March 2016

Art of the Heart: China's Love Consultant

INTERNATIONAL

Mr Bombastic: N Korean Nuke Proves Divisive

SOCIETY

Empty Nesters: Bereaved One-child Parents

HEAVY LIFTING

We ask a panel of experts why China's economic trajectory will be the biggest story of 2016

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Volume No. 091 March 2016

PROFILE

EDITORIAL

Published by China Newsweek Corporation Publisher: Zhang Xinxin Executive Director: Zhang Xinxin Editor-in-Chief: Wang Xiaohui Editorial Office Managing Editor: Zheng Zhonghai Advisor: Liu Dizhong Senior Editor: Ruan Yulin Copy Editors: Jack Smith, Brittney Wong Lead Writers: Yu Xiaodong, Li Jia Editors: Wang Yan, Yuan Ye, Xie Ying, Du Guodong 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: Wu Shangwen Art Editor/Designer: Zhang Dawei Publishing and Development Office China Newsweek Corporation President: Peng Weixiang Tel: 1-212-481-2510 Fax: 1-212-481-2503 Address: 820 2nd Ave, 3B-C, New York, NY 10017, USA Email: readers@newschinamag.com Toronto Office Director: Xu Chang'an Address: 51 Halstead Drive, Markham, ON Canada L3R7Z4 Tel: 1-905-604-6150 Fax: 1-905-604-6170 Email: canada@newschinamag.com Marketing Director: Wang Chenbo Account Manager : Ren Jie Tel: 86-10-88388027 Circulation Manager: Yu Lina Tel: 86-10-88311834 Advertising Director: Gao Weiwei Tel: 1-212-481-2510 Marketing Promoter: Jerry Meng Tel: 1-212-481-2510 New York Office: Tan Hongwei, Ruan Yulin, Deng Min Washington Office: Zhang Weiran, Diao Haiyang Los Angeles Office: Mao Jianjun San Francisco Office: Liu Dan Houston Office: Wang Huan London Office: Zhou Zhaojun Tokyo Office: Wang Jian Paris Office: Long Jianwu Bangkok Office: Yu Xianlun Kuala Lumpur Office: Zhao Shengyu Moscow Office: Wang Xiujun Manila Office: Zhang Ming Berlin Office: Peng Dawei Sydney Office: Lai Hailong Brussels Office: Shen Chen Astana Office: Wen Longjie Rio de Janeiro Office: Mo Chengxiong Johannesburg Office: Song Fangchan Jakarta Office: Gu Shihong Kathmandu Office: Fu Yongkang Legal Advisor: Allen Wu ISSN 1943-1902

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NEWSCHINA I March 2016

Promoting innovation remains the key for China’s economy

I

n the past year, in order to address a sustained search institutions are characterized by pyramidal economic slowdown and achieve much- organizational charts. Successful reforms should desired economic restructuring, the Chinese alter these institutions’ organizational structures so government has launched quite they become more horizontal and a few initiatives, such as Made in team-based, with more liberal The bulk China 2025, Internet Plus and motivation mechanisms. of China’s the Innovation Development Secondly, China needs to crescientific Strategy. More recently, the leadate a better policy environment ership has called for “supply-side” for innovation. This should inexpertise and reforms to promote total factor clude strengthening legislative resources is productivity. efforts to protect intellectual located in It is clear that the core concept conducting structural State-controlled property, underwriting all of these initiatax cuts and providing subsidies research tives is increasing the incentives in relevant fields to encourage institutions. and ability to innovate, which the development of innovative the leadership has considered industries. Moreover, the govthe key to whether or not China ernment should also open up its can escape the so-called “middleregulatory procedures to encourincome trap” and become a highage and facilitate the acquisition income country. of foreign enterprises by Chinese To achieve the goals of these companies. initiatives, the government must Thirdly, given the higher level center its policies around specific of risk inherent in innovative infactors related to innovative industries. Firstly, as dustries, the Chinese government needs to estabState-owned enterprises (SOEs) account for about lish an adequate financing platform to fund the 40 percent of the economy, and the bulk of China’s sector’s sustainable development. Unfortunately, scientific expertise and resources is located in State- China’s plans to transform the Chinese stock marcontrolled research institutions, China should sig- ket into just such a platform were seriously disnificantly reform both SOEs and State-controlled rupted by market turbulence last July, which led research institutions in order to unleash the spirit to the securities regulator suspending IPOs, with of creativity in those entrepreneurs, scientists and market plunges in January once again dampening researchers who remain the country’s most valuable such efforts. assets in regards to innovation capability.

Despite these difficulties, the Chinese governWhile SOE reform – including allowing private ment should continue to actively seek means to capital to enter sectors previously controlled by attract more financial resources for its innovation SOEs and introducing multiple types of ownership initiatives. into the State sector – has been underway, more efGiven its importance in China’s overall naforts should be devoted to State-controlled research tional strategy, promoting innovation should institutions. continue to be among the top priorities of the Currently, most of China’s State-controlled re- Chinese government. 

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Contents

THE SHAPE OF THINGS TO COME?

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Editorial

politics

Cover Story

Society

environment

01 Promoting innovation remains the key for China’s economy 10 Calligraphers Association:

Graphical Graft

12

Economic Forecast Part Old, Part New/On Guard Against External Shocks/ Ownership Matters/Manufacturing Overhaul/Down to the Roots/Along the Belt and Road

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30 Fashion Designers:

Finding Their Voice 34 Winter Pollution:

Sounding the Siren

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P37 NEWSCHINA I March 2016

Photo by CFP

In a candid series of exclusive interviews, NewsChina talks to those in the know about the biggest year yet for China’s economic transformation.

Will 2016 make or break the world’s number two economy?

Contents

P42

P30 37 Biodiversity Decline:

Saving Species

Culture

56 Xu Lei:

Artist, Alone

International

40 North Korea Nuclear Test:

Stuck in the Past 42 Middle East Policy:

Shifting Sands Economy

44 Financial Discipline:

Battles in the Boardrooms advertorial

47 Samsung Electronics: Nurturing the Dreams of

Future Scientists Profile

48

52

Childless Parents: Sole Survivors Lu Qi: The Love Guru

NEWSCHINA I March 2016

P64

Visual REPORT

60 Chinese Food in Kabul

OUTSIDE IN

64 Captivating KL: The City of Many Commentary

72 One Belt, One Road will benefit China – and the world 04 MEDIA FOCUS 05 What They Say 06 NEWS BRIEF 08 Netizen Watch 46 China by numbers 66 real Chinese 67 Flavor of the Month 68 ESSAY 70 CULTURAL LISTINGS

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NewsChina, Chinese Edition

Fangyuan

January 11, 2016

December 28, 2015

Power Restriction

Environmental Litigation

Official statistics have shown that the number of corrupt Chinese officials at the city or bureau level who have been removed from office in recent years has skyrocketed. From 2003 to 2012, fewer than 200 officials at the bureau level fell from grace, but the annual total in every year since 2013 has surpassed that 10-year total, making this subsect the worst-hit area of officialdom, thanks to the continuing high-profile anti-graft campaign. This powerful group, typically in their 50s, includes Party chiefs, mayors of prefecture-level cities and senior officials in State-owned enterprises. Experts warned that the restrictions to power as stipulated by law and the rules regulating the integration of power and responsibility have to be more strictly followed in order to manage this large group more effectively. Besides, decentralization of powers to local branches by the Party’s Central Commission for Discipline Inspection, China’s top anti-graft watchdog, needs to accelerate to prevent the large-scale abuse of power by senior officials.

China Financial Weekly December 25, 2015

Tightening the Belt And Road It has been more than two years since the Silk Road Economic Belt and the Maritime Silk Road, otherwise known as the One Belt, One Road initiative, was made public in late 2013. According to China’s Ministry of Commerce, in the first three quarters of 2015, domestic enterprises registered an overall investment volume of US$12 billion in One Belt, One Road countries, signing contracts for over 3,000 overseas projects with a total value of nearly US$60 billion in areas including electrical engineering, real estate, telecommunications and petrochemicals. Analysts say the Chinese government’s next priority will be improving the infrastructure that connects One Belt, One Road countries, as well as boosting regional cooperation on industrial production through the introduction of more preferential funding policies and further promotion of overseas investment.

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When the Chinese Environmental Protection Law was revised and took effect on January 1, 2015, it marked the first time the law had been changed since its adoption 25 years ago. According to Friends of Nature, an environmental NGO, more than 40 public environmental lawsuits were lodged by nonprofit environmental organizations in China in 2015 under this law, yet only one case received a verdict. Several reached a settlement and the remaining lawsuits failed to yield a result. From 2000 to 2013 there had only been a total of 60 such lawsuits. Environmental law professors said hefty legal costs, lengthy evaluations of environmental damage and the absence of authorities that supervise conservation proved to be the main barriers standing in the way of environmental litigation in China, in addition to the continuing problems of the lack of trained lawyers and other professional staff in private environmental organizations.

Vista December 28, 2015

Overtime Work Chinese office workers often work overtime, particularly in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen. Employees in the tech industry endure the longest working hours, followed by staff in the real estate, trade and wholesale industries. According to a recent survey released by Chinese online recruitment site Zhaopin, only 28.6 percent of China’s office workers actually work a standard eight-hour day, with 24.3 percent working an extra one to three hours per week, 12.8 percent working an additional five to 10 hours, and 11 percent working an extra 20 hours or more every week. In another report by China Youth Daily, 600,000 people die from working too hard every year in China. Human resources experts said that rocketing housing prices as well as growing job pressure are beginning to lessen the appeal of China’s first-tier cities.

Oriental Outlook December 17, 2015

Delivery Boom Before China’s private delivery companies received official business licenses in 2009, they had been struggling for survival, frequently getting fined or having business suspended for “illegal operations.” The e-commerce boom in recent years boosted the explosive growth of the courier industry, particularly that of private companies, which seized the majority of a market that had previously been dominated by State-owned firms. Data from China’s State Post Bureau show that over 20 billion packages were delivered in China in 2015, and in the next few years it is expected that the delivery industry will continue to thrive. Nevertheless, the identical services, fierce price competition, lack of qualified employees and weak management of the industrial chain are affecting the industry’s steady growth.

