December 2014 by China Newsweek Corporation

Silent Killer: China's Battle with Depression

ECONOMY

Stock Image: Alibaba and the NYSE

POLITICS

Gone to Earth: The Hunt for Fugitive Officials

LAW AND ORDER

What does the Party mean by rule of law? (P16)

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Volume No. 076 December 2014

SOCIETY

EDITORIAL

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

NEWSCHINA I December 2014

China’s ‘new normal’ will be a long-term phenomenon

n the past couple of years, China’s central leadSecondly, the leadership must limit its power ership has frequently stressed that the country within the framework of the law, and draw clear must adapt to a “new normal” in terms of the boundaries between the government and the marpace of economic expansion, as GDP growth has ket to establish a modern system of governance. dropped below 8 percent. As the government shifts The current lack of a free market operating accordits priorities towards legal reing to the rule of law is the forms amid further slowdown, fundamental cause of a variety This period will pose any so-called “new normal” of social problems. will likely be for the long haul. Thirdly, the leadership must both opportunities and The 65 years that have carefully handle its relationchallenges for China passed since the establishships with foreign countries. and its leadership, as ment of People’s Republic of In recent decades, China’s the central authorities China in 1949 can be largely economy has leaned heavily are compelled to focus divided into two periods. on the global market, with its on getting China back While the first three decades dependence rate in external were dominated by devastatmarkets reaching more than on the track of healthy ing political turmoil and eco60 percent. Simultaneously, development. nomic instability, the latter China’s increasing economic, three have been characterized political and military power by rapid economic expansion. has exacerbated tensions and It appears that China's “new normal” marks a third confrontations with other countries in the region, phase in the short history of the PRC, a period in which poses a serious threat to future development. which China has to tackle a series of looming social The government must seek to establish an effective crises that many see as systemic in nature, a direct model for dialog and cooperation with other naresult of a preoccupation with GDP growth ahead tions. of social and civil development. Finally, in re-balancing and restructuring the This period will pose both opportunities and economy, the government needs to address some challenges for China and its leadership, as the cen- innate conflicts embedded within the economy ittral authorities are compelled to focus on getting self. For example, as urbanization accelerates, the China back on a track of healthy development. government should terminate its black-or-white Firstly, and most obviously, the government approach to defining urban and rural society, must adjust its basic attitude towards economic which in practice has uniformly meant benefiting growth. For a long period of time it has been ar- urban residents at the expense of their rural coungued that China “must maintain” a growth rate terparts. above 8 percent to avoid political instability. Such It is no doubt that these problems can only be an approach only serves to exacerbate social prob- solved over an extended period. As legal reforms lems stemming from economic injustice. It is now have gained momentum with the recently held a consensus that China must shift priorities from Fourth Plenum, the leadership must now demeconomic growth to social development, a major onstrate the political will to push forward relevant task for the immediate future. reforms to some ambitious goals. 

Contents

SHOW OF HANDS

P16

Editorial

politics

Cover Story

society

01 China’s ‘new normal’ will be a long-term phenomenon 10 12

EMBAs: School’s Out For Officials Anti-graft Drive: Fleet Foxes

P42

16 Fourth Plenum Legally Bound/Courting Reform

24 26 30

He Wenkai: As Clean as a Chinese Official Depression: Talking About It China Post : Survival for the Fittest

P36 NEWSCHINA I December 2014

Photo by CFP

Has the CPC Central Committee’s Fourth Plenary Session fudged or forwarded the Party’s stated goal of comprehensive legal reform?

Contents

P58

P46 33 Sex Therapy: Sexual Healing 36 Dengue Fever: Battle of the Blight

special report

38 Anti-social Crime: Villains and Victims economy

42 46

Alibaba IPO: No Alchemy Real Estate: End of an Era

international

50 North Korea: Deep-cover Diplomacy culture

52 Shen Jiawei: Painting History Red

NEWSCHINA I December 2014

P62

55 Ann Hui: Golden Gamble

visual REPORT

OUTSIDE IN

Commentary

58 Unsettling Development

P55

62 Accessible Yanqing: On The Fringe 70 A Great Deflation? 72 Tax reform is key to solving local debt 04 MEDIA FOCUS 05 What They Say 06 NEWS BRIEF 08 Netizen Watch 49 China by numbers 64 real chinese 66 ESSAY 68 CULTURAL LISTINGS

NewsChina, Chinese Edition

Minsheng Weekly

October 17, 2014

September 22, 2014

Unfamiliar Neighbors

Running Dry

China and India, two countries separated by the Himalayas, have many similarities in terms of population distribution, economic potential and global influence. While the two have maintained economic and cultural exchange throughout history, India remains relatively mysterious to the Chinese. Statistics show that yearly numbers of Chinese tourists heading to India in 2013 only passed the one million mark, far fewer than those traveling to most other neighboring countries, with total numbers of Chinese outbound tourists reaching over 100 million. In September, NewsChina reporters visited several Indian cities including Bangalore, Bombay, Gujarat, Bodh Gaya and Varanasi to explore the opportunities and challenges currently facing India in its drive toward modernization, and to learn how Indian people see themselves, their country and relations with China. Some believe choices and reflections inherent in India’s transformation process can serve as a mirror for its neighbor.

Economy & Nation Weekly October 10, 2014

Ready for Takeoff? On September 19, the C919, China’s first 150-seat large passenger aircraft, built using homegrown intellectual property, entered its final assembly phase in Shanghai, one year behind schedule. Its manufacturer, the Commercial Aircraft Corporation of China (CACC) announced that its first test flight would be conducted in 2015. If successful, some hope this new aircraft might have the potential to break the Boeing and Airbus monopoly in the civil aviation industry, and generate a huge supporting market coveted by both domestic and overseas suppliers. However, analysts have predicted that the success of any large domestic passenger airliner will continue to rely on supporting industries, a situation whereby Chinese enterprises assemble the final product, but the core technology, including the plane’s engines, is imported. Indeed, statistics from CACC show that half of the suppliers in the domestic industry are foreign companies. Huang Jun, a professor with Beihang University, said the government should try to prevent the market from becoming dominated by foreign suppliers, and encourage domestic development of core technology.

Frequent droughts in Beijing over the last 14 years have left the authorities in a constant battle to bolster the water supply. According to the Beijing Water Authority, Beijing’s daily water capacity is 3.22 million cubic meters, and recent drought has pushed these resources almost to their limits. Statistics from 1980 to 1998 show that the water supply per capita in Beijing dropped during that period from 320 to 100 cubic meters. According to the engineers with the South-to-North Water Diversion Project, the largest water diversion project undertaken in human history, by the end of 2020, Beijing is expected to have a diverse water supply sourced mainly from the nearby Miyun Reservoir, with additional supply provided by underground and imported water. Supply redirected to Beijing will fill 20 water plants serving an area of 6,000 square kilometers, fulfilling 50 percent of the capital’s residential and industrial water requirements. Analysts have warned that even with a reliable and constant supply of water, rapid population growth in arid northern areas will mean that water shortages continue to plague the region. Oriental Outlook October 14, 2014

Garbage Peril 20 years after Beijing’s first landfill site was built in 1994, the city’s waste disposal infrastructure has completed its second phase, incineration, and has entered the third, recycling. The growing volume of garbage in Beijing has become a significant challenge, and several garbage disposal facilities are under construction, each with massive investment. In 2013, Beijing’s waste volume reached a five-year high, although remained slightly lower than 2008, when the city hosted the Summer Olympics. According to the Beijing Municipal Environmental Protection Bureau, Beijing had a total garbage volume of 6.72 million tons by the end of 2013. However, the lack of scientific disposal methods, particularly an effective sorting system, has turned out to be a major obstacle to modernization. According to government policy, a total of 70,000 garbage sorting specialists are soon to begin educating the public on modern waste disposal techniques. South Reviews September 21, 2014

Bumpy Road Ahead September 29 was the first anniversary of the opening of the Shanghai Free Trade Zone (FTZ). Over the past year, this proving ground for economic reform has provoked enthusiastic coverage in both domestic and international media. Chinese Premier Li Keqiang pointed out that China began its reform in coastal areas 30 years ago, and the FTZ has boosted a new round of reform with great potential for further economic growth. However, as with all large-scale reform in China, there have been discrepancies between top-level design and actual implementation on the ground. China is still not a mature market economy, and the authorities still play a key role in resource allocation. However, the Shanghai FTZ remains a bold pilot project, and will likely play a key role in the next round of economic reform. NEWSCHINA I December 2014

Illustration by Wu Shangwen

“For Chinese people, buying an iPhone is more to keep up appearances than to show off. iPhones are actually quite cheap compared to other luxury items, but somehow they have become a status symbol and a fashion icon.” Commentator Wang Shichuan on the high demand for Apple smart phones in the Chinese market.

“I’ve already given all I can give, and I can’t do any better. I wish I could stay longer, but my body can’t take it anymore. Honestly, I’m not sad about it.”

“While I was a student, Lu Xun’s work was so ubiquitous that it felt like he was receiving government support.”

Chinese tennis star Li Na explaining her decision to retire.

Popular modernist-realist writer Yu Hua, on his former doubts about the authenticity of writings by early 20th century Chinese literary giant Lu Xun.

“Rising prices will force those who cannot afford an apartment out of Beijing, which will help alleviate the city’s overpopulation problem.”

“My boss was scared off by the pay cuts at Stateowned enterprises.”

Professor Dong Pan from Beijing Normal University earning public criticism for his opposition to administrative action in the housing market.

“Rule of law shouldn’t mean that the government can make a crime out of anything it wants to – that is called rule of punishment. Rule of law is placing the law above both the government and the people.” Sociology professor Sun Liping on the rule of law, the theme of the Fourth Plenary Session of the 18th Central Committee that began October 20, 2014.

“A foreign friend told me he is afraid of Chinese people since Chinese TV shows have taught him that we are all kung-fu masters and experts at deception. China urgently needs to export more than dramas about palace intrigue.” Writer Yu Qiuyu on modern Chinese cultural exports. NEWSCHINA I December 2014

Li Songnian, deputy general manager of a State-owned tourism company in Shandong Province, on his boss’s resignation. China has been lowering salaries for public sector executives in an attempt to curb corruption.

“Drug use has gradually become social currency – inviting someone to use drugs is a display of respect, and accepting the invitation is an expression of loyalty.” Yi Shenghua, a Beijing lawyer, warning that drug use is increasingly common among China’s population.

“In China, the Party will usually drop a corruption investigation if one of those implicated commits suicide.” Deng Yuwen, an independent political commentator, implying that many corrupt officials may have slipped through the net in cases where a fellow suspect has killed themself.

Top Story

China Strengthens German Ties

At the invitation of German Chancellor Angela Merkel, China’s Premier Li Keqiang made an official visit to Germany from October 9 to 11, further enhancing Sino-German relations. The most notable outcome of Li’s visit was the “Sino-German Action Plan for Cooperation: Joint Creation” concluded between the two countries, which clarifies bilateral exchanges in business, culture, tourism and “daily life.”

This new accord, according to Li, will inject fresh capital into the flagging Chinese economy. At the 2014 Sino-European summit held in Hamburg, Li defined “creation” as a “stimulus” to the Chinese jobs market, claiming that China will “open its doors wider to attract more foreign investors.” “Money is no longer a problem for China. What we lack now is creativity, and Germany will offer its abundant experience [to help] China’s economic transition,” Li Le, a

professor from Shanghai’s Tongji University specializing in Sino-German relations, told financial paper China Business News. Based on the new action plan, Germany will help introduce more creative technologies to China, especially in high-tech fields such as the design and manufacture of intelligent home appliance systems, water management and disposal, electric cars and cloud computing. In order to further facilitate bilateral trade, Germany also pledged to shorten the approval time for Schengen visa applications from Chinese nationals to 48 hours while also extending the standard term of validity of these pan-European visas. According to Chinese media reports, China and Germany signed US$18.1 billion worth of agreements in trade and technical cooperation during Li’s visit. China also invited Germany to participate in its muchtrumpeted development plan for its western regions, one of the Chinese government’s centerpiece strategic policies established in 2000. Li’s delegation left Berlin to continue their European tour with visits to Moscow and then Rome where further trade agreements were inked.

Business

Rural E-commerce Expanding

On October 13, the Ali Research Center under Alibaba Group, China’s e-commerce giant, issued its 2014 report 9 on rural e-business, indicating that this key market would expand in value to be worth a total of 460 billion yuan (US$76.7bn) by 2016. 8 Based on data from eBay equivalent Taobao, Alibaba’s online retail wing, the rate of online consumption in rural areas as a percentage of total consumption has risen from 7.11 7 percent in Q2, 2012 to 9.11 percent in Q1, 2014. Although still low in comparison to the revolutionary embracing of e-commerce seen in cities, the report said that this rate will 6 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 “keep growing.” This rapid growth in rural e-commerce has been attributed to competitive pricing and a better variety of goods offered online. However, the report also warned that infrastructure construction, particularly networking and logistics, was still a major obstacle for e-retailers hoping to reach China’s remote rural communities.

NEWSCHINA I December 2014

Health

Economy

“Cancer Killer” Discovered

Direct Yuan-Euro Trade

China’s Sun Yat-sen University in Guangdong Province recently discovered a new “cancer killing” virus, which they have named “M1.” At a press conference held October 7, the university revealed that they discovered M1 through the examination of mosquitoes found in Hainan, China’s southern island province, discovering that a single viral particle could kill up to 10 lung, bowel or bladder cancer cells without harming healthy cells. The university published their discovery in the Proceedings of the National Academy of the Sciences of the United States of America, an-

China’s central bank, the People’s Bank of China (PBoC), announced September 29 that it has approved direct trading between the Chinese yuan and the euro on the interbank forex market. According to the PBoC statement, the move aims to reduce the cost of currency exchange, facilitate bilateral trade between China and the EU, and promote the internationalization of China’s currency. The euro has become the sixth global currency that can now be directly traded with the yuan, after the US dollar, Australian dollar, New Zealand dollar, Japanese yen and the British pound. According to China’s customs agency, China-EU trade volume reached 1.8 trillion yuan (US$300bn) by the first half of 2014, a 9.6 percent increase on the same period in 2013 and some 220 billion yuan (US$36.6bn) more than China’s trade volume with the US.

nouncing that laboratory tests on rats and rabbits had been successful, and that monkey trials would begin shortly. Clinical trials on humans are expected to begin within three years.

Society

Riots in Yunnan The forced requisition of land has triggered violent conflict between developers and villagers in Jinning, Yunnan Province, leaving eight people dead and another 18 injured. The incident broke out on October 14 after villagers reportedly seized eight construction workers of the developer and doused them in gasoline. The developer then assembled a gang of over 100 armed people to attack the kidnappers, and were reportedly answered with Molotov cocktails. According to the official data, six construction workers and two villagers died in the violence. Media revealed that the conflict centered on complaints of inadequate compensation paid

to evicted villagers by the developer, who began bulldozing properties before any contracts had been signed. Given that local government had ignored two years’ worth of petitions from the villagers and that attempts by locals to alert police to the ongoing violence received no response, critics have slammed local bureaucrats for turning a blind eye until it was too late.

Politics

Runaway Expenditure “Rectified”

NEWSCHINA I December 2014

Rectification by Numbers

Public expenditure reduced by 25 percent in total: Over 100,000 officials gave up US$87m in illegal assets, mostly bribes

663 “vanity projects” suspended 586,000 meetings cut 132,000 leadership teams dismissed 137,000 administrative formalities cut 114,000 government cars withdrawn 22.3 million square meters of office space

Photos by Xinhua, CFP

The Central Committee of the Communist Party of China (CPC) recently publicized its first statistics about the inner-Party “rectification campaign” which began June 6, 2013, saying that the campaign has helped “reduce government expenditure by 53 billion yuan (US$8.8bn).” Fronted by President and Party Chairman Xi Jinping, the campaign aims to curb “formalism, bureaucratic red tape, hedonism and extravagance,” the so-called “four bad tendencies.” During the crackdown, unnecessary meetings have been canceled, formal ceremonies curtailed, luxurious office buildings have been closed and the government has seized tens of thousands of superfluous official cars. Recently, the campaign has shifted focus to crack down on high-end clubs patronized by officials, as well as luxurious “training days,” while also removing 160,000 reportedly freeloading personnel from government payrolls.

construction halted 457 high-end clubs located in historic sites or public parks closed down

Provoking Wu Chunming, a graduate tutor at Xiamen University, Fujian Province was expelled from the school and the Communist Party after it was alleged that he had sexually harassed a number of female students. A total of 122 people at the university jointly signed a letter in support of the revelations by one of Wu’s alleged victims.

Amazing A middle-aged woman from Huangshi, Hubei Province, remained afloat for around 10 hours after falling asleep in the Yangtze River following a heavy drinking session. She told the media that she fell asleep while swimming, and woke to find she had floated to a town in downstream Jiangxi Province, 75 kilometers from her home. She was pulled from the river by local villagers.

Embarrassing

He Xiuli, a county-level Party secretary from Sichuan Province, was mocked by Chinese netizens after a video clip appeared online of him playing the erhu, a traditional Chinese instrument, with the provincial symphony orchestra. Shocked by the “horrible, duck-like” sound of his playing, netizens deduced that he had been allowed to perform due to his political standing. The orchestra responded that the official was “just nervous.”

Interesting

A middle school in Anhui Province caught nationwide attention by celebrating when its “son-in-law” Eric Betzig won the 2014 Nobel Prize for Chemistry. According to media reports, Betzig is married to a Chinese woman named Ji Na, an alumnus of the school. Netizens were amused by the school’s brazen attempt to use a former student’s husband’s achievements to boost its reputation.

Poll the People The Beijing Trade Association for Performance has recently reached an agreement with 42 performance companies and agents who pledged they would not allow any performers with known links to drug offences to perform.

What do you think? I support it. It will help to purify the performing arts: 71.88% 6,760 I oppose it. It is too inhumane – they should be given a chance for rehabilitation: 20.35% 1,914 I don’t care: 6.31% 593 Other: 1.46% 138 Source: www.infzm.com

Most Circulated Post Retweeted 76,630 “Civilized behavior while traveling” has become a hot topic on the Chinese Internet since numerous Chinese media reports surfaced of Chinese tourists vandalizing cultural relics or littering while on vacation. A netizen posted a picture of a street cleaner holding their pay stub, appealing to Chinese people to behave themselves.

“Although re-tweeting can’t help raise this cleaner’s meager wage, I hope nobody will drop litter while on vacation, especially at peak holiday time. We are no more noble than any street sweeper. Environmental protection begins with you and me!” NEWSCHINA I December 2014

WHO’S

Top Five Search Queries On

HOT? WHO’S NOT?

over the week ending October 20

Running Man 246,868 Running Man, a reality outdoor obstacle-course game show on satellite TV station Zhejiang TV, is winning big audiences away from ubiquitous reality singing and dancing competitions. Thai Boxer vs. Gangster 210,936 Kwong Chun Hin, Hong Kong’s “King of Thai boxing,” has earned notoriety on the mainland by allegedly having a local mafioso hacked to death.

Red Wedding A young couple in Shanxi Province held a “red wedding” during the country’s National Day holiday, presided over by a giant portrait of Mao Zedong hung in the ceremony hall. During the wedding, the guests and the couples also exchanged copies of the Cultural Revolution-era Little Red Book as gifts.

“Least-employable” Majors 128,178 China’s Ministry of Education recently published the 15 college majors least likely to guarantee a job, with e-commerce and marketing two surprise inclusions.

“Model Police Officers” Under Investigation 98,802 The local police in Chengdu, Sichuan, came under fire after a number of former “model police officers” came under investigation for alleged corruption.

Top Blogger Profile Zhou Xiaoping Followers: 510,668 Zhou Xiaoping, a Chinese writer and blogger, has caught the public eye after being invited to the central government’s latest forum on literature and art, presided over by President Xi Jinping. Vehemently patriotic and given to warning against the US’ “hostile attitude” toward China, Zhou is regularly on the front lines of online political debate. Despite his rising popularity, Zhou has been constantly mocked online, with his detractors calling him a “Party mouthpiece.” However, Zhou has vowed to “keep bringing positive energy to the web,” just as President Xi has told him to. NEWSCHINA I December 2014

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

Smoggy Cities 116,301 Many Chinese netizens have posted photos of their hometowns blanketed by recent heavy smog.

Phony Princess A 48-year-old woman in Xi’an, Shaanxi Province, was caught claiming to be “the rightful heir to a US$29.2 billion-valued Qing Dynasty family inheritance.” With the help of faked government documents, she tricked six people into financially helping her “reclaim her imperial fortune.”

True Altruism

Public praise was heaped upon Dai Xingfen, a woman in Zhejiang Province who recently refused a check for one million yuan (US$167,000) from businessman He Rongfeng, whom she had helped 20 years ago when he was a beggar.

Presidential Peddler Jin Jianping, former president of Tianjin Gas Group, was found to have attempted to escape the anti-corruption campaign by disguising himself as a vegetable seller. The local police saw through Jin’s disguise, which consisted of a worn hat. Media have reported that Jin is under investigation for allegedly accepting bribes worth 36 million yuan (US$6m).

politics

EMBAs

School’s Out For Officials

A ban preventing government officials from attending executive training programs will likely put an end to classroom romances between officials and entrepreneurs By Han Yong

xecutive MBA programs, or “EMBAs,” may soon be a thing of the past in China, after becoming the newest target in the Communist Party of China (CPC)’s anti-corruption drive. On July 31, the CPC Central Committee and the Ministry of Education jointly issued a notice banning officials and executives at State-owned enterprises (SOEs) from enrolling in executive training programs, many of which, the Party claims, are “expensive networking clubs” masquerading as higher education. Officials already enrolled were

ordered to terminate their “studies” immediately. A document attached to the notice listed the training programs in which officials are forbidden from enrolling: EMBA and postEMBA programs, CEO programs purporting to facilitate networking between officials and businesspeople, and seminars and training programs designed for senior business executives. Two business schools – the China Europe International Business School and the Cheung Kong Graduate School of Business, were singled out by name.

Official Majority

The documents highlighted two key aspects of executive training programs that had led to the ban: murky practices surrounding tuition fees, and their use by private entrepreneurs to buy access to the influence of government officials. While the latter accusation referred specifically to CEO programs, analysts say that EMBA programs are essentially the same, and that the two characteristics make EMBA programs unsuitable for officials. Given that yearly fees for China’s top NEWSCHINA I December 2014

EMBA programs all exceed 500,000 yuan (US$81,000), questions have been raised as to how officials are footing the bill – in theory, enrollment in an EMBA program would cost a middling government official in Beijing about five years’ total income. However, officials are reportedly a common sight in Chinese EMBA schools – according to a report by the State-run Xinhua News Agency in July, more than 100 Chinese EMBA programs openly advertise themselves as having “high-ranking officials” as students. “Just flip through the alumni list of business schools that offer these EMBA classes, and you’ll see Party secretaries, procurators, judges and bureau chiefs,” the Xinhua report quoted He Jie, a member of the Revolutionary Committee of the Chinese Kuomintang, as saying. “Some businessmen hope to gain access to more resources by getting to know officials, while the latter may hope to trade their power for personal gain. EMBA programs can help make these connections,” He told Xinhua. According to data collected by NewsChina, officials account for about 5 to 10 percent of students on any given EMBA program, although the proportion varies considerably between different schools. Renmin University of China told NewsChina that the proportion of government officials enrolled in its EMBA classes has previously hit 26.3 percent. Three other prestigious Chinese business schools, Peking University’s Guanghua School of Management, the Cheung Kong Graduate School of Business and Shanghai Jiao Tong University’s Antai College of Economics and Management reported respective enrollment rates for government officials of 12, 11 and 4 percent. Of the 20 former students on Xiamen University’s list of notable alumni, four were officials. The rate is even higher if SOE executives are taken into account. Official statistics NEWSCHINA I December 2014

show that SOE executives take up a larger proportion than officials – around 30 percent of all EMBA students. Combined, government officials and SOE executives account for about half of all EMBA students at some universities.

Who Profits?

A former recruitment officer for a top Chinese EMBA program told NewsChina that there were three ways for officials to pay their tuition fees: reimbursement by their government organization, asking someone else to pay, or receiving a deduction or exemption from program administrators. “Of these three methods, the first two are hard to pull off, but most schools will willingly offer deductions or exemptions for officials,” the officer said. The ex-employee added that officials are the “lifeblood” of EMBA programs – they serve as a seal of approval, making the school look more attractive and drawing in new high-value students. The Peking University program, for instance, waives tuition fees if “an official can bring three other entrepreneurs to the class,” reported Xinhua. “In so doing, officials’ tuition is effectively shouldered by fee-paying entrepreneurs, and the program also aims to bring in more officials for those entrepreneurs to interact with,” Xinhua quoted Li Chengyan, an anticorruption researcher at Peking University, as saying. Since it first rolled out in China in 1995, the EMBA training system, which ostensibly focuses on the cultivation of business acumen, has evolved to better fit the Chinese environment – most EMBA programs in China have attached great importance to the sharing of resources among students. The owner of a Zhejiang-based private enterprise told NewsChina that the public and private sector resources gained on his twoyear EMBA course were a “low-cost, lowrisk” investment compared to traditional net-

working, since the classroom environment helped build “strong emotional connections” and rapport. There are clear benefits for officials too – compared with the compulsory training they receive at Party schools, EMBA programs not only tend to have better curricula, but also allow officials to cherry-pick the most effective business partners from the private sector, a Beijing-based government official told NewsChina.

Golden Years Pass

In 2002, 30 Chinese colleges and universities were granted permits to run EMBA programs, and EMBA tuition fees have risen continuously in the interim. Average tuition fees for the autumn 2002 semester of China’s top EMBA programs were about 200,000 yuan (US$32,400), but by 2012, that average had risen to over 500,000 yuan (US$81,000). The Cheung Kong Graduate School of Business saw the biggest rise to 658,000 yuan (US$106,600), 2.6 times the 2002 level of 253,000 yuan (US$41,200). EMBA students usually attend class four days per month, adding up to a total class time of 80 days over a two-year period to complete the program – at the Cheung Kong Graduate School of Business, this is equal to more than 8,000 yuan (US$1,300) per day. In 2009, as the global financial crisis loomed large, EMBA tuition surged – the Cheung Kong Graduate School of Business raised its EMBA tuition by 35 percent yearon-year. However, the year saw an equally steep rise in demand, with some programs reporting a 50 percent jump in the number of applicants. Now that EMBAs have been singled out for criticism in a CPC Central Committee document, insiders predict tough times ahead for the industry. The former EMBA program worker told NewsChina that EMBA schools are bracing themselves for a significant drop in applicants and tuition fees.

politics

Anti-graft Drive

Fleet Foxes China has launched an international ‘fox hunt’ designed to snare fugitives from justice. However, given the authorities’ limited ability to operate internationally and the sheer volume of cases, implementation has proven challenging By Xi Zhigang and Xie Ying

A suspected fugitive official surnamed Zhao is extradited from Malaysia, September 12, 2014

n September 27, four Chinese nationals were extradited to Beijing from Bangkok, Thailand to face charges of “illegal fundraising.” So far, 102 similar cases have seen Chinese citizens living overseas extradited as part of a Party-initiated “fox hunt” launched July 22 that is designed to detain fugitives linked to economic crimes. Unlike previous attempts to acquire corrupt officials living overseas, this latest campaign has succeeded in uniting several official law enforcement agencies, thanks largely to its placement under the auspices of the powerful Communist Party of China (CPC) Central Commission for Discipline Inspection (CCDI). “[The campaign] will have a direct influence on our fight against corruption whether or not we successfully snare fugitive officials,” Vice Minister of Public Security Liu Jinguo claimed at a recent work conference convened to announce the “fox hunt.” However, while the CCDI has abundant resources at their disposal within China to detain and punish those suspected of graft, its ability to project its powers overseas is largely dependent on the cooperation of foreign governments.

Campaign

Corrupt officials have routinely fled China since market reforms were embraced in the 1980s. The close connection between government and business provided ample opportunity for embezzlement,

but regular crackdowns on wayward officials meant those who had enriched themselves at the public’s expense typically chose to move their wealth abroad, out of the Party’s reach. The Chinese government has never published any complete data on this unique form of capital flight, with estimates from academics, think tanks and media sources varying wildly. In 2004, for example, a report by a research center under the Ministry of Commerce revealed that 4,000 officials had absconded since 1979, representing capital flight of some US$50 billion. This number seemed to underestimate the extent of the problem, as was indicated in 2011 when a similar report by China’s Academy of Social Sciences claimed that around 18,000 officials or top-level leaders in Stateowned Enterprises (SOEs) had fled abroad since the mid-1990s, taking with them assets worth 800 billion yuan (US$133.3bn). Although no official source has ever confirmed or denied the numbers involved in what remains an embarrassing problem for the Communist Party, a 2013 report by Cao Jianmin, chief procurator of the Supreme People’s Procuratorate, a key branch of China’s judiciary, mentioned that Chinese police had secured the extradition of 6,694 alleged corrupt officials between 2008 and 2013. More recently, the CCDI revealed that during China’s 2013 Mid-Autumn Festival (September 19-21) and National Day vacations (October 1-7), 1,100 officials left China and failed to return on schedule, with 714 confirmed as having “fled permanently.” NEWSCHINA I December 2014

Photo by CNS

A suspect surnamed Sun is returned to China from Cambodia, August 30, 2014

“We have to tighten our crackdown on fugitive officials to frighten those who are planning to flee,” CCDI director Wang Qishan claimed at the committee’s third plenary session in early January. In order to concentrate more efforts on the hunt, the CCDI has incorporated personnel from its foreign affairs and corruption prevention bureaus into an international cooperation bureau tasked entirely with securing the extradition of fugitive officials. In May, the CCDI held its first conference on its self-proclaimed “fox hunt,” discussing the division of labor and cooperation between relevant departments. The bureau has also stated that it can enlist the help of the Supreme People’s Court and the Supreme People’s Procuratorate, the country’s highest judicial bodies, if necessary. The main driving force behind the campaign, the Ministry of Public Security, has led the charge. Liu Dong, the campaign’s figurehead who also serves as deputy director of the Economic Crimes Investigation Department under the Ministry of Public Security, told NewsChina that they have opened a file on each suspected fugitive, and dispatched a total of 32 work teams worldwide. Despite the sixmonth time frame, Liu described the “fox hunt” campaign as “just the first step.”

Cooperation

On the wall of Liu Dong’s office hangs a large world map densely marked with red dots showing what he calls the “hideouts” of his

NEWSCHINA I December 2014

targets, most of them concentrated in North America, Eastern Europe, Africa and Southeast Asia. Liu claims that China’s “enhanced standing” in the international community has led to “great support” from international police forces, citing examples such as hedge fund manager Chen Yi who, along with seven million yuan (US$1.7m) in foreign currency and luxury goods, was extradited from Fiji 60 hours after catching her oneway flight out of China. However, China only has extradition agreements with 38, mostly developing, nations. Beijing’s cast-iron policy of never extraditing Chinese nationals to foreign jurisdictions under any circumstances has made it difficult to secure reciprocal agreements with some of the prime destinations for fugitive officials, including the US, Canada and the EU. “Given that China has failed to secure an extradition agreement with the US, and that the US provides so-called political asylum, many [fugitive] officials, particularly those of higher ranks, prefer the US as a destination,” Huang Feng, a professor of international law with Beijing Normal University, told the official Xinhua News Agency. According to domestic reports in the Chinese media, an estimated one third of the 51 officially named fugitive officials are now resident in the US. During the APEC conferences it hosted this year, China attempted to make cooperation on anti-graft campaigns between Asia-Pacific nations a key point on the agenda, heavily promoting the ACT-NET

Courtesy of the “Fox Hunt” Office

politics

A “fox hunt” strike force discuss cooperation with local police in an unnamed Southeast Asian country, date unknown

international anti-corruption network established between the APEC members. According to Robert Wang, the US official in charge of APEC affairs, China has set up an ACT-NET secretarial office in Shanghai in cooperation with the US. Although China and the US concluded an agreement in June 2014 on exchanging financial information concerning overseas nationals suspected of criminal activity, many observers have warned that it is not practical to expect too much from such agreements. While a CCDI official speaking on condition of anonymity told NewsChina that the US is seeking China’s help to secure the extradition of tax exiles, he acknowledged that “many more details still have to be negotiated.” Indeed, locating and identifying such fugitives in the absence of international police cooperation and extradition agreements is incredibly difficult, as most fugitives manage to secure foreign nationality, with many obtaining a foreign passport under a new name.

Persuasion

A hardline approach to fugitive officials, given China’s generally weak bargaining position when it comes to extradition and a lack of integration into global police practices, has left a second option, which the authorities term “persuasion and repatriation.” This softer approach is the preferred option of campaign head Liu Dong as it necessitates “less international involvement.” “Despite their wealth, many escaped officials live an isolated life dominated by the fear of being caught, which provides an opportunity,” he told NewsChina.

According to Liu, around 40 percent of the 102 fugitives repatriated were “persuaded back,” while others voluntarily turned themselves in at Chinese embassies or consulates. Still others nominated family members as a go-between in negotiating a repatriation agreement. However, when the CCDI discusses “repatriation,” it is referring to the practice of canceling officials’ passports and ID cards, making it difficult for them to obtain legal residency overseas. The hope is that such people will be deported by foreign jurisdictions as illegal immigrants, though many still secure political asylum in the US or EU, particularly if they can prove they are being pursued by the Chinese authorities. In order to minimize the risk of China’s overseas police operations causing diplomatic faux pas, according to Liu, the bureau has been staffed with highly-educated younger people, most of whom hold Master’s or doctoral degrees in criminal or corporate law, finance, economics or business management, a tactic Liu calls “fighting doctors with doctors” – a reference to the educational backgrounds of the bulk of his targets.

Failures

While the “fox hunt” has managed to claim a few pelts, its failure in terms of repatriating fugitive capital has been roundly criticized. With NEWSCHINA I December 2014

the bulk of the ill-gotten gains of fugitive officials invested abroad or secured in foreign banks, there is little the government or the Chinese police can do to retrieve them. Recent data showed that Australia only returned US$7.5 million to China since 2002, a negligible part of the embezzled funds claimed to have made their way across its borders. In July 2013, China and Canada reached an agreement on the exchange of internationally embezzled funds, but so far neither side has approved the deal. China has yet to draft its own law on recovering illegally-obtained assets moved offshore. Liu Dong denied that foreign countries are simply “unwilling to give the money back,” instead attributing the paltry rate of return to suspects’ attempts to launder their money through various offshore financial or investment channels, making it hard for investigators to distinguish the provenance of their assets. China has some of the world’s strictest laws and regulations on the removal of assets overseas, with each private citizen only permitted to move up to US$50,000 offshore in a single year through official channels. Recently, additional measures cracking down on unlicensed banks, strengthened supervision of financial institutions trading in foreign currency and new measures further restricting the ability of officials and their family members to travel abroad have all been approved by the authorities. The CCDI has issued a moratorium on NEWSCHINA I December 2014

Courtesy of the “Fox Hunt” Office

“Fox hunt” officers meet with local police in the South Pacific, August 18, 2013

Chinese police discuss extradition with Canadian police officials, June 21, 2013

promotions for any officials who have moved immediate family members overseas, and some provincial and municipal Party agencies have even seized the passports of their most high-ranking officials in order to further restrict their movement. However, paradoxically, such measures are easily circumvented by officials, particularly at higher levels, who can secure fake IDs and passports and have privileged access to under-the-table channels for moving their money, and even themselves and their families, out of reach of the authorities. For example, Gao Yan, the former Party secretary of Yunnan Province who fled to Australia in 2002, was revealed to have possessed at least three different identity cards and four passports. Yang Xiuzhu, the now-repatriated former deputy director of the construction department of Zhejiang Province who fled to the US in 2003 was found to have obtained a US green card under an assumed name. Earlier in September, the Chinese media revealed that Guo Yipin, the deputy mayor of Luoyang, Henan Province, simply “disappeared” in August when a higher-level disciplinary department launched an investigation into potential corruption among local officials. While some vanished officials later “reappear,” many are able to construct entirely new identities and new lives for themselves and their family members in foreign jurisdictions, supported by vast personal fortunes. The problem, therefore, remains preventing corruption in the first place in a system which continues to provide advantages for those who abuse it. A commentator on Hunan provincial television recently remarked that “the ultimate goal of the ‘fox hunt’ should be rooting out ‘foxes’ while they are still on their home turf.”

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hammer time Now in its second year, President Xi Jinpingâ&#x20AC;&#x2122;s anti-corruption campaign has seen an unprecedented number of Communist Party officials prosecuted for a range of offenses. Prior to the Fourth Plenary Session of the 18th Central Committee of the Communist Party of China, the fact that legal reform was top of the agenda caused many to ask: is the Party considering making itself subject to, rather than simply arbiter of, the law? As NewsChina discovers, the truth is complex...

NEWSCHINA I December 2014

Fourth Plenum

Legally Bound

Photo by CNS

The Party’s decision to choose “rule of law” as the theme of its annual conference reflects important shifts in its approach toward economics, law and ideology By Yu Xiaodong The live broadcast of the closing ceremony of the Fourth Plenum of the 18th Central Committee of the Communist Party of China is shown on a screen outside Beijing Railway Station, October 23, 2014

ince the central leadership under Chinese President and Party Chief Xi Jinping announced in late July that fazhi, loosely translated as “rule of law” would be the theme of the Party’s Fourth Plenum, heated discussion has raged among Chinese academics and officials, with many hoping that the plenum would lead to a fairer legal system. While analysts continue to debate the significance of the reform guidelines issued in the wake of the meeting, there is a consensus among experts that the success of legal reform will be crucial for China both in terms of sustaining its economic development and maintaining political stability, given the massive social problems that continue to result from the stagnation of political reform.

“Reform Dividends”

Much of the discussion has been conducted in the context of “reform,” a topic that has dominated China’s policy agenda ever since China launched its reform program more than 30 years ago. As reform is generally seen as the driving force behind China’s rapid economic growth over the past three decades, many experts attribute the lack of rule of law to the failure of the government to agree upon NEWSCHINA I December 2014

a reform agenda. In the late 1970s, in the aftermath of decades of political turmoil, the late Deng Xiaoping, the Chinese leader often credited as the architect of China’s reform, outlined an ambitious blueprint for economic and political reform that called for the separation of the government and the Party. But after the restoration of basic law and order following the Cultural Revolution, the emphasis on economic growth soon eclipsed the shortcomings of the country’s political and legal systems. Indeed, since the previous Maoist-era legal system had outlawed private property, the first steps toward market economy were, in the eyes of many, illegal. Effectively, this made law-breaking not just a necessity for a market-oriented reform, but a form of innovation to be encouraged. For example, the bold experiment in 1978 conducted by villagers in Xiaogang Village, Anhui Province, who rejected the collective ownership of farmland, a landmark event that for many signaled the beginning of China’s economic reform, was at the time technically a capital crime. In the past three decades, with slogans such as “Cross the river by feeling the stones,” and “Try boldly, and if you fail, correct your er-

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rors,” Chinese leaders have adopted a policy of “trial and error” that is effectively a ceaseless flirtation with law-breaking. “[Try and see] fosters disregard for the law among many officials,” said Xu Yaotong, a legal expert from the Chinese Academy of Governance, a mentality Xu warns has become prevalent, especially since economic growth has long been prioritized in officials’ performance criteria. This mentality is so deeply rooted that the ongoing anti-corruption campaign President Xi launched two years ago, which has brought down dozens if not hundreds of senior officials, has, some have argued, discouraged officials from “innovating,” as many fear being punished for overstepping blurry legal boundaries.

Vested Interests

However, since rapid economic growth creates powerful vested interests, the argument that the law should bend to accommodate reform – rather than vice versa – is often manipulated to serve the interests of local officials and their associates, resulting in widespread abuse of power. Perhaps the most obvious example of this is land appropriation, which often ends in forceful eviction of those who resist, a major source of public discontent. The lack of rule of law is also believed to be the fundamental reason behind most of China’s problems, such as environmental pollution, ailing food security and a spotty welfare state. The consensus is that China’s current model, which is based upon unlimited State power, is a dead end. In a widely cited article written in September 2013, Wu Jinglian, a respected economist, warned that without a market based on rule of law, vested interests would transform China’s economic model into “crony capitalism.” The Party’s pledge to allow the market to play a “dominant” role in the economy during the Third Plenum held in 2013, and this year’s focus on “rule of law,” are both seen as efforts to avoid that outcome. In the meantime, the Party has stepped up its anti-corruption drive, which has increasingly targeted interest groups within several Statedominated sectors. In a Party meeting held on October 8, President Xi reiterated his warning against the formation of “vested interests and factions” within the Party. On the next day, Party mouthpiece the People’s Daily explicitly identified five major “interest groups” including those in the oil sector associated with fallen former Politburo Standing Committee member and security tsar Zhou Yongkang, and senior officials in coal-rich Shanxi Province, who have also fallen under investigation in recent months. Experts now hope that tackling vested interests and establishing a

fairer legal system, which economists say would lead to lower business costs and reduced uncertainty, would provide new “reform dividends,” making China’s economic growth more sustainable. For example, in a survey conducted by Bloomberg News, a group of 17 economists estimated that Xi’s anti-corruption campaign would boost GDP by 0.1 to 0.5 percent by 2020, equal to a dividend of about US$70 billion.

Means or Ends?

But for many liberal experts, discussion of legal reforms should go beyond the issue of reform dividends, and genuinely solve the fundamental issue – the power structure within China’s political system. Chen Jian, vice-president of the China Society of Economic Reform, for example, argues that the establishment of rule of law should not just be a tool to fight corruption and drive economic reform, but the overall goal of China’s reform agenda. According to Chen, the fundamental problem with China’s legal system is that the Party has placed itself above the law, allowing senior leaders such as Zhou Yongkang to abuse power on a national scale for an entire decade. Chen argues that China’s legal reform should take a two-pronged approach. On one hand, the Party should confine its power within the framework of the constitution and the law. On the other, the government should take concrete measures to ensure that the various civil rights guaranteed in China’s constitution, such as the rights to free speech, protest and demonstration, as well as freedom of the press, are respected and protected. But so far, protection of civil rights has been entirely left out of the proposed legal reforms, with minimal discussion among experts and officials – the Party has sent mixed messages regarding the limiting of its own power. After assuming power, President Xi has repeatedly vowed that the Party’s power will be exercized “within the cage of regulations.” Moreover, by announcing the “rule of law” theme of the Fourth Plenum at the same time as the announcement of the investigation into Zhou Yongkang, the most senior Party official ever to fall under investigation, the Party has also shown itself willing to subject individual top leaders to punishment according to the law. In recent months, the Party has taken measures to grant more independence to local courts to guard them from the political influence of local officials, in an attempt to bring some fairness at the local level, where social conflicts are most serious. On September 7, all seven members of the Politburo Standing Committee attended a ceremony celebrating the 60th anniversary of the establishment of China’s top legislature the National People’s NEWSCHINA I December 2014

Photo by xinhua

Communist Party of China Chairman Xi Jinping (center) and other top Party leaders attend the Fourth Plenum of the 18th CPC Central Committee in Beijing, October 23, 2014

Congress (NPC), an unusual move which many took as a sign that the NPC’s role will be strengthened. According to the Fourth Plenum’s decision, the Party will adopt the principle of “rule according to the constitution,” establishing a supervision mechanism over the implementation of the constitution within the NPC. Prior to the opening of the Fourth Plenum, a book authored by 18 leading Chinese legal experts, entitled The State’s Bottom Line, delineated an initiative for constitutionalism, calling for the establishment of a constitution committee within the NPC, with the power to interpret the Chinese constitution, investigate constitutional violations and impeach national leaders. Although details of the legal reforms are yet to be unveiled, the fact that the book was published by the Central Compilation and Translation Bureau (CCTB), an influential agency directly subordinate to the Central Committee of the Communist Party of China (CPC), indicates that constitutionalist initiatives are at least on the agenda of the central leadership. Despite all the optimism, few expect the Party to relinquish its legislative and judicial decision-making power, something Professor Chen and many others deem to contradict the principle of rule of law. NEWSCHINA I December 2014

In an earlier speech in 2012 calling for respect for the constitution and legal reform, Xi reaffirmed that the Party must retain control over the country’s legal system. “The Party will lead the people in legislation and law enforcement, and will be the first to abide by the law,” said Xi. The approach is not only in line with that of the ongoing anticorruption campaign, an effort to boost the Party’s reputation and legitimacy, but also appears to be a part of Xi’s overall governance strategy based on his ubiquitous buzzword, “the Chinese dream.”

“Confucian Socialist Constitutionalism”

Instead of adopting “rule of law” as it is understood in Western democracies, Xi has repeatedly cited classical Chinese literature and philosophy, including the ancient sage Confucius, who advocated harmonious social order maintained by a righteous and virtuous ruler. Xi has also quoted Han Fei, a legalist thinker and contemporary of Confucius, who argued for uncompromising legal order maintained under a strong ruler. In a keynote speech made just days prior to the Fourth Plenum, Xi again drew upon ancient Chinese wisdom to justify the proposed le-

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Local judges from all over the country receive honors from the Supreme People’s Court, Beijing, October 20, 2014

gal reforms. Among the key concepts Xi raised in the speech were “the combination of ethics and law” and “virtuous rule with the supplement of punishment,” quotes from Xunzi and Dong Zhongshu, two later Confucian philosophers. Stressing that “the Chinese nation trod a development path that was different from other countries’ for several thousand years,” Xi argued that China should see “the experiences of other countries” – a phrase usually used to refer to Western democracies – as reference points, while also learning from China’s own cultural and historical heritage. Xi’s literary rhetoric has sparked debate as to whether he is more of a ruthless, Mao Zedong-style ruler, or a liberal, Deng Xiaopingstyle reformer. His apparent endorsements of a variety of ideological concepts since assuming power, ranging from Marxist-Leninism, to socialism with Chinese characteristics, to constitutionalism and Confucianism, have left China-watchers puzzled. Although Xi has vowed to “remain fully mindful of the experiences, lessons and warnings of history,” many remain skeptical about his seriousness in pushing forward meaningful political and legal reform, given the long tradition of authoritarian rule in China. But according to Professor Zheng Yongnian, director of the East Asian Institute at the National University of Singapore, Xi’s rhetoric may reflect a broader strategy aiming to transcend the heated ideological debate within China in recent years, primarily between “leftists” arguing for a stronger, more orthodox socialist State and liberal “right-

ists” advocating Western-style democracy. Many see both approaches as recipes for chaos and, ultimately, disaster. Zheng argues that by avoiding becoming tied up in ideological debates, Xi will be able to take a more pragmatic and institutional approach to solving the various challenges China is facing. Zheng’s view is partially echoed by Kang Xiaoguang, a professor of public administration at Renmin University, who argues that Xi’s emphasis on classical Chinese thought indicates a genuine interest in promoting a cultural change to re-establish China’s traditional value system after decades of economic growth that has encouraged naked materialism. In the last couple of months, in pushing forward with the anticorruption drive, China’s State media has frequently called for respect and restoration of Confucian ethics among officials and Party cadres. Professor Kang argued that Confucian values are a more cohesive and inclusive force than most political ideologies, and by blending Confucian values with elements of both socialist and Western values into what he calls “Confucian socialist constitutionalism,” the Party can not only accommodate the seemingly contradictory historical legacy left by Mao and Deng, but also allow it to take an non-confrontational approach towards Western political concepts. For Kang and many others, with its new focus and new theories, the Fourth Plenum will have a significant impact on China’s development as the Party strives to establish a new platform for national governance. NEWSCHINA I December 2014

Fourth Plenum

Courting Reform

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China’s central leadership has concluded its annual conference by issuing guidelines addressing the rule of law, but does this pledge mean progress? NewsChina reads between the lines By Yu Xiaodong Officials in Yichang City, Hubei Province distribute information leaflets on China’s legal system, December 2, 2011.

fter four days of meetings, the Fourth Plenum concluded on October 23 with the issuance of a communiqué pledging to “comprehensively advance the ruling of the country according to law,” a list of proposed reforms that the government says will serve as guidelines in the coming years. Although the document lacks specific details, it offers a general overview of the government’s approach to legal reform.

Cutting Connections

As many analysts had anticipated, the most concrete measures cited in the guidelines deal with protecting the legal system from interference by local officials. In recent months, the Party has taken steps to transfer the power to appoint judges and set budgets for local courts from local governments to higher-level courts. Instead of reporting to local Party leaders, local judges now report to their judicial superiors. In addition to these efforts, the guidelines also pledge that China will create “circuit courts” and establish “cross-administrative regional courts and procuratorates” aimed at widening the separation between local judges and local Party leaders. A mechanism to “record” and “publish” the names of officials who try to interfere in individual judi-

NEWSCHINA I December 2014

cial cases will be established within the court system. Other measures outlined in the guidelines include efforts to increase the level of professionalism among judges by recruiting legal professionals and graduates into the judiciary, instead of appointing bureaucrats with no legal background, a practice endemic nationwide. The guidelines also promise to “allow prosecutors to file public interest litigation cases,” such as those involving issues like environmental protection and food security. The move to make courts and procuratorates more independent is closely in line with President Xi Jinping’s “mass line campaign” launched earlier in 2014, under which Xi has urged government officials to respond to needs of the people, both to boost the Party’s public image and to encourage more effective governance.

‘Rule of Law Index’

Besides reform within the court system, the guidelines also declare that government and Party officials will be judged on their effectiveness in upholding the rule of law. Following President Xi Jinping’s repeated calls to “conduct reform according to law,” the document pledged to establish “a mechanism to examine the legitimacy of gov-

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A community court in Yunyang, Chongqing Municipality. Local judges endeavor to settle disputes at the micro level

ernments’ major decision-making” to increase both the accountability and transparency of government. The move is believed to be an effort to redefine the relationship between reform, which has so far focused on economic development, and the legal system, which for years has been subject to the imperative for economic growth. According to the guidelines, the government will incorporate a “rule of law index” into its evaluation of government officials, something analysts believe indicates a fundamental change in the Party’s approach to governance by shifting its focus from economic growth to social and legal development. In recent years, a major criticism of existing practices in official appraisals, which many argue to be one of the major causes of social injustice, is that officials are primarily evaluated based on economic indices like GDP growth, a large factor in determining their career trajectories. As the priority for economic growth has led to social unrest, with rocketing numbers of complaints and petitions, local officials are then evaluated by the number of petitions filed by residents in localities under their jurisdiction, which only exacerbates the problem as of-

ficials often resort to intimidating and punishing petitioners rather than addressing their grievances. The guidelines do not offer a specific explanation of the rule of law index, but pilot programs already implemented in various localities may provide clues as to how it might operate. For example, in March 2013 the Guangdong provincial government launched its own rule of law implementation index, comprising 108 indicators covering areas such as decision-making, transparency, and responding to petitions. The criteria include the number and ratio of public hearings held, responses to public requests for disclosure of government information, and administrative re-examination. In December 2013, the Guangdong government launched a province-wide “social appraisal” of major government agencies. Rather than relying on internal appraisals, the project ranked all government departments and agencies based on the results of surveys conducted among 11,570 randomly selected local residents. According to Professor Ma Huaide, vice-president of the China University of Political Science and Law, who recently led a similar project to assess the level of “rule of law” among 53 local governments, public opinion will likely play an important role in the future NEWSCHINA I December 2014

in evaluating officials according to the rule of law index, as it is a harder statistic for local governments to manipulate. Besides the rule of law index, another major measure adopted in the guidelines is the establishment of a “lifelong liability accounting system for major decisions, and a retrospective mechanism to hold people accountable for wrong decisions.” It has long been an unwritten rule among Chinese officialdom that officials are only responsible for their decisions made in their jurisdiction during the period of their tenure. Once they are promoted, transferred, demoted, or retired, all responsibility is erased. This is generally believed to be a major reason behind a variety of failings in governance – China’s well-documented local government debt problem, for instance. During their tenure, officials tend to be enthusiastic about launching projects involving massive investment, boosting economic growth and helping their political career but resulting in huge debt for which they will not be held accountable after being promoted.

‘Constitutionalism’

Photo by ic

Besides technical measures, which appear to target specific problem areas, the guidelines also provide a general direction for China’s future legal reform – “constitutionalism,” or more literally “ruling the country according to the [Chinese] constitution.” “To realize the rule of law, the country should be ruled in line with

College students in Liaocheng, Shandong Province, hold placards listing changes they expect from the Fourth Plenum

NEWSCHINA I December 2014

the constitution,” the document reads. Given the Western origin of the term and China’s emphasis on a “socialist legal system,” the Party’s use of the word “constitutionalism” has led to much discussion and debate. According to Qin Qianhong, a legal professor from Wuhan University, the move is unprecedented, and may mark a new era in China’s legal system. “It is the first time the concept of ‘constitutionalism’ has been mentioned in a keynote Party document,” said Qin. But the Party’s insistence on its own leadership over the legal system has led to skepticism among many, particularly those who advocate a more Western-style political system. While “the Party will remain above the law” is the most common conclusion among Western observers, many Chinese media outlets are pondering how highly the Party will prioritize its mandate over the legal system. For some, the fact that the term “the Party’s leadership” appears 13 times in the document indicates that the Party will continue to exert firm control over the country’s legal system, potentially jeopardizing legal reform. But for others, the fact that the Party only stressed the importance of its leadership in the last of the six major tasks outlined in the guidelines, instead of in the first as would have been expected, may suggest otherwise. For legal experts such as Professor Qin, the Party’s launch of a “constitutionalism” initiative is more than just rhetoric. Qin pointed out that the guidelines do not just mention this word, but call for the National People’s Congress – China’s top legislature – and its Standing Committee to have a larger role in both interpreting China’s constitution and supervising its implementation. “It is something that is stipulated in the Constitution, but that has never been invoked by the Party,” Qin added, who argued that the guidelines’ wording suggests that there will be any concrete institutional arrangements forthcoming in the following months. Stressing in the guidelines that “China’s constitution establishes the leadership status of the Communist Party of China,” the Party appears to have found no conflicts in its objectives. For Professor Ma, the biggest threat to proposed legal reform is not potential conceptual contradiction, but what he calls “formalism” among officials, a widespread tendency to pay lip service to reform without taking affirmative action, a habit that has helped scupper various reform initiatives over recent years. “Currently, there is no incentive to push forward legal reform at the local level,” Professor Ma told NewsChina, “Now, the question is how to effectively implement these reforms.”

society

He Wenkai

As Clean as a Chinese Official A local public prosecutor’s bold online disclosure of his private assets has drawn cautious public plaudits, but may have made him an enemy of his higher-ups By Chen Tao

hen a 200,000 yuan (US$32,557) prize was offered for any mid- or high-level Chinese government official who could prove they were completely innocent of corruption, most took it as little more than a sarcastic joke – the type of wry social commentary that is the stock-in-trade of Chinese netizens. However, one official didn’t seem to get the joke – in mid-July, government official He Wenkai from Fangchenggang, Guangxi Province, shocked many by voluntarily publishing information about his private wealth through his account on Weibo, China’s Twitter equivalent. Acting as a public prosecutor with the local procuratorate in Fangchenggang, a coastal city of over 1 million people, He Wenkai, 46, has spent much of the last few decades investigating local officials, earning him his fair share of enemies. Yet he also admits that, even in his line of work, bribery is relatively commonplace. “The temptation is real,” he told NewsChina, adding that given the complex internal power politics in the government system, he was careful not to make “stupid mistakes.” He Wenkai acknowledged, however, that it would be “virtually impossible” to prove his total innocence: “It would be much easier to defame myself than prove myself. Initially, this wasn’t an effort to prove myself uncorrupted, but more an attempt to improve the image of officials in general,” he told NewsChina. In response to the online post offering the reward, He quipped: “I am poor, so I’m very interested in the 200,000 yuan. I invite the awarder to have me ‘human flesh searched.’”

“I completely agree with the policy to encourage officials to declare their private property, as it could foster a much cleaner domestic political environment,” continued He, on his Weibo. “My monthly salary is 6,400 yuan (US$1,042), and my wife earns up to 9,000 (US$1,465) per month. We have two apartments, one of which is mortgaged, and we have two cars worth a total of 380,000 yuan (US$ 61,860). My family has bank deposits of 150,000 yuan (US$24,418).”

Active and Outspoken

He Wenkai’s mother and father both served as officials in Guangxi Province. Graduating from university as a Chinese major, He first worked as teacher in Guangxi University for Nationalities in 1989. Six years later, he moved to a job with the Fangchenggang Procuratorate, before obtaining a Master’s degree in law in 2000. A prolific writer, He remained active in online forums and maintained a blog before moving to Weibo when the platform began to take off in 2010. Since then, he has garnered more than 200,000 followers, and has written a total of over 20,000 public posts on the site. He’s online popularity is due in large part to his background as a procurator – his insider knowledge allowing him to comment with authority on China’s legal system and social issues. For instance, after Yang Dacai, an official in Shanxi, was charged with corruption after netizens pointed out his various luxury watches in photos online, He Wenkai posted photos on Weibo of his own 10,000 yuan (US$1,628) luxury NEWSCHINA I December 2014

Photo by Xinhua

He Wenkai in front of his workplace, the local procuratorate

watch, which he claimed was bought for him by his wife. After netizens questioned the fact that He had two children – an apparent violation of China’s One Child Policy – He explained that his first child had been born during his first marriage, which ended in divorce. He told NewsChina that his wife opposes his proactive disclosures about his private life, not only because it threatens the couple’s privacy, but also since it may put them under pressure from other government officials. He acknowledges that being too vocal or critical may land him and his family in trouble, and that due to his position, he is technically under strict regulations concerning “state secrets.” He’s willingness to bend these rules has brought him both plaudits and criticism. “Indeed, those who condemn me do not target me in particular, but rather to express resentment towards anyone rich. They question the validity of my opinions not necessarily because they disagree with me, but more because of my role in the government system,” said He, who sometimes enters into public debate with his online detractors. He says this is a way to keep his Weibo account active and popular. Tan Baoxian, a friend of He’s, a government official from Fangchenggang Politics and Law Committee, told NewsChina: “He’s Weibo content is mostly related to his work, and often gives off ‘positive energy,’ which is a good thing. However, from another perspective, for He himself, increasing his public profile may land him in unfavorable situations.” NEWSCHINA I December 2014

Indeed, He as a procurator has witnessed the downfall of a number of local officials, many of whom were personal acquaintances. He recalled that in 2008, he prosecuted his close personal friend, former Public Security Bureau chief Kang Fushun, for taking bribes. Kang was eventually sentenced to 15 years in prison. “This is the dramatic side of my life,” commented He.

Straightforward

Chinese officials are famous for their silence and secrecy outside of work. He once wrote in March 2011, “Chinese officials cannot be straightforward, and cannot speak the truth as they wish. Most of the time, they are pretending. They certainly do not enjoy easy lives. They too need to earn a living and support their families.” The night after his interview with NewsChina, He Wenkai posted on his Weibo: “Scores of officials who used to be vocal on Weibo are now retreating from it. In most people’s eyes, public servants with Weibo accounts are those who really want to change something. However, such people are few in number, and even worse, they are becoming more and more cautious with their words. Eventually, they may be forced to remain silent.” He is unsure how long his straightforward personality could still survive on the boundary between officialdom and media – He worries that his Weibo could come back to haunt him one day. “I live my life waiting for that day,” He wrote in mid-August.

society

Depression

Talking About It

With depression on the rise in China, Chinese people are being forced to discuss mental health By Yuan Ye

NEWSCHINA I December 2014

hen it was reported that the suicide of Robin Williams, one of China’s best-loved Western comedians, had been attributed to depression, discussing this illness quickly shot to the top of the Chinese domestic media agenda. Only two-and-a-half weeks after Williams’ death, Sun Zhongxu, 41, an acclaimed literary translator, was found dead in his home - his death was also ruled a suicide. Sun was known for his popular Chinese translations of various modern classics including J.D. Salinger’s The Catcher in the Rye and George Orwell’s Nineteen Eighty-four and Animal Farm, among a body of translation work spanning roughly 4 million Chinese characters. It was reported that Sun had been suffering from depression for about three years, and had been receiving treatment prior to his death. Alongside the celebration of Sun’s life and work, the illness of depression, whether in the form of reports of new suicide cases or general discussion of the illness, also became a popular topic. On China’s various social media platforms, a number of articles written by current or former sufferers, detailing their experiences and explaining the illness, many prompted by Sun’s death, garnered large numbers of clicks. People were trying to find out what the disease was like and how it could affect them. Suddenly, it seemed as though China had begun to discuss an issue that, despite affecting large numbers of its population, had long remained hidden.

“Nobody told me”

It wasn’t the first time the Chinese public had heard of depression. Mentions of the

NEWSCHINA I December 2014

illness in China’s mainstream media can be found as early as 2003, when Hong Kong entertainment star Leslie Cheung leapt to his death from a building. Reports at the time focused on the suicide itself, and the subsequent commemoration, rather than the disease Cheung was known to have suffered from. The public still tended to see depression as something that was only a threat to temperamental movie stars, rather than themselves. Discussion was revived in 2006, when Cui Yongyuan, a famous talk show host with State broadcaster CCTV, talked publicly about his struggle with clinical depression. Witty and intelligent on camera, many were shocked at the stark contrast between Cui’s public persona and his inner struggle. However, perhaps since Cui was known primarily for his mind (he joked that “only a genius can get depression”), the illness was largely discussed as a mental issue, rather than a physical one. In reality, many Chinese were suffering from depression in its various forms – they simply weren’t aware of the illness’s existence. “In 2002 and 2003, I became very sick. I had a fever and couldn’t sleep,” said Du Hanqi, now a psychotherapist based in Beijing. “The fever went on for half a year, accompanied by terrible hives.” During that time, Du found herself constantly in low spirits, accompanied by chronic anxiety. She was in her 20s, but “the world had become gray.” “I often felt extremely pessimistic and in despair,” Du told NewsChina. She was also plagued by thoughts of suicide. “Every week, there would be one day when I just wanted

to die. I would just lie in bed for the whole day,” she said. Du, a student at the time, saw a doctor about her condition - besides receiving saline drips and being prescribed anti-febrile medication, she was also given heavy doses of estazolam, a sedative, for her insomnia. In terms of advice, the doctors told her to “be optimistic and take things easy.” However, Du’s treatment in Beijing wasn’t working. Her fever would not dissipate, and her hives became uncontrollable. She decided to leave for her hometown Shenzhen, where her father was also a doctor. Back in Shenzhen with her family, Du was hospitalized for two months. She also made a decision to apply for postgraduate study in the UK. “When you feel there’s something waiting for you somewhere far away, you feel hope,” she said. The thought of going to the UK, in addition to the proximity of her family, eased Du’s suffering. In 2004, she left for the UK. The change of environment brought a fresh perspective for Du. While studying journalism, she became interested in psychology. Though she was still suffering from insomnia, anxiety and low-grade fever, the symptoms lessened. In 2006, Du went back to China and worked as part of a documentary film crew in Tibet. She stayed in Tibet for three months, where the clean, picturesque natural environment and relaxed interpersonal relationships further eased her condition. She became interested in Buddhism, and began to read up on the subject, which led her back to reading about psychology. She began to notice that in every book she read, she would encounter the

Photo by Xinhua

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Renowned translator Sun Zhongxu, who suffered from clinical depression, committed suicide at the age of 41

word “depression.” “I then realized I had been suffering from depression,” she said. “And when I realized it…there came strength.” She continued to study psychology in her spare time, since she found it “so practical and useful.” “I started to like myself and enjoy life,” she said. Also, she learned to accept the fact that “everyone may lose, fail and make mistakes… You simply have to accept yourself,” she said. “I had wished someone would come to my rescue when I was at my worst. If someone had told me that I was suffering from depression, things would have been much easier for me,” she told NewsChina. “But back then, no one did.”

Staggering Increase

Many Chinese people have had similar experiences to Du Hanqi. Zhu Yi, executive editor of a Shanghai-based film magazine, shared his experience in a recent article titled “Talking about My Depression,” which was re-tweeted nearly ten thousand times on We-

ibo, China’s Twitter equivalent. Zhu wrote that he had been suffering from depression for three years before being diagnosed. During those three years, Zhu wrote, he had suffered from dizziness, drowsiness, impaired memory, headaches, insomnia, and despair. He went through numerous medical examinations and tried a plethora of medicines, both Western and Chinese. Nothing seemed to work – until one day, a doctor suggested he visit the psychology department. “In China, we often used to diagnose patients with ‘neurasthenia’ [weakness of nervous system],” said Chen Lin, director of the Depression Treatment Center at Beijing Huilongguan Hospital, one of Beijing’s three major psychiatric hospitals. “But many neurasthenia patients were in fact suffering from depression.” “The stigmatization of mental illness has been entrenched in China for a long time,” Chen told NewsChina. Patients feared being labeled as having mental problems, and doctors gave in to their requests for a different

diagnosis. Neurasthenia, in many cases actually the physical manifestation of depression – insomnia, anxiety and weakness – became a household term in China over recent decades, especially in the 1990s, during which time a large number of purported neurasthenia cures flooded the market. As far back as 1982, an epidemiological investigation into mental disorders was carried out in 12 areas nationwide. The results showed only a 0.076 incidence rate of mood disorders (with depressive disorders one of the main diagnoses). In 1993, another national investigation showed that this had increased to 0.45 percent. Between 2001 to 2005, the third and most recent national investigation into mental disorders, covering 113 million Chinese people, indicated a mood disorder rate of 6.1 percent – an eighty-fold increase in just two decades. Though many experts, including Chen Lin, believe the rates in the first two investigations were in part due to different classification methods, the rapid increase in the prevalence of depression over the past decades is generally seen as a hard fact. The Depression Treatment Center at Huilongguan Hospital has 60 regular ward beds – most of these are consistently occupied, and the center often has to keep several additional beds in the narrow gaps left in the wards. “In the past years, we’ve seen an annual increase in the number of patients of 20 to 30 percent,” said Chen Lin. “And we are basically always running beyond capacity.” “Pervasive competition in modern society is one of the reasons for the epidemic of depression,” said Chen Rongxia, a philosophy professor from Shanghai Normal University. “In big cities like Beijing, the competiNEWSCHINA I December 2014

NEWSCHINA I December 2014

Photo by ic

tion has become so fierce. People have many worries about success and failure,” said Du Hanqi. “Chinese society now adopts a very unitary standard of success, which often prioritizes material achievements or fame over all else. People don’t value the safety and happiness found in their own homes,” she said. Du passed the national second-level psychotherapist examination in 2009, and opened her own consultancy center in 2011. Many of her visitors are suffering from anxiety caused by frustrations like divorce, breakup, business failure and parent-child tensions. Du said that tense interpersonal relations between Chinese people are a common cause of anxiety. “People don’t trust each other. We don’t feel safe in our hearts,” she said. In her opinion, such cautiousness may even be rooted in the decades of political turmoil before Reform and Opening-up began in 1978. All of these “lead to an intense anger directed both at the outside world and oneself,” she added. Some see the acceleration of technological development as another important reason. Doctor Zhang Jiming from the Psychological Consultation Center at Beijing Normal University said that information technology has bound people to their work, leaving no clear concept of a work-life balance. Zhang also said that China has moved too fast “into the modern world.” “It actually took a very long time for developed countries to transform from traditional societies into modern ones, [whereas in China] it all happened in one second,” something for which neither the country as a whole nor individual citizens were adequately prepared. From his professional medical perspective, Chen Lin pointed out that biological factors

TV anchor Cui Yongyuan is one of a handful of public figures in China to have openly admitted to suffering from depression

like genetic inheritance and neuroendocrine disorders can often cause depression, as well as more personal psychological reasons such as a lack of understanding from one’s family members. “People are facing more negativity in today’s society,” Chen said, pointing out the stress faced by China’s migrant worker population, which reached 269 million in 2013, alongside a similar-sized floating population. New migrants into a strange city face stress and loneliness, as do those they leave behind. According to a recent report by The Guardian, research funded by the Heilongjiang provincial government indicated that nearly 50 percent of children left behind by migrant parents – a group that numbers 61 million, according to the All-China Women’s Federation – suffer from depression and anxiety to some degree.

“There is also the pollution, and food safety problems,” Chen added. Many Chinese media outlets have reported a figure of 90 million depression sufferers currently living in China, calculated on the basis of the 6.1 prevalence rate of mood disorders. “In the medical circle, a more common estimate is between 26 and 30 million,” Chen Lin told NewsChina. Yet what worries Chen most are those who haven’t visited the right doctors. A figure widely quoted in Chinese media indicates that even in advanced hospitals in major cities like Shanghai – let alone village clinics – the recognition rate of depression is only 21 percent. “Only 8 percent of sufferers had ever sought professional help, and only 5 percent had ever seen a mental health professional,” he said. “[Ideally] the cure rate of depression can be up to 67 percent.”

society

China Post

Survival for the Fittest

The ossified mega-State-owned Enterprise China Post Group has undergone restructuring to cater to a modern marketplace. But is this enormous entity really able to change? By Su Xiaoming in Beijing and Yang Di in Nanjing

NEWSCHINA I December 2014

“Business as Usual”

Since 1990, faced with increased competition from courier services and the Internet, China Post began to record sustained financial losses for the first time in its history. In a single year (1995), 2 billion yuan (US$326m) was wiped off its books. Higher consumer demand for express delivery services has driven China Post to attempt to increase efficiency, with each day’s mail having to be fully sorted between 7 AM and 4 AM the following day in order to ensure that deliveries make it onto the dozens of postal trains that leave the capital in the early hours of each morning. By 2013, there were over 954,000 employees working for China Post. To ensure maximum efficiency, the company underwent a massive hardware upgrade, rebuilding its central distribution center in Beijing which today covers an area of about 2,077 acres, or 31 soccer fields. At peak times, over 1,200 clerks work inside this building, known locally as the “Big Flat,” which in 2013 processed a total of 955 million conventional letters, 39 million registered letters, 460 million printed documents, 9.73 million registered printed documents and 9.14 million parcels. In other words, 20 percent of all the mail sent and received in China in that year passed through this single building. Streamlining has inevitably led to cuts. Between 2002 and 2013, the central authorities cut the number of local post offices in China from 78,000 to 64,000. Nevertheless, China Post is still by far the country’s most ubiquitous business, with branches in some of the country’s most remote and impoverished areas, providing an essential

NEWSCHINA I December 2014

distribution channel for government welfare to areas lacking even a local bank. As a result, although savings have been made, profits have remained stagnant. “According to the common rule established by the Universal Postal Union (UPU),” said Liu Shaoquan, newspaper and periodical distribution bureau chief with China Post Group, “there should be a uniform flat rate to mail a letter to anywhere in the world. Thus, conventional mail services rarely make a profit.” “For example, a letter from Beijing to a remote region in Tibet would cost the consumer a mere 1.2 yuan (19 US cents) to post,” Liu continued. The human cost and price of transportation spending has kept increasing as China’s economy has expanded and demand has risen. However, prices have remained generally low, as have the wages of postal employees. Even State subsidies have failed to have much of an impact on China Post’s declining profitability. Zhou Huande from the China Post Shanghai Research Institute recalled that at the beginning of the 21st century his company opted for drastic and often misguided measures simply to make ends meet. Beginning in the early 2000s, he told NewsChina, local post offices also ran small stores on their premises, selling goods from commemorative stamps and calendars to beer, cake and ramen noodles. “[China Post] faces both opportunities and difficulties,” Zhou told NewsChina. “For example, our large number of branches mean operations are expensive, but at the same time it gives us the reach to be able to distribute farming subsidies and agricultural insurance to remote areas,” he said.

Photo by CFP

t 7 PM on September 4, 2014, Wang Xiang sits at her desk in the sorting office of China Post Group in Beijing’s Tongzhou District. Wang has worked for this vast government corporation since 1997, her principal job being to sort letters and small packages according to destination. Though her job is boring and repetitive, Wang takes pride in it, and on a good day can sort some 3,000 letters per hour, making her one of China’s most efficient mail sorters – an honor she has had officially recognized by her employer and the State. “Despite the center being equipped with 20 sorting machines that can each sort 35,000 to 40,000 letters an hour, over 40 percent of mail received still needs to be sorted by hand” said He Huan, head of the Tongzhou center’s production and dispatch department. “One reason is illegible handwriting,” he added. As the Internet has become the population’s favored communication tool, and courier companies have eaten into the parcel delivery sector, China Post, despite having a virtual monopoly on conventional postal delivery, is struggling to compete. As a vast enterprise responsible for hundreds of thousands of employees across the whole country, the onus is now on China Post to reform according to the needs of the market.

A newsstand owned by China Post with a screen indicating local weather conditions, Beijing, March 19, 2014

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Photo by Dong Jiexu

Competition

A sorting officer scans packages awaiting delivery, September 4, 2014

“To turn disadvantages into advantages, the key is to change our philosophy,” Zhou added.

Reshuffle Measures

In Zhou Huande’s opinion, the decade-long reshuffle has been a process of continuous trial and error. Since 2003, the State Council Economic Research Center started to conduct research into reforming China Post. First on the agenda was to attempt to separate its monopolies (conventional mailing) from its competitive services (courier services and financial management) by the end of 2004. A reform plan was formally issued in September 2005. By November the following year, China Post was formally reclassified as a Stateowned Enterprise (SOE) rather than a branch of the government. The plan also created the Postal Savings Bank of China (PSBC), which today is the nation’s seventh-largest bank in terms of holdings. Close ties to the government, an unrivaled network of branches (opened in China Post’s hundreds of thousands of outlets nationwide) and exacting loan application standards have made the PSBC a highly profitable enterprise, with some US$909 billion in total assets and an average default rate of only 0.51 percent. “It can be said that we are one of the most affluent banks in China,” Lü Jiajin, president of the PSBC, told NewsChina. According to Lü, the PSBC currently has a total of 390,000 outlets, and enjoys a presence even in the country’s most remote locales. “PSBC services cover the largest area and enjoy the largest client base [of any Chinese bank],” he added, with the PSBC’s customer base even dwarfing that of the Agricultural Bank of China (ABC), which has nearly 24,000 branches. The company is now preparing to go public.

in 1980, China Postal Express & Logistics Co., Ltd., the branch of China Post responsible for express mail and courier services, launched EMS, the first courier service in China. EMS enjoyed 97 percent market share until the industry was opened to the private sector in the 1990s, which saw EMS dominance broken in 1995, and its market share sink to 20 percent in recent years (see: “On the Move,” NewsChina, February, 2013, Vol. 054). “Compared to private companies, EMS, as an old SOE, faces various restrictions, and is slow and inefficient,” said Ma Zhanhong, vicepresident of China Postal Express & Logistics Co., Ltd. While some success has been made with international operations, and many online retailers make use of EMS’ services, in general private enterprise has cornered the courier market in China. However, China Post is refusing to give up, and is attempting to secure a share of China’s white-hot online marketplace. This June, China Post Group inked a strategic cooperative agreement with Alibaba, announcing that the two parties would “cooperate in various fields including logistics, e-commerce, finance and information security.” Insiders believe that Alibaba’s access to big data and cutting-edge Internet technology combined with China Post’s network of outlets will help power reform. Six postal services were listed on the Fortune 500 in 2013, and EMS clocked in at No. 196, much higher than its No. 258 ranking in 2012. The company recently opened a vast airmail sorting and distribution center in Nanjing, and processes tens of thousands of letters and packages daily. However, technology has still proven the biggest competitor to China Post’s business operations, with the explosion in the digital sphere taking a heavy toll on its formerly unrivaled position as China’s principal distribution network for newspapers and periodicals. Now, this sector of the company runs at a loss. The company’s newsstands are also struggling to survive, and despite attempts to diversify by also selling mobile phone credit, SIM cards and soft drinks, this once-familiar sight on Chinese street corners is starting to become less common. For the first time, China Post has found itself having to engage in marketing in order to retain customers and attract more business. The company has also begun to participate in data analysis in order to make its targeted marketing more sophisticated by establishing a comprehensive subscription database. However, tablet devices and smart phones are both major competitors, and with the trend still being away from print media, China Post is still struggling. Despite being a household name, China Post’s distinctive green and yellow logo, while it may still be seen in every corner of the country, has survived in the modern marketplace only through implementation of a mixed bag of reforms. Its successes continue to be tempered by its need to support a number of loss-making businesses. Unless it can further embrace digital delivery, market competition and the need for efficiency, it is unclear whether this former monopoly will continue to be the powerhouse as it was in its heyday. NEWSCHINA I December 2014

Sex Therapy

Sexual Healing

With Chinese social attitudes to sex often conflicted, those offering unorthodox treatments for the nation’s sexual problems face an uphill battle for recognition By Qian Wei

he Hangzhou Baoshantang Sex Therapy Center is situated on a quiet sidestreet a five-minute stroll away from the busy downtown area of Hangzhou, capital of Zhejiang Province. 41-year-old Tong Songzhen, the owner and general manager, is known to many as Taiwan’s foremost sex therapist. Baoshantang is a branch of her Sungful Sexual Health Center in Kaohsiung. Tong earned her degree from the Graduate School of Human Sexuality of Shu-Te University in Taiwan in 2006 and continued her studies first in the United States and then in Germany. On her return to Taiwan she opened the Sungful Center in Kaohsiung, the island’s first dedicated sex therapy clinic, and expanded to the mainland in 2012, opening branches in Wuhan and Hangzhou. Since arriving on the mainland, Tong has found herself at the forefront of an in-demand but poorlydefined industry. On August 29, 2014, the Sixth Academic Conference of the World Association of Chinese Sexologists was held in Hangzhou. Baoshantang, as the organizer, was thus at the center of the largest-ever gathering of sex therapists and organizations in Chinese history. NEWSCHINA I December 2014

Birdcatchers

Tong and her colleagues don’t use the word “patient” to describe visitors to their clinic, preferring the term “individual case.” Baoshantang has no signage, and visitors have to make an appointment in advance. Inside, the walls are bare, with consultation rooms simply labeled “Therapy Room.” During consultations, clients sit on cozy sofas or lie on couches to discuss any physical and psychological problems relating to sex. Baoshantang’s therapists are trained in a number of behavioral therapies designed to help the clinic’s clients resolve these issues, though the precise nature of these therapies remain a closely guarded secret, or, in Tong’s words, “a matter between therapist and individual case.” A course of therapy typically requires six 90-minute sessions, and costs between 30,000 and 50,000 yuan (US$4,900 and 8,160), around three to six months’ wages for the average Chinese urban resident. While secretive about the methodology her therapists employ, at least on the mainland, Tong does, however, sum up her

Photo by Zhen Hongge

Photo by Mark Ralston

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Zhu Qiaoru (right), a therapist at Tong Songzhen’s sex therapy center, in a consultation with a patient, Hangzhou, May 2014

Videos offering guidance on common problems in Chinese marriages at an exhibition in Shanghai

philosophy of care succinctly. “We instruct people in how to make love,” she told NewsChina, though is at pains to stress that there is “no sexual intercourse” between therapist and client at Baoshantang. Yet, in one of her books, Sex Therapist Teaches You to Make Good Love, Tong claims that “in the whole Chinese world, only my team has so far adopted the person-to-person sex therapy technique of ‘catching birds.’” This technique is illustrated with a photograph on the Sungful Center’s website depicting a fully-clothed female therapist, wearing latex gloves, masturbating a blindfolded patient on a clinic bed. So far, Tong’s mainland clinics have treated around 300 clients from all over China. Her Taiwanese operations, by contrast, will see between two and three hundred cases in a single year. However, Tong is focusing her efforts on the mainland, where she believes the market has yet to realize its full potential. Her methods, however, have proven controversial in a society where the majority remain uncomfortable discussing sex openly, let alone seeing a sex therapist. A patient from Chongqing, speaking anonymously, told NewsChina that his understanding of Baoshantang’s treatments was that they were largely “just masturbating with help.” Tong calls this “the concentrated training of sex sensation.” “We wear gloves,” she said, “and the case is blindfolded so we can encourage them to make love with their mind rather than with us.” Ma Xiaonian, vice chairman of the China Sexology Association (CSA), told NewsChina that the aforementioned Chongqing man had suffered erectile dysfunction (ED) for two years, going on to describe the patient’s successful treatment at Baoshantang as a “breakthrough for him.” By the time Ma Xiaonian retired in 2005, he had treated more than 20,000 patients, 83 percent of them male. The bulk of these patients were prescribed Viagra and sent on their way. In Ma’s view, Viagra

is a “milestone of modern sexology and [led to] a revolution in sex therapy.” Statistics indicate that the incidence rate of ED, currently 52 percent among males from ages 40 to 70, has been significantly reduced since Viagra became widely available. Ma also argues that Viagra has a role to play when treating a patient’s psychological state when it comes to sex – eliminating the key debilitating factor of “performance anxiety.” Pan Suiming, former dean of the Institute of Sexuality and Gender Studies at Renmin University, disagrees. He believes the reason ED and premature ejaculation have been pathologized is because they affect conception, and are thus “illnesses” to a society that view sex as purely for the purposes of procreation. Nowadays, he claims, they remain pathologized because drug companies and doctors need to keep peddling their “cures.”

No Standards

Indeed, the Chinese market for “silver bullet” treatments for various sexual ailments is vast. Chen Jian works as a sexual health consultant at WA Health Care in Shanghai. She told NewsChina that her job is to provide “sexual health solutions” to high-end, middle-aged clients. Most of these “solutions,” according to Chen, are expensive hormone therapies, with a single course typically costing between 50,000 to one million yuan (US$8,200 to 163,300). Ma Xiaonian told NewsChina that so far, only a few health care organizations in China have started using hormone therapies, but that the potential market is huge, as is the potential for self-professed sex gurus to mislead and even harm ignorant and often desperate patients. Increasing numbers of Chinese people from all backgrounds are joining in the competition to get rich in the sex therapy market. These self-styled “experts,” only a few of whom have any medical experience, NEWSCHINA I December 2014

call themselves, variously: “sexual tutors,” “anti-aging experts,” “sex coaches,” “adult observers,” “sexual function rehabilitation experts” and “clinical hypnotists.” The term “sex therapist,” along with all the above named “professions,” however, is not legally recognized by the Chinese authorities. The CSA has been pushing for legalization for years, but acknowledgement requires approval from both the labor and health ministries. Neither currently seem keen to give their blessing to this unfamiliar branch of psychiatric medicine. Tao Lin, former director of the Shenzhen Family Planning Commission, told NewsChina that a large number of sex therapists are registered under three professions officially recognized by the Ministry of Labor and Social Security, namely psychological consultant, reproductive health consultant and marriage guidance consultant. The latter two were added to the Ministry catalog in 2007. In Taiwan, Tong Songzhen called itself a “Sexual Health Center” rather than a “Sexual Therapy Center” in order to obtain official registration as a company while avoiding having to obtain a license from the island’s medical establishment. On the mainland, however, Tong has found protection through the support of local hospitals. During the Sixth Academic Conference of the World Association of Chinese Sexologists, the Chinese Association of Sex Therapy was also founded with Ma Xiaonian as chairman and Tong Songzhen and Tao Lin as vice-chairpersons. The organization has yet to be recognized in Taiwan. “Several experts and I are working on a draft code of standards for the Chinese sex therapy industry,” Ma told NewsChina. “Without standards to regulate the industry, it cannot develop long-term.”

Chinese Issues

One of the major reasons why sex therapy has found a receptive underground market in China is the conservative culture surrounding sex, particularly a lack of traditional emphasis on a varied sex life as key to sustaining a successful marriage. While China has an historic tradition of relative sexual openness, and Traditional Chinese Medicine (TCM) has an extensive materia medica relating to sexual ailments, the import of conservative values from abroad in the late 19th century and the strict moral prescriptions in the early years of the People’s Republic severely restricted public discussion of sex, even within the bounds of marriage. “Ever heard of ‘ED of the newly-married?’” Professor Li Hongjun, director of the Department of Genito-urinary Surgery of Peking Union Medical College Hospital, asked NewsChina. He remarked that many young male patients who were recently married would come to his college clinic stating that they were suffering from ED. “Actually, 99 percent of them were healthy and their ‘ED’ was due NEWSCHINA I December 2014

to psychological reasons,” he continued. He found that the bulk of these patients had not had sex prior to marriage, and thus encountered difficulties when attempting to engage in intercourse with their new brides. Li went on to say that couples who had been together for years also approached him for help with persistent ED which, in some cases, had been a problem from their wedding night onwards. Li terms such problems “ED with Chinese characteristics.” Ma Xiaonian, who now runs the sexual health clinic at Beijing’s Yuquan Hospital, also describes similar issues affecting his patients. In his opinion, despite changing societal attitudes towards sex, most Chinese people grow up in conservative families, and encounter “sexual bewilderment” with the onset of puberty. Ma also talks frankly about “the failure of China’s sexual education” to adequately prepare young people for healthy and fulfilling sex lives. With depiction and even discussion of sex and sexuality severely restricted in the mainstream Chinese media, sex therapy has developed slowly, and largely underground. Ma Xiaonian opened his Yuquan clinic, the first dedicated sexual health clinic located in a public hospital in the country, in 1996. Today, apart from Yuquan, there is only one other operational public sexual health clinic in China, at the Third Affiliated Hospital of Zhongshan University in Guangzhou. This is disheartening for China’s millions of sufferers of some form of sexual complaint, more of whom than ever are seeking treatment. Pan Suiming told NewsChina that from 2000 to 2006, reported incidences of sexual disorders in China increased sharply, which he attributes to growing life pressure and increasing importance attached to a fulfilling sex life as an aspect of a happy marriage. In 2010, Pan noted that reported cases leveled off – the result, he claims, of developing awareness among the population of the importance of sexual health. However, the general growth trend has continued upwards. Growing sexual awareness and increased sexual freedom has also led to a significant rise in the incidence of extramarital sex. From 2000 to 2010, Pan Suiming conducted three investigations of extramarital sex in China, which showed that the numbers of both men and women having sexual relations outside of marriage doubled in that period, men from 13.2 to 28.9 percent, women from 4.5 to 9.7 percent. According to Pan, his male patients would typically encounter problems performing sex with their spouse, but not their extramarital partners, or vice versa. Li and other sexologists believe that sex isn’t merely a physical process, as current Chinese sex education maintains, but also an emotional one, meaning that without a level of emotional maturity, most people will struggle to maintain healthy and satisfying sexual relationships. “The human brain is our biggest erogenous zone,” he told NewsChina.

A medical officer fumigates a police barracks, Guangdong, October 9, 2014

Dengue Fever

Battle of the Blight

A public fightback against mosquito infestations in Guangdong Province has been underway since August 2014 in a bid to contain the worst outbreak of dengue fever in China’s history. Are these emergency measures effective? NewsChina investigates By Wang Yan

hile the Ebola virus held the world’s attention during the autumn of 2014, people in southern China, particularly in Guangdong Province, faced their own epidemic. Dengue fever, a mosquito-borne, flu-like infection causing severe, sometimes fatal symptoms has so far infected approximately 40,000 people in the province, killing six. According to the Health Department of Guangdong Province (HDGP), since the first local case was diagnosed on June 22, twenty out of twenty-one cities within its jurisdiction have reported outbreaks. The provincial capital Guangzhou, with a population of 15 million, has been hardest hit, with over 33,000 reported cases by October 22, 2014,

almost thirty times the number recorded in the province in the whole of 2013. A HDGP spokesperson told NewsChina in an email interview that the provincial government and five municipal governments with the most severe outbreaks initiated an emergency response in late September to contain the spread of the disease. From August until late October, 2014, most cities within the province were engaged in wiping out mosquito infestations.

Outburst

Most dengue patients exhibit high fever, rashes and joint pain. Few die from initial infection, but, if untreated, patients can experience plasma leakage from blood vessels,

excessive fluid retention, respiratory distress, severe bleeding, and organ malfunction. The incubation period is three to 14 days, with symptoms in each of the disease’s three stages lasting for up to a week. Due to climate change and rapid urbanization, the number of dengue cases has increased globally, and the disease has now become an urban problem. In China, an outbreak of dengue in Yunnan Province in the summer of 2013 was only the latest in a growing number of such epidemics seen in China since the 1990s that have spread from subtropical Guangdong, Hainan and Guangxi provinces to affect temperate zones such as Fujian, Zhejiang and Yunnan. Yang Zhicong, deputy director of the NEWSCHINA I December 2014

Photo by Mark IC

society

Mosquitoes

The Aedes aegypti mosquito is the primary vector for dengue, with the females of the species passing the virus to humans via bites. There is no specific treatment at present, nor is there an effective vaccine. This has made epidemics an inevitability, and in a densely populated urban area there is little that can be done to contain an outbreak. Since the SARS crisis in 2003, the Chinese government launched a raft of measures aimed at preventing and controlling the spread of infectious disease. Local governments are required to initiate an immediate response through early detection, open reporting, rapid quarantine and other surveillance measures. Guangzhou, on the frontline during the SARS pandemic, has invested massively in municipal disease control and prevention since 2003. “Our local government invested hundreds of millions of yuan in relocating the Guangzhou CDC headquarters from the downtown area to the suburbs, as well as upgrading our laboratory equipment and reforming our training program,” Yang Zhicong told NewsChina. “So far, we’ve set up a comprehensive response system.” The Guangzhou municipal government has until now focused on the only measure that has been proven effective in limiting the spread of dengue fever – destroying mosquito breeding grounds. So far, over 100 million yuan (US$16.27m) has been spent on this in Guangzhou alone. NEWSCHINA I December 2014

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Guangzhou Center for Disease Control and Prevention (CDC) told NewsChina that the first imported case of dengue fever, a Chinese national returning from Southeast Asia, appeared in Guangzhou. “The first local case was reported in June, followed by a rapidly growing number of new infections,” he said. Hu Xiaofei, a doctor with the Guangzhou No. 8 People’s Hospital, told NewsChina that, from September onwards, the hospital’s infectious diseases clinic was seeing 1,000 new dengue patients per day. Experts have pointed to a slow response to the early outbreaks as a reason for the rapid spread of the disease.

A doctor in a Guangzhou hospital examines a Dengue fever patient

As the mosquitoes which carry dengue typically breed in stagnant water close to human dwellings, government personnel wearing masks spraying insecticide have become so ubiquitous in Guangzhou that their manmade “fog” has even eclipsed the city’s infamous air pollution. A WHO email statement to NewsChina confirmed the effective measures undertaken in Guangzhou: “Given the latest information available on the dengue outbreak in Guangdong, the government has taken action in line with international recommendations.”

Causes

The official explanation from the HDGP for this year’s dengue epidemic has listed three main reasons. First has been the increased frequency of trade between Guangdong and dengue “hot zones” in Southeast Asia and South America. Secondly, sustained high temperatures in the summer of 2014 provided the ideal environment for mosquitoes to breed. Finally, they confirmed that more cases were actually reported than normal thanks to the government’s expanded surveillance network – rural outbreaks in previous years regularly went under-recorded or even entirely unreported due to a lack of integrated communications. Wu Mingliang, an engineer from Huicheng Pest Prevention and Control Co. Ltd. wrote an article in early October expressing his concerns about the potential environmental cost of the unregulated pesticide spraying undertaken to control dengue. Based upon his personal experience in a local community in Guangzhou, Wu wrote that “according to the contract

with our company, pyrethroid pesticides were sprayed throughout the community once a week, whether or not we had noticed a mosquito infestation. The “wanton” use of insecticides, Wu claims, allows mosquitoes to build resistance to them, as well as wiping out natural predators such as spiders. In an interview with the Guangzhou-based Southern Metropolis Daily, Peng Shaolin, chairman of the Guangdong Provincial Ecological Institute, said that “while considering the severity of the dengue outbreak, we have to balance the situation.” “If we are to sacrifice elements of our ecosystem, we should first thoroughly research the scale and density of insecticide use.” However, little action has been taken to monitor whether or not the deployment of insecticides has been carried out with any consideration for their environmental impact.

Endemic

Dengue is far from being a solely Chinese problem. According to the WHO, global incidence has risen dramatically in recent decades, with over 40 percent of the world’s population now at risk from the disease, meaning some 50–100 million dengue infections worldwide each year. A paper published in 2013 in the science journal Nature predicted some 390 million worldwide dengue infections per year, of which 96 million would be serious cases – three times the WHO estimate. “Dengue… is set to increase and we aren’t doing enough to develop concrete tools for its control,” Debarati Guha-Sapir, director of the WHO Collaborating Centre for Research on the Epidemiology of Disasters (CRED), told environmental news website chinadialogue.net. “In China I would say that, with urbanization aggravated by climate change … the burden of the disease is going to be a problem.” Yang Zhicong also admitted to our reporter that there’s a possibility that dengue would become endemic in Guangdong in the near future. “That’s why we should call on every citizen to help combat the disease, otherwise its spread cannot be checked,” said Yang.

SPECIAL REPORT

NEWSCHINA I December 2014

Anti-social Crime

Villains and Victims

China is asking why some citizens seem to be driven to commit horrific attacks against innocents, often without an apparent motive. Whatever the reasons, a consensus seems to be emerging as to how to resolve this social illness By Su Xiaoming, Yang Di, Chen Wei and Li Jia

n the space of 45 days at the height of summer, three arson attacks on public buses in the cities of Hangzhou, Guangzhou and Yantai shocked China’s population. Since 2009, nearly 90 people have been killed in such attacks, including, in one case, a four-month-old baby boy, while hundreds have been injured. Such attacks are not limited to urban arson. On September 1, the first day of a new semester, three students and a teacher were killed and five other students were injured at a county elementary school in Shiyan, Hubei Province by a man who was later identified as a parent of another student. After dozens of kindergartners and elementary school students were hacked to death in a spate of knife attacks in several cities in 2010, the specter of violence has continued to hang over Chinese campuses. Security guards toting defensive weapons have been deployed in kindergartens and schools, with mandatory inspections among other security measures conducted at the beginning and end of each semester. There are also a number of cases in which people have called local police stations to threaten to “do something big and extreme” if the police refused to help them with their personal problems, the most prominent typically being issues with debt or failing relationships. Analysts and media sources have typically described these crimes as the ultimate method of venting social frustration – channeling personal anger into a murderous asNEWSCHINA I December 2014

sault on vulnerable groups in attacks that are guaranteed to attract media attention. Most concerning to the general public has been the apparent inability for such criminals to be identified before they offend – most are impoverished, many are either mentally or physically ill, and almost all maintained a practically invisible public profile before they struck. While various solutions have been proposed, with the public looking to opinion formers, the authorities and even their own social circles for answers, nobody seems able to definitively say what exactly is the catalyst for these crimes, nor how they might be, for the most part at least, prevented.

Downtrodden

In 2004, 16-year-old Ou Shangsheng, along with his older sister, left his hometown, a mountain village in Hunan Province for the southern city of Guangzhou to begin a new life as an apprentice to his uncle, a carpenter. He thrived in his new role, and in 2013 he was even able to make a down payment on a 129-square-meter apartment in his home county, expecting to have paid off the mortgage within three to five years. Then, in July 2014, Ou was detained at an Internet café by police who had identified him as the sole suspect in the Guangzhou bus arson case. People close to Ou told our reporter that he became “a different person” after he suffered a lower back injury at the end of 2012. Unable to continue as a carpenter, Ou struggled to

find a stable job, because he could not stand or sit in one position for long. As he only had a few years of elementary education, having left school while still a child, he couldn’t even operate a cell phone or use word processing software. After losing his job, Ou’s cousin told NewsChina, he divided his days between watching TV in local Internet cafés and sitting in his rented room, ignoring those who attempted to contact him. When his elder sister found that he was gambling, and asked him to stop, Ou responded that he felt living as a jobless, disabled person was “meaningless.” Ou’s story was familiar to investigators looking into what the Chinese authorities and media are terming “anti-social crimes.” In several cases, suspects complained that their rights had been infringed by local governments. Ji Zhongxing, for example, a wheelchair-bound man who detonated an explosive device at Beijing Capital International Airport in July 2013, claimed that being beaten by urban security officers in 2005 had left him paralyzed, and that all his bids for compensation had been rebuffed. While the public are often quick to conclude that the perpetrators of anti-social crimes are mentally ill, except in one or two cases, serious psychosis does not appear to be a factor. However, clinical depression and severe anxiety are almost universally present in suspects, who otherwise share very few characteristics. All income levels, living situations and educational backgrounds seem to be

SPECIAL REPORT

The severity and apparent randomness of anti-social crimes has led to a charged atmosphere in public spaces, with people inclined to panic when a potential threat appears. On August 14, when a man on a bus in Changsha, capital of Hunan Province, was seen playing with a cigarette lighter in a plastic bag, a passenger immediately sounded the alarm, resulting in the evacuation of the bus and the police being called. It later transpired that the man, who may suffer from mental problems, had merely been trying to burn a loose thread from his clothing. The Chinese public appear disinclined to hear the other side of the story when it comes to anti-social crimes. A week after the Hangzhou bus arson attack in early July, the website of the influential South Metropolitan Daily was inundated with complaints after it ran a feature detailing the suffering of suspect Bao Laixu while in custody. The report was pulled after only 12 hours online. Many netizens have even called on the authorities to prevent too much detailed media reportage of anti-social crimes, in order to prevent further “copycat” attacks. Given the violent outcomes of many civil disputes in China, particularly concerning individual debt and land appropriation, fingers are often pointed at the government when the stories behind anti-social attacks come to light. Abuse of police power, red tape when attempting to secure redress for social injustice, and the employment of heavy-handed quasi-official law enforcement to settle difficult social problems are all frequently cited when journalists and analysts attempt to deduce why seemingly ordinary citizens would direct violent attacks against the general public.

The gutted shell of a bus in Guangzhou, July 15, 2014

Photo by cfp

Panicked

Photo by ic

represented, with migrant workers, teachers, doctors and farm laborers apparently equally likely to offend.

Police negotiate with a suspect who hijacked a coach and, when cornered, stood outside the guardrail of a bridge threatening to commit suicide, Wuhan, Hubei Province, August 8, 2014

Zhu Li, a professor of sociology at Nanjing University and an expert on social conflict, told NewsChina that he sees anti-social behavior as the “most pathetic and most abhorrent way of dealing with grievances, no matter what their origin.” He added that both personal and social problems need to be addressed to end the cycle of violence.

Internal Anger

Xu Jing’an, a former senior government official and a trailblazer of economic reforms in China culminating with the establishment of the Shenzhen stock exchange, set up an NGO in 2009 in Shenzhen helping people in despair seek counseling. He told NewsChina that one of his younger clients wanted to “kill foreigners to attract social attention”

which could use to raise funds for the medical treatment of his ill nephew. During their sessions, Xu discovered that the young man’s marriage had broken down after his own son died from an illness. Without an outlet such as a therapist or psychiatrist, Xu argues, there is nothing to stop such people from acting on their impulses. Xu is currently working on proposals to include psychiatric care provision as part of the national healthcare budget. He believes that a small portion of China’s massive internal security fund would be enough to build a national counseling network that could prevent or at least mitigate the effects of anti-social criminality. The series of bus arson attacks this summer have only served to heighten his sense of urgency. NEWSCHINA I December 2014

Professor Zhu Li stressed that mental health professionals have to be deployed within communities to build an archive of first-hand data and provide mental health education and counseling services where they are most urgently needed. The potential risk to the mental health of China’s “left-behind children” – infants and young people left in rural communities in the care of often elderly or infirm relatives by parents working in cities – has aroused particular concern in recent years. A survey by the All-China Women’s Federation showed that there were 61 million “left-behind children” living in rural areas by the end of June 2014, with 38 percent of these aged under 5 years old. Many are simply left to their own devices, and thus become vulnerable to exploitation, trafficking, substance abuse and homelessness. Many surveys undertaken by both local courts and the media in recent years found that “left-behind children” were more likely to engage in anti-social behavior, more likely to suffer from personality disorders, and more likely to be both the victims and perpetrators of criminal acts. While reform of China’s controversial hukou system, effectively an internal visa restricting employment and social security access to one’s birthplace, could help reduce the population of left-behind children, few would dispute that more needs to be done to tackle what is seen as a looming mental health crisis. There are also proposals calling for the establishment of a formal system like the UK’s now-defunct Anti-social Behavior Orders (ASBOs) which could serve as a formal “report card” for young offenders, targeting those who “act in an anti-social manner… that caused or was likely to cause harassment, alarm or distress to one or more persons not of the same household [as the offender].” Both American Psychiatric Association and World Health Organization guidelines NEWSCHINA I December 2014

focus on subjects’ lack of empathy, propensity to blame others for conflict and persistent misconduct to determine whether or not a criminal suffers from a personality disorder. Experts have been quick to warn the public not to label those suffering from depression, anxiety or personality disorders as potential “anti-social criminals.” Professor Ma Ai, director of the Clinical and Counseling Committee of the Chinese Psychological Society, told NewsChina that psychosis must be formally diagnosed before it be cited in court. He added that personality disorders affect all societal groups, not only the disadvantaged.

Social Illness

Professor Pi Yijun at China University of Political Science and Law believes that the choice by many so-called anti-social criminals to target vulnerable groups, specifically young children and infants, can be classed as “social hostility” – venting one’s own pain by inflicting as much pain on a community as possible. In Pi’s view, discontent, distrust and resentment between family members, social groups and between the individual and the State all contribute to a sense of social hostility. Many analysts and netizens have documented a rise in violent public incidents stemming from seemingly trivial disputes. Movie theater audiences, commuters and Saturday shoppers are all seemingly more likely to erupt into violence and foul language if they feel inconvenienced or disrespected by those around them, with a number of prominent examples captured via camera phone. Analysts, public opinion and the government seem to buy in agreement that this “touchiness” which, in extreme cases, might lead to an attempted murder, is the product of pervasive anxiety due to a widening gulf between both individuals and groups living within society as a whole. As Professor Pi argues, while conflicts of interest

and emotion tend to be more common in utilitarian and pragmatic societies, this tends to cause the disintegration of family unity and close friendships. To at least some members of Chinese society, it seems, everyone is a potential enemy. It is also widely recognized that inadequate social security provision and well-documented and widespread social injustice further stretch the “trust gap” between the individual and society, a factor which exacerbates anxiety and frustration. In 2010, former Premier Wen Jiabao and former spokesperson of the Public Security Ministry Wu Heping, recognized that knife attacks on kindergartens were at least partly the result of a buildup of frustration with perceived social injustice and inequality. Most suspects in such cases had become destitute as a result of illness or unemployment, and all their attempts to either secure a job or social welfare had failed. Professor Zhu Li noted that the ineffective and limited legal channels through which individuals might air and resolve their problems can easily transform depression into extreme resentment, which can, in extreme cases, lead to a complete psychological breakdown. To many, then, creating “big trouble” is the only way to call attention to their plight. This, as Zhu told NewsChina, has created a dangerous sub-culture in society that sees a refusal to conform to ethical and moral norms and a willingness to take extreme action for personal gain as something to be admired. The only solution, it is almost unanimously agreed, is to reinforce the rule of law to a degree that would allow the desperate and the destitute to seek help. “Unequal opportunities and a wealth gap created by corruption, institutionalized discrimination and an ineffective legal framework is the most dangerous threat to social stability and the root of social division,” said Zhu. 

economy

Alibaba IPO

No Alchemy

Alibaba has made a splash on the NYSE – but will its success affect the reform agenda on the Chinese stock market? By Li Jia

hy can’t Chinese companies innovate like American ones? This perennial question inevitably raises its head whenever Apple releases a new gadget, signaling the commencement of national handwringing that sees Chinese media, analysts and officials variously blaming the education system, State banks, foreign protectionism and much else besides. However, the recent international media attention on Alibaba and its founder, former English language tutor Jack Ma, seems to have put an end to the yearly tradition – Alibaba, the world’s largest e-commerce company by some distance, has built its success on hundreds of millions of small Chinese retailers and consumers, changing far more Chinese lives than Apple. In mid-September, Alibaba raised US$25 billion with its long expected initial public offering at the NYSE, the highest-value IPO in history. The share price of BABA (Alibaba’s NYSE stock name) soared by 36 percent in the two-and-a-half hours following its IPO – since then, it has remained at least 22 percent higher than its IPO price, and has at times risen to rival Apple’s. Alibaba plans to spend its windfall expanding into China’s rural areas and buying up US companies. International investment banks have received huge underwriting commissions. Related industries, such as logistics and packaging, will benefit. As Ma has repeatedly said, Alibaba is a life-

changing “ecosystem.” However, swaths of excited Chinese stock investors have found themselves unexpectedly turned away from the party, many of them realizing for the first time that BABA is not the e-commerce platform they know and love, but a foreignregistered company incorporated in the Cayman Islands, the majority of which is owned by Japanese IT company Softbank and US Internet company Yahoo!. Meanwhile, international investors have been continually reminded by analysts that the BABA at which they are throwing money is effectively a shell company that relies on cashflow from the Alibaba mothership in Hangzhou, Zhejiang Province, the majority of which is owned by Jack Ma. In theory, if the Chinese government or the famously eccentric Ma were to change their mind, their shares could become worthless overnight.

BABA, Oh Really?

In their early days of growth, Internet companies tend to absorb huge investment with little likelihood of making any money. Ma, in his former job as a tutor, had insufficient collateral for a bank loan, and under China’s securities rules, a company with no profit record is not eligible for floatation on the stock market. Venture capital, often the savior of new hitech, high-risk companies, was basically unheard of in China NEWSCHINA I December 2014

Eight Alibaba Group customers ring the bell for the company’s IPO at the NYSE, September 19, 2014

when Alibaba was founded in 1999, and foreign capital was generally off-limits for Internet-based companies. The solution for Alibaba and its like was often to register a “variable interest entity” (VIE) and establish an arrangement with an overseas shell company, normally in a low-tax territory such as the Cayman or Virgin islands, allowing access to foreign capital while guaranteeing a license to operate in China. Alibaba’s Cayman shell, held primarily by Yahoo! and Softbank, and the Chinese VIEs owned and controlled primarily by Jack Ma, are linked by three layers of foreign and Chinese companies, a complex tax workaround. So-called “control agreements” within this structure ensure that Cayman Alibaba controls the company’s operations, and the profits from Ma’s Chinese VIEs return to the Caymans in the form of fees for services and technical support. China’s forex controls are also circumvented in the process. The inherent risk of this business model, as Wang Shuqian of the East Associates Law Firm told NewsChina, is that one entity, to circumvent policy restrictions, gives money to another with the requisite license, legally entrusting it to act on its behalf. As a result, the first entity’s rights, interests and investment are in the hands of the entrustee. If the second entity sells the first’s property without consent, and the entrustee cannot be proven to have illegally colluded with the purchasing party prior to the NEWSCHINA I December 2014

deal, the first is left either with nothing or, at best, compensation. The existing law does not specify whether or not using the VIE structure to get around foreign investment restrictions is illegal. A number of Chinese companies, mostly Internet firms but also some in other service and manufacturing sectors, has been using the VIE method since since 2000, which many saw as an indicator of tacit approval from Chinese regulators. However, the development of China’s regulatory framework and Jack Ma’s behavior over the past few years have accentuated widely held concerns over the dual risks to both legitimacy and reliability inherent in the VIE model, which has underwritten the take-off and boom of China’s Internet companies for more than a decade.

Tightening Net

While there is little to indicate that foreign investment restrictions in VIE-oriented areas will be eased anytime soon, there are increasingly clear warning signals that the Chinese authorities are becoming less tolerant of VIEs. In January 2014, restrictions on foreign equity holdings in e-commerce and cloud computing companies were eased in the Shanghai Free Trade Zone, but not enough to allow wholly foreignowned enterprises like Alibaba in. In 2011, the Ministry of Commerce required that the

Photo by Xinhua

economy

Jack Ma, Alibaba Group executive chairman, rings the NYSE opening bell, September 19, 2014, the day of his company’s IPO

acquisition of Chinese companies with foreign investment through control agreements be subject to national security reviews. The same year, the US Securities and Exchange Commission (SEC) disclosed that Buddha Group had withdrawn its application to list in the US after the company’s Hebei Province VIE was told by the local government that the arrangement was “in contravention of current Chinese management policies related to foreign-invested enterprises and, as a result, [was] against public policy.” In 2009, the Chinese publications authority prohibited foreign investment in the online gaming industry through “indirect methods of signing relevant contracts or provision of technical support.” In 2012, China’s Supreme Court ruled that an investment by a Hong Kong company into China Minsheng Bank via one of Minsheng’s mainland shareholders was ineffective, on the grounds that the deal aimed to “illegally circumvent” China’s restrictions on foreign investment in the banking sector. The case has been widely cited by Chinese and international lawyers as an indicator that VIEs could be defined as illegal for the same reason. If new rules against VIEs are enacted in the future, say the prospectuses of Alibaba and other companies using Chinese VIEs, the operation licenses held by the VIEs could be re-

voked, or the flow of revenue from VIEs to their overseas parent companies could be blocked. While few expect VIEs to be completely outlawed overnight, the uncertainty remains a looming risk. Kevin Rosier, analyst with the US-China Economic and Security Review Commission, noted in his recent report that it would be preferable for China to ban VIEs sooner rather than later, since short-term losses would be less trouble than long-term ambiguity. In 2011, when required by China’s central bank to explain the VIE arrangement in order to acquire a license for his third-party payments platform Alipay, Jack Ma voluntarily terminated the control agreement between Alibaba and his Hangzhou-based VIE in control of Alipay, without informing Yahoo! and Softbank in advance. The two foreign companies had no choice but to negotiate with Ma for compensation. Ma responded to questions about his integrity at a press conference, saying that he had to make the “only right, albeit imperfect, decision,” in order to avoid the risk of losing the license due to protracted boardroom negotiations. His unilateral action, no matter how commercially and legally savvy, has undeniably left foreign investors wary of Chinese VIEs, and Ma’s integrity. A so-called “partnership” arrangement further consolidates Ma’s dominance of Alibaba’s business operation. A majority of Alibaba’s board of directors are nominated or appointed by Jack Ma and his senior managers, minority-stake holders in the company. While this could avoid embarrassing situations like Apple’s 1985 ejection of visionary founder Steve Jobs in pursuit of short-term share prices, it also puts investors, particularly small ones, at a significant disadvantage.

Not Easy

Alibaba’s listing has also put Chinese regulators under greater pressure than ever before. Only Chinese companies reporting minimum profit standards set by the existing rules can file to list on the stock market in China. Once they have filed for listing, their ability to profit in future is subject to review by the China Securities Regulatory Commission (CSRC). This system has long been criticized as neither friendly to hi-tech growth companies, nor to market demand for stock. Chinese investors and many analysts blame the system for any and all problems on the market, accounting fraud at listed companies, corruption of CSRC review committees, deterring good companies, and declining share prices. A veteran private equity manager, who asked not to be named, told NewsChina NEWSCHINA I December 2014

they were forced to “give up on” various good companies in sectors that China was keen to develop, such as environmental protection, due to the unreasonable rules governing access to the stock market. An overhaul of the system was on the CPC’s sweeping reform agenda unveiled in November 2013. At the end of that month, the CSRC announced reform guidelines focusing on full and proper corporate information disclosure, leaving the assessment of a company’s profit-making ability to investors. Stock exchanges will now review applicant companies. Revision of the Securities Law is scheduled to be tabled at the national legislators’ meeting before the end of this year, and a draft of new IPO rules would be unveiled on that basis. It seems that for Chinese stock investors, a lavish investment banquet lies behind this as-yet unopened door. Some experts warn that this expectation is based on a misunderstanding of the US market which is often used as a reference point. As Professor Wang Xiao at Central University of Finance and Economics in Beijing explained to NewsChina, in practice, the US SEC reviews companies by asking thorough questions about business risks that might affect the profitability of the company filing for an IPO, and the three main US stock exchanges exercise final discretion over which companies can trade there after their IPO. The NYSE, for example, revised its rules to accommodate Alibaba’s partnership structure, since it believes that Alibaba will bring value. By the same token, a company that meets the stock exchange’s standards but is not regarded as valuable would not be allowed to trade. All of this, Wang stressed, is exactly the profitabilityoriented “value judgment” that Chinese investors want to remove from the existing Chinese system. More importantly, some key factors in the US system are either weak or absent in China’s case. Exchanges in the US are market-oriented companies, while those in China are quasi-government agencies whose leaders are appointed by the CSRC. Without reform of China’s own exchanges, analysts worry that corruption in CSRC-sponsored review commissions today will be replicated on the trading floor tomorrow. Many lawyers, acquisition-hungry players and short-sellers who profit from share price drops are always on the lookout for chances to take advantage of business and legal vulnerabilities of listed companies. Wang noted that their pursuit of their own interests are another powerful market discipline force for investor protection in the US, and a powerful deterrent that forces companies to think twice about going public. NEWSCHINA I December 2014

This is an important reason, Wang argued, that the number of US listed companies has remained below 5,500 for so many years. Many analysts have pointed out that the risk of lawsuits from overseas brands over counterfeit goods could force Alibaba to improve its business practices. In China, however, short selling is restricted, and the legal procedure for class action lawsuits is lacking. Developed markets are also cautious about full deregulation without proper conditions. In 2013, the Hong Kong Securities and Futures Commission (HKEx) rejected market pressure to revise its rules to accommodate Alibaba’s partnership structure, prompting Alibaba to set its sights on New York. In an article in October 2013 explaining the decision to retain the requirement that shareholders at HKEx-listed companies enjoy equal voting rights – a move that cost the HKEx Alibaba – Charles Li, the stock market’s CEO, said that the Hong Kong market was “less institutionalized and less litigious” than the US, and its “checks and balances” were not as strong. In November 2013, HKEx imposed stricter rules on the listing of VIEs. The stock market in the Chinese mainland is even weaker than Hong Kong in both these regards. Given this, even outspoken deregulation advocates, like Professor Liu Jipeng at China University of Political Science and Law, warned at a forum at the end of 2013 the danger of regarding the reform as an instant and wholesale deregulation, without considering the as-yet undeveloped market infrastructure and legal framework. Wang Xiao called for steady, consistent steps in order to send clear, predictable signals to market players. For example, the CSRC has suspended IPO reviews from time to time over the years in response to market fears that new stock supply would further drag prices down. Wang suggested that regulators maintain a reliable pace in their reviewing of candidates – regardless of market fluctuations – in order to let traders and candidates know how long the review process is likely to take, and the chances of listing successfully. The CSRC tried this in 2010, announcing that its review process would take 3 months, and about 200 companies would be approved, with roughly a 10 percent failure rate. However, this practice was soon scrapped when it met with resistance from the market. This pandering to short-term interests, he said, distorted both the market and the reform agenda in the long-term. Alibaba’s coup, and the NYSE’s flexibility, have made it unprecedentedly difficult for regulators to continue shrugging off the market’s hopes of reform.

economy

Real Estate

End of an Era

Chinaâ&#x20AC;&#x2122;s real estate market has been on a downward spiral since early 2014. Although stimulus policies may be helping sales in some areas, most analysts believe that market is simply weaning itself off price hikes

Photo by Wei Gensheng

By Zhou Zhenghua and Xie Ying

NEWSCHINA I December 2014

Turndown

The sudden freezing of China’s previously white-hot real estate market, according to analysts, originated in second- and third-tier cities from late 2013, and soon spread to even the country’s most robust markets in Shanghai and Beijing. According to the National Bureau of Statistics, nearly all Chinese cities have seen both average house prices and sales volume decline in the first eight months of 2014, with some NEWSCHINA I December 2014

Photo by IC

purred by local stimulus policies, such as loosening controls on the purchase of second homes and reducing mortgage rates, many Chinese cities have seen a slight warming in real estate sales since September. However, compared to last year, growth, according to analysts, remains far from being sufficient to bring the entire market out of its current slump. Beijing, for example, sold 472 new apartments over the “Golden Week” National Day vacation (October 1-7), nearly 40 percent fewer than were sold in the same period in 2013. Similarly lukewarm figures emerged from the other key markets of Shanghai, Guangzhou and Shenzhen. Although Hangzhou, the so-called “barometer” of the Chinese real estate market, saw a rise in year-on-year sales volume during Golden Week, analysts warned that this was largely due to promotions and price cuts – bad news for those pinning their hopes on a turnaround. On September 30, just one day before the National Day holiday officially began, China’s central bank announced that it would offer the families that had paid off loans for their first homes up to 30 percent off their next mortgage, indicating that the Chinese government is keen to boost the country’s real estate market. Many developers and investors voiced optimism at the news, but with early gains reportedly “consumed in advance” by previous price hikes, the “golden age” of the Chinese housing market might already have passed.

Staff remove exhibits after closing a real estate exhibition, Hangzhou, May 19, 2014

even suffering particularly sharp falls. For example, average house prices in the key economic centers of Hangzhou, Wenzhou and Ningbo (all in Zhejiang Province) plummeted to below those of four years ago, leading some homeowners to riot against developers. Despite sales growth in September, Su Xuejing, a top real estate analyst with China Securities, told NewsChina that sales “cannot catch up with the increase in housing stock.” According to China’s Ministry of Housing and Urban-rural Development, Beijing currently has nearly 80,000 unoccupied housing units, which according to current projections will take at least 18 months to sell. 2014 sales in the capital peaked in August with 10,163 new apartments sold, but these retailed at an average 25 percent discount on the previous year. Second-tier cities like Hangzhou were even harder hit, with housing bubbles caused by reckless investment leading to prices even

more inflated than those in Shanghai and Beijing, where demand has somewhat tempered the fallout from the downturn. Despite having only about one third of the population of a first-tier city, this small eastern resort town had stockpiled nearly 130,000 unoccupied housing units by June 2014. Now, the sluggish market has seemingly halted developers’ thirst for new land to build upon. Data from the China Index Academy showed that land-transfer revenue had decreased nationwide by about 22 percent over the past eight months, with the figure halved in some key cities. Despite slightly improved housing sales, September was a low point for land sales, with revenue dropping by 70 percent year-on-year. Many cities, including Beijing, Shanghai and Hangzhou, frequently go months without closing a deal. This data was a bitter blow to local economies that are heavily reliant on land sales and construction. Many analysts have voiced

economy

concerns that dismal market projections might drag GDP growth in some cities below the 7 percent demanded by the central government.

Regulation

End of an Era

A variety of successful stimuli have margin-

Photo by IC

Pressured by the downturn, most cities had already moved to rescue the market before the central bank issued its new policies on September 30. According to Chinese media reports, by the end of September, all Chinese cities excepting Beijing, Shenzhen, Shanghai, Guangzhou and the resort town of Sanya, Hainan Province had loosened previous restrictions on homebuyers, such as provisions preventing people from taking out a mortgage on a second home. The hope is that this will revitalize the market and prevent developers and buyers from hedging currently stifling growth. Hangzhou, for example, has re-opened the purchase of second homes to non-locals since July, 2014. Though keeping its own restrictions, Shanghai has eased the terms under which local residents can take advantage of public reserve funds to apply for mortgages. Amid calls from developers to break capi-

tal chains, the central bank also attempted to bolster the market by relaxing lending restrictions on State banks. An anonymous insider told NewsChina that the relevant departments are planning to work out a new policy allowing unlisted developers to issue company bonds at the Shanghai Stock Exchange. While discussed in terms of being a bold step, many listed developers have already rushed to take this course of action. In July, Citychamp Dartong, a real estate developer in Shanghai, issued US$300 million in company bonds. The same month, Jiangsu Future Land issued US$330 million in bonds, followed in quick succession by another three big developers whose issuances added up to US$700 million in total value. “These bonds have performed well so far, and stimulus policies issued by the central bank and local governments will further help reduce the risk of developers breaking contracts in case of a fragmentation of their capital chain,” Xu Hanfei, chief analyst from Guotai Jun’an Securities, told NewsChina.

Real estate sales centers in Hangzhou sat empty in 2014

ally improved real estate sales volume since the end of September, but the kind of growth developers hoped for has failed to materialize. Data from Essences Securities showed that out of 20 second-tier cities observed, only an average 6 percent month-on-month growth in sales volume was recorded, despite stimulus measures being in place as early as June. Investors and developers have attributed the slow turnaround to poor implementation that failed to comply with the requirements of the central bank. The September 30 policy statement from the People’s Bank of China (PBoC) thus came as a reassurance that central support would improve market outlook. However, analysts and developers have remained conservative in their forecasts, most citing the housing surplus as a reason to be wary of the prospects for growth. The most typical example of the plight of China’s real estate sector is Hangzhou, where an orgy of land snatching made the local government’s 2013 land sales revenue 40 percent higher than the total financial budget for that year. Supposing that Hangzhou had maintained the breakneck pace of selling 8 million square meters of new housing every year, it would take a minimum of five years to clear surplus land resources. Shao Changjian, a real estate developer in Hangzhou dubbed “the housing prophet” by Chinese media, refused to call the slowdown a “collapse,” but instead, “a return to normalcy.” In past years, Hangzhou’s housing price has grown on average 20-30 percent faster than annual municipal GDP. Shao believes this to be an abnormal state of affairs. This idea is shared by many well-known developers, such as Vanke, China’s biggest real estate firm, which in 2014 purchased only one fourth of the total land resources they amassed in 2013. The Evergrande Group, another leading real estate developer, also claimed that they would not buy new landholdings until they had cleared surplus stock. As early as in 2012, Zhang Baoquan, president of Antaeus Group, a major real estate developer in Yunnan Province, warned that the traditional residential apartment market NEWSCHINA I December 2014

china

bynumbers in China was becoming saturated. According to statistics published by the Ministry of Housing and Urban-rural Development, China had built around 260 million residential housing units nationwide by 2013, a total of 1.1 homes per household on average, while the number of the young people aged 25-35, the largest demographic for first-time buyers, is declining year on year. Although some analysts believe that the government’s intensive urbanization program will create new demand, especially in major cities, stagnant wages and what many see as inflated house prices are a major threat to future growth. “It is good for the market that the government has lifted its former administrative controls on home purchases, but this does not mean that the market will enjoy an immediate turnaround,” Tian Shixin, a chief analyst at BOC International, an investment company under the Bank of China, told NewsChina. He believes that real estate investment may return to a slow stable pace in the future, even more potential demands are released. When attending an IMF conference in Washington in early October, Zhu Guangyao, China’s deputy finance minister, told media that the Chinese government is keeping a “close eye” on the real estate market, but will be very “cautious in launching any big stimulus package.” “I don’t think a turndown in the market is a problem, since the previous prices were too high,” he said. “We should allow the market to self-regulate.” His words, however, did not allay confusion over the tendency of China’s real estate market, especially in the longer term, to expand and contract according to China’s reform agenda. Controls on home purchases, the much-hated residence registration permit or hukou, the spotty construction of low-income housing and back-and-forth over land sales regulations have all served as destabilizing factors in the market. Until clarity on these issues is achieved, real estate developers, investors and ordinary homebuyers are likely to remain bewildered and yet beholden to the vicissitudes of one of the world’s messiest marketplaces. NEWSCHINA I December 2014

-1.8%

Drop in China’s PPI

The year-on-year drop in China’s Producer Price Index (PPI) in September 2014. China’s PPI has been falling continuously for 31 months due to sluggish demand for production materials, indicating business slowdown.

0.0 -0.5 -1.0 -1.5 -2.0 -2.5 -3.0 -3.5

Source: China National Bureau of Statistics

-4.0 Mar’12

Sep’12

2.59:1

May’13

Mar’14

Sep’14

95 million

China’s urban-rural income ratio in the first three quarters of 2014, down 0.05 on the same period in 2013. The figure has continued to drop from its 2008 peak. 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

2007

2008

2009

2010

2011

2012

2013

Source: China Ministry of Agriculture / China National Bureau of Statistics Breakdown of Chinese individual investors on A share market

The estimated number of inbound tourists who arrived in China over the first nine months of 2014, down by 1.5 percent from the same period in 2013, compared with a 16.6 percent increase in outbound tourism. Source: China Tourism Academy

31,674

The number of accounts with stock value above US$1.62 million held by individual investors on China’s A share market by the end of September 2014, a record high. Source: China Securities Depository and Clearing Corporation Limited Below US$1,620 US$1,620-16,200 US$16,200 – 81,300 US$81,300 – 162,000

US$162,000 – 813,000 US$813,000 – 1.62 m Above US$1.62m

46% Percentage of bank account holders who said in a central bank survey that they “planned to save” in the third quarter of 2014, compared with 18 percent who “planned to spend” and 36 percent who “planned to invest.” Source: People’s Bank of China

international

Photo by Xinhua / kcna

hen South Korea asked the North to send a delegation to the opening and closing ceremonies of the 2014 Asian Games held in Incheon, South Korea between September 19 and October 4, nobody expected the North to send anyone of importance given rising political tensions between both sides in recent months. As a result, when South Korea announced just hours prior to the closing ceremonies on October 4 that the North would send a high-level delegation led by Hwang Pyongso, the newly elected vice-chairman of North Korea’s National Defense Commission and one of Pyongyang’s highest officials, other Asian leaders were flabbergasted.

Kim Jong-un with members of the North Korean air force, October 19, 2014

North Korea

Deep-cover Diplomacy

pledge to resume “high level” negotiations in February 2014, no personnel with higher than vice-ministerial rank have met with their South Korean counterparts in recent years. In the course of their single-day visit to Incheon, however, this latest delegation met with Prime Minister Chung Hong-won, unification minister Ryoo Kihl-jae, and Kim Kwan-jin, the top national security advisor to President Park Geun-hye. Both sides agreed to unconditionally resume high-level talks, which had been suspended since a meeting in February during which North Korea hosted a rare reunion for families separated by the Korean War.

Absence

Analysts are divided regarding Pyongyang’s motives in its “unprecWidely seen as Kim Jong-un’s edented” high-level overture to the right-hand man, Hwang was acSouth. For some, diplomatic moves companied by another top Kim by Pyongyang typically indicate polaide, and the former head of the icy shifts at the highest level. North’s General Political Bureau, Just days prior to Hwang’s visit Choe Ryong-hae. Choe was recently to Incheon, North Korea’s Foreign “demoted” to the post of head of Minister Ri Su-yong proposed in North Korea’s sports ministry, but a speech made to the General Asis reputedly still a loyal member of sembly of the United Nations that uniting the two Koreas under “a Kim Jong-un’s inner circle. Another confederation of two systems within key member of the 11-strong delegation was Kim Yang-gon, Central one country” was the only way to Committee Chairman of the Work“prevent war and safeguard peace.” ers’ Party of Korea (WPK) and a vetRi’s appearance in New York was the eran negotiator with the South. first visit to the US mainland by a Few believed these big-hitters North Korean minister in 15 years, were in Incheon to watch sports. further fueling speculation about The visit is arguably the most sigthe political situation in Pyongyang. nificant in terms of the seniority of South Korean officials and media By Chen Jun the North Korean delegation since remained cautious in their responses to Ri’s statements. the end of the Korean War. The last The temporary “disappearance” senior Pyongyang official to cross the DMZ was WPK official Kim of North Korean paramount leader Ki-nam, who attended a memorial for late South Korean President Kim Jong-un from public view also fueled consternation in the reKim Dae-jung in 2009. gion. The young head of state missed a number of important public After the sinking of the South Korean naval ship Cheonan, which engagements from September 3, with underlings taking his place, Seoul claimed was torpedoed by a North Korean midget submarine, leading to speculation across the globe as to what might be happening resulting in the deaths of 46 soldiers in 2010, relations between the north of the 38th parallel. two Koreas deteriorated and, until now, Pyongyang’s senior officials However, Kim’s absence from public view ended after five weeks, have shown little interest in resuming bilateral talks. Even after a when he reemerged in North Korean state media broadcasts on Octo-

Shock

An unusual visit to South Korea by North Korean officials alongside the disappearance of paramount leader Kim Jong-un has left diplomats and experts in the region puzzled over its strategic intentions

NEWSCHINA I December 2014

ber 14 on a visit to a housing project, walking with the aid of a cane. This seemed to confirm rumors that he had undergone surgery for an ankle problem after being seen “limping” in earlier news footage. Previous reports had speculated wildly that Kim was fatally ill, or had been deposed, or “retired from public duties to become North Korea’s ‘spiritual leader.’” Although Kim’s reappearance ends speculation over his grip on power, it remains unclear whether the leader’s absence was in fact due to medical reasons, or was rather indicative of internal political struggle in Pyongyang. It is not the first time Kim has disappeared from public view for an extended period. In 2012, the leader was not seen in public for 23 days. In 2013, he went “missing” again for 17 days. In both cases, his disappearance was followed by political purges of prominent North Korean leaders – WPK Politburo member Lee Young-ho in 2012 and Jang Song-thaek, Kim’s maternal uncle, in 2013.

Policy Shift

According to Zhang Liangui, an expert on Korean studies from the Party School of the Central Committee of the Communist Party of China, rather than a departure from Kim’s earlier policies, the North’s “shock” visit to the South is in line with a new diplomatic strategy formulated under Kim and aimed at dividing international pressure and lessening its increasing isolation by taking advantage of regional rivalries between Japan and China, and between the US and Russia. Like many analysts, Zhang argues that the new strategy is more about change of diplomatic tactics rather than policy. In recent months, Pyongyang has found itself struggling to maintain its former standing with Beijing as China’s latest administration under Xi Jinping has adjusted its policy towards its erstwhile ally. Not only has Xi yet to extend Kim Jong-un an invitation to Beijing, the Chinese president has also broken with tradition since assuming power by visiting Seoul before Pyongyang, signing pledges to deepen Sino-South Korean ties and in so doing tipping the strategic balance on the Korean peninsula. Instead of allowing North Korea privileged status equal to that of a treaty ally, the Chinese government is now describing the bilateral relationship as one between “normal countries.” The sudden arrest and execution of Jang Song-thaek in 2013, a man seen by many as a key political and business intermediary between North Korea and China, further strained the bilateral relationship. China is believed to have cut strategic oil shipments to Pyongyang since January 2014, and tightened controls on cross-border financial transactions. In response, rather than making concessions to Beijing, Pyongyang has instead launched a new round of diplomatic overtures to other regional powers, particularly those with an interest in containing an ascendant China. Earlier in July, as if in a direct rebuke to Xi’s visit to South Korea, North Korea held negotiations with its former arch-enemy Japan in which the two sides discussed the repatriation of Japanese nationals abducted by the regime, as well as the possibility of “some form of diplomatic rapprochement.” In July, Japan announced that it would NEWSCHINA I December 2014

ease some of its sanctions against North Korea, prompting US Secretary of State John Kerry to warn Japanese Prime Minister Shinzo Abe against visiting Pyongyang. In September, the same month that Foreign Minister Ri Su-yong addressed the UN General Assembly, a delegation led by WPK Politburo member Kang Sok-ju embarked on a tour of Germany, Belgium, Switzerland, Italy and Mongolia. After returning from the US, Foreign Minister Ri made an 11-day visit to Russia in October, the first ministerial-level visit to Moscow since the death of Kim Jong-il in 2011. Meeting with his Russian counterpart Sergei Lavrov, Ri discussed ways to bring Russo-North Korean bilateral trade volume to US$1 billion. “So far, the gains of Pyongyang’s diplomatic offensive have been limited,” said Zhang Liangui, “South Korea is the next target.” In Zhang’s view, neither Korea is likely to seek rapprochement so long as both sides remain fundamentally divided on so many issues. Pyongyang’s state media agency has continued with its vicious longstanding smear campaign against South Korean President Park Geun-hye. According to South Korean media sources President Park allegedly suggested a meeting with the North Korean officials visiting Incheon, but her request was rebuffed by Pyongyang. The North’s nuclear program, the curtailment of which is seen as an essential precursor to peace talks by everyone but Pyongyang, is another sticking point. Although So Se-pyong, North Korea’s ambassador to the United Nations, told media in Geneva on October 2 that the country was “not planning a nuclear or missile test” and “stood ready to resume six-party talks on its nuclear program,” most analysts are skeptical, given the status afforded the country’s nuclear ambitions in the North Korean media. On October 10, North and South Koreas exchanged fire across the DMZ after a group of South Korean activists launched propaganda balloons filled with leaflets bearing anti-Pyongyang slogans, books and DVDs across the border. South Korean soldiers returned fire after North Korean forces targeted the balloons, with some shots landing in South Korea. Earlier in August, Pyongyang turned down a South Korean proposal to hold high-level talks, insisting that Seoul stop such actions by anti-Pyongyang activists. No indications that the North has changed this stance have been forthcoming. On October 12, a commentary in the official newspaper the Rodong Sinmun stated that the South’s “provocation,” referring to the launch of propaganda balloons, had meant the planned high-level talks had “virtually come to nothing.” On October 15, during a meeting between generals from both sides held in the neutral area of Panmunjom in the DMZ, the first military talks between the two sides in more than three years, North Korea repeated demands that South Korea prohibit activists from launching the balloons, a demand South Korea rejected. With its leadership still lacking the will to make compromises, regardless of internal and international conditions, it seems more than likely that Pyongyang’s “sports diplomacy” with the South will be short-lived. 

culture

Shen Jiawei

Painting History Red Chinese-Australian Shen Jiawei’s passion is creating portraits of key figures from the modern history of his homeland. NewsChina catches up with him and his latest works By Wan Jiahuan

tanding in front of a 30-meter tawnytoned spray painting titled Brothers Squabble Inside the Walls, ChineseAustralian painter Shen Jiawei, 66, dressed in a cream-colored cotton coat, sporting gray hair and a pointed beard, looks more like he’s posing for a portrait than presenting one. Behind him hang a row of iconic historical images, including a portrait of former Japanese Prime Minister and Class A war criminal Hideki Tojo and a painting depicting Japanese WWII spy Yoshiko Kawashima seated at the feet of Wang Jingwei, China’s latter-day of Benedict Arnold. These canvases are only a tiny part of Shen’s

new collection of 22 paintings depicting 422 historical figures and events during the years 1936-37. Apart from Red Army generals and leaders of the Communist Party of China (CPC), the portraits also include influential personnel from the Kuomintang (KMT), former arch enemies of the Communists. “Some high-ranking generals in the KMT were heroes who fought the Japanese invaders,” Shen said at a press conference held for the unveiling of his new painting. “Puyi [the Xuantong Emperor, China’s last absolute monarch] was a traitor, but in the end they all became citizens of the People’s Republic.” “History is complicated,” he added.

Narrative

It took Shen four years to complete Brothers Squabble Inside the Walls. His aim was to make every image in his painting traceable back to its origins, to withstand his critics. His source materials are file photos he has collected over the years, and thus a blue vein stands out on the forehead of Chiang Kai-shek, while Mao Zedong, who appears smoothly-complexioned in airbrushed official photographs and paintings, has a deeply wrinkled forehead in Shen’s canvas. “The artist’s job is to revitalize [historical figures],” Shen told NewsChina. “By searching for these figures’ names, young people NEWSCHINA I December 2014

Photo by CNS

Shen Jiawei

will be able to find each individual’s respective history, and together they constitute a single, huge historical narrative.” In 1987, Shen, then working with the Liaoning Art Academy, painted a similar painting titled Red Star Over China. The difference was that all the protagonists of this painting were Red Army personnel. The painting caused a stir when it was released, with its naturalistic depiction breaking with contemporary conventions of the “false, large and empty” themes and “red, glossy and bright” tones demanded during the Cultural Revolution (1966-76). In 2011, Red Star over China was displayed NEWSCHINA I December 2014

in Australia, where Shen found that visitors showed great interest in his historical images. Afterwards, he began to consider a sister or sequel painting, executed on a grander scale. Set in the same period as Red Star Over China, Shen modified his theme to depict KMT-Communist cooperation during the Second Sino-Japanese War (1937-1945). The title, Brothers Squabble Inside the Walls, is a line from the Book of Songs, the definitive canon of ancient Chinese poetry. The line itself was frequently cited when discussing the myriad internal political squabbles and intrigues in China in the 1930s, and appeared frequently in government documents and newspapers. For Shen, the painting “fully expressed the complexity of my Chineseness” and also “made full use of my accumulated knowledge of Chinese history.” Shen has devoted a lifetime to historical paintings, and in the past 10 years has experimented with expressing his own viewpoint by “allowing the artist to walk onto the stage and directly comment upon history.” However, for Brothers Squabble Inside the Walls, Shen decided to revert to his earlier style, restoring his original studies for Red Star Over China and, in his own words, “letting facts converse with images” while keeping the artist’s hand “unseen.” “I frequently hesitate to speak, because I worry that he who talks too freely will be more prone to error,” he told NewsChina. In the early years of China’s Reform and Opening-up, naturalism posed a challenge to artists that had been systematically indoctrinated to exclusively limit their works to socialist-realist propaganda, calligraphy or bland landscapes. When Shen was painting Red Star Over China, which depicted some sensitive political figures, a few of the teachers and students at the Liaoning Artists’ Association voiced their worries – didn’t the Politburo need to approve the subjects an artist could paint? Shouldn’t the Party leadership have a voice in who was, and wasn’t, depicted? “What could I do?” Shen flung his hands up. “I did nothing but shut the door and continue to paint.” Asked during the press conference whether times had changed, Shen responded: “If ‘Red

Star’ can be accepted [in China], ‘Brothers’ can also be accepted. There’s no difference between the two canvases. I don’t think these paintings will encounter censorship and need ‘revision.’”

Propaganda

Shen lives in the artists’ community of Bundeena, south of Sydney. On the first Sunday of every month, he hosts art fans who come to visit, but for the rest of the time, he either paints or reads. Most of the books he owns are about the international communist movement – and Shen devours whatever he can find on this topic. Born in 1948, Shen remembers that his first painting was of the Kremlin’s clock tower. As he loved to read Soviet literature, his art was almost exclusively limited to depictions of the Red Army. When it came to Chinese figures, Shen’s only truly familiar subject was Mao Zedong. “During the Cultural Revolution, most painters concentrated on political figures,” he said. “All our thoughts were confined to that theme and I wasn’t able to step outside that box.” In 1968, an art exhibition was held in Jiaxing, Zhejiang Province. Most of the works displayed were painted by factory workers, but the exhibition included two oil paintings by Shen. Shen went on to work for half a year in the People’s Liberation Army (PLA) air force, painting heroic portraits of airmen and women. In 1970, Shen was embedded with the Heilongjiang Production and Construction Corps in northeast China. As a painter, he was called upon to eulogize heroes among workers, peasants and soldiers, to create art that would “serve the people” as demanded by Chairman Mao. Shen shot to fame in 1974 for his Standing Guard for Our Great Motherland, a painting eulogizing the Cultural Revolution. In the 1980s, many painters of his generation chose to depoliticize their works, but Shen, now comfortable with political themes, continued with his portraits. He continued to stick to these themes even as his fellow artists began to experiment with alternative styles after the Cultural Revolution, though Western naturalism began to influence his works, and the

Photo by CNS

culture

Part of Shen Jiawei’s painting Red Star Over China

figures became less and less idealized. However, his work was still largely seen as belonging to the socialist-realist school. Renowned painter Chen Danqing once called Shen “an individual among peers who openly sticks to revolutionary realism.” Shen emigrated to Australia in 1989, where he hoped to pursue his interest in historical painting without as much political scrutiny. While he experimented with portraits for a time, he had returned to historical themes by the end of 1990s. Shen said of his 1999 painting, Absolute Truth, themed around the historic meeting between Mikhail Gorbachev and Pope John Paul II in 1989, that it marked “his comeback.” Later works, including Beijing Jeep and The Third World, placed political themes and figures center stage.

Different

In his homeland in the 1980s, Shen’s themes were seen as conservative and outdated. But Shen wanted to rehabilitate his favorite subject matter. “Resentment had accumulated within me over what the Cultural Revolution did to historical painting,” Shen told our reporter. “I wanted to create a new branch in this field and let people know that there are alternatives.” Facing backlash from more avant-garde artists, Shen’s naturalistic paintings also found little favor with the authorities. One of his canvases, completed two years earlier than Standing Guard for Our Great Motherland, included a self-portrait of the artist within its composition, depicted eating snow to ease his thirst while working as a logger in

Manchuria. This inclusion of a self-portrait, a style officially banned in China at the time, ensured his canvas was never exhibited – slammed as “too close to real life, rather than superior to real life.” Such was the pressure on Shen working in his mother country. Even Standing Guard for Our Great Motherland suffered what Shen describes as “brutal” revisions – the soldiers’ expressions were “enhanced” to make them appear angrier, and the sun was repainted to look brighter and a deeper shade of red. Only after these changes were made could the canvas be exhibited publicly, which it finally was in 1974. To the artist, who had spent an entire month observing the effect of the hoary Manchurian sunlight on the coarse faces of soldiers, the changes were devastating. However, when Jiang Qing, Mao’s wife and one of the main architects of the Cultural Revolution, beheld the “revised” canvas, she declared herself “quite happy” with it. This was enough to make Shen’s doctored painting famous nationwide, with prints distributed across the country and Shen himself lauded in the State media. After the fall of the “Gang of Four,” the ultra-left clique led by Jiang Qing herself, however, the painting was ignominiously thrown along with other “revolutionary” works into the basement of the China Artists’ Association. More than 30 years later, this disgraced masterwork would sell for 7.95 million yuan (US$1.3m) at the China Guardian 2009 spring auctions, making it one of the most valuable modern historical paintings ever sold in China. Shen maintains that the only thing he can do in the face of criticism is “be able to think independently”. “In the years when we were most thirsty for knowledge, we were fed with false history. I wanted to turn this history right side up,” he told NewsChina. “I spent most of my life on this endeavor, a hostage of the Cultural Revolution.” NEWSCHINA I December 2014

Ann Hui

Golden Gamble

When it came to making a biopic of maverick early 20th-century Chinese writer Xiao Hong, divisive Hong Kong filmmaker Ann Hui was perhaps the only person for the job By Yuan Ye and Wen Tianyi

NEWSCHINA I December 2014

Ann Hui

Photo by Xinhua

n a November 1936 letter to her husband, Chinese novelist Xiao Hong, trapped in Japan on the eve of the country’s invasion of China, lamented her misfortune: “Isn’t this my golden era?” Ann Hui, one of Hong Kong’s most critically acclaimed film directors, took this quotation as the inspiration for her 28th cinematic work – on October 1, the first day of the 2014 Chinese National Day vacation, Ann Hui’s biopic of Xiao Hong, Golden Era, was released to eager Chinese audiences. The considerable hype was due not only due to Ann Hui’s directorial reputation and a star-studded cast, but also to the film’s promise of an unadorned portrayal of China’s literary scene during the Republic of China period (19121949) – an impoverished, unstable era often romanticized by many modern Chinese people due to its progressive political climate. This brief period provided the backdrop to the creation of some of the country’s greatest literary works. Indeed, there is plenty to romanticize. In 1936, Xiao Hong was 25. One year earlier, she published The Field of Life and Death, a novel that earned the support of Lu Xun (18811936), one of the most important literary figures in modern Chinese history, who called the novel in its foreword “a female writer’s meticulous observations and extraordinary writing.” Portraying a hellish life in a northeastern Chinese village

culture

before and after the Japanese occupation of Manchuria in 1931, the book propelled Xiao to fame in China’s burgeoning modernist circles, and placed both her and her husband Xiao Jun – who had published his more overtly radical novel Village in August in 1935 – firmly in the leftist revolutionary camp. The Xiaos became de facto leaders of what came to be known in the Chinese literary circle as the “northeastern set.” In fact, Xiao Hong and Xiao Jun were pseudonyms that the couple gave themselves after they met in 1932 – the four Chinese characters combine to make a homophone for the phrase “xiao xiao hong jun,” literally: “tiny red army.” However, when the couple’s marriage took a turn for the worse in 1936, Xiao Hong left for Japan – one year later, Japan launched a full-scale invasion of China. According to Ann Hui, she had been ruminating on the story of Xiao Hong for some 40 years. Now 67, Hui is an accomplished director, having won Best Director four times at the Hong Kong Film Awards (HKFA) and twice at Taiwan’s Golden Horse Awards (GHA), as well as a lifetime achievement award at the Asian Film Awards. Xiao Hong’s life was also marked by accomplishment, but was short, arduous and controversial. Her mother died when she was little, leaving her in the care of a strict, emotionally distant father. At 19, Xiao Hong fled to Beijing from her hometown in the northeast to avoid an arranged marriage – an act that brought shame on her family, and eventually caused her father to cut off communications with her. At 21, she was abandoned by her fiancé after becoming pregnant. She married twice, each time pregnant with the child of a former partner. Her first child was given away and the second died several days after birth, the cause of death unknown. Despite her literary achievements, the impoverished Xiao Hong died of tuberculosis in 1942 in Hong Kong, at the age of 31. Ann Hui first read Xiao Hong’s writing in 1972, the same year she received her Master’s in English and comparative literature from the University of Hong Kong, before going on to study at the London Film School for two years. Hui found herself captivated not only by Xiao’s writing, but also by the obscurity of her life story. “She was from northeast China, and I was born there. She died in Hong Kong. I felt some kind of connection,” Hui told NewsChina. In 1947, Ann Hui was born in Anshan, in northeast China’s Liaoning Province. When she was only two months old, her parents – a Japanese woman and a member of the nationalist Kuomintang – took her to Macau, and later to Hong Kong. Hui knew nothing of her mother’s life until the age of ten. “The war with Japan had only just ended. It was a serious problem to have a Japanese wife,” she told NewsChina. “My family lied about my mother’s nationality to our neighbors – they explained her strong accent by saying she was from the northeast and didn’t speak [the local dialect] Cantonese very well.” Ann Hui also found a connection between her own mother and Xiao Hong. “I always felt that my mother was a drifter. She left home very young and moved from Japan to China, from Qiqihar to Shenyang, to Anshan, then to Macau and finally Hong Kong, only to

Wang Zhiwen (center, seated) plays writer Lu Xun in Golden Era

find that nowhere felt like home,” said Hui. Xiao Hong moved around too, from her hometown in Hulan County to Beijing, then Harbin, Shanghai, Japan, Shanxi, Wuhan, Chongqing and finally Hong Kong, in the 12 years after she ran away from her arranged marriage. In 1990, Ann Hui directed Song of the Exile, a semi-autobiographical movie about herself and her mother. The movie, a subtle and refined depiction of conflict and understanding between a Hong Kongraised daughter and her Japanese mother, was nominated for several awards at the HKFA and GHA, and won Best Screenplay at the latter. The movie flopped at the box office, though, provoking Wong Jing, one of Hong Kong’s most successful commercial movie directors, to say of it: “Who wants to watch a biopic about a fat woman and her mother?” Though Ann Hui was irritated by the comment, and lashing out at Wong by calling his entire oeuvre “garbage,” his words had undeniably touched a nerve – Hui did seem to have weak commercial instincts. In 1991, her two cinematic releases Zodiac Killers and American Grandson both lost money. Wong Jing continued to criticize Ann Hui’s tendency to “let her investors down.” Ann’s commercial fortunes failed to improve over the following years – despite increasing critical acclaim and a steady accumulation of awards, few of her movies sold well. That led to a predicament – she frequently encountered trouble finding investors. While criticizing Ann Hui for being too artistic and literary, Wong Jing later admitted he admired her talent, telling the media that Ann Hui and John Woo, another mainland-born, Hong Kong-raised filmmaker, were the directors he admired most. He even actively reached out to Ann Hui to discuss collaboration. Ann Hui’s investment woes continued all the way up to this year’s Golden Era. Around 2006, Ann Hui and Li Qiang, one of China’s most famous playwrights who wrote the screenplay of Ann Hui’s The Postmodern Life of My Aunt (2006), began to work on the story of Xiao Hong – in 2010, Li Qiang finished the screenplay. The story was long, and due to Ann Hui’s fastidious attention to detail and her insistence that the film be shot in multiple locations – she set the NEWSCHINA I December 2014

Tang Wei (center) plays Xiao Hong

budget at 60 million yuan (US$9.8m). Perhaps unsurprisingly, it was a sum that failed to interest many investors. Ann Hui was told that the movie was “too literary”, and had little chance of a return on an investment – one investor told her the price tag was three times too high. After quite some frustration, it was Li Qiang who finally convinced Tan Hong, chairman of the board of SMI Corporation, one of China’s largest media and movie companies, to invest in Golden Era – Tan reportedly liked the script. Tan Hong was clearly aware of the risk involved in the project – in his words, Golden Era, a staunchly non-commercial film, went “against the rules of the market.” The shooting period was long and hard. “It’s my most experimental work,” Ann Hui told Chinese media. Perhaps most dauntingly, Hui faced the challenge of navigating the contentious politics of this controversial period of history. Ann Hui’s experience and reputation seemed to bulldoze many perceived difficulties. Although a dozen A-list stars joined the cast, “the total remuneration for all of them was 3.7 million yuan (US$603,000),” said Tan Hong. “Feng Shaofeng [playing Xiao Jun] took no payment at all.” In the early days of Ann Hui’s directorial career, investment hadn’t been much of a problem. In 1981, she directed Boat People – a movie recounting the plight of the Vietnamese people after the communist takeover following the end of the Vietnam War, for which she won 5 awards, including Best Film and Best Director, and 12 nominations at the second HKFA. Moreover, the film earned box office revenue of 14 million Hong Kong dollars (US$2.7m then). One year earlier, she had directed satirical thriller The Spooky Bunch, which was also a box office success. Only just in her 30s, she was already recognized as a leading light of Hong Kong cinema’s New Wave. However, further influenced by Taiwan’s New Wave directors such as Edward Yang and Hou Hsiao-Hsien, Ann Hui became obsessed with making movies that were “so transparent that the viewers can touch the lives therein.” She decided to focus more on making movies that portrayed the real lives of people in Hong Kong and on the mainland, and began directing more literary adaptations. “There’s never a fixed model for my movies. Pursuing change is a NEWSCHINA I December 2014

worthy cause, and I won’t ever stop,” she said. While focusing on her preferred themes and her gentle, nuanced approach to depicting these themes, she continued to expand her exploration of more esoteric territory. In 1995, Hui’s Summer Snow was released. Telling the story of a middle-aged Hong Kong woman trying to strike a balance between her career and her family, the movie swept that year’s HKFA awards, also claiming four nods from the GHA, and two prizes at the Berlin International Film Festival. However, despite winning four awards at the HKFA, her next film The Way We Are (2008), a story of a Hong Kong community that experiences a series of family tragedies, barely broke even at the box office. A Simple Life (2012), a story of the twilight years of a nanny and the now adult boy she brought up, put her back on track, pulling in more that ten awards both at home and abroad and earning a box office income of near 100 million yuan (US$16m). This return to form made the staunchly left-field Golden Era even more of a gamble – clocking in at over three hours long, and awash with flashbacks, interposed narration, dialog, monologues and asides, Ann Hui’s assertion that the film was her “most experimental work” was no offhand comment. In perhaps the biggest challenge to the viewer, the director peppers the film with clips from documentarystyle interviews with each of the characters, in which they discuss events in the film as they unfold – at the very beginning of the film, even Xiao Hong herself ruminates on her own birth and death. While her early writings were explicitly left-leaning, what distinguished Xiao most from other writers was the loose, essay-like form of her novels, a style that earned her criticism from her peers, who complained that her writing “lacked structure and plot,” especially her later work. After her separation from Xiao Jun, she abandoned her leftist compatriots and began writing about her personal feelings – at a time when the entire nation was busy making revolution and preparing to fight the Japanese invasion, her introspection found little favor. Some also criticized Golden Era for this same looseness, calling it a mixture of a stage play, a documentary, a poetry recital and a costume drama, rather than a movie. “Who decides what a novel should be?” Xiao Hong says in Golden Era. It seems Hui couldn’t agree more – at the end of the movie, Ann Hui even inserted a comment from Shu Qun, a writer and friend of Xiao Hong: “Her value lies in her independent choices in opposition to her times.” Xiao Hong suffered greatly for this “value,” and so far, it appears that the avant-garde Golden Era has too – according to Chinese media, the movie was roundly beaten at the box office by more commercial movies over the National Day holiday, though no concrete figures have yet been released. To address this, the movie’s distributor has announced an extended screening period, with the first round being one month and the second round yet to be negotiated – still, the movie’s submission as Hong Kong’s entry for Best Foreign Language Film at the 87th Academy Awards may provide a glimmer of hope for commercial success in the future.

visual REPORT

1 1. Twins at an elementary school for migrant children, September 2014, Xi’an, Shaanxi Province 2. Liu Yangyang, daughter of a migrant worker family, Xi’an, Shaanxi Province 3. Students attend the flag-raising ceremony at an elementary school for migrant children, Xi’an, Shaanxi Province, September 1, 2014 4. Parents try to register their children at an elementary school for migrant children in Xi’an, Shaanxi Province, August 31, 2014

Unsettling Development 58

NEWSCHINA I December 2014

ith rapid urbanization throughout China, the country is expected to be home to 120 million migrant workers by 2020. However, social benefits, including pensions and medical care, are still lacking. Furthermore, education for the children of migrant workers has become a significant social problem - few gain access to the public school system in the cities where their parents work. NEWSCHINA I December 2014

Photo by IC and CFP

visual REPORT

1. Two parents accompany their child to school 2. Two parents wait for their child at an elementary school for migrant children 3. Elementary school students in their schoolyard 4. Shi Xinmin, principal of an elementary school for migrant children in Xiâ&#x20AC;&#x2122;an 5. Students in their dormitory at an elementary school for migrant children, Xiâ&#x20AC;&#x2122;an, Shaanxi Province, September 1, 2014

6. Children line up at lunch

NEWSCHINA I December 2014

Photo by IC and CFP

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NEWSCHINA I December 2014

OUTSIDEIN perspectives from within China

Accessible Yanqing

On The Fringe Find rural idyll barely an hour from the capital – just don’t forget to feed the ducks!

By Kenneth Kagan

eijing is huge. In case you hadn’t heard. Commuting its main subway line from end to end takes five transfers and three hours inside a sardine can. It used to be that the city virtually ended at its walls – long gone, their outline now traced by a perpetually gridlocked expressway imaginatively known as the Second Ring Road. Today, the gray urban sprawl stretches outwards to the Sixth Ring Road, a remote ten-lane, 81-mile loop that you could fit most of Liechtenstein into and is at least an hour’s drive from its smallest cousin – depending on the traffic. The Sixth Ring Road is informally considered to be where the city ends and the rural areas of Beijing Municipality begin, though cheaper land prices have meant that blockish developments continue way into the sticks. Yet, this area also offers pastoral villages, mountain ranges and glorious tracts of farmland. It was in pursuit of these that got me onto the bus out to Yanqing County, the northernmost district of the Beijing metropolitan area. Anything to escape the smog. For most farmers out in the north, Huairou, not Beijing, is the big city. For Beijingers, however, this is a market town. The wide boulevards and low buildings where we passed through are a great gateway

to the wilder unrestored sections of the Great Wall or the karst valleys of the Longqing Gorge. We hop in the first “black cab” we can find, driven by a local who realized he could make more money as an unregistered transport service than a cubicle zombie. Big mistake. As nice as his leatherseated sedan appeared, his lack of GPS or even a map made him a hopeless guide. “Take us to the lake!” we cry, pointing out the Wild Duck Lake in our woefully outdated guidebook. He didn’t know where this supposedly famous local landmark was, so we attempted to direct him. Our fumbling directions led us through long, tree-lined avenues before finally arriving at a vast, expansive plateau of, well, nothing. Literally – what lay before us might have been the world’s largest putting green had it not been crisscrossed by horse trails and the occasional gust of unseasonably powerful wind. Every once in a while we might see a fluffy white sheep scudding across the horizon. Our cabbie turned around and grinned through tobacco-stained teeth. “OK, you’re here.” Like hell we were. NEWSCHINA I December 2014

Getting There Yanqing is only about one hour’s drive from Beijing, and renting a car is the most convenient method of getting there, though Bus 919 from the Deshengmen depot goes all the way to the Yanqing terminus. From here, take a taxi to the lake - it’s best to have rough directions (in Chinese) written down for your driver. Where to Stay Come early in the morning and Yanqing can easily be done as a day trip. Overnighters should keep an eye out for one of the many nongjiayuan farmhouses where a cheap night’s sleep and decent food can be found yearround. Some international resorts exist in areas closer to the Great Wall, including a Holiday Inn Express, but that’s hardly the point of coming out here.

We had arrived, we discovered, not at the Wild Duck Lake, but rather the Kangxi Grasslands, the largest green space in The Kangxi Grasslands Beijing Municipality. It’s a thematic throwback to the days nomadic warriors continuously threatened the capital, though urban sprawl has settled that contest for good. Attracted by cooler temperatures and relatively pollution-free skies, it’s now a mock-up of Mongolia: horse (or even camel) riding is popular on the prairie, and many stay the night in a yurt. It’s a chance to live the rugged nomadic life without worrying about where to shower off later. Given our options, we decided against the nomadic life and paid NEWSCHINA I December 2014

our driver up front to wait around and take us to the real lake later. We mounted up and trotted around, gaining a good vantage point over a whole lotta nothin’. The wind and less than friendly horses soon pushed us onward, and our driver, who seemed to have recalled his local geography, assured us the Wild Duck Lake wasn’t far, so we boarded his cab once more, and finally made it to our desired destination. The Wild Duck Lake, or yeyahu, is a tangled series of trails around a rippled, rural body of water populated by thousands – and I mean thousands – of wildfowl. Even the most amateur ornithologist could easily cross half the local species off their hit list in minutes, and wildlife photography is a cinch when every square foot of water seems to be home to a placid, dabbling aquatic bird. This isn’t exactly a wildlife refuge. Indeed, these fowl are so accustomed to tourists that they will even come to you. For loose change, vendors at the entrance will give you a small bag of birdseed. Toss the kernels in any direction and countless ducks will descend on you almost instantly. While seemingly wild, the birds are certainly living well off of enthusiastic visitors.

travel

Photo ic

Renting bikes is the best way to take in the whole area in a short space of time. Perhaps we just got lucky, or maybe the lake is just far enough away from urban settlement, but a quiet bike ride under the blue skies Students feed wildfowl at the Wild Duck Lake with only the ducks for company allowed us to feel more removed from urban life than most Beijingers ever get. The only sounds we heard were the squeaking of the tires along the dirt roads, and the occasional quacks of wildfowl. Bliss. And the views! The rough wetland provides vistas free of people or buildings, save the occasional roadside pavilion provided for shelter. We watched the sunset from beneath the secluded eaves of one of

these, streaks of gold and crimson burning across the sky. Then, of course, we had to get home. Yanqing is too far for a day trip if you don’t have your own transportation, but thankfully for us it’s a piece of cake to find accommodation. Many farmers have expanded their courtyard houses to accommodate guests, with many standing vacant even during national holidays. Many of these guesthouses, like the one we were brought to, do a brisk trade in authentic rural living. This means hard but cozy kang brick beds, and nothing else. Bring friends and expect body contact. If you get lucky, the farmers themselves will cook you dinner. We were treated to simple northern staples like eggs and tomatoes sweetened with sugar; savory eggplant braised in soy sauce; and the unfortunately soapy sliced luffa. It wasn’t that long ago that a good portion of the city – if not China – lived like this, though, we reflected, without unhindered access to the green bottles of Tsingtao beer we were collectively chugging. We had only traveled an hour, but we’d gone decades back in time. The next day, as our bus approached the Deshengmen gate, a rebuilt version of one of the city’s main entrances and now a traffic intersection, we remembered - despite the rural idyll, we had at no point left Beijing.

real chinese

gōng

zhī

gongzhi “Public Intellectual”

Different from its meaning in the West, the term “public intellectual,” or “gongzhi,” has become somewhat pejorative in China, often used to satirize those who are critical of Chinese society or the government, on or offline. An abbreviation of “gonggong [public] zhishifenzi [intellectual],” the term gongzhi was first brought to prominence by Southern Metropolis Weekly in 2005, when it published its list of China’s top 50 most influential public intellectuals. At the time, the magazine defined gongzhi as those with a strong academic background, possessed of critical insight into society and keen to participate in public social discourse.

One widely recognized “model gongzhi” was Lu Xun (1881-1936), an outspoken writer during China’s Republican era who actively criticized the nationalist Kuomintang government. However, the meaning of gongzhi has changed over the past five years. With conflict between leftists and rightists within China becoming increasingly intense, intellectuals across the political spectrum, as well as certain celebrities, have become known for their tendency to blame the system for all society’s ills, and their empathy for those who harm the innocent while venting their anger toward society. Inevitably, gongzhi are frequently targeted with

accusations of being backed by Western organizations. The term is now essentially a byword for any Chinese public figure who reprimands the State or the socialist system– a near synonym for “traitor.” Analysts have attributed the evolution of the term to China’s rapid social transition in which public figures, particularly intellectuals, are more concerned with guiding public opinion than having a rational discussion. However, though many public commentators have eschewed the term, few have given up being critical, and continue to try to hold those in power to account. NEWSCHINA I December 2014

flavor of the month

Hot Stuff By Sean Silbert

t was a challenge I couldn’t turn down. Funiutang, a restaurant tucked away in a nondescript Beijing shopping mall, peddled what it claimed were the world’s spiciest beef noodles. Supposedly only 15 “iron stomachs” had finished the challenge – a whole bowl. I never questioned that I would be the next on that list – not even after the restaurant made me sign a waiver absolving them of any wrongdoing should it prove too much. The noodles don’t look different than any other bowl served up at countless nooks throughout the city. But after only a few bites my gut was so contorted I could barely sit up straight. My eyes were bloodshot and my lips burned. I made it through two and a half minutes of sweating, weeping, hiccupping, panting and dry-heaving before setting down my chopsticks in defeat. The culprit? Funiutang’s rice noodles were drenched in a chili oil so piquant that it could probably be used for riot control. The source is a heaping helping of qixingjiao, or sevenstar pepper, a sweltering sibling of the popular “heaven-facing” chili known for its skyward-pointing tips. Served in the bowl both dried and powdered and made into oil, the red pepper raises the noodles to an infernal spice level nearly 120 times the heat of neat Tabasco sauce. The owner told the Wall Street Journal that while the pepper’s origin is in Hunan province, their supplier gets the peppers from Sichuan – a land also known for its intensely fiery cuisine. That highlights a debate that many Chinese love to weigh in on: Hunan or Sichuan – which has the fieriest cuisine? Hunan has a strong case to seize the chili crown. While the Portuguese only introduced the chili pepper to China in the 17th century, this ingredient became integral to the collective cookbook of the Hunanese. NEWSCHINA I December 2014

Less oily than Sichuan cooking, Hunan’s choice of a spicy smackerel makes up for this with a dry burn that’s far more direct. Forget subtlety. Hunan spice is a knockout punch. Chairman Mao frequently professed an undying love for the spice-soused dishes of his Hunanese hometown. It can seem that every regional restaurant is in a competition to see who can inflict the most brutal burn – even street dumplings are brazenly slathered in chili and noodles soak in a bright crimson broth. I once went on a date with a girl from Hunan to a barbecue joint, where she demanded the hottest thing on the menu. After taking one bite, she frowned, drenched it with a bottle of hot sauce, and eventually pushed her meat aside. It wasn’t hot enough for her. Dine at a Hunanese place and you shouldn’t miss out on signature dishes like gan guo, a medley of sautéed fatty pork and vegetables sizzling in a liberal bedding of blood-red peppers. Ingredients like smoked tofu and cauliflower add taste to many dishes, which is little consolation when your sinuses burn and your nose won’t stop running. Its main competitor, as any novice China foodie would know, is the food of Sichuan

(sometimes known in the West as Szechwan) Province, where the locals even call their womenfolk “spicy.” Sichuanese spice differs greatly from the Hunan burn, due to the numbing prickle of huajiao, the infamous Sichuan peppercorn, which is in fact a minute citrus fruit not dissimilar to bergamot. Not everything in this part of the country burns your mouth: a good percentage of Sichuan food is packed with savory flavors, like tea-smoked duck. Yet when Sichuanese order hot pot, the broth is so packed with chilis that the base can appear nearly black. One explanation for this excessive, sweatinducing heat – given to me by a Beijing chef – is that while the steamy climes of Sichuan and Hunan provide agricultural bounty, they also spoil food rapidly. One answer to the issue of fetid meat and fish was to make food spicy enough to mask unpleasant flavors. Consider malatang, a street-side snack which involves unidentifiable meats, tofu products and vegetables simmered in a searingly seasoned broth. The side effect, of course, is that so much of the piquant kick in the various forms of food available just makes it all the more delicious, and distracts the mind from questions of provenance. None of this, though, explains why anyone would want to eat a bowl of noodles like Funiutang’s. I wouldn’t recommend it, unless you’re trying to show off your machismo, though self-flagellation might be a quicker fix on that front. Tap out from the contest and you’ll get a small cup of water to ease your suffering. I was left panting, with the staff gawking and obviously giggling at me. But what’s the prize if you manage to slurp down every last noodle? Beyond everlasting glory, you get a ten percent discount for life. You know, just in case you want to go through the ordeal again.

essay

I’m Wokking Away By Anna Lykkeberg

With personal relationships in China revolving around food and eating, it surprised me how much of a person’s character could apparently be gleaned from their eating habits.

Illustration by Liu Xiaochao

A year living with a local family in Dalian, China treated me to a smorgasbord of culinary experiences. Auntie, my homestay mother, was the cook in the household. Uncle, my homestay father, reaped the benefits. Arriving in China I thought I was sufficiently prepared for cutlery-free mealtimes. This turned out to be slightly wishful thinking as messy-haired, pink pajama-clad Auntie placed a steaming plate of dumplings in front of me on Day One. I was assured that this portion, which I judged could easily feed three people, was only for me. Uncle and Auntie sat down to their respective miniscule and average-sized portions, and began gulping them down. Picking up my chopsticks, calculating how best to attack these slippery rascals, Uncle turned to Auntie and asked, shocked: “She can use chopsticks?” Auntie gave a proud nod in response, while I felt somewhat slighted by this apparent aspersion cast upon my manual dexterity. Still new to the family I decided not to object, and instead focus on proving my skills. After managing to chomp down a couple, not even bothering to attempt dipping them in the vinegar and garlic sauce (the risk wasn’t worth it), disaster struck. The dumpling tumbled from my weak grip and smacked onto the table with an audible squelch. As far as my newly-adopted parents were concerned, it was game over. Auntie uttered a single word, “spoon” and withdrew to the kitchen to bring out the baby utensils. I’d failed the first test of going native. I needed to train harder. With food playing such a central role in Chinese family life, eating out is an important formative experience for the expat. The custom is for the host to order an excess of dishes, so that you can try a little of everything, and they can look generous. Auntie and Uncle regularly treated me to a meal out, where my adventurousness was always put to the test. At one typical-looking restaurant with the fancy but slightly worn décor preferred

by Chinese urban eateries, Uncle and Auntie would spend 15 minutes furiously jabbing at items on the menu and quizzing staff who were scribbling furiously on their notepads. The highlight of this particular meal was most definitely the dumplings – a Northern staple and apparent favorite of my host family. Recalling the previous incident, Auntie insisted on the immediate delivery of a spoon to my seat. I was mortified. Hearing that these were some particularly “special” dumplings, I of course enquired as to the reason. Auntie responded matter-of-factly that they were stuffed with donkey meat, and were a delicacy.

I’m a fussy eater at the best of times, but had been expecting something far more outlandish, and thus dug in with relief. In an effort to redeem myself, I insisted on ignoring the spoon and sticking with the chopsticks. This time, luck was on my side – the dumplings were a pleasant surprise, and I got through the evening without dropping any large chunks of food onto the table (bad), the floor (worse) or another diner (worst). So ended my first two meals with my host family. For my final repast, a whole year later, they decided to treat me to something extra special. Mistakenly thinking I had become extremely adventurous over the course of my stay, by host parents ordered a rather extravagant array of dishes that were a little outside of my comfort zone. I should have been impressed and honored that they went all out (this stuff isn’t cheap), but my apprehension at having to try every last one of these mystery dishes was slightly overwhelming. Most turned out to be fine, and I was just being overly apprehensive, but there was one that I simply could not conquer. It came in a big wok, stir-fried with stringbeans and whole chilis. Duck heads, the gleaming brains cleaved neatly in half along with the papery skull. My inclination to try them could be said to be low at best, and not helped by Auntie’s description of them as “deliciously mushy.” To their disappointment I ended up, ahem, ducking out, mumbling a half-baked excuse about the dish “looking too spicy.” Despite falling at this final hurdle, I broadened my tastes greatly during my stay in China, and managed to regain my grasp on chopsticks. With personal relationships in China revolving around food and eating, it surprised me how much of a person’s character could apparently be gleaned from their eating habits. Auntie always claimed she was “too fat to be hungry.” Uncle prided himself on eating as efficiently as he worked, and as for me, I dined like I lived – cautiously, but with a nascent spirit of adventure. NEWSCHINA I December 2014

Warmth Amid the Clouds By Katharina Bertelsen

NEWSCHINA I December 2014

Everyone out of doors seemed, like me, to be wandering, at a loss as what exactly to do with themselves in this apparent ghost town.

Illustration by Liu Xiaochao

The streets were gray, dangerously icy, desolate, and all the shops were boarded up. I was out of breath, my eyes were stinging, and now my stomach was rumbling. All in all, my arrival at ShangriLa’s 3,200-meter altitude in early February was not quite what I had expected. With gray walls encased in a cyclorama of brilliant blue sky, the town was unlike any I had ever visited. But I couldn’t drink in the view – I was starving. I couldn’t even follow the usual rule of looking for a restaurant with clientele – I might never have completed such a search – I merely plumped for the first open door I came to. Dried yak meat hung outside the door in place of a sign, caked in frost, while the tails of the ubiquitous Tibetan beast of burden dangled over the threshold. Within, more flesh hung from the rafters in the deserted dining room. Authentic enough, I thought to myself. Aside from the jerky-themed décor, this place looked like just about any other rural Chinese bistro in Yunnan. Dark wooden tables, cloistered private rooms – the only things missing were customers. In the corner, hunched over a glowing brazier, was the boss, his black biker boots cast aside as he sipped tea from a paper cup and tended the coals. Across from him sat a diminutive woman in a garish pink overcoat, her eyes locked on a tiny TV screen broadcasting a Chinese soap opera. She didn’t move, but the boss rose lugubriously to his feet and trudged over to me, his pace seemingly in time with the evidently slow trade this joint managed in the deep winter. I asked, in Chinese, for a menu, and was answered in a guttural series of throaty consonants which evoked nothing more than a bemused expression from me, the restaurant’s only customer. Seeing my confusion, the boss abandoned the spoken word, and instead beckoned to me to follow him. At the end of a dim hallway lined with closed, silent private dining rooms, no doubt remaining shuttered until the summer’s tour groups arrived, we entered the kitchen. While horrifically chilly, the restaurant’s hub was spotless and well-kept,

ingredients carefully squirreled away in gleaming refrigerators that, given the season, seemed almost superfluous. Gesturing around this treasure trove, my companion asked, slowly and clearly, what I wanted to eat. I was so baffled by the entire experience that he ultimately determined to make my selection for me – tomatoes and scrambled eggs over rice. Surely even a barbaric foreigner could tolerate that! He motioned me to return to my table, and busied himself at the stovetop. Sitting down at a bench built for six, I mulled over the bizarre journey I was on, exploring the formerly mystical kingdom beyond the clouds that was now an easily achievable travel destination on most every Chinese person’s bucket list. I also marveled at the warm, if gruff, greeting I had received in this gray, nameless street on the mountainside. Soon I was savoring a steaming dish of eggs and tomato and tuning in to the soap opera that seemed to so fascinate the sole other occupant of

this deserted restaurant. Seeming to notice my lack of comprehension, the pink-clad lady in the corner switched over to a children’s cartoon which, I hate to admit, was pitched closer to my linguistic level. I paid my bill and nodded goodbye, receiving an almost imperceptible smile in return as I ducked under the dangling yak tails and made my exit. Walking back down the silent, icy streets I spotted some distant shadows in the distance. They emerged from the gloom, revealing themselves to be a troop of pigs seemingly out for a stroll by themselves, that is, until their cold and tiredlooking owner finally appeared bringing up the rear. Everyone out of doors seemed, like me, to be wandering, at a loss as to what exactly to do with themselves in this apparent ghost town. That evening, having found no alternative on my rounds, I returned to my lunch venue, greeted again by the same couple, both smiling the same half-smile. “Same again?” I was asked. I shook my head no, and indicated I’d rather try the yak, a statement that earned an appreciative-sounding if unintelligible response. I sat at my usual place, and waited, finding the TV had already been switched over to the cartoons by the lady in the pink coat. A scalding bowl of yak broth came along with a plate of my favorite tomatoes and scrambled eggs – I guess chef wanted to make sure I wouldn’t go hungry if the yak didn’t impress. Once again, I felt surprisingly welcome, even more so when the boss handed me a paper cup – this one with its own plastic holder – filled with vaporous green tea. We didn’t talk – he went back to warming his feet by the brazier. I pondered how the people of Shangri-La, the edge of the Chinese world, reflect their landscape. They are stark, yet welcoming, rough, yet with a strange affinity for propriety and politeness that one might struggle to find in the nation’s cities. Pioneers, in short, blazing a trail in summer for the tourist buses to follow and, in the deep midwinter, accommodating the occasional wayward foreigner in need of a warm meal.

Cultural listings Cinema

Tears and Fears Released in late September 2014, Hong Kong director Peter Chan’s latest work Dearest has become a winner with both critics and at the box office. The triple-barreled narrative, set on the Chinese mainland, follows an abducted child, his adoptive mother and his biological parents and the movie has received a rating of 8.5 out of 10 on aggregator douban.com, based on 75,000 user reviews. Earning 220 million yuan (US$36m) in box office income in 10 days of release, the movie stars actress Zhao Wei and comedian Huang Bo in what some already describe as careerdefining performances, while its plot has touched a nerve with audiences. According to Chinese media, 200,000 children are abducted in China each year, a widely-known social issue that few mainland movies ever dare to broach. With the success of last year’s American Dreams in China, based on the real story of the co-founders of mega-enterprise New Oriental Group, the runaway success of this new tearjerker is winning Chan a legion of mainland fans.

Music

Book

A Carefree Combination

I’m from Xinjiang

After two years’ preparation and recording, Xiban, a Shanghai-based band known for their creative combination of traditional Chinese, especially ethnic Han, musical elements with modern rhythms, released their latest work in a double-disc album in late September 2014.With the two sides titled Peace and Prosperity and Powder of Five Minerals, the album contains a complex web of concepts and themes expressed in both experimental and traditional forms. While their style is still rooted in rock, reflecting their earlier influences, the band is branching out into a more carefree state with the gentle but pointed use of genres ranging through world music, rock, jazz, experimental and electro.

By Kurbanjan Samat

Exhibition

Image of a Generation The traditional Chinese symbols for the scholar have historically been plum blossoms, orchids, bamboo and chrysanthemums. However, Xu Jiang, a renowned painter and sculptor and the dean of China Academy of Art, has taken the sunflower as a token for not only himself but for his entire generation. Born in 1955, Xu lived through the chaos of the Cultural Revolution (1966 - 1976) as a teenager. He describes his “lost generation” as “zealous, impulsive and idealistic” yet “greatly confused and miserable.” In Xu’s works, the sun itself is conspicuously absent, giving a wild, brutal and desolate aspect to many of his compositions. From late September to midNovember, 2014, “Oriental Sunflowers,” the solo exhibition of Xu’s paintings, sculpture and writings spanning the last decade and with the central motif of sunflowers, has been showcased at the National Museum of China in Beijing.

Born in Xinjiang in 1982, Kurbanjan Samat embarked on his career as a photographer at the age of 17. I’m from Xinjiang, his latest collection documenting vignettes of 100 members of the Uyghur ethnic group, was published mid-October. The subjects are Uyghur people living in various parts of China and from all walks of life, including cooks, bartenders, dancers, artists, doctors, storekeepers, farmers, office workers and students. Kurbanjan, a Uyghur himself, presents both an accomplished visual experience to his readers as well as a direct and unsentimental insight into life in the modern Uyghur diaspora. NEWSCHINA I December 2014

NEWSCHINA I December 2014

Commentary

A Great Deflation? Wang Tao, chief economist with UBS Securities China, explains why China needs to worry about deflation By Wang Tao

n August 2014 China recorded a 6.9 percent increase in valueadded industrial output, the most important indicator of GDP growth - a 66-month low. This data fell well below market projections, including the 8.7 percent growth forecast from UBS and an even more optimistic Bloomberg survey of 8.8 percent. The same figure peaked at 10.4 percent growth in the same month of 2013. While moderation tends to follow a peak, a slowdown of this magnitude leaves only one possibility - market deceleration. This can largely be explained by China’s sluggish real estate market, which in turn has reduced domestic demand for the products of the country’s heavy industries. In addition, the 2 percent inflation rate in August 2014, with an average 2.2 percent inflation for the first eight months of the same year, are well below the government’s annual target of 3.5 percent. Stagnant demand and price slumps are the main symptoms of unwelcome deflation, which swallows jobs and growth, and, to economists, is a far more worrying prospect than sharp inflation.

2014. As a result of shrinking demand for property-related products, investment in manufacturing fell to 11.3 percent, marking the sector’s worst growth data in almost a decade. Meanwhile, policies boosting infrastructure investment only yielded a moderate year-on-year growth rate of 16 percent, thanks largely to a more successful boost administered around the same time the previous year. All these factors took a toll on total fixed asset investment, which fell from 15.7 percent in July to 13.8 percent in August. With the exceptions of household appliances and furniture, sales of consumer goods, particularly food and beverage, pharmaceuticals, telecommunications equipment and jewelry were robust. Logistics data also indicates solid service sector growth. It seems that policymakers’ attempts to jump-start China’s investment-led economy continue to struggle, while growth in the consumer market remains steady. The resolve of the country’s economic planners is being duly put to the test.

Chain of Risk

“Drip Irrigation”

Most Chinese cities have already relaxed or even removed restrictions on property purchases following a nationwide 12.4 percent decline in floor space sold in August on the back of a 16.3 percent drop in July. Despite a flurry of investment in low-cost urban housing and a low base point in the same month of 2013, construction of new floor space rose by only 6.2 percent. Therefore, investment once again slowed, dropping below 10 percent in August 2014, its lowest ebb in two and a half years. Meanwhile, a brief summer surge in construction has been attributed to optimistic developers banking on a white-hot “golden season” of homebuying in September and October replenishing their cash flow. The increasingly weak performance of China’s property market has choked off demand and production of construction materials (mainly steel and cement), automobiles, furniture and home appliances. The depression in these energy-intensive industries and a cool summer combined to reduce demand for power, another important indicator of business activity, by 2.2 percent in August in its first decrease in

At the World Economic Forum held in Tianjin in September, Chinese Premier Li Keqiang reiterated his commitment to focusing on reform and restructuring, rather than fiscal or monetary stimulus. The central government, he stressed, “had no problem accepting” even slightly less than 7.5 percent GDP growth, given that more than 9.7 million new jobs have been created in the past eight months, close to the government’s target of 10 million for the whole year 2014. Senior officials with the National Bureau of Statistics also described the figures for August as “within reasonable boundaries.” Keeping in mind the risks posed by both overcapacity in some sectors and a rising debt-to-equity ratio, a measure of an entity’s ability to fulfill its financial obligations, the central government has been aversive to stimulus on a scale comparable to the vast package it distributed in 2008 and 2009 to offset the impact of the global financial crisis. However, if the climate in construction and industrial production further deteriorates in the following months, which is very likely, the labor market will be affected. This will put unprecedented pressure on NEWSCHINA I December 2014

There is common belief that lowering benchmark lending rates or at least mortgage lending rates can empower homebuyers and thus curb downward momentum in the housing market.

current thinking among economic planners, and could lead to further instances of what Premier Li calls “drip irrigation” targeting selected, vulnerable areas of the economy. The efforts to slash administrative approval and embrace more private investment will continue to be consolidated. More liquidity will be injected into some specific areas through unconventional tools. For example, in June, China’s central bank granted so-called pledged supplementary loans (PSL), collateral-backed lending, to the China Development Bank to support urban shanty town renovation projects and help determine medium- and long-term interest rates. Such new tools are likely to be used repeatedly. Policies of relaxing restrictions on mortgages have been announced at the end of September. The pace of infrastructure and affordable housing construction is expected to accelerate, and prestige projects in environmental protection, water conservancy and energy will be launched to recover the losses in the construction and manufacturing sectors. First-time homebuyers might be allowed to pay less up front. Local governments in third or fourth tier cities will be required to accelerate their implementation of residence registration (hukou) procedures in order to grant migrant workers better access to social security and urban services such as healthcare. However, if the real estate downturn continues through 2015 and triggers even more drastic backsliding in the Chinese economy, more broad-based stimulus might prove to be the only means for policymakers to avert disaster.

Deflation Danger

Deflation is now a tangible risk in China. This phenomenon is not always a negative – indeed, it is often a byproduct of rising economic efficiency and labor productivity. However, if deflation results from falling economic demand and a dwindling money supply - as would likely be the case in China currently - it can be catastrophic, pushing up the price-weighted real interest rate and making both economic NEWSCHINA I December 2014

expansion and debt more expensive. There is a common belief that lowering benchmark lending rates or at least mortgage lending rates can empower homebuyers and thus curb downward momentum in the housing market. Theoretically, the pricing of lending rates is already market-led in China, however, with the central bank’s benchmark rates used as the basis for pricing some 70 percent of credit, it is logical for this institution to take the lead to actively reduce benchmark rates. Indirect tools, such as relaxing credit in targeted sectors and reducing interbank market rates, have failed to make a dent in the existing problems. The central bank needs to grasp that there is no paradox between reducing interest rates and continuing with structural reform - indeed, keeping interest rates low mitigates economic contraction, while liberalizing interest rates distributes capital more evenly throughout the economy. Given the weaker than expected growth in the first three quarters of 2014, and the possible further shrinking of property related business in Q4, UBS tuned their forecast for China’s GDP growth to 7.1 percent in Q3 and 7.2 percent for the whole year, compared with the single previous rate of 7.3 percent. Estimates of 6.8 percent growth for 2015 remain largely unchanged. It is actually more pessimistic than the average, but we have already taken upcoming progrowth policies into account. Falling prices and shrinking domestic demand has also led us to adjust our import growth forecast down to 1 percent. This could bring China an additional US$75 billion trade surplus. As a result, net exports will contribute more fuel to the country’s economic engine, with the role played by domestic demand, particularly investment, smaller than ever. The recent economic indicators show great risk of deflation, and we believe it is more alarming than inflation. (The author is chief economist with UBS Securities China)

Commentary

Tax reform is key to solving local debt Solving the local government debt crisis will require a drastic realignment of China’s tax system By Yang Yingjie

n recent months, the risk of a looming debt crisis affecting decreased from 78 percent in 1993 to 44.3 percent in 1994. In China’s local governments has been identified as a threat to the the meantime, the financial duties of local governments were left country’s entire financial system. Meanwhile, a recent drop unchanged – local governments are responsible not only for the in house prices across many Chinese cities is further exacerbating provision of public services at the local level, but for various social concerns over the financial health of the security and infrastructure expenditures. country’s debt-ridden local governments. It was against this background that loIt is likely only a matter Much of the problem lies in the lack cal governments began to rely on land of time until revenue from grant fees and other unconventional and of reliable revenue sources available to lothe real estate industry cal governments, most of which depend controversial revenue sources to meet heavily on a so-called “land grant fee,” the their financial needs, typically approprifalls short of a local fee they can charge when selling land to ating land from farmers at a low price government’s financial developers. and selling it to developers at a mark-up. liability. According to official data, land grant Given the lack of transparency and fees have accounted for more than 40 rule of law, local governments are often percent of local government revenues naaccused of abusing their power in the tionwide over the past decade. In 2010, process of land appropriation in order to that figure spiked to an unprecedented maximize profits, leading to unfair com69.4 percent. After falling back to 43.6 percent in 2012, it has pensation, and in many cases the forced eviction of residents. now resurged to 59.8 percent, with a total sum of 4.1 trillion yuan Local governments quickly became addicted to this method of (US$670bn) collected in 2014. fundraising, with serious political and economic consequences. The result is that local governments have become very sensitive Disputes have led to widespread social injustice and unrest, and to any decrease in house prices, since the ensuing drop in demand dependence on land grant fees has made local governments increasfor land directly affects their income from land grant fees, a deficit ingly vulnerable to fluctuations in the real estate and financial inwhich may in turn trigger systemic financial risk. Consequently, dustries. many cities have taken measures to boost the real estate industry, As the central leadership strives to build a fairer legal and adsomething the central government has previously forbidden, but ministrative system, the time has come to reform the tax system as now seems to be tacitly tolerating. well. Firstly, the government should re-structure the distribution of However, this can only be effective in the short term – it is likely tax revenues between central, provincial and local governments, to only a matter of time until revenue from the real estate industry falls ensure that local governments have a stable and healthy source of short of a local government’s financial liability. To fundamentally funds. Secondly, through legal reform, the leadership should make tackle the debt crisis at the local level, the government must reform local government power subject to the law, and increase the transthe distribution of tax revenue between local and central govern- parency of the budget-making process to regulate local government ments, an imbalance that is the major reason behind the problem. behavior. Based on the tax reform program launched in 1994, 75 percent Only this way can the debt crisis, along with many other probof sales tax and value-added tax, two major sources of revenue, goes lems related to land appropriation, be solved. to the central government, with the remaining 25 percent allocated to local governments. As a direct result of the tax reform, local (The author is a senior commentator with China Newsweek, sister government revenue as a percentage of total government revenue publication of NewsChina.)

NEWSCHINA I December 2014