January 2012

Eurozone Crisis: Should China Care?

Volume No. 041 January 2012

ECONOMY

SOCIETY

College Entry: Birthplace Lottery POLITICS

Cultural Reform: Creative Control

CHINA IN THE WTO: TEN YEARS ON

Do We Need New Rules Of The Road?

$4.99 www.newschinamag.com

Cover.indd 1

11/24/11 5:07 PM

Cover2.indd 1

10/25/11 11:07 AM

NEWSCHINA I December 2011

Dec_01_15.indd 1

1 10/25/11 10:16 AM

EDITORIAL

Published by China Newsweek Corporation Publisher: Liu Beixian Executive Directors: Liu Beixian, Zhou Jianming Editor-in-Chief: Wang Xiaohui

Anti-Monopoly Investigations Should be Conducted Openly and Independently

O

n November 9, 2011, the State broad- its in various industries, including telecommunicacaster China Central Television (CCTV) tions, oil and air travel, often at the cost of public reported that the Price Supervision and interest. Therefore, the NDRC’s anti-monopoly Anti-Monopoly Bureau of the National Develop- investigation is no doubt a good start. However, ment and Reform Commission (NDRC) had been the incident has shown that under the current inconducting an anti-monopoly investigation into stitutional framework, anti-monopoly investigation China Telecom and China Unicom, two of China’s is not treated as a serious legal issue. Although the biggest telecommunications companies. law grants the NDRC the power to investigate susThe first investigation into State-owned enterpris- pected monopolies, it seems that it has to obtain the es since China’s anti-monopoly law became effective approval of the governing ministry of the enterprison August 1, 2008, the case received wide attention es in question in order to administer punishment. and soon led to a media war between various State In other words, these ministries, which usually have outlets. Two days after CCTV’s critical report, the People’s Post Daily, a newspaper under the administration of the The result is that the safeguarding Ministry of Industry and Information of public interest is subject to power Technology (MIIT) published an edistruggles among various government torial refuting the CCTV report for its agencies. “bias” and “lack of technical knowledge.” The Telecommunications Industry Daily, another MIIT newspaper, also commented that a company’s dominance over a market does not in itself violate anti-monopoly law.

The State news agency Xinhua then weighed in a sizeable stake in the companies involved, actually to provide some context. According to Xinhua, the have the power to veto an anti-monopoly investigaNDRC’s investigation was launched in April, and tion. The result is that the safeguarding of public had ruled in June that the two companies had vio- interest is subject to power struggles among various lated the anti-monopoly law, and were subject to government agencies. fines equivalent to 1 to 10 percent of their annual With the once-secret anti-monopoly investigation revenues from broadband services. On November now made public through the media, the NDRC 17, the NDRC submitted their investigation to the has to continue the investigation in an independent People’s Supreme Court, the MIIT and the Legal and open fashion, and must establish legal proceAffairs Office of the State Council for review. When dures for various parties, including the companies it became apparent that these agencies held con- in question and the public, to express their views. As trasting opinions on the conclusion of the report, the nation’s first anti-monopoly investigation, how the NDRC resorted to publishing their investiga- and when the case concludes will have great signifition through CCTV. cance in the establishment of a precedent for future In recent decades, State-owned enterprises have investigations, and thus determine the direction of established dominance and enjoyed excessive prof- the development of many industries.

2 01-11_Jan.indd 2

Editorial Office Managing Editor: Zheng Zhonghai Advisor: Liu Dizhong Senior Editor: Yang Yi Copy Editors: Jack Smith, Alex Taggart Lead Writer: Yu Xiaodong Editors: Wang Yan, Yuan Ye, Xie Ying, Sun Zhe, Li Jia First Reader: Wesley Jacks 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: Philip Jones Photo Director/Illustrator: Wu Shangwen Marketing Office China Newsweek Corporation President: Wang Xiaohui Chief Executive: Fred Teng 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 for China: Wang Chenbo Account Manager for China: Ren Jie Tel: 86-10-88388027 Circulation Manager for China: Yu Lina Tel: 86-10-88311834 Advertising Director for the US: Gao Weiwei Tel: 1-212-481-2510 Marketing Promoter for the US: Jerry Meng Tel: 1-212-481-2510 New York Office: Jing Xiaolin, Wei Xi, Sun Yuting Washington Office: Wu Qingcai, De Yongjian Los Angeles Office: Zhang Wei San Francisco Office: Liu Dan London Office: Wei Qun Tokyo Office: Sun Ran Paris Office: Wu Weizhong Bangkok Office: Yu Xianlun Kuala Lumpur Office: Zhao Shengyu Moscow Office: Tian Bing Legal Advisor: Allen Wu ISSN 1943-1902

CN11-5826/G2

NEWSCHINA I January 2012

11/24/11 4:22 PM

CONTENTS

Commercial Comfort Zone

Photo by CFP/Cover Illustration by Wu Shangwen

Have dynamic and far-reaching economic reforms, initiated in order to qualify China for entry into the WTO, given way to complacency on all sides in the ten years since the country earned its place in the organization? NewsChina investigates

EDITORIAL

POLITICS

02 Anti-Monopoly Investigations Should be

Conducted Openly and Indendently

10 Cultural Reform:

A Hundred Flowers More

COVER STORY

12 China in the WTO:

Trading Places/Crying Wolf

22

24

26

29

SOCIETY

Tax Riots: Taking Sides Mental Health Law: Psych Revaluation Beauty Pageants: Catwalk Diplomacy Educational Inequality: Peasants Need Not Apply

NEWSCHINA I January 2012

01-11_Jan.indd 3

SPECIAL REPORT

32 E-Commerce Activism:

Brutal Bazaar / From Stall to Mall

38

40

42

ECONOMY

Real Estate Industry: Safe as Houses?

Wind Industry: Gale-Force Glut Game Piracy: Can You Afford to be an Angry Bird?

INTERNATIONAL

SPORTS

44 Chinese Investment in Europe:

Money Talks 46 Basketball:

Hoops Away From Home

48

50

CULTURE

Micro Movies: Move Toward Mainstream Art Market: Masterful Mock-ups

HISTORY

ENVIRONMENT

VISUAL REPORT

OUTSIDE IN

04 05 06 08 43 66 68 70 71 72

MEDIA FOCUS WHAT THEY SAY NEWS BRIEF NETIZEN WATCH CHINA BY NUMBERS REAL CHINESE ESSAY CULTURAL LISTINGS COMMERICAL LISTINGS COMMENTARY

53 Spring Festival 1967-1980:

The New Year That Wasn’t 56 Cross-Border Floods:

The River Wild 60 Mule Logisitics 64

67

Lonely Pingyao: Beauty Means Business Flavor of the Month: King of Burgers

3 11/24/11 4:22 PM

Xinmin Weekly

NewsChina Chinese Edition

November 9, 2011

November 7, 2011

Trust Crisis Undermining Safety Due to over 60 years of unrestricted heavy mining, Shanxi Province, which boasts China’s biggest known coal reserves, has been gradually hollowed out, with related geological disasters such as subsidence and sinkholes causing death and damage in rural communities. Hundreds of villagers have been forced to move out of their homes into abandoned brick kilns or temporary government housing far from their fields. Worse still, many of these “new houses” are in fact built on unstable land, and fail to conform to national safety standards. All the while, unrestricted mining continues unabated.

Sanlian Lifeweek October 21, 2011

Edible Bribes As crab season approached in late Autumn, live crabs packed into gold-plated boxes and priced at around 100,000 yuan (US$15,740) became a must-have status symbol or, more commonly, bribe. A trend of giving extravagantly packaged food items as luxurious “gifts” to employers and officials has seen a resurgence in recent years, with expensive imported gifts such as vintage bottles of Chateau Lafite and Hermès bags jostling alongside homegrown luxuries like top-end organic tea. With the big gift-giving season prior to Chinese New Year now in full swing, a growing number of critics have begun to decry the distribution of such gifts in an attempt to curry favor with superiors, instead championing so-called “European” traditions of giving gifts out of generosity alone.

4

01-11_Jan.indd 4

A recent online survey by China’s Xinhua News Agency has shown that over 80 percent of respondents believe that popular trust in government and judicial affairs is in “urgent need of improvement,” with a series of scandals such as toxic milk powder, gutter oil and ongoing forced demolitions bringing government credibility to its lowest ebb since Xinhua began to run opinion polls in the 1990s. The State Council has vowed to establish a “social trust system” to encourage “morality” among officials, but experts argue that a lack of related legislation will make any such system hard to implement, and that inner-Party attempts to rein in corruption through a system of “social credits,” which have been ongoing for almost a decade, have so far failed to yield results.

China Economic Weekly November 1, 2011

Medical Gambling A loosened national loan policy introduced during the 2008 financial crisis has reportedly caused the hoarding of traditional Chinese medicines (TCM), leading to asset bubbles among both retailers and producers of TCM. However, since traditional medicines are priced by the government, producers have failed to turn a profit on the sale of TCM, resulting in the bubble bursting and a 90 percent drop in the autumn of 2010. Now, over 90 percent of China’s TCM producers and salespeople are reporting massive losses while buyers hold out for the market to hit bottom, resulting in the spoilage of countless tons of premium TCM products.

Oriental Outlook October 24, 2011

Stealing from the Poor?

The Guangzhou government has launched a new poverty alleviation program, effective from February 2011, aiming to lift eight townships and 305 villages out of poverty by the end of 2012. Controversy surrounding the scheme arose after the government invited nine real estate developers into the program to “jointly build public facilities and low cost housing.”

Despite some achievements in the first 10 months, some developers are suspected of abusing the program for personal gain, with some gaining privileges in the purchase of government land contracts and others engaging in high-end retail development. After a series of high-profile clashes over land use, the Guangzhou government has been forced to reconsider its position on big business and its responsibility to the local populace.

NEWSCHINA I January 2012

11/24/11 4:22 PM

Illustration by Wu Shangwen

“Hospitals, especially at the most basic level, administer vitamins, hormones, antibiotics and saline no matter what patients are suffering from.”

Xiao Yonghong, a professor of pharmacology with the Ministry of Health, slams the overuse of antibiotics in the treatment of minor ailments.

Auto Expo in Macao.

“In the 1950-60s, the philosophy that ‘socialism must not back up’ meant that this car was not installed with side mirrors.”

“China’s financial industry is open to foreigners but closed to Chinese. It’s our modern version of Shanghai’s Huangpu River Park in the ‘30s. ‘No Chinese and dogs allowed.’”

Caption explains the lack of certain features on Mao Zedong’s official car, which was exhibited at the 2011 International

Economist Mao Yushi criticizes the exclusion of Chinese private firms from the country’s financial sector.

“Now we have two kinds of filial sons – regular and CESapproved.”

- New Weekly comments on a move by the China Ethics Society (CES) to identify one million 4-6-year-olds as “filial sons.”

“Microblogs allow intellectuals to consider themselves giants, but when faced with real power, they are nothing.”

Rights campaigner Yang Haipeng on the limitations of “Internet justice.”

“Gongpu [public servant] would be better translated as VIP.” TV presenter Song Yingjie on the conduct of China’s public servants.

“I don’t acknowledge Tsinghua University any more. It has become a plutocrat. It’s just a shame it still attracts the cream of China’s students.”

Former director of the Institute of American Studies with the Chinese Academy of Social Sciences Zi Zhongjun speaks out during a book launch.

“A train crash is described as a ‘side clash.’ A boiler explosion is described as ‘community disassembly.’ How can I write science fiction when the world around me seems like science fiction?”

Sci-fi writer Han Song satirizes the language employed in government accident reports.

“Girls, please marry a Chinese soccer player. They love their homes so much they refuse to leave Asia – even the South African World Cup was too far to go!”

Henan Business Daily mocks the woeful performance of China’s national soccer team in the qualifiers for the 2014 World Cup. NEWSCHINA I January 2012

01-11_Jan.indd 5

5 11/24/11 4:22 PM

Top Story

e-Cartels In late October, China’s Ministry of Public Security launched a controversial nationwide campaign against online drug trafficking. A total of 12,125 people were detained and questioned about their participation in drug-related chat on the Internet.

The campaign was sparked by a case in Lanzhou, Gansu Province, when a detained dealer led police to what they termed an “online drug trafficking ring” operating via a video sharing website. Investigation teams acting through informants blocked the website, based in Jinhua, Zhejiang Province, digging identities out of the website’s code and detaining 12,000 “suspects” across 31 provinces and municipalities.

According to detective Gu Jian, over 3,000 drug-themed chatrooms had been set up on the website, which had a total of 10 million users.

Police claimed that these 10-person chatrooms were specifically used to sell and purchase narcotics.

“Suspects generally deal between 9pm and 4am and set strict access re-

Suspects alleged to be taking drugs on webcam

strictions on their designated rooms,” Gu Jian told State media. “Nobody can gain access without a recommendation from an existing member before openly taking drugs in front of a webcam to prove they are regular users.” Gu’s claims that all the chatroom members were drug users have not been independently verified.

A multi-tiered sting operation carried out with the full cooperation of webmasters allowed police to prosecute 500 individual cases of “drug trafficking,” uncover 144 “online cartels,” shut down 22 drug factories and close down 340 drug-themed

“Convenient, economical and hard to investigate, the Internet has turned into a new platform for the drugs trade.”

chatrooms.

Over 66 percent of the suspects detained were aged under 30, with some 2.6 percent under the age of 18. “Convenient, economical and hard to investigate, the Internet has turned into a new platform for the drugs trade,” said Lan Weihong with the Chinese police’s narcotics division. The police are now demanding new legal provisions for the investigation and prosecution of “online cases of drugs trafficking,” as well as an education campaign on the dangers of drugs in China’s schools.

Policy

Business

PepsiCo Joins The Master

China Legislates Against Terrorism

PepsiCo, the world’s second largest beverage company, declared a “strategic alliance” with food and beverage giant Master Kong, China’s largest domestic soft drink manufacturer.

According to a joint statement, Master Kong will exchange a 5 percent stake for ownership of PepsiCo’s China bottling plant, also acquiring a local franchise extended to all Pepsi’s sodas as well as the sports drink Gatorade. In addition to 5 percent stake in Master Kong, PepsiCo also has the right to determine whether or not to increase its indirect stake in Master Kong to 20 percent before 2015.

This alliance between China’s number two and number four beverage compa-

The Standing Committee of China’s National People’s Congress, the country’s legislative body, passed a new draft anti-terrorism law October 29.

The draft for the first time defines terrorism, terrorists and terrorist groups as “any act or organization that violently does harm to public facilities, social order and the people to cause panic and threaten the country.” A State list of terrorists and terrorist organizations compiled by the Ministry of Public Security accompanied the draft and will be made public at a later date, after which the assets of the listed parties will be frozen. Given the broad application of the term “terrorism” by China’s police force, human rights organizations are expecting some controversial names to appear on the list.

6

01-11_Jan.indd 6

nies is now pending final approval from the Ministry of Commerce, but has already unnerved others in the industry.

Competitors have accused Pepsi of attempting to slash its distribution costs in order to bolster its core competitiveness as its Chinese sales continue to slump, while also claiming that Master Kong is hoping to ride on its more influential partner’s coat-tails to increase brand recognition.

NEWSCHINA I January 2012

11/24/11 4:23 PM

Industry

Another Mission Complete Chinese orbiter Shenzhou 8 has landed in Inner Mongolia on November 18 after spending 17 days in orbit and successfully coupling with the Tiangong 1 orbital module 340km above the Earth. Launched on September 29, Tiangong 1 is part of China’s development of a manned space lab which, according to scientists, is expected to be operational by 2020.

China has undertaken a total of eight manned space missions in the last 12 years, completing its first manned space flight in 2003, and its first space walk in 2008.

Scientists have revealed to the media that China will launch another two craft to dock with Tiangong 1, of which at least one will also be manned.

Society

Road Carnage in Guizhou At least eight people were killed and over 300 injured in a multi-vehicle explosion in Fuquan, Guizhou.

Around 11:30 AM, November 1 2011, two cargo trucks loaded with 72 tons of explosives suddenly blew up at an auto repair station near an interprovincial expressway linking Lanzhou, Gansu Province, with the southernmost island province of Hainan.

Witnesses told State media an “earthquake-like” blast completely demolished the repair station, shattered windows in nearby homes and destroyed parked cars. A nearby granary also collapsed. The local education authority also suspended classes pending a risk assessment of the structural integrity of local schools shaken in the explosion.

The cause of the explosion remains unclear, but witnesses claimed that one truck’s front tire was “smoldering” during repair. Critics of national health and safety regulations are already calling for an overhaul of China’s notoriously slapdash freight industry.

International

Chinese Airlines to Sue EU After 10 months of fruitless negotiations, China’s national airlines finally decided to jointly file a lawsuit against the European Union by the end of 2011.

The upcoming lawsuit originated with a new EU law which, since January 1, 2012, required the extension of EU-wide emissions tax to any airplane departing from or arriving at a European airport, with additional fines for excessive emissions.

The law, which lists all of the 33 Chinese national carriers as excessive emitters, has aroused strong opposition from countries including China, Russia and the US. Experts argued that the EU has no right to force non-EU members to comply with its local regulations.

Xie Xingquan, a Chinese civil aviation lawyer, told domestic media it is unreasonable for the EU to adopt the average emissions of 2004-2006 as a standards threshold for 2012-2020, since it would constrict the development of civil aviation in poorer countries. According to the Beijing Environment Exchange, the law, once implemented, will add at least US$40 to the price of an airplane ticket from China to Europe.

NEWSCHINA I January 2012

01-11_Jan.indd 7

China’s State Bureau of Quality Supervision held a hearing on October 26 on the regulation of auto warranties. Some 16 representatives from the auto industry were present, including customers, dealers, repair companies and leading carmakers like Hyundai and Toyota.

According to media reports, most participants supported the draft regulation which would require carmakers to offer a minimum two-year or 4,000km-warranty on all vehicles, extending a three-year or 6,000km-warranty to any vehicle’s steering system.

The most hotly debated topic, however, is a clause permitting customers to a full refund on the price of a vehicle if a problem arises within 30 days of purchase. Many dealers and carmakers are concerned that the clause will open them to a torrent of difficult lawsuits.

Experts have suggested including a third party to resolve any dispute between a carmaker or dealer and any claimant.

Consumers as well as some carmakers have supported the clause, believing it will enable international carmakers to further improve their brand image in China, while also pushing some Chinese domestic brands who sacrifice quality for sales volume out of the market.

Photos By CFP

Hearing Held for Auto Warranties

Science

7

11/24/11 4:23 PM

What’s Making China Smile?

What’s Making China Angry?

A hero mom who redirected traffic around a woman injured in a car accident sustained injuries requiring surgery when she herself was hit by an oncoming car. Her actions earned the praise of Chinese netizens shocked in early October by the seeming indifference of passersby to a two-yearold child knocked down by two hit-and-run drivers. The child later died in hospital.

Diao Na, the woman who redirected motorists while her husband called the police, said it was the fate of the two-year-old girl, nicknamed Little Yueyue, that stopped her from stepping aside even when she was hit by speeding traffic.

A photograph of a Fujian policeman having his shoes polished by a female bootblack while sitting in his squad car has gone viral in China’s blogosphere as the perfect image to sum up contemporary Chinese society. One netizen, who called the officer a “grand old lord,” railed against the abuse of power by so-called public servants. Another wryly pointed out that “this pair of smelly feet symbolizes the arrogance of the government.”

Most Circulated Post on Sina-Weibo 104,625 times

What’s Shocking China?

A surgeon from Shenzhen, Guangdong Province was beaten up by a father for saving his newborn baby, who he believed to have been born with cerebral palsy. “I do not want to live my life with a retard!” The father shouted while attacking the doctor.

After suffering severe postnatal hypoxia, the doctor attempted life-saving surgery on the newborn baby while a nurse informed the father. When the nurse returned and told the doctor that the father didn’t want his child saved, the surgery had already been successful. “Seeing the baby struggling to breathe, I didn’t have time to give saving its life a second thought,” said Luo Jun, the doctor. Ironically, later testing proved the baby was completely healthy.

8 01-11_Jan.indd 8

“I do not want to live my life with a retard!”

Poll the People 38,895 respondents Homeowners across China rioted when real estate agents reduced property prices in their areas, claiming the personal impact of the loss was too severe. (See: Taking Sides, p22)

“Today, in Qingyang City, Gansu, a local kindergarten minibus collided with a goods vehicle, resulting in the deaths of 17 preschoolers, with many more injured. The minibus is designed to seat nine, but in fact had 64 passengers! How unfortunate for the children who died! From now on, we implore everyone to repost ‘safer school buses for our kids.’ Care for the children, care for the future!”

Is it unreasonable to protest when real estate agents mark down house prices?

Yes 30,955 (80%) No 2,726 (7%) Unsure 5,214 (13%)

Source: www.weibo.com NEWSCHINA I January 2012

11/24/11 4:23 PM

Luo Yonghao

W ho ’s Ho t?

TOP BLOGGER PROFILE Followers: 1,207,871

Nicknamed Old Luo, 40-yearold Luo Yonghao is founder of the bullock.cn blog, the manager of an English language training school and the one of China’s most popular after dinner speakers. Born in a small town in northeast China, he taught himself to be the best GRE coach in China after he quit high school.

Luo shot to fame when jokes told in class were posted online by his students. A self-proclaimed idealist himself, Luo claims that he is “selling idealism to China.” Many have seen his life story as epitomizing the modern-day “Chinese dream.”

Xianjiang Street Wonton Restaurant in Changchun, Jilin Province Staff knowingly accepted plastic coins as payment for food sold to an elderly beggar.

No 2 High School of Jinxian Couty, Jiangxi

The school’s lowestscoring students were forced to take their examinations outside in the winter.

Top Five Search Queries

1 2

over the seven days to November 22 Journey to the West (New) The newest of dozens of TV series based on China’s canonical literary classic which tells the tale of the monk Tripitaka’s journey to India with his companions, including the mischievous Monkey King. 460,144 Xi’an Explosion The explosion of two liquefied gas tanks on November 14 which killed nine people. 179,123

3

Electricity Rate Hike 11,8196 The National Development and Reform Commission is reported to be planning a hike in electricity bills to offset an anticipated winter power shortage.

4

National Football Team 4-0 104,649 A victory over Singapore on November 15 in the qualifiers for the Brazil World Cup 2012, which has however failed to reverse China’s fortunes, with the country looking to miss out on yet another World Cup.

5

Self immolation in Zhengzhou 96,168 An 81-year-old woman set herself on fire to protest the government’s forced demolition of her home.

NEWSCHINA I January 2012

01-11_Jan.indd 9

Chongming county, Yunnan In a marked contrast to the rest of the country, the county’s seat of government is housed in a notoriously dilapidated building, however officials have launched a string of costly welfare initiatives to help impoverished locals.

Drivers in Linyi, Shandong Motorists rubbernecked past a 5-year-old boy hit by a falling beam.

The boy later died on his way to hospital.

W ho ’s No t?

On

9 11/24/11 4:23 PM

POLITICS Cultural Reform

A Hundred Flowers More China’s authorities are attempting to kick-start a cultural renaissance, but culture itself has never been the problem By Yu Xiaodong

S

ince President Hu Jintao stressed the importance of promoting cultural development as an important element of China’s ”soft power” in his keynote speech delivered at the 17th National Congress of the Communist Party of China (CPC) in 2007, the issue of China’s cultural production has topped the agenda of the Sixth Plenary of the 17th CPC Central Committee.

In early October of 2011, the annual meeting of China’s top cadres was convened in Beijing resulting in a memorandum entitled “The CPC Central Committee’s Decision on the Major Issues of Deepening Cultural System Reforms and Promoting the Development and Prosperity of Socialist Culture.”

Following this, the State media began frenzied speculation over the meaning of “cultural system reforms.”

Zhang Xixian, a professor from the Party School of the CPC Central Committee, told NewsChina that the CPC Central Committee’s guidelines are intended to address “three discrepancies,” namely those between China’s cultural influence and its national strength, between cultural and economic development, and between cultural development and “cultivation of the citizenry.”

Or in other words, cultural development is taken as a means to make the nation more powerful.

“History has shown that a nation’s awakening is always heralded by a cultural awakening, and the strength of a political party is largely defined by its cultural consciousness,” read a report by State news agency Xinhua.

“Without culture to guide the way, without enriching the people’s spiritual world, without the spiritual strength of the whole nation being brought into play, a nation is not expected to stand firmly on its feet among its world peers,” ran an editorial in the People’s Daily.

10

01-11_Jan.indd 10

These statements, as long on rhetoric as they are short on information, are a hard nut for the average reader to crack. While there has been no lack of enthusiasm for the promised cultural system reforms, it raises the old question of how the cultural sector can move forward when old problems such as tight political controls remain in place.

Cultural or Political?

“The first thing the authorities should do for any meaningful cultural reform is to lift restrictions on the creative industries so that people can freely engage in cultural creation,” Qiu Feng, a freelance commentator, told NewsChina, echoing the sentiments of many Chinese intellectuals and artists, such as movie director Feng Xiaogang and writer Han Han. Even officials from the Ministry of Culture shared the same concerns. “Under the current institutional infrastructure, the cultural sector is subject to ideological and political considerations, and any real reform cannot circumvent this problem,” a provincial culture department director, speaking on condition of anonymity, told NewsChina.

However, with “building a cultural power” now designated as being of strategic importance in the new Party guidelines, systemic reform of China’s cultural sphere will, in the view of analysts, only result in strengthening the power of the government and Stateowned monopolies.

This kind of “cultural reform” is already underway at the local level, most prominently in the city of Chongqing, where the local satellite TV channel’s promotion of Mao-era and modern-day “red songs” praising the Party and the army have led to the channel effectively banning all programming that does not promote “red culture.”

In late August this year, the Ministry of

A traditional Kunqu opera show in Beijing, September 17, 2011

Culture released a blacklist of 300 “unauthorized” pieces of music freely available on the Internet, outlawing them on the grounds that they posed a threat to “national cultural security.” These “subversive” songs included Lady GaGa’s Hair and Run The World (Girls)

by Beyoncé Knowles.

Following the release of the new CPC guidelines, the State Administration of Radio and Television (SARFT) issued an administrative decree to all commercial satellite television stations on October 25 capping the number of so-called “entertainment programs” being screened during prime-time hours, as well as limiting the appearances of TV presenters from Taiwan.

This decree included heavy restrictions on “excessively entertaining” shows that “magnify negative sentiments,” in particular those focusing on domestic disputes, criminal cases and the “dark side of society.” By contrast, “harmonious and healthy” programs featuring “mainstream values” were encouraged.

Earlier in 2011, a statue of Confucius was erected in front of the newly revamped National Museum on Tiananmen Square, NEWSCHINA I January 2012

11/24/11 4:23 PM

Photo by Xinhua

leading to rampant speculation that the authorities were gearing up to endorse Confucianism as part of their mainstream dogma.

However, the statue was relocated months later with no official explanation, proof of the ongoing ideological sensitivity of the abstract issue of “culture” on the mainland.

Cultural Economics

Since many of the newly-imposed restrictions on cultural production are claimed to address what cadres call the “over-commercialization” of the cultural sector, many had hoped the official call for cultural reform would switch China’s GDP-oriented development model for something more “culture-friendly.” Artists and intellectuals have continued to allege that China’s rapid economic growth has been achieved at the cost of culture and popular cultivation.

“In the future, the focus on economic growth may see a sea change, with the responsibility for cultural construction given to Party secretaries at various levels,” Peking University professor Chen Shaofeng told NewsChina. Indeed, in certain localities including Beijing, initiatives are being drawn NEWSCHINA I January 2012

01-11_Jan.indd 11

up specifying that the criteria used to gauge officials’ performance focus more on “innovation” than on GDP growth.

However, such policy adjustments may be little more than minor tweaking. With repeated calls for turning cultural production into one of the nation’s “pillar industries,” it seems that government attitudes toward the cultural sector may continue to revolve around the sector’s contribution to the State coffers. Therefore, this perceived gap between economic growth and “cultural construction” will continue to be hurdled with commercialism – including entertainment, art and design all aimed at the mass market.

For example, the Chinese version of the hit musical Mamma Mia, created through a combination of copyright purchase and domestic innovation, which has so far earned 45 million yuan (US$7m) at the box office, has been held up by the Ministry of Culture as a model for other cultural ventures. This could in part be due to the perceived political neutrality of Broadway-style musicals, which are, alongside online games and animation, the creative genres most promoted by the central cultural authorities. Since 2005, doz-

ens of animation and online entertainment development bases have been established across the country. In Beijing, a 45 billion yuan (US$7bn) project to build a “performing arts district” was launched in late October 2011.

However, few believe that increased investment will lead to a cultural renaissance. Following the release of the guidelines, an old People’s Daily article entitled “When management dominates every detail, there is no hope for art,” written in 1980 by the late movie star Zhao Dan, a landmark figure in Chinese cinema history, recently went viral online.

“Artistic creation cannot be dictated by a show of hands. It can be discussed, criticized, encouraged or praised. In terms of historical eras, the arts are not inhibited and cannot be inhibited,” commented Zhao.

To many intellectuals, Zhao’s comments remain relevant after more than 30 years.

“Culture is a way of life for a nation and the people. Nurturing cultural development is like nurturing the growth of a forest – you have to let it grow naturally,” commented Yi Zhongtian, a well-known professor of Chinese literature from Xiamen University. 

11

11/24/11 4:24 PM

COVER STORY

COMMERCIAL

COMFORT ZONE Glowing from a combination of economic prosperity boosted by a downturn in the fortunes of its major competitors, China, once one of the WTO’s most proactive members, has begun to rest on its commercial laurels. Ten years after China won its hard-earned place in the global trade organization, can the WTO still act as a catalyst for further reform, or has the world’s number two economy simply outgrown it?

12 12-21_Jan.indd 12

NEWSCHINA I January 2012

11/24/11 4:27 PM

Illustration by Wu Shangwen NEWSCHINA I January 2012

12-21_Jan.indd 13

13 11/24/11 4:27 PM

COVER STORY China in the WTO

Trading Places The campaign to join the World Trade Organization was the most powerful external force behind China’s unprecedented economic liberalization. But now, with reform losing momentum, has China outgrown WTO influence? By Li Jia

P

igs symbolize wealth in Chinese tradition, and modern China’s accumulation of wealth was not without porcine contribution; from World War II to the late 1970s, pig bristle exports to the US were the primary source of China’s meager foreign exchange reserves. Now, Chinese exports are part of the daily life of consumers worldwide, and while China still dominates the world’s bristle market, it is manufactured goods that have underwritten prosperity. A wealth of investment in and export from China’s manufacturing industry has made the country the world’s biggest exporter and second biggest importer. Millions of Chinese have been lifted out of poverty, many of them through work in the export sector.

Along China’s dramatic path towards industrialization and integration into the global economy since 1978, external forces have taken a lead role. The country’s world-beating export achievements, for example, may not have been possible had it not been for China’s acceptance into the World Trade Organization in 2001.

While membership of the organization brought with it an influx of foreign capital and access to the global market, it also came with great responsibility. “Encouraging development and economic reform” is enshrined as one of the fundamental prin-

14 12-21_Jan.indd 14

ciples of the WTO, and in practice, living up to the organization’s stringent requirements served as one of the most important external forces behind China’s economic reform from the mid-1980s onward. Pascal Lamy, director-general of the WTO, said in Shanghai last year that “Joining the WTO was, for China, a process inextricably linked to its own domestic reforms,” an opinion shared by many in China.

But while efforts are still being made to improve China’s economic structure, they have slowed drastically, and in a time when China can’t afford to lose momentum; the distribution of the nation’s wealth is becoming more and more uneven by the day.

This lack of enthusiasm for change has not only hindered the growth of domestic consumption, but has also increased the risk of social instability. Internationally, developing countries have taken defensive stances against cheap Chinese imports, while developed ones have turned to more powerful measures, like attacking aspects of China’s macro-economic policy and intellectual property protection.

Meanwhile, within China, the last 10 years of interaction with the WTO are largely seen as a success story. Staggering growth in trade and GDP figures, and a clean record of prompt fulfillment of requirements dominate the State media.

A visitor passes by a wheel exhibit at the China International Automobile Manufacturing Expo, Beijing, October 12, 2011

NEWSCHINA I January 2012

11/24/11 4:27 PM

Photo by CFP

Deeper reflection, if any, has been either limited to academic discussion, or focused on how better to use WTO rules to defend Chinese products in trade disputes. The WTO’s role as an impetus for future economic reform has rarely been mentioned.

None of China’s economic headaches can be cured without renewed enthusiasm for economic reform, and the government has recognized the need to shift to a more NEWSCHINA I January 2012

12-21_Jan.indd 15

balanced, innovation-oriented growth pattern. But, with China’s economy in a much stronger position than a decade ago, some have suggested that the WTO no longer has the clout to steer China in the right direction.

Pressure

While China began to encourage export in the early 1980s, talk of a “market econo-

my” remained taboo until 1993, when the government finally declared that the ultimate goal of its economic reform was to create a “socialist market economy.” That declaration not only broke the seven-year stalemate in negotiations over China’s entry to the international trading system, but also ushered in a 10-year surge of sweeping reforms in nearly every aspect of China’s economic system, including

15

11/24/11 4:28 PM

COVER STORY

changes in fiscal framework, the role of State-owned enterprises (SOEs), housing, government institutions and investment practices.

Unsurprisingly, resistance was strong.

“Chinese reformers at that time, led by Zhu Rongji as vice-premier and then premier, saw the potential of using the WTO negotiations as an external leverage to resist domestic interest groups that preferred oligarchy and monopoly,” said Joerg Wuttke, who has witnessed China’s economic development over 20 years as a senior executive of several multinational companies, in an interview with NewsChina.

To fit into what Wuttke, currently Chairman of the China Task Force of Business and Industry Advisory Committee to the OECD (BIAC), described as the “WTO socket,” China had to make itself into the “right plug.” This involved efforts to reduce or remove tangible barriers like tariffs, quotas and restrictions, but more significantly, it encouraged China to make drastic

changes the very structure of its economy in order to comply with WTO rules.

The year 2003 saw China on a legislative fast-track towards a market economy.

According to Professor Li Shuguang at the China University of Political Science and Law, who participated in the legislation of most market economic laws in China, almost no law consistent with market economy existed before 2003. Although some laws, such as the Corporate Law and Securities Law, had been established years earlier, they were “more pro-SOE, rather than pro-competition,” Li said. Those laws were later revised to reflect WTO principles promoting fair competition.

In the first two or three years of membership, the government also launched a nationwide campaign to promote the understanding of WTO rules and principles.

Government officials at all levels, businesspeople and the general public were all encouraged to attend training courses. In an effort to adapt society as a whole to the

WTO era, State-run newspaper the People’s Daily called for better awareness of integrity and observance of rules.

Since China’s transition period concluded in 2005, the WTO has served as an external surveillance body over the development of China’s economic reform.

The WTO Trade Policy Review evaluates a member’s consistency in fulfilling its commitments. In all three reviews to date, the focus has been placed heavily on government intervention and policy transparency, reflecting the trade community’s focus on China’s business environment as a whole rather than just policies directly related to trade and investment. Issues raised include progress in the public sector, overinvestment in certain sectors as a result of government “guidance,” and intellectual property rights protection.

Out of Fashion?

However, times have changed. In the chairperson’s concluding statement for

China’s WTO by Numbers China’s Position in World Trade in merchandise The 7th leading exporter and 8th largest importer of merchandise in 2000

249.2bn

Exports: US$

(3.9% of world total)

225.1bn

Imports: US$

(3.4% of world total)

Top three destinations of China’s exports

Japan 19.7% European Union 18% South Korea 13.8%

European Union United States Hong Kong, China

Imports:

16 12-21_Jan.indd 16

12.6% 12% 9.9%

Breakdown of total imports and exports by commodity groups Imports

Exports Agricultural products: 3.3%

Fuels and mining products: 3%

The top exporter and second largest importer of merchandise in 2010 Exports:

Top three origins of China’s imports

Fuels and mining products: 26.7%

Agricultural products: 7.8%

1.58tn

US$

(10.4% of world total)

1.40tn

US$

(9.1% of world total)

Manufactured goods: 93.6%

Manufactured goods 64.1%

(Source: World Trade Organization) NEWSCHINA I January 2012

11/24/11 4:28 PM

China’s WTO Trade Policy Review in 2010, trading partners expressed concerns for the first time that “progress towards market liberalization had showed signs of slowing down,” and urged China to “give new impetus to its reform program.”

Criticism has come not only from outside, but also from within China, with both domestic and foreign stakeholders voicing dissatisfaction. “Items on the list of complaints from European and American businesses in China have scarcely changed over the past 10 years,” said Wuttke.

Transparency and intellectual property protection, in particular, have always been among the hottest issues. That, he insisted, shows that systematic improvements expected years ago have still not been made.

Prominent Chinese economists share similar concerns. For example, Professor Yao Yang, Director of the China Center for Economic Research at Peking University, openly warned in an article last year that China’s current growth model had caused social discontent domestically and trade frictions overseas. Wu Jinglian, one of China’s most vocal advocates of marketoriented economic reform, repeatedly called for progress on the rule of law in the country’s economic governance.

But Wuttke does not think the WTO is as potent a source of change now as it was a decade ago. One reason, he argues, is that China’s position as a world trading power has led to complacency, and a lack of motivation to change. The other reason is that the efficiency of the WTO itself has been called into question; the Doha Round negotiations, aimed at building a fairer trading system within the organization, have been fruitless since 2008.

To make matters all the more complicated, while the WTO can spot areas that need improvement in China’s economic reform, the right to properly assess those areas is problematic, as China has technically fulfilled its WTO commitments.

In its 2010 review, the WTO hardly questioned China’s performance in relaxing restrictions on trade and investment.

Even the European Union recognized in its 2008 report that in certain key areas, NEWSCHINA I January 2012

12-21_Jan.indd 17

“Chinese reformers at that time, led by Zhu Rongji, saw the potential of using the WTO negotiations as an external leverage to resist domestic interest groups that preferred oligarchy and monopoly.”

History of China’s WTO Accession 1948 China becomes one of the 23 original signatories of the General Agreement on Tariffs and Trade (GATT), the organization overseeing the multinational trading system established in 1947.

1949 Taiwanese authorities announce that China will leave the GATT system, a decision never recognized

by Beijing.

1986 China notifies the GATT of its wish to resume its status as a GATT contracting party.

China “has in place almost all the necessary legislation” for a market economy by the EU’s definition. As a result of the technical fulfillment and establishment of WTO-consistent rules, China’s system has been “made rigid enough to respond to pressure,” said Professor Li Shuguang.

If the WTO mandate to move to a rule-based economy is forgotten, resistance to China’s Reform and Opening Up process could be on the horizon. Professor Li Shuguang warned that at the local level, improper business practices are still rife, showing clear signs of that dangerous prospect. He has noted that in cases where debtors are politically connected, creditors often choose to appease them rather than resort to legal means.

There is no doubt that, with or without the WTO, China needs further reform of its economic system just as urgently as it did ten or twenty years ago. But now, having jumped through the necessary hoops, China’s member status keeps its attractive economy, theoretically open to all comers, leaving it with little reason to continue to reform. But while the days of WTO pressure may be gone, China cannot overlook the benefit that its membership can still bring in terms of ideas and culture, arguably as important to an economy as capital and goods. The dynamic between the two may have changed, but China and the WTO still have a lot to learn from each other.

1987 The Working Party on China’s status is established under GATT. 1995 The Working Party is converted to a WTO Working Party when the WTO replaces GATT as the rulebased multilateral trading system.

1999 China and the US reach an agreement on China’s WTO entry, paving the way for China’s entry.

2000 China and the EU reach an agreement on China’s entry.

September 17, 2001 The World Trade Organization successfully concludes negotiations on China’s terms of membership of the WTO and agrees to forward some 900 pages of legal text for formal acceptance by the 142 member governments of the WTO. November 11, 2011 The WTO’s Ministerial Conference approves by consensus the text of the agreement for China’s entry into the WTO, subject to ratification by the National People’s Congress, China’s parliament.

December 11, 2011 China legally becomes a member of the WTO.

(Source: World Trade Organization)

17 11/24/11 4:28 PM

COVER STORY China in the WTO

Crying Wolf

While openness to both foreign and domestic investment has led to prosperity in many industries in China, the prospect of increased competition still has the power to spook

Photo by CFP

By Li Jia

Women from neighboring rural areas in Anhui province work on production lines for apparel exports to the Southeast Asian region, February 22, 2011

“T

he wolves are coming!” was a popular Chinese catchphrase in 2001, the year when China finally became a member of the World Trade Organization after 15 years of tough negotiation. While encouraged by the prospect of expanding the Made in China brand on the global market and attracting more foreign investors to China, there were worries within the country over potentially devastating competition from superior foreign products and the meddling influence of investment from both within and beyond the border.

Contrary to the pessimistic forecasts on China’s export prospects by many international and domestic institutions, the “wolves” have turned out to be somewhat toothless; today, while major economic blocs worldwide struggle to balance the books, China ponders how best to spend the world’s largest foreign exchange reserves, built largely on its exports over the past 10 years. In 2010, China replaced Germany as the world’s top

18

12-21_Jan.indd 18

goods exporter.

China’s success story so far has not resulted from protectionism, but from openness, which to a large extent was driven by China’s accession into the WTO. Where the market is open to competition, foreign and private companies play a much larger role than State-owned enterprises (SOEs) and there is higher economic efficiency. The manufacturing sector has long been the first destination of foreign capital in China. According to the Ministry of Commerce, in 2010, foreign-funded enterprises, accounting for only 3 percent of all companies incorporated in China, contributed 27.1 percent of all industrial output value, 21.2 percent of tax revenue, about 45 million direct job opportunities and more than half of China’s foreign trade. The textiles and clothing industry, which provides more trade surplus and jobs than any other sector, is dominated mainly by private small and medium-sized Chinese companies.

Their performance has far outshone SOEs, which hold 70 percent of the economic resources but account for a meager 30 percent of GDP in the world’s second largest economy, and that 30 percent contribution is founded largely on their governmentbacked monopolies over energy, natural resources and telecommunications.

The success of openness, however, has not silenced cries of “wolf” and calls for protection, particularly in the service sector where openness lags far behind the manufacturing industry. In those areas, development is slow and competitiveness is weak. That, according to some experts, is not a coincidence; further opening to both domestic and international players in those areas could help sustain China’s growth miracle for another 30 years.

Contenders

To foreign consumers, the most familiar Made in China products are clothing and NEWSCHINA I January 2012

11/24/11 4:28 PM

China in the WTO Breakdown of China’s foreign trade in groups of enterprises in the first nine months of 2011

Foreign investment in China’s service industry

174%

40.2bn

83% 51.1%

52.4%

27.6%

21.3%

Imports & Exports

33.2% 14.4%

Imports

US$

49.8%

foreign direct investment in China went to the service sector in the first months of 2011, more than the

21.5% 28.7% Exports

Trade Surplus

46.5bn

Profile of China’s textile and clothing industry as the largest source of China’s trade surplus

-157%

The share of China’s export of textile and clothing rises to of the world’s total for these products in 2010 from

80%

14.7 % in 2000

22million employees in China in 2010 are migrant workers. In 2000, 13million

to manufacturing for the first time in decades.

However, real estate is the largest destination of foreign investment in China’s service sector. Between 40% to 50% of the FDI in the service sector went to real estate between 1998 and 2010.

China’s trade deficit in services (US$billion)

of the

workers were in textiles.

shoes. Despite various attacks from global competitors, including a “bra war” with the EU in 2005, Chinese clothes and shoes have consolidated their dominance on the world market. A joint statement by US and Asian guilds in 2003 urging extension of the quota system is evidence that Chinese exports in this sector are a force to be reckoned with.

“We don’t grow just because we have cheap labor. We boast one of the most market-based, internationalized industries in China,” said Zhao Hong, director of the international trade office at the China National Textile and Apparel Council. “Facing the international market, producers have to invest hugely to adapt to different standards in different markets,” he noted.

Even in areas where China is not endowed with a comparative advantage, there have been some pleasant surprises.

There was concern over the fate of China’s auto industry, regarded as an “infant industry” needing special protection in NEWSCHINA I January 2012

12-21_Jan.indd 19

In 2000 The 12th leading exporter and the 10th largest importer of commercial services

29.5 2009

29.7bn

Exports:

US$

Imports:

US$

US$

Foreign-funded Private State-owned

33%

China’s foreign trade in services:

(2.1% of world total)

34.8bn

(2.5% of world total)

In 2010 The fourth leading exporter and the 3rd largest importer in commercial services Exports: Imports:

170bn

US$

(4.6% of world total)

192bn

US$

(5.5% of world total)

9.6 2004 3.2 1997

6.7 2002

7.6 2007

’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09

China’s post-WTO accession era. Now, domestic brands like Geely and Chery drive alongside locally built BMWs and Toyotas on China’s roads. “No-one could have predicted that China’s auto industry would become the world’s largest in production and sales,” said Li Guanghui, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation.

Perhaps the clearest example of how openness has facilitated growth can be found in the IT industry. “Opposition from certain ministries towards signing the WTO Information Technology Agreement (ITA), which subjected some 290 kinds of IT products to zero tariffs, was extremely strong,” recalled Professor Zhang Hanlin, president of the China Institute for the WTO at the University of International Business and Economics.

It was not approved until then-Chinese Premier Zhu Rongji confirmed that many

(Sources: China National Textile And Apparel Council, World Trade Organization, Ministry of Commerce of China)

other developing countries, such as Indonesia and Thailand, had already signed up. As a result, this industry has attracted more foreign investment and technology than any other sector, making China the world’s largest producer and exporter of more than 200 items on the list.

But the fact that most profits have been scooped by foreign companies has attracted criticism in China. “A series of estimates based on true domestic content can cut the overall deficit (of the US in its trade with China)…by half, if not more,” wrote Pascal Lamy, director-general of the WTO, in an article for the Financial Times early this year. Professor Lang Xianping, famous for exposing various pitfalls in China’s economic Reform and Opening-up, argued that multinational giants aimed to control the flow of China’s manufacturing with an “industrial chain conspiracy”, which was also the name of his book on the subject.

Professor Zhang Hanlin played down

19

11/24/11 4:28 PM

COVER STORY

In Need of Service

Even if half of China’s GDP comes from the service sector by 2015, as predicted by the government, that goal is still five percent lower than the current average for developing countries. In this sector, deficit has been reported for the ten years since China’s WTO accession, with the US as the largest source.

One of the most obvious examples of a lack of openness in the sector is the absence of agricultural insurance. In a country where more than 200 million rural residents have become industrial workers over the past 30 years, and where natural disasters cost at least 100 billion yuan (US$15bn) per year, Chinese farmers are incredibly vulnerable.

“Only with a job in a city can we buy food and pay other expenses without waiting for months to sell grain or livestock for a poor return or sometimes a loss,” said a migrant worker surnamed Jia living in Beijing. She recalls “hopeless days” working in the countryside, when torrential rain would frequently destroy the family’s crops.

But agricultural insurance has long been available on the international market. In-

20

12-21_Jan.indd 20

“You have to be part of the chain to have any chance of moving up. That is exactly what China is trying to do.”

dian farmers have benefited hugely from insurance schemes, with foreign and domestic private insurers playing an important role under the support and supervision of the Indian government. Professor Zhang Hanlin thinks this is a model that China should learn from.

Scare Tactics

Without openness, change is unlikely. In the banking and telecom sectors, where China is particularly disadvantaged on the international market, the SOE monopoly is very strong. For years, European and American business groups have urged China to relax restrictions on foreign investment in banking. Recently, there have been unprecedented calls for easier access to the private capital market.

Even in more conventional service sectors where China’s performance is much better than in finance or telecom, there is widespread opposition to openness.

“Even today, some experts think openness to tourism would necessarily lead to the legalization of the sex industry in China, because they believe that the two go hand-in-hand in foreign countries,” said Professor Zhang, adding that “this lack of knowledge of the outside world proves that we are clearly in need of more openness.”

The trend of increasing market openness to domestic and international players seems to have slowed in the past three years; wolf rhetoric is back in fashion.

Nearly every time a foreign brand moves to acquire a Chinese one, there is an outcry for “protection of our national brands” and renewed alerts on “national economic security.” Dirk Moens, secretary-general of the European Union Chamber of Com-

Photo by CFP

the theory: “You have to be part of the chain to have any chance of moving up.

That is exactly what China is trying to do, though it takes time to achieve it,” he said.

The retail sector may be a good example for the prospect of advancement. At the end of 2004, China removed all restrictions on foreign investment in the retail sector to fulfill WTO regulations. Since then, international giants like Walmart and Carrefour expanded so aggressively in China that warnings about “national economic security risks” posed by foreign “wolves” have risen. However, in early November, New Hua Du Supercenter, a privately-owned Chinese retailer based in Fujian province, announced its purchase of six outlets of the South Korean discount store E-Mart, the first acquisition of a foreign retail business by a Chinese company.

The case has been hailed by Chinese media as an example of how Chinese retailers have gone from start-ups to competitors, and are now even taking the lead as they continue their dance with the wolves.

Workers operate in a warehouse at a logistics center in Zhejiang province, July 25, 2011

merce in China, told NewsChina that due to the slowdown in market liberalization, the EU now suffers the same hindrances to growth as Chinese private companies.

Professor Wang Zhile, international trade and investment consultant to a UN Global Compact Working Group, utterly rejects the notion that the wolves are, or ever have been, conspiring to harm China economically. In his research, he has not found a single instance of a foreign acquisition in China putting China’s national security at stake. Sentiment against acquisitions by foreign companies, either in China or in the US, he thinks, has been exploited by groups whose commercial interest would be affected.

In industries where openness has been encouraged, China has exerted strong competitiveness, and its sizeable trade surplus and relatively stable economy would suggest that it is well placed to continue doing so; China would risk little and have much to gain from increased partnership and competition. But with the public highly susceptible to scare tactics, talk of wolves at the door may keep change on hold for the time being. NEWSCHINA I January 2012

11/24/11 4:29 PM

NEWSCHINA I January 2012

12-21_Jan.indd 21

21 11/24/11 4:29 PM

SOCIETY Tax Riots

Taking Sides Rioting in the Zhejiang township of Zhili has unnerved the local government, awakening Chinese administrators to the risks of using taxation to drive small-scale businesses out of the marketplace By Xu Zhihui, Yang Di and Xue Yumeng

L

ocated in the prosperous Yangtze River Delta, Zhili Township, Zhejiang, is China’s primary children’s clothing manufacturing base, accommodating more than 12,200 enterprises and workshops with a total annual sales revenue of over 18 billion yuan (US$2.8bn).

The area’s 300,000 residents are mostly employed by small household-run textiles workshops as well as in large factories, which, combined, produce 30 percent of China’s children’s garments.

Smaller, independent businesses in the area were recently targeted by the local government’s tax office, which doubled the so-called “children’s garment tax” levied on small household workshops, termed husband-and-wife teams. Their actions triggered an anti-tax protest on October 26, which soon escalated into a full-blown riot.

According to witnesses, after a brief clash between a workshop owner and a tax collector, hundreds of husband-and-wife teams turned out to protest in front of the local government building. While the protest was in full swing, a white Audi, believed to belong to a local government official, tried to drive through the crowd.

Protestors closed in and banged on the hood with their fists. The driver panicked and accelerated into the crowd, injuring

“Once you have trained a rookie into a skilled worker, he or she will quit to open his or her own workshop.”

22 22-31_Jan.indd 22

nine people, two seriously, which sparked the riot.

In the days that followed, more than 100 vehicles were destroyed and several shops damaged in the second large-scale riot reported in China’s eastern industrial belt this year. The first took place in May in Xintang, Guangdong Province, nicknamed “Jeansville” due to its prominence in the denim industry. Zhili’s small police force was unable to deal with the rioters, and had to call in thousands of police from other provinces to regain control of the streets. 28 people were arrested before the riot ended on October 30.

The intensity of the Zhejiang riot was believed to stem from long-standing tensions between Zhili’s small-scale garment enterprises and the local taxation bureau, with the tax increase acting as a catalyst.

After the police had regained control of the town, local media began to probe into the grievances of the region’s independent entrepreneurs.

Arbitrary Taxation

According to the Zhili taxation bureau, even though business tax on small household workshops has more than doubled, the absolute amount payable was fixed at 636 yuan (US$100) per employee per year, an amount the taxation bureau did not consider “burdensome.” However, workshop owners complained that the taxation standards were arbitrarily set by the local taxation bureau without soliciting public opinion. Some even argued that the tax increase was in violation of tax law.

In fact, arbitrarily determined business taxes levied on small private businesses have been common practice in China since the economic reforms of the 1980s.

Given the underdeveloped financial infra-

structure at the time, private business taxes were typically paid in cash, leaving no paper trail which taxation bureaus could use to determine appropriate rates of business tax. As a result, the authorities turned to other indicators to gauge turnover, such as the numbers of employees in a private enterprise, to determine an appropriate tax rate. In addition, small businesses would have to pay their business tax in cash, meaning face-to-face collection which significantly increases the likelihood of clashes between small business owners and tax collectors.

After 30 years of economic reform, not much has changed. In 2007, a pilot project was launched to create a national database of small and medium-sized private enterprises (SMEs). However, the database still relied on archaic indicators such as hardware volume, power consumption and the number of employees to determine a company’s tax bracket. The sheer number of SMEs active in China also proved problematic – Gan Gongren, a professor from the Central University of Finance and Economics, told our reporter that national tax authorities simply lacked sufficient staff to carry out comprehensive audits of every one of the country’s millions of SMEs. No articles in the country’s tax levy management law cover businesses as small as Zhili’s mom-and-pop garment workshops, meaning that local tax bureaus simply concoct a tax rate out of thin air.

In Zhili, the fallout was exacerbated by the fact that, prior to 2009, such small workshops were given tax-exempt status to attract business to the area. In 2009, a 100 yuan (US$16) tax was levied on each sewing machine operated by a single workshop, and in 2010, this was replaced NEWSCHINA I January 2012

11/24/11 4:29 PM

Photo by Xu Zhihui

by a 300 yuan (US$47) tax levied on each employee (often family members) of a small garment workshop. When the local taxation bureau chose to double the rates in 2011, the decision seemed arbitrary to business owners.

Industry Reshaping

With children’s garments the driving force behind Zhili’s economy, substantially increasing tax on SMEs involved in the industry seems counterintuitive. A tax official speaking on condition of anonymity told NewsChina that the real purpose behind the increased tax was not to enlarge government revenue, but instead to “reshape” the children’s garment industry by driving small businesses out of the market and reinforcing the supremacy of large factories.

Yang Cheng, who owns a children’s garment factory, told NewsChina that the existence of small family-run workshops has substantially driven up wages in recent years. “Once you have trained a rookie into a skilled worker, he or she will quit to open his or her own workshop,” Yang said. “Now the monthly pay of an ordinary worker in my factory has doubled in a year to reach 3,000-4,000 yuan [US$470-627], and the wage of a skilled worker is much higher; 6,000-7,000 yuan [US$946-1,104].”

Moreover, unlike household workshops which paid no business tax prior to 2009 and only a very small amount in 2009 and 2010, larger enterprises bear a much heavier tax burden and have continued to struggle with the rising cost of raw materials.

This means the profit margins of large-scale children’s garment enterprises has narrowed significantly. “If the situation continues, we’ll be unable to compete with enterprises in other provinces,” said Yang.

However, many small-scale entrepreNEWSCHINA I January 2012

22-31_Jan.indd 23

Riot police on the streets of Zhili, Zhejiang on October 28, 2011

neurs argue that the secret to their success lies in greater job satisfaction than can be found in the local sweatshops. Li Chuanting, a husband-and-wife workshop owner and former factory worker, told NewsChina that he had to work 12-16 hours a day as a garment factory employee, but now, with his own workshop, he enjoys much more flexibility and leisure time while maintaining the same income.

According to Yang, a lack of skilled workers forces many larger enterprises to outsource up to 90 percent of their production to small workshops. The latter are good at pirating popular brand-name garments, which has made it very difficult for larger enterprises to profit from their in-house equivalents, an area in which larger factories initially excelled.

“If a certain fashion proves profitable, the market will be flooded with knock-offs in less than a week,” a wholesale shop owner in Zhili told NewsChina.

By increasing the operational costs of husband-wife workshops, the local government has openly waded into this ongoing commercial battle, siding with larger enterprises and this incurring the wrath of smallscale entrepreneurs.

Locals vs. Migrants

But for many small workshop owners, increase in business tax is not only unfair and arbitrary on the part of the government, it is also a way to discriminate against “outsiders,” as most of the husband-and-wife workshops are operated by migrants from neighboring Anhui Province. It is estimated that among Zhili’s 300,000 residents, about 200,000 are migrants, of whom 80 percent are from Anhui. When the local tax authorities resort to coercive means to collect taxes, these tensions becomes intensified, and opposition begins to form along regional lines. During the riots, most destroyed vehicles were those with local license plate numbers. Locals responded by ransacking businesses owned by migrants from Anhui.

In response to the riot, the local taxation bureau fired the tax collector whose altercation with a workshop owner had sparked the initial protests, but have yet to comment on the unpopular tax increase which remains in place. However, the riot and its aftermath have demonstrated to the local government the risks involved in taking sides during a commercial dispute. 

23

11/24/11 4:29 PM

SOCIETY Mental Health Law

Psych Revaluation A Chongqing man whose employers had declared insane has won a 13-year court battle to have the decision overturned. What consequences will this landmark case have? By Yang Zhenglian

Nuisance

When Zhou Rongyan was committed to the Jieshi Mental Hospital in the city of Chongqing’s Ba’nan District at the end of 1998, none of his family members were informed. It was not until his half brother Fan Jianhong got a phone call from one of Zhou’s friends, Hu Zhongrong, the neighbor of an odd-job man at the mental hospital, that the family knew Zhou had been committed against his will.

“Zhou is in now imprisoned in the Jieshi Hospital and wants you to rescue him,” Hu told Fan. Zhou had just turned 31 that year, and had worked at the Agriculture Bureau of Ba’nan District for seven years after graduating college in 1991. Prior to his incarceration, Zhou

24

22-31_Jan.indd 24

Courtesy of Zhou Rongyan

A

fter a 13-year campaign against his being certified insane, Zhou Rongyan, 44, was finally declared sane on October 17. Zhou received 200,000 yuan (US$31,500) in compensation for mental damages and back pay from his former employer, its supervising agency and the hospital that declared him insane in 1998. Zhou called his victory a “triumph for the rule of law.”

Now in his forties, Zhou has lost the vigor of his youth and is gray-haired, his face careworn, the result of 93 days’ incarceration in a mental hospital followed by 13 years of wandering, during which he repeatedly petitioned various government agencies to declare him sane. Zhou described his experience to NewsChina as like “being sent to the crematory while still alive.” Now, while Zhou believes his persecutors have “finally learned a lesson,” he has vowed to continue his fight to bring criminal charges against the people and organizations involved in his incarceration and subsequent inability to live a normal life.

Zhou Rongyan in a Chongqing village after fleeing his home

had just been transferred to the bureau’s Rural Business Management (RBM) station, one of the few college graduates assigned there.

Living in a temporary dormitory, Zhou was applying, like many of his colleagues, to purchase a newly-built cut-price apartment, a form of welfare offered to government employees at the time. However, the leaders of the station favored the division of single-family apartments into shared accommodation to save money and squeeze more personnel into a smaller space. Zhou thought the apartments should be sold as suites, not as individual rooms, with preferential treatment for senior staff with a higher level of education.

He began to argue that his leaders’ approach ran counter to official worker housing policy

at the time, finally sending a strongly worded letter to the local disciplinary committee, reporting the activities of his leaders.

Shortly after sending the letter, Zhou heard that he was being sued for libel. The local court, however, threw the case out due to lack of evidence, and Zhou believed that would be the end of the matter. However, on the morning of September 17, he received a subpoena from the Ba’nan District Court, requiring him to submit to a psychiatric assessment by a court-appointed doctor. Knowing himself to be of sound mind, Zhou ignored the subpoena. Within days, a squad of bailiffs and representatives from the Agriculture Bureau came to his dormitory, looking for him. Terrified he might be “disappeared,” Zhou went into hiding, and began to petiNEWSCHINA I January 2012

11/24/11 4:29 PM

tion the Chongqing Intermediate Court, the National People’s Congress, the People’s Supreme Court and the General Office of the State Council to intervene, to no avail.

At the end of his rope, Zhou came back at the end of 1998 to the Agriculture Bureau of Ba’nan District, to attempt to explain himself. However, in a matter of minutes, he was bundled into a van and transported to Jieshi Mental Hospital, where he was promptly diagnosed with paranoid schizophrenia, and forcibly committed to a residential ward.

However, the diagnosis, as indicated by Zhou’s medical records, was largely based on the testimony of Tang Ruxue, one of the three directors of the local RBM station.

“Zhou has a 10-year history of psychosis, with symptoms including insomnia and gibbering fits… He always believes his superiors and colleagues are trying to persecute him and keeps lodging complaints against them,” ran Tang’s statement. A psychiatric review by the Chongqing Forensic Injury Institute, an institution not qualified to diagnose psychiatric illness, dated December 29, 1998, also declared that Zhou suffered from “personality disorder” and “delusional psychosis,” adding that he “had no capacity to assume responsibility for his actions.”

Hell

“It was like the end of the world,” Zhou Rongyan told our reporter, describing the hospital. The walls were about 20 feet high, topped with broken glass, and the corridors caked with feces and urine. Zhou was terrified of the other patients, many of whom suffered from severe psychosis. He was forced to take pills which induced fits of trembling three times a day before meals. He was not permitted to contact his family to tell them where he was, and it was simply blind luck NEWSCHINA I January 2012

22-31_Jan.indd 25

that enabled contact with them through the hospital’s odd-job man, Hu Zhongrong’s neighbor.

Finally informed about Zhou’s situation, Fan Jianhong contacted the hospital and managed to negotiate a transfer for his half-brother to the nearby Minkang Mental Hospital, using the excuse that it was closer to their home. There, Zhou’s mother was permitted to visit and care for her son. At the end of January 1999, Zhou was finally granted parole to “spend Spring Festival at home.”

Having secured his release, Zhou began a relentless campaign to have himself declared sane. He first went to the Forensic Identification Center of West China Medical University (which merged with Sichuan University in 2000) in Chengdu and underwent a psychiatric evaluation that found no evidence of mental illness. Zhou sent a copy of the diagnosis to Minkang Mental Hospital, the Agriculture Bureau and the Ba’nan District Court. The hospital merely responded with a request that Zhou’s family bring him back for re-commitment, threatening that if they did not, hospital orderlies would “come and get the madman.” Afraid for his and his family’s safety, Zhou once again became a fugitive, never staying in one place for longer than five days and eating only one meal a day.

Meanwhile, Zhou’s former employer announced the suspension of his salary. In 2000, the Ba’nan District Court, based on Zhou’s initial psychiatric report, declared that Zhou had “lost the capacity to conduct himself in a civilized manner.” Zhou continued to petition various government bureaus, seeking help from as many people as possible. He told our reporter he put his faith in “people’s good conscience.” He didn’t return home to Ba’nan until 2005. This time, however, he brought the media.

Accompanied by a journalist from a national-level media outlet, Zhou began a public campaign against the judgment passed by the Ba’nan District Court in 2000. He asserted that the evaluation was groundless because the Ba’nan trial had involved no court hearings nor cited a legitimate psychiatric report.

His efforts began to pay off in 2005 when the Chongqing High Court decided that the verdict was improper and suggested that it be “corrected.”

However, this “correction” took more than two years, meaning Zhou didn’t receive a formal reprieve until January 2008, following which he had to wait another two years before he could receive compensation for the loss of earnings and mental anguish endured during his years as a fugitive.

Despite these delays, the unprecedented overturning of Zhou’s diagnosis was revolutionary enough to be described by the Supreme People’s Procuratorate, a branch of China’s State judiciary, as “having legislative significance.” In recent years, cases of individuals misdiagnosed as “mentally ill” and forcibly hospitalized have come to light when the involvement of certain special interests has been exposed by the media.

Conservative estimates from the business news periodical Caixin Century have indicated that as many as 50 percent of institutionalized mental patients in China may have been committed against their will, with an estimated 300,000 such cases in 2008 alone. It is impossible to estimate how many of these people have been institutionalized merely for being a nuisance to their employers or to local government officials, however the landmark ruling in Zhou’s case and the resulting draft law could finally lead to the release of these prisoners of conscience from China’s mental hospitals. 

25

11/24/11 4:30 PM

SOCIETY Beauty Pageants

Catwalk Diplomacy With China’s 2011 Miss Universe contestant Luo Zilin wooing Manhattan before placing fourth in the pageant, is China experimenting with a new soft power secret weapon – the beauty queen? By Jack Smith

A

s the seventh plenum of the Communist Party of China drew to a close on April 9 1988, a more glamorous event was taking place just south of the Great Hall of the People. China had, quietly, launched its first ever beauty pageant: Miss Youthful Elegance China 1988. With the nation still emerging from the genderless proletarian culture of the 1960s and 1970s, social attitudes remained conservative. The Miss Youthful Elegance contest reflected this sensitivity – hemlines remained low, cosmetics understated and, during the swimsuit contest, nobody dared breathe the word “bikini.”

Despite all the precautions taken by the organizers, the leadership stepped in, a central directive on May 29 declared the event was too “unfamiliar” for the Chinese public, effectively canceling the pageant. However, while it never crowned a winner, Miss Youthful Elegance had established a precedent, and copycat pageants in Shanghai, Guangzhou, Chengdu and Kunming were already underway.

Big Business

In 2003, China fully embraced the Miss World franchise, playing host to the international final. “At that time, beauty pageants were still sensitive,” Peter Wang, General Manager of Miss World China, told our reporter. “So the aim was to promote fashion, as at the time there was no modeling profession on the Chinese mainland.” The focus on fashion was impossible to miss – the event was even co-managed by the New Silk Road modeling agency and the Ministry of Textiles.

In anticipation of a conservative backlash, the government chose the Hainan Island resort town of Sanya in China’s tropical south as host city for the event.

“The organizers in Hainan saw the success

26

22-31_Jan.indd 26

of Miss World in Sun City, South Africa, which hosted four worldwide Miss World finals, and turned that town into South Africa’s Las Vegas,” Wang told NewsChina.

“Miss World is a great form of location marketing. A month-long pageant attracts a lot of media attention, and the final has a worldwide audience of over one billion people,” he added.

Beauty pageants in China, while primarily commercial ventures, have now begun to be noticed by politicians eager to improve the country’s image. When China sent its first Miss World contestant, Li Bing, to compete in the final in South Africa in 2001, she placed fourth, and was crowned Queen of Asia-Pacific. This made Li a national celebrity overnight, and awakened the Chinese authorities to the potential diplomatic dividends offered by success in international beauty pageants.

Boot Camp

With Li Bing’s victory, more resources were made available to China’s beauty queens, and the country celebrated its first Miss World victory in 2007, when Zhang Zilin claimed the crown. However, China still has a long way to go to match the successes of its rivals.

Venezuela alone has claimed both the Miss World and the Miss Universe title six times, and the current Miss World, Ivian Sarcos, is Venezuelan. By contrast, Cece Chen, 2011’s Chinese entrant, failed to place in the top 30.

In the view of Linda Lee, a professional coach of beauty queens since 1991, success in a beauty pageant is all to do with training, “Brazil and Venezuela are well-oiled machines,” she told our reporter. “The organization backing a beauty queen needs to have the right eye for how to present China in an international way.”

Chinese-American TV personality Yue-Sai

Kan, dubbed the “Chinese Oprah” by the US media, who personally led the high-profile PR campaign for China’s Miss Universe 2011 finalist, agrees that the country still lags behind other nations in terms of its ability to produce successful international beauty queens. “Women in South America are encouraged to be feminine,” she told NewsChina. “Chinese girls are humble and low key.

We are taught never to smile with our teeth showing.” In terms of social conduct, Kan believes, “China has all the hardware, but not enough software.”

For Kan, Lee and other professionals involved in the training of beauty queens, physical appearance is the most superficial part of the process, and good looks alone never guarantee a win. Preparing a teenager to face an inquisitive international media as well as the subjective judgment of a worldwide television audience is what takes the most effort, and it is in the area of self-expression that Chinese contestants can be at a disadvantage.

“I think the rote learning in the Chinese education system makes communication with others a challenge – beauty queens have to express their own opinions,” said Lee. “Take athletes as an example. [Tennis player] Li Na is controversial because she says what she thinks and so she’s authentic, but for decades Chinese athletes would only thank their motherland after a success.”

“People feel that when they’re in a certain position they need to act a certain way. Leaders and CEOs, like beauty queens, are fearful because they know they’re being judged.

Imagine a CEO having to stand in front of an audience in a bikini and answer a tough question.”

Controversy

However, while Socialism with Chinese Characteristics might struggle to reconcile NEWSCHINA I January 2012

11/24/11 4:30 PM

Luo Zilin

itself with beauty pageants, these events encounter less public opposition in China than in many Western nations. This year’s Miss World final in London drew protests from feminist groups opposed to the pageant on principle, with similar protests a consistent feature of the Miss World pageant since its inception, also in London, in 1951. “They [beauty queens] are growing up in a culture that sees pornography as increasingly mainstream,” protest organizer Rebecca Mordan told the Guardian newspaper.

“This is the soft end of that, reducing women down to the sum of their NEWSCHINA I January 2012

22-31_Jan.indd 27

PHOTO BY FARIL BERISHA

“I think the rote learning in the Chinese education system makes communication with others a challenge – beauty queens have to express their own opinions.”

27

11/24/11 4:38 PM

parts.”

Linda Lee disagrees that beauty pageants are any more exploitative than any other competition. “There’s a reason beauty pageants exist. American Idol promotes singing, Hell’s Kitchen promotes cooking - Miss World promotes ‘Beauty with a Purpose.’”

The Chinese public generally have a more practical view towards the culture of beauty.

Yue-Sai Kan also feels there is no domestic momentum for an anti-sexist drive to ban beauty pageants in China. “It’s too early for a feminist backlash,” she told our reporter.

However, she agrees that pageants which deliberately objectify women remain a problem. “I have seen some really rather stupid pageants [in China] that are so poorly produced and managed that they make women look really bad,” she said.

The main problem, in Peter Wang’s view, is that public perceptions of the Miss World pageant, both in China and overseas, see the contestants as vying for a modeling contract, not competing in a talent contest, with many contestants being pushed to secure a lucrative career through their activities by concerned parents.

“It’s about much more than modeling, but people don’t see that. [Former Miss China] Guan Qi went on to become a deputy professor at the Beijing Clothing Institute. Cece Chen’s dream is to be a professional musician.

A lot of big companies are looking for brand ambassadors, PR people, and our contestants have even been approached by government agencies,” he told NewsChina. Peter Wang told our reporter that there were over 10,000 applicants for the Miss World China pageant in 2011, with this year’s winner Cece Chen hoping to advance her international musical career through her association with the “premium brand” of the Miss World pageant. He added that this was typical of the modern Chinese beauty queen – their focus is what happens after they win.

Fast-Track

Many Asian beauty queens become superstars through their involvement in beauty pageants. Hong Kong screen legend Maggie Cheung was a semi-finalist in Miss World 1983, while the biggest female star in Bollywood, Aishwarya Rai Bachchan, launched her career after winning Miss World 1994.

“In the US you have a much more robust

28

22-31_Jan.indd 28

system of agents and professional representation. In China the system exists, but is very chaotic, it’s not like there’s a Screen Actor’s Guild or William Morris equivalent,” said Linda Lee. “If you look at Hong Kong and other Asian countries, a lot of TV actors and movie stars come from beauty pageants.”

Lee believes that part of the reason for China’s limited success in reaching out to other nations stems from centuries of educational force-feeding. A stuffy, unapproachable leadership circle and inarticulate artists, actors and other celebrities do little for international communication. In her view, beauty queens, if trained properly, are better placed than anyone to reach out across international borders, because their success hinges on their ability to communicate.

“A beauty pageant is a microcosm of society,” Lee told our reporter. “You learn how to get along with people, amd how to co-exist with competitors.”

Photo courtesy of Miss World China

SOCIETY

The current Miss World China, Cece Chen (left) has made charity work central to her campaign

Power

One avenue that has recently garnered greater interest among China’s leadership has been the potential use of beauty queens to expand Chinese soft power. It is this area that professional trainers like Lee and Kan believe is of greatest value to the country’s leadership.

The video campaign paid for by the Chinese Ministry of Culture which appeared in Times Square in January 2011 featured China’s only Miss World winner, Zhang Zilin, among a host of Chinese celebrities in an attempt to woo America with the many successful faces of China. However, the response among Americans was pointedly lukewarm.

Instead of relying on China to provide the resources to make a champion out of Luo Zilin, the country’s latest Miss Universe contestant, Yue-Sai Kan, enlisted a private stylist, photographer and a series of etiquette coaches before introducing Luo at glamorous Manhattan parties, creating a media storm.

While Luo may not have been the ultimate victor, she has so far generated far more column inches in the US than any PR campaign embarked upon by China’s Ministry of Culture. She has also faced some hostility, largely due to China’s current unpopularity with many Americans.

“She is representing China…there are always people who don’t like China and I have to prepare her for all kinds of situations

where the questions may not be friendly,” Kan told the Wall Street Journal. However, Luo has learned to field and deflect leading political questions. This is in stark contrast to the often flustered attempts by visiting Chinese leaders, accustomed to directing their own interviews at home, to handle the incisive questioning of foreign reporters.

In the view of Linda Lee, beauty queens are forced to mature by the nature of their profession, meaning they develop a distinct and powerful personality rare in the average Chinese teenager, or even the average adult.

“Spending two months being trained together is the equivalent of maybe five years in the real world,” she told our reporter. Both Lee and Kan agree that this makes beauty queens the perfect “soft power” weapon.

“Don’t send a press release, send a beauty queen,” Lee told our reporter. In Lee’s view, there’s a lot that China’s leadership could learn from the conduct of beauty queens.

“Beauty queens are role models, public people, and they’ve learned how to behave,” Lee told NewsChina. “They know there’s no excuse, just because you’re eighteen, to be impolite or do whatever you want without consideration for others. I wish more people could be that way.”  NEWSCHINA I January 2012

11/24/11 4:38 PM

Educational Inequality

Peasants Need Not Apply China’s residence registration system restricts the ability of rural-born Chinese children to secure a place at college, regardless of academic achievement By Sun Zhe

T

ao Yuan owns a car and rents an apartment in Beijing, but she does not feel at home in the city. The reason? She doesn’t have a Beijing hukou, or permanent residence permit. This administrative distinction between Tao and her Beijing-born friends and co-workers also means that her teenage son was not permitted to take his college entrance exam in Beijing in June 2011.

High-school graduates can only register for the national college entrance examination in their official birthplace which is, technically, wherever their hukou is officially registered.

There are a total of around 400,000 migrant students in a similar situation in Beijing alone.

After completing junior high school, these young people are legally required to return to their official hometowns where their hukou is registered for senior high education.

Even the children of migrant workers who hold a temporary residence permit, granted to about 20,000 high-end skilled workers by the Beijing municipal authorities, still must return to their hometowns to sit the national college entrance examinations. Because the examinations differ region to region, in practice this means most will leave Beijing as early as three years in advance in order to adjust to the new learning environment. Unlike the SATs, China’s college entrance examinations are based on as many as 17 different curricula haphazardly divided between the country’s various provinces, municipalities and special economic zones.

Tao Yuan, who has a temporary residence permit, could not bring herself to split up her family and chose to keep her son in Beijing in the hope that the hukou system would be relaxed. She only gave up hope three months prior to the examination. Despite the family having called Beijing home since 1996 after moving there from Shandong Province, their only son was legally prevented from sitting his college entrance examination in his own school alongside his Beijing-born classmates.

NEWSCHINA I January 2012

22-31_Jan.indd 29

The mother of an examinee prays while waiting for her child during the college entrance examinations in Changchun, Jilin Province, June 7

Tao’s son had not spent more than a family holiday in his birthplace for 15 years, and couldn’t get used to a completely new curriculum and textbooks in three months. Despite being a straight-A student in Beijing, his eventual score in the college entrance examination was too poor to secure a place at a well-regarded college, meaning he had to settle for a lesser-known, third-tier university. In the mean time, many of his Beijing classmates got into first-class colleges, some into the country’s top schools - Peking and Tsinghua universities.

Elitism

A new curriculum in a new place was not the only obstacle Tao Yuan’s son faced in gaining a place at college. Competition for limited places made available to students from Shandong Province has become ferocious as the province has continued to improve its educational standards. Only seven out of 100 high school graduates from Shandong will gain places in China’s top universities, three times less than

their Beijing peers. Regardless of their academic ability, students from outside of China’s most affluent urban centers are uniformly granted fewer places as part of the country’s regional quota system for college enrollment.

In China, the enrollment quotas of firsttier universities are distributed between provinces and municipalities and are unrelated to population or average income of their relevant regions. For instance, 960,000 students competed in the college entrance exam in Henan Province in 2009, about 10 times the number in Beijing the same year. However, there are only 1.7 college places made available to Henanese students for every one place offered to students from Beijing.

Top-tier universities, obliging to the desires of their local governments, recruit more local freshmen than those from other areas. With China’s top 10 universities divided between the country’s main urban centers, Chinese children lucky enough to be born in Beijing, Shanghai, Tianjin or other major cities

29

11/24/11 4:38 PM

Photos by IC

SOCIETY

Left: A student from southwest China’s Guizhou Province struggles with a test section on the last day of the national college entrance examinations, June 8, 2011; Right: Test papers are collected after the mathematics examination in Yangzhou, Jiangsu Province, June 7, 2011

have priority access to the highest-level educational institutions simply by default.

In other words, in China, some children are born into better opportunities simply due to an accident of geography. Bright children living in far-flung provinces, conversely, will face a much tougher struggle to enter a decent college than their urban peers, regardless of academic achievement. To make matters worse, the restrictive hukou system forcibly prevents children whose families have relocated to more affluent urban centers from competing alongside their city-born classmates.

In short, the hukou effectively denies educational equality to tens of millions of Chinese children.

Outsiders

Migrant Cheng Hailin, a self-defined “hukou have-not,” who relocated to Beijing from Jiangsu Province, has become a prominent antihukou activist. Cheng said that almost all his posts on the Internet calling for educational equality draw derogatory comments from Beijing natives, or, as he terms them, “hukou haves.” Most often, he says, his critics blame the migrant workers for “grabbing educational resources” from Beijing locals.

“Actually, I never want to share in their privilege,” said Cheng, a 42-year-old software programmer and father, who has lived and worked in Beijing since 1997.

“I wanted this privilege to be eradicated so

30

22-31_Jan.indd 30

that my daughter could finish school while living with her parents.”

White-collar migrants like Cheng are better off compared with low-income migrants, particularly manual laborers, who make up the majority of China’s floating population.

Cheng can afford the extra fees imposed on migrant children by Beijing’s public schools.

Six-year enrollment of his daughter in a suburban elementary school costs Cheng 15,000 yuan (US$2,350) in “contribution fees,” a price too high for most blue-collar migrants.

Even if some of the low-income migrants are ready to empty their pockets to pay for their kids’ education, the chances are that their way would be blocked during the “interview phase,” a practice adopted by most urban elementary schools to check the educational background of an applicant’s parents so as to ensure what the schools term a “desirable source of students.” In most cases, migrantworker parents flunk these interviews simply by default. Even if they are not weeded out in interview, they have to produce a mountain of paperwork including a temporary residence permit and a certificate from the local government to prove that custody of their child cannot be granted to a relative in their birthplace.

Beijing is populated by 20 million taxpayers, but its public schools, paid for by these 20 million, are only fully open to the children of the 12 million in possession of a Beijing hukou, according to Xu Zhiyong, a Beijing-based

legal scholar and veteran activist pushing for an overhaul of China’s education system.

According to a survey by Xu’s team, four out of five migrants in Beijing leave their children in their hometowns because of hukou restrictions and the high “contribution fees” illegally collected by the capital’s public schools.

For those migrant workers who do bring their kids along with them to Beijing but can’t afford the public school fees, a chain of ramshackle schools run by migrants are the only option. These schools are usually poorly kept, but low fees make them accessible to all. However, even these perceived havens are now under threat. Just before the 2011 autumn semester began, more than 20 of these temporary schools were demolished by the government, on the grounds that they were structurally unsound. Though the government promised that the displaced students would be relocated in nearby public schools, this pledge was not extended to the new intake of migrant children.

Cheng took this as a sign of a further clampdown on the freedoms of Beijing’s migrant population. He told our reporter that it was much more difficult for a few of his friends to get their kids accepted by a public school than it was for him in 2010. Migrants, or “mobile population,” as migrants are referred to in official documents, are usually seen as a likely source of civil unrest. Big prestige events, such as the 2008 Olympics and the annual NEWSCHINA I January 2012

11/24/11 4:38 PM

National People’s Congress sessions, see mass evictions and deportations of unregistered migrant workers.

Given that Beijing is increasingly congested and faces a looming water shortage, migrant workers, lacking the rights extended to local residents, are likely to be the first to go, in the view of Cheng and other activists.

Left Behind

A total of 220 million Chinese have relocated from impoverished rural areas into big cities such as Beijing and Shanghai and economically prosperous coastal areas such as Zhejiang, Jiangsu and Guangdong provinces for employment, according to the 2010 national census.

Restrictions on schooling have forced the majority of these migrants to leave their kids behind. These 58 million “left-behinders” make up about 28 percent of the nation’s young people, while a further 10 million of their peers live as unregistered migrants in urban areas with their parents.

Left-behinders are typically deposited in the

NEWSCHINA I January 2012

22-31_Jan.indd 31

care of aging grandparents, where educational resources remain at a bare minimum, further adding to the rural-urban gap in national living standards. The hukou system, initiated in the early 1950s to restrict the movement of China’s population by tying peasants to the land, has effectively made Chinese residents who choose to relocate to the cities in search of work illegal immigrants in their own country. In the meantime, public spending remained focused on urban development, with rural communities largely left to fend for themselves.

In spite of government efforts in recent years to narrow the gap between urban and rural development by increasing investment in rural infrastructure, the educational disparity between urban and rural areas has remained largely unchanged.

The focus of resources on China’s political and economic elites is the historical legacy of the national education policy adopted in the late 1970s, when the country concentrated its best educational and social resources on key urban schools to speed up the country’s recov-

ery from the disastrous Cultural Revolution which effectively ended formal schooling in China for a full decade, leading to a massive educational deficit from which the nation is only now recovering.

In cities, the upper class have both the resources and administrative advantages to secure a place for their children in top high schools even if their children lack academic flair, falling back on family connections or simply bribery as a last resort. By contrast, even phenomenally gifted rural children fail to qualify because the schools don’t want them.

Yan Lieshan, a Guangzhou-based columnist, has predicted that only about 10 percent of the freshmen enrolled into the prestigious Peking University in 2009 were from rural areas, despite the fact that 62 percent of entrants for the college entrance examinations that year held a rural hukou. If this system continues unchecked, say critics, it is likely that a firstrate education will one day only be available to urban residents with money or connections.

Some even say that day has already arrived. 

31 11/24/11 4:39 PM

special REPORT

l a t u Br

ivism E-commerce Act

r a a Baz alent, iv u q e y a B e s ’ a in h C , o l Taoba Is e-commerce porta China? in n o ti la u g re ss e n si of e-bu capitalizing on a lack

Illustration by Yang Guang

By Sun Zhe

32

32-41_Jan.indd 32

NEWSCHINA I January 2012

11-11-25 下午1:30

S

mall merchants selling through China’s largest retail website have discovered their total dependence on e-commerce giant Taobao has revealed a darker side.

In early October 2011, Taobao’s businesses-to-customer (B2C) portal Tmall announced its new terms and conditions of use which included a fourfold increase in the website’s annual service fee and vendor security deposit, catching users off guard.

Only a matter of months before, Taobao had made a formal announcement that it wouldn’t increase any of its membership fees.

There had long been grumbles among Taobao’s small-scale vendors that they were being marginalized in favor of large-scale business-to-business (B2B) wholesalers, however this move was seen as unexpected even by the website’s harshest critics.

Taobao declared that the new policy was adopted to ensure the provision of quality goods and services and to prevent the selling of fake, faulty or non-existent goods, an issue which has plagued the website since its inception.

Illustration by Yang Guang

Group Shopping

Soon after the statement was released, small vendors who planned to quit Tmall and relocate to Taobao Marketplace, the customer-to-customer (C2C) retail website which had not initiated any fee increases, began dumping their inventories, while protests were reaching a crescendo on the voice chatting platform YY, similar to Skype.

By the evening of October 11, the day

NEWSCHINA I January 2012

32-41_Jan.indd 33

after the Tmall fee increases were publicized, an anti-Taobao group on YY had swollen to include over 3,000 members.

An organizational structure soon formed comprising more than 10 departments, including human resources, operations, public relations and planning, all of which were staffed by volunteers.

In order to express their dissatisfaction with Taobao’s new rules, the group’s organizers ordered all 3,000 followers to embark on a buying spree in Hstyle, a top womenswear company operating through Tmall, of which Jack Ma, president of Taobao’s parent company Alibaba, was a key investor.

Immediately after placing an order, protesters would demand a refund and enter negative feedback on the item’s Tmall page. According to Tmall’s terms and conditions, a refund can be required with no explanation up to seven days after purchase, meaning the protesters’ actions were not illegal or even in violation of Taobao’s own rules. The attack was referred to by protesters as “group shopping.”

Hstyle was forced to suspend sales in less than an hour. The incident spread so fast across e-commerce platforms that a few hours after midnight on October 11, the operation was joined by another 4,000 protesters. Soon several other major clothing retailers also had to shut up shop to prevent massive financial losses.

In a hurried statement released the same night, Taobao branded the incident “hooliganism” carried out by “gangsters” working with Taobao vendors. Taobao CEO Daniel Zhang reinforced his company’s position, stating that Tmall contracts would only be renewed with vendors who

agreed to abide by the new policy.

“We will not tolerate or bend to violence and malicious acts against our vendors,” said Zhang. “Resorting to violence only harms our law-abiding vendors.”

Zhao Yingguang, founder and CEO of Hstyle, was infuriated by the attack, condemning the activists’ “irrationality” in a vitriolic post on Sina Weibo, China’s Twitter equivalent. One Taobao employee added inflammatory comments on Weibo likening them to “tiny loaches that can never make big waves.”

Protesters responded to the stronglyworded criticism of Taobao’s management with indignation. The posts from Zhang and the Taobao employee were repeatedly posted in the activists’ forum, leading to further coordinated “group shopping” attacks on over 100 major Tmall retailers.

Some protesters even changed their online pseudonyms to “tiny loach.”

In the next two days, thanks to widespread coverage and condemnation of the attacks in the State media, the anti-Taobao protest group experienced a rush of traffic, and by noon on October 12, the number of registered users had swelled to 50,000, with a further 10,000 joining in the following 24 hours. A system of online debate was created whereby an administrator could freely speak to all other users, however regular members had to take a number and wait in line to speak. During busy periods, tens of thousands were waiting in line to share their Taobao experiences with others.

“Finally my turn! I’ve waited for two days and two nights!” was, unsurprisingly, the first remark made by most participants, followed by an account of the difficul-

33

11-11-25 下午1:33

SPECIAL REPORT

“We will not tolerate or bend to violence and malicious acts against our vendors.”

ties they faced running a small business through Taobao. Most closed with a tirade against the company’s recent “arrogance.”

A small number of activists identified themselves as Tmall merchants unhappy with the annual fee hikes, however the vast majority were small-scale vendors with Taobao Marketplace who were angry with Taobao’s diverting customer traffic away towards the more-profitable Tmall. Upon the launch of Tmall in 2008, five years after the founding of Taobao Marketplace, Tmall shared the address taobao.com, funneling traffic away from its B2B sister site.

Snowballing

However, after October 13, the online furor began to lose momentum as group shopping attacks ceased. Organizers explained that they wanted to give Taobao “a break,” so that it might think twice about its new policies. However, speculation arose that the protest forum’s administrators had been bought off by Taobao, with some activists predicting the group’s dissolution “as soon as the leaders got paid.”

These rumors went viral and caused the group to hemorrhage members. By noon on October 14, only 36,000 remained, forcing the organizers to begin a second round of group shopping simply to prevent a total collapse. This tactic paid off, and before evening numbers had recovered to above 50,000.

On October 15, the Ministry of Commerce (MOFCOM) announced that it would “look into the anti-Taobao incident,” with a MOFCOM spokesperson attributing the attacks to the absence of

34 32-41_Jan.indd 34

e-commerce law in China. Some activists responded with calls for a stepping-up of attacks on Taobao to force the company’s hand, others calling for a “ceasefire” to avoid a government backlash against the protest movement. New attacks were halted before November 17, when Jack Ma held a press conference to announce “adjustments” to the new terms and conditions that had caused the incident.

Ma declined to talk to representatives of the anti-Taobao activists, instead announcing a new clause in Taobao’s revised terms and conditions granting a nine month “grace period” to vendors with good ratings, during which they would be exempt from the fee increases, as well as a 50 percent reduction in all vendors’ liability deposits.

Ma’s offer fell far short of the protesters’ demands, which by this point included consultation in Taobao’s rulemaking and the “fair distribution” of customer traffic. The group responded by asking over 5,000 vendors to withdraw all funds from their accounts with Alipay, an Alibaba-affiliated third-party payment tool similar to Paypal, between 8PM and 9PM on October 21, severely disrupting Taobao’s financial operations and drawing further fire from the company.

This new tactic generated more media interest, but also gave Taobao a chance to fight back. As the Alipay accounts were tied to vendors’ Taobao store IDs, Taobao could easily pinpoint activists and slow or cut customer traffic to their individual pages.

A Jiangsu-based clothing retailer, who only wanted to be identified by his surname Yang, disclosed that the day after

the mass withdrawal, in which he had participated, traffic to his store dropped by more than 90 percent and did not recover.

However, the protesters continued to attack Taobao, turning attention to advertising platform Taobao Express.

Thousands of protesters were guided to click selected ads simultaneously, crashing servers and leaving vendors reluctant to use Taobao Express, cutting revenue for businesses which earned money for each time their ad was clicked. In a lastminute attempt to legitimize their actions, protesters targeted ads for controversial businesses, notably retailers selling fur.

By the end of October, the YY protest group had been blocked by the authorities and the protesters, denied their main forum, dissolved into smaller groups, many of which have continued to attack large Tmall stores and Taobao Express.

However, some have attempted to negotiate peacefully with Taobao’s management.

A small group of activists appeared in person at Taobao’s headquarters in Hangzhou, Zhejiang, intending to negotiate with Jack Ma and Taobao’s top management, however, they were told to remain outside. On October 16, representatives from the group submitted a list of demands to Taobao. Shi Yefei, the group’s spokesman and a seller of wedding accessories from Zhejiang Province, said that his comrades would travel from all over the country to camp in front of Taobao headquarters to wait for an answer.

“Now we are determined to solve a real problem in the real world.” 

NEWSCHINA I January 2012

11/24/11 4:48 PM

E-commerce Activism

From Stall to

MALL A warehouse sometimes doubles as a bedroom for a Taobao merchant Photo by Liu Jun / LENS

Taobao’s shift towards a business-to-consumer model has come at a cost to small-scale sellers, who are learning some harsh lessons about the cutthroat world of business

By Sun Zhe

O

ver the past decade, domestic online marketplace Taobao has risen to eclipse online giants such as eBay to become China’s leading online retail platform. It has enjoyed particular popularity with small-scale sellers; everyone in modern China seems to have a Taobao store, with merchants ranging from college students to farmers to wholesalers who find themselves with a little surplus stock.

But such diversity in China’s online merchant class may soon be a thing of the past. Having previously focused on customer-to-customer (C2C) retail with its highly accessible Marketplace platform, in 2008 Taobao began its foray into the business-to-customer (B2C) market with the establishment of its highly regulated premium portal, Tmall. With many C2C customers now struggling to survive, Taobao’s change of face has left many dispirited.

Indeed, due to the bias of Taobao’s in-

NEWSCHINA I January 2012

32-41_Jan.indd 35

ternal search engine, the website’s C2C sellers now find it difficult even to display their wares; in every product search, Tmall stores occupy the top three results. Previously decided by the time companies list a product, meaning every store had an equal chance of coming out on top, search result rankings are now decided by various parameters including previous sales volume of the product, the seller’s credit rating, and the number of times the store has been visited and bookmarked.

Additionally, the sales volume reading of a Tmall store is able to accumulate over time, while that of a C2C store is reset to zero at the end of every month, making it even more difficult for small sellers to attract attention.

Even for sellers who had established solid roots on Taobao Marketplace, business has been hard to sustain. Wang Weiyang, a 29-year-old woman from east China’s Jiangsu Province, started her Taobao operation in 2005 upon leaving university,

when she found herself faced with a lack of prospects in an overpopulated job market.

By that time, Taobao had begun to take the upper hand over eBay in the battle for the China market. With free registration, commission-free transactions and a free third-party payment platform, the homegrown hero soon amassed millions of registered users. By 2006, Taobao had overcome the previously dominant eBay, which charges commission, eventually edging it out of the market entirely.

“For start-ups, Taobao looked like heaven,” said Wang. This was an image that Taobao was keen to reinforce; the company’s slogan at the time was “Small is beautiful.”

Wang’s business of spectacle frames started slowly but soon picked up. After three years, her store had recorded more than 5,000 transactions, and she found herself better off than most of her whitecollar former classmates. But Wang’s

35 11/24/11 4:49 PM

SPECIAL REPORT

Ouyang Qingqing, a 20-year-old sophomore from Zhejiang Province, displays her Taobao store‘s bestselling item, an eye-bag corrector

Struggling to Profit

Kick-started by customer traffic redirected from Taobao Marketplace, Tmall soon overtook major rivals Dangdang and 360buy to become the country’s largest B2C portal.

Aside from higher profit margins than Taobao Marketplace, which generates revenue mostly from advertising, quality control was another reason for the shift toward Tmall.

Populated by companies rather than individuals, the B2C platform is much easier to regulate, said Chen Shousong, an e-commerce researcher with Beijing-based IT consultancy Analysys International.

Due to its sheer size and low barriers to entry, Taobao Marketplace became awash with counterfeit goods and unscrupulous sellers. The launch of Tmall created an outlet through which Taobao could compete with 360buy and other rivals with quality goods and services.

“B2C portals will be a major part of future e-commerce, as they provide more security and ensure higher quality,” said Chen.

While China’s C2C market grew by roughly 70 percent in 2010, B2C sales almost doubled during the same period, according to iResearch, a Beijing-based IT consultancy. Sales on Chinese B2C websites are expected to more than triple to 650 billion yuan (US$102bn) in 2013 from around 198 billion yuan (US$31bn) in 2011, and by that time, B2C sales will account for 47 percent of total online sales in China, up from 25 percent in 2011, according to estimates from Analysys International.

So far, Tmall has amassed more than 50,000 companies selling more than 70,000 brands. In 2011 alone, the number of Tmall stores grew more than 40 percent. Tmall occupied 35.5 percent of the B2C market in the third quarter of 2011, compared with 13.3

36 32-41_Jan.indd 36

percent for runner-up 360buy, according to Analysys International.

In response to the protest against Tmall’s recent annual fee hikes, Jack Ma said in a recent post on Sina Weibo, China’s Twitter equivalent: “If it is normal for a company to want to make profit and abnormal for it not to, Taobao has been abnormal since it was founded nine years ago.”

The commission-free policy since 2003 had enabled it to beat eBay, and in the following three years when fellow Chinese web giants Baidu and Tencent launched their respective C2C portals, it was forced to carry on with its commission-free policy for fear that it would lose its market share to rivals.

There is no doubt that the policy was one of the main reasons behind Taobao’s immense sustained growth to its current size of over 8 million stores.

However, while transactions on Taobao have always been commission-free, in a real sense, Taobao has never been truly free of charge, as store owners have always had to pay to use tools and services such as customer traffic data and store decoration. After it achieved market dominance, Taobao began working out a wide range of premium value-added services to turn its market share into profit, a venture which proved challenging.

Broken Dreamers

In June 2006, Taobao infamously tried to launch a bidding system for search result rankings similar to that of Baidu, but was

Photo by Liu Jun / LENS

luck changed when Tmall was launched in 2008. Since then, customer traffic to her store has dropped by more than half.

later forced to give up when shopkeepers threatened to stop using the website to sell goods. As a compromise, the advertising tool Taobao Express was put into operation in 2007.

In 2009, advertising made up 85 percent of the company’s total revenue, allowing it to break even. Taobao’s 2010 profit was estimated to be 1.5 billion yuan (US$235.7m), only about 0.4 percent of Taobao’s total sales figure of 400 billion yuan (US$62.9bn) that year, way below the industry average of 2 percent, according to iResearch estimates.

Taobao’s profits are bound to soar with the rise of Tmall, as the economically robust Tmall sellers are more willing to spend money on advertising. The other side of the coin is that preferential treatment of these large-scale sellers and their impressive advertising budgets may mean that the days when anyone could make their fortune on Taobao are over.

For many Taobao sellers, the friendlyfaced website was a symbol of the commercial possibilities of China’s economic liberalization; no matter who you were, wealth was only a few clicks away. But with a legal responsibility to maximize profits, the giant marketplace has been forced to teach its smaller tenants some harsh lesson about the world of business. While its defense is consumer protection, Taobao’s despondent amateur merchants might well ponder that maximizing profit has been the goal from the very beginning. 

NEWSCHINA I January 2012

11/24/11 4:49 PM

Dec_52_63.indd 55

10/25/11 10:48 AM

ECONOMY Real Estate Industry

Safe as Houses?

A year and a half into the government’s housing market regulation scheme, property prices have at last begun to decline, but tensions remain high By Yu Xiaodong

O

n October 26 at the Imperial Scene housing complex in Shanghai’s sparkling Pudong district, 200 disgruntled homeowners staged a rare public protest in front of the sales office of the housing developer over its attempt to stimulate sales by slashing its prices. The owners feared that the value of their properties, bought at 22,000 yuan per square meter (US$383 per square foot), might shrink significantly now that the developer was reducing the price to 16,000 yuan per square meter (US$279 per square foot), a 27 percent drop.

In September and October, similar protests were held by homeowners in Beijing and other cities. Experts believe that the friction may signify the beginning of a downturn in China’s property market, whose unprecedented boom over the last decade has been plagued with runaway housing prices and public discontent.

Signs of Cooling

“This is just the start. The worst will begin in the first quarter of 2012, as it is unlikely

“This is just the start. The worst will begin in the first quarter of 2012.”

38 32-41_Jan.indd 38

that the central government will loosen its property regulation policy,” Luo Jiaming, an analyst from ICBC International, the global wing of one of China’s “big four” commercial banks, told NewsChina.

In an effort to control the overheating market, since early 2010, the central government has been implementing a package of policies restricting the purchase of housing. These have included raising down payments and forbidding the purchase of real estate where the buyer is not resident, as well as limiting the number of houses an individual can buy.

The measures have targeted the hoarding of apartments by speculators, a practice largely responsible for the Chinese housing bubble.

Despite unfavorable financing policies and a drop in the number of eligible home buyers, real estate companies have been reluctant to lower prices, reasoning that a price reduction could cause panic among buyers already fearful of further price cuts; most real estate companies have planned to weather the government’s austerity policies by keeping enough cash in the coffers to see them through. The result was that by June 2011, after a year of strict regulation, house prices had dropped only marginally. However, trading volume has recently plunged into a downward spiral.

By the end of September, the total value of unsold houses on the market amounted to 531.4 billion yuan (US$83.3bn), 2.4 times the same figure at the end of June. In Shanghai, the trade volume of the property sector in the usually lucrative first three weeks of October dropped by 72 percent compared with the same period in 2010. Nationally, the total worth of housing inventory in the first three quarters of 2011 reached 1.2 trillion yuan (US$189.3bn), a 40.7 percent increase over the same period in 2010.

Stagnation of sales has put serious strain on the capital flow of property developers. According to the quarterly reports of 70 publicly traded real estate companies, 70 percent of them witnessed negative cash flow in the first three quarters. Even Longfor Properties, with the largest cash reserves of all 70 real estate developers (12.6bn yuan or US$1.97bn), resorted to price cuts.

In late October, rumors circulated that Greentown Group, one of China’s largest real estate companies, was on the brink of bankruptcy. Although Greentown’s CEO Song Weiping was swift to refute the allegation, there was no doubt that Greentown was nevertheless in real trouble, its liability rate rising to 160 percent and both sales and profit dropping rapidly.

Experts estimate that about one-third to 90 percent of real estate companies may be driven out of the market within five years if the current austerity policy continues. “The domestic real estate market has witnessed a change of direction,” said Xiao Li, executive vice-president of Vanke, China’s largest real estate company, in an investors’ teleconference on October 25. “Sales and prices will decline further in the next few months,” she warned.

Desperate Measures

As housing prices reach a tipping point, many worry that the government may loosen its policy. Acquiring huge amounts of land grant funds by appropriating land then transferring it to real estate developers, local governments have been the biggest beneficiaries of China’s property boom, and would be happy to see it continue. Even the resolute central government may be concerned that a sudden dive in housing prices could hurt State-owned banks NEWSCHINA I January 2012

11/24/11 4:40 PM

Photo by Ding Jia/CFP

Homeowners protest in front of the sales office of the Imperial Scene housing complex in Shanghai, October 26, 2011

and further hamper GDP growth.

The current impasse is not without precedent. When a similar austerity scheme was launched to control housing purchases in 2008, a drop in real estate prices led to protests in certain areas, which were acquiesced to, if not encouraged, by local governments.

Wang Shi, CEO of Vanke, openly criticized local authorities for their inertia when protestors stormed his company’s sales offices.

When the global financial crisis struck later the same year, the central government swiftly scrapped the tightened policies, resulting in a renewed rise in house prices.

In the wake of the protest in Pudong, the Shanghai government announced that real estate companies are required to re-register their property with the authorities if the price cut is more than 20 percent. The intervention has been widely interpreted as an effort by the Shanghai government to limit the margin of price reduction. It is estimated that the revenue from land grant fees decreased by NEWSCHINA I January 2012

32-41_Jan.indd 39

23 percent in Shanghai in 2011 compared with the same period in 2010.

Spooked by falling prices and shrinking revenue, a number of other city governments have also launched minor policies to shore up the real estate market. But with the central government standing firm on housing market regulation, local governments have no power to lift major restrictions, and it is unlikely that minor adjustments could have much impact.

On October 27, Jiang Weixin, head of the Ministry of Housing, sparked speculation that the central government could remove the limits. “It would be unnecessary to continue limiting housing purchases…once all information on the housing situation of each individual is incorporated into the databases of banks and taxation departments,” said Jiang at a meeting of the Standing Committee of the National People’s Congress.

While many have interpreted Jiang’s comments as a prelude to a policy reversal, Pre-

mier Wen Jiabao delivered the opposite message with an unequivocal reinforcement on November 6 that it was “staunch” national policy to bring housing prices back to a “reasonable” level.

Some believe that this “reasonable” level is 20 to 30 percent below the current market price, and the central government may loosen its policy in early 2012 when that target is likely to be met. Others however believe that, despite its obvious potential to raise the public’s hackles, the policy will remain in place until the launch of other long-term mechanisms, such as property tax.

Confused by mixed messages from upperlevel politicians and with little room to maneuver, speculators, real estate agents and local governments await their next public standoff. With none of the three able to effect any significant change on their own, the future of China’s real estate industry remains squarely on the central government’s doorstep. 

39

11/24/11 4:40 PM

ECONOMY Wind Industry

Gale-Force Glut Despite having a virtual monopoly on China’s oversupplied domestic market, attempts by the country’s wind energy companies to compete internationally have brought their lack of maturity into sharp focus By Li Jia

W

hile European companies are world leaders in practical deployment, and their American counterparts are the kings of commercial exploitation, nobody can match China for the sheer scale, or inefficiency, of wind farming. European and American wind farms boast 90 percent connectivity with national power grids, with wind power providing between 2 and 3.5 percent of national energy reserves. Only 70 percent of China’s wind farms have been connected to the State grid, and less than one percent of the total national power supply is wind-generated.

China’s lopsided development of its wind industry has, however, been a boon to wind turbine manufacturers, who are now reaping the benefits of white elephant wind farms. Superior technology and well-established brand names allowed foreign manufacturers led by GE, Gamesa (Spain) and Vestas (Denmark) to lead the field in China until 2005. However, “indigenous innovation” policies rolled out that year jumped Chinese manufacturers to the vanguard of the market in 2009, where they consolidated their position in 2010. By 2011, even China’s third-placed turbine manufacturer held a greater market share than all the foreign companies still active in China combined.

Hoping to echo their domestic success, Chinese manufacturers, facing a dip in demand at home, are now seeking to challenge the dominance of European and American giants in the international market. Although the stigma attached to made-in-China turbines has so far made them a rarity overseas, the market momentum of cut-price hardware is strong enough to cause concern among the field’s big hitters. A recent report by the Financial Times caused jitters with the headline: “China set to challenge global wind industry.”

However, the biggest stumbling block for Chinese manufacturers could prove to be in-

40 32-41_Jan.indd 40

ternational IP law. While few Chinese agencies will decry the infringement of patents held by foreign companies in the domestic marketplace, foreign companies are likely to be less forgiving towards Chinese companies illegally appropriating their technology in order to undercut their market position. Consequently, foreign companies frozen out of China’s market are set to turn the tables on China when its turbine manufacturers aim to gain a foothold outside a government safety net.

Rollercoaster

Prior to 2005, China’s homegrown wind energy market was almost entirely supported by imported technology and foreign companies.

An array of policies, particularly the Renewable Energy Law, were issued in 2005 to set out government strategies to boost wind power. As a result, productivity doubled each year through 2009, when, for the first time, China’s deployment of wind turbines outpaced that of the US. The number of domestic turbine companies rose from six in 2004 to more than 80 in 2010. Foreign manufacturers, however, were marginalized due to the 2005 policy clause that stipulated that a minimum of 70 percent of China’s wind power equipment had to be “locally produced.”

The boom did not last long. By 2009, wind energy was already on the State Council’s list of “industries at overcapacity.” In addition, a price war and the rising cost of financing labor and raw materials all squeezed turbine makers’ profits. In its 2010 annual report, the NYSE-listed China Ming Yang Power Group remarked: “Our future prospects may be adversely affected by an increasingly competitive market.”

Sinovel and Goldwind, the mainland’s top two producers, reported drastic drops in net profits for the first half of 2011.

Following a series of accidents involving

wind turbines coupled with the inefficient and sporadic connection of wind farms to the State grid, the Chinese government now looks set to pull the plug on its great leap forward in wind power. Stricter market access has been imposed in a series of policies issued in July and August 2011 which look set to dramatically narrow the domestic market and squeeze out smaller players.

Chinese manufacturers are consequently eyeing overseas markets as a potential release valve for their excessive capacity as well as a much-needed source of revenue. Terrence Zhang, an energy investor, told NewsChina that nearly all Chinese producers had factored overseas market demand into their capacity projections from at least 2009 on. Since 2007, some Chinese wind turbines have shipped to developing markets such as Cuba, India, Chile and Thailand.

Headwind

In 2011, Chinese companies seemed to be consolidating an incursion into developed markets in Europe and North America. In early 2011, Goldwind announced the commencement of operations on the US mainland, informing shareholders it expects overseas business to contribute nearly one third of its revenue by 2015. After a cooperation agreement with the Public Power Corporation of Greece in April 2011, Sinovel struck a 1.5 billion euro (US$ 2 bn) deal with European wind farm operator Mainstream for a project in Ireland.

China’s principal international competitors are less than welcoming to the incursion of manufacturers which their technology and business models helped to establish.

US trade unions and politicians are particularly hawkish about any Chinese industry that might constitute a threat to American jobs. In early September, some Democratic congress-

NEWSCHINA I January 2012

11/24/11 4:41 PM

law firm based in San Francisco.

On September 14, Superconductor (AMSC), a global leader in power technology, declared they would be filing “criminal and civil complaints in China against Sinovel and other parties alleging the illegal use of AMSC’s intellectual property.” Sinovel recently canceled all orders from Superconductor without warning, and industry insiders believe this slight is what prompted the American company to take legal action.

“Sinovel’s [IP] infringement has been an open secret in the industry. However, it used to be in the commercial interests of Superconductor to defend its biggest client,” Brian Wang, a sales agent for an overseas wind turbine company in China, told our reporter. “If you don’t have the core technology, then your fate is subject to the whims of others,” he added.

“Any advancedment in today’s technology is based on existing technologies made by others - you can’t

‘invent’ a lightbulb or electricity now, but changes must be real and innovative,” an engineer surnamed Sun, who works for a foreign wind turbine manufacturer, told NewsChina.

Despite chaos in both the domestic and international markets, the government rubric of official support for the development of wind power in China has not changed. However, its success hinges on developing indigenous innovation and freeing its homegrown industry from technology misappropriated or purchased from foreign competitors. Until then, global market dominance will remain as elusive for China’s wind power giants as it has for other enterprises which piggyback profitability off the innovation of others. (Some names have been changed to protect identities)

Photo by CFP

men urged the Obama administration to take further action against China’s “trade distortion” in the clean energy field, particularly the forced transfer of technologies from foreign to domestic enterprises. After receiving a petition from the United Steelworkers of America and lawmakers on Capitol Hill one month before Chinese President Hu Jintao’s visit to Washington in late 2010, the US Trade Representative Office raised the issue of Chinese government subsidies to indigenous wind turbine manufacturers at the WTO. The US accused the Chinese government of erecting “a barrier to US exports to China.”

IP has long been the Achilles’ heel of Chinese companies aiming to compete overseas. The National Development and Reform Commission recognized in its report in July that the indigenous wind turbine industry is still struggling with “weak basic research and heavy reliance on the import of core technologies.” In the 2010 Analysis Report on China’s Patents by the Chinese Wind Energy Information Center, even in the domestic market, most of the top ten patent applicants in China in recent years have continued to come from foreign companies, specifically GE, despite their dwindling market share.

The annual 140 percent increase in patent applications from US wind technology companies has created a “patent minefield” similar to those in other high-tech industries, according to a September 2010 report by Carey Jordan and Stefan Schmitz, partners with Chicagobased law firm McDermott. The risk of patent infringement is “much greater than most industry participants suspect,” the report continued.

“Latecomers like China have higher risk of IP disputes with third parties in developed markets like the US,” said Shelly Zhang, an IP lawyer with the Beijing office of Orrick, Herrington & Sutcliffe LLP, an international

NEWSCHINA I January 2012

32-41_Jan.indd 41

41 11/24/11 4:41 PM

ECONOMY Game Piracy

Can You Afford to be an Angry Bird?

The developer of the popular mobile game recently claimed that Chinese piracy has helped his business, but domestic industry hopefuls aren’t so sure

By Wang Yan

I

n late October at the Disrupt Conference held in Beijing by American tech blog TechCrunch, Peter Vesterbacka, CEO of Rovio Mobile, developer of the ubiquitous iPhone game Angry Birds, made a controversial speech. Besides reiterating China’s importance as the company’s largest and fastest growing market, he also stated that he would not seek legal action against piracy, despite the fact that his company’s most valuable product is among the most popular targets of Chinese copyists.

Instead, he said, the company would use the pirated products as a source of inspiration, and enter the business of “pirating the pirates.”

His remarks sent shock waves across the audience, especially since Western companies and governments have consistently urged better protection of intellectual property in China. The small Finnish company’s peculiar strategy left the assembled industry insiders bewildered.

Vesterbacka of Rovio looks at piracy from a completely different angle. In his eyes, the widespread piracy means Angry Birds enjoys enormous popularity in China. “We want to become the top brand to be pirated, which would mean we are the most popular game developer,” he said.

According to Vesterbacka, his company is now working to become an entertainment brand. In addition to its new merchandise business, its animation studio has created a number of shorts that have been viewed 200 million times on YouTube. In the Chinese market, in addition to launching products specifically tailored to local users, Rovio opened an office in Shanghai this October, with the goal of building an official retail store selling authorized derivative products. Since the company has started to provide free downloads of Rovio games in China, it will now seek profit from ads planted inside the games.

Alternative Way

Sustainability

The game Angry Birds has been downloaded over 300 million times throughout the world, and according to Vesterbacka’s estimates, the game will reach 100 million legitimate downloads to China-based handsets by the end of 2011. However, before Rovio announced its formal entry into the Chinese market in July 2011, most of the Angry Birds downloads inside the country had been acquired illegally.

In most cases, victims choose to fight piracy head-on. For example, Fruit Ninja, another popular mobile game, has been rewarded for its popularity with widespread piracy. Halfbrick, the Australian game developer that designed the game, announced in mid-2011 that the company had hired a law firm to gather evidence of piracy by Chinese firms, in preparation for legal action.

In contrast to Halfbrick’s quick reaction,

42

42-49_Jan.indd 42

Rovio’s strategy is a wise choice in terms of the company’s sustainable growth. However, it is a privilege not all can enjoy; most mobile game developers in China are incredibly small, with only a handful of staff on average. While they focus on the production of games in the hope of turning out a mega-hit of Angry Birds proportions, it is difficult to imagine how they can profit in a market fraught with piracy.

Since early 2011, the mobile game industry in China has seen a dramatic surge in numbers of developers and users. Computer programmers have quickly smelled the huge market potential of mobile games services that go hand-in-hand with the boom of the smart phone market. Thus, many programming companies have been attracted into the field of mobile game design. Yet profit, though within reach, has proven harder to secure by

than expected.

“For the game developer, it is never taken for granted that creation of one hot game will automatically be followed by the creation of another hot game,” said Tian Jing, CEO of Youdian Mobile, a new mobile game company in Beijing’s Wudaokou district, in an interview with NewsChina. “Thus the game designer needs to find a sustainable way to attract the users,” he continued.

According to Tian, the profit model for most mobile games in China is different from that in the US market where money is made through the direct sale of independent games.

For example, at Apple’s App Store, the price for one game such as Fruit Ninja or Angry Birds typically ranges from US$0.99 to US$2.99.

“In China, the game itself is free, but fees are charged on extra services. For example, the users have to buy virtual tools or equipment to use within the game as it progresses,” Tian said.

Yet Tian said that the superficial booming of the game industry cannot hide the fact that it has become over-heated in China. “The promotion fees are pretty high. Although the game download is free of charge, the game producer needs to pay a hosting platform an average of US$3 for each download and installation. It is quite likely that the game developer will be unable to earn that US$3 back from the user in the future,” he continued. “In the NEWSCHINA I January 2012

11/24/11 4:51 PM

CHINA

BYNUMBERS 13.37% The internationalization index of the “2011 Top 100 Chinese Multinationals,” 80 of which are State-owned enterprises (SOEs). Index indicators include multinationals’ international asset volume, the size of their overseas workforces, and other factors. The average for multinationals in developing countries besides China is 40%, showing a much lower rate of internationalization even in China’s most globalized SOEs. (Source: China Enterprise Confederation / China Enterprise Directors Association)

Photo by CFP

2.05bn 20.67% long run, this is devastating to small and medium-sized game development companies.”

According to Shen Si, CEO of Papaya Mobile, a mobile gaming social platform, the wealth of opportunities accompanying the booming smart phone industry are apparent, yet the challenge is to meet demand while at the same time fostering a market that can neutralize the industry itself. “Currently, the Chinese market enjoys larger space and larger challenges when compared with the mobile gaming market overseas,” said Shen in an interview with NewsChina, “so the co-operation of different sections inside the industry will be decisive for the sustainable development of China’s mobile gaming.”

With one of the fastest growing markets but still lacking a clearly defined profit model, the mobile gaming industry is still very much finding its feet in China. While Rovio’s surprising strategy has won plaudits for its innovative take on a chronic problem of piracy in China’s tech industry, it is most likely a oneoff. Would-be imitators may find Rovio’s new business model somewhat harder to copy than the eponymous avian projectiles of its flagship game. However, the Finnish company has perhaps taught China’s domestic mobile gaming industry an important lesson: in the tech industry, with copyists ready to shoot you out of the sky, you have to be agile to stay airborne. NEWSCHINA I January 2012

42-49_Jan.indd 43

Reduction in China’s individual income tax revenue, in US dollars in October 2011 compared to August the same year, as a result of a raise in the minimum tax threshold introduced September 2011.

(Source: Ministry of Finance)

Increase in foreign direct investment in China by major Asian countries and regions from January to October 2011, compared with the minor growth of 1.05% for EU investment and a 18.13% drop in US investment.

20.67%

1.05 Asia

US

EU

(Source: Ministry of Commerce, China) -18.13%

7%

2nd

44.4% 2008

36% 2005

28% 2010

0.7% 2007

-41.4% 2002

Increase in the total number of administrative fines imposed on designated hot money investments in the first half of 2011 compared to the whole of 2010.

(Source: State Administration of Foreign Exchange, China)

World ranking of China’s hi-tech manufacturing sector in terms of output. The industry posted total revenue of US$1.2 trillion in 2010, placing China just after the US and more than doubling the sector’s value since 2005.

(Source: National Development and Reform Commission)

43 11/24/11 4:51 PM

INTERNATIONAL Chinese Investment in Europe

Money Talks While investment may speak louder than politics, the business communities from both China and Europe will have to adapt in order to fill the widening gaps in the eurozone By Li Jia

Divided by Politics

So far, Europe’s handling of the crisis has failed to convince investors. Leadership changes

44

42-49_Jan.indd 44

Photo by CFP

W

hile Cannes is a city that sees its fair share of drama, it usually plays out on the silver screen. In early November, however, protesters replaced tourists and A-listers on the streets of the French seaside town, as G20 leaders gathered to find a solution to the mess in the global economy.

The euro crisis, a plotline in which China found itself playing a lead role, dominated the action: “While different countries in Europe may have varying expectations of China, one thing they have in common is the hope that China will invest its sizeable foreign reserves in Europe,” said China’s State-run Xinhua news agency.

China, for its part, has sensed the risk the euro crisis poses to its own growth. Its trade surplus with the EU, its largest trading partner since 2004, has dwindled. Chinese President Hu Jintao noted in his dialogue with his French counterpart Nicolas Sarkozy in Cannes that there will be no global economic recovery without the recovery of the eurozone.

However, if and how China should give Europe a helping hand has become a sensitive issue. Europe is concerned that Chinese money could give China political leverage over bilateral relations, while the idea that some of China’s hard-won foreign exchange reserves might be spent rescuing rich Europeans is unpopular in China. As a result, both sides have been cautious towards having Chinese money come to the eurozone’s rescue.

However, that is not to say that the two major world economies and prolific trading partners have no interest in a joint effort. With both sides now preferring the word “investment” over “bailout,” the question is how best to bring them together.

Protesters gather in Nice, France, on November 1, 2011, two days before the G20 summit in Cannes

and the approval of rescue and austerity plans have further shaken stock and bond markets in London and New York. “A European sovereign debt default may well sink the United States back into recession,” warned the Federal Reserve Bank of San Francisco in its report on November 14. The Chinese business community apparently has also felt the chill from across the Atlantic; Chinese exporters saw a slump in orders from Europe and the US over Christmas 2011 and the first few months of 2012.

At the World Economic Forum in September, Chinese Premier Wen Jiabao mentioned China’s willingness to help, as well as his expectation that the EU would grant China market economy status. Wen’s comments were immediately interpreted by foreign media as attaching an unpopular political condition to China’s helping hand. Reuters, for example, ran

the rather fatalistic headline: “Politics Stymie China’s EU Aid Offer.” Francois Godement, senior policy fellow at the European Council on Foreign Relations, warned recently at the Yale Center for the Study of Globalization that the crisis in Europe could attract “potential heavy-handed pressure by a better organized player” like China.

If China plays a role in financing the Europe bailout package, then it should be defined as “an investment” with the expectation of reasonable returns, rather than a rescue mission, as Markus Ederer, the EU Ambassador to China, told NewsChina. It is widely believed that only about a quarter of China’s US$3.2 trillion foreign exchange reserves has gone to the euro.

While there is little doubt over China’s interest in the economic recovery of its largest trading partner, the idea of unconditional aid is not welcome in China. Professor Yu YongNEWSCHINA I January 2012

11/24/11 4:51 PM

ding with China Academy of Social Sciences argued publicly that Chinese pensioners had the right to ask the government why the money would be used to protect much better-off European workers.

China’s State-run English-language newspaper China Daily quickly denied China’s “intention to play hardball.” Chinese President Hu Jintao told Sarkozy: “It is mainly up to Europe to resolve the European debt problem.” The most important thing for China, as Premier Wen reiterated in St. Petersburg on November 7, is “to keep [its] own house in order.”

Business Fills the Gap

Even without taking politics into account, an abrupt shift towards the euro in China’s foreign exchange reserve is not feasible, since such a massive withdrawal from the dollar could disturb the global foreign exchange market.

It is time for businesses to play a bigger role.

Direct Chinese investment in Greek industries, said Theodore Georgakelos, Greek Ambassdor to China, is more desirable than bond purchase. Chinese capital flow to the EU only accounts for less than 4 percent of China’s total overseas investment, showing “huge potential” for further growth, said Markus Ederer at a forum in Hong Kong on November 15.

Similar to the US, European countries used to be very cautious about investment from the sovereignty fund and State-owned enterprises from China. “Now, we feel governments in European countries are showing more enthusiasm towards China’s State capital,” as Sun Yongfu, director-general of European Affairs at the Ministry of Commerce, told NewsChina.

The business community agrees. “Five years ago, a European entrepreneur could be reluctant to face a Chinese buyer, today they have to be more realistic,” said Christine LambertGoué, Asia managing partner with Invest Securities, a Paris-based investment bank specializing in the listing of Chinese companies on the NYSE-Euronext stock exchange. She thinks it is “a good time for Chinese buyers to get some really beautiful assets in Europe at a cheap price.”

However, it is too early to predict a surge of collaborations between Chinese investors and European companies. “In the current situation, we are very prudent in choosing the right assets in terms of either buying European bonds or State-owned enterprise investment in European companies,” said Sun NEWSCHINA I January 2012

42-49_Jan.indd 45

“Five years ago, a European entrepreneur could be reluctant to face a Chinese buyer, today they have to be more realistic.”

2004 For the first 10 months of 2011:

s total exports went 19% ofto China’ the EU

at the Ministry of Commerce. As small and medium-sized enterprises (SMEs) form the backbone of both the Chinese and European economies, a match between them would appear perfect. But Chinese SMEs “are also cash strapped, so their priority now is definitely to focus on the domestic market, where there is strong growth,” said Lambert-Goué.

To make matters more complicated, high welfare costs in Europe are an unattractive prospect for Chinese SMEs, who mainly focus on the labour-intensive manufacturing sector.

Legal framework is also a problem: “In Europe, you have to know both the EU rules and the rules of the target country, which makes things difficult for us,” said Wang Hailong, a spokesman for Ao Kang, a big Chinese shoe maker that bought the greater China brand ownership of Italian shoe maker Valleverde last year. The European Commission represents the EU’s trade policy, but investment rules are subject to member country oversight.

Given the complicated situation, both Sun and Lambert-Goué think that acquiring a minority stake in strong European companies is a more realistic partnership commercially and politically. Increasing this stake step-by-step could be welcomed once trust has been built between the parties.

According to China’s Ministry of Commerce, China’s direct investment in EU countries has been decreasing since July 2011, after nearly 100 percent growth in 2010 and the first half of 2011, meaning that a solution is not likely to happen overnight. However, the current crisis at least presents more possibilities and incentives for the two sides than ever before. Whether or not the cautious partners can adapt to the situation is significant not only for their commercial future, but also for their relations as a whole, which, for the time being, are very much based on economics.

12% offromChina’thesEUtotal imports came The EU ranks:

1in China’ st s tech imports measured by contract value 3 rd in origin of foreign direct investment in China Huge potential of China’s investment into the EU yet to be exploited By the end of 2010 China’s direct investment in the EU was only

China’s total 3.9% ofoutbound FDI

Breakdown of China’s direct investment in the EU by sector at the end of 2010: Leasing and commercial services: 47% (mainly Luxembourg, Holland Mining: 2.9% and Ireland) Wholesale and retail: 5.5% (mainly Germany, Sweden and the UK) Finance: 11.6% (mainly the UK, Italy and Romania)

Manufacturing: 24.6% (mainly Sweden, Germany and Hungary) Source: Ministry of Commerce of China

45 11/24/11 4:52 PM

SPORTS

Basketball

HOOPS away from

HOME

Photo by Yun Long/IC

Higher pay and better competition has recently attracted Taiwanese basketball players across the straits to compete in the mainland CBA By Tang Lei Taiwanese player Tseng Wen-ting prepares for the CBA’s new season with his Shanghai teammates, October 19, 2011

O

n October 30, bearded, long-haired Tseng Wen-ting, six feet six inches tall in his sneakers and known as “Taiwan’s best center,” took a three-hour bus ride from Shanghai to Chuji, Zhejiang Province. He was traveling with his new Shanghai teammates for a pre-season away game before the official start of the Chinese Basketball Association playoffs.

Tseng was looking forward to meeting his Chinese Taipei teammate Wu Tai-hao on the court, though they would not be standing shoulder to shoulder for this

46

42-49_Jan.indd 46

match, with Wu now the star player for the Zhejiang Lions. Standing six feet five inches tall, Wu Tai-hao is a formidable center and power forward, and along with Tseng forms the bulwark of Chinese Taipei’s inside line. However, for now, these former high school teammates are bitter competitors.

Tseng’s decision to join the CBA was a simple one. “When I came to the mainland, the salary was for sure a very important reason,” he told NewsChina. He follows up with the caveat that the CBA is

“one of the best basketball leagues in Asia.”

“It’s like going abroad for higher learning. A better environment helps one a lot,” Tseng said.

Since 1999, Taiwanese basketball players have become a common sight in the mainland league, with more making the move each year. So far, more than 15 Taiwanese players have joined the CBA. Of the 13 players of the Chinese Taipei team that came eighth at the 2011 Asian Basketball Championship, five have previously played or are now playing in the CBA. NEWSCHINA I January 2012

11/24/11 4:52 PM

Independence According to the Taiwan media, the deal Tseng Wen-ting struck with Shanghai covers a yearly salary of 2 million yuan (US$315,000) and a three-year contract, about six to seven times the salary a Taiwanese basketball player can expect at home under Taiwan’s SBL (Super Basketball League) regulations, which are supervised by the Chinese Taipei Basketball Association (CTBA). The SBL, in order to prevent explosions in player salaries, has a firm rule that the monthly salary of a Taiwanese basketball player cannot exceed US$3,980.

Taiwanese players have long found ways around their limited salaries – according to senior Taiwanese basketball critic Chu Yen-shuo, most top players have several alternate sources of income. However, the CBA has no qualms about using a brown envelope to poach the island’s most promising players. “One year’s income [on the mainland] equals that of two to three years in Taiwan,” Chu Yen-shuo told NewsChina. “In addition, contracted income on the mainland is mostly after tax, whereas Taiwanese players pay 20 percent tax on their income at home.”

Before 1999, basketball was a good way for athletes to strike it rich in Taiwan. Many investors in the sport were real estate entrepreneurs who poured their money into the league. Early basketball stars like Wang Libin (mainland) and Chieng Chih-lung (Taiwan) had once earned a monthly salary of 400,000 to 500,000 New Taiwanese dollars (US$13,000 to 16,500), even higher than the annual income of today’s players.

Yet, in the wake of the Asian financial crisis that struck in late 1997, which crippled the island’s real estate industry, many investors pulled out of the league leading to a shutdown in 1999 after only operating for five years. In 2003, the SBL was founded by seven teams, yet its operation under the jurisdiction of the CTBA has prevented the league from establishing itself as a marketoriented enterprise.

Marketing

As a result of the more economical approach of the CTBA, matches in Taiwan are often staged in second-rate venues to save money. “If you go and watch a game, you’ll feel the whole thing is really shabNEWSCHINA I January 2012

42-49_Jan.indd 47

by,” Chu Yen-shuo told our reporter. “All profits from ticket sales go to the CTBA. The teams will receive a share from the TV broadcasting fee, roughly NT$5 million (US$166,000) a year. However, to run a team costs about NT$16 million to 20 million (US$530,000 to 663,000).

The balance is usually covered by investors who make the investment as a way to deduct tax or to boost the image of their companies. Few people would now go into Taiwanese basketball to make a profit.

“There are many gifted marketing professionals in Taiwan,” said Chu. “But none of them are working in basketball.”

Due to its market weakness, the SBL has remained low-key since its launch.

Though basketball’s cultural influence in Taiwan is second only to the island’s national sport of baseball, basketball players’ salaries remain stagnant. By contrast, the CBA has exploded into the mainland’s fastest-growing sports league, attracting more and more top Taiwanese players who generally lack the ability to enter the NBA or the European leagues.

The CBA, of course, also welcomes Taiwanese players. The island is renowned for creating strong team players with good discipline, and there are no language barriers and few cultural barriers to Taiwanese players, unlike those faced by the Americans and Europeans currently playing in the CBA. Crucially, transfer fees are waived, and once a player is released from a contract he is free to join any team of his choice.

This has led to a severe talent drain from the SBL, with more and more Taiwanese basketballers playing in the CBA. “The best players are all now going overseas, which will definitely affect the SBL’s performance. The league and individual clubs need to find out how to shore up the declining enthusiasm of the fans,” said Chou Jung-san, chief coach of the Chinese Taipei team.

“On the plus side, the absence of the star players also provides an opportunity for emerging players. They should grab these opportunities,” he added.

New Environment

Though quick to mingle with their new teammates, players from Taiwan still find

“It’s like going abroad for higher learning. A better environment helps one a lot.”

it takes some time for them to totally adjust to the new environment. The mainland lacks many of the conveniences they are accustomed to in Taipei - Tseng Wenting complained to our reporter about the difficulties in getting a morning taxi in Shanghai, adding that his Taiwanese compatriots playing basketball on the mainland are also “struggling to get used to the weather and traffic.”

Also, top foreign players (including former NBA players) and equally good mainland players are making it increasingly tough for Taiwanese players to distinguish themselves in the CBA. Only a handful have decent score sheets, denting their professional reputations both on the mainland and in Taiwan.

“It’s normal for the stats to drop,” said Chou Jung-san, adding that mainland teams tend to gear their tactics toward the foreign players, meaning Taiwanese players need to adapt. “Stats are only a reference.

What matters is doing what the coach expects of you on the court,” he added.

One good example of a Taiwanese player who has blossomed on the mainland is Lee Hsueh-lin who transferred to the Beijing Ducks from Taiwan’s top team Yulon Dinosaurs in September 2010, in the process evolving from top scorer into rearguard stalwart. Though he has only registered mediocre stats in scores and assists, his organization knits the Ducks together and has seen the team’s performance as a whole dramatically improve.

Taiwan is now having to rethink its administrative approach to its second-favorite sport, with its most promising players sometimes disappearing into the mainland right out of college. “Taiwan and its basketball teams need to figure out how they’re going to hold onto their best players,” said coach Chou Jung-san. 

47

11/24/11 4:52 PM

CULTURE Micro-movies

Move Toward Mainstream

Internet shorts, dubbed “micro-movies,” are growing in popularity, but how long can this fringe genre escape official censorship? By Tang Lei

D

u Haitao, a well-known talk show host, is attempting to sell cookies on the street while wearing a chicken costume. Not a bizarre PR stunt, but rather a scene from a short film entitled @Who Who. Du plays a nobody who tries to change his fate by pretending to be a famous writer on a microblog while selling cookies in the real world.

The movie’s running time of 22 minutes and 21 seconds makes it perfect for screening online. @Who Who, the final episode of the Haunted Microblog Trilogy, attracted more than 10 million clicks in only a couple of days.

Fronted by a celebrity, the fast-paced and professionally produced short movie also gently satirized the microblogging trend without being too controversial.

All these qualities have made China’s socalled “micro-movies” a big success story.

Much shorter and cheaper to produce than a full-length movie and screened almost exclusively online, these movies attract large audiences and, as a result, some of the biggest movie stars, directors, studios, websites and advertisers in the industry.

Shoestring

“The difference from traditional movies is huge,” @Who Who director Guo Zhengding told our reporter. “Production is very short.

The story is short. It needs to be more delicate.

Normally, you can’t have several story lines, just one, well-narrated plot.

“The script is more detailed. Every shot needs to be written down and meticulously designed so it can be completed in one take.

There’s no time for retakes,” he added.

Limited budgets mean that micro-movies, for example the three parts of the Haunted Microblog Trilogy, have limited investment.

The full trilogy cost less than 3 million yuan

48

42-49_Jan.indd 48

(US$473,000) to make, with each director allowed a three-day shoot. “Ideally, I need a week to shoot a short movie,” said Guo Zhengding.

“So we had to work day and night for three days. I got in about two hours’ sleep a day.”

Limited budgets are of similarly limited appeal to China’s highest-paid movie stars, however increasing numbers seem willing to waive their usual fee for a “friendly price” if a movie seems to have enough clout. “The actors are well aware of the influence of micro-movies,” said Wang Yue, media director of Linksus, a local PR company who produced Haunted Microblog. “Also, their eventual fee will depend on how well we promote the movie.”

A short running time, limited budget and widespread market has made the micro-movie particularly popular with advertisers. A large number of the earliest professionally produced short Internet movies were simple extended commercials or a series of product placement sketches attached to a token plotline. The three directors of Haunted Microblog all have backgrounds in music videos and commercials. However, as audience expectations have developed, enthusiasm for blatant advertising has waned. The Haunted Microblog Trilogy featured no product placement, with the filmmakers aiming instead to make legitimate movies grounded in social realities.

Youth Wave

“The term ‘micro-movie’ was coined by some industry professionals to distinguish these works from feature films or art house shorts,” Jin He, director of Private Messages, the second episode of Haunted Microblog, told NewsChina. “The problem is now the term ‘micro-movie’ is becoming stretched to mean any short movie.” He added that the loose application of the term has led to a gulf in quality

TV anchor Du Haitao (left) stars as a cookie seller and microblogger in the recently released Internet micro-movie @Who Who

between the best and worst works in the genre.

Despite plenty of hacks seeking to profit from the new trend, micro-movies have opened access for young and inexperienced directors to experiment and gain critical acclaim without needing to break into mainstream cinema. Other directors used to commercial projects in music or advertizing have also branched into micro-movies as a more creative outlet.

In December 2010 an automobile commercial entitled Imminent, complete with a trailer and a national premiere, claimed to be China’s first micro-movie. However, it was the release of the short Old Boys in late October 2010, a 42-minute drama centering on two people in their late 20s recalling their younger days which kick-started a nationwide nostalgia for the 1980s and became massively successful. Advertisers and investors, smelling potential profits, flocked to the short movie genre as offering quick rewards for minimal outlay.

“In the past, there were no investors for micro-movies,” Guo Zhengding told NewsNEWSCHINA I January 2012

11/24/11 4:52 PM

China. “But since May 2011, everyone has started to pay attention - not only advertisers, but actual production companies are also joining the trend. It is a good opportunity for young directors.”

Meanwhile, shooting micro-movies has become a boot camp for those wishing to cut their teeth in the movie industry. “Shooting micro-movies is like a buffer for directors who aim to shoot features later on,” said director Jin He. “It’s a process of self-reflection and self-awareness. Every time you shoot a micromovie, you find shortcomings. After shooting ten micro-movies, you may still find shortcomings. If all these shortcomings appeared in one full-length movie, it would be a disaster.”

Matter of Time

Another popular feature of micro-movies is that they fall outside the jurisdiction of State censorship. “For traditional movies to be licensed for public performance, they must first be approved (and potentially re-edited) by both SARFT (the State Administration of Radio, Film and Television) and CFGC (the China Film Group Corporation), which usually takes a long time,” said Song Huanyu, general manager of Linksus. Before a movie can even commence production, it has to have its script, locations, production schedule, cast NEWSCHINA I January 2012

42-49_Jan.indd 49

and crew all approved by various authorities.

This process, as well as being expensive, tends to leech creativity out of a production as compromises have to be reached with government cadres, the police and the filmmakers themselves.

“Micro-movies, so long as they don’t infringe copyright, don’t need a license. We can produce and release in a short time. Basically, there’s no censorship,” Song added.

“Don’t shoot pornography or nudity and don’t talk about the Party or politics,” said Jin He. “Other than that, anything goes.”

However, Jin believes it is only a matter of time before the government will seek to restrict the development of micro-movies. “The Internet is highly tolerant. But if controversial works became too popular, it would rouse official attention, and might be banned,” he said.

Indeed, there are already signs that the Ministry of Culture and its associated organs are beginning to take an interest in the micromovie phenomenon, with some filmmakers believing it’s only a question of when, not if, censorship applied to more mainstream entertainment comes to apply to their works as well. Some, controversially, have said they would welcome a certain degree of qualitative censorship. “Many popular Internet shorts are just nonsensical,” said Song Huanyu. “We are

opposed to this, and are happy to conform to SARFT requirements.”

“We hope to maximize the benefits of those who participate in building the micro-movie platform. Therefore, we will still adopt the distribution methods of traditional movies,” he added.  (Liu Min and Jiang Xiaobin also contributed reporting)

49

11/24/11 4:52 PM

CULTURE Art Market

Masterful Mock-ups Counterfeiting, driven by booms in speculation and investment, has now become endemic in China’s nascent art market By Yi Xiaohe and Yu Hua

I

n late May, an ink-and-wash painting sold for 425.5 million yuan (US$65m) at the China Guardian auction house, setting a national record. However, less than a day later, rumors emerged that the painting was in fact a forgery.

The art work in question was a study of an eagle perched upon a pine tree entitled Towering Pines and Cypress, with an accompanying calligraphic couplet which translates as “A Long Life; A Peaceful World.”

The piece was said to be the work of Qi Baishi (1864–1957), one of China’s bestknown 20th century masters of ink-andwash, who allegedly completed Towering Pines and Cypress in 1946 to commemorate the 60th birthday of Chiang Kai-shek, China’s former paramount leader.

China Guardian’s management was less than pleased with media reports that they had auctioned a forgery to an unsuspecting buyer, responding with an online statement on September 30 on one of China’s major art portals, which read: “We reserve the right to pursue the media outlets which concocted

“Qi Baishi created many paintings featuring similar images, but he never executed two pieces with exactly the same composition. If two of his works have the same composition, one of the two must be fake.”

50 50-59_Jan.indd 50

inaccurate reports and people who made irresponsible remarks through the appropriate legal channels.” The auction house accused the media’s allegations of “lacking an academic and factual basis.” However, four months later, the painting’s buyer, the Hunan TV & Broadcast Intermediary Co. Ltd (TIK), had still failed to pay for its latest acquisition, according to various sources. China Guardian refused to comment on whether or not they had received payment for the artwork.

As with many such cases, it wasn’t long before other auction houses came under scrutiny for allegedly peddling fake artworks.

In September, a group of artists from the Central Academy of Fine Arts graduating class of 1984 claimed in an open letter that an oil painting of a female nude attributed to Xu Beihong (1895–1953) which sold for 70 million yuan (US$11m) at the Jiuge auction house in June 2010 was actually painted as a practice canvas by one of their classmates.

Despite Xu’s son Xu Boyang vouching for the work’s authenticity, the letter was accompanied with photos of similar paintings depicting an identical nude from various angles, seemingly supporting the claims of forgery.

These two high-profile incidents have embarrassed China’s auction houses and, according to observers, proven that counterfeit artworks are being knowingly sold to unsuspecting buyers on the open market.

Inferior Imitations

Mou Jianping, an art critic specializing in counterfeit artworks, was the first to allege that Towering Pines and Cypress was very likely a fake, in an interview with CCTV, China’s main State television network. Mou also told NewsChina that while the painting itself could be classed as a “mid-level forgery,” the accompanying calligraphy was barely up

to the standard of “inferior imitation.”

Mou’s allegations were supported by the discovery of a similar painting by Qi Baishi.

Part of a collection belonging to Le Manyong, the wife of a former Kuomintang official, the painting bears a striking resemblance to the piece auctioned by China Guardian.

However, Liu Wenjie, a prominent collector of modern Chinese ink-and-wash paintings, came to the defense of the auction house, saying that 20th century Chinese painters would often produce copies of their own works. However, an art historian speaking on condition of anonymity told NewsChina: “Qi Baishi created many paintings featuring similar images, but he never executed two pieces with exactly the same composition. If two of his works have the same composition, one of the two must be fake.”

China Guardian emphasized its “strict” vetting procedures to our reporter. According to Kou Qin, vice-president of the auction house, the company has adopted a “fourstep, three-dimensional method” for distinguishing genuine artworks from fakes. China Guardian claimed that every artwork they receive has to undergo a primary appraisal, followed by internal research, consultation with experts outside the company and a final assessment prior to auction. The auction house’s “three dimensions” refer to assessment of individual pieces, historical research and comparison with similar works, and the use of modern techniques to determine the authenticity of each artwork.

However, China Guardian has found itself struggling with issues such as non-payment, which is especially pronounced when dealing with government-affiliated agencies. “The auction houses operate in the light, whereas buyers operate in the dark,” Kou Qin told NewsChina.

NEWSCHINA I January 2012

11/24/11 4:53 PM

Photo by IC

Art collector Ma Weidu says the common practice of selling counterfeit works is reflective of society in general

The auction of Towering Pines and Cypress is a case in point. Originally intended as a lucrative deal for the painting’s seller, real estate mogul Liu Yiqian, chairman of Shanghai Sunline Group, the artwork has proven to be something of a false economy. Liu bought the painting in 2005, and the couplet in 2010, at a total cost of 17 million yuan (US$2.6m).

Yet, despite selling for 25 times that price at auction, Liu and China Guardian have yet to see a cent as the buyer continues to hold out on payment.

Collection or Speculation

The Chinese classical painting and calligraphy market entered the so-called 100-million-yuan era in 2009 with the auction of Eighteen Arhats by the 16th century Ming Dynasty painter Wu Bin, which sold for 168 million yuan (US$24.8m).

Following that, Aachensee Lake, a landNEWSCHINA I January 2012

50-59_Jan.indd 51

scape by the 20th century master Zhang Daqian (1899–1983) fetched 101 million yuan (US$15.9m) in 2010. In the same year, Xu Beihong’s Baren Jishui (The Sichuan People Draw Water) sold for 180 million yuan (US$28.4m), while the fourth century calligrapher Wang Xizhi’s cursive-hand scroll Ping’an Tie (Peace Note) sold for 308 million (US$46.4m). In a spring 2011 auction, Zhichuan Resettlement by the Yuan Dynasty (1271–1368) painter Wang Meng sold for 402.5 million yuan (US$62.1m). Towering Pines and Cypress merely set the latest record.

Mou Jianping sees 2009 as a watershed year for China’s fine art market. According to Mou, before that year people were mainly buying artworks for collection. However, investment and speculation have since become the principal driving forces behind a market boom. Now that Qi Baishi’s work has set a record price at auction, many observers have

begun to count down to the first 1 billion yuan (US$157m) price tag.

Since the latter half of 2009, hot money, already a well-known phenomenon in China’s other commodities markets, has become a keyword in art circles. The business volume of auction houses in China has grown explosively, tripling from 21.25 billion yuan (US$3.27bn) in 2009 to 58.87 billion yuan (US$9.06bn) in 2010, quickly recovering from a brief lull during the 2008 financial crisis. According to a report released earlier in 2011 by artprice.com, a leading world art data portal based in France, China had overtaken the United States and Britain to become the world’s largest fine arts market by 2010.

Experts believe the explosive growth of the art market is largely attributable to the influx of hot money from other sectors. The Chinese government stepped up its regulation of the real estate market in order to put a

51

11/24/11 4:53 PM

CULTURE brake on runaway housing prices at the end of 2010, sealing off the country’s foremost channel for private investment. Eager to find an outlet, hot money soon flowed into the largely unregulated art market. In late 2011, among the leading auction houses in China, Poly’s auction turnover had reached nearly 6.2 billion yuan (US$976m), China Guardian’s stood at 5.3 billion yuan (US$835m), Hanhai’s at nearly 2.5 billion yuan (US$394m) and Council’s at over 2 billion yuan (US$315m).

Though the profusion of counterfeit artworks continues to threaten the stability of this emerging market, investor confidence seems robust. Industry insiders told NewsChina that with the well-embraced theory of “liquidity before authenticity,” recent scandals over counterfeit works are unlikely to derail the boom. But why would buyers of fine arts not care if they were sold a lemon?

Who Cares?

“Authenticity is very important to collectors but matters little to investors [and speculators],” said Ma Weidu, one of China’s bestknown fine art collectors. “Selling counterfeit goods has become common practice, and I think this ambivalence is reflective of society in general.”

Conservative assessments from anonymous insiders suggest that only about half of the buyers in the Chinese art market are collectors and investors. About 20 percent are short-term speculators, 20 percent get in the art market for bribery purposes and 10 percent to participate in money laundering. Sources told NewsChina that in many cases, a buyer pre-sells an artwork at a “special price” to someone they wish to bribe, usually a government official, and then outbids all comers at auction, making a loss on the purchase but gaining a foothold with their ultimate buyer.

It is this market atmosphere that has allowed a complete supply chain for counterfeit artwork to become well established across the country. In Beijing, for example, counterfeiters are reputedly particularly good at faking paintings of Qi Baishi and Xu Beihong as well as other 20th century masters. In places with better access to prerevolutionary artworks like Henan Province and Xi’an, capital city of Shaanxi Province,

52

50-59_Jan.indd 52

their peers focus on local ancient masters.

The vagueness of China’s legal statutes also allows counterfeiters to flourish. Article 61 of China’s 1996 Auction Law decrees that unless the auctioneer and seller declare some doubt over the authenticity of a lot prior to auction, they cannot be made liable for any defect. In short: buyers beware.

The clause has been criticized for favoring sellers and auction houses over buyers.

“I think it’s unfair,” said Zhang Xinjian, former vice chief of the Cultural Market Department of the Ministry of Culture, told NewsChina. “It’s difficult for the buyers and bidders to obtain comprehensive and accurate information about the artworks on sale. How can a potential bidder tell a fake from the genuine article through a glass case?”

As a result of the recent counterfeiting scandals, the government has begun to strengthen supervision of the market. On July 1, Heritage and Artwork Auction Procedures, the first set of standardized industry guidelines for China’s auction houses was finally published. Though concrete in content and practical in application, the Procedures, as an industry guideline, is only a government regulation, not a law, and is therefore not legally binding.

Prior to the Procedures, the China Auction Association (CAA) also released the Self-Discipline Convention of Heritage and Artwork Auction Enterprises, urging auction houses to stop selling counterfeit goods. Yet, the association itself has long been criticized for inaction in response to the practices it is set up to prevent. Mou Jianping said that several high level CAA officials actually work for auction houses. “They are both athletes and referees,” he told our reporter. However, the vast profits and widespread practice of bribery means there is little motivation for China’s art market regulators to get tough on the tricksters.

In 2010, the average rate of return in China’s financial industry was around 15 percent, and around 20 percent in real estate. By contrast, the average rate of return in the art market stood at 30 percent, according to sources. There’s little sign that China’s billionaires are losing their taste for luxury goods. Liu Yiqian, the seller of Towering Pines and Cypress, spent more than 800 million yuan (US$123m) on art

The alleged “grand” counterfeits 1. Lady Jiang Biwei by Xu Beihong, sold for US$11m in June 2010 2. Towering Pines and Cypress by Qi Baishi, sold for US$65m in May 2011

in 2009.

“It’s difficult to tell how long the art investment craze will last. Whether the bubble will continue to expand or burst is hard to tell,” Liu remarked in a recent media interview.  NEWSCHINA I January 2012

11/24/11 4:53 PM

HISTORY Spring Festival 1967-1980

The

Photo by fotoe

That Wasn’t

A family poses before a propaganda poster with a quotation from Mao Zedong: “Serve Poor Peasants for Life,” Shanghai, 1970

As the Cultural Revolution raged across the country in early 1967, the Chinese Spring Festival holiday was cancelled, cutting through very roots of the nation’s culture and traditional values. NewsChina looks at how the most important date in the Chinese calendar became a day like any other By Huang Wei and Xie Ying

NEWSCHINA I January 2012

50-59_Jan.indd 53

T

o the Chinese, the Lunar New Year, or “Spring Festival,” is as important as Christmas is in the West. It is a time for reunion, with hearty dinners, blessings of goodwill, and firecrackers. While the idea that Christmas could be canceled is occasionally used to keep naughty children in line, celebration of China’s annual holiday was effectively forbidden for 13 years after it was suddenly scrapped in 1967, in the throes of the Cultural Revolution (1966-1976).

This was not the first time the festival had come under threat. In a bid to keep traditional Chinese festivals in pace with the Gregorian calendar, in 1928 the then-ruling

53

11/24/11 4:53 PM

HISTORY “Due to the masses’ desire to follow Chairman Mao in pushing forward the Cultural Revolution, the State Council has decided to forego the Spring Festival holiday.”

January 25, Zhang wrote, “For days, I debated whether or not to go home [for the Spring Festival], and I have made up my mind not to. As a revolutionary worker, I should follow Chairman Mao’s command to continue the revolution.”

“Even now, I am often asked why I made such an unreasonable call. But to tell you the truth, I didn’t write that letter,” Zhang told NewsChina.

An unmarried out-of-towner unlikely to cause a fuss, Zhang Renxing was chosen as the letter’s “author.”

“I was summoned to the leaders’ office and told to sign the letter,” Zhang recalled. “I did it without any hesitation. For me, any order from the leaders was right.”

Photo by fotoe

Revolution Comes First

A girl poses with her “Little Red Book,” Shanghai, 1970

Kuomintang government decreed that Lunar New Year would fall on January 1, but this calendarial coup was abandoned due to overwhelming opposition from the populace at large. Critics accused the government of trying to abolish an ancient tradition, arguing that it was inappropriate for the government to interfere in the observance of such treasured customs.

However, the holiday failed to escape the axe a second time in 1967, when the ruling Communist Party government announced plans to cancel the imminent three-day holiday, which fell on February 9, instead calling for the revolutionary masses to celebrate the festival by absorbing themselves in the Cultural Revolution and pushing forward industrial production.

For over a decade, New Year festivals were observed in a “revolutionary” way; in practice, this meant no feasts, no firecrackers, no gifts, and nothing else that might distract the Chinese people from their revolutionary duties. Repetition of propaganda slogans was the prescribed method of celebration, and festive enthusiasm was channeled into rather more

54

50-59_Jan.indd 54

prosaic, and sometimes menacing, efforts.

Popular Demand

As Spring Festival 1967 approached, Liu Qishun was a 23-year-old technician at the Shanghai No 1 Woollen Mill. Having seen the Cultural Revolution run quickly out of hand in the preceding months, he had assumed all would be back to normal in time for the yearly celebration, he told NewsChina.

He was wrong. The Cultural Revolution was only just beginning. In January, a notice from the State Council dashed his hopes of enjoying a normal holiday with his parents.

“We have come to a key point in the fight against a handful of capitalist-road powers,” read the notice issued on January 29. “Due to the masses’ desire to follow Chairman Mao in pushing forward the Cultural Revolution, the State Council has decided to forego the Spring Festival holiday.”

Zhang Renxing, at the time an 18-yearold worker at the Shanghai Glass Factory, is recorded as the instigator of the anti-Spring Festival movement. In an open letter to the Liberation Daily newspaper published on

Inspired by Zhang’s open letter, a glut of similar pieces began to appear in newspapers nationwide. A commentary in the Wenhui Daily, for example, echoed Zhang’s sentiments: “Petty private concerns like returning home to see one’s parents are of little consequence. The only important things are large public affairs, such as following Chairman Mao’s instructions, continuing the revolution and consolidating our power.”

Official State mouthpiece the People’s Daily fueled the propaganda with volleys of powerful rhetoric: “Ancestor worship, New Year’s greetings, visits to relatives, gift giving and feasts can all go to hell! The working classes have never had such stinking customs; what we have is the power to uproot decadent capitalist influences and uphold Mao Zedong thought.”

Meanwhile, Spring Festival was approaching. “Had it been a normal year, February 5 would have been the day for Shanghainese to begin preparation for the New Year’s Eve feast, but in 1967, it was no more than an anniversary of the founding of the Shanghai Commune [a group of central government-appointed rebels named after the Paris Commune of 1870],” said Liu Qishun, a woollenmill technician.

“A million people turned out for the celebration in People’s Square,” Zhang Renxing recalled. “Factories used fleets of trucks to transport their ‘revolutionary rebels’ to the site.

All the rebels in our factory, over 200 people, were taken there in four trucks.”

Liu Qishun was among the spectators. “I had been made a worker-journalist to cover the event, but I wrote nothing. I knew that NEWSCHINA I January 2012

11/24/11 4:54 PM

cookie-cutter reports would be concocted anyway,” said Liu.

A Cold Festival

Laden with slogans, the State Council’s announcement was on a continuous loop over the public address systems of local railway stations, encouraging the masses to sacrifice their train tickets and return to their governmentassigned jobs with renewed revolutionary fervor. In the city’s factories, the message to continue working was reinforced even on the eve of the festival itself, when many were “asked” to work overtime.

In rural areas, people busied themselves digging irrigation canals, cultivating fields and building houses. While the doors of households were adorned with couplets of poetry as per New Year tradition, their usual wishes of happiness and plenty were replaced with the instruction: “Let us not rest on New Year’s Eve; Continue working on the first day of next year.”

Revolutionary celebrations were far from festive. Family members would dine frugally

NEWSCHINA I January 2012

50-59_Jan.indd 55

under the ubiquitous portrait of Chairman Mao, before a solemn ceremony of “self-criticism.” When the clock struck midnight, the children would wish “Comrades Mother and Father” a happy New Year. The next morning, families sang revolutionary songs together, with “Little Red Book” of Mao’s quotations in hand. Greetings between neighbors, such as “May you be prosperous,” were replaced with “May you see Chairman Mao in Beijing this year.”

Traditional forms of celebration, such as fireworks and public performance, were forbidden. Some local governments also cancelled Spring Festival bonuses and advance issuance of wages, both established practices, calling them “a conspiracy to corrupt the revolutionary masses.”

That New Year was the coldest of Liu Qishun’s life. After a simple meal with his girlfriend, he escorted her home to find rebels had broken into and ransacked her house, her father having been labeled a “reactionary academic authority,” a damning term reserved

for senior intellectuals. As they approached the house, they heard revolutionary rebels berating her parents. The two stood at a distance, Liu’s girlfriend weeping silently.

“We walked the streets for seven hours that night,” Liu told NewsChina. “No one was around, and the streets were dead silent.

No firecrackers, no street performances, noone burning ceremonial offerings to their ancestors. There were no signs of a festival, only enormous posters saying ‘Long live the Cultural Revolution,’ ‘Smash the head of such-and-such a person,’ and so on,” he continued.

In 1979, three years after the death of Chairman Mao, the People’s Daily published a letter entitled “Why is there no Spring Festival vacation?” The following year, in the newly relaxed political climate, the nation officially reinstated all traditional customs.

Over the past three decades, China’s New Year celebrations have continued to evolve, with younger generations adding shopping and travel to their annual festive activities.

55 11/24/11 5:01 PM

ENVIRONMENT

Cross-Border Floods

The River Wild From its source in Tibet, the Yarlung Tsangpo River meanders 2,900 kilometers and passes through India and Bangladesh. With devastating annual floods and potentially hazardous hydroelectricity projects in the pipeline, there is an urgent need for improved cross-border co-operation By Wang Yan

An Indian child paddles through floodwaters on a raft in North Lakhimpur district, some 470 kilometers east of Guwahati in Assam State

F

or Chandan Duarah and Mubina Akhtar, a couple in their thirties who live in Assam State, south of the Himalayas in northeast India, the Brahmaputra is like a kind yet quick-tempered mother. Lovingly nurturing her children in the river basin but prone to bouts of rage, the river’s temper shifts with the seasons.

The Indian couple now live in Guwahati, the capital of Assam, which is situated among the hills on the bank of the Brahmaputra. Few cities in the state enjoy such a favorable perch; Guwahati narrowly escapes the annual flooding of the Brahmaputra River during the monsoon season. Residents across most of the state are not

56

50-59_Jan.indd 56

so fortunate, and often fall victim.

Due to seismic activity in the fragile geological base of the Himalayan plateau, in addition to a high level of annual precipitation, the northeastern part of India is constantly under threat from flooding.

Suffering

Each year, a few months of hot, dry weather in India give way to the southwest monsoon in early June, followed by three months of strong winds and flooding. During this period the days are long and humid, and the countryside is verdant. Yet during the monsoon, floods “have been occurring annually

since 1950, and the tributaries of the Brahmaputra also swell, causing havoc in the region,” Chandan told our reporter.

Locals will never forget the most catastrophic flood in Indian history, which struck in early June 2000 and inundated five districts of the state of Arunachal Pradesh and parts of Assam, killing at least 30, leaving over 100 missing and rendering 50,000 homeless.

The flood was triggered by the overflowing of a lake in the upper reaches of the Brahmaputra River, or Yarlung Tsangpo as it is called in China’s Tibetan region, which had formed after a landslide.

Originating from the Chema Yongdong NEWSCHINA I January 2012

11/24/11 4:54 PM

Photo by AFP

“Were there a transborder early warning system between China and India, people in Assam and Arunachal could be better prepared to save their property, livestock and themselves from flash floods.”

glacier in the Kailas Ranges in southwestern Tibet at an elevation of 5,300 meters above sea level, the Brahmaputra is one of the world’s largest rivers, with a drainage area of 580,000 square kilometers (50.5 percent in China, 33.6 percent in India, 8.1 percent in Bangladesh and 7.8 percent in Bhutan).

On April 9, 2000, a massive landslide occurred along a mountain slope in Bomi County in the Yigong region of Tibet. Three hundred million cubic meters of displaced soil and ice dammed up the Yigong Zangbu River, a large tributary of the Brahmaputra.

It created a 90 meter-high, 3,000 meter-long and 1,500 meter-wide dam, 300 kilometers NEWSCHINA I January 2012

50-59_Jan.indd 57

upstream of the Indian border. Dr Yang Yong, 52, a well-known Chinese independent scientist who has traveled down most major river systems inside China and its neighboring countries, said that the Yigong landslide in 2000 was “the largest geological disaster of its kind in the world.”

According to Yang, a team of scientists rushed to the spot immediately after the mudslide. “We estimated that the natural dam could hold a total of 3 to 4 billion cubic meters of water, and urged the Chinese government to work out a plan to release the backed-up water by drilling before the dam collapsed,” Yang recalled. “We also proposed that the government evacuate residents from downstream areas and inform their Indian counterparts about the situation so that people who might be affected could prepare for the approaching disaster.” Tragically, the dam collapsed before the drilling project was completed in early June that year, leading to a massive flood that inundated large areas of India as well as Tibet.

Whether the Chinese side sent the warning to the Indian side in time or not remains a matter of contention. Partha Jyoti Das, head of water, climate and hazard projects at Aaranyak, a conservation NGO from Guwahati, stated that Chinese scientists predicted the flash flood on the basis of the rising of water level in April 2000, yet the Indian authorities ignored the warning. However, various Indian media blamed China for the catastrophic flooding, accusing their neighbor of withholding vital hydrological data concerning the Brahmaputra’s flow through Chinese territory.

Whoever is to blame, one thing is certain: the warning had not been passed on to the Indian residents living along the Brahmaputra before the unstable dam gave way on June 10, 2000. “That day, the river rose by an unprecedented 100-120 feet, and devastated four districts of Arunachal Pradesh,” said Chandan, in whose mind the chilling memory is permanently etched.

Panic

In addition to constant worries over seasonal flooding, people in northeast India now face another, far more avoidable threat: large hydropower projects in the Brahmaputra basin, promoted by the Indian government over the last decade.

Recent years have seen major conflicts emerge in Assam and Arunachal Pradesh states over the impact of over 100 dams planned in upstream Arunachal. According to the report Damming Northeast India, “repeated incidents of floods caused by upstream projects have been a major catalyst triggering debate over the impact of dams in Assam.” In 2004, at least 22 people were killed by flash floods in Assam caused by the release of water from a 405-megawatt hydroelectricity project in Arunachal Pradesh.

While the Indian government is eyeing the huge unexploited hydroelectric potential of the Brahmaputra, often called “the nation’s future powerhouse,” Chinese players are also beginning to exploit the river’s hydropower potential. Last November, China began damming the river at its Zangmu (Nagmu) section for its first major hydropower station on the river, a 510-megawatt project, scheduled to come into operation in 2014. Another five hydropower plants along the river will follow, with a total capacity of 2,000 megawatts.

All of these are supposedly environmentally friendly “run-of-the-river” (ROR) projects, in which electricity is generated directly by river flow, without water storage or flow modification.

Despite India’s own projects to divert water from the Ganges or to build controversial dams on international rivers such as the recent Tipaimukh Dam, which Bangladeshi media claim deeply harm the ecology and economy of Bangladesh, many Indians in turn worry that China plans to divert water from the Brahmaputra to its own droughtprone regions; since the 1990s, both

57

11/24/11 4:54 PM

ENVIRONMENT international and Indian media have consistently alleged that China’s construction aims to alter the river’s flow. Understandably, this leaves residents of Assam in a state of fear, and quick to assume the worst at the slightest fluctuation in the river’s flow.

Chandan expressed local concerns over hydropower projects to NewsChina: “The disaster in 2000 could be a small-scale illustration of what could happen if the Brahmaputra project is some day completed. At that time, the breach of a natural dam in Tibet would lead to severe floods and leave many people dead. It is not difficult to understand that areas downstream in Arunachal or Assam are extremely vulnerable to goings-on upstream in Tibet.”

Damming the Yarlung Tsangpo Apart from the Zangmu Dam, the Chinese government is debating a proposal to channel water via a 20-kilometer tunnel before running nine ROR projects along the Yarlung Tsangpo.

On October 12, Jiao Yong, vice minister of the Chinese Water Resources Ministry, officially stated that China had no plans to divert the Brahmaputra, considering “technical difficulties, environmental impact and relations with the neighboring countries.”

The Chinese government’s refusal to acknowledge the possibility of a Brahmaputra diversion came as a relief to both the Indian government and the local population, at least for the time being.

Four days later on October 16, according to the Indian Express, Assam Chief Minister Tarun Gogoi expressed that “This is the first time China has actually said it will not divert the Brahmaputra. Even so, I have requested the Centre [the Indian government] to keep an eye [sic].”

While China has denied that it plans to divert the Brahmaputra, it is mulling over plans to construct another large project on the river. According to Dr Yang Yong, who obtained the project plan from designers of HydroChina Chengdu Engineering Corporation, the enormous project will have a capacity of 49,000 megawatts, twice that of China’s flagship Three Gorges project, and is to be constructed in the “Great Bend” of the river, where the Brahmaputra takes a sharp southward turn toward south Tibet and India.

According to the plan, a portion of the Yarlung Tsangpo water inflow will be diverted, before the Great Bend, into a 20-kilometer tunnel dug through the mountains across the Bend. Then the water flow will run down the tunnel through nine consecutive

58

50-59_Jan.indd 58

Illustration by Wu Shangwen

Reassurance

ROR projects before rejoining the Yarlung Tsangpo’s main stream.

The initial proposal of the Great Bend project came out in 2000, with the basic aim of utilizing the natural momentum of water to generate electricity. “There will be no reservoirs except at the diversion point, where a temporary 50-meter-high dam will be built, and only 50 billion cubic meters of annual water inflow will be diverted at this spot for electricity generation,” Yang added. “Considering the total annual water outflow of 150 billion cubic meters at Pasighat, on the border with India, at most one-third of the water will be rechanneled. Therefore, there will be little effect on the downstream flow of the river.” Yang also explained that the difficulty of construction in the earthquakeprone region posed major challenges, so the proposal was unlikely to be implemented in the next ten years.

Geological Instability

Due to the collision of the Eurasian and Indian tectonic plates, the Brahmaputra Valley and the adjoining mountain ranges are seismically unstable. Earthquakes in 1897 and 1950, both measuring 8.5 on the Richter scale, were among the most severe in recorded history. Glacial lakes become a major hazard if they are ruptured by earthquakes; according to the United Nations Environment Program (UNEP), there have been at least 35 glacier lake outbursts in Nepal, Pakistan, Bhutan and China during the last century.

Himalayan Karakorum Hindukush (HKH) mountain ranges possess the largest glaciers in the world outside of the polar regions. A research paper by Li Zongyi of the Chinese Academy of Sciences recently published in British academic journal Environmental Research Letters indicated that NEWSCHINA I January 2012

11/24/11 4:54 PM

Photo by AP

According to a report released in May 2010, “it is estimated that there are over 8,000 glacier lakes in the HKH region with more than 200 of them identified as potentially dangerous.”

Villagers attempt to escape rising flood waters in Jalimura village, Assam

glaciers in southwestern China have encountered consistent warming at a statistically significant level between 1961 and 2008. “In the face of rising temperatures, the fronts of 32 glaciers and the area of 13 glacial basins have retreated, and the mass losses of 10 glaciers have been considerable. As a result, glacial lakes in six regions have expanded and the flow of melt water washing through four basins has also increased. Yet, all this is but a fraction of the retreating glaciers in southwestern China,”according to the paper.

Since 1990, lake overflows have been observed fairly frequently on the QinghaiTibet Plateau. According to domestic report, in Naqu, Qinghai Province, over 100 lakes have expanded in area, thus inundating over 100,000 hectares of grassland and forcing the relocation of over 100,000 people.

Fast growing lakes greatly increases the probability of glacial lake outburst floods (GLOFs) which have been reported in many Himalayan basins. According to a report released in May 2010 by the International Centre for Integrated Mountain Development (ICIMOD) in Kathmandu, “it is estimated that there are over 8,000 glacier lakes in the HKH region with more than 200 of them identified as potentially dangerous.”

Early Warning System

Taking into account the severe threat of melting glaciers and, in turn, potential GLOFs, NEWSCHINA I January 2012

50-59_Jan.indd 59

a sound network of monitoring and early warning systems to allow downstream residents time to take evasive action is urgently needed both domestically and between countries with trans-border river connections. “In most cases, there would be little or no warning, with insufficient time for complete a evacuation,” the UNEP report said.

Efforts towards the establishment of a flood forecasting system got underway in India in November 1958 when the Flood Forecasting Unit was created for the River Yamuna at Delhi. By 2006, a total of 175 regular flood forecasting stations had been set up in India.

However, reliable trans-border early warning systems do not yet exist among the Himalayan region countries. Only sporadic meteorological and hydrological data are shared.

“Were there a trans-border early warning system between China and India, people in Assam and Arunachal could be better prepared to save their property, livestock and themselves from flash floods,” said Chandan Duarah.

Further Cooperation

After the 2000 Yigong mudslide, a Memorandum of Understanding to share data on water level, discharge and rainfall was signed in 2002 between China and India. Since then, data provided by the Yanghen, Nugesha and Nuxia stations on the Brahmaputra River inside China have been transmitted to corresponding Indian agencies twice a day.

The data provided by China have helped in flood forecasting, and have kept the Indian Water Ministry updated with what is happening on the upper reaches of the Brahmaputra. In accordance with the Memorandum of Understanding, any plans to divert the Brahmaputra will have to be made known to the Indian Water Ministry beforehand.

“China’s own research in the Himalayan region didn’t get started until the late 1950s, and so far fixed-position monitoring of water resources, covering the meteorological, hydrological and glacier aspects, are still relatively insufficient,” said Professor Kang Shichang, assistant director of the Institute of Tibetan Plateau Research at the Chinese Academy of Sciences (CAS) in an interview with NewsChina.

Some forms of international cooperation in water-resource research projects in this region are in their fledgling stages. The CAS launched a Third Pole Environment (TPE) project a couple of years ago, under which Chinese scientists and their counterparts from Nepal, India and Pakistan meet on a regular basis to exchange information, technology and scientific perspectives. According to Dr Kang, China has also started some research cooperation projects with the EU. “All these projects combine to mark a good start. Yet more efforts are needed for more profound cooperation and wider sharing of information,” Kang told the reporter. 

59

11/24/11 4:54 PM

VISUAL REPORT

Mule Logistics H

orseback transportation of goods used to dominate ancient China’s agricultural society. Nowadays, with automobiles and heavy machinery carrying most of the heavy goods in the industrial world, horse-drawn carts are a rare sight in everyday life. Yet they are still in use, especially in remote mountain regions where machines and vehicles would struggle to make their way through jungle or up steep slopes.

Lei Tianhu, 37, lives with his family in Yancun village, near the border region between Shaanxi and Henan provinces in central China. Lei boasts four mules, without whom the family would struggle to survive.

Accompanied by two other villagers leading their own respective mules, Lei and his wife begin their day’s work. After a three-kilometer uphill journey on the roadless mountain slopes, they arrive at the local gold mine, where each mule will be loaded with over 200 kilograms of gold ore.

Fully laden, the downhill journey is much harsher for the mules, their iron horseshoes clanking on the rubble, echoing with the exhausted breath of both man and beast.

The round trip takes about two hours, and each day the mules finish an average of three round trips. Generally, according to Lei, the four mules can earn him a total of over 500 yuan (US$79) per day, as long as there is work to do. Lei plans to renovate the family’s old house, but with financial income mainly derived from his mules, it will take three years for Lei to realize this plan.

For mule drivers, seeking new work opportunities is a priority. In these remote mountain regions, where transportation of building materials for mobile phone pylons cannot be accomplished by vehicles, mules still play a critical role.

60 60-72_Jan.indd 60

NEWSCHINA I January 2012

11/24/11 4:55 PM

Photo by CFP NEWSCHINA I January 2012

60-72_Jan.indd 61

61 11/24/11 4:55 PM

VISUAL REPORT

Clockwise from top left: Villager Wang Huimin and his son prepare food for their mules; The age of a mule can be determined from its teeth; The average price of an adult mule is around 10,000 yuan (US$1,574); A white mule belonging to Lei Tianhu; Lei Tianhu, his wife and their two children posing in front of their house; Lei and his family rely on four mules to sustain their income; The account books of a group of mule drivers; Lei Tianhu collects payment from the gold mine owner

62 60-72_Jan.indd 62

NEWSCHINA I January 2012

11/24/11 4:55 PM

Photos by Chen Tuanjie/CFP NEWSCHINA I January 2012

60-72_Jan.indd 63

63 11/24/11 4:55 PM

OUTSIDEIN perspectives from within china

Lonely Pingyao

Beauty Means Business Despite its tourist-trap window dressing there’s always something new to discover in the tortuous alleyways of Pingyao, Shanxi By Robert Foyle-Hunwick

Photos by CFP

T

he UNESCO World Heritage Site of Pingyao is a surprising diamond in the bleak loess plateau of northwestern China’s Shanxi Province. Despite being one of China’s most-visited ancient walled cities, the cacophonous hassle of tour groups can be avoided almost entirely by visiting Pingyao off-season, especially in the chilly northern fall, when you’ll be treated to the city at both its bitterest and most serene.

Belying the promising sign (“Our hotel is doing the business”), the Yuan Tai Mao Hostel was deserted on arrival; admittedly, it was around

64

60-72_Jan.indd 64

seven in the morning. Despite the absence of any other guests (or staff) throughout our stay, the chain-smoking proprietor Cao informed us the 260 yuan (US$40) per-night deluxe room wouldn’t be ready for several hours. Perhaps that was because the housekeeping had fled town.

This Pingyao hotel was strictly business – no frills.

Hunger was a pressing concern for a pair of travelers who had spent 16 hours on a sleeper train with a buffet carriage that inexplicably closed at 11. Thus we hit the narrow streets in search of food and a smidgen of early-morning

adventure.

At such a benighted hour, Pingyao’s streets are populated by wizened local seniors and equally wizened feral dogs – all of whom seemed to have already had breakfast. As with most tourist traps, the best food is away from the main drag – helpfully demarcated in Pingyao with cast-iron posts. These also have the additional function of blocking access to the profusion of tourist golf carts that zip through the quiet alleys, honking forlornly for business.

Maddening distractions like these, and the identical shops hawking exactly the same “anNEWSCHINA I January 2012

11/24/11 4:56 PM

Photos by CFP

Left: Ancient city walls of Pingyao; Right: Shuanlin Temple sculpture

tiques” and Maomorabilia can annoy any visitor. But the clear blue skies, sound of birdsong and near-absence of demolition noise and debris demonstrate how easy it is to completely write an area off based on first impressions.

The city’s imposing, 600-year-old, 10-meter high walls, complete with watchtowers and gates at all four points of the compass, loom over the surrounding buildings and gladden the heart. It is this square mile that’s the main attraction.

Pingyao is constantly reminding you – as if it even needed to –that it’s a city of history. It is NEWSCHINA I January 2012

60-72_Jan.indd 65

one of the rare places in urban China where you’ll actually need to take to the rooftops to glimpse the lofty cranes that signify “development.”

The city’s biggest claim to fame is that it became the chief silver depository along the former Ming and Qing dynasty trade routes. After the Rishengchang, the first piaohao – or remittance house – opened in 1823, the city soon housed 50 percent of China’s banking houses, perhaps explaining the presence of a quite enormous police station in the middle of such a quiet area. Pingyao soon became the Switzerland of Ming China: 800 years of peaceful civilization built on banking and defending itself against wouldbe robbers. Marauders and bandits probably took one look at the city’s impregnable walls and went straight for the next village.

Pingyao has consequently been in business for well over 1,000 years. Rishengchang however, along with the area’s other leading banks, collapsed a little over a century ago, leading the citizens who remained to face the turmoil of the twentieth century and, eventually, shift their focus to tourism.

The spectacularly intact walls, and everything else, including shops, temples, opulent residences and other feudal trappings, apparently survived the decade-long Cultural Revolution just by staying off the radar -- unlike the equally spectacular old quarter of the provincial capital Taiyuan, of which barely any trace now remains.

One ticket of 150 yuan (US$23) will get you a pass to all places of interest in the Old Town plus six kilometers of ancient wall.

Architecture buffs will be thrilled at the distinctive local construction style, which builds courtyard houses on progressive levels, with the rearmost and most prestigious lodgings built atop artificial caves, representative of traditional yaodong cave homes built into Shanxi’s loess plateau for centuries.

While old rambling temples and residences are all very well, the real magic of Pingyao lies in the joy of just going your own way, wandering the alleys and courtyards with their sloping clay roofs, where life seems to go on just as it did two hundred years ago: slowly and with little interest in the outside world.

Pingyao may be old but it’s growing

65

11/24/11 4:56 PM

travel

Getting There There are up to 10 China Eastern Airlines flights a day from Beijing, and about half that number from Shanghai, to Taiyuan airport, 10 miles from Pingyao’s walled city. Trains from all over China stop at Taiyuan’s train station, including two daily expresses from Beijing (four hours). There are also direct, slower services to Pingyao’s small train station from Taiyuan, Beijing and several other cities. Buses to Pingyao depart every hour from Taiyuan’s main bus station.

Accommodation You’ll likely be spending no more than a couple of nights in tiny Pingyao, so you’ll want to get your accommodation right and avoid hotel-hopping.

The English-speaking Harmony Guesthouse offers banana pancakes and helpful local expertise.

Starting out at over 1,000 yuan (US$157) a room, the city’s highest-end Yunjinchen Hotel offers Ming opulence and ample creature comforts, but seeing as everyone in Pingyao seems to live in an 800-year-old leafy siheyuan courtyard with swallow-eaved rooftops, lacquered furniture and ornate carved fittings, you may be able to spend that money better elsewhere.

Must-Sees A 150-yuan (US$23) all-you-can-see ticket actually offers underwhelming value: the two-day ticket buys you the privilege of walking the walls and entering (once) any or all of its 18 designated “historic tourist sites”. Better value in every sense to rent a bicycle for 10 yuan and cycle to the Buddhist Shuanglin temple, admission 25 yuan (US$4) to take in the very real and utterly captivating Song and Yuan iconography.

You can also peek into the private life of Qing aristocracy at the Wang Castle, a 123-courtyard fortified residence which is impressive, if repetitive. Behind

Photo by CFP

up fast. My 2009 guidebook has the Da Mian Noodle House as a “Real China” kind-of place, offering pork soup with egg (six yuan, US$1) on an improvised, Chinese-only chalkboard.

Now it’s eight yuan (US$1.25), there’s a bound picture menu (complete with the usual backpacker fare, like banana pancakes and burgers) and bike rentals. The same was true that evening with the Shanxi specialty restaurant, where Lonely Planet economics were again at work.

I had to go out to the Zhangbi Underground Castle – a 1,400 year-old warren of defensive tunnels in a cliff behind Zhangbi Cun, a youthful 800-year-old village – to find true peacefulness and proper Shanxi food.

The dishes - salted kelp with garlic, wild roots salad, a spicy Shanxi tomato dip (fanqiejiang, reminiscent of salsa but entirely local), a thick pork stew – kept arriving, preceded by a big cold bottle of the local beer, Xinghuacun, a strong, hop-heavy pilsner which nixes the watery Tsingtao most expats drink by miles. The entire feast cost about 40 yuan (US$6.25) – next year, it will probably cost twice that.

The tunnels themselves were (literally) cool and completely deserted yet not at all creepy.

Well-lit, signposted routes almost recall Pingyao’s own beguiling town planning; it looks simple, which is why it’s easy to lose your way.

This is the enchanting spell that Pingyao can weave – you suddenly find yourself alone, in the silent, crumbling streets, with nary a human voice to offer comfort. Suddenly you feel how vulnerable, lonely and anonymous the ancient former residents of this tiny fortified city were in years gone by.

Bird’s eye view over local residences

that, there’s a remarkable taste of how the other half lived – and continues to live – at the still-occupied yaodong cave dwellings in the shadow of the castle walls.

Better still, time your arrival to coincide with the Pingyao International Photography Festival in September, a week-long curate’s egg of collections.

This eclectic event with no admission fee will easily consume an afternoon, with dozens of different exhibitions and stalls offering a range of photography from the unexpected – a North Korean photo diary of the Korean War; an attempt to document the facial diversity of the Han Chinese people – to the insightful-photojournalist Xie Jun’s Impression/ The 1990s, a collection of black-and-white urban vignettes that ranges from the bizarre and humorous to the petty and tragic, accrued from China’s Reform and Opening-up era.

real chinese

Guanggun Jie Chinese Singles Day With a numerical date composed entirely of the number 1, November 11 is known in China as “Singles Day.” Thought to have begun at a university in Nanjing, Jiangsu Province in the early 90s, Singles Day, or guanggun jie, is usually celebrated by people who are not in a relationship. The unofficial festival is seen as a day to rid oneself of the perceived sadness - and social stigma - of being single, with singles typically celebrating by going on a blind date or to a singles-only party in the hope of finding a partner.

In Chinese, the word jie means “festival,”while guanggun literally translates as “bare stick.”Originally, the term guanggun was used exclusively to describe a man with no wife or children; in Chinese tradition, a man is seen as the trunk of the family, with the wife and children sprouting off as branches, making a rather forlorn “bare trunk”with no branches a vivid metaphor for loneliness. With the male-heavy gender imbalance caused by China’s One Child Policy, Chinese men often lament the difficulty of finding a wife, especially with high demands from

66 60-72_Jan.indd 66

potential in-laws.

However, with women gaining higher societal standing in China, the meaning of guanggun has now extended to include its bachelorette population. With more and more females choosing an education and a career over an early marriage, the number of single women in China has soared, meaning guanggun jie singles parties are often female-dominated.

2011’s guanggun jie was a once-in-a-lifetime occasion. With an extra pair of 1s in its numerical date, it was dubbed “Super Singles Day”in China, and was commemorated with the cinematic release of a singles-themed movie, Love is not Blind. The film echoed the emotional struggle of many Chinese singles, and was a box office hit, outselling Hollywood blockbusters such as Rise of the Planet of the Apes on the day of the festival.

NEWSCHINA I January 2012

11/24/11 4:56 PM

flavor of the month

King of Burgers By Jacob Bailes

NEWSCHINA I January 2012

60-72_Jan.indd 67

Courtesy Photo

A

fter spending almost five years in Beijing and being disappointed on countless occasions by poorly imitated “western cuisines” disguised by fancy names and elaborate presentation, my search for a taste of home in an authentic hamburger had begun to look like a desperate enterprise, until one crisp November morning I stepped into the discreet environments of MRL.萌, the in-house restaurant of the Millennium Residences Beijing and home to local celebrities and wealthy expats, and ordered a “King Burger.”

My previous frustrations, combined with the realization of the mammoth challenges faced by a Chinese restaurant catering to both high-end local and American clients, made me a little uneasy as I waited for my order. Having personally attempted to market blue cheese, kippers and meringues to Chinese palates, I have experienced firsthand the pitfalls faced by any chef wishing to be true to a particular food’s roots while also compromising more outlandish flavors in favor of the tastes of his or her clientele. Yet as a hardcore gastronome myself, I demand that nothing but the best enters my mouth. In a hamburger, no amount of cracked, flour-dusted artisanal bread or salad shaped into a swan can disguise the fact that the meat maketh the meal and only prime cuts of marbled grass-fed beef can truly deliver the satisfying, juicy and flavorful punch of a really world-class burger. A little more fat would make it chow like a stick of butter and little less would give you a mouthful of seasoned cardboard. Every chef hoping to satisfy this particular client has to play Goldilocks – not too much, not too little – everything has to be just right.

When the plate was served, my anxiety was immediately eased by its presentation – the dish looked perfectly to my liking, only better. The mouth-watering hamburger was accompanied by a mish-mash of roasted and raw vegetables and deep-fried sweet potatoes pont-neuf, encouraging the diner to open their mind – red-blooded American trepidation at the sight of anything but French fries somewhat reduced at the

sight of a towering burger that would look perfectly at home in a Vegas-era picture of Elvis at table, while the Chinese would see familiar staples such as eggplant and sweet potato presented in an unmistakably international manner.

Quickly I sunk my teeth into the deepest and most luscious prime beef I had ever tasted outside of my mom’s kitchen.

Seasoned delicately with black pepper and, unless I am much mistaken, a smidgen of oyster sauce, the perfectly-marbled prime Angus beef was at once succulent and substantial, oozing delicious juices and just on the right side of medium rare. At that moment, all my misgivings melted away and I was left with all I’d ever asked for – the perfect beef patty, seasoned and cooked to my

exact request. Everything else on the plate melted away, and no impression remained beyond the toothsome satisfaction of that first bite.

As a longtime expat locked into a passionate affair with Chinese cuisine, dining out on Western food has become a risk I’m increasingly less inclined to take. I had almost abandoned my quest to find a “real” hamburger after a series of crushing disappointments. Yet the discovery of the King Burger at MRL.萌 in Beijing’s CBD on that gently sunlit morning has once again awakened me to the new lease of life that the local chefs are injecting into their American fare. While MRL.萌 may not have a western origin, they’re no doubt the best when it comes to hamburgers. 

67

11/24/11 4:56 PM

essay

Keeping Beijing’s Spirits Up

A

fter centuries of uprisings, invasions and bloody political intrigues, a short walk through a grey-brick hutong in the Chinese capital gives a palpable sense of the netherworld, giving rise to legends of eerie ghosts and wandering spirits. In an ancient city such as Beijing, so steeped in history that nearly every district is a center of ancient significance, such folktales are inescapable.

Today, the neighborhood of Caishikou, on the west side of the inner city, is unrecognizable as the former public execution ground of the Qing emperors. Rebels were once taken here for beheading, and some, according to local legend, never left. One favorite yarn tells of a local tailor who heard someone stumbling around his shop and rummaging through his wares, though he found no trace of a thief. The next day, however, the head of a recently-beheaded criminal was found stitched back onto his corpse with tailor’s thread. On the anniversary of that criminal’s execution, locals tell of headless figures trawling the streets in search of medicine for their wounds.

Only a short walk from Caishikou brings one to a dilapidated structure that stands out starkly from Beijing’s contemporary skyscrapers. The church on Chaoyangmen Inner Street was built by a British priest during the twilight years of the Qing Dynasty, originally intended to house missionaries living in the imperial capital but quickly fell out of use after thousands fled China in response

A walk through the unlit, labyrinthine hutong at night can easily evoke unsettling thoughts of things that go bump in the night.

68 60-72_Jan.indd 68

to the massacres of foreigners during the Boxer Rebellion. A prominent Kuomintang official later moved in, turning the church into his private estate with his wife, but later abandoned her in his flight to Taiwan after the Communist victory in the Chinese Civil War. His distraught wife later hung herself from the church’s rafters, but her weeping has been reported by visitors ever since.

A walk through the unlit, labyrinthine hutong at night can easily evoke unsettling thoughts of things that go bump in the night.

Tragedy casts shadow over the historic Bell Tower on the city’s central axis. Legend tells of an official who worked for over a year to perfect the casting of the massive bronze bell, used by Beijing’s residents to tell the time, but each bell cracked during casting. His daughter, fearing for her father’s life, threw herself into the molten bronze after being told by a fortune-teller that only a virgin’s blood would result in a successful casting. Her father was left holding her embroidered slipper after he attempted to save her. The resulting bell was a success, and installed into the colossal tower, to toll the time of day for centuries. However, legend has it that xie, the Chinese word for shoe, can be heard beneath its distinctive chime, itself said to sound eerily like a scream during stormy days.

Far out on the outskirts of Beijing, the classical gardens of the Summer Palace which swarm with visitors and hawkers throughout the year, might seem far too bustling to offer rest to the dead. Tourists regularly climb Longevity Hill to the Fragrant Buddha Pavilion, a picturesque temple in one of the finest classical gardens built by the grand emperor Qianlong. Qianlong desired to build a grand retreat, dominated by a large tower to honor his mother. Renaming the hill for “longevity,” he began large scale construction on the temple’s terrace, during which workers came across a cave, possibly a royal tomb, and notified the emperor himself to inspect it. The emperor is said to have seen the Chinese characters for “Don’t disturb me, I won’t disturb you” appear on the cavern wall. Frightened,

Illustration by Xiang Zhaohui

By Sean Silbert

he ordered the tomb sealed, and demanded the temple built on top, rather than into the mountain, to contain any evil spirits.

The most haunted house of all in Beijing is its largest and most famous. The immense, foreboding Forbidden City, home to the ruler of all under heaven for six centuries, was subject to bloody infighting between jealous concubines, rapacious eunuchs, and sly assassins. The high, red walls of the Forbidden City were a crucible for the palace drama that ended only after the fall of the empire in 1919. It was only thirty years later, when the doors of the palace were swung open and the general public allowed to view the inner pavilions and halls as a museum that the secrets of the palace began to creep out. Guards began to report the existence of odd, pig-like creatures running around the palace late at night.

A young man who snuck into the palace at night reportedly saw women crying in the section of the complex formerly home to the emperors’ concubines, as well as the ethereal figure of a woman wandering the grounds, who would never turn around if addressed.

Some say that it is these spirits that keep the palace closed at night, and that ancient ghosts are the reason the palace security guards only patrol at night in large groups.  NEWSCHINA I January 2012

11/24/11 5:16 PM

Everything is Dangerous

I

t’s amazing how many near-death experiences can be squeezed into a two-hour stint within the confines of an elementary school in China. The most mundane, some might say instinctive, actions can have drastic consequences if not carried out correctly. Going down stairs, washing hands, walking across the room— all scenarios require elders to enforce China’s unwritten safety regulations, whether for the child in their own care, or a classmate in the care of another, less attentive ayi (nanny). Every movement of the child must be watched, and commented on, in order to ensure their survival. The extent to which these ayi hover over the children entrusted to them makes me wonder, are they more concerned with the child’s safety, or with simply appearing concerned?

Four days a week I had a front row seat at the kindergarten where I would attend classes with my employer’s daughter. The ayi crowd always put on a show for each other, engaging in an unspoken contest of who was most attentive to the needs of their employer’s child. Amateurs simply forced their child to sit in their lap during class. More seasoned caretakers went to much greater lengths to prove their worth. The children under the watch of these women may as well have stayed home, as they weren’t going to have any sort of independent learning experience while chained to their respective old ladies. When it’s time to clap, ayi grabs her

The extent to which these ayi hover over the children entrusted to them makes me wonder, are they more concerned with the child’s safety, or with simply appearing concerned?

NEWSCHINA I January 2012

60-72_Jan.indd 69

charge’s hands and claps for them. When it’s time to eat, ayi all but chews their food, placing the child in a chair, pushing them up to the table, and proceeding to deposit consumables into the child’s mouth (all the while incessantly wiping their chin and reminding them to chew slowly and drink carefully).

Any journey up or downstairs invites a whirlwind of comments on the proper way to use a staircase. Daredevil foreign kids who hop down the stairs will quickly be intercepted by an ayi (not necessarily the one taking care of that particular child) who points out that by behaving so recklessly, they are endangering not only their own wellbeing, but also the wellbeing of everyone around them.

There is also a wrong way to wash your hands. Most children stand in a trance as their ayi does the washing for them: turning on the tap, squirting the soap, rubbing their hands together. This is the correct way. The wrong way goes something like this: a two-year-old attempts to go through these steps on her own, and gets water on her sleeves. This results in a gaggle of concerned ayi flocking to the poor, damp child and shoving paper towels up her sleeves to keep her arms dry. There is, of course, also a lecture in store for the neglectful mother who has failed to appropriately educate her wayward daughter.

The charges of the most attentive ayi have become so crippled in their ability to do anything that they fear even traveling across the classroom without an ayi’s hand to clutch. The most traumatic event for one of these children is when the ayi excuses herself to run to the bathroom while the child is seemingly distracted by some activity. The screaming and crying that erupts when the child notices ayi’s absence usually only lasts a few seconds before the frantic woman scurries back in.

Foreign mothers and ayis generally make no attempt to talk to one another. During the slightly calmer snack break, ayis con-

Illustration by Xiang Zhaohui

By Abby Fitzgibbon

gregate around the table of children eating to keep a constant watch as the mothers retreat to the back walls for a hard-earned chat with their girlfriends. The resentment was clear from both the ayi and the Chinese teachers, who delighted in any chance to scoop up the plate of a fumbling child or help push in a chair, all the while looking daggers at the negligent chatting mothers.

It was abundantly clear what was on the minds of the teachers and ayi: they were doing it right, and we Westerners had a lot to learn. And maybe, in a way, they were right.

In a crowded, competitive society in which children are taught from kindergarten to study hard for one big test at the end of high school which profoundly influences their higher education and career, perhaps the children left alone to learn from their own mistakes are precisely the ones left behind. But what does this mean for foreign children in the care of an ayi, the children who will go on to international schools and never be placed in the Chinese education system? I couldn’t help but have flashbacks to myself as a kindergartner - scraped knees, my self-styled hair in some bizarre up-do, making messy art projects that I no doubt thought exquisite at the time - and feel that these children were missing out. 

69

11/24/11 4:57 PM

CULTURAL LISTINGS Music

Bold Double Album Increasingly threatened by Internet piracy, many modern musicians are reluctant to release real CD albums. However, Wang Feng, a veteran singer-songwriter with a career spanning one-and-a-half decades, has shown confidence in his fans and the quality of his work by releasing a new double-disc album of 26 songs in mid-November 2011. Unlike many of his contemporaries, whose popularity has faded after one or two albums, Wang’s fan base has continued to grow, particularly over the last two years, with his consistent effort, musical professionalism, and resolution to rock the mainstream. The record, entitled Life Asks for Nothing, is Wang’s ninth album. In contrast to most double albums, all 26 songs on the record are new releases and touch on a wide range of personal emotions as well as social themes.

Exhibition

Cinema

30 Years of Sculpture

A Modern Love Story

Start from the Horizon, an exhibition reviewing modern Chinese sculpture since 1978 when China began its policy of Reform and Opening-up, was launched in early November 2011 at Beijing’s Si Shang Art Museum. Lasting four months, the exhibition includes more than 100 works from 54 established and up-and-coming artists. Strikingly different from the realist style ubiquitous before 1978, sculptures in the exhibition show a strong tendency toward diversity, with many pieces showing abstract, satirical, revolutionary and countercultural themes. Also, with the influence of “art integration,” many sculptors represented in the show have borrowed forms and ideas from other arts, creating stranger and more challenging works.

Book

Top of the Wave

By Dr Wu Jun

A book about the history of communication and the IT industry, Top of the Wave has received glowing reviews from readers and critics. Published in August 2011, it quickly entered many Chinese bookstores’ bestseller charts. On douban.com, a major cultural portal in China, the book received a score of 9.4 out of 10, as voted for by more than 2,000 readers by mid-November 2011, a higher score than Steve Jobs: A Biography, which scored 8.7 from roughly the same number of readers. Its author Dr Wu worked at Google from 2002 to 2010, and then joined Tencent, one of the leading Internet companies in China, to become its vice-president, supervising the company’s search engine business. Besides detailing the ups and downs of the IT industry over the past hundred years, the book also received plaudits for its analysis of the relationship between the development of technology and commerce, and the reasons behind the trials and triumphs of the industry’s major players.

70 60-72_Jan.indd 70

Released in early November 2011, Love Is Not Blind, a story about the 33 days following a young woman’s discovery that her boyfriend is cheating with her best friend, quickly created a buzz among Chinese moviegoers. While love is no new theme, critics argue that the film has captured the young Chinese audience by portraying the ease with which trust and intimate relationships are discarded in the modern world. Directed by Teng Huatao, director of the successful TV dramas Dwelling Narrowness in 2009 and Naked Wedding in 2011 which both dealt with the emotions of the younger generations in an increasingly materialistic society, Love Is Not Blind seems to have once again pricked the underlying melancholy of the Chinese youth.

NEWSCHINA I January 2012

11/24/11 5:16 PM

COMMERCIAL LISTINGS

Knigge Akademie Knigge Akademie was established in Germany in 1993. This year, we have opened a branch in Beijing, to broaden our business and attract more foreign tourists and businessmen. Knigge Akademie has decided to create its own “Hotel Guide” for China, which will be published in 2012 in Europe and North America.

All hotels in this book undergo training and certification by Knigge Akademie to ensure that they meet western service standards, including English language certification for key members of staff, and enforcement of service standards that customers would expect in their home countries, from concierge to waiting staff. Staff at all of the hotels are trained by German tutors who are IHK certified and professionals in the hotel and restaurant business, and are known for their ability to manage hotels.

It normally takes one week bring a hotel to the requisite standard for certification. Knigge Akademie is currently working hard to train hotel staff, and compiling information in our new hotel guide. For more information or to see the hotel guide visit our homepage at www. knigge-akademie.cn

Yuhu Resort

Star-studded Welcome Stars of the film East Meets West, including director Liu Zhenwei and actors Karen Mok, Eason Chan, Kenny Bee, William So, Stephy Tang, Crystal Huang and Sitar Tan, stayed in the newly-renovated Kerry Hotel during their recent trip to Beijing. They were warmly welcomed by the hotel’s General Manager Mr Johnson Wong (left).

Outing of Millennium Residences

Built against a mountain, Yuhu Resort was the place where ancient Chinese writer Sun Tzu wrote his military strategy books with great concentration. A stream flows through bamboo pipes from the mountain to the front of the hut, which is furnished with an ancient bed and stool, as well as a coir raincoat. The hut is bordered on one side by a vegetable field, and on the other by a bamboo booth; these simple surroundings were the setting of Sun Tzu’s hermetic life. Outside the Sun Tzu Garden, there are two parallel walkways that span 1300 square meters. On the walkways stand pillars engraved with the text of Sun Tzu’s classic The Art of War. To the sides are the Generals’ Wall and Calligraphers’ Wall. On the Generals’ Wall, there are epigraphs from 16 contemporary generals, and the work of 17 contemporary calligraphers adorns the Calligraphers’ Wall. On the stage to the northeast of the walkways, you will find a bronze statue of Sun Tzu, and the Sun Tzu Hall sits behind the statue.

NEWSCHINA I January 2012

60-72_Jan.indd 71

This magnificent Beijing autumn, The Millennium Residences at the Fortune Plaza Beijing organized a wonderful outing to a picturesque farm on the outskirts of Beijing for its residents. Free transportation, entry tickets and lunch were provided.

Millennium Residences staff were glad for an opportunity to spend a relaxing day with their guests, who were also grateful for the chance to mingle with their neighbors. The management and staff of the Millennium Residences also made use of the occasion to find out more about the guests’ needs, so as to provide better services in future.

71 11/24/11 4:57 PM

COMMENTARY

Do We Really Need to Fingerprint 1.3bn People?

The new biometric ID card scheme needs serious consideration before we impose it on an unprepared nation By Zhou Dawei

O

n October 25, the National People’s Congress passed an ror, with variables such as air pressure, posture, humidity and the age amendment to the country’s ID Card Law to allow citizens’ and physical condition of the subject all contributing to the outcome fingerprints to be digitally embedded in their ID cards. Ac- of the final reading. Extending fingerprinting to banking, transportacording to the Ministry of Public Security, fingerprint scanners will be installed throughout China’s infrastructure including in financial, telecommunications, transportation, education and medical institutions in order to “accurately and swiftly identify people,” allegSince China launched its current ID card system in the edly in response to a growing problem of identity theft.

1980s, mismanagement is estimated to have caused 1.6 However, the amendment also proposes a massive million individuals to share an ID number with another expansion of police power, essentially extending fincitizen gerprinting beyond suspected criminals to the entire population.

Currently, there are 56 countries and regions which embed fingerprint information in national ID cards, and biometrics have become a feature of passports and ID cards in Spain, Malaysia, Belgium and India. However, debate tion and social welfare systems means that any errors will be costly. over the use of fingerprint information in something as quotidian Since China launched its current ID card system in the 1980s, as an ID card continues to rage, with many claiming the collection mismanagement is estimated to have caused 1.6 million individuals of such personal data from non-criminals is the hallmark of a po- share an ID number with another citizen, an error which carries a lice state. Biometric passports cards in the US, for example, have re- litany of problems. A more complex system of fingerprint IDs may mained controversial since their introduction in 2005. create more errors. Given China’s huge population, vast land area, China is one of the few countries where ID cards and passports huge economic and social disparity and uneven managementacross are issued by the police, leading to increased public suspicion of the different regions, the implementation of such a scheme will be a scheme. Police power has been gradually expanded in response to daunting task. rising social tension in recent years, and the new amendment has Now, as the amendment has been passed, the authorities must proonly deepened concerns over the powers afforded to China’s police ceed with caution to ensure not only the protection of citizens’ rights, force. When expanding police power, policy makers should also take but also minimize the negative impact on their daily lives.  measures to hold the police accountable for any abuse of that power.

A biometric ID card system also poses great technical problems.

(The author is a professor of law with the Chinese Academy of Social Fingerprint identification technology retains a certain margin for erSciences)

72

60-72_Jan.indd 72

NEWSCHINA I January 2012

11/24/11 5:15 PM

Cover2.indd 1

10/25/11 11:09 AM

NEWSCHINA I January 2012

60-72_Jan.indd 73

73 11/24/11 5:09 PM