NEWSCHINA I March 2016

“The biggest problem is Jack Ma. Brick-and-mortar shopping malls are hit hard by e-commerce.”

“I believed men should conquer both the world and women. It was an index of success.”

Zhou Wenbin, former president of Nanchang University,

in a public “self-criticism”written after he was sentenced to life imprisonment for embezzlement and bribery.

Illustration by Wu Shangwen

Yang Junting, a consultant member of the China Shopping Malls Commission, referring to Alibaba’s CEO in a critique of what he calls unfair competition from online retailers.

“Urgent emissions reduction [measures] are... like shock treatment. Long-term pollution controls depend on industrial upgrading, clean energy and energy efficiency, which, according to global experience, will not effect radical change for 30 to 50 years.”

Municipal Environmental Crisis Center director Zhang Dawei, warning Beijingers to brace themselves for a long campaign against smog.

“What worries me about‘Made In China 2025’ is the prospect of a new round of duplicate construction.”

Feng Fei, China’s deputy minister of industry and

information technology, warning against reverting to an earlier model of industrial expansion.

“80 percent of my foundation’s projects will focus on the mainland. Nobody can change my mind.”

Hong Kong’s richest resident, real estate tycoon Li Kashing, denying rumors that he is pulling his assets out of the Chinese mainland.

“I don’t think that middle-aged women square-dancing in public spaces falls into the category of‘Chinese characteristics.’I think they would give it up if they had something better to do.”

Xiang Zhaolun, China’s deputy cultural minister, appealing

for more diverse cultural activities targeting middle-aged and elderly people.

NEWSCHINA I March 2016

“The State Council and the Ministry of Finance have issued nearly 40 documents on financial reform in the last two years. That’s almost two per month. How could lower-level departments possibly digest so many documents in so short a time, let alone implement their requirements?”

Liu Shangxi, director of the Research Institute for Fiscal Science, Ministry of Finance, speaking at the 2015 China Reform Forum.

“During a meeting, I found many of my colleagues habitually checking WeChat every two or three minutes. I don’t think that a good product should be addictive.”

Zhang Xiaolong, president of the company behind social media app WeChat, hinting at a change in direction for his company during a public lecture in Guangzhou.

“Anti-corruption campaigns launched by administrative bodies or executive orders have indeed curbed corrupt practices, but without a unified set of rules, haphazard crackdowns may have a negative impact on the economy and politics.”

Li Yongzhong, former deputy director of anti-corruption think tank China Discipline Inspection Institute, warning that current anti-corruption efforts lack a systematic approach.

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Top Story

Xi in Chongqing

Chinese President Xi Jinping visited Chongqing, a municipality that straddles the Yangtze River in southwestern China, from January 4 to 6.

This marked the first time Xi chose to travel to a developed city instead of a poverty-stricken one for his customary

New Year visit since becoming president in 2013. Analysts attributed the change to China’s entry into the “new normal” state of economic development, characterized by a growth slowdown and industrial upgrading. Chongqing, which stands out for its economic

transformation, sets a good example for other Chinese cities. At the same time, given that the city’s Guoyuan port is a key link connecting the Yangtze River to the rest of the planned route of China’s One Belt, One Road initiative, Xi’s visit shines a light on this national endeavor.

The city is also known as a terminus of the Chongqing-Xinjiang-Europe International Railway, which stretches from Chongqing to Duisburg, Germany.

On his visit, Xi first went to the Guoyuan port, an inland hub connecting railways, highways and waterways, then stopped by the offices of BOE Technology Group, a global supplier of semiconductor displays that has large manufacturing bases nationwide.

According to Xinhua News Agency, Chongqing has seen significant development in its pillar industries since 2013, including the auto industry and IT equipment manufacturing. Its GDP grew by 10.9 percent year-over-year in 2014 to 1.43 trillion yuan (US$220bn), while the GDP growth rate in 2015 is estimated to be 11 percent.

Economy

‘Circuit Breakers’Die Young China Securities Regulatory Commission (CSRC) suspended the new stock market “circuit breakers” on January 7 after just four days of use by mainland markets.

The circuit breakers were meant to curb market free-fall by automatically pausing trading for 15 minutes if the composite index (the CSI 300) fell by more than 5 percent compared to the closing index of the previous trading day. If it dipped by more than 7 percent, trading would close for the day.

However, the new mechanism did not help control market risk – Ashares suffered a dramatic drop in 2015, inciting further investor panic over falling share prices. During the circuit breakers’ four-day life span, China’s stock markets in Shanghai and Shenzhen triggered them twice, the second occurrence happening just minutes after the market had opened for the day.

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Given that the CSRC has set a fluctuation threshold of 10 percent for individual stocks, many experts saw the circuit breakers as unnecessary.

Some others attributed their failure to the fact that the circuit breakers triggered at too cautious a limit.

NEWSCHINA I March 2016

Development

China Inaugurates Two New Armed Services

Airport in Nansha (Spratly) Islands Ready for Service

On December 31, 2015, the Central Military Commission (CMC) of the Communist Party of China officially founded the Rocket Force and the Strategic Support Force as two new branches of the People’s Liberation Army (PLA), and also formed a new general command headquarters for the PLA. According to Chinese media reports, the Rocket Force replaced the Second Artillery Corps (SAC) of the PLA, which has commanded China’s strategic missile array since 1966. The SAC answered solely to the CMC in China’s military hierarchy, placing the new Rocket Force on the same level as the PLA Army, Navy and Air Force.

The new Strategic Support Force will focus on col-

lecting intelligence and cyber defense, which is playing an increasingly important role in modern warfare.

China is now launching sweeping military reforms that focus on restructuring and stamping out corruption. The latest reforms, including the formation of the PLA Army general headquarters, show that the PLA intends to streamline command by establishing more functional administrations directly under the CMC and replanning military zones to better balance military strength between the ground, navy and air forces.

Policy

‘Two Child Policy’ Goes Nationwide The Chinese government issued its revised family planning law at the end of 2015, allowing every married Chinese couple to have two children.

To encourage people to have more children more quickly, lawmakers retracted former legislation that rewarded those who marry and have children at a more advanced age with longer leave, a measure that has angered many single people who are in their late 20s or 30s.

The revised policy will continue to give assistance to families who have lost their only children. The article that guaranteed this was originally removed in a previous draft, triggering a round of public criticism.

Easing the ban on second children has been a hotly debated topic for years, as more and more experts warned that China’s rapidly aging population has created a serious demographic problem. However, given the heavy financial burden that comes with raising two children instead of one, many couples feel reluctant to have a second baby, according to media reports. Experts have called for the government to give couples a financial incentive to have second children.

Employment

Chinese Mainland Wage Raises Among Highest in East Asia

On January 6, two governmentchartered civilian aircraft landed safely on the runway of a new airport on Fiery Cross Reef, located in the Nansha (Spratly) Islands. The planes had taken off two hours prior in Haikou, the capital of Hainan Province.

Their successful flights set a milestone for China’s construction projects in disputed areas of the South China Sea. According to Chinese media reports, the new airstrip was built on land that China has reclaimed and expanded to an area of 2.8 square kilometers, a process that began in late 2013.

The trial flight aroused protest from some of China’s neighbors, including Japan and Vietnam, while China’s foreign ministry responded that China has sovereignty over the islands.

On January 8, retired major general Xu Guangyu revealed to Hong Kong newspaper South China Morning Post that a trial military flight might be conducted in the following months.

Experts believe that Fiery Cross Reef will serve as a regional logistical center for China’s civilian and military activities.

Employers on the Chinese mainland plan on giving employees large raises in 2016, according to a report released by global recruiting group Hays on January 14.

The 2016 Hays Asia Salary Guide analyzed salary and recruitment trends based on data from more than 3,000 employers representing six million employees on the Chinese mainland, Hong Kong Special Administrative Region (HKSAR), Singapore, Malaysia and Japan. The research showed that 29 percent of Chinese mainland employers intend to increase wages by 3-6 percent in 2016, 44 percent plan a 6-10 percent boost, and 16 percent plan to raise salaries by more than 10 percent.

By contrast, 63 percent of employers in Japan plan to increase pay by no more than 3 percent. The majority of employers in HKSAR, Malaysia and Singapore expect to raise salaries by 3-6 percent.

Chinese mainland employers stood out for high increases in salary last year as well – 50 percent of mainland employers raised wages by 6-10 percent in 2015, while 13 percent hiked wages up more than 10 percent.

According to the guide, an insufficient salary and benefits package is the key reason why 41 percent of mainland candidates re-enter the job market, while the most popular reason for remaining with an employer is a healthy work-life balance.

NEWSCHINA I March 2016

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Photos by Xinhua, CFP and CNS

Military

Pleasing

Poll the People

In early January 2016, Chongqing residents went to the local Yangjiaping pedestrian street to take photos of 39 new road blocks, which are sculpted in the shapes of different colorful fruits.

Netizens cheered the designs, claiming that they have made Chongqing stand out from China’s other “dull and characterless” metropolises.

After the Chinese government issued its new family planning law to allow all married couples to have two children, demographer He Yafu suggested lowering the statutory age of marriage from the current 22 (for men) and 20 (for women) to 18 for both genders.

What do you think?

I support it. 18-yearolds are adults and should be free to marry.

2,985 51.2%

Moving Despite 40 years of experience teaching in a remote village of Lingchuan County, Shanxi Province, Song Yulan has seen her monthly salary pegged at around 150 yuan (US$23) since 2000. She told the media that despite her despair, she could not bear to leave her students. Pressured by netizens, the local government raised her salary to 900 yuan (US$138). Netizens have appealed for the government to take better care of rural teachers, especially the temporary ones who are often marginalized because they are not a part of the official education system.

I don’t support it, because most 18-yearolds are still full-time students and unable to support a family.

2,629 45% It is hard to say. 222 3.8% Source: www.sina.com.cn

Most Circulated Post Retweeted 376,120 times by January 7

Provocative

Compelling

A netizen recently revealed that some Chinese retailers have begun steeping live owls in alcohol, claiming the resultant liquor to be a good treatment for rheumatism. A reporter who searched “owl in alcohol” on a Chinese search engine reportedly found over 30,000 related entries. Netizens were horrified, criticizing the country’s forestry administration for failing to protect wild owls, which are Category B protected animals.

An elementary school teacher from Qingdao, Shandong Province, recently revealed that a group of students in her class formed an “alliance” to jointly protest their parents having a second child. China’s removal of its controversial three-decade-old One Child Policy has worried many only children that they will lose their parents’ love if a sibling comes along. Netizens suggested that it would take time for both parents and children to adapt to the new law.

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Chinese President Xi Jinping visited the PLA Daily, the official paper of the People’s Liberation Army (PLA), on December 25, 2015, where he used the paper’s microblog account to post a New Year greeting to all members of the Chinese armed forces. Many netizens left messages suggesting that Xi open a personal microblog, like US President Barack Obama’s Twitter account.

“I, on behalf of [the Communist Party of China] and the Central Military Commission, wish all military officers, armed police and militia members a happy New Year. I hope that we will make joint efforts to strengthen our military and to realize our dreams of a strong military and a strong country.”

NEWSCHINA I March 2016

WHO’S

Top Five Search Queries On

HOT? WHO’S NOT?

by January 7 “Circuit Breaker” 666,578

China’s new financial “circuit breaker” system, designed to halt trading if stocks rose or fell too rapidly, was mothballed four days after entering service on January 4.

2.5-Day-Weekend? 452,315

The Chinese government recently encouraged Chinese employers to give employees 2.5 days of leisure time each week, which many doubted would be possible in the private sector.

Palace Proposal

CNH Weakened 169,342

The exchange rate of the offshore yuan (CNH) dramatically dropped to around 6.60 against the US dollar in the first week of 2016.

As many as 1,000 men, many of them believed to be immigrants, allegedly harassed, raped and robbed women outside the railway station in Cologne, Germany, on New Year’s Eve.

North Korea Tests H-bomb 107,375

North Korea announced on January 6 that they had successfully detonated the country’s first hydrogen bomb, leading to criticism from China.

Top Blogger Profile Feng Tang Followers: 8,722,643 by January 15 Chinese poet Feng Tang came under fire after he published a fanciful translation of Stray Birds by Indian poet Rabindranath Tagore. Feng’s style took Tagore’s subtle language and injected it with sentimental, sexual and even pornographic imagery. One phrase, “The world puts off its mask of vastness to its lover,” was rendered into Chinese as “a man unfastens his pants and gives his lover a long, soft French kiss.” Feng’s readers soon clashed over the translation, while academics slammed Feng for breaking a basic rule of translation – remaining faithful to the original text. Supporters argued that Feng’s translation “rhymed better” and better displayed the “elegance of the Chinese language” than some well-known versions of the same work.

Under mounting pressure, Feng’s publishing house later withdrew his translation from bookstores, triggering another round of protest from readers who argued that only the market can judge a product. Feng himself criticized the recall, claiming that anybody could criticize his poems, but nobody should interfere in how he writes and translates. Writer Hou Hongbin publicly condemned the move as “censorship,” warning that it would “strangle people’s creativity.” Feng retweeted her post with the message: “I am a small bird flying away.”

NEWSCHINA I March 2016

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

Sexual Harassment in Germany 164,626

Li Shun, a young Chongqing man, spent 150,000 yuan (US$22,800) building a “castle” for his girlfriend before he proposed to her. Li said that the remodeled warehouse, situated on the hilltop where they first met, was designed based on his girlfriend’s dream home. Many netizens called Li every woman’s “dream man.”

Paternal Poisoner Lacking money to have his daughter’s leukemia treated, a man in a rural area of Hebei Province allowed venomous snakes to bite her, believing he could “cure poisoning with poison,” a common idiom in China. Though netizens described themselves as sickened by the man’s ignorance, they called on the government to improve healthcare funding.

Street Philanthropist Despite his comfortable pension, Wei Sihao, a 77-year-old man in Hangzhou, Zhejiang Province, helped fund impoverished students for years by collecting trash. His good deeds only came to light after his death in a car crash, when his daughter found records of his donations.

Laughable Largess A man in Qingdao, Shandong Province, was recently revealed to have thrown an unknown number of banknotes into the air during a class reunion, video of which quickly surfaced online.

Netizens commented that in a money-worshiping society, reunions have simply become another means to flaunt wealth.

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Politics

Calligraphers Association

Graphical Graft

Controversies surrounding one of China’s largest artist associations, the China Calligraphers Association, have sparked calls for its disbandment

Photo by CFP

By Li Teng and Yuan Ye

A local calligraphers association in Hangzhou, Zhejiang Province, holds a “ground calligraphy” demonstration to celebrate the second anniversary of its founding, December 8, 2012

T

he election of the chairperson, vice chairs and the council of the China Calligraphers Association (CCA), an event which rarely elicits much public interest, recently unleashed a nationwide storm of questioning, criticism and mockery.

On December 7, 2015, the Seventh National Congress of the CCA was held in Beijing, with its main aim being the election of a new chairperson. 14 vice chairs and 195 council members were also up for election.

However, a couple of weeks before the poll, a list of candidates for the positions of chairperson and vice chairs was already circulating among prominent collectors of contemporary Chinese calligraphy, who immediately began buying up the works of every name on the list. The election results vindicated their shopping spree. All those listed were duly elected, and the prices of their works immediately doubled.

Although similar lists were said to have circulated for some time, this one seemed to finally light the fuse on a powder keg of discontent and complaints. A number of CCA members and calligraphers such

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as Zeng Xiang, Qi Jiannan, Wang Haiquan and Feng Zhengming implied they would quit the association, shaking public faith in the credibility of this self-described “people’s professional non-government organization” made up of China’s foremost calligraphers. Along with this scandal, more allegations of corruption within the association have bubbled to the surface, including fraud, membership trading and the use of calligraphy to bribe government officials.

Two Photos

As alleged evidence of the CCA’s chaotic situation, two photos that have emerged online have been circulated widely.

One is the ballot for the CCA leadership election, upon which electors can apparently only choose to abstain or vote against candidates.

Any ballot that doesn’t include a vote against a candidate, therefore, becomes an automatic vote in favor of those listed. A mid-level cadre representing the CCA confirmed the authenticity of this image to NewsChina. “The result has actually been fixed before the vote,” he told our reporter.

The controversy surrounding the latest CCA election process has dogged the fledgling premiership of new chairman Su Shishu. “Su is very senior in the CCA. But his calligraphy is not so convincing,” a source within the CCA, who preferred to remain anonymous, told NewsChina.

Su was born in Beijing in 1949, and studied under famous calligraNEWSCHINA I March 2016

phers Liu Boqin and Qi Gong. He formerly served as president of the Cultural Relics Publishing House under China’s State Administration of Cultural Heritage, as well as vice chairman of the CCA and the head of its Seal Cutting Committee. Our anonymous CCA source told NewsChina that Su’s skills as an engraver were “excellent,” but that his calligraphy was more lackluster.

A second image, the authenticity of which was also confirmed by our CCA source, is a work by Su Shishu. Completed in 2007, the work quotes a household phrase from The I Ching. However, Su’s complementary commentary, also visible in the image, mistakenly attributes the phrase to the Zhuangzi, a Taoist classic by philosopher Chuang Tzu. Su’s questionable “knowledge” of ancient Chinese culture, as well as his skills as a calligrapher, has made him the target of mockery on the Internet.

Moreover, Su’s ability to lead the CCA has also been called into question. In the view of many of his opponents, Su is seen as a “good guy,” but not a capable one. “[Su] is not able to lead reform of the CCA,” another anonymous source from the CCA told NewsChina. According to the same source, Su has not appeared at work once since being elected on December 7, 2015. “He’s just an image and a symbol. He participated in no real work,” the source added.

Serving on the general council of the CCA is also lucrative for those elected. Not only will the market price of a council member’s work rise sharply upon election, the position typically comes with nominations to the presidencies of lower-level calligraphy associations around the country, giving council members further opportunities to enrich themselves. During the latest election process, a government official and part time calligrapher also got his name on the candidate list for council members. Only a boycott by other CCA members, who called his artistic credentials into question, drove him off the ballot.

Price

The CCA was not always dogged by scandal. Its founding in 1981 was hailed as an inspiration to not only calligraphers in China but all admirers of traditional Chinese arts. For a long time after the founding of the People’s Republic of China in 1949, calligraphy, other than that penned by Communist leaders on revolutionary topics, was seen as a feudal art form to be squashed. The first major summit of classical calligraphers on the Chinese mainland, the “Chinese Calligraphy Congress,” was held in 1978, the year the Communist Party launched its policy of Reform and Opening-up.

However, given the social and political resources commanded by “people’s organizations” in China, the potential and influence of the CCA were soon realized by those in the calligraphy industry. Membership could automatically bestow both fame and wealth. For some calligraphers with political interests, it could also facilitate bribery.

One famous example of a government official exchanging calligraphy for favors occurred in the late 1990s. After becoming a CCA member and then getting elected to its council, former deputy governor of Jiangxi Province Hu Changqing started selling his calligraphy.

Average prices for his works usually fell within the range of 3,000 to

NEWSCHINA I March 2016

6,000 yuan (US$361-722 at the time). However, one piece was recorded as selling for 90,000 yuan (US$10,800). Hu was later arrested for corruption, and ultimately found guilty of taking bribes worth some 5.5 million yuan (US$663,000). He went on to become the first deputy provincial governor to be executed for corruption since 1949.

Another famous case involved Chen Shaoji, former chairman of Guangdong’s People’s Political Consultative Committee, who spent 10 million yuan (US$1.33m then) to be nominated as chairman of Guangdong’s provincial calligraphy association. Chen was arrested for corruption in 2009, and was sentenced to death with reprieve.

Becoming a CCA member does not, according to insiders, come cheap. According to one source, potential candidates need recommendations from two current members, two published theoretical essays on calligraphy and two “awards of excellence” in national-level calligraphy competitions. Still, certain relationships are often needed to secure a nomination. The same source told NewsChina that a 20-something “calligrapher” from northeast China recently became a CCA member. “I asked him what relationships he used and how much he spent, and he told me he spent 60,000 yuan (US$9,500),” the source told our reporter.

When the CCA was first founded, it was run by a single secretariat.

Yet rapid expansion has seen the organization outgrow its administrative departments, with a current total of eight professional committees covering different schools of calligraphy, and nine work committees in charge of education, publishing and business development. Each committee has its own director, secretary-general and membership of around 40 people. A mid-level cadre in the CCA told NewsChina that the level of efficiency in terms of coordination between these multiple departments and committees was very low. “The benefit is that there are more posts for more people,” he said.

The CCA’s membership has also increased sharply. “The CCA currently has about 12,000 members,” said one insider. The result has been that the supply of members’ works has outstripped market demand. “Now, except for those of the leadership, it’s difficult for members’ works to sell at a good price,” the same source told our reporter.

Discontent towards the CCA has been mounting in past years, with voices among China’s online commentariat frequently calling for its disbandment. Even some CCA members admit that the association can no longer represent the pinnacle of Chinese calligraphy – many outstanding calligraphers have declined to join, or have never been nominated.

But still, some are optimistic about the organization’s future. A mid-level cadre told NewsChina that the CCA is trying to reform. He held up the skills test required for membership as an example of this.

In the past, candidates didn’t have to be present for the examination, a peculiarity that led to cheating. Now, since the presence of candidate calligraphers is required, “many give up,” the source said.

“The pursuit of art is something that comes from deep in one’s heart,” the anonymous cadre continued. “No matter if it’s in the CCA or in the wider world of calligraphy, opportunists are always in the minority.”

11

Cover story

what’s next?

12

NEWSCHINA I March 2016

After a year of stock market turmoil and slower GDP growth, the state of China’s economy continues to capture headlines around the globe. The country has colossal tasks on its to-do list. It needs to shift focus from its aging manufacturing industry to its fledgling service sector. It needs to reform its State-owned enterprises and balance out heavy-handed government intervention in its capital markets. And it needs to prepare to expand globally through its One Belt, One Road initiative, while remaining wary of rough external economic factors. In short, 2016 promises to be a year of challenge and change.

NEWSCHINA I March 2016

13

Cover story

‘The cost of labor, land and environment has risen to the point where high-speed growth that relies on sizable inputs from these three elements is no longer possible.’

A

Economic Forecast

Part Old, Part New

State Council economist Wang Yiming discusses whether or not China’s hybrid engine can successfully propel its economy forward during the transitional period of 2016

By Min Jie and Li Jia

14

hybrid engine began to drive China’s economy in 2015. The conventional part, fueled by labor, land and capital, is losing steam; the new part, fueled by innovation and entrepreneurship, is developing. This has infused China’s economic future with great uncertainty. In the past few months, China’s central government has established a two-pronged strategy based on both aspects of this engine.

While boosting demand to stabilize the former, the country is accelerating structural reform to provide consumers with better goods and services in order to power the latter.

However, the trick is that the efforts of one side may at times offset the effects of the other. According to a statement made after the Communist Party of China Central Committee’s annual meeting on economic affairs at the end of December, five tasks are on the to-do list to improve supply: eliminating industrial overcapacity, reducing excessive inventories (mainly housing), cutting the debt ratio, easing corporate operational burdens and fortifying weak foundations wherever they may be.

The first task may mean shutting down factories, which would dampen demand rather than boost it.

Is it possible for China to dump its overcapacity and at the same time keep growth stable? How can the seeds of new dynamics be cultivated?

Wang Yiming, deputy director of the Development Research Center of the State Council, gives his answers to these questions in an exclusive interview with NewsChina.

NewsChina: What is your view on China’s economic situation in 2016?

Wang Yiming: I think China’s economy will experience a steady slowdown in 2016 until it reaches a turning point, when it will begin to pick up again.

If we look at the demand-side troika: exports will continue to grow slightly, with some fluctuations, and consumption growth will remain steady. It is investment that will be the key variable of the three and define the demand matrix.

Investments in both real estate and manufacturing will hit bottom before turning around, while investment in infrastructure will shrink slightly. This moderate downtrend in investment will pave the way for stabilizing the whole economy at a certain level.

Systematic reform on the supply side is scheduled to launch in 2016.

This means that efforts to eliminate overcapacity and “zombie enterprises” [whose survival relies on government support] will be beefed up considerably to reallocate resources to places where they will produce more efficiently. This is a source of endogenous dynamics within the economy.

In the meantime, positive expectations will grow in the market as new technologies, new products and new business models emerge faster than ever and make up for the weakened momentum of conventional forces.

NEWSCHINA I March 2016

Two Years of Economic Indicators January-November 2014 January-November 2015 Share of infrastructure investment in total fixed asset investment NC: Investment in infrastructure mega projects still underlies current efforts to stabilize growth. Will it really stop the slowdown?

WY: Huge investment in this sector has not only fundamentally rebuilt China’s infrastructure, but has also contributed to the growth of the economy. It is true that the improved condition of China’s infrastructure means fewer investment opportunities and returns in this sector [in the future]. However, it is necessary to take advantage of lowered costs [in raw materials and capital] and invest in infrastructure projects that will improve consumption and living standards, such as broadband networks, subways, underground duct systems, parking lots, tourist sites and charging stations for electric vehicles. The key is to make investment more efficient at a reasonable scale so that it can benefit the whole economy.

NC: What do you think is the biggest obstacle in solving industrial overcapacity?

WY: Debts, unemployment and asset liquidations are intense pressures. For example, local governments, short of either strong determination or effective tools, are inclined to rescue struggling enterprises out of fear of massive unemployment, social unrest and their own GDPoriented political careers. Corporate debts will immediately become bad loans once bankruptcy is filed. This is the last thing that State-owned bank officials responsible for these loans would ever want. Local courts do not actually have the experience or professionals needed to deal with a surge of corporate restructuring and liquidation. Incumbent officials of State-owned enterprises on the brink of collapse are afraid of being accused of causing losses of State-owned assets if they declare insolvency.

Despite all of these pressures, the longer they put off taking action, the more built-up the risk will become, until it’s too late.

NC: What are the differences in the newly launched supply-side reform in comparison with the old concept of demand-side stimulus?

WY: Stimulus on the demand side is more about government-sponsored investment, while reform on the supply side is designed to let the market reallocate resources from low-efficiency areas suffering from overcapacity to more efficient areas with high demand.

A lot needs to be done to realize this. The government has to intervene in the market less, but provide it with better services at the same time.

More sectors have to be opened up to private investors. State-owned enterprises need more diversified ownership. Taxes and fees have to be reduced to ease corporate burden. Geographic segmentation and industrial monopolies have to break down to let resources flow effectively between different markets.

Supply-side reform does not mean a complete withdrawal of demandside stimulus. Without an environment of stable, reasonable growth NEWSCHINA I March 2016

16.7%

Year-on-year change in China’s foreign trade surplus

17.9%

Year-on-year change in property floor space sold

-8.2%

7.4%

42%

78%

Sources: China National Bureau of Statistics, China General Administration of Customs

based on releasing consumption and investment potential, conditions for supply-side reform would be closed off and difficult.

NC: Should supply-side reform be focused on the manufacturing, service or tech sector?

WY: Big changes have already taken place in market demand. People want more diversified, higher-end products and services. They are not satisfied with what they are offered now. Supply-side reform is meant to encourage market competition to provide the kind of supply to meet changing consumer demands. The decision of picking a particular sector, be it manufacturing, service or tech, should be left in the market’s hands, not any individual’s.

NC: As you have mentioned before, the five-year period from 2016 to 2020 is the “window” in which China will flip the switch from the old driving force to the new one [in the country’s hybrid engine]. What impact will this transition process have on China’s economy?

WY: The old and new engines will work together for some time. This is what China’s economic “new normal” basically looks like. The old engine will remain important, though it will no longer be as powerful as it used to be. The cost of labor, land and environment has risen to the point where high-speed growth that relies on sizable inputs from these three elements is no longer possible. However, the new engine alone is still too small to drive the economy independently. Using the old engine effectively can lay a sound foundation and buy time for the new engine to develop.

In the time to come, higher productivity and investment returns have to be achieved through both the old and new engines to make them work together effectively. In this process, corporate restructuring, capacity reduction and corporate bankruptcy are the biggest challenges. We have to get ready, and have contingency plans for the risky road ahead. 

15

Cover story

‘The possibility of a global crisis cannot be excluded while the debt supercycle in developed economies has yet to end.’

A

Economic Forecast

On Guard Against External Shocks

The disappointing performance of emerging economies and the debt supercycle plaguing developed economies will continue to weigh on global growth in 2016. World players are trying to rewrite the rules of international trade and investment. Economist Yu Yongding analyzes whether or not China will submit to these external pressures

By Min Jie and Li Jia

16

ccording to traditional Chinese wisdom, the “right climate” is the first of three conditions necessary for success. The other two are “right place” and “right people.” In 2015, the world economy went through financial market turbulence and experienced more slowdown in growth. It appears that this situation will continue in 2016, which means a favorable economic climate may not be possible for China as it journeys towards the goal of doubling its 2010 national GDP and average per capita income by 2020.

In a January 4 interview with the International Monetary Fund’s (IMF) online magazine IMF Survey, IMF Economic Counselor and Director of Research Maury Obstfeld predicted “an abundance of challenges” for the world economy in 2016, including sagging commodity prices, US interest rate hikes, the refugee crisis in Europe and China’s difficult transition towards more service- and consumptionoriented growth.

In 2015, China made progress on increasing its say in world trade and investment rule-making. The Chinese yuan was included in the IMF’s Special Drawing Rights (SDR) currency basket, an international foreign exchange reserve asset. US Congress finally approved long-delayed reform that will give developing economies, particularly China, more clout within the IMF, reform which was agreed upon by the G20 in 2010. However, the stronger dollar and the US’s attempts to maintain its position as lead decision-maker in world trade and investment indicate a bumpy road ahead for the yuan’s internationalization and China’s role in international economic governance.

Professor Yu Yongding, member of the Chinese Academy of Social Sciences and former member of the monetary policy committee of the People’s Bank of China, speaks to NewsChina about how external risks could affect China’s economy.

NewsChina: What is your take on world economic prospects in 2016?

Yu Yongding: ‘Persistent stagnation’ is what I would say about the world economy in 2016. In the five years after the global financial crisis flared up in 2008, the world economy grew by about 5 percent annually. However, the IMF’s regular survey, World Economic OutNEWSCHINA I March 2016

look [published twice a year, last updated in October 2015], shows that pace slowed to 3.1 percent in 2015 and will be 3.6 percent in 2016. Developed countries are expected to report 2 percent growth in 2015, their best figure since 2010, and developing ones will likely report 4 percent growth, well below the 5 percent growth in 2013 and 4.6 percent in 2014.

NC: How will the performance of developed and emerging economies diverge in 2016?

YY: Among developed economies, the US is displaying the strongest momentum in terms of recovery from the 2008 crisis. In 2014, the IMF estimated that the US would reach a 2.6 percent growth rate in 2015. However, the US Federal Reserve has forecast a lower one, 2.1 percent.

The eurozone began to enter a period of weak growth in the fourth quarter of 2013, accelerating to a more than 1 percent growth rate at times in 2015 before dipping back to slightly above zero last September.

Japan did the worst among developed economies, with negative growth in both the second and third quarters of 2015.

Emerging economies are also struggling. Two of the five BRICS countries, Brazil and Russia, are already in recession. South Africa is on the brink of recession. India is enjoying a positive forecast; it is predicted to sustain its speedy growth rate of 7 percent or higher, making it the only bright spot in the global economy.

The slowdown in nearly all major economies has placed developing economies that are commodity export-oriented into a difficult situation, leaving recession an unavoidable outcome for many of them.

Since 2008, nearly all of the world’s economies have put expansive fiscal and monetary policies to work in order to stimulate growth.

In spite of this, the world economy is still far from being back to pre-crisis conditions. This can only be explained by reasons that are more deep-rooted than insufficient effective demand. Possible reasons include the slower advancement of technology and a quickly aging society.

Given this, the world economy’s real recovery will not come about NEWSCHINA I March 2016

before new innovations and breakthroughs in technology improve the productivity of labor and capital inputs, and investment demand and lending rebound.

As the world’s largest trader, China must get prepared for the persistent stagnation of the world economy.

NC: What are the chances we’ll experience another global crisis to some degree?

YY: The possibility of a global crisis cannot be excluded while the debt supercycle in developed economies has yet to end.

In essence, the 2008 global financial crisis was a debt crisis. Developed countries, especially the US, had built their high spending on low savings, leading to an unprecedented internal and external debt burden. This is how their debt supercycle came into being.

In the aftermath of the collapse of the real estate bubble and the emergence of the subprime mortgage crisis, people in the US had no choice but to cut their debt ratios by foreclosing, defaulting or borrowing less. This then turned the subprime mortgage crisis into an economic recession. The US government adopted expansionary fiscal policy and lax monetary policy to defend the economy from being hit too hard by residents’ efforts to reduce their debt. As a result, the US’s public debt went up drastically while residents’ debt decreased significantly.

Other developed economies shared a similar story arc. The global debt ratio is still high, with debt just moving around in different sectors. In other words, the longest and biggest debt supercycle in world history has not ended, which means the fuse that detonated the 2008 global financial crisis is still there.

If it is fair to say that the 2008 global financial crisis was triggered by the bursting of the US housing bubble, then a future crisis may likely be caused by the bursting of the US Treasury bond bubble. As the biggest overseas holder of US Treasury bonds, China should not overlook this risk.

NC: What about emerging economies? They are suffering a slowdown in growth and capital outflow against a strengthening US dol-

17

Cover story

‘As the world’s largest trader, China must get prepared for the persistent stagnation of the world economy.’

lar. Is it possible that a major emerging economy will become trapped in a crisis that spreads to others, perhaps even repeating something similar to the Asian financial crisis in 1997?

YY: It is quite possible that a crisis may happen to a major emerging economy. In fact, Brazil is already in a severe recession.

However, a sweeping crisis among developing economies, like the one in Asia in 1997, is not likely.

Firstly, the US Federal Reserve will taper off quantitative easing rather than suddenly eliminating it. It intends to gradually, over at least three to four years, raise the federal funds rate, the benchmark interest rate, to 3-3.5 percent, up from the previous near-zero rate [instated in December 2008]. Secondly, developing economies are more equipped than ever to resist external shocks. They generally hold healthy foreign exchange reserves and maintain flexible foreign exchange systems, which was not the case in 1997.

NC: With a massive amount of US Treasury bonds in hand, how can China deal with the possible impact of the change in the US’s monetary policy?

YY: It is hard to foresee the spillover effect of the US Federal Reserve’s policy. However, it is very likely that the stability of developing economies is at stake, at the very least.

Quantitative easing in the US means printing money. Since the subprime mortgage crisis started, the US’s money supply has risen from US$800 billion to about US$4 trillion, in terms of currency in circulation [a definition of money supply termed ‘M0’], from about US$1.4 trillion to US$3 trillion in terms of M1 [or “currency held by the public and transaction deposits at depository institutions” as described by the US Federal Reserve], and from less than US$8 trillion to more than US$12 trillion in terms of M2 [M1 plus other deposits and financial market mutual funds]. By any of these standards, the growth of the US’s money supply far outpaced the growth of its GDP over the past few years.

However, this “helicopter drop” of money, as described by Ben Bernanke, former chairman of the US Federal Reserve, has not turned into inflation in the US. [Bernanke earned the nickname “Helicopter

18

Ben” after a 2002 speech in which he cited this phrase of economist Milton Friedman’s, which characterizes fighting deflation with a loose monetary policy.] One possible reason for this is that excessive money did not enter into the real economy, but created various asset bubbles [in stock and bond markets, for example]. Once prices of these assets stop rising, the bubbles will burst. Then the money will withdraw from the capital market and enter the real economy, leading to inflation.

From a long-term perspective, the US has been recording a currentaccount deficit since 1982 and has accumulated more than US$7 trillion in net external debt. Rational investors outside the US have no reason to continue buying US dollar-denominated assets and keep the US dollar strong.

In the meantime, the US has the incentive to devalue the dollar to improve its international payment position and ease its external debt burden.

Given the uncertainty of the spillover effect of US monetary policy, China should strengthen, and not dismantle, the firewall against short-term capital flow in order to secure economic stability.

NC: Regional trade rules are changing. How will this affect China’s foreign trade in the future, particularly after the pressures in 2015?

YY: Exclusive regional free trade arrangements are increasingly replacing multilateral trade negotiations within the World Trade Organization framework. They pose a great challenge to the liberalization of global trade and investment. China’s room for foreign trade expansion will also be squeezed as a result.

The US has been trying hard to be a leading decision-maker in new world trade and investment by building the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership and the Trade in Services Agreement. It has revealed its intention to exclude China from the world trade and investment rule-making process. China can find a way out of this by being an active participant in various negotiations on trade liberalization to defend its own interests and pursue a win-win result for all. China should also waste no time in improving its growth model with higher quality trade and investment with the NEWSCHINA I March 2016

The World Economy in 2016 Gross government debt-to-GDP ratio in advanced economies, according to IMF projections 245.9% 247.8%

2015 2016

104.9% 106%

93.7% 92.8%

US

NEWSCHINA I March 2016

Russia

-30.4 -37.8 -72.8

UK

Developing and emerging Europe

South Africa

Mexico

India

Brazil

61.8 63.9

-13.7 -14.8 -27.9 -24.3 -63.2

-162.9

-148.1

India 7.8%

Brazil -2.5%

Russia -0.7%

UK 2.4%

Japan 1.3%

Euro area 1.7%

World Bank predictions for GDP growth rates in 2016

US 2.7%

NC: What do you think of China’s chances of weathering all of the external challenges ahead?

YY: It is true that China faces severe challenges both internally and externally. After the Asian financial crisis and the 2008 global financial crisis, China is now in a better position and has more experience than ever to deal with them. 

Japan

2015 2016

China 6.7%

NC: The yuan has become the fifth currency in the IMF’s SDR currency basket, along with the US dollar, the euro, the Japanese yen and the British pound. How will this affect short-term capital flow in and out of China, as well as the yuan’s future exchange rate?

YY: The yuan’s SDR inclusion is a good thing, generally. However, it makes more sense politically than economically, symbolically than substantially, and in a far-reaching way rather than an immediate one.

The yuan’s exchange rate and short-term cross-border capital flows depend on how China’s economy performs in comparison with the rest of the world, and what policies major economies’ monetary authorities will choose. The yuan’s inclusion in the SDR itself will not have much impact on either the yuan’s value or short-term cross-border capital flow.

In addition, the yuan’s inclusion had been widely expected by the market before the IMF announced its decision. If there were any effect, it may have already dissipated.

347.8 344.4

China

NC: There is a lot of concern in the market over the risk of capital flight from developing economies if the US dollar grows stronger.

What are your thoughts on this?

YY: Capital flight and the ensuing drastic devaluation of local currencies is indeed a very big challenge for developing economies in the case of a strong US dollar. However, its impact will vary. For China, the value of yuan-denominated assets will weaken vis-à-vis US dollardenominated assets. Other things being equal, this will very much dampen non-Chinese enthusiasm for yuan-denominated assets, which in turn will slow down the internationalization of the yuan.

Eurozone

Current account balances in emerging economies, according to IMF projections, US$bn

World 2.9%

rest of the world and less reliance on external demand.

88.9% 88%

19

Cover story

‘Supply-side reform will be nothing more than lip service if SOE reform does not take meaningful steps forward.’

S

Economic Forecast

Ownership Matters

Reforming State-owned enterprises has been a three-decade-long process for China. Countless solutions have been tested unsuccessfully. NewsChina asks researcher Zhang Wenkui if this round of reforms, with its emphasis on diversified ownership, will be different

By Yue Wei and Li Jia

20

tate-owned enterprises (SOE) have always been one of the focal points of reform in transitional economies. This seems to be particularly true in China. As the concept of “structural reform on the supply side” becomes the norm, SOE reform stands at its core.

According to the SOE reform policies that were publicized in the second half of 2015, Chinese SOEs appear to have two options in the coming year. Those haunted by industrial overcapacity and debt will be acquired by others, or even go bust, so that their resources, land and capital can be set aside for more efficient players in the market.

Most of the others will be restructured in some way, so that they can re-emerge as more efficient market players themselves. Private investors are welcome to become SOE shareholders or to enter the markets that were originally closed to them, such as oil and gas.

Zhang Wenkui, vice director-general and research fellow at the Enterprise Research Institute, Development Research Center of the State Council, talks to NewsChina about how supply-side reform would be meaningless without substantial progress in SOE reform.

The most important step in this regard, he says, would probably be the diversification of SOE ownership.

NewsChina: How important is SOE reform for structural supplyside reform?

Zhang Wenkui: SOE reform is one of the focuses of supply-side reform. Supply-side reform itself is all about the reform of enterprises.

Private sector businesses are certainly part of this, as they also have to deal with problematic ‘zombie enterprises’ [sluggish companies on the brink of bankruptcy], strengthening management and improving technological skills. SOEs not only have these same problems, but also face an additional issue of how to become real market players.

I believe supply-side reform will be nothing more than lip service if SOE reform does not take meaningful steps forward.

NC: Last September, the central government unveiled guidelines for SOE reform. Do you think these guidelines address these problems?

ZW: It is a fairly comprehensive blueprint. Contributions from relevant government agencies can all be found in there, including the ideas of mixed ownership, more stringent supervision and improving SOE dynamics. However, key points may get lost in such a holistic approach. There may be confusion in implementation.

For example, ownership reform has been identified as the way to go. However, the key question of how to avoid the loss of Stateowned assets has yet to be answered. A recent policy paper stated that NEWSCHINA I March 2016

The State of State-owned Enterprises By the end of November 2015, China’s State-owned enterprises held:

the next step is to make rules to prevent such loss, meaning that the red line [dictating what is and isn’t allowed] has yet to be drawn. This wait-and-see attitude will prevail until that red line is clear, because nobody wants to take the risk of crossing it.

NC: What do you think is the most important thing to do right now for SOE reform?

ZW: SOE reform itself is nothing new. Nearly everything that has been inscribed in today’s official decisions has been tried or brought up over the past 30-plus years. According to what I’ve observed, there is little contention over the direction of the reform, which is to make SOEs market-oriented, except those in a few special sectors [such as the defense industry].

Then the question becomes: What is the path towards that goal?

Our experiences over the past 30 years have told us that becoming market-oriented is not possible if we continue to get tangled up in the issue of who should be in charge of the daily operations of these companies. One trial that tested different management structures brought in a board of directors [who were supposed to be more independent in making major business decisions, such as choosing managers and investment projects]. Basically, it failed. If we continue to go down the road of focusing on who is in control, the most likely result will be more eyes watching SOEs but fewer able and motivated hands at work.

Ownership, rather than control, is the area where change is most needed. The so-called “mixed ownership” structure, with the participation of private capital, is the right way to go. It is a moderate change acceptable to most stakeholders. Indeed, this idea was enshrined in the decision made at the Third Plenary Session of the 18th Communist Party of China Central Committee in November 2013, which set the roadmap for all reform to move towards a full-fledged market economy.

NC: The SOE reform guidelines issued in September include an initiative to establish State-owned investment holding companies that focus on managing portfolios, not specific assets. This model is often compared to the Singaporean company Temasek, which manages the assets of the city-state’s government. However, the Temasek model is widely regarded as not applicable in China. Why not?

ZW: There are preconditions for the Temasek model to work.

Temasek is basically a wealth fund that makes independent business decisions based on its own business judgment, even when the decisions involve selling an SOE or State-owned shares. This is not possible in China now.

NEWSCHINA I March 2016

Central SOEs 36.5%

Central SOEs 54.0%

US$18 trillion in assets, with 54.0% in central SOEs

US$12 trillion in liabilities, with 36.5% in central SOEs

For the first 11 months of 2015, China’s State-owned enterprises experienced:

6.1% year-on-year decrease in revenues 9.5% year-on-year decrease in gross profits 0.8% year-on-year increase in taxes payable However, there are already examples [in China] similar to Temasek, though on a much smaller scale. Parent companies of a few central SOE giants, like China Resources, China Poly Group Corporation and China National Cereals, Oils and Foodstuffs Corporation, just serve as headquarters for management. Business operations and assets are actually held by their subsidiaries, which in many cases are listed companies. These parent companies are Temasek-like within their industries.

This shows that the Temasek model can work properly in China as long as the precondition of independent operation is met. If the SOEs are regarded as market entities, such a precondition will be made possible through reform. If they are regarded as political entities, then the opposite will happen, and we’ll continue to tighten control of SOE business operations.

NC: What are the areas where breakthroughs are most likely in SOE reform in 2016?

ZW: According to the State Council’s blueprint, which was unveiled right after the September guidelines on SOE reform, trial projects on mixed ownership will launch in the power, oil, natural gas, railway, aviation, telecommunications and defense industries. I personally expect breakthroughs in mixed ownership to emerge from these trials.

Besides altering ownership at the parent-company level of some central SOEs in these areas, restructuring could probably also take place in other aspects of SOEs, including business, governance structure and debts. All of these are necessary to transform central SOEs into strong players that can compete globally. 

21

Cover story

‘Manufacturing is at once the focal point, the challenge and the solution to China’s economic growing pains.’

A

Economic Forecast

Manufacturing Overhaul

Manufacturing is shrinking in terms of its share in China’s GDP. While 2016 promises to be a time of change for the industry, its importance remains unshakable. Deputy Minister Feng Fei tells NewsChina what the upcoming ‘industrial revolution’ will look like.

What old sectors will drop away, and what new industries will take their place?

By He Bin and Li Jia

22

fter more than 30 years of running at top speed, machines in China, the “world’s factory,” are slowing down, in turn stalling the country’s entire economy. In dealing with this aging equipment, China has decided on replacement rather than repair. The purpose is not just to maintain steady economic growth. It is also to win the latest round in the international competition for resources, technology and markets, a contest that has become increasingly fierce since the global financial crisis hit in 2008.

But it’s costly to dispose of old machines and install new ones. It can be particularly difficult when the market is shrinking, as it is now. This pressure also means there is no time to waste.

Feng Fei was a research fellow at the Development Research Center of the State Council before he assumed office as the deputy minister of China’s Ministry of Industry and Information Technology (MIIT) in early October 2015. He is in charge of the departments of industrial policy, industrial operation monitoring and coordination, small and medium-sized business affairs and consumer products manufacturing.

He also co-manages the departments of policies and rules, energy conservation, production safety and raw materials industries.

In an exclusive interview with NewsChina, Feng detailed the national goal of making China not only the biggest manufacturer in the world, but also one of the most powerful, as the country tries to define its own role in the world’s new industrial revolution.

NewsChina: China’s manufacturing sector accounted for only 40.6 percent of GDP in the first three quarters of 2015, down from the 43.7 percent recorded after the first half of the year. What accounts for the change?

Feng Fei: There are three reasons behind it. Firstly, it reflects China’s economy’s improved economic structure. China’s service sector, particularly services that are oriented towards the manufacturing sector, has been accelerating in recent years. The service sector outweighed manufacturing in 2012 in terms of value-added output, and made up 51.4 percent of GDP in the third quarter of 2015, 2.3 percent higher than it did during the same period in 2014. This is because better productivity in manufacturing has allowed more of the labor force to transfer to the service sector.

Secondly, the service sector has received a boost from new policies, especially those encouraging business startups and innovation. In the meantime, many services that used to be part of the manufacturing sector, including R&D, design, logistics, branding and IT, have spun off to become independent industries. The rapid growth of these productionrelated services has added momentum to the tertiary sector.

Thirdly, overshadowed in the complicated and difficult economic cliNEWSCHINA I March 2016

The Future of Manufacturing 81%

Percentage of the 3.9 million new enterprises set up in the first 11 months of 2015 that are in the service sector Source: China State Administration for Industry and Commerce

NC: Then how can China’s manufacturing sector overcome the constraints of finite resources and environmental limits?

FF: Manufacturing is at once the focal point, the challenge and the solution to China’s economic growing pains. This was made clear in the proposal for China’s 13th Five-year Plan (2016–2020) that was published in November. Scaling up the size of the manufacturing industry is NEWSCHINA I March 2016

52.9 53.2

52.3

Jan’15

Feb’15

Mar’15

Apr’15

50

May’15

Jun’15

53.7

49.8 49.8 49.6 49.7

50.2

50.1

49.9

52.3

52.8

52.6

52.3 50.2

50.1

49.8

Services 53

52.8

52 52.4

49.7 Jul’15

Aug’15

Manufacturing Sept’15

Oct’15

Nov’15

Dec’15

Non-ferrous metal mining -19.8%

Ferrous metal mining -42.4%

Coal mining -61%

Ferrous metallurgy -68%

Industrial sectors reporting the biggest decline in gross profits, January-November 2015 Oil and gas extraction -70.4%

NC: The decrease in the secondary industry’s portion of China’s GDP, however, has also led to the assumption among some observers that China’s manufacturing sector is losing importance. Do you agree with this?

FF: I don’t buy this idea. Manufacturing has always been the foundation of human survival, the comprehensive power of a nation and the wealth of a society. The status of the real economy, with the secondary industry at its core, as the pillar of our national economy, is unshakable, despite its decline in GDP share in relation to the service sector.

Even the development of the service sector itself has to be built on the progress of technology, on the efficiency and division of labor in manufacturing. If the former is “fur,” then the latter is the “skin” on which fur grows. This is true even in industrialized economies. Germany has successfully resisted the global economic recession largely thanks to the importance Germany has always given to its manufacturing power.

Manufacturing has already returned to the high ground for which every country is competing in the game of international economics. The deep integration between information technology and manufacturing is greatly transforming production methods, production organization and the whole supply chain, which in turn is transforming the competitive structure of world manufacturing.

Developed economies, for example, are racing towards the high ground through their “reindustrialization” initiatives to expand their edge in high-end markets, while emerging economies have made manufacturing a key part of their national strategies.

For China, the path of relying on massive inputs of labor, land and capital is no longer sustainable in the manufacturing sector. The only choice is to grasp the historic opportunity given by this new technological revolution to renovate the manufacturing industry.

Manufacturing and Services PMI in 2015

Auxiliary services for mining and drilling -70.8%

mate both in and out of China, some of the country’s conventional industries, already grappling with overcapacity and a lack of innovation, have experienced a significant slowdown in 2015. This has also reduced the manufacturing sector’s share of GDP. In the first three quarters of 2015, the added value of the secondary industry [manufacturing, mining and public utilities] was up by 6.2 percent year-on-year, which was 2.3 percent slower than the growth recorded the previous year. By contrast, the service sector rose by 11.6 percent, a 0.8 percent increase year-on-year.

Manufacturing Purchasing Managers’ Index (PMI) in 2015, an indicator for business expansion Total: 49.9 Consumer products manufacturing: 52.9 Hi-tech manufacturing: 53

Source: China National Bureau of Statistics

no guarantee that it will make it stronger.

Situations vary within the manufacturing sector itself. Conventional manufacturing needs to find a new way out of external pressures and internal problems. According to the China Manufacturing 2025 strategy [issued by China’s State Council in May 2015], conventional manufacturing should be upgraded on a technical level. As for emerging manufacturing, the key is to explore ways to help it develop. It is also crucial to address fundamental weaknesses of the manufacturing industry as a whole, digging into innovation capability, product quality and some basic industrial manufacturing supplies.

NC: How should conventional manufacturing be overhauled?

FF: Conventional manufacturing still serves as the foundation for China’s manufacturing sector as a whole, and it will be an asset in the

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sector’s upgrading. Information technology can help with this process.

While the market plays the decisive role in allocating resources, the government needs to provide better services through new systems. Specifically, the government can encourage R&D along the value chain.

NC: Is there an exit plan for enterprises that are performing poorly?

FF: Industrial restructuring will follow market principles, while keeping an eye on the future outlook of the industry. Disposing of zombie enterprises at a faster pace and in a way that respects the market and the law is the key to industrial restructuring and solving overcapacity. Also, stricter implementation of technical, environmental, quality and safety standards should eliminate outdated capacity.

In the meantime, the pressure these measures place on local economic growth can be eased through a tactic called capacity replacement. This entails giving up outdated production capacities in exchange for updated, more advanced ones. [The MIIT issued this plan in July 2015.

Local governments can apply for new projects by dumping old ones on the MIIT’s overcapacity list.] The money saved through this strategy can help to cover the cost of supporting laid-off workers as well as the cost of transitioning to a new, advanced production system. The central government has asked relevant ministries to come up with plans detailing the arrangement of zombie enterprises’ personnel and assets.

NC: The Made in China 2025 strategy proposes service-oriented manufacturing. What does this mean and how should it be accomplished?

FF: It means that services will play a bigger part in improving and expanding the manufacturing value chain. This will be realized by the use of information technology to build a smarter, more integrated system of organization and production. The government can help this transformation by providing information to the market.

The government is doing three things [to make the transition to service-oriented manufacturing]. Firstly, the Three-year Action Plan for Developing Service-oriented Manufacturing will soon be drafted and declared a roadmap [for the future of the industry].

Secondly, a few sectors have been selected to be the first to develop service-oriented manufacturing through deep integration along the entire value chain, including new-generation telecommunications, robotics, and aviation and aeronautics equipment. In addition, the government will support the construction of zones that will specialize in service-oriented manufacturing. The areas and industries with the most potential to be shortlisted first are those that fit into national priorities such as the One Belt, One Road initiative, the economic integration of Beijing-Tianjin-Hebei Province and the Yangtze River Economic Belt.

Thirdly, the IT foundation for service-oriented manufacturing will be consolidated and updated. We are trying to build a powerful Internet industry and encourage Internet-based entrepreneurship. This is a good opportunity for us to apply IT to the service-oriented manufacturing industry more widely and deeply. Actions should focus on the construction of infrastructure for smart manufacturing and smart services, including high-speed broadband, smart sensors and mobile telecommunications. 

24

Economic Forecast

Down to the Roots

To reform China’s capital market, one must look back at its origins. Professor Cao Fengqi explains how the market’s problems are rooted in its inception

By Yue Wei and Li Jia

NEWSCHINA I March 2016

‘A well-functioning, diversified capital market is crucial to support China’s economic restructuring and urbanization and to realize the country’s goal of doubling the 2010 national GDP by 2020.’

Breakdown of ‘aggregate financing to the real economy’ by the end of November 2015 3% 11% 4% 4% 7.8% 2.2%

A

t the end of June 2015, China’s stock market lost more than a third of its peak value recorded just two weeks before. Trillions of US dollars in assets vanished and drastic volatility lasted for over two months. The government’s intervention, hesitant at first and then strong-handed, aroused controversy both domestically and internationally. The government-imposed “circuit breakers,” which shut down trading automatically when the market fell by a predetermined percentage, were triggered twice in early January, once just minutes after trading began. Both the Shanghai and Shenzhen stock exchanges suspended the mechanism after four days of use.

On December 27, the Standing Committee of the National People’s Congress, China’s legislative body, granted a two-year authorization to the State Council to try out a registration system for the capital market. Chinese companies that wish to raise funds through the Chinese stock market will no longer have to go through the lengthy process of getting approval from regulators, as they currently do under the existing Securities Law. Like companies in the US, they will be able to go public as long as they have done their due diligence in information disclosure.

Recently calls for reshuffling the entire regulatory framework of China’s capital market have been unprecedentedly high.

The financial links connecting China with the rest of the world are bringing the two closer and closer together through capital markets.

In his December 20 “letter to Santa,” Charles Li, CEO of Hong Kong Exchanges and Clearing Ltd. (HKEx), said HKEx was “getting ready for the opening of” its link with the Shenzhen Stock Exchange, a year after its link with the Shanghai Stock Exchange began operation.

On November 18, China Europe International Exchange opened in Frankfurt, Germany, making the first yuan-denominated fund available in Europe.

How could this reform, expansion and chaos happen all at the same time? The future can be decoded by the past. Cao Fengqi, a professor at Peking University’s Guanghua School of Management and director of the university’s Research Center for Finance and Securities, traced China’s capital market problems back to the market’s inception, and comments on how to propel it forward through reform.

NewsChina: What is wrong with China’s capital market?

Cao Fengqi: China’s capital market has been around for 25 years.

However, I have to say that in all that time, it has not played the role it was supposed to play.

NEWSCHINA I March 2016

68%

Yuan-denominated loans 68% Corporate bonds 11% Entrusted loans (loans from institutional depositors to designated borrowers, with banks as no-risk intermediaries) 7.8% Trust loans 4% Undiscounted bankers’ acceptances (a short-term, bankguaranteed credit for trade dealers, kept off of banks’ balance sheets) 4% Equity financing on the domestic stock market by nonfinancial enterprises 3% Foreign currency-denominated loans 2.2% Source: People’s Bank of China

This has been proven by so-called ‘aggregate financing to the real economy’ statistics, [a Chinese index that represents] the total funds raised by Chinese enterprises from China’s entire financial market. Between 2002 and 2014, it rose from US$300 billion to US$2.5 trillion. In 2002, 97 percent of the money was bank loans, and only 2-3 percent came from the stock market. While the share of bank loans was already down to 59 percent in 2014, the stock market contributed a mere 4-5 percent, only slightly higher than the 2002 figure.

This shows that other sources of financing, including foreign loans, borrowing through other intermediaries such as trust companies, or quasi-loans made through banks in other ways [mainly informal loans that aren’t on banks’ balance sheets], have taken over much of bank loans’ former arena. Neither corporate bonds nor the stock market have really advanced into the void left by banks’ retreat.

More than 25 years after China’s first IPO, listed companies hold nearly US$1.1 trillion in total funds, a figure that is tiny by any stan-

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dard [e.g. compared with China’s GDP and the funds raised by Chinese companies on overseas stock markets].

NC: What has been keeping China’s capital market from functioning well?

CF: The fundamental problem lies in China’s capital market system. The purpose of establishing the market 25 years ago was to implement reforms on State-owned enterprises. The background at the time was that Chinese banks and budget funds could no longer feed heavily indebted SOEs, so those SOEs turned to the stock market.

In a market designed to raise money, companies never thought about how to reward investors.

Given this, there is an urgent need to address issues concerning China’s capital market system, including stock issuance and trading, dividends distribution, corporate governance and the regulatory framework.

NC: When you say the capital market needs further development, what are you referring to, specifically?

CF: Mainly the stock and bond markets. They are the direct links between investors and businesses, with no intermediaries. Listed companies own the money they raise from the stock market. They don’t owe. This is particularly important in supporting business startups and innovation. It is expected that raising capital through these two direct links will account for at least half of the total financing injected into the real economy, and down the road, maybe even more.

NC: What kind of capital market do we need in China?

CF: A well-functioning, diversified capital market is crucial to support China’s economic restructuring and urbanization and to realize the country’s goal of doubling the 2010 national GDP by 2020.

The capital market has to be built on market principles. That is not the case now. The China Securities Regulatory Commission does too much approval work and controls how many shares should be issued by which companies at what prices and when. The registration-based system for issuing stocks must be installed so that the market watchdog can focus on its proper duties, like cracking down on misconduct and defending the rights of investors.

The rule of law and transparency should prevail in the capital market. The existing Securities Law and Investment Fund Law are too general to be implemented effectively. The Securities Law is currently undergoing revision. Moreover, law enforcement is weak even when

26

the law is clear. Illegal behaviors have gone unpunished in some cases.

Further internationalization is our future path. When the Chinese yuan becomes an international currency and China’s capital account is open to the rest of the world, China’s capital market has to be strong enough to be the launchpad for Chinese companies and investors to join the global market.

Last but not the least, the boundary between the government and market has to be redefined. Government intervention is prevalent in China’s capital market, leaving little room for the market itself to play its role. The government can step in when the market fails, but the government must respect market rules. The government should confine its role to building the platform and providing services to it.

Anything beyond this should be left to the market, where companies and investors make the judgment calls.

NC: The regulatory framework of the financial market is fragmented now. That is, a separate regulator keeps watch on each separate sector of the financial market – banking, securities, insurance – with no knowledge of what is going on in the other sectors. Is it time to change this?

CF: This fragmented framework, when it was built, reflected the fragmented financial market structure. There was no firewall between different sectors of the financial market, so it could be dangerous to let money slosh around and enter into the stock market en masse.

However, the financial market has become increasingly integrated, making a fragmented regulatory framework very problematic. For example, consumers’ money kept in [major Chinese payment platform] Alipay is invested in the money market [in safe, short-term debt securities] through Alipay’s partnership with Tianhong Asset Management, which also engages in peer-to-peer business. Which regulator is responsible for such a cross-sector operation? The joint meeting of the People’s Bank of China and the three market watchdogs, a cooperative mechanism established in 2013, decided that “each parent should take care of their own kids.” It means that each watchdog should identify the particular part of the operation that they are responsible for and put it under scrutiny. However, now it is nearly impossible to distinguish whose “child” is whose.

In this tangled market structure, relevant ministries fumbled with the aftermath of the stock market chaos in mid-June 2015. They lacked coordination and tried to pass the buck on to the next guy.

This serves as a lesson about how a fragmented regulatory framework can fail an integrated market.  NEWSCHINA I March 2016

Wei Jianguo

Yuan Dongming

Economic Forecast

Along the Belt and Road Economists Wei Jianguo and Yuan Dongming express to NewsChina that Chinese enterprises going global through the One Belt, One Road initiative need to learn how to organize themselves in order to get a head-start in this challenging, yetto-be-tapped market

By He Bin and Li Jia

‘The One Belt, One Road initiative is an opportunity for China to develop a global supply chain led by Chinese enterprises.’

M

aking better use of domestic and overseas markets and resources. Becoming more dynamic and influential in the world economy. These purposes underlie China’s One Belt, One Road initiative, which links China and Europe via Asia and Africa, both on land and by sea, as Peking University National School NEWSCHINA I March 2016

of Development professor Justin Yifu Lin explains in his commentary in this issue of NewsChina (page 72).

The Asian Infrastructure Investment Bank (AIIB) officially launched on December 25, 2015. On that day, 17 founding members, who hold more than half of the bank’s shares, ratified the Articles of Agreement of the AIIB, which was signed on June 29 by 57 founding members, including some developed countries. The AIIB, as a Chinese initiative with China as the largest shareholder, has been regarded as a good beginning for the One Belt, One Road initiative and a diplomatic success for China in 2015.

High risks come with high returns. It is Chinese companies that will take on the risks in their daily operations, meaning not only normal business risks, but also political and social risks in a still underdeveloped market. The One Belt, One Road market is challenging even for Western multinationals that have abundant experience in managing a global presence. What preparations should Chinese companies and government officials undertake to explore this untapped potential as new players in the international arena?

Wei Jianguo, executive deputy director of the China Center for International Economic Exchanges and former deputy minister of commerce, and Yuan Dongming, a research fellow with the Development Research Center of the State Council, share their thoughts with NewsChina on the One Belt, One Road initiative.

NewsChina: Terrorism is a threat to countries along the Belt and Road.

Do you think this is an impediment for Chinese companies planning to expand there?

Wei Jianguo: I don’t think Chinese companies should be deterred from entering countries with a large potential market because of political instability. The opportunity may be lost if they wait until the situation is ideal enough that competitors from other countries start to swarm in.

Now is the best time for Chinese enterprises to go abroad. The One Belt, One Road initiative, being a national initiative, is backed by the Chinese government. The US and countries in Europe have their hands full with issues of refugees, worker strikes and terrorist attacks. They don’t have the spare time and tools to help their companies expand overseas.

However, it is not wise for any company to enter a market regardless of the cost and risks. It is a test of a company’s competence to analyze risks and deal with them.

NC: For Chinese companies interested in taking advantage of the One Belt, One Road initiative to go abroad, what particular market risks will

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they face?

WJ: Chinese companies must think about three issues before going abroad: how to integrate their own business plan into the industrial strategy of the host countries, how to adapt themselves to the local markets and how to work together with the right partners who are in line with the policies of host countries.

For example, if a Chinese motorcycle manufacturer wants to enter a market along the Belt or Road, it needs to do its research on the appropriate type of engine, the size of the motorcycle, the potential for local consumption and the possibility of exporting to third-party countries. Chinese companies do not have previous experience of doing such thorough research in this regard.

Special industrial parks and favorable policies for overseas investors are additional attractions in some host countries. Information like this is also very helpful for Chinese companies when making business decisions.

Chinese companies have a strong desire and ambition to expand their market along the Belt and Road. However, they have little idea about how to go about it.

NC: What should be the One Belt, One Road initiative’s first step in 2016?

WJ: The Chinese government should provide basic, sector-by-sector information on the business environment in One Belt, One Road countries.

Also, a more feasible approach, I think, is to start the implementation of the One Belt, One Road initiative in 2016 with, say, about 10 countries in which market conditions are favorable and there is a strong willingness to cooperate with China. If landmark joint projects can break ground there early, as a ‘first harvest,’ they can serve as good examples for other endeavors. The Gwadar port project in Pakistan is probably just such an example.

[The port is located at the mouth of the Persian Gulf. China built it from 2002-2006, took over operational rights from Singapore in early 2013, and made it a part of the US$46 billion China-Pakistan Economic Corridor plan that was announced in April 2015. ] Cooperating with international financial institutions and multinationals, either from the US, Europe or countries along the Belt and Road, is another good strategy for Chinese companies to subscribe to in their joint projects with host countries.

NC: What kind of help can Chinese companies expect from the Chinese government?

WJ: China can work together with host countries to issue a catalogue listing industries with the most local potential. It can also propose a timetable and a roadmap detailing when and where to go first. It can enact favorable policies as well.

Besides the Chinese government, intermediaries like trade associations have a crucial role to play. They have two main tasks. Firstly, they are the bridge between enterprises and government bodies. Secondly, they can

28

help avoid undercutting and unfair tactics among competing Chinese businesses [which are not uncommon among Chinese companies undergoing bidding processes overseas].

NC: What kind of trade organizations can perform all of these functions?

WJ: Only those that specialize in serving and coordinating with their members are able to fulfill these duties. They are knowledgeable about enterprises within their industries, and based on that can come up with proposals for the government. The performance of these trade groups even underlies to a large extent the results of Chinese enterprises’ and industries’ ventures along the Belt and Road.

Given this, industrial organizations themselves could probably go through a reshuffling in their participation in the One Belt, One Road initiative. Those with bad services that are unpopular among their members will be phased out. Many Chinese trade associations are still more like secondary government agencies. They should learn something from their international peers, which are selected, funded and led by enterprises of the industries they represent. Chinese chambers of commerce and guilds engaged in One Belt, One Road projects have to be reassessed and rebuilt to improve their services.

NC: What major risks and challenges will Chinese enterprises face when they expand into One Belt, One Road markets?

Yuan Dongming: There are four major challenges. Mutual trust with host countries and security come first. Civil wars and attacks by extremists and terrorists in the Middle East and Africa have already caused significant damage to Chinese enterprises operating abroad. China has yet to build strategic mutual trust with some One Belt, One Road countries. Trade protectionism and nationalism have been rearing up due to the global economic downturn. All of these pose mounting risks to the security of personnel and assets of Chinese enterprises investing abroad.

There are also a lot of concerns among other countries over China’s ‘go global’ strategy. They are worried that Chinese enterprises may take control of their strategic resources, including energy, minerals and port facilities, or take away core technologies through large mergers and acquisitions, or that Chinese State-owned enterprises may enjoy unfair support from the Chinese government through capital, favorable taxation and market access. China’s rapid rise to major global trader and investor status is another source of anxiety for some countries.

Secondly, some domestic policies currently hinder Chinese enterprises from going global. A lot of policies have been adopted to encourage Chinese enterprises to go global, however, they are too fragmented to help Chinese enterprises as much as expected. Restrictions remain in capital control, foreign payments and investment protection, although the overseas investment system has become much more relaxed.

NEWSCHINA I March 2016

Going Global More than US$3 trillion

Overseas assets of about 30,000 Chinese enterprises as of December 2015

345

Approximate number of overseas security incidents affecting Chinese enterprises from 2010-2015

-11%, -2.5%, -22% The government needs to improve its ability to analyze the investment environments of other countries, and to cooperate with international institutions. Intermediaries and trade associations have not provided proper coordination and advisory services, as independent third parties should.

Thirdly, Chinese enterprises still rely too much on lending through financial intermediaries [mainly banks, which are more difficult and expensive to use than direct financing through equities and bonds]. It is particularly challenging for private Chinese enterprises to fund their overseas investments. In addition, it is not easy for Chinese companies to find a Chinese bank in overseas markets.

Fourthly, Chinese enterprises themselves have a lot of homework to do.

Some in the mining industry have reported huge losses in their overseas investments due to their lack of understanding of the industry and international experience. Some do not have enough awareness of political, legal, environmental and social risks in host countries, nor the competency to deal with these risks. Also, