojun Tokyo Office: Sun Ran Paris Office: Long Jianwu Bangkok Office: Yu Xianlun Kuala Lumpur Office: Huang Hongbin Moscow Office: Jia Jingfeng Manila Office: Zhang Ming Berlin Office: Huang Shuanghong Sydney Office: Zhu Daqiang Legal Advisor: Allen Wu ISSN 1943-1902

CN11-5826/G2

China Weekly is the Chinese Mainland edition of NewsChina magazine

CHINA WEEKLY I March 2014

n recent years, deteriorating air quality has be- million yuan (US$1.6m) in investable assets said come a major social problem in China as the they were either considering emigrating or had alpublic are becoming more and more aware of ready emigrated from China, leading to a drain of environmental issues, and look beyond monetary China’s wealth. Poor air quality was identified as gains to measure their quality of life. one of the most prominent reasons in their conRealizing the severity of the problem, China’s sideration. new leadership raised the concept of establishing Air pollution is also believed to one of the reasons an “ecological civilization” behind the falling number of forin 2013. However, despite eign visitors to China. According The root cause of air various measures taken by to data released by the Beijing pollution is embedded the new leadership, there is Municipal Administration of no sign that the air is getting Tourism, 4.2 million internawithin China’s growth cleaner. tional tourists visited the city in model As the winter set in last the first 11 months of 2013, 16 year, the air quality in many percent fewer than the previous Chinese cities plummeted year. Moreover, concerns over air due to a combination of weather conditions and quality and other forms of pollution have also lead the widespread burning of coal for home and mu- to a spate of protests across the county in recent nicipal heating systems, leading to a renewed pub- years. lic outcry over worsening air pollution. In its latest effort to address the problem, the In response, the authorities made new pledges to State Council held a meeting focusing on combataddress the problem. In January, Beijing’s Mayor ing air pollution on February 12, at which Premier Wang Anshun said he would “put his head on a Li Keqiang outlined three approaches: transformplatter” if pollution did not improve by 2017. The ing China’s energy structure, providing policy inBeijing municipal government pledges that it will centives including taxes and subsidies for use of spend 760 billion yuan (US$125bn) to clean up clean energy, and holding officials more accountthe capital’s air. Also in January, Zhang Qingwei, able. The meeting suggested that curbing air polgovernor of Hebei Province, vowed to cap the pro- lution has become a national priority of the central duction of polluting industries such as iron and government. But to really deliver results, the govsteel, cement, and glass, as a measure to curb air ernment needs to adopt a more comprehensive appollution. “If the levels rise by one ton, the respon- proach, both in its economic and political policies. sible officials will be removed,” said Zhang. Economically, the government needs to put a While these new political promises indicate price on the environment so it can be integrated strong political will to tackle the issue, they may into economic decisions. Politically, it is necessary not bring immediate results, as the root cause of to allow the public into the decision making proair pollution is embedded within China’s growth cess and to push forward environmental legislation. model, which relies heavily on manufacturing, esAfter the infamous Great Smog that struck Lonpecially the polluting and energy-intensive heavy don in 1952, Britain responded by passing the industries. Clean Air acts of 1956 and of 1968, and the City Within the government, achieving economic of London Act of 1954 to restrict polluting energy growth and increasing government revenue con- resources. Even so, it took 10 years to alleviate Lontinues to outweigh environmental issues in the don’s problem. Comparatively, the problem of air decision-making process. Now, as air pollution pollution in China is more severe in terms of its persists, it is beginning to take its toll on the econ- geographic scale and its multiple causes. To bring omy. According to a report jointly made by China clear air back to China’s cities, the government Merchants Bank (CMB) and Bain & Company, must turn its political will into swift and persistent 74 percent of correspondents who have at least 10 efforts.

Contents

HANDHELD HEGEMONY

P18

Editorial

politics

Cover Story

society

01 Addressing air pollution needs a comprehensive approach 10 14

Rural Reform: Super Bowl Cross-Straits Relationship: Overdue Conversations

P54

18 Mobile Internet: Handheld Revolution/Digital Warfare/ Competition in the Pipeline

30 34 38

Population Control: You’re Welcome to Leave Beijing China Coast Guard: Fracture and Fusion Xinjiang Violence: New Threats, New Strategies

P14 CHINA WEEKLY I March 2014

Photo by CFP

How mobile Internet is revolutionizing consumption in China

Contents

P40

P50 international

40 44

Xi in Sochi: Friends or Allies? South China Sea: Making Up the Rules

environment

47 Anti-desertification NGO: Entrepreneurs for Ecology

50 Tesla in China: Beautiful Toys

HISTORY

54 Nixon’s Return to China: Villain at Home, Hero Abroad culture

57 Gu Cheng: Death of a Poet

CHINA WEEKLY I March 2014

P64

outside in

64 Spiritual Wudang Mountain: The Tao of Tourism 67 Flavor of the Month: Macanese Magic

economy

visual report

60 Shuttered Society

P60

Commentary

70 The Future of the Chinese Middle Class 04 MEDIA FOCUS 05 What They Say 06 NEWS BRIEF 08 Netizen Watch 53 China by numbers 66 real chinese 68 ESSAY 69 CULTURAL LISTINGS

NewsChina Chinese Edition

Southern Metropolis Weekly

February 17, 2014

January 16, 2014

Hometown Heroes

Keeping in Check In China, the lack of a family doctor system has led to a boom in the health check-up industry in recent years. Facing deteriorating air quality and regular food safety scandals, ordinary Chinese people are choosing to spend more money on healthcare. However, rather than seeking advice or diagnosis from professional medical personnel, many opt for frequent health checks – it has been estimated that China’s check-up market will break 300 billion yuan (US$49bn) by 2020. However, the industry lacks regulation, and since health check institutes are registered as businesses rather than medical service providers, many consumers undergo unnecessary procedures like CT scans and ultrasound without professional guidance. Analysts believe that a lack of trust in doctors is the key reason behind the phenomenon.

During the Chinese New Year festival, hundreds of millions of Chinese return to their hometowns to celebrate the national festival with family members and reunite with their childhood friends. Due to the effect of rapid urbanization on the rural landscape, many find their hometowns – and their childhood friends – completely unrecognizable. This issue features stories from the childhoods of 11 famous Chinese people, offering new perspectives on the lives of celebrities including entrepreneur Cao Dewang, writer Mo Yan, director Zhang Yimou, actress Zhang Ziyi, Olympic diving champion Guo Jingjing and others.

Oriental Outlook February 11, 2014

Non-government, not Independent Thanks to President’s Xi Jinping’s measures to set up “think tanks with Chinese characteristics,” China is now home to the second largest number of think tanks in the world, following the US as of August 2013. This growth, however, has done little to help detach nominally non-governmental Chinese think tanks from heavy dependence on government oversight. Lack of financial sources and young talent are believed to be the major obstacles to their full independence. Some experts believe that it is this dependence that prevents think tanks from speaking for the interest groups that fund them. Oriental Outlook cited think-tank researcher Zhu Xufeng from Tsinghua University as saying that there is no fixed model for the development of Chinese non-governmental think tanks and revealed that many think tanks are now trying to cooperate with domestic commercial businesses while expanding their influence via the media.

China Economic Weekly January 14, 2014

Touching the Sky According to the US standard for skyscrapers (buildings with a height of at least 152 meters), China boasted 470 skyscrapers by 2012, and it is estimated that by 2022, the total number of skyscrapers in China will reach 1,318. Throughout the whole country, a race is on to build the tallest building, with more than 80 percent of skyscraper projects being initiated in small and medium-sized cities. “Megatalls” including the Shanghai Tower (632m), the Ping’an International Finance Center (646m) in Guangdong Province, and 777 Plaza (over 700m) in Shandong Province are all currently under construction. Sky City (838m), currently being built in Hunan Province, will dwarf even the Burj Khalifa, the tallest skyscraper in the world since 2010 with a height of 829.8 meters. In China, local governments tend to use tall buildings as vanity projects, often overlooking issues such as safety and risk management. Economists have also pointed to the “Lawrence Spell” – an economic theory that links excessive completion of skyscrapers to impending economic downturn.

Economy & Nation Weekly January 17, 2014

Battle for Gene Technology Non-invasive pre-natal DNA tests for Down’s syndrome, a blood test for pregnant women that can detect the condition in unborn babies in 99 percent of cases without risking a miscarriage, has been used in China for over two years. BGI, one of the top Chinese companies in the genetic technology field, is the major player in promoting the test. In late 2013, however, the China Food and Drug Administration (CFDA) issued a ban on BGI’s clinical application of this technology. The absence of regulations in China for genetic technology has become a major hurdle for the development of this industry. Experts believe that China should invest more in genetic technology, upgrade the industry to a strategic level and set up industry regulation and criteria for clinical application so as to support sustainable development. CHINA WEEKLY I March 2014

“Good journalists are like woodpeckers - they maintain a healthy ecosystem by rooting out the worms.”

“My boss told me that if my air pollution control targets aren’t met by 2017, he doesn’t want to see me alive.” Beijing Mayor Wang Anshun on the State Council’s Air Pollution Prevention and Control Action Plan. “We should see our country through the world’s eyes, not see the world through our country’s eyes.” Linguist Zhou Youguang speaking to the media on his 109th birthday.

“The sex industry cannot be eradicated. You cannot eradicate desire, nor the sexual instinct. Demand will always drive supply. So long as there are people willing to spend their money, you’ll find people willing to take it.” Sexologist Li Yinhe calling for the legalization of the sex industry amid a crackdown on “licentiousness” in Dongguan, Guangdong. “If a bunch of taxes were eliminated, China’s house prices would fall 70 percent.” Hong Kong-based Economist Larry Hsien Ping Lang (Lang Xianping) on the exorbitant tax levies on developers which many blame for China’s overvalued housing.

CHINA WEEKLY I March 2014

Illustration by Wu Shangwen

Bai Yansong, CCTV news anchor, on the need for muckraking.

“The‘two local sessions’[the People’s Congress and the People’s Political Consultative Conference] are platforms for representatives to voice opinions, and should be where their questions are taken. Now, the biggest problem is a lack of questions.” A Changjiang Daily editorial on local and national-level political representation. “Emphasizing written Chinese characters is not for students to show off their ability to remember anachronistic characters, but for them to understand their real meanings and cultural connotations.” Yu Dan, professor at Beijing Normal University, responding to a decline in written Chinese proficiency among students accustomed to typing. “Being mediocre is not a crime. However, if a civilization like China can only boast a mediocre modern culture, how can we let it stand?” Author Wang Meng on the perceived limitations of Chinese pop culture. “On what grounds do I have to donate the property to the Beijing Yuanmingyuan Imperial Gardens? Will they really protect them? I only trust my Alma Mater, Peking University.” Chinese entrepreneur Huang Nubo, refusing to return marble plinths originally taken from imperial gardens and purchased for US$1.6m from a Norwegian museum, to their original setting.

Top Story

Anti-Prostitution Campaign Launched The Chinese police launched a sweeping crackdown on prostitution in Dongguan, Guangdong Province, known as China’s “sin city,” firing the first shot in a nationwide anti-prostitution campaign. The crackdown began with an undercover report into several local “entertainment venues,” including a five-star hotel, by State broadcaster CCTV news on February 9, which revealed that prostitution was open and rampant in the city. The local government dispatched over 6,500 policemen for an inspection, closing down 12 venues and detaining 67 suspects the same day. The following day, the Dongguan police continued inspections on nearly 2,000 venues, including massage parlors, hair salons, karaoke bars, dance clubs and hotels, with a total of 162 suspects detained. The campaign triggered debate on whether or not China should legalize prostitution, a business that has boomed in Dongguan over past the 10 years and has reportedly contributed largely to Dongguan’s GDP. Many netizens flooded to express their support for sex workers.

The government has resolutely rejected the prospect of legalization, with editorials appearing for the next few days from Party mouthpieces Xinhua News Agency and the People’s Daily decrying the “corruption of mainstream social values.” Many critics, however, have attributed sympathy for the sex workers to outrage at the government’s perennially aggressive campaigns, which routinely fail to expose the officials behind the illicit industry. In order to ease public doubts, the government has dismissed over 10 local public and police officials for dereliction of duty, including the Director of the Dongguan Public Security Bureau Yan Xiaokang. CCTV also alleged that the “big boss” behind the five-star hotel exposed in the report is Liang Yaohui, president of a wealthy oil company and a delegate to the People’s National Congress, China’s highest legislative body. Now, the campaign has extended to nearly all Chinese cities, including the capital Beijing, with the public expecting to see more “tigers” (President Xi Jinping’s buzzword for corrupt senior officials) exposed for their links to the industry.

Business

Lenovo Buys Motorola Mobility China’s IT giant Lenovo announced on January 30 that it has concluded an agreement with Google to purchase the latter’s shares in Motorola. The deal is worth US$2.91 billion, and includes use of Motorola’s trademark, its smartphone products (including its bestselling Moto X and Moto G series), and 2,000 patents. According to the agreement, Lenovo will also take over the product planning of Motorola’s mobile products. Google, developer of the popular smartphone operating system Android, purchased the loss-making Motorola Mobility in 2011

for US$12.5 billion. As of now, it still owns over 15,000 of Motorola’s patents, leading some Chinese analysts to doubt whether Lenovo’s purchase was worth the heavy pricetag. Nevertheless, most analysts believe that the acquisition will help Lenovo, currently the world’s number three smartphone vendor, to explore the global market and close the gap on its two biggest rivals, Samsung and Apple. Lenovo CEO Yang Yuanqing told the media that Motorola will be Lenovo’s key to the North American and Latin American markets. By 2015, the Beijing-based group,

according to Yang, aims to sell 100 million phones worldwide.

CHINA WEEKLY I March 2014

Society

Politics

Mainland Students Big on SATs

Xi’s Cartoon Image Published

In late January, nearly 10,000 mainland students flocked to Hong Kong to sit the SAT (Scholastic Assessment Test), transforming Hong Kong’s AsiaWorld-expo into what the media called a “mass grave.” The SAT has attracted a growing number of mainland students, who believe the foreign exam is fairer and offers a higher chance of entry into a good university than its Chinese equivalent. The gaokao, China’s yearly college entrance examination, is increasingly under fire for regional discrimination – the pass mark is usually significantly lower for students holding residence permits in large cities like Beijing and Shanghai than it is for those from smaller cities. According to media reports, the number of mainland SAT examinees has risen from 7,000 in 2007 to about 40,000 today, bringing the price of training programs up to a hefty US$5,000-7,000.

Citing President Xi Jinping’s quotation during an official visit to the winter Olympics in Sochi “Where is my personal time? It has all been occupied by work,” and listing the 14 countries and 11 Chinese provinces and municipalities Xi has visited since becoming president, as well as 47 conferences, a cartoon image of China’s top leader caused a stir when it appeared, and stayed, on website Qianlong.com February 19. Previously, all cartoon or otherwise “disrespectful” images of Chinese leaders have technically been outlawed. The Chinese public generally applauded the image, calling it an effective move to shorten the distance between the leader and the masses.

Industry

Austerity Damages Dining

China’s Catering Revenue 20102013 (US$bn)

Growth Rate (%)

Chinese catering businesses earned over 2.5 trillion yuan (US$416.7bn) in 2013, a 4.6 percent drop in growth 20 500 20 500 compared to last year and the slowest growth for the past 21 years. 400 400 The statistics were published by the China Cuisine As15 15 sociation (CCA), whose report also revealed that high300 300 end restaurants (those with an annual turnover exceeding 200 200 US$33m) suffered their first ever drop in annual revenue 10 10 in 2013, about 1.8 percent down compared to that of 100 100 2012. The nationwide anti-corruption campaign launched by 0 5 5 0 2010 2011 2012201020132011 2012 2013 the new leadership is believed to be the major reason be-2010 2011 2012201020132011 2012 2013 hind the decline. According to the CCA, the government’s Source: National Bureau of Statistics of China ban on luxurious government feasts at the public’s expense has helped reduce sales volumes at high-end restaurants by around half. Media reports said nearly 40 percent of such restaurants in big cities went bankrupt in 2013. Analysts predicted that the catering market will be re-shuffled in 2014 and suggested high-end restaurants shift to lower-end business, such as replacing costly abalone and shark’s fin with less rarefied dishes.

Health

China’s State Council recently issued its plan for food and nutrition (2014-2020), defining national intake standards of essential food, including grain, meat, vegetables, fruit and dairy, among other things. The target, according to the plan, depends on self-sufficient food production over the sixyear period, with annual grain production to be secured at 550 million tons and the annual added value of the food industry to grow by 10 percent per year. CHINA WEEKLY I March 2014

The plan puts a special emphasis on a reasonable dietary structure which provides 2,2002,300 Kcal per capita per day, with the energy from grain to remain at over 50 percent and that from fat less than 30 percent. Irregular diet and junk food due to increasing life and work pressure, according to the government’s third nationwide sample health test in 2010, has resulted in 32.1 percent of Chinese adults being classified as overweight, a rate that has been constantly rising since 2000.

Grain: 135kg

Vegetables: 140kg

Edible Vegetable Oil: 12kg

Fish & Sea Food: 18kg

Pulses: 13kg

Eggs: 16kg

Meat: 29kg

Dairy: 36kg

Photo Credit: Top, IC; Society, IC and CFP

China’s Food and Nutrition Plan 2014-2020 (average consumption per capita/year)

China Defines National Health Diet

Fruits: 60kg

Shocking

Poll the People Do you think prostitution should be legalized? Respondents: 1,219

Yes. 926 76% A debt collector who tried to stop a man from evading payment took a death-defying ride down a highway in Anshun, Guizhou Province February 8, clinging to the windshield of his fugitive debtor’s car. Highway patrol officers commenced a high-speed chase with the SUV as it barreled through traffic at 140 kilometers per hour before stopping at a toll booth. The debt collector had clung on to the car for 30 kilometers.

Saddening

No, it should be cracked down upon. 137 11.2% I prefer the status quo. 156 12.8% Source: www.weibo.com

Surprising Most Circulated Post Retweeted: 114,261

Fearing extortion, a 60-year-old man from Taixing, Jiangsu, named Xiao Guohua took a photo of the scene of an electric bike accident before helping the fallen motorist, February 10. A recent swath of extortion cases in China saw would-be good Samaritans accused of being involved in accidents that had injured pedestrians, before being shaken down for treatment bills. The female victim was knocked down in a hit-and-run with another electric bike, but sustained only minor injuries.

A woman from Guangzhou posted a full-page advertisement in a Chinese-language Australian newspaper promising her son that she would “not pressure him into marriage again,” and begging him to come home for the Spring Festival. The son was studying in Australia and had refused to answer her phone calls over the dispute.

After China’s first lunar rover Jade Rabbit Retweeted: 114,261 bounced back to life February 13, space enthusiasts updated the post on the robotic explorer’s unofficial microblog, prompting thousands of responses within minutes. In late January, the six-wheeled rover reported a “mechanical control abnormality” and was pronounced “dead” six weeks into a three-month mission

“Hi, anyone there?”

Amusing The odd-numbered seats of one auditorium in one of Shanghai’s popular UME movie theaters were all booked out on Valentine’s Day by singles wanting to give lovers a hard time. A netizen named UP called on single people to book out all odd-numbered seats to prevent couples from sitting together as a form of protest.

CHINA WEEKLY I March 2014

WHO’S

Top Five Search Queries On

HOT? WHO’S NOT?

over the week ending January 15 Black Coal, Thin Ice 191,956 The detective thriller directed by Diao Yinan won the Golden Bear at the Berlin International Film Festival February 16. Giant Infant 158,475 A woman from Guangdong Province gave birth to a seven kilogram baby, about twice the average weight of Chinese newborns. Shirley Temple 149,166 A great number of Chinese fans mourned the former child star, whose movies were popular in both pre- and postrevolutionary China.

Hero Firefighter A fireman in a harness caught a woman as she leaped from her thirdfloor apartment window during a suicide attempt in Hefei, Anhui Province on February 16.

Frankie Kao 78,261 The Taiwanese rock star passed away at the age of 63.

Top Blogger Profile Hua Sheng Followers: 327,882 The 61-year-old professor with Southeast University of Nanjing, Jiangsu Province is a renowned economist, and an outspoken advocate for land reform. He has argued that China should prioritize land reform as a means to encourage social justice, and narrow the ever-widening wealth gap by depriving government of the profits from land sales, instead passing that value on to the landholders themselves. CHINA WEEKLY I March 2014

Some of the images used in this section are from the internet

Ferrari Accident 79,982 A Ferrari crashed into a guardrail on Beijing’s Airport Expressway February 13, causing one death and three serious injuries.

Henan Officials A museum in Baofeng, Henan Province was ordered to close its doors to ordinary visitors on February 12 while government officials were taking a tour.

Pang Kun This lawyer from Shenzhen demanded that the Hubei government disclose the source of the 800,000 yuan (US$131,500) it ceremonially awarded to Australian Open tennis champion Li Na.

Wuhan Children More than 90 percent of students from a high school in Wuhan, Hebei Province could not give the exact date of their parents’ and grandparents’ birthdays in a pop quiz.

politics

Rural Reform

Super Bowl

The No.1 resolution recently issued by the central government is designed to be a solution to the No.1 issue facing China: food security By Li Jia

“

Chinese bowls must be filled with food grown on Chinese land,” read a resolution issued following a rural affairs conference convened by the Central Committee of the Communist Party of China (CPC) in late December 2013. Three weeks later came the annual “First Decision” reached by the Central Committee in 2014. As widely expected, it was a pledge to further pursue rural reform. 2014 marked the 11th year in a row in which rural reform was highlighted in the CPC’s annual First Decision, and while the CPC has an exhaustive reform agenda on its hands, there remains a potent symbolism attached to the distinction of being “first.” The Party’s 2004 First Decision was a pledge to speed up the slow growth of rural incomes to curb the ever-widening ruralurban wealth gap - an effort which has so far had negligible impact. Since then, measures taken to improve management of rural affairs have been focused on replacing various agricultural taxes with government subsidies. Securing China’s food supply and improving the livelihoods of the Party’s rural support base is now a serious strategic concern for the central authorities. What has made this most recent pledge different from its predecessors are the explicit concerns raised over food security and, even more startlingly, hints at possible land reforms allowing farmers greater individual autonomy, dividing land rights between farmers, the government and business.

At its core, most observers agree that rural reform needs to begin and end with improving the lot of rural residents - currently by far China’s poorest and most deprived demographic. Unless farming can be made profitable for farmers, neither establishing reliable national food security nor ongoing economic growth will be possible.

Why Worry?

Whether the “food in Chinese bowls” is actually produced in China depends on what’s for dinner. When it comes to staples, mainly rice and wheat, the chances are overwhelmingly good that consumers are buying local. Although rice imports reached a record high in 2012, they only accounted for 1.6 percent of domestic consumption. Imports of rice and wheat were estimated at 2.5 percent in 2013, well below the 5 percent ceiling set by the government. Increased grain imports were largely attributed to more competitive import prices from Southeast Asia, and increased demand for quality bread flour. However, the situation for other foodstuffs is more complicated. While most cooking oils and soy sauce used in Chinese homes are domestically pressed, they are overwhelmingly made from imported soybeans, as is the majority of Chinese animal feed. More than 80 percent of soybean consumption in China is of imported soybeans, with the US the leading provider. This year, at last, the Chinese government acknowledged this situation. Its First Deci-

sion resolution states clearly that domestic production must “absolutely dominate” China’s rice and wheat supply and “relatively dominate” its corn supply, while reliance on soybean imports will continue. This clarifies a long-running controversy over what foodstuffs should be included in China’s national food security strategy, particularly whether soybeans, an essential food item for most Chinese, should be part of it. Whether or not food imports are a strategic concern (jitters over this issue are something of a relic of the planned economy era, when self-sufficiency in agriculture was seen as a life-and-death priority), the issue of China’s rural-urban wealth gap seems far more urgent. Although this gap has officially narrowed in the past four years, in 2013 the total average income of farmers, most of which came from a combination of land use and working part-time urban jobs, was only one-third of the average disposable income of urban residents. It is hard to imagine any consumption-oriented economy developing in China’s rural hinterland, where many continue to eke out a living at subsistence level, largely oblivious to the consumer culture flourishing in nearby cities. What is clear to economists is that both the issue of food security and the country’s failure to reduce rural poverty have their roots in China’s antiquated land use system. Only a complete overhaul, in the view of many, can avert disaster. CHINA WEEKLY I March 2014

Fragile

of “38, 61 and 99,” numbers signifying national holidays for women, children and the aged. Most rural men of working age have migrated to China’s cities in search of work to supplement their meager incomes. This move to the city is perhaps not the shrewd financial move it once was. According to the National Bureau of Statistics, about 250 million urban residents - people who have resided in cities for more than half a year - do not possess an urban household registration card, or hukou. The hukou requirement for urban welfare, housing and other benefits remains in place despite the government’s desire to move more rural residents into cities. To provide jobs and housing for migrants, China’s already vast cities need to expand. The reality of this shift is described by economists and the media as the “two rats story.” Migrating farmers leave their two or threestoried rural houses behind for the rats, instead exchanging them for “rat hole” accommodation in the city. The latest Ministry of Land and Resources survey found that the area of rural land given over to construction projects has expanded over the years, despite a declining number of rural residents. How can this seemingly terminal decline be reversed?

Photo by ic

Han Changfu, Minister of Agriculture, recognized in a press conference in December 2013 that the growth in China’s harvest has been lagging behind demand for years, and that this trend would continue as more farmers became urban residents. Moreover, he noted, though grain output had been increasing annually for a decade by the end of 2013, the huge cost of resources and the strain placed on the environment has put the sustainability of the harvest under enormous pressure. In almost all China’s agricultural areas, farmers are recording severe water shortages, overuse of chemical fertilizers, and general pollution. A survey released by the Ministry of Land and Resources in December 2013 shows that more than 10 million hectares of arable land would have to stop growing crops briefly or permanently to recover from heavy contamination, some of which would need to be repurposed as forest and wetlands. In an article published in Qiushi, a magazine printed by the CPC Central Committee, Han stressed that the poor education of farmers and poor returns on farming undermine the capability and incentives of agriculture. The bulk of the agricultural workforce in China is described by experts as made up

Vegetables are planted in the grounds of what is actually a future industrial park in order to hoodwink inspectors looking for land use violations, Hubei Province, July 7, 2011

CHINA WEEKLY I March 2014

Owners, Contractors, Operators

China has a unique system of land use, a product of both the planned economy era and the Reform and Opening-up movement of the 1980s. The law says all rural land, either for farming or for construction, is owned by “rural collective organizations,” mostly villages or small rural communities, and all urban land is owned by the State. In practice, the State’s strong intervention through agricultural price controls and direct land appropriation makes this nominal collective ownership a fallacy. Individual rural households hold far more limited rights to “their” land than, say, the relevant rural officials, who retain approval rights for all modifications made to the long-term land contracts held by farmers. While collective land ownership will remain unchanged in the latest round of reforms, the government claims that farmers’ land use rights will be expanded. A new concept called “operational land rights” has been created, a concept independent from the original “contracted land rights.” Effectively an extension of land use rights, this new concept will allow farmers to put up land use rights as collateral when fundraising. This change, while seemingly minor on paper, is designed to address the biggest technical and political obstacle preventing farmers from improving their lot by selling land. Creditors, typically State-owned banks, can “repossess” land used as collateral by farmers. Repossession, and evictions, are associated with rural unrest and rioting, making this a tricky issue for the government to handle. Even when banks do successfully take possession of rural land resources, they often struggle to sell or repurpose it, as ownership remains in the hands of the rural collectives. This is what also prevents land from being put up as collateral under the existing system. Under the new system, according to the rubric of the government’s reform agenda, creditors will only be entitled to yields from land operations, with the contract of land use remaining in the hands of farmers. This is expected to encourage efficiency. It is often the case that contractors and operators of the same land are not the same people due to a complex web of subcontracting and

land transfers, many of them illegal, between farmers or between farmers and agricultural concerns. In theory, the new policy offers some security to farmers considering longer term contracts with operators as well as more confidence to operators demanding longerterm contracts and more financing options. China’s agriculture has suffered from a chronic lack of investment, with farming practices largely unchanged since the 1960s. The government hopes that these tentative reforms will spark a wave of investment allowing for the full mechanization of China’s outmoded agriculture. There are also other methods whereby rural residents can profit from greater rights to their land. Farmers will reportedly be allowed to “sell” rural landholdings to construction companies, which many hope will put an end to government land snatching, which has been rampant in recent decades. Private homes will also be accepted as collateral, or can be made transferable between individuals living in the same village. To implement these complex reforms, the Ministry of Agriculture has declared a fiveyear schedule beginning in 2014 to register the arable landholdings of all China’s millions of rural households. To accomplish this vast project, the government has enlisted outside help. Bayer, a multinational from Germany, has become a technical service provider for an agricultural trust project in Anhui Province funded by CITIC, China’s largest trust company. In the past few months several other large funds have followed suit and signed deals with local governments in Heilongjiang, Jiangsu and Guizhou provinces that will allow them to operate farming projects on land acquired through transfer agreements with farmers. This change, unprecedented in modern Chinese history, has led to some alarm.

Unlevel Field

Companies, particularly those with State backing, are unquestionably better placed to operate large-scale farming projects than China’s impoverished and heavily-restricted

Photo by ic

politics

Abandoned homes in a village in the suburbs of Beijing, December 5, 2013

farmers. Fears are growing that such concerns will take advantage of poorly-informed farmers, tricking them into signing unfair land transfer deals, before ruining arable land with industrial contaminants. At a press conference convened January 22, 2014, Chen Xiwen, director of the CPC Central Committee’s Office for its Leading Group on Rural Work, gave a dramatic example. A company rented a rice paddy before repurposing it to grow lotus roots, a popular delicacy in China, but abandoned the land when the market price of the roots fell a few years later. The farmers working the project had to simply shoulder the burden of the unfulfilled deal and the high cost of reclaiming the destroyed rice paddies. Another example of how the new system might be undermined occurred during a trial land transfer project in Shandong Province. A village official acquired land with the help of the local government, using the resulting transfer contracts to secure bank loans and sow corn, garlic and other produce in 2012. Local farmers became both his landlords and his employees. This model worked well and he was even named a “model reformer.” However, he also disappeared after making losses on the project in June 2013, leaving

behind huge unpaid loans and salaries. Other cases have abounded where land has been given over to the construction of luxury villas or hotels in back-room transfer deals, leaving it useless for repurposing for agriculture once these projects have fallen through. Heavily indebted local governments addicted to the quick profits of land revenues have always been a big player in the rural land market, and their interests rarely coincide with those of farmers. In Han Changfu’s article, he notes that the Ministry of Agriculture found during its recent survey that land disputes accounted for 65 percent of petitions filed by farmers with the central authorities. Land rights infringement, he continued, involved forced land transfers to companies coupled with forced land appropriation, as well as the illegal withdrawal of arable land contracts by some village officials. Land, he warned, remained “the very core of farmers’ interests and the biggest issue threatening rural stability.” In 2009, the Supreme People’s Court had to issue special guidelines focusing on rural land disputes, including infringements, which soared after millions of migrant workers lost their jobs and returned to their home villages only to find their land gone CHINA WEEKLY I March 2014

Photo by beijing times / c

Illegal construction of luxury villas on collectively owned rural land in Changping on the outskirts of Beijing, June 28, 2013

and their livelihoods destroyed. In a rural-urban land exchange trial project undertaken in the past few years, some local governments turned some rural construction land into arable land, sold these new “quotas” on the market and got approval for new landholdings of equal size - usually in suburban areas - to use for industrial or residential development projects. Farmers who participated in these deals received much higher compensation than the victims of direct land appropriation, with the added bonus of being able to keep their land, while the total arable land area remained unchanged. However, this initially vaunted “silver bullet” solution to China’s chronic land shortage soured once media reports surfaced showing farmers being forced off their land so that local governments could secure their quotas, which, once obtained, allowed them to dodge actually having to repurpose the reclaimed land resources. These alarming lessons have triggered concerns over what would happen if projects led by trust companies, with little agricultural experience, fail, and how to prevent the new reforms from giving even more incentives to the many inveterate land snatchers in charge of indebted local governments. CHINA WEEKLY I March 2014

Too Little or Too Much?

Caution remains the watchword of the new policy. Controversy has raged over whether companies should be encouraged to “go rural.” The new policy makes it clear that rural households will remain the dominant players in agricultural production. At the same press conference in January 2014, senior CPC official Tang Renjian stressed that companies are more suitable for facility agriculture (greenhouse gardening, for example), as well as taking responsibility for the processing or marketing of agricultural produce. The government has also insisted that companies be required to insure themselves and their partners against business risks for rural land projects, and the authorities have also pledged to get tough on the use of land by commercial entities. When it comes to opening further tracts of rural land for construction, however, the chaos that has resulted from recent rural-urban exchange trials has seen this notion fall out of favor with the public and, by extension, the government. Exchanges have never been rolled out at the national level, and some trial projects have been curtailed. While this concept is mentioned briefly in recently-issued government documents, however, it is clearly

fading from the forefront. There is a lot more to clarify. While farmers’ houses are apparently to be marketized, the new policy does not specify whether the land underneath these houses is included. The only clue has so far been Chen Xiwen’s remark that “land and the homes upon it are inseparable” - hardly a concrete policy pledge. Moreover, although the central government has stepped up surveillance of arable land management and land disputes by exerting both political and technological pressure (satellite monitoring, for example, has become widespread), not much has been said about how to protect farmers’ rights, whether through education, resource allocation or political empowerment. Predictably, many have complained that the new policy is too cautious. Professor Zhou Qiren at Peking University is a prominent academic specializing in rural affairs. In an article in the Economic Observer published January 20, he criticized the system through which all land use is subject to the approval of the Ministry of Land and Resources. Zhou and his fellow critics have also slammed policymakers’ unclear and conservative posture on how to build a fair rural land market. In his other columns in the same paper, Zhou has advocated a fully comprehensive ruralurban construction land exchange, arguing that concerns over teething problems must not translate into inertia. The central government has adopted a strategy of “crossing the river by feeling for stones,” a softly-softly approach which is typical for any unprecedented major shift in central policy. This cautious stance allows the government to roll back unsuccessful reforms quickly by claiming experimentation, as well as to vary enforcement of untried policies according to circumstances. Malpractice, in such an uncertain environment, is a fact of life. However, allowing the threat of abuse to become an insurmountable barrier to efforts to genuinely improve the lot of China’s rural communities would likely lead to far worse outcomes. 

politics

Cross-Straits Relationship

Overdue Conversations A historic meeting between officials from Taiwan and the mainland, though lacking concrete outcomes, marks an important step toward normalizing relations By Yu Xiaodong

“

Nanjing is closer to Taipei than to Beijing,” said Zhang Zhijun, director of the mainland’s Taiwan Affairs Office in a historic meeting with his counterpart, Taiwan’s Mainland Affairs Council Minister Wang Yu-chi on February 11. The meeting was the first ever official government-to-government contact between the two sides since the end of the Chinese Civil War in 1949, when the former Nationalist government fled to Taiwan. Zhang is not only referring to the geographic distance between a Taiwanese and mainland city, but also the historical and cultural ties that still link the Republic of China (ROC), Taiwan’s official name, and the city of Nanjing, China’s capital under the Kuomintang (KMT), or the Nationalist Party before it retreated to Taiwan after losing the Chinese Civil War in 1949. During the meeting, both sides agreed to “create a formal dialog

mechanism” between the mainland’s Taiwan Affairs Office and Taiwan’s Mainland Affairs Council. Zhang also accepted Wang’s invitation to visit Taiwan, a trip which could be made as early as April, while Taiwan proposed a second visit by Wang to the mainland later in 2014. It is expected that such interactions could become routine, with hints of official representative offices in both territories in the next decade or so.

Breakthrough?

While the meeting was widely reported as a “milestone” in the history of relations across the Taiwan Strait, like many interactions between Beijing and Taipei, its significance is more symbolic. In the past, dialog across the Strait has been carried out by two semiofficial organizations imbued with the power to negotiate on behalf of the two governments, the mainland-based Association for Relations CHINA WEEKLY I March 2014

Photo by ic

Taiwanese official Wang Yu-chi (center), head of Taiwan’s Mainland Affairs Council, visits the Sun Yat-sen Mausoleum in Nanjing, February 12, 2014

Across the Taiwan Straits (ARATS) and its Taiwanese counterpart the Straits Exchange Foundation (SEF), both of which were set up in the 1990s. Meetings between politicians from both sides are typically conducted at party level - between the KMT and the Communist Party of China – a problem, given that Taiwan’s voters have previously placed the KMT’s rival party in power, which typically results in a diplomatic freeze. Beijing has refused to recognize the ROC’s government on Taiwan, insisting that the two sides should reach unification under Beijing’s leadership, while Taipei has insisted that dialog between the two sides should only be conducted on “equal footing.” These semantic issues have persisted even though economic ties have greatly improved since the KMT’s Ma Ying-jeou won the Taiwanese election in 2008. The Economic Cooperation Framework Agreement, CHINA WEEKLY I March 2014

a landmark pact widely seen as a bold step towards reconciliation, has also been reached between ARATS and SET, a move which would typically only result from direct government-to-government negotiations. The issue of how Taiwanese officials should be addressed has become increasingly thorny as the two sides have stepped up engagement. For example, in mid-January, Lung Ying-tai, Taiwan’s cultural chief, responded to an unofficial invitation from Cai Wu, Beijing’s Cultural Minister, to visit the mainland “under a proper title,” that she would only visit the mainland as “Minister Lung.” The Communist Party, its media organs and the Chinese government follow a strict policy of never referring to Taiwanese leaders by their official titles, which is considered to legitimize the government in Taipei -- tantamount to acknowledging Taiwanese sovereignty. This time around, the fact that Wang was received in his official ca-

politics

John Chiang (center), vice chairman of the Kuomintang, visits the Anhuili resident community, Beijing, February 18, 2014

Photo by cns

the mainland under any other context would require him to be addressed as “president of the ROC,” as opposed to “chairman of the ruling Kuomintang,” as the mainland has proposed. Taiwan’s leaders are barred from Zhang Zhijun (right), head of the State Council’s Taiwan Affairs Office, shakes hands with Wang APEC summits due to objections from Yu-chi before their formal meeting in Nanjing, February 11, 2014 Beijing, which claims sovereignty over the island, and are represented instead by “senior economic leaders.” pacity and addressed by his official title by his counterpart Zhang was The government-to-government talks between Wang and Zhang have seen as a “breakthrough” in Taiwan, a recognition of the existence of its led many observers to suspect that the stage was being set for a top-level system of government if not an explicit acknowledgment of sovereignty. meeting between the two leaders. But Wang Yu-chi told the media after Beijing also appears to have made concessions on some minor issues. returning to Taiwan on February 14 that Zhang had officially declined For example, the mainland has finally agreed to work to find a solution Taipei’s request for such a meeting. Continuing to class relations across to Taipei’s request for family visits for Taiwanese imprisoned on the the Taiwan Strait as “a domestic issue,” Beijing refuses to arrange such mainland, an issue previously deemed to be a consular affair which meetings at international events. Despite this setback, Ma Ying-jeou praised the “extraordinary sigcould only be resolved by two sovereign states. The two sides also talked about creating a “more convenient” envi- nificance” of the meeting, according to spokeswoman Garfie Li, who ronment for Taiwanese journalists working in China, and the issue of said in a press conference held on February 16 that Ma sees the meeting Taiwan’s bid to join international trade organizations such as the US- as “exemplifying how the two sides do not deny each other’s authority led Trans-Pacific Partnership was also raised during the meeting. to govern.” But a major setback for Taiwan is that Beijing has ruled out the In recent months, Ma has been advocating the concept of “nonpossibility of arranging a meeting between Ma Ying-jeou and China’s recognition of sovereignty” and “mutual nondenial of jurisdiction” as a President Xi Jinping at this year’s APEC summit, to be held in Beijing possible approach to push forward cross-straits ties, remarks to which in November. Beijing has made no official response. Ma explicitly expressed his intension to meet Xi at the 2014 APEC summit in a December 2013 interview with Yazhou Zhoukan, a Hong Low Profile Kong-based periodical. Ma explained that the APEC Economic Compared to the enthusiasm shown in the Taiwanese official media Leaders’ Meeting allows for a great deal of political flexibility, mean- over the meeting, Beijing seems to have tried to keep a low profile, ing he could meet Xi as “an economic leader.” To meet the leader of as no press conference was arranged during the entire visit of Wang

CHINA WEEKLY I March 2014

Photo by Xinhua

Photo by ic

Yu-chi. State media coverage, while fulsome, held back from editorializing. Although Beijing received Wang Yuchi in his official capacity, redressing to the official titles of Taiwanese officials was now only limited to Taiwan’s Kuomintang Honorary Chairman Lien Chan (right) receives an honorary professorship from Wang En’ge, Mainland Affairs Council, an indica- president of Peking University, in Beijing, February 19, 2014 tion that the mainland is not ready to recognize ROC sovereignty. During the meeting, Zhang also noted the new official communication mechanism “would not replace” existing quasi- cent Siew, Taiwan’s former vice-president, on the sidelines, where Xi government channels between the ARATS and SEF. stressed that the two sides should keep pushing for a political settleAnalysts believe that unlike Taipei, which focuses more on symbolic ment and cannot “hand these problems down from generation and developments, Beijing is more interested in political negotiations. generation.” In contrast to the low-profile reporting on the meeting between It is reported that, while preparing for the meeting, Beijing proposed Wang and Zhang, the mainland’s state media gives front coverage to that the two sides sign a written accord. Taipei declined on the grounds the meeting between Xi Jinping and Lien Chan, honorary chairman of that it was “premature” to do so at the first official meeting. the KMT, who visited the mainland on February 17. The request also reflects Beijing’s concern over perceived Taiwanese In a keynote speech made on February 18, President Xi Jinping said ambivalence towards political talks. Fearing backsliding if Ma’s unpopBeijing respects “Taiwanese compatriots’ choice of social system” and ular government were to be voted out of power, the mainland is keen is willing to conduct negotiation “on equal footing” with Taipei under to secure written commitments. the “one China framework” in order to reach a “reasonable political Beijing’s concerns are well-founded. Many in Taiwan are wary of settlement,” an unprecedented statement, as it was the first time Bei- even the idea of unification and oppose any political talks with the jing dropped the insistence that unification can only be achieved under mainland. Prior to Wang’s mainland trip, for example, Taiwan’s legislaBeijing’s leadership. ture adopted a resolution which stipulates that Wang may not sign any According to the report of the Taipei-based United Daily News, Xi document or issue a joint statement of any kind that accepts or echoes also raised the issue of possibly meeting Ma in the future, by asking Beijing’s claim of a “one China” framework. Lien’s opinion on such a meeting. Analysts believe that Xi is more proWith a variety of issues unsettled, there will be a lot of ground to active on the Taiwan issue than his predecessors, and has tried to speed make up if further progress is to be made. As Zhang Zhijun acknowledged during the meeting, “We must have some imagination to make up negotiations. In the 2013 APEC meeting, Chinese President Xi Jinping met Vin- a [real] breakthrough.”  CHINA WEEKLY I March 2014

cover story

Upwardly Mobile Mobile Internet, able to circumnavigate social and economic controls, is dramatically changing the lives of Chinese citizens, and the economic landscape

CHINA WEEKLY I March 2014

cover story Mobile Internet

Handheld Revolution

Mobile Internet, an area expected to grow exponentially in China, is rapidly revolutionizing a broad range of industries, the economic landscape, and people’s lives By Yu Xiaodong

t has long been a tradition for Chinese people to exchange hongbao – red envelopes stuffed with cash – with families, friends and colleagues when celebrating the Lunar New Year. This year, the old tradition took on a new spin as millions chose to send their hongbao electronically through their smartphones, via a new feature on WeChat, the ubiquitous social networking and messaging app from Chinese Internet giant Tencent. Besides the traditional method of exchanging hongbao – sending specific amounts of money to specific contacts – the feature allowed the sender to distribute the cash to multiple friends via group conversations. The sender could also decide how much they wanted to give in total and to how many people, but then allow the app to randomly select the recipients. Both senders and receivers were required to link their bank accounts to the app. It is estimated that over the nine days between January 30 and February 6, eight million WeChat users received a total of 40 million “envelopes.” Tencent was obviously hoping to secure the lion’s share of China’s enormous mobile payment market. While analysts had previously expressed doubt over the viability of WeChat’s business model,

most now believe the company is trying to turn the app into a diversified mobile e-commerce platform. This is just the latest example of how mobile Internet could cater to people’s needs, and generate billions of dollars in profit every day in the process. Chinese people are already using mobile devices to book taxis, movie tickets, air tickets and hotels, reserve restaurant seats, watch live video feeds, read the news, play games and find dates. With unprecedented penetration of mobile Internet use connecting the online and offline world, there has been much discussion about the revolutionary impact of the mobile Internet, not only on the traditional Internet industry, but on many traditional industries, and the economic structure as a whole.

Promising Market

In the past few years, China’s mobile Internet market has seen drastic growth. According to the China Internet Network Information Center (CNNIC), a government-backed industry administration body, Internet users in China reached 618 million by the end of 2013. Among them, 500 million connect to the Web using smartphones, CHINA WEEKLY I March 2014

Photo by Getty Images

80 million more than the previous year, a 16 percent increase. A re- E-commerce search report released in mid-January by iResearch, a leading Chinese Many Chinese media have called 2013 a defining year in the develIT consultancy, stated that the number of Chinese mobile Internet opment of the mobile Internet. After experiencing an average growth users would surpass the number of traditional Internet users in 2017. rate in e-commerce of 71 percent from 2009 to 2012, China overtook Another report released by International Data Corporation (IDC), the United States to become the world’s largest such market in 2013 a global consulting company, estimates that China’s smartphone ship- with a total transaction volume of 10 trillion yuan (US$1.65tn), inments reached 360 million units in 2013, making China the world’s cluding 1.8 trillion yuan (US$298bn) from online retail sales. largest smartphone market. According to the same report, China’s Over the “Singles’ Day” online shopping bonanza on November smartphone shipments will increase further to 450 million units in 11, China’s answer to America’s Cyber Monday, Chinese shoppers 2014. splurged a jaw-dropping record of 35.01 billion yuan ($5.7bn) in just The rise in the penetration rate of mobile Internet is partially 24 hours on Taobao and Tmall, two e-commerce platforms owned spurred by fierce competition between China’s smartphone compa- by e-commerce giant Alibaba. About 21 percent of online purchases nies, particularly in the mid were made via mobile deand low end of the market, vices, up from a mere 5 which has driven smartpercent a year earlier, an inphone prices down as low dication of how mobile is as US$60. Analysts within gaining importance among the industry believe that Chinese shoppers. the Chinese smartphone The mobile Intermarket will soon enter net market generated an era of “free hardware,” about 106 billion yuan whereby smartphones are (US$17.7bn) in revenue sold at cost price and comlast year, a drastic increase panies rely on profit from of 81.2 percent on the accessories and Internet previous year, according services connected to their to iResearch’s mid-January products. report. The entire market Such a business model volume is expected to increase four times to 584.8 would help connect more billion yuan (US$97.4bn) youngsters and rural residents to the Web. by 2017. Additionally, the rapid The elderly in China are increasingly web-literate With the development of e-commerce, an increasdevelopment of China’s ing number of industries 3G network – there are now over 400 million 3G are now under serious subscribers – and publicly available Wi-fi spots also make access much threat. For example, China Mobile, the world’s biggest carrier with easier for many Chinese. 760 million subscribers, reported a drop of 9 percent in net profit in Currently, more than 55 percent of Chinese Internet users are un- the third quarter of 2013, which the company attributed to the risder 30 years old. Low prices are expected to drive up the percentage of ing of WeChat, which allows netizens to make live video calls, thus younger smartphones users, which will further boost mobile Internet reducing the amount of traditional direct calls, a major profit source of China Mobile. expansion. As young users find it easier to adopt new features, this has led to a A more significant phenomenon in 2013 is the invasion of the Inreshuffle in China’s Internet landscape, as many once-popular services ternet into the financial sector. With its success in e-commerce, Aldesigned for personal computers face challenges from more popular ibaba can retain a constant revenue stream and pool of capital as funds transferred for the purchase of goods must stay with the company mobile apps. Weibo, China’s most popular microblog service, for example, which for seven to 10 days, which allows the company to conduct a broad has 281 million users and was called “revolutionary” just a couple of range of online financial services expected to pose a severe threat to years ago, is now under serious threat from mobile social network- the traditional banking. ing apps such as WeChat, which claims to have 270 million monthly Over the past few years, Alibaba has set up various financial comactive users. According to the CNNIC report, 27.8 million netizens panies including an online microcredit company and an online insurstopped using Weibo in 2013, a nine percent drop and the first de- ance provider. On June 13, 2013, Alipay, Alibaba’s third party online cline in user number growth ever recorded by the service. payment service, launched a service that allows users to invest money CHINA WEEKLY I March 2014

cover story Chinese Mobile Internet Market Size (2010-2017) 100

0 2010

2011

2012

2013e

2014e

Market Size (in US$bn)

2015e

2016e

2017e

Growth Rate (%)

Photo by CFP

Note: 1. The market size of the Chinese mobile Internet refers to the total size of the segment markets including mobile value-added services, mobile commerce, mobile promotions, mobile Web search, etc. 2. Beginning Q2 2012, market size refers to revenue 3. Beginning Q4 2011, the mobile Internet market size includes tablet computers as well as mobile phones

China Telecom workers transform the old telephone booths in Shanghai into Wi-fi hotspots to meet the increasing demand for mobile Internet

Source: iResearch.cn

Number of Chinese Mobile Internet Users and traditional Internet Users (2010-2017) 800 800 700 600

into a market fund, which attracted US$950 million fund from 2.5 million users in the following 17 days. Analysts believe that the development of online finance will reshape the banking and financial industry. As Alibaba marched into the financial sector, various banks, including China Merchants Bank and China Minsheng Banking Corporation, have started to offer integrated banking services on WeChat, the rival of Alibaba. With more than 270 million monthly active users, Tencent has been trying to develop WeChat into a platform for e-commerce of various sorts. “The innovation [in mobile Internet] has dislodged the boundaries between many traditional industries, which will lead to a reshuffle of the industrial landscape, and fiercer competition,” said Pony Ma, founder and CEO of Tencent. Robin Li, CEO of Baidu, China’s top search engine, suggests the development of the mobile Internet will penetrate every aspect of people’s lives in the future. “China’s Internet is outpacing traditional industries, and every industry is now facing the impact of the Internet,” he remarked at the Baidu Union Summit held in early 2013. Li also identified a number of sectors in which mobile Internet could play a large role, including tourism, catering, education, and healthcare. “Every industry that enjoys high added-value based on information asymmetry will be under attack,” said Gao Xinmin, standing vice-chairman of the Internet Society of China at the annual China Internet Industry Summit on January 8. At the summit, a major topic of discussion was how the year 2014 would see the beginnings of the “‘Internetization’ of traditional industries.” With the issuance of 4G licenses in China in December 2013, faster connections will allow the mobile Internet to expand further. “[Companies must] reconstruct, or be eliminated. Subversion is happening,” said Li.

500 400 400 300 300 200 200 100 100 0 0 2010 2010

2011 2011

2012 2012

2013e 2013e

2014e 2014e

2015e 2015e

2016e 2016e

2017e 2017e

Population of Mobile Internet Users (m) Population of Traditional Internet Users (m) 35 35 30

30 25

25 20

20 15 15 10 10 5 5 0

2010

2011

2012

2013e

2014e

2015e

2016e

2017e

2011

2012

2013e

2014e

2015e

2016e

2017e

Growth Rate of Mobile Internet Users (%)

Growth Rate of Traditional Internet Users (%) Note: 1: “Traditional Internet users” refers to those accessing the traditional Internet in the past half-year. “Mobile Internet users” refers to those accessing the Internet with mobile devices in the past half-year 2. The data on traditional Internet users (2010) and on mobile Internet users (2010-2012) are from CNNIC. The rest are iResearch estimates.

Source: iResearch.cn

CHINA WEEKLY I March 2014

Mobile Internet

Digital Warfare

As smartphones continue to outpace personal computers in user number growth, China’s IT giants are racing to redefine their territory in the mobile Internet market By Xu Zhihui and Chen Jiying

“

He who controls the three fragmented hours will own the Internet of the future” is a truism popular among Chinese IT professionals. The “three fragmented hours” refers to the amount of free time that Chinese people, under pressure from the quickening pace of life, have to themselves – an aggregate length of time often scattered in minutelong intervals, such as while commuting or in the washroom. This change has helped pave the way for the rapid growth in the popularity of smartphones – according to analysts’ prediction, China would be home to over 600 million smartphone users by the end of 2013, leading many to predict that mobile Internet services will one day overtake traditional ones. In China, the traditional online services market is currently dominated by the country’s three IT giants: Baidu, Alibaba and Tencent (collectively known as BAT). Baidu leads the online search market, Alibaba leads in e-commerce with its shopping platform Taobao and third-party payments service Alipay, and Tencent leads social netCHINA WEEKLY I March 2014

working with its ubiquitous QQ desktop instant messenger service. This delineation, however, is beginning to fracture in the mobile Internet age, particularly since the launch of Tencent’s WeChat, a popular smartphone messaging app that incorporates social networking, games and, most recently, online payments. With over 270 million monthly active users, WeChat’s rapid success and aggressive expansion strategy have provoked its competitors, especially Alibaba and Baidu, to join the race to dominate China’s mobile Internet.

Dark Horse

Two years ago, when Tencent launched WeChat, originally a copycat of Canadian-developed Kik Messenger, the exponential growth in Chinese smartphone user numbers was just beginning. Though not the first Chinese smartphone messaging app, WeChat enjoyed the significant advantage of access to users of Tencent’s flagship desktop messenger QQ, which, according to Tencent’s fiscal report, has acquired over 800 million monthly active users since its

cover story Baidu: Baidu: China’s leading search engine iQIYI: Video platform

Tieba: Top discussion forum

Robin Li

launch 15 years ago. In the second version of WeChat, Tencent enabled WeChat users to import their existing QQ buddy lists, bringing the number of WeChat users up to 200 million within one year. In the following version, WeChat further expanded its friend-finding capabilities with a location-based service (LBS) function that allowed users to connect with other WeChat users by shaking their phones, thereby discovering other users in the surrounding area who were shaking their phones at the same time. While some criticized the function for encouraging the solicitation of extramarital affairs and casual sex, the ability to connect with strangers resulted in accelerated growth in WeChat’s user numbers. Now, several versions later, WeChat has expanded beyond personto-person networking by opening its platform to commercial and public services. According to Zhang Ying, WeChat’s deputy product manager, more than two million banks, media outlets, companies, organizations and government departments have registered public accounts on WeChat, and many provide services via the mobile platform. For example, in Guangzhou, vehicle owners can use the Guangzhou traffic police’s WeChat account to search the Ministry of Transport database for vehicle test results. Boosted by these value-added functions, WeChat has reportedly seen its registered users reach 600 million in 2013, 100 million of which were based outside of China. By September 2013, Tencent’s market value had exceeded US$100 billion, with WeChat believed to be a key component in the company’s mobile Internet strategy.

Counterattack

Despite the growth in WeChat users, Tencent’s stock price remained relatively low for some time. Investors remained doubtful of the app’s prospects for monetization until the latter part of 2013 when the company integrated an array of new functions and services into the app, and began carving out a viable profit model with Weizhifu (literally “micropayment”), Tencent’s mobile payment tool that launched

Jack Ma and Robin Li (right), CEO of Baidu

the same year. This came as a clear challenge to Alibaba, which has dominated the online third-party payment business for many years. “The penguin [Tencent’s corporate mascot] has walked out of the Antarctic. They are trying to adapt to hot weather, and to force the world to adapt to their preferred conditions too. It is time for Ali to hit out, either on the offensive or the defensive,” Jack Ma, founder of Alibaba, reportedly warned his employees in an internal email. In fact, Alibaba entered the mobile Internet market long ago, launching its online shopping and payments wings on smartphones. However, the lack of social networking capabilities, which have proven to be highly desirable among mobile Internet users, meant Alibaba’s applications were not as popular as Tencent’s. In September 2013, Alibaba launched Laiwang, a messaging app, in an attempt to bind users to its other applications. According to Zou Mengrui, Laiwang’s product manager, the app aims to offer alternative services to WeChat, rather than engaging in direct competition. “WeChat focuses more on interaction between acquaintances, while Laiwang intends to provide an online community culture through the ‘zhadui’ [interests-based discussion groups] function,” he told NewsChina. Alibaba’s data shows that over 100,000 zhadui groups have been registered on Laiwang, 1,500 of which have over 1,000 members. Laiwang also incorporates a microblogging feature, and has enlisted a number of celebrities from the culture and entertainment industries. By December 2013, Laiwang had more than 10 million registered users, a number which the company claims is still growing rapidly. Although its current user base is far from enough to threaten WeChat’s dominance, Jack Ma of Alibaba regards it an indispensable tool to secure the company’s territory and to facilitate development. “While Laiwang currently has shortcomings and lags far behind CHINA WEEKLY I March 2014

Alibaba: Taobao: Largest online marketplace Alipay: Leading third-party payment service Kuaidi: Taxi booking service

Tencent: WeChat: Messaging service and social media platform

QQ: Instant messenger

Didi: Another taxi booking service Jack Ma

Pony Ma

WeChat…We have to take measures right now to re-shape the mobile Internet … We have to challenge the dominant power, no matter how weak we are and how many obstacles we face. Sleep well tonight, and begin the fight again tomorrow,” he posted publicly in Laiwang on January.

Merger Rush

Due to its lack of a huge user base like that of WeChat, Alibaba, according to analysts, has adopted a “multiple strategy model” towards mobile Internet business development, challenging its competitors on a variety of different fronts. Besides purchasing an 18 percent holding in China’s Twitter equivalent Sina Weibo to provide another channel for its payment service Alipay, Alibaba is also planning a buyout of AutoNavi’s Amap, China’s leading free navigation service, to promote its O2O (online to offline) business. In June 2013, Alipay used a finance company it had acquired to facilitate the launch of Yu E Bao, a banking service through which users can buy Alibaba financial products using their Alipay account. Branding itself as “a wallet that makes money,” Yu E Bao’s trade volume had reportedly exceeded 400 billion yuan (US$66bn) by February 2014. iResearch, a leading Chinese IT consultancy, revealed that Alipay occupied 75 percent of the mobile payments market in Q3 of 2013. However, Alibaba was beaten by Baidu in bidding for 91 Wireless, China’s biggest distribution platform of third-party mobile applications, an acquisition that many consider to be Baidu’s most aggressive move in the mobile Internet market to date. The search giant set a new record for Internet company mergers, spending US$1.9 billion to acquire 57.41 percent of 91 Wireless, compared to US$16,700 that NetDragon Websoft, 91 Wireless’s former owner, paid for the company six years ago. “[Compared to the other IT giants], Baidu reacted very slowly to the rise of mobile Internet. It is in a race against time, but has deep pockets… the price is really too high [compared to 91 Wireless’s market value], but in the context of Baidu’s mobile strategy, it’s worth it,” commented Chinese business newspaper the 21st Century Business Herald. Another major Baidu purchase in 2013 was the US$379 million acquiCHINA WEEKLY I March 2014

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Dimmed Bounds

The BAT companies have a long history of competition in traditional Internet service sectors. For example, Tencent launched a C2C e-commerce website paipai.com through its QQ platform, but ultimately failed to compete with Alibaba’s Taobao. Somewhat less courteously, Alibaba removed the Baidu-powered search function from its e-commerce website and launched its own search engine, restricted to within the Alibaba empire. For years, the dominant powers have kept to their respective domains, remaining careful not to overstep their limits. The rise of mobile Internet, however, has seen this unspoken truce disintegrate. “Given the fragmentation of users’ free time, integrated functions are more valuable in mobile Internet. Therefore, service providers will have to expand their services and integrate them into their mobile Internet platforms,” explained iResearch analyst Liu Leiming.

Alibaba and Tencent are currently engaged in fierce competition for taxi-calling services. Collaborating with competing mobile taxicalling companies, both have encouraged users to call taxis through their respective apps, offering discounts on fares paid with their mobile payment tools. Although competition on discounts means that both are losing money, taxi functions have helped increase user numbers for their respective mobile payment services. According to Zhang Jing, the deputy operation director of Tencent’s taxi-calling service, over 5000 taxi rides were arranged through WeChat in the service’s first 12 hours on the market, and 25 percent of users registered with Tencent’s payment service to pay their fare. “Tencent plans to build WeChat into an open platform, welcoming various innovations from outside of Tencent,” Pony Ma, founder of Tencent, once told the media. His intention tallies with Alibaba’s efforts on another O2O app under its brand, Taodiandian, a food delivery service for smartphones, which allows users to order delivery meals from nearby restaurants, and pay with Alipay. According to Wang Yulei, the app’s product manager, Taodiandian connects an array of Alibaba’s mobile applications – Alipay payments, Amap, and Laiwang’s social networking functions. “Catering is just one of our entries [into mobile Internet], we aim to extend our services to various other fields related to local life,” Wang told NewsChina. “[In 2013,] IT powers have finished dominating their respective specialist areas in mobile Internet...in the following year, they will focus on more diversified services to seize user resources,” predicted iResearch in its report on the development of mobile Internet. Although analysts are still arguing about the business models of mobile Internet services, the subversive rise of mobile Internet seems to have slowed the decline of China’s IT powers. “We are all irrevocably invested in the future, though we may suffer losses in profits,” said Liu Zhiping, president of Tencent. Photo by IC

sition of the video website PPStream, which it then integrated into iQIYI, another video website Baidu had purchased earlier. Recently, iQIYI has purchased the exclusive online rights to broadcast the popular Chinese sitcom iPartment 4, attracting a great many new users to the application. Analysts believe the expanding number of iQIYI users will bolster Baidu’s dominance of mobile video, a potentially huge market given the imminent rollout of 4G (fourth-generation mobile communications technology) in China. Tencent has also refused to stick to its traditional domain. In 2012, the company purchased e-commerce website yixun.com, drawing new battle lines with Alibaba. In September 2013, Tencent purchased over a 40 percent share in Sougou, a search engine, at US$450 million, a challenge to Baidu and Qihoo People tend to use taxi-calling apps for discounts 360, China’s top two web search companies. Liu Zhiping, president of Tencent, reportedly revealed at an internal meeting that although Tencent performed very poorly in desktop search, it would not abandon mobile search, since a clear leader was yet to emerge.

CHINA WEEKLY I March 2014

Mobile Internet

Competition in the Pipeline As the companies behind smartphone applications continue to pressurize China’s traditional telecom businesses, mobile carriers are faced with the challenge to either evolve or die By Xie Ying and Zhou Zhenghua

he Chinese Ministry of Industry and Information Technology (MIIT) on January 29 granted the second batch of mobile virtual network operation (MVNO) licenses to eight private enterprises, including home appliance giants Gome and Suning, both of which are close partners of the country’s largest carrier China Mobile. The move came about one month after the MIIT issued the first batch of licenses to another 11 private enterprises, permitting them to sell own-brand telecom services using bandwidth rented or purchased from China’s three State-owned telecom carriers, China Mobile, China Unicom and China Telecom. While on the surface, the move looked like a blow to the three SOEs’ (State-owned enterprises) longstanding monopoly of the telecom market, analysts have called it a strategic move to defend their profits from the onslaught of Internet service providers (SPs) led by the “BAT” (Baidu, Alibaba and Tencent) companies, with their rapidly diversifying range of free OTT (over the top) smartphone applications – those that provide Internet services directly to end users, bypassing telecom carriers.

Pipeline

According to MIIT statistics, China saw about 120 million more cell phone users in 2013, a 10.5 percent growth on 2012. This growth, however, brought little in the way of revenue to carriers, with

CHINA WEEKLY I March 2014

their MOU (average communication time per month per user) values for local and long-distance calls dropping by 6.4 and 5.4 percent respectively. Worst hit were traditional text messaging services, which according to official data were mostly used by enterprises, with messages sent by individual users seeing a significant drop to only two or three per capita per day. During the 2014 Chinese New Year holiday, a time in which text messages have become a popular method of exchanging greetings in recent years, China’s cell phone users sent a total of 18.2 billion messages, 43 percent less than over the 2013 holiday period. Meanwhile, data traffic via the mobile Internet grew by 86 percent over the same period, according to MIIT. “The pace of transformation in the telecom industry is quickening, with volume in the voice [call] business continuing to decline, and that in the non-voice business [data usage] continuing to rise,” concluded MIIT in its 2013 report on the telecom industry. Thanks to the explosive growth in mobile Internet users, Tencent’s market value has risen to over three times that of China Unicom and China Telecom. In the first three quarters of 2013, both Baidu and Tencent exceeded China Unicom in net profit, with figures approaching those of China Telecom. “OTT services are playing an increasingly large role in replacing traditional telecom businesses, pushing the industry’s value to move

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from ‘pipeline’ to ‘content,’ from telecom networks to Internet, and from voice [call] services to information services. For telecom carriers, the competition with Internet enterprises is much fiercer than that with their counterparts,” Xi Guohua, chairman of the board of China Mobile, warned at the MWC 2013 (Mobile World Congress). In an attempt to help the telecom carriers out, MIIT in 2013 organized two industrial conferences to discuss whether or not telecom carriers should impose charges on OTT applications, particularly the hugely popular instant messaging app WeChat, only to find that the discussion triggered strong opposition from both the public and the SPs, who argued that the telecom carriers had no grounds on which to levy additional charges on top of the data traffic fee. Now, the telecom carriers have, according to China Telecom’s chief engineer Wei Leping, fallen to the lowest end of the industrial chain, whose profit only takes up six to seven percent of the total, leading analysts to predict that they might become little more than pipelines through which information flows.

Big Data, Big Pipe

Photo by GETTY

China’s State-owned telecom giants are unlikely to accept their fate without a fight. They have proposed to “‘intelligentize’ the pipeline,” meaning setting up a broader and more multi-functional data channel that can provide individualized services to a variety of users. “China Telecom will gradually ‘intelligentize’ its pipeline in the

Smartphones are lifesavers in queue-ridden China

next three to five years, which focuses on dynamically distributing network resources and optimizing data management based on cloud computing technology,” Zhao Huiling, an industrial research director at China Telecom, told the media in 2011. This objective will require a faster network, which has pressed the telecom carriers to rapidly develop their 3G (third-generation) and 4G (fourth-generation) mobile telecom technology. According to MIIT, China Unicom and China Telecom, both of whom operate on the global 3G technology standard, enjoyed manifold growth in their data usage in 2012. China Mobile, though adopting the less widely accepted TD-SCDMA technology standard, also saw a 19 percent growth in data usage over the same period. This did not mean equal growth in revenue, however. The pace of technical development – Chinese telecom carriers spent only five years developing 3G and 4G technology, reportedly half the time it took their counterparts in the US – has overloaded carriers with huge infrastructure building costs that are difficult to recoup merely through expanded data usage. In early February 2014, two months after the three telecom carriers received 4G licenses, China Mobile took the lead in publishing their 4G usage tariffs, only to find themselves under fire. “Given that 4G technology is said to enable a maximum speed of 100 megabits per second, and China Mobile charges 40 yuan for 300 megabytes of data [the lowest tier of its 4G package], a user would reach their limit in three seconds, and if he or she were to forget to shut off the service before going to sleep, the 4G costs for one night would add up to the price of a house,” said Li Guoqing, CEO of ecommerce platform dangdang.com, in a post that was retweeted over 30,000 times within an hour on Weibo, China’s Twitter equivalent. Although Li’s calculation mistakenly equated “megabit” with “megabyte” and confused the maximum download speed for an average speed, the public still agreed that 4G service was not economical for ordinary people, especially with the rapid spread of free Wi-fi coverage. “The high charges, the limited coverage and the inadequate supporting services have dampened people’s desire to use 4G services,” Zhang Yi, CEO of iiMedia Research, a research firm specializing in mobile Internet, told the China Youth Daily. “4G technology cannot put the telecom carriers at an advantage in mobile Internet if it remains nothing more than an ‘expressway,’” he added. CHINA WEEKLY I March 2014

Revenue from Voice (Call) Business VS. Non-voice Business (2010-2013)

Net Growth in Number of 2G/3G Users (2009-2013)

(%)

200

(%) 18

100

150 80 12

100

50 40

0 -50

0 2010

2011

2012

2013

-100 2009

2010

2011

2012

2013

Ratio of Revenue from Voice (Call) Business

De-telecom

Ratio of Revenue from Non-voice Business

Net Growth in Number of 2G Users (m)

Ratio of Revenue from Mobile Data Usage and Internet Services

Net Growth in Number of 3G Users (m)

Source: Ministry of Industry and Information Technology

Zhang Yi’s opinion is shared by Wu Hequan, director of the Internet Society of China, who told NewsChina that the “intelligence” of telecom pipelines lies in their capacity to provide value-added services based on their fast networks. Within the telecom industry, this has also been called “de-telecommunication,” a popular new concept encouraging the telecom carriers to abandon their comparatively rigid methods of operation, and abandon the practice of building closedoff networks. This is why the three carriers have rushed to launch their own applications or platforms for smartphones, such as China Mobile’s online music base, China’s largest platform for music downloads, and China Unicom’s Wo Market, an open platform for app downloads. In August 2013, China Telecom and the Web portal NetEase jointly launched the instant messaging tool Yixin, reportedly attracting over one million users on its first day with free text and voice messaging between smartphone users, regardless of whether or not the sender and recipient were on the same telecom network. By the beginning of 2014, Yixin had accumulated more than 10 million users. These user numbers, however, are still far from shaking the dominance of Tencent’s WeChat, whose user numbers have reportedly exceeded 600 million. According to analysts and the media, the telecom giants’ bureaucratic thinking and lack of creativity, both chronic SOE problems, are the main reasons why their Internet services are no match for BAT apps, despite the rising sales volumes in the three’s fiscal reports. The telecom carriers then began to rethink “de-telecommunication,” with the intention, in their words, of making full use of their existing advantages in hardware, their biggest competitive edge on the SPs. “‘De-telecommunication’ requires the telecom carriers to extend and expand the industrial value of their own businesses, not to try to CHINA WEEKLY I March 2014

become pure SPs,” said an industrial analysis report by the telecom department of the Selection Market Research Group. Such conclusions are vindicated by the China Telecom research director Zhao Huiling’s emphasis on cloud computing, a technology the future of which will likely be heavily integrated with the development of mobile Internet, requiring a safe, stable and high-speed network for the processing of data. That is also why Lü Tingjie, a professor from the Beijing University of Post and Telecommunications suggested in a public speech about de-telecommunication that carriers set up an open platform based on their fundamental facilities and technology. “Carriers should be wholesalers, opening their services and resources to re-development and re-packaging by others,” he said. MVNO licenses are being touted as a win-win move towards detelecommunication, through which both the MVNO and telecom carriers are given a chance to compete with each other. For example, Suning will benefit from China Mobile’s technology in the market for “cloud commerce,” a new concept aiming to integrate real and virtual malls. China Mobile, for its part, will enjoy increased promotion of its new technology among users thanks to Suning’s relatively flexible and economical sales mode. “The future telecom industry will reject the old polarized system – neither the pipeline nor content providers would be the dominant power. Instead, it will support varied collaboration between carriers and providers to optimize the division of labor in society and the distribution of industrial values,” said Yang Peifang, director of the China Information Economic Society. This vision for the future seems to tally with China Telecom’s new strategy: to be “an intelligent pipeline, an integrated platform and a participant in Internet content and services.” But in the fast-evolving Internet industry, even the best laid pipelines often go wrong.

society

Population Control

Youâ&#x20AC;&#x2122;re Welcome to Leave Beijing Beijing plans to further tighten its ineffective population control measures, but more drastic policy changes may be needed By Sun Zhe

CHINA WEEKLY I March 2014

Photo by ic

Passengers returning from the Chinese New Year vacation crowd Beijing Railway Station, February 16

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More than 40 percent of Beijing residents have no Beijing hukou, or residence permit (effectively an internal visa), leaving them without access to social benefits and local public schools, though some manage to send their children to privately funded schools for migrant workers’ children. Over the past few years, the Beijing government has bulldozed many of these schools for not having the requisite government licenses, and no new licenses have been issued for the past three years.

Photo by CFP

Failure

Passengers jostle to board a bus in Beijing’s CBD

t a municipal plenary session late 2013, Beijing Mayor Wang Anshun placed population control at the top of his agenda for the year 2014, claiming that the city’s exponential population growth had contributed to problems like pollution, traffic congestion and the deteriorating appearance of the city. How bad could Beijing’s problems be? In a list compiled by IBM that compared levels of difficulty endured by commuters in major world cities, Beijing was second only to Mexico City. On Beijing’s roads, automobiles move at an average of 12 kilometers per hour, in contrast to 20 kilometers per hour in Hong Kong, 21.4 in Tokyo, 25 in New York and 29 in London, according to a report by international bank UBS. Some have pointed to poor city management and urban planning as the root of Beijing’s problems, citing Hong Kong and Tokyo as counter-examples. Though population density in Tokyo and Hong Kong is much higher than in Beijing, both suffer less congestion and are in far better order. However, such theories are unpopular

among Beijing officials, who prefer to blame their city’s problems on overpopulation. Mayor Wang stated that a major goal of his population control plan was to chase low-end industries from Beijing – a policy in line with the government’s efforts over the past few years to edge out low-end manufacturing, garment wholesale markets, small commodities markets and construction material markets – all of which draw in large population numbers yet generate little GDP – from the city proper. Housing regulations are another of Wang’s population control measures – landlords, especially those in the downtown area, will be banned from dividing their houses into tiny cells to be leased at prices affordable to migrant workers. Some basements have been sealed off to prevent them from being rented out as accommodation. Residence permits for migrants to Beijing will also be introduced, available only to those deemed to have the “top technical talent” the city needs, granting them access to public services such as schooling and affordable housing.

Regardless of these measures, Beijing’s population control efforts are widely considered to have been a total failure – the city previously aimed to keep its population below 18 million by 2020, a limit that was broken long ago. In spite of stringent population control measures and record-breaking levels of air pollution in 2013, Beijing’s population saw a net annual increase of 460,000, or 2.2 percent, to 21.1 million. “These policies to control population have served only to make trouble for those without a hukou,” said Mao Shoulong, a professor specializing in public policy at Renmin University of China in Beijing. However, population growth rate has been slowing for the past four years, from 5.5 percent in 2010 to 2.2 percent last year, along with the city’s slowing GDP growth, according to the Beijing statistics bureau. Beijing’s population policies aim to attract upscale industries like finance, IT, upscale manufacturing and other high-end services, and only the sections of the population it sees as most desirable. According to Mao Shoulong, this is unlikely to work out as planned. “The elite need secretaries and drivers. When a member of the elite moves into Beijing, five to 10 new service sector employees will be needed to meet his or her needs,” Mao said. “How can we believe that Bill Gates could do anything on his own? He needs someone to drive him around, do his laundry and take care of his security.” CHINA WEEKLY I March 2014

Market Blindness

Another reason for the population influx could be the comparatively low cost of public services in the city, with immense government investment and subsidies warping prices and continuing to attract more people to the city, according to Yi Peng, an urbanization researcher with Beijing-based think tank Pangoal. So far the city has relied on top-down policy mandate, rather than market-oriented

CHINA WEEKLY I March 2014

Photo by Xinhua

Shoppers browse at the Zoo Market in Beijing, an area well-known for its commodity wholesale industry

Photo by IC

“If Beijing wants to bring top law firms and software companies to the city, these people will need people to cook for them, at least.” Moreover, Beijing has now amassed such a high concentration of resources – including many of the country’s most desirable hospitals, universities and job opportunities – that it is unavoidably attractive to non-Beijingers. Beijing has also enjoyed privileged allocation of fiscal, energy and water resources in recent years, and its government has placed heavy subsidies on services like public transportation and Statemanaged central heating. Even during nationwide gas or electricity shortages, Beijing’s resource security is marked as a political priority, and a blackout in Beijing is virtually unimaginable. To better cater to the capital’s increasing demand for water, a large-scale project is currently underway to channel water from the Yangtze River to the capital. In 1949, when the Communist Party of China founded the People’s Republic and settled on Beijing as its capital, the city’s population was only 1 million, about one fifth that of Shanghai, China’s biggest city at the time. Over the past six decades, Beijing’s population has grown twentyfold, bringing it level with Shanghai’s in 2013. As the economic, cultural, political and educational center of the country, Beijing has a concentration of resources rare in other countries – a major reason behind the city’s problems, according to Mao Yushi, one of China’s most prominent economists.

Retailers pack bundles of goods at the Zoo Market

measures, to solve its problems. For instance, while Shanghai and Guangzhou use license plate auctions to control vehicle numbers, Beijing has adopted a lottery system to issue new license plates. Residents without a Beijing hukou are excluded from the lottery unless they have a record of paying taxes in Beijing for at least five consecutive years. While most of the world’s largest cities use congestion charge to control traffic density, Beijing bans one fifth of its automobiles from its roads on weekdays, and even intends to

increase this to 50 percent if its traffic problem does not improve. “A solution for Beijing could be to have the market set the cost of living in the city. Living costs would rise, and many people would consider moving somewhere else,” said Yi Peng. In the long term, public resources will have to be distributed more equally among China’s cities. This could enhance the attractiveness of other cities, and even out population distribution, he added.

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China Coast Guard

Fracture and Fusion China’s new coastguard has finally begun operations in some of Asia’s most contested maritime zones. Will the new agency be up to the challenge? By Xi Zhigang and Du Guodong

n January, two ships each with a displacement of 4,000 tons were commissioned for the use of the China Coast Guard (CCG), the revamped maritime law enforcement agency that began official operations last July. The two multifunctional vessels with advanced facilities, christened the CCG-2401 and 3401, were transferred to the CCG’s East and South China Sea fleets, placing this brand new hardware in two areas which have seen China’s most heated struggles to assert Beijing’s claims of maritime sovereignty. In the same month, the State Oceanic Administration (SOA) unveiled a massive shipbuilding project, claiming that in 2014 China will build 20 inspection ships and purchase four aircraft, while also accelerating provincial programs to update and revamp the country’s maritime law enforcement.

Stepping Up

As early as March, 2013, China consolidated maritime law enforcement under the central direction of the CCG, streamlining the functions and duties of several agencies including the SOA maritime surveillance agency, the Ministry of Public Security’s maritime police and border control agency, the Ministry of Agriculture’s fisheries law enforcement wing and the General Administration of Customs’ (GAC) anti-smuggling operations. The amalgamation was part of an overall institutional reform package released by the State Council, China’s cabinet. Previously, four law enforcement agencies together with the maritime safety adminCHINA WEEKLY I March 2014

Photo by Xinhua

China Coast Guard crew members during drills off the Zhoushan Islands, Zhejiang Province, November 14, 2013

istration under the jurisdiction of the Ministry of Transport were referred to with the Chinese idiom “five dragons churning the ocean” because of the chaotic overlap which made them virtually powerless to efficiently enforce maritime law. Effectively integrating these resources into a single coastguard will “greatly reduce internal friction and shorten the decision-making process” said Luo Yuan, a researcher with the Academy of Military Science, in an interview with China Daily. According to the SOA’s 12th Five Year Plan, the agency planned to bring its total number of ships to 360, plus 16 support aircraft, by 2015. Sun Shuxian, chief engineer with the SOA told NewsChina CHINA WEEKLY I March 2014

that after unification, China’s maritime surveillance agency “remains the most powerful and professional unit” among the five law enforcement agencies that comprise the CCG. “China Maritime Surveillance has taken part in roughly 80 percent of the country’s sovereignty protection activities,” he said. Although Sun’s agency has undertaken two ship building projects, in 1998 and 2008, adding several vessels with over 1,000-ton displacement to its fleet, over 50 percent of the vessels serving its three regional operation branches – the North, East and South China Sea Fleets – had their keels laid in the 1970s. When facing the modern, well-equipped coastguards of China’s territorial rivals, Japan in par-

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Photo by Xinhua

ticular, these outmoded and dilapisponse to rising tensions in the dated ships struggle to compete. South and East China seas. The “The previous upgrading project ongoing territorial spat with Japan aimed relatively low, within the limover the Diaoyu Islands off Taiwan its of China’s financial capabilities,” has continued as disputes over sevsaid Sun. “In recent years, such oberal uninhabited reefs in the South jectives are increasingly hard to meet China Sea have set Beijing at odds considering the increased pressure, with the Philippines, Vietnam and especially in disputed waters.” Brunei among others. China is reportedly building a “The South China Sea needs 10,000-ton maritime surveillance patrolling against the backdrop vessel this year, one of the largest of of growing disputes with several its kind in the world. The vessel will Southeast Asian countries,” an offihave a higher continuous voyage cial with the SOA who chose to recapability with an estimated maximain anonymous told our reporter. mum speed of 20 knots, be armed “These areas will be the focus of the with several heavy deck-mounted maritime surveillance in the future guns and be equipped with an adand ships with special equipment vanced communication system will patrol the area more frequentalong with two helicopter landing ly.” pads. “Sending warships to protect The unified CCG’s new vesChina’s maritime rights is both too sels have also been promised stateaggressive and too risky,” the official of-the-art equipment, including continued. “China maritime surunderwater surveillance, radar veillance and fisheries are the go-to Vessels from China Coast Guard patrol disputed waters around the jamming capabilities, robotic subfrontline choices.” Diaoyu Islands on September 11, 2013 mersibles and high-definition surIndeed, large fisheries vessels veillance systems. and maritime surveillance vessels “By integrating five maritime diare seen as an effective deterrent. visions, it is conducive to the unity of command, and can help avoid During a 2012 confrontation with the Philippine coastguard off the overlap,” Yang Mian, professor of international relations with the Huangyan Island (the Scarborough Shoal) in the South China Sea, a Communications University of China told the Global Times. ship from the North China Sea fleet was dispatched to the area. This “In addition, the new agency will also empower law enforcement,” led the maritime surveillance authorities to speed up the develophe continued. “Now, all these agencies’ vessels, rather than just those ment of a rapid response protocol to deal with anticipated future owned by China Maritime Surveillance, can be armed.” crises. Data from the SOA show that in 2013 China Maritime SurveilAlthough Chinese vessels currently patrol the South China Sea uslance carried out 36 patrols and 402 flights in China’s claimed territo- ing radar, high-intensity searchlights at night as well as air support, rial waters. According to the China Daily, officials spent 262 days at the authorities in Beijing are demanding 24-hour patrols in order to sea, during which time they detected incursions by 188 foreign ships “defend China’s territorial claims and sovereignty.” and 21 foreign aircraft into China’s maritime territory. The anonymous official with the SOA we spoke to declined to comment on how far the new equipment upgrading project would Moving South shift resources toward the South China Sea but asserted that “more The new amalgamated coastguard in China is indisputably a re- large ships and aircraft would be deployed.”

CHINA WEEKLY I March 2014

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Yongkang Hardware City

Ready for Take-off H

u Zhenqian, manager of Zhejiang Ruifeng Drill Chuck Manufacture, reviewed the long list of orders on his computer screen: “Previously, we did business in the office, but now we deliver goods after receiving orders online.” At the Yongkang Hardware City in Zhejiang Province, Hu has a retail shop with a floorspace of over 300 square meters. He now has clients across the world with sales volumes hitting 100 million yuan (US$16.5m) annually. This is a common sight in Yongkang, a city with over 4,000 individual businesses which has gained a reputation in China as the national capital of hardware manufacturers. It was listed among the top 100 counties in the country, with a GDP per capita reaching US$10,000. The hardware manufacturing business has turned out to be a goldmine for Yongkang. Over the past 20 years, its sales volume has gone from 300 million yuan (US$49.5m) to over 52.3 billion yuan (US$8.8bn) with daily trade volume hitting 1,000 tons, and business links with over 170 countries and regions. Yongkang Hardware City has received a series of honors including “Credible Market in China,” “Pilot Zone of Modern Service Industry in Zhejiang Province,” “Fivestar Model Market in Zhejiang Province,” and is among the “Top 100 Markets in China.” However, with the ebbing of its competitive advantage over the years, Yongkang Hardware City has been plagued with development bottlenecks recently, and how to revive business has become an urgent problem. “To continue the rapid pace of development seen in previous years, Yongkang Hardware City has to make breakthroughs to make full use of its leading role, at the same time driving transformation and upgrading in the hardware industry,” said Li Xingwang, chairman of Zhejiang China Science and Technology Hardware City Group. He

CHINA WEEKLY I March 2014

said Yongkang Hardware City has a close link with the local economy and has a responsibility to scale up to a new level. Nevertheless, it will be a long process, requiring a long-term planning. Yongkang Hardware City is squaring up to make further progress. Having organized 18 hardware exhibitions, Yongkang Hardware City is striving to present events routinely starting from this year – holding exhibitions twice every month. Based on these events, including the mould exhibition at the beginning of the year to the door exhibition later on, Yongkang hardware products have become increasingly popular. During the 2013 hardware exhibition, Yongkang released a hardware index, the first of its kind in China, which is expected to boost its prestige as the hardware leader in China. In fact, in Yongkang, a large number of businesspeople have been playing a pioneering role in e-business. Since 2009, Yongkang has set up four online platforms: “China Science and Technology Hardware City Group,” “China Hardware Exhibition,” “China International Door Industry Exhibition” and “China Hardware City.” Over 500,000 enterprises do business on these platforms – daily visits have reached 800,000 and the sales volume has reached 20.1 billion yuan (US$3.3bn), and they are among the top 100 commercial websites in China. In the near future, a Yongkang e-commerce headquarters is expected to be set up with an investment of 2 billion yuan (US$33m). Based on hardware manufacturing and the widespread sales stores, Yongkang Hardware City is speeding up its drive to become a cybereconomy. By emphasizing both the real and Internet economies, both sales stores and the online market, Yongkang is preparing for a new spring for the hardware industry in the future.

society

Xinjiang Violence

New Threats, New Strategies Unprecedented policies in Xinjiang in response to a spate of terrorist attacks in the region hint at a strategic shift

n the past year, the Xinjiang Uyghur Autonomous Region experienced a spate of violent attacks on law enforcement forces and civilians alike. Following several bloody attacks in April, June and August, a jeep carrying three Uyghurs plowed into tourists before crashing and catching fire in Beijing’s Tian’anmen Square, on October 28. Five tourists were killed, and 40 others injured. The Turkistan Islamic Party, which the Chinese government claims is a splinter cell of the terrorist organization the East Turkestan Islamic Movement (ETIM), later claimed responsibility for the attack. More violence was to follow. In November, nine civilians and two police officers were killed in an attack on a police station near the city of Kashgar, followed by two similar attacks in December, the first leaving 14 civilians and two police officers dead, and the second, on another police station, causing eight more civilian casualties. Then, on January 24, bombs exploded near a market in Toksu County, Aksu Prefecture, killing one local resident and two militants. Aksu County saw more violence on February 14, the night of the Chinese Lantern Festival, when two police officers and two locals were injured in an attack on a police patrol in Uqturpan that ended with eight suspected militants being shot dead.

Hard Line

On February 14, Zhang Chunxian, Party chief of Xinjiang, announced that the regional government would send 200,000 officials to work at the grassroots level over the next three years in a campaign aimed at improving “peo-

ple’s livelihoods and regional stability.” The selection of officials, who will be sent to around 10,000 villages and communities following a “leave no gaps” approach, will be ready by March 5, local media reported. The move follows Chinese President Xi Jinping’s remarks to the Standing Committee of the Politburo in December 2013 regarding the governance of Xinjiang, which analysts believe marks a major strategic shift in Beijing’s official policy. The Xinjiang Daily, official newspaper of the regional government of Xinjiang reported earlier in January that Xi laid out “guiding principles, major targets and tasks,” of the Xinjiang government during the meeting, though specific details were not revealed. The Global Times, citing anonymous sources close to the leadership, claimed that the full text of Xi’s speech was only available for perusal by officials “at the regional level.” The Xinjiang Daily later quoted Zhang Chunxian, Party secretary of the region, as stating that the “primary task” in the region should be “maintaining social stability and an enduring peace.” Earlier, in mid-2013, the central government had dispatched high-level inspection teams to Xinjiang, headed by Public Security Minister Meng Jianzhu and Politburo Standing Committee member Yu Zhengsheng. Observers believe that the report on Xi’s speech suggests that the central leadership has reached a common understanding of the situation in this vast, ethnically diverse region. With the establishment of the National Security Committee in late 2013, it was believed that the central government had taken direct

Photo by CFP

By Min Jie

The Kashgar Grand Bazaar, Xinjiang, August, 2013

control over Xinjiang’s internal security.

Past Lessons

Unrest in Xinjiang has persisted since ethnic riots in Atmo County south of Kashgar in April 1990 left eight police officers dead, and seven seriously injured. Official data show that throughout the 1990s, 250 armed riots and terrorist attacks occurred in the region, killing and injuring more than 600 police officers, government employees and local residents. Starting in the late 1990s, the regional government under Wang Lequan, the former Party chief of Xinjiang, adopted an “iron fist” policy, enforcing a series of zero-tolerance measures that made social stability the regional government’s sole priority. However, after periods of relative stability in the early 2000s, violence erupted once more in July 2008, just one month prior to the Beijing Olympics, when two Uyghur separatists bombed a police garrison in Kashgar, killing 16. Then, in July 2009, bloody ethnic riots erupted in Urumqi, in which 197 people, mostly Han Chinese as well as several UyCHINA WEEKLY I March 2014

ghurs, were killed, and more than 1,700 injured. In the wake of the rioting, which many experts argued resulted from rising ethnic tensions between Uyghurs and Han Chinese as a consequence of Wang’s heavy-handed antiterror campaign, the situation continued to deteriorate. Other analysts claimed that the poverty of native Uyghurs, coupled with a massive influx of comparatively wealthy and more socially mobile Han migrants into the region, had created a tinderbox, particularly in urban areas. In response, the central government under Hu Jintao began to adopt the mantra “development is the key,” stressing that reform and development were as vital to calming the situation as maintaining stability. In 2010, Zhang Chunxian, a perceived moderate, replaced Wang Lequan to assume the top Party post in Xinjiang. Zhang launched various programs to promote economic development and improve the livelihoods of local Uyghurs, though counterterrorism measures remained firmly in place. But with outbreaks of violence in 2012 and 2013, Zhang became criticized as a “soft touch.” While stressing the necessity of “maintaining stability and economic development,” the central leadership has increasingly emphasized the importance of “safeguarding people’s safety and property,” a swing back towards the emphasis on security, but with a nod to economic considerations. But experts argue that the central government will go beyond these catch-all concepts to launch more comprehensive, specific and concrete measures in the realms of both socioeconomic policy and security. According to Turgunjan Tursun, a research fellow at the Xinjiang Academy of Social Sciences, instead of programs that aim to engender nonspecific economic growth, the government will develop projects oriented toward specific problems. For example, labor intensive industries are expected to be developed in southern Xinjiang to curb mass unemployment, seen by many as the cause of much of the region’s unrest. Tursun argued that the recent move to send an unprecedented number of officials on the grassroots level is an effort to win support from CHINA WEEKLY I March 2014

local residents, especially from ethnic minority groups, in promoting Xinjiang’s development, while facilitating security enforcement. Professor Zheng Shouhua, director of the Non-war Military Operations Research Center of the Academy of Military Sciences, told NewsChina that “stronger central leadership” will enable “better coordination and integration” between law enforcement agencies, including the police, the armed police and the military in terms of counterterrorism.

Global Perspective

Besides policy adjustment at the regional level, the central leadership’s assumption of direct control over Xinjiang policy also suggests a greater understanding of how unrest in the region is perceived globally. Professor Li Wei, an expert on terrorism at the China Institutes of Contemporary International Relations, suggests the central government’s new thinking over the Xinjiang problem reflects a realization that terrorism in Xinjiang is shaped by a dynamic of transnational Islamic extremism. According to Professor Li, the emergence of terrorism in Xinjiang in the 1990s occurred as a knock-on effect of the former Soviet Union’s withdrawal from Afghanistan in 1987 and its eventual collapse in 1991, which left a regional power vacuum that well-funded extremist Islamist organizations were able to fill. As the former Soviet Union’s central Asian republics, including Kazakstan, Tajikistan, Turkmenistan, Kyrgyzstan and Uzbekistan, a region also known as West Turkestan, gained independence, this fostered the Islamic “East Turkestan” movement in Xinjiang. Russia experienced similar unrest and upheaval in majority-Muslim Chechnya and Dagestan in the same period, and the West was fully awoken to the reality of Islamic fundamentalism by the September 11 attacks of 2001. After Russia launched the Second Chechen War in 1999, and the US launched its invasion of Afghanistan in 2001, attacks in Xinjiang sharply declined, as China declared its wholehearted support for the global War on Terror. However, the US withdrawal from Afghanistan, along with political turmoil in Iraq and

armed conflicts in Syria, has once again left a power vacuum and a subsequent resurgence of Islamic extremism throughout the region. Xinjiang has not been immune from its effects. According to Xing Guangcheng, director of the Institute of Russian, Eastern European, and Central Asian Studies under the Chinese Academy of Social Sciences, a major difference between more recent attacks and those in the 1990s is that they are now driven more by Islamic extremism than separatism. “In the 1990s, flags captured in violent attacks were mostly the blue flags of ‘East Turkestan,’” Xing told NewsChina. “Today, these appear to have been exchanged for the black flags of jihadists.” The resurgence of violent attacks in the region not only threatens Xinjiang’s internal security: they have now reached the heart of Beijing, with October’s car bombing a terrifying wake-up call for the central leadership. The Party now perceives that extremism in one of the country’s most restive areas could also jeopardize China’s so-called “westward strategy.” In his first Central Asia tour made in September, 2013, President Xi Jinping launched his “New Silk Road” initiative, proposing to build an “a Silk Road economic belt” centered on China and encompassing its Central and South Asian as well as Middle Eastern neighbors. Aimed to find new markets and new growth stimulus for China’s vast hinterland, the westward strategy is being used to address the imbalance of economic development between China’s coastal and inland provinces. As part of this vision, China has tried to establish Kashgar as a Central Asian trading hub. But Kashgar, no stranger to bombings, knife attacks on citizens and ethnic riots, already risks becoming a rallying point for fundamentalist Islamism, scaring off investors, tourists and developers. At the very least, an assertion of central control over Xinjiang is expected to guarantee better coordination when meeting the multiple and historic challenges faced by the Chinese authorities in managing the region. As Professor Xing told our reporter: “Xinjiang’s stability is no longer a regional issue, but a national one, with global significance.” 

international

Xi in Sochi

Friends or Allies? Is China quietly changing its official foreign policy of non-alignment? If so, will Russia prove to be the friend, and more importantly, even the ally, China needs? By Li Jia and Cai Rupeng

President Xi Jinping waves to his countryâ&#x20AC;&#x2122;s delegation during the opening ceremony of the 22nd Winter Olympic Games in Sochi, Russia, February 7, 2014

CHINA WEEKLY I March 2014

Photo by Xinhua

earing Chinese President Xi Jinping and his Russian counterpart Vladimir Putin refer to each other as “friend” in their recent meeting during the 2014 Winter Olympics in Sochi was not out of the ordinary. This is a regular feature of meetings between world leaders, regardless of the politics underlying the camaraderie. However, Xi’s specific timing seems to have caught the attention of those looking to read the tea leaves when it comes to the direction of the new president’s inscrutable foreign policy.

CHINA WEEKLY I March 2014

Smiles and Frowns

Xi’s Sochi appearance marked the first time that a Chinese head of state has ever attended a major international sports event overseas. As in 2012, Russia remains Xi’s first choice of overseas destination, indeed, his only choice so far this year. In an exclusive interview with a Russian TV channel, Xi praised the “top-notch preparation and organization” of the Games. Meanwhile, Xi’s international counterparts, under pressure from mounting condemnation of Putin’s various domestic policies, conspicuously gave Sochi a wide berth. The leaders of the US, UK, France and Germany all sent underlings to the opening ceremonies. Global media outlets ran reports ranging from investigations into the recent Russian crackdown on LGBT rights to the perceived poor condition of the Olympic site and its press facilities. Security concerns, the arrest and detention of LGBT and environmental activists, and above all the sheer cost of the Games – a cost, many allege, increased tenfold by rampant corruption – were all a feature of international coverage. China’s State media, by contrast, were all smiles, delivering endless glowing reports of Sochi’s “exemplary” organization, and slamming the “Western media bias” which sought to “undermine” the Games for political reasons. The “relentless disparagement” of Sochi, ran a commentary by the English service of China’s State-run Xinhua News Agency, is “all too familiar.” “[Beijing] faced identical political finger-pointing” six years ago, during the Beijing Olympics, it continued. As Russia’s Prime Minister, Putin attended the Beijing 2008 Olympics opening ceremony despite his country being on the eve of a war with Georgia. As on that occasion, Xi’s presence in Sochi was not a goodwill mission. Rather it was designed to show solidarity with another world power which is politically isolated in the international community, and to court Russian support in potential future conflicts. It seems that after a decade of playing the good guy, China has dropped the pretense of being “everyone’s friend,” and is instead distinguishing between allies, friends and, potentially, enemies. Chinese experts have long warned that China is in desperate need of allies. The US secured a virtual monopoly on political support after World War II, and has since deepened its influence with developed nations who preferred American support over the alternative – the Soviet Union.

Photo by Xinhua

international

Xi Jinping gives an interview to Russian TV in Sochi, Feburary 7, 2014

Now, with both Chinese and international media muttering about a new East-West political divide, China may be explicitly delineating friends and enemies after the fashion of its biggest rival – the US. Xi’s rhetoric in Sochi suggests that Russia is a key player in determining a new status quo.

Déjà vu

The Winter Olympics, despite attempts by Russia to tone down the underlying politics, has proven a symbolic battleground between competing ideologies, at least in terms of the associated media coverage. The theme of the opening ceremonies – “Dreams about Russia” – was designed, as Putin explained at a reception held February 7, to “give people the opportunity to take a new look at Russia, its achievements, distinctiveness and traditions.” A similar note was struck during the opening ceremonies of the Beijing Olympics in 2008, framing what would later become Xi Jinping’s China Dream ideology in the context of China’s oft-repeated desire to throw off imperialist oppression and return, triumphant, to its rightful place at the center of the world. “Mutual support is an important element in the SinoRussian strategic partnership of cooperation, and evidence of the close friendship between the leaders of the two countries,” said Li Jianmin, a research fellow at the Institute of Russian, Eastern European and Central Asian Studies of the Chinese Academy of Social Sciences. While the world’s athletes competed in Sochi, Chinese and

Russian warships were on a joint UN mission escorting a shipment of Syrian chemical weapons through the Mediterranean Sea to a US base where they were destroyed. In video addresses alongside their respective naval commanders, Xi and Putin reiterated their commitment to a “political settlement of the Syria crisis.” China’s State media saw this as a triumph for the SinoRussian stance on the Syria conflict, favoring diplomacy over military intervention. An editorial in the People’s Daily on February 8 crowed that, had both nations not stood opposed to military intervention, this international cooperation on destroying Syrian chemical weapons “would not have been possible.” Japan is also a factor that unites China and Russia. Remarking that “history cannot be forgotten,” Xi and Putin agreed to hold joint activities in 2015 to commemorate the 70th anniversary of the Chinese victory over Japan and the end of World War II. The Soviet Union never signed a peace treaty with Japan after the war, and today’s Russian Federation has its own territorial disputes with Japan in the Pacific, while China’s increasingly acrimonious standoff over the Diaoyu (Senkaku) Islands continues to foment. Professor Jin Canrong, a well-known international relations scholar at the Renmin University of China, thinks that working with Russia to contain Japan’s right-wing Abe administration was definitely “on Xi’s agenda” during his Sochi visit. Though Japanese Prime Minister Shinzo Abe also exchanged warm words with Putin in Sochi, Jin believes that “shared experiences” in World War II and its resulting treaties (or lack of them, in the case of Russia and Japan) have given China and Russia more incentives to work together to contain suspected Japanese rearmament. “Of the countries which have the potential to become China’s allies, Russia is the largest,” said Professor Yan Xuetong, dean of the Institute of Modern International Relations with Tsinghua University.

Refresh or Restart?

China’s foreign policy discourse has not talked in terms of “allies and enemies” since the country implemented an official non-aligned stance in 1982 to avoid becoming further embroiled in the Cold War. Many Chinese experts think this defensive approach, suitable for weaker countries wishing to appear neutral, has harmed China’s global standing, and left the world No. 2 economy lagging far behind smaller countries in terms of diplomatic clout. China’s rise has not helped Beijing’s international isolation. Even experts who continue to support the principle of nonCHINA WEEKLY I March 2014

CHINA WEEKLY I March 2014

Photo by Xinhua

alignment agree that at least a more flexible practice is needed and diplomatic conflict between China and Russia, stretchto prepare for a day when China may find itself on one side ing back into the days of the Qing Empire, the present-day or another of a major international incident or conflict. Yan growth gap and the use of mutual antipathy to the US as a baargues that the number and quality of its allies is an important sis for friendship have all been seen as problematic. Many obfactor underlying the US victory in the Cold War and secur- servers point out that neither nation trusts the other enough ing virtual global hegemony. Despite a number of recessions, to consider an alliance. Jitters have also surfaced over a potenincluding the Great Recession of 2008-09, the US weathers tial Cold War II, splitting the world into East and West, and economic storms by shoring up its international network further isolating an ascendant China still dependent on its US of friends and committed allies. China, meanwhile, has no trade relations for economic supremacy. Pragmatists also fear explicit alliances, and its closest “friends” remain even more that, if China chose an overt alignment with Russia, it would politically isolated nations like North Korea, Cuba and, until be backing the weaker power. recently, Myanmar. Yan insists that, unlike in a friendship, shared interests, “In the context of nuclear weapons and globalization, there particularly in terms of security, are a better bond than muis no other way available for the peaceful rise of a big nation tual trust when it comes to political alliances. In his words, with fewer drawbacks than forming alliances,” Yan told our “alignment is a rule in the human history of diplomacy,” not reporter. a “Cold War contingency.” Yan’s advice is for China to sign In Yan’s “spectrum” of major power relations with China, a treaty with Russia “guaranteeing strategic commitment,” by descending order in terms of how friendly they are, Russia while offering Moscow preferential regional development stands the highest, followed by a raft of “ordinary relations” conditions to balance the economic gap between the two. with major European countries, specifically France, Germany “If neighbors get economic benefits and, more importantly, and the UK. After these comes India, and then “competitive security protection, from China, then [Beijing] could have relations with global implications” with the US. Bringing about twenty strategic allies by 2023,” he added. up the rear are “confrontational relations” with Japan. “China should take responsibility for protecting allies, winning over the neutrals and punishing opponents,” he stressed. The possibility of an alliance has been discussed more frequently by Chinese and Russian experts since 2010, when both countries chafed at the Obama administration’s proposed “pivot to Asia.” Despite this, many have pointed out the ideological and cultural differences which could be a sticking point in deepening Xi Jinping talks with members of the Chinese Winter Olympic delegation in Sochi, Russia, February 7, 2014 cooperation. A history of both armed

South China Sea

Making Up the Rules

Renewed tension in South China Sea comes amid speculation over the possibility of China declaring its second ADIZ By Han Yong

ollowing rows over naval confrontations in the South China Sea in December 2013, the US and China kicked off 2014 with another exchange of accusations, ranging from China’s amendment to fisheries regulations to speculation that Beijing is preparing to announce a second Air Defense Identification Zone (ADIZ) in the region to match the one established in the East China Sea.

‘New’ Rule

The new rules, passed in November 2013 which became effective January 1, 2014, require foreign fishing vessels to obtain approval to “enter waters under the jurisdiction of Hainan Province.” Given the sensitivity of territorial disputes in the South China Sea, the amendment has attracted much criticism. “The passing of these restrictions on other countries’ fishing

activities in disputed portions of the South China Sea is a provocative and potentially dangerous act,” said US State Department spokeswoman Jen Psaki on January 9. The US has taken the position that the new restrictions run counter to efforts to resolve territorial disputes multilaterally. Following an initial mild response that it would seek “clarification” from Chinese authorities through its embassy in Beijing, the CHINA WEEKLY I March 2014

Photo by Xinhua

US Secretary of State John Kerry talks with Wang Yi, Foreign Minister in Beijing, February 14, 2014

international

Philippines later criticized the new regulations as a “gross violation of international law” that “threatens the peace and stability of the region.” In response, China’s Foreign Ministry spokeswoman Hua Chunying said in a daily news briefing on January 10 that “China has the right and responsibility to regulate relevant islands and reefs according to international and domestic law.” “For more than 30 years, China has implemented its relevant fisheries regulations in a normal way, and has never caused any tension,” said Hua. “China’s claim over the South China Sea is consistent and clear, and does not need a local regulation to strengthen it,” he added. “If someone feels that these technical amendments made to local fisheries regulations which became effective many years ago will cause tensions and pose a threat to regional stability, then I can only say that such feelings either stem from a lack of common sense, or are based on an ulterior motive.” For many Chinese officials and experts, this criticism is a new US effort to “hype the China threat,” pointing out that the “new” rules are nothing new at all. The rubric of China’s new regulations is well-established. A requirement for foreign fishery vessels to obtain approval prior to entering waters under China’s jurisdiction appears in China national fisheries law, in effect since 1986. According to the law, foreign vessels can be apprehended and face up to 500,000 yuan (US$82,600) in fines if they fail to obtain approval from relevant government departments. Similarly, a 1993 fisheries regulation in Hainan province requires all fisheries vessels “from outside Hainan province” -- including those from other Chinese provinces -- to obtain approval from the Hainan provincial authorities. In November 2012, the Hainan governCHINA WEEKLY I March 2014

ment passed a border control regulation which authorized local police to “board, inspect, apprehend, and expel foreign vessels that illegally enter waters under the jurisdiction of the Hainan government.”

Misinterpretation?

For many Chinese experts, criticism of the newly-established regulations only serves to inflame the controversy. Liu Feng, vicedirector of the Institute of Oceanic Sciences of the National Institute for South China Sea Studies (NISCS) in Hainan argues that the criticism of the amended new rule is established on a misinterpretation of the phrase “waters under the jurisdiction of Hainan Province,” mentioned in the amended regulation. “In various media reports, the amended regulation is said to apply to all waters claimed by China in the South China Sea, which is a misinterpretation,“ Liu told NewsChina, “In reality, ‘the waters under the jurisdiction of Hainan’ refers to the waters around the islands where the Chinese government has announced territorial baselines, which include Hainan Island and the Xisha [Paracel] Islands, but not the Nansha [Spratly] Islands.” China claims an area of 2 million square kilometers in the South China Sea, about three fifths of the entire area’s ocean territory, including the Xisha (Paracel) Islands and Nansha (Spratly) Islands, a claim contested by surrounding countries, including Vietnam, the Philippines, Malaysia, Indonesia and Brunei. Currently, the Hainan government currently only enforces its fishery regulations north of the 12th parallel, an area Liu estimates to be between 600 to 700,000 square kilometers in size, including the waters around the Hainan Island itself, the Paracel Islands, where China established effective control after naval skirmishes with Vietnam

in the 1970s and declared territorial baselines in 1996, but excluding the more controversial Nansha or Spratly island chain, where a number of countries exercise de facto control over various islets and shoals. With its claim based on the so-called “ninedashed line” first drawn on its official maps in the 1940s but not recognized in international law, China has not yet clarified the specific boundaries of its declared territory, nor what kind of claims it intends to stake in the region. The US has repeatedly urged China to clarify its stance, but Beijing has declined arguing that doing so would only serve to stoke up tensions.

ADIZ

To many observers, the renewed tension over the South China Sea is fueled by the rows over China’s decision to establish an Air Defense Identification Zone (ADIZ) in the East China Sea in late November 2013, which included the disputed Diaoyu (Senkaku) island chain also claimed by Japan. With overlapping disputes regarding islets and reefs in the South China Sea still unresolved, it is concerned that China may establish a similar ADIZ in the region. In a press conference held December 26, Geng Yansheng, spokesperson of the Chinese Ministry of Defense, refused to rule out the possibility of setting up an ADIZ in the South China Sea, and said the decision will “depend on a variety of factors and the overall security environment in the region.” In an editorial published in the Stateowned Global Times on January 3, Wu Shicun, president of the NISCS, claimed that the Chinese government had “no immediate plan” to set up an ADIZ in the South China Sea. According to Wu, China’s strategic priority in the region is to build a “maritime silk road,” a concept championed by Chinese President Xi Jinping and Premier Li Keqiang during their high-profile visits to various

international

Photo by Xinhua

ASEAN countries in October press conference on February 2013 to promote economic in7 that the US’s criticism is “irtegration between the two parresponsible” as it is based on ties. “rumors” and only serves to “in“In the South China Sea, flame tensions.” China has a grander vision than Hong’s remarks reflect China’s setting up a ADIZ, that is to attempt to adopt a different promote maritime integration, stance toward ASEAN countries, build the ‘maritime silk road,’ Japan and the US, in order to upgrade the China-ASEAN isolate Tokyo. China’s response Free Trade Zone, and deliver ‘a to the US has so far been typified diamond decade,’” Wu wrote. by relative restraint, which anaA source close to China’s Forlysts believe is due to US Secreeign Ministry told NewsChina tary of State John Kerry’s visit to that Wu’s editorial was the US Secretary of State John Kerry holds a press conference in Beijing, China on February 14 and 15. product of “consultation with February 14, 2014 While in Beijing, Kerry warned the ministry, and represents the that “a unilateral, unannounced, official position of the Chinese unprocessed initiative like [setgovernment.” By sending a mesting up an ADIZ] can be very sage that China has no intention to set up an by Japan’s Asashi Shimbun that a draft plan to challenging to certain people in the region, ADIZ in South China Sea through a govern- set up a ADIZ in the South China Sea had and therefore to regional stability.” mental think tank while refusing to make an been submitted to China’s military for disKerry’s Asian trip, including visits to Beiofficial promise, the Chinese government has cussion, citing unnamed sources, Washing- jing and Seoul, bypassed Japan. The Chinese endeavored to retain maneuverability over ton also stepped up its warnings. State media posited that this was a response the issue. Evan Medeiros, senior director for Asian to Abe’s visit to the Yakusuni Shrine, which In the same editorial, published only days affairs at the US National Security Council, had drawn criticism from various US offiafter the December 2013 naval confronta- threatened that China’s establishing another cials. tion between China and the US in the South ADIZ “would result in changes in our presBut there is no sign that the US will weakChina Sea, Wu warned that if the US and ence and military posture in the region” in an en its ironclad military alliance with Japan. Japan continued to stoke up tensions and interview with Japan’s Kyodo News. Just days prior to his Beijing visit, Kerry reintensify their “close-range surveillance acIn response, Chinese Foreign Ministry iterated in his meeting with visiting Japanese tivities” in the region, China would be “com- spokesman Hong Lei dismissed the claim Foreign Minister Fumio Kishida that the US pelled” to set up an ADIZ. that China was about to declare an ADIZ in will “come to Japan’s aid” if events escalate in To many analysts in China, renewed ten- the South China Sea as “speculation.” the East China Sea. sions over the South China Sea issue is a co“The Chinese side has yet to feel any air Evan Medeiros also stressed in his interordinated effort by Japan and the US to shift security threat from ASEAN countries and is view with Kyodo News that the Obama international attention from Japanese Prime optimistic about its relations with its neigh- administration was working “in very strong Minister’s Shinzo Abe’s controversial visit to bors,” said Hong. He then warned “right- coordination” with Japan on the ADIZ isthe Yasukuni Shrine honoring the country’s wing forces” in Japan “not to misguide public sue. As if to make up for Kerry’s bypassing war dead, including Class A war criminals, in opinion with rumors and play up tensions Tokyo, President Obama will visit Japan, December 2013, an action which has drawn for their own selfish interests.” South Korea, the Philippines and Malaysia international criticism. Responding to US warnings that Wash- in April. Such arguments are unlikely to sway the ington may step up its military presence in Few are anticipating a peaceful and permaUS, still the dominant military power in the the South China Sea if China were to unilat- nent solution to Asia’s territorial disputes in Asia-Pacific region. Following a report made erally set up an ADIZ, Hong said in another the near future.

CHINA WEEKLY I March 2014

environment

Anti-desertification NGO

Entrepreneurs for Ecology The Society of Entrepreneurs & Ecology (SEE), founded by nearly 100 Chinese entrepreneurs, is now one of China’s largest anti-desertification NGOs By Yang Min

very morning before dawn, the instant messaging group chat of the Society of Entrepreneurs & Ecology (SEE) begins to buzz. In 2004, the SEE was founded in the Tengger Desert of the Alxa League of Inner Mongolia by 87 initial members – most of whom were influential Chinese entrepreneurs. Among the delegation were real estate giants, investment bankers, mine owners, private educators and dotcom CEOs. Today, their ranks swelled, online debate over delegates’ pet issues rages daily. “Everyone’s serious. Everyone’s here for real,” commented Feng Lun, the current chairman of the SEE and one of China’s most famous real estate developers. Through its open and democratic management structure, and commitment to a bottom-up mode of fostering community development, the SEE has become one of China’s largest desertification control organizations as well as perhaps the country’s most influential independent environmental protection fund.

Constituents

On October 1, China’s National Day, 2003, Liu Xiaoguang, chairman of Beijing Capital Group (one of China’s largest State-owned water utilities companies), went to the Tengger Desert for the first time. He was invited by the China Entrepreneurs Forum which was holding an entrepreneurial salon. Liu was being asked to see for himself the seriousness and speed of desertification in the Alxa League. Data indicates that before the founding of the People’s Republic of China in 1949, there were 1.13 million hectares of haloxylon – desert vegetation – covering the Alxa League. By 2001, this area had receded to 0.2 million hectares, effectively creating a new desert. In CHINA WEEKLY I March 2014

the spring of 2000, sandstorms hit Beijing on nine occasions. On eight of these, the sand was blowing in directly from the Alxa League. Liu Xiaoguang told NewsChina that he underwent “spiritual purification” in the desert, falling to his knees and prostrating himself before nature. Eight months later, Liu and his 86 fellow entrepreneurs gathered at the Tengeer’s Moon Lake Hotel to launch the SEE, with every member pledging 100,000 yuan (US$16,500) in funding per year for at least ten years. However, dissent appeared from the very beginning. The preparatory group, led by Yang Ping, executive chief editor of financial broadsheet the China Times, and Yang Peng (no relation), director of the Policy Office of Environmental Economic Policy Research Center of the then State Environmental Protection Administration (now the Ministry of Environmental Protection), drafted a nomination list for an executive committee with 15 members and a supervisory committee with 5 members. Then they called for a so-called single-candidate election – a system widely used by the Communist Party, where a certain number of deputies are symbolically “elected” from an identical number of candidates, essentially a rubber-stamp approval of executive appointments. The proposal was rejected by the majority of the SEE’s members. They claimed the preparatory group was “playing by the rules of old games,” a reference to the management practices of State-owned enterprises. They wanted real elections – competitive elections. The preparatory group had to compromise, agreeing to add more names to the ballot. Zhang Shuxin, the chairman of Genesis Capital, and Wang Weijia, the chairman of Mtone Wireless, were given the responsibility for new nominations. The preparatory group went on

environment

Wang Shi (first from right), chairman of Vanke Group, visits a water-saving cotton field promoted by the SEE, 1996

to re-structure the election and ballots, working into the small hours of the following morning. The next day, the election was held. Liu Xiaoguang, bleary-eyed from a fitful, sleepless night, was unanimously elected chairman. Ma Weihua, CEO of China Merchants Bank, was elected the head of the supervisory board. Zhang Shuxin and Wang Shi (chairman of Vanke Group) were both elected to the post of vice chairman. Yang Ping was elected secretary general. Feng Lun (chairman of Vantone Holdings) and Shi Yuzhu (chairman of Giant Interactive Group) were elected members of the executive committee. Feng Lun would later describe the election as a “victory for the grassroots,” unusual terminology from a captain of industry. Wang Weijia failed to be elected. However, he declared himself satisfied with the result, as “my failure justifies others’ success.” He called the meeting a “constituency assembly” of the SEE. Twenty days later, the executive committee and the supervisory committee held a joint meeting. Hosted by Liu Xiaoguang, the meeting discussed amendments to the SEE charter as well as budget proposals for 2004. Once again, conflict erupted. Some members accused Liu of being “bossy,” and behaving as if he were in his own office. Liu found himself forced to compromise at every turn in order to placate his critics. Wu Kegang, the chairman of the Yunnan Red Wine Group, was one of Liu’s most vocal opponents. He banged his fist on the boardroom table, yelling at Liu, “Do you know how to host a meeting? There should be motions, proposals, discussions and voting. Your task is to organize the discussion and the voting.” “Motion” was a new word to Liu Xiaoguang, but he accepted the criticism and quickly readjusted his strategy. “He was good at listening to others’ suggestions and criticism,” said Yang Peng. Yang

Liu Xiaoguang plants haloxylon in the desert, 2013

believes that Liu’s openness is the only quality which has allowed him to retain his position.

Community Development

From the very beginning, the SEE adopted an inbound community development model for conducting their environmental protection projects. Project Manager Gui Guodong has been working for the SEE since 2006. The organization aims to help rural residents to establish project management committees on a voluntary basis and through democratic elections. Projects proposed by these committees can receive funding from the SEE when approved. In 2007, Gui’s project team worked as members of the Helan Production Team in Barun Bieli Town in the Alxa League. Their aim was to persuade herdsmen to reduce the size of their sheep herds in order to protect grasslands from overgrazing. The team contacted Heifer International, who matched their funding pledge to provide a total of 900,000 yuan (US$148,000) to 101 local villagers, allowing them to raise dairy cows to supplement their incomes. They also lobbied milk processing giant Yili Group to help the new dairy farmers expand their market share. In the first year, the net income of villagers who received financial support reached 310,000 yuan (US$51,000), allowing them to restore 67 hectares of grassland, and cease exploiting well water for irrigation of their cornfields. A trip to water-poor Ningxia Province funded by the SEE convinced them of the need to save water resources by switching to less intensive farming methods. In 2008, the project team introduced villagers to new membranedrip irrigation technology, allowing them to save some 1,500 to 4,000 tons of irrigation water per year. The project team also facilitatCHINA WEEKLY I March 2014

Courtesy of the SEE

Ren Zhiqiang (left) and Feng Lun (right), both real estate moguls, at an SEE meeting

ed a switch from corn to millet, a staple which consumes less water. Another focus of the project was convincing locals not to cut down haloxylon for firewood, as each of them were consuming some 10,000 kilograms per year, or about 3 hectares of this essential plantlife, as well as selling even more to barbecued meat vendors. Song Jun, chairman of Jiuhantiancheng Group and a founding member of the SEE, was one of the first advocates for the protection of haloxylon resources. He bought up entire supplies of cistanche, a medicinal desert herb similar to the foxglove, encouraging locals to protect the plants that sheltered it. Soon, agreements had been inked curtailing the exploitation of haloxylon for fuel. “There is a forgotten tradition of not cutting down living wood in Mongolian culture,” Gui Guodong told our reporter. “We are merely reminding people of it.”

No Money in the Bank

In June 2007, the SEE held its second general election. Wang Shi was elected chairman and Ren Zhiqiang (chairman of Huayuan Property) was made head of the supervisory committee. On the Internet, Ren is known for his candor in commenting on current affairs. Dubbed “Cannon Ren,” he is followed by 16 million people on Twitter equivalent Weibo. As Ren took office, the SEE secretariat became extremely cautious, checking and double checking financial reports to ensure that Cannon Ren did not raise “an angry wind over a calm ocean”. However, Ren still questioned the executive committee’s use of funds in the SEE’s account, which had a balance of 20 million yuan (US$3.18m). Ren told the committee that the SEE’s purpose was “not to save money.” He suggested expanding SEE funding for other NGOs.

CHINA WEEKLY I March 2014

In December 2008, the SEE Foundation was established, with an initial fund of 8 million yuan (US$1.27m). Economist Wu Jinlian became the foundation’s chief executive. In order to fund other environmental protection organizations, the foundation established a project approval committee, which elected Tong Shumeng, chairman of Oriental Patek Investment Company, as its president in 2011. Since 2010, the foundation also began to fund the Public Environmental Research Center led by environmental activist Ma Jun. in 2006, Ma compiled data released by environmental, water and oceanic departments, and published The China Atlas of Water Pollution and The China Atlas of Air Pollution, in the process establishing China’s largest pollution database. “Ma Jun’s research center is a de facto hub. Smaller NGOs give him data. The SEE funds him and he in turn funds smaller NGOs,” said Tong Shumeng. On Tong’s advice, in August 2013 Ma Jun introduced his five-year plan to the SEE: upgrading his pollution atlas, promoting a green supply chain and enhancing team building. “We now have a database of 100,000 companies. That’s a lot of leverage. But we ourselves are too small,” says Ma Jun. In response, Tong brokered a deal between the SEE’s approval committee and Ma Jun, whereby the fund agreed to provide 20 million for Ma’s research center over the next five years. By November 2013, 267 entrepreneurs were listed as members of the SEE. From the beginning of 2012 to November 2013, the SEE received donations of some 54 million yuan (US$8.6m), of which, 7.18 million yuan (US$1.14m) were spent immediately. While NGOs in China often face opposition from regulators and government agencies, the SEE has set the example that, with enough money at your back, genuine, long-lasting change is achievable.

economy

Tesla in China

Beautiful Toys In spite of a sensational Chinese debut, Tesla’s electric sedan is unlikely to replicate its US market success in the People’s Republic By Sun Zhe

CHINA WEEKLY I March 2014

Photo by Sun Zhe

Tesla’s Beijing dealership

blog post drafted by car company Tesla’s CEO and founder Elon Musk went viral in China’s blogsphere in late January. The post detailed the unavoidable tariffs, delivery costs and value-added tax included in the “fair price” Tesla was going to charge for the company’s electric sedan, the Model S. Musk’s candour garnered wild applause from Chinese auto fans, who have long felt they’ve been ripped off by foreign companies who take advantage of domestic distrust of indigenous automobiles. CHINA WEEKLY I March 2014

Tesla’s Model S was priced at 734,000 yuan (US$121,370) in Chinese dealerships, an almost exact 50 percent markup on its US price. It is typical for imported cars in the China market, especially vehicles at the luxury end, to be sold at far higher prices than in Europe and North America– the MercedesBenz S-class sedan costs 3.1 million yuan ($510,000) in China, 150 percent more than its retail price in the US. Tesla could afford to sell its electric sedans slightly cheaper due to a direct sales strategy

and an exemption from consumption tax thanks to the car being entirely battery powered – the tax on gas-powered automobiles with an engine capacity above four liters can be as high as 40 percent. The perception of this flashy new vehicle as a relative bargain soon translated into healthy pre-sales in China. A sales manager at Tesla’s sole mainland outlet in Beijing, while declining to give specific numbers, said many Chinese customers had made down payments on the Model S, despite the fact that none were able to take a test drive.

Photo by IC

economy

A visitor sits in a sample car at Tesla’s Beijing store

Tesla’s total sales in 2013 were about 22,500, mostly in the US, but the company has high hopes for its China operations. There are plans to open another 10 stores in China by the end of 2014, and Tesla is anticipating that the China market will contribute one-third of its sales growth this year.

Hard to Crack

Even more so than other high-end auto brands, Tesla has no local rivals, and the performance and design of Chinese-branded electric cars are decades behind the specs offered by the Model S. The 85-kilowatt version of the Tesla Model S, which could pass as a fancy roadster, is able to run a maximum of 500 kilometers, while the most presentable China-made electric vehicle models, which generally look the same as any mediocre hatchback, have a limit of less than 300 kilometers. “There will be no competition between Tesla and domestic brands, since Chinese battery electric vehicles (BEVs) concentrate at the entry-level end,” said Li Ming, an industry analyst with Shenzhen-based Guoyuan Securities. Chinese-branded BEVs are mostly priced be-

The workings of the Model S

tween 200,000 to 300,000 yuan (US$32,900 – 49,400), though buyers can usually expect to receive more than 100,000 yuan (US$16,500) of subsidies from central and local governments. These subsidies, however, are unlikely to be extended to Tesla buyers, as they were designed to incentivize domestic production of electric cars. China has pledged to put 500,000 plug-in hybrids and BEVs on the nation’s roads by the end of 2015, and 10 times that number by 2020, according to a State Council industry program released in 2012, which aims to turn China into the world’s largest market for electric vehicles within a decade. However, with one year to go, China is still about 480,000 units away from meeting its first stated target, according to a report from Ping’an Securities. As Tesla has yet to be listed in China’s newenergy vehicle catalogue, which so far only include domestic brands, Tesla drivers would not be eligible for other preferential policies, such as the purchase tax exemption enjoyed by domestic-branded BEV buyers. In addition, anyone purchasing a Tesla Model S would need to enter the massively unpopular license plate lotteries or auctions in Beijing,

Shanghai and Guangzhou – the mainland cities with the densest concentration of people with an income sufficient to consider purchasing such a high-end vehicle – as better odds in these lotteries, or exemptions, are only extended to those willing to purchase a Chinese-made automobile. In spite of all these policies, consumers have yet to show much interest in domestically-banded BEVs. By the end of 2012, domestic automakers sold a total of 4,400 to Chinese households, and 2013 sales were negligible due to the absence of subsidies. So far, more than 100 BEVs, manufactured by 54 Chinese automakers, have been given the government green light to go into full-scale production, but only few presentable models have reached volume production. Chinese consumers are particular about their cars – still a major symbol of upward mobility – and few are inclined to flaunt the purchase of a mainland-branded vehicle. In contrast, US EV sales totaled 960,000 units in 2013, including 226,000 units of the Japanese-branded Nissan Leaf, coming in just after the Chevrolet Volt’s 230,000 units. Neither of these models are marketed in China. Tesla came in third with 18,650 units CHINA WEEKLY I March 2014

china

bynumbers US7.23 bn

No.1

China’s non-financial outbound investment in January in 2014, up by 47 percent over the same month in 2013.

China replaced India as the world’s biggest gold market in 2013, 28 percent of the world’s total.

January year-on-year change in investment from Chinese mainland to major economies 500 400 300 200

Photo by Sun Zhe

100

sold, mainly in coastal states. “The quality and performance of current domestically-branded products has yet to convince consumers,” said Zhong Shi, an independent analyst based in Beijing. According to Zhong, the disappointing development of China’s BEV industry has undermined Tesla’s expansion in the China market, because it is highly unlikely that Tesla will be given the green light to establish a network of roadside superchargers, significantly increasing the recharge time of its Model S. Plugging in to a Tesla Supercharger gives a driver half charge within 20 minutes. Plugging into a Chinese 220-volt household power socket only provides 10 to 16 kilometers of mileage per hour of charging. While the company has declared its intention to establish such a network, starting with the expressway connecting Beijing and Shanghai, “it is highly unlikely that the State Grid, which is seeking to monopolize BEV recharging stations, would concede any market share to Tesla,” said Zhong. “For a long while yet, Tesla [automobiles] will just be big toys for those who can afford them, since a drive out of town is still not feasible,” he added. CHINA WEEKLY I March 2014

0 -100

Japan

Russia

ASEAN Australia

Source: Ministry of Commerce of China

Source: World Gold Council

US$154bn

Drop in bank deposits in January 2014, more than the combined decline seen in April, July and October 2013. Source: People’s Bank of China

0.473

0.5

China’s Gini coefficient measuring income inequality in 2013. Source: China National Bureau of Statistics

48.3 China’s Manufacturing Purchasing Managers’ Index in February released by HSBC, a seven-month low, indicating weakening growth in manufacturing. Source: HSBC

0.4

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

60 50 40 30 20 10 0

Aug 2013

Sept 2013

Oct 2013

Nov 2013

Dec 2013

Jan 2014

Feb 2014

history

Nixon’s Return to China

Villain at Home, Hero Abroad Shortly after his resignation in the wake of the Watergate scandal, former US President Richard Nixon returned to China, where he received the red carpet treatment By Zhou Yao

n December 31, 1975, an aged and seriously ill Mao Zedong received Julie and David Eisenhower, the daughter and son-in-law of Richard Nixon, at the luxurious Zhongnanhai compound, the lakeside residence for paramount Party leaders located at the heart of Beijing. “I am waiting for your father.” Mao told them. Incumbent President Gerald Ford, the man who replaced Tricky Dicky, had just departed the Chinese capital Beijing after a four-day visit. No further progress had been made in Sino-US relations. The Soviet Union, which had inadvertently brought China and the US together through mutual enmity in 1972, had suddenly re-emerged as an obstacle to a deepening of ties. In July 1975, the US and the Soviet Union inked the Helsinki Accords, signaling a long-awaited thaw in relations between the two

superpowers at the heart of the Cold War. This was not good news for Beijing, which felt the chance of US cooperation in creating a counterbalance to the perceived military threat of Soviet troops along its Northern border slipping away. A displeased Chairman Mao, who had made no secret of his preference for US-China rapprochement over dealing with the Soviet Union, came up with a surprising move – inviting the disgraced Nixon to return to China, a blatant snub of his successor Ford.

Excessive Hospitality

After resigning the Presidency in 1974, Nixon had remained close to the Chinese leadership that had opened their arms to him during his historic first visit in 1972, which established formal relations between the US and the People’s Republic of China for the first time. CHINA WEEKLY I March 2014

Photo by CORBIS

Nixon visits Peking University, Beijing, March 1, 1976

Days after Nixon left the White House, he received a telegram from Premier Zhou Enlai, who expressed his best wishes and extended an invitation to return to Beijing. Two months later, while Nixon was hospitalized with phlebitis, Mao telephoned him in person to reiterate the same invitation. Rumor had it that Mao was sympathetic to Nixon, who he perceived as having been unfairly maneuvered out of power following the Watergate scandal. “They’ve made too much fuss over the Watergate affair. Please write to Nixon and tell him I miss him a lot,” Mao told Thai Premier Kukrit Pramoi during a meeting in July 1974. Huang Zhen, director of the China Liaison Office in Washington, DC, was sent to visit Nixon at home in late August 1975, to reiterate the urgency of accepting Mao’s invitation. The Chairman, suffering CHINA WEEKLY I March 2014

from Lou Gehrig’s disease, was in increasingly poor health, and while this information was being kept from the public, few in Zhongnanhai expected him to live for many more years. Nixon called Henry Kissinger, who had remained Secretary of State, to express his wish to visit China in September if Gerald Ford did not oppose it. Kissinger advised him not to visit China until his successor had, advising Nixon that to jump the gun might look like an attempt to meddle in international relations. When his daughter, who traveled with the Ford delegation, brought back another invitation from Chairman Mao, Nixon readily accepted. Overjoyed, Mao ordered the Ministry of Foreign Affairs to receive Nixon as a head of state, even dispatching an official plane to bring the former president to Beijing. According to Zhu Xianda, then chief of protocol of China’s Ministry of Foreign Affairs, such a deviation

history

His private audience with Mao lasted one hour and 40 minutes. The Chairman had given Ford two hours. In a speech delivered during his visit, Nixon said that it was “naive” to believe that the mere act of “signing statements of principle” could ensure lasting peace. This was interpreted as criticism of President Ford’s support for the Helsinki Accords, though Nixon’s office denied this claim.

Apologies

Photo by UPI

After Nixon returned to the US, Charles Cross, the US Consul General in British Hong Kong, sent a telegram to the State Department to report on his talks with Fei Yimin, then president of Hong Kong-based pro-Beijing newspaper Ta Kung Pao. Fei, a member of the National Committee of the Chinese People’s Political Consultative Conference, was usually seen as a spokesman for the mainland government. Fei said that Beijing had “underestimated the reaction of the US people” to the former president’s visit. He claimed that after it had “got the message,” China had toned down Nixon’s welcome – denying US journalists access to his plane, prohibiting a live US television broadcast of the visit, and also keeping American reporters away from the former President during various legs of his trip. Fei reiterated four times that the US had “misunderstood China’s attitude toward the Watergate scandal.” He went on to talk down the political implications of a disgraced President visiting what remained officially a hostile foreign nation, insisting that Nixon was invited “out of respect” for his efforts to improve Sino-US relations. Fei jokingly added that he was “relieved” that President Ford had won the New Hampshire primary. While this opaque quasi-apology didn’t cut much ice with the American media, Qian Dayong, speaking to NewsChina, believes it was a sincere attempt to manage a delicate diplomatic situation. Qian told NewsChina that Nixon had, off the record, agreed with Party leaders to establish official diplomatic relations between the US and China in his second term. When the Watergate scandal broke, however, the promise was out of the question, and Nixon would acquire a reputation as a corrupt, paranoid and inveigling figure while his successes in mending relations with China, not to mention his efforts to end the Vietnam War, would fade into the background. Maintaining a public and seemingly intimate relationship with Mao Zedong did little to improve his image at home. In November 1977, Gerald Ford was defeated at the ballot box by Jimmy Carter. Despite being both a Democrat and an ardent critic of the Nixon administration, when it came to China, the two men apparently saw eye-to-eye. It was during the Carter administration that the US tied official diplomatic relations with the People’s Republic of China - on New Year’s Day, 1979.

The Nixons and Zhu Xianda (left), chief of protocol of China’s Ministry of Foreign Affairs, who was sent to the US to fetch Nixon

from protocol had occurred only once before, when the presidentelect of Mozambique, Samora Moisés Machel, was brought to Beijing in a Chinese plane in 1975 because his administration could not afford to send its own plane. Zhu was a member of the Nixon welcoming committee assembled by the Ministry of Foreign Affairs, and accompanied the plane, a Boeing 707 just like Nixon’s Air Force One, which was equipped with a kitchen and two staterooms for Nixon and his wife. On February 6, 1976, State news agency Xinhua announced that Nixon would arrive on the 21st of the same month. Ford was only notified of the visit a day earlier. The timing could not have been more sensitive, given that Ford was campaigning for reelection and would square off in the New Hampshire Republican primary against Ronald Reagan that same month. The US media, meanwhile, honed in on the politics of Nixon’s visit, and Ford’s inability to rein in the actions of his predecessor. Nixon, meanwhile, was intractable. As he topped the staircase leading onto his luxuriously appointed Chinese plane, he turned and flashed reporters his trademark grin, last seen as he boarded the helicopter that would escort him from the White House. However, once aboard, according to political consul Qian Dayong of the China Liaison Office, Nixon simply took his seat and spent most of the flight staring out of the window, his brow furrowed. Not even the extravagant appointments, or the stewards’ resolutely referring to him and his wife as Mr and Madam President, could bring Nixon out of his reverie. The plane landed in a freezing Beijing at 8 PM on February 21, with the newly-appointed premier - and Mao’s anointed successor Hua Guofeng, on the tarmac to greet Nixon, though the Party had spared him the honor guard he had viewed on his last visit.

CHINA WEEKLY I March 2014

culture

Gu Cheng

Death of a Poet One of Chinaâ&#x20AC;&#x2122;s most successful modern abstract poets has been the subject of controversy since his grisly death in 1993. A new documentary looks at the rise and fall of Gu Cheng, and his complex relationships with those around him

Gu Cheng (right) and his wife Xie Ye (left) in Chengdu, 1986 CHINA WEEKLY I March 2014

Photo by CFP

By Yuan Ye

culture

“

Even with these dark eyes, a gift of the dark night, I go to seek the shining light.” This abstract two-line poem, titled A Generation, was published in a Chinese poetry magazine in 1980, bringing overnight recognition for its author Gu Cheng. At 24 years old, Gu quickly rose to become one of China’s most prominent poets and a leading figure in what came to be known as the “misty poetry movement.” 13 years later, Gu committed suicide on Waiheke Island, New Zealand, where he and his wife Xie Ye, also a poet, had lived for 5 years. Xie died several hours later in hospital, from injuries inflicted by her husband before he took his own life. While the public acknowledged the cultural value of Gu’s vast catalog of groundbreaking poetry, the gruesome details of the murder-suicide were difficult to ignore – one rumor had it that Xie’s injuries were inflicted with an axe. It is widely known that the conflict between Gu and Xie was linked to the involvement of another woman: Ying’er, Gu’s lover. Ying’er had spent two years living with Gu and Xie on Waiheke Island – six months before their deaths, Gu and Xie wrote a novel together, titled Ying’er. Now, twenty years later, a documentary titled Exiled Hometown, the first film about Gu Cheng and his death, was released in December 2013 by the Culture Channel of Phoenix New Media, a major news portal in China. What exactly happened in the run up to Gu’s death, and who really was this immensely popular yet little understood young writer? Endeavoring to shed new light on these questions, the film has rekindled the curiosity of readers and the literary scene. Two decades later, the poet’s talent, influence and mystique still linger.

ing Shi Zhi, Bei Dao, Shu Ting and Hai Zi, formed the center of the obscure, abstract poetry movement known as “misty poetry.” A school of Chinese modernist poetry, misty poetry first appeared at the end of the Cultural Revolution (1966–1976), using “misty” and abstract expression and a strong sense of personal emotion in reaction to the extreme political realism of the Mao era. Its deliberate antagonism to socialist-realist Cultural Revolution literature brought great fame and popularity to its leading figures. Though misty poetry remained underground in the Mao era, the earliest influential works of the school actually date from as early as 1968, just three years after the beginning of the Cultural Revolution. It was at this time that Shi Zhi, then 19, wrote his most famous poem Believe in the Future – widely regarded as a beautiful, stubbornly optimistic work inspired by liberalization in Czechoslovakia. In China, that year saw the end of the destructive Red Guard movement, but it was also the year that twenty million urban youth were sent to remote rural areas to work on farms. That year Gu Cheng was 12. As the Red

Guards had all but destroyed China’s education system, Gu was forced to quit school. That same year, he wrote his first two poems – although it is claimed in the documentary that Gu first began composing poems at the age of six, works he dictated to his elder sister Gu Xiang, since he had not yet learned to write. Gu Cheng’s father, Gu Gong, was a wellknown army poet based in Beijing. The year after Gu junior dropped out of school, his father was sent to carry out rural labor in a village in Shandong Province, and took his family with him. Gu Cheng didn’t fit well into the education system, not even kindergarten – political struggle seemed to be everywhere, and he disliked the zealous revolutionary crowds. He had always been fascinated with nature, especially insects, and was initially delighted about the prospect of moving to the countryside. Yet the depressing reality of the situation soon quashed his enthusiasm. “Gloomy thatch, a mud wall and a barren beach blending with the sky,” he later wrote about the time. In Shandong, the Gu family was designated to raise pigs and collect firewood.

China in the 1980s saw an age of literature and poetry which, in the view of critic Tang Xiaodu, an old friend of Gu’s, functioned as a “substitute for religion” following the death of Mao Zedong in 1976, before the arrival of commercialism and popular culture. Gu Cheng and a dozen other poets includ-

Photo by Jin Xuqi/Xinhua

The Misty Movement

Gu Cheng (right), with poets Shu Ting (left) and Fu Tianlin (middle) at a poetry festival in 1986

CHINA WEEKLY I March 2014

Yet it was there, among the pigs, that Gu’s writing began to take off. In 1971, he wrote A Fantasia of Life and I Praise the World. In both poems, the 15-year-old youth displayed his splendid imagination, borrowing rich imagery from nature – bees, flowers, the ocean, mountains, the stars and the universe were among the most common themes. The innocence and sincerity in Gu’s poems was a breath of fresh air amid the heavy, desperate atmosphere of his time. It was around the same time that other misty poets such as Bei Dao, Mang Ke and Shu Ting began writing poetry. In December 1978, immediately after the official announcement of the policy of Reform and Opening-up, Today, a privately funded poetry magazine founded by Bei Dao and Mang Ke, released its first issue. It was the first time that misty poetry, an as yet entirely underground movement, made its public debut.

The Town of Gu Cheng

“At 12 midnight, the ghost treads very carefully, fearful of stumbling and becoming human.” In the opening scenes of Exiled Hometown, Gu’s voice can be heard reading his series of poems titled The Ghost Went into Town, written in December 1992, ten months before his death – the Chinese character for “town,” cheng, is the same character as Gu’s given name, and gu cheng is a homonym for “hometown.” “When I moved with my family to the village, I dreamed of owning land, and building a small town out of mud. I would grow potatoes in the town, and keep watch on the wall with a bow and arrow,” Gu once said in an interview. Some two decades later, he realized his dream. In July 1990, he and his wife Xie Ye bought a large but broken-down house on Waiheke Island. It was beautiful, and far away from modern society. “The island is a place of comfort for me. You don’t feel like you’re living in a country or a society. There were few people, and they didn’t talk very much,” he said in the interview. Gu had previously lectured in Europe in 1987, and the following year was invited to CHINA WEEKLY I March 2014

teach at the University of Auckland, New Zealand. One month before Gu and Xie bought their house, they acquired the right to permanent residency in New Zealand. Life on the island was beautiful, but not easy – living far away from the modern society, the couple needed to make a living with their own hands. Often they had to “struggle for a living.” He had to spend five hours collecting firewood for one hour’s cooking. Gu Cheng knew that his wife was indulging his desire to live in isolation – Xie Ye remained silent on the couple’s first night in the house. “She must have hated me so much,” Gu Cheng later recalled. Gu and Xie first met on a train from Shanghai to Beijing in 1979, three months after Gu wrote his breakout poem A Generation. Immediately, they fell in love, and began to write letters to each other between their respective cities of Beijing and Shanghai. Gu’s writing went into overdrive during this period – in 1980 alone, he wrote 417 poems. In 1983, against her family’s wishes, Xie married Gu. As the misty poets grew in popularity, they became to be seen as heroes of their time. Gu was invited to meetings, recitations and other events, and Xie went everywhere with him. But Gu, who friends say could barely take care of himself, relied heavily on Xie. Occasionally, Gu would “go mad.” The misty poets received fierce criticism from conservatives. Today, the misty poetry magazine, was shut down after two years. In 1986, Gu Cheng attended a poetry meeting in Beijing, where he came under verbal attack from old-school poets. A young female college student, Li Ying, stood up to defend him – Gu Cheng later took to calling her Ying’er. Initially, Gu didn’t pursue Li Ying, but Li fell deeply in love with him. In 1987, one night before Gu and Xie’s departure for Europe, Li went to their home and told Gu about her feelings for him, in the presence of Xie Ye. In July 1990, Ying’er flew to Waiheke Island. Xie Ye helped to pay for her visa and air tickets.

Destruction

Subsistence life on the island didn’t suit

everyone in the complicated love triangle. In her memoirs and in interviews, Li Ying has said that the scarcity of resources and Gu’s constant nervous breakdowns made life on the island extremely difficult. But Gu was deeply physically attracted to Li Ying – a fact he later explored extensively in Ying’er, despite claiming that the book was a work of fiction. In fact, Ying’er was said to be a book that Xie had Gu write, as a “confession.” Its content was dictated by Gu, and written by Xie. Gradually feeling stifled on the island, both Xie and Li became increasingly confused. Eventually, in early 1992, Gu received an invitation for a working visit to Berlin – both Xie and Li saw this as a welcome opportunity for change. Xie urged Gu to accept the invitation, and they left the island, without Li Ying. Li Ying later left the island at the end of the year, without informing the couple. When Gu Cheng called back to Waiheke Island, he found that Li Ying had left. Meanwhile, Xie Ye was also having an affair. When Gu and Xie returned to Waiheke Island in 1993, the relationship with Xie became strained, and they decided to divorce. According to Li Ying, Xie Ye told her that Gu had suffered from suicidal thoughts for as long as he had been married to Xie, and Gu eventually asked Xie to commit suicide with him. In his suicide note, he wrote that he had been “cheated” by both Xie and Li. According to the memoirs of Gu’s sister Gu Xiang, the last two weeks of the couple’s lives were spent in constant conflict, which reportedly turned violent. Gu Xiang also noted that there was an axe lying beside Xie, although refuted the rumors that it had been involved in her killing – according to the documentary, the criminal investigation made no mention of an axe. But while the documentary has certainly rekindled curiosity about the turbulent life Gu Cheng lived, only he and Xie knew exactly what happened in those final few hours. It seems some aspects of the life of this great poet are set to remain shrouded in the mist.

visual REPORT

Shuttered Society

CHINA WEEKLY I March 2014

mateur photography is perhaps Chinaâ&#x20AC;&#x2122;s most popular hobby. Every morning at the West Lake, a scenic spot in Hangzhou, Zhejiang Province, thousands of people line up to take pictures of the sunrise. At 5 AM, especially in September, the Bashang grasslands in Hebei Province are dotted with the car lights of approaching photographers. Under the ancient banyan trees of Xiapu, Fujian Province, hundreds of shutterbugs gather together to photograph an elderly local and his prize water buffalo. Day by day, avid photographers search every nook and cranny of Chinaâ&#x20AC;&#x2122;s most picturesque areas for the best direction in which to point their scrupulously-maintained lenses. Few realize that they themselves have now become part of the landscape, and rarely do holidaymakers manage to secure a snap completely free of their competitors.

CHINA WEEKLY I March 2014

visual REPORT

A crowd wait for the sunrise on the Jinshanling stretch of the Great Wall, Hebei Province, September 25, 2013 Another sunrise draws a crowd in chilly Harbin, December 28, 2013

Models pose under a waterfall in Hangzhou, Zhejiang Province August 3, 2013

Child models in Hangzhou, November 2, 2013

An unfinished building is crowded with photographers awaiting the sunrise in Fujian, June 1, 2013

CHINA WEEKLY I March 2014

Photographers venture into a Siberian tiger conservation park in northeast China, December 29, 2013

A peasant and his water buffalo pose for the cameras in Xiapu, Fujian Province, June 12, 2013 CHINA WEEKLY I March 2014

OUTSIDEIN perspectives from within China

Spiritual Wudang Mountains

The Tao of Tourism

In the Wudang Mountains, the birthplace of taichi and a popular Daoist pilgrimage destination, our writer finds natural beauty, inner calm, and discount weaponry By Will Philipps

“

It’s quite light. Looks pretty fancy – how many people has it killed?” I ask. I’m standing in one of many tourist-trap sword shops that line the town at the foot of the Wudang Mountains. The weapon merchant emits a labored laugh at my attempt at humor. She’s probably heard that joke a hundred times. “No-one,” is the reply, but despite my sinister line of questioning she still offers me the blade for the cut-price amount of 400 yuan (US$66). I wasn’t expecting weaponry to be the souvenir of choice at Wudang. The small mountain range in the northeast corner of Hubei Province, about midway between Xi’an and Wuhan, is famous as the birthplace of Daoism and the predominantly non-combat internal martial art taijiquan (often referred to as taichi in the West) and its offshoot, qigong, a form of breathing exercises. Many Chinese regularly make the pilgrimage to this holy spot, and the collection of temples and monasteries are home to some 200 hundred practicing monks. Chinese New Year is a popular time to make that pilgrimage, and that’s when I’ve chosen to make my own – not in a religious context, but more in commitment of witnessing the area’s outstanding natural beauty. (The site is often used for film sets: the 2010 Hollywood remake of The Karate Kid had scenes shot here.) Due to the national holiday, the town, called Wudangshanzhen, which sits just outside

the gate to the Wudang temple site (entrance 240 yuan, US$40) is bustling. Walking back out of the sword shop (unarmed), the crowds, noise, hollow grey shells of future hotels (estimated percentage of hotels here that have taiji in the name: 70) and general commercialism are starting to plant doubts in my mind that just above us can be the famed sacred temple complex that I’d seen on film. The sword seller told us not to worry – a 40-minute bus ride plus a three-hour climb meant the peak was still some distance away. Early the next day we take the bus up the winding mountainous road to just below the peak. The area is called Zhongguan, home to a few hotels, shops and restaurants options, as well as the starting point for the 5-minute cable car (80 yuan, US$13) to the summit. As sunlight starts flooding the valley, the vertical drops on either side of the snaking road become ever clearer. I realize why there is a large bunch of plastic bags attached to the wall of the bus, and it’s not long before a queasy passenger makes a dash for one. The ascent through the trees to the summit provides us with a much-needed way to warm ourselves up. It does indeed take three hours, and although strenuous, it’s well paved all the way. I presume that is a big help for the many women who see no problem in making the climb in high heels and tight jeans. We stop to banter with some

CHINA WEEKLY I March 2014

How to get there: Wudang is best reached by train. Slow trains run direct from Beijing (about 24 hours), but you can reach it from nearby Wuhan in about 5 hours. Wuhan has two main stations: take a train to Wudang from Hankou station. Alighting at Wudangshan station, it’s a ten-minute taxi ride (20 yuan, US$3) to Wudangshanzhen, where the gate to the site is. Where to stay: Wudangshanzhen has plenty of hotels, try the Xuanwu Hotel or Wudangshan Hotel. If you’re staying for a few days you can stay within the site further up the mountain. Try the Xianshan Hotel at Zhongguan or the South Rock Hotel at Nanyan (South Rock).

Photo by IC

good intentions and to pray for the local vendors on the mountain. Sedan chair to the well-being of themselves and their top: 200 yuan (US$33). Whole, peeled cucumber to family, I don’t mind,” he tells me. quench your thirst: 5 yuan (US$0.80). He’s only 24 and made the pilgrimAfter finally making it over the crest of the hill you age from Sichuan Province to “come catch the first glimpse of the Golden Palace and its and enjoy the peaceful mountain surrounding structures: this largest and most captilife.” vating set of buildings will be the highlight of any As most of the crowds make their trip to the Wudang Mountains. Built in the early way back down the mountain well 15th century, they pay homage to the most signifibefore sunset (there is no accomcant Daoist deity, Xuan Wu, who was said to have modation for visitors at the peak), attained immortality at this site. The hordes of smartphone-wielding tourists flocking around the resident the joys of the place espoused by A Taoist priest practices martial arts at Wudang our Sichuanese friend start to make monks, who are dressed in traditional garb, make for themselves apparent. The setting is an interesting China disparity snapshot. It’s a shame undeniably enchanting – spiritual, that not more consideration has been made here to if you so believe – and the vast exbetter accommodate tourists – a few tacky souvenir shops are the only source of food and drink, and the ground nearby is panse of the valleys beneath you, together with the sheer weight of the mountains shaping them, holds our attention for some time. littered with instant noodle wrappers. The setting sun forces us to make our descent – aided eventually by I ask one young-looking monk if all the tourist clamor detracts from the spirituality of his adopted home (acutely aware, of course, of the torch of our smartphone. At the bottom of the cable car, we visit my own contribution to said clamor). “As long as they came here with one of the many restaurants inside the site, that mainly offer home-

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style food with local wild vegetables yecai. Our elevation and remoteness from major dwellings mean that the prices are high, but we bargain hard with some success. We start our second day the same way we started the first – careering around the mountains in a bus while trying not to get vomited on. It’s worth mentioning that these free buses that shepherd tourists around the mountain are incredibly frequent and easy to hop on and off – they certainly help justify the high price of the site’s entry ticket. Our vehicle took us to the Cloud Temple, which dates back to the Song Dynasty (960-1279). The Pilgrimage Hall, which housed traveling Daoists in the Ming Dynasty (1368-1644), is dedicated to the semi-mythical monk Zhang Sanfeng, said to be the founder of taijiquan. As the story goes, after witnessing a fight between a snake and a crane, he incorporated the animals’ movements into a martial art. The picture-perfect image of taijiquan disciples all crouched in formation in the courtyard is something you’ll have to leave to your mind’s eye. Although the views aren’t as spectacular as the peak, the aesthetic of temples set against the fir-speckled misty mountain backdrop is as

Photo by IC

travel

close to a realization of a traditional ink-and-wash Chinese landscape painting as you’re going to find. A little further up takes us to the last major site, the South Peak, where gravity-defying constructions peer precipitously over jagged crags. By this time we’ve spent a large portion of the last 48 hours climbing up or down staircases, but we’re sustained by a local Wudang tea tasting (50 yuan, or US$8, for a small box). It’s sold to us by a charming young lady who’s clearly preyed on a few impressionable young western tourists before. We leave with five boxes of Wudang tea after absolutely no

effort to bargain at all. Heading back into town (witnessing our third unlucky traveler reach for the sickbag), I was reminded of my earlier doubts as to the integrity of the sacred site, which thankfully proved to be misplaced. Of course somewhere this special is going to be visited by droves of tourists, and who am I to criticize any local entrepreneurs for wanting to make a buck or two from it. They have one of China’s most sacred sites in their back garden, one that attracts pilgrims and tourists alike.

real chinese

nǚ

Nü Hanzi Tough Girl

When a photo of a 17-year-old Russian girl named Julia Vins went viral on the Chinese Internet in 2013, the young woman’s pretty face and rock-hard muscles left netizens stunned, enraptured and more than a little confused. They dubbed the young bodybuilder “the prettiest nü hanzi.” Combining “nü,” or “female,” with “hanzi,” an overtly testosterone-charged word for “man,” nü hanzi was first popularized in the online gaming world, specifically referring to female players who were more vicious than their male opponents. As the term entered the real world, it came to be used as a general term for females endowed with personality traits traditionally seen as masculine

in China, such as boldness, frankness, generosity, independence and a lack of inhibition. Chinese netizens have even compiled a list of criteria for qualification as a nü hanzi. For example, a typical specimen doesn’t wear make-up or brush her hair before going out. She seldom does her nails, prefers pants to skirts, and never peels her apples before she eats them. She would rather play basketball than go shopping, and wouldn’t be caught dead letting a man carry her luggage for her. She speaks loudly and with confidence, and can’t stand girly-girls. Thanks to their reputation as grounded, practical people, women perceived as nü hanzi tend to

hàn

zǐ

form good friendships with both sexes. However, as the term’s popularity snowballed, many girls and women began to pretend to be nü hanzi. Furthermore, genuine nü hanzi are now coming in for criticism for being rude, discourteous and unladylike. Such opinions mean little to true nü hanzi, yet they cannot deny that they have a harder time finding love – men tend to see nü hanzi as their buddies, rather than potential partners. Indeed, many Chinese netizens agree that a ruan meizi (literally a “soft girl”) – a gentle, delicate woman desperately in need of saving – is the smarter choice. CHINA WEEKLY I March 2014

flavor of the month

Macanese Magic By Stephy Chung

CHINA WEEKLY I March 2014

Photo by Robin Fall

he term "fusion cuisine" has been abused in recent years. I get particularly annoyed at what some "hip" eateries are dreaming up in order to slap this moniker on their menus. Take the Ramen Burger for example. It was last summer's New York hit - a carb-heavy abomination that swapped the All-American bun for two pan-fried cakes of instant Japanese ramen. This, I suppose, was the coming together of two cultures? I am surprised that Macanese - a genuine example of fusion cuisine from Macau - is not more famous outside Asia. For far too long, it has lived in the shadow of nearby Hong Kong’s many Cantonese specialties. But as this tropical peninsula, the Las Vegas of Asia, quickly becomes one of China's hottest tourist destinations, its culinary profile is sure to rise. A former Portuguese colony, Macau is one of China's two Special Administrative Regions, and now home to the world's largest gambling economy. Gaming alone accounts for 50 percent of GDP. To the casual observer, gamblers here seem much more serious than the ones found on the Las Vegas Strip. It's common to see Chinese businessmen grip their cards tight, chain smoke, and somberly and soberly sip tea. Alcohol is seen as a distraction, and, bizarrely, thick slabs of buttered toast are the preferred snack at the tables. I much prefer spending my time outdoors - where the food is cheaper and prepared with less fanfare. On foot, Macau still feels quite European in parts, with its bilingual signage, mosaic tile plazas and charming colonial architecture. Alongside Mediterranean stucco bloom dim sum cafes, wet markets, ancient Buddhist temples, and the general sprawl of Chinese city planning. Food in Macau also dips in and out of East and West. Portuguesestyle egg tarts, now an institution throughout China, can be purchased hot from the oven. Dried salt cod or bacalhau dangle next to sweet Chinese jerk sausages, or lap cheong, which hang like upsidedown bouquets of scarlet-pink orchids. Portuguese and Chinese residents have lived side-by-side for over 400 years, allowing culinary cultures to commingle, with popular ingredients including chili pepper and tomatoes from the Americas, cinnamon and cloves from the East Indies, turmeric and cumin from India, soy sauce and star anise from China, and, naturally, Portuguese wine. Seafood from the harbor provided the essential local source of protein. Finding genuine Macanese cuisine was harder than I had imagined. Since the handover, restaurants tend to swing one way or the other, and it’s either very traditional Portuguese favorites or joints that stick to Cantonese or other Chinese regional cuisines. With no particular destination in mind, we settled on one more promisingly named "Taste Macau." Two things drew us in. The laminated, faded photos of dishes taped

onto the walls revealed curried crabs and stir fries. And then, there was the slightly cocky chef, who when asked if he served Macanese-style food claimed he had held onto secret family recipes from the 60s. He said he'd bring out some classics. To start, was minchi, Macau's “national dish”. It’s basically meat and potatoes with an Asian twist. The beef and pork was minced, spiced with cumin, soy and Worcestershire sauces, stir-fried with potatoes and served over white rice. Topped with a fried egg, its reminiscent of a Korean bibimbap, and is tastiest when all parts and juices are mixed together. The green soup, or caldo verde, was a glorified chicken soup. The Macanese version stayed true to its Portuguese roots - the broth was thick with mashed potatoes and livened up with chewy slices of smoked sausage. The kale however was swapped with baby bok choy leaves, and the addition of ginger gave each spoonful a nice little zing. The next dish, the African chicken, looked sloppy to eat, but its flavors were top notch. The grilled chicken was slightly blackened, yielding a crisp, sticky skin, and well-marinated with a Peri-Peri-style mix of garlic and hot chillies. The highlight was the creamy sauce that coated the dish. It was a thick blend of roasted tomato, coconut milk, peanuts, and white wine, whipped together to a savory, slightly curried gravy. The baked seafood rice was deliciously salty. It was the chef's take on baked duck rice after he ran out of duck. Small sardines and squid were sautéed in an oily brown sauce of peppers and caramelized onions, poured over a thin layer of rice, and then baked in a clay pot greased with pork fat, which helped create a buttery crust as in a good paella. Overall, I did feel as if I had a good first "taste" of Macau. The effortless swap of ingredients and spices in Macanese dishes is fusion, done right. 

essay

Braggers Abroad By Duncan Darroch-Thompson

For me, these events are spent trying to find and join the first, putting up with the second and desperately avoiding the third.

Illustration by Wu Shangwen

I creep into the room and look around with a familiar sense of impending doom, conscious that I am about to be subjected to the full glory of my least favorite two-word combination after “Chinese buffet:” “networking evening.” After only a year or so in the Shanghai business world, I find I can already nail the participants down on sight. The first category are those who, like me, hate going, but have had the foresight to bring a friend and take advantage of the free booze. They stand in the corner skillfully avoiding eye contact with anyone they do not know, and leave well before the end, relatively unscathed by the experience. Next, the card collectors – in my experience, these tend to be Chinese businessmen who speak poor English, have little interest in speaking to you in Mandarin, and are merely there to swap cards with you so they can justify their presence to their boss the following day. They race round the room, eat as much free food as humanly possible, and leave, probably with a goody bag for later. Third, the braggers. These are people to whom the evening is like a glorified speed dating event, where they are licensed to ooze self-importance from their every arrogant pore, and wax lyrical about their relative advantages and how pleased they are that they chose their current path. For me, these events are spent trying to find and join the first, endure the second and desperately avoid the third. It is, therefore, with horror that I see the evident Bragger-in-Chief swaggering up to me before I have even taken my first sip of cheap red wine. “David,” he grins slimily, thrusting his business card towards me at waist height – his forced American confidence stings my innate British hesitance. I fish out the only business card I have on me and give it to him. He glances at my company’s name and doesn’t recognize it. His is a big-name bank. His testosterone level visibly spikes.

After the formalities of what his job entails (“I’m the guy that keeps ex-pat money out of the hands of the world’s tax men”), his every word dripping in nauseating, glutinous selfcongratulation, I ask him the age-old question: “How long have you been in China?” “I’ve been here for five years. My company shipped me out here just after the Crisis because they couldn’t trust the Chinese to deal with civilized people.” At this point I’m 90 percent sure I’ve hit the mother lode, Wanky Ex-pat Zero. “But you enjoy living here?” I ask – expecting an answer revolving around his huge

package (pay or otherwise), his adoring Chinese girlfriend and his massive apartment. “Dude, I’m just glad I don’t have to deal with any Chinese people. [I raise a quizzical eyebrow] I mean, those guys really don’t have a clue, do they? I think the only way guys like us [I wince] can bear living here is by making fun of the Chinese.” His eyes betray the insecurity of the failed frat-boy. We move onto what he does with his evenings. “I like Mint [an upmarket club in Shanghai], man, but who pays to get in? Idiots, that’s who. I mean, have you met [insufferable local celebrity]? I went to his birthday party last year, and he was paying models to be there. I was like, seriously?” He motions to his iPhone, “I could make two calls now and have thirty girls here in twenty minutes, no money. You should come out with us sometime – I’ve got your card, I’ll give you a call.” My heart leaps to my throat, goosebumps spring up on my skin, then a sense of calm supersedes as I realize I’ve given him an old email address and phone number. I assure him that it has been an absolute pleasure to meet him, and that I’d love a night out with him and his harem, the very thought of which makes me want to eat my own feet. “Definitely, man,” he smirks, moving on to his next victim. Fortunately for the rest of us, my own experiences suggest that specimens such as David (not his real name) are harder to find than in previous years, even in Shanghai. As companies become less willing to shell out on huge ex-pat relocation packages, particularly to those in their 20s and early 30s, more young foreigners are taking jobs outside of the finance world. And as Chinese wages rise, the gap between locals and laowai is narrowing, which can only be a good thing for the perception of Western people in China. Yes, most of us are not as integrated into Chinese society as we would like, but as the number of Davids dwindles, the rest of us will flourish. CHINA WEEKLY I March 2014

Cultural listings

Cinema

Beijing in Love Four love stories, featuring different generations looking at love, romance and commitment with a quintessentially Beijing approach, are at the heart of the recently released cinematic work Beijing Love Story. Adapted from the hit TV series premiered in 2011, the movie aimed to capture the lovebirds market this year’s Valentine’s Day. 36-year-old Chen Sicheng, director, screenwriter and male lead of both the movie and the TV series, married Tong Liya, the female lead, one week before the movie’s release. Joined by Hong Kong actor Tony Leung Ka-fai and actress Carina Lau, the movie performed well at the box office, breaking 200 million yuan (US$31.7m) in three days. While some fans complained the movie had almost nothing to do with the original TV series, others praised its humor, clearly developed storylines and resonance with audiences.

Music

Book

Farewell to the Frog Prince

The Ignorant Travel, Works of Carelessness, Moss of Talking

On February 17, Taiwanese singer Frankie Kao died of cancer at the age of 63. One of the earliest Chinese pop rock singers, Kao became extremely popular and influential in the 1980s. His album Flaming Phoenix and its hit title track, released in 1982, made him a household name on both sides of the Taiwan Strait. Combining elements of pop, disco and rock, the album essentially set the tone for pop music, particularly on the mainland, for the 1980s. Yet Kao quit his singing career at the end of that decade to invest in the hotel business. When this endeavor failed, he returned to singing and entertainment, though his influence dropped sharply compared to his heyday. Wearing a pair of glasses on his famously “square” face, Kao was nicknamed “the Frog Prince.” His death once again reminded the Chinese pop scene of his contributions, and fans and the media have been mourning the loss.

CHINA WEEKLY I March 2014

By Chen Danqing

Exhibition

A Literary Heart in Paintings More than 200 works, including ink-andwash paintings, calligraphy and seals from artist Wei Guanjun, are showcased at Times Art Museum in Beijing from mid-January to early March. Now 49, Wei has been a longtime explorer of traditional Chinese art. Absorbing the essence of art works from different ages which may date back to two thousand years ago, Wei’s works display exquisite skills and no lack of creativity. Besides practicing art creation, Wei is also known for his intellectual contributions, teaching at some of China’s most prestigious academic institutions including Peking and Tsinghua universities, as well as publishing theoretical works. Titled The Literary Heart in Tuanlu - Large-scale Exhibition of Wei Guanjun, the exhibition displays Wei’s works across a long time span and also includes several forums for public art education and interaction.

A famous and outspoken painter, Chen Danqing was also well received by readers as an “amateur” writer, mainly of essays. His criticism is sharp, especially towards China’s social systems, and takes perfect command of the old-school language style inherited from writings before the founding of the People’s Republic of China. Additionally, his blank sincerity and sober wit have also won him a great number of followers. In January this year, three books of his – a travel diary, an essay collection and an in-depth interview – were published at the same time, further expanding his already thick literary oeuvre.

Commentary

The Future of the Chinese Middle Class The Party is now aware that in order to create a genuinely prosperous and stable society it can no longer sideline the aspirations of the consumer class By Cheng Li and Ryan McElveen

hen the Rolex store in Beijing’s swanky Sanlitun shop- to appear in academic writing related to the rise of rural industry ping district shut its doors earlier this year due to lack- and private urban entrepreneurship. At that time, academics generluster sales, it was taken as a sign that the government’s ally agreed that referring to these newly-monied up-and-comers as austerity campaign, launched in December by Xi Jinping, had begun “middle class” was not particularly apt because they tended to come to take effect. from underprivileged and uneducated backgrounds. At the same time, upscale Beijing restaurants in January saw revOver the past decade, however, increased globalization and urbanenue decline an average 35 percent on ization has created a group that the govthe previous year. A certain sense of ernment now seems comfortable calling irony accompanies this new frugal apChina’s middle class, although this group As China’s consumer class proach to life among the country’s upis materially different from its US and Euemerges to become the per class – just as their leaders advocate ropean equivalents. driving force behind growth, increased domestic consumption, those Although China’s middle class is made it provides a new challenge with genuine consumer power are goup of a complex mosaic of groups and to the country’s leadership ing to ground, suddenly afraid to flaunt individuals, it can be divided into three their wealth. major clusters. A pro-austerity campaign alongside a The first is an economic cluster that inpro-consumption drive may seem paracludes private sector entrepreneurs, small doxical, but in reality both movements urban business owners, employees of forare part of a wider push to placate a middle class that has, despite eign and domestic joint ventures, stock and real estate speculators, lacking political power, emerged as a core constituency with its own rural industrialists and rich farmers. The second is a political cluster unique needs and desires. that includes government officials, clerks, state sector managers and As China’s growth model shifts from being export to consumption- lawyers. The third and final group is a cultural and educational cluster based, the burgeoning middle class hold the keys to the effective fu- that includes academics and educators, media personalities, public inture governance and prosperity of the entire country more than any tellectuals and those working for think tanks. other group. Companies and banks abroad are also closely observBased on criteria combining occupation, income, consumption ing the rise of the Chinese consumer, knowing that their purchasing and innovation, distinguished Chinese sociologist Lu Xueyi noted power could potentially reshape the global economy. that in 2009 the middle class constituted 23 percent (243 million) After years of debate over its very existence, the Chinese middle of China’s total population, up from 15 percent in 2001. Lu predicts class (property-owning professionals and small and medium-sized that the Chinese middle class will grow at an annual rate of 1 perbusiness owners) has now emerged as the driving force behind Chi- cent over the next decade or so. As a result of this consistent growth, nese policy development and is in the process of becoming the largest members of the middle class will be better able to organize socially single consumer market the world has ever seen. and politically, leaving the government with no other choice but to It was not until the late 1980s that the term “middle class” began proactively factor the middle class into all major policy decisions.

CHINA WEEKLY I March 2014

Globally, the meaning of “middle class” tends to translate well in demographic and economic terms, but its political and cultural significance tends to differ from country to country. Lu believes that China will become a “true middle-class nation” in twenty years when the middle class constitutes 40 percent of the Chinese population, a figure approximately on a par with her analysis of Western societies. According to a study by two analysts at the Brookings Institution, China accounted for only 4 percent of global middle class spending in 2009. By volume this made it the seventh-largest middle class country in the world (unsurprising, given its 1.3bn population), but in terms of per capita income, China still lags far behind Western, and most other East Asian, economies. Nevertheless, the Brookings Institute concluded that China could become the “world’s largest single middle class market by 2020, surpassing the United States.” The middle class is not evenly distributed throughout China. According to some calculations, by 2009, this group already constituted 40 percent of the population in major cities such as Shanghai and Beijing. The proportion of Chinese urban residents is expected to increase by 34.8 percent between 2000 and 2030, the fastest urbanization rate in history, according to economist Hu Angang. By 2030, 71 percent of the Chinese population will live in cities, making up 21 percent of the world’s total urban population. However, how this will impact average incomes is far from clear. While the economic opportunities for China’s new middle class will be great, so will the costs. While the ability to buy a house, a car, and luxury goods has become synonymous with the Western middle class ideal, in China, a country already facing grave environmental, health, and housing crises long before it has made its citizens even moderately wealthy, such hopes and dreams could yet come to represent the single greatest socioeconomic dilemma of the 21st century. CHINA WEEKLY I March 2014

What could hamper the transition to consumption-based growth could be a general skepticism concerning social mobility. While Americans thrilled at the prospect of fulfilling the American Dream in the 1950s, in China, few seem to enjoy such unbridled optimism. The Chinese Ministry of Health revealed in 2011 that the majority of Chinese professionals — 51 percent — showed signs of depression. Extreme socioeconomic pressure in Chinese society, including skyrocketing housing prices when home ownership is almost always a precondition of marriage, environmental degradation which has led to some of the world’s worst urban pollution, health scares over tainted food, water and infant formula and the ever-present problem of official corruption have all shattered public confidence in the government and the country’s future direction. Middle class grievances over government policy have become increasingly evident in part because the expansion of the middle class has slowed even as economic disparity has increased. Members of the middle class often complain that they, rather than the upper class, have shouldered most of the financial burden of the government’s “harmonious society” policies. As the Party turns to austerity while also trying to convince the populace to spend more freely, the message is clear: there is now the political will at the top to engender optimism in the middle class. Indeed, only when middle class consumption fulfils its potential and when middle class interests in public health, rule of law, and freedom of speech are all institutionally protected, will Xi Jinping’s “Chinese Dream” have a hope of becoming a reality. (Cheng Li is the director of research and senior fellow at the John L Thornton China Center in the Foreign Policy program at The Brookings Institution. He is also a director of the National Committee on USChina Relations. Ryan McElveen is a researcher at The Brookings Institution Thornton China Center. A modified version of this commentary was originally published in International Studies Quarterly)

CHINA WEEKLY I March 2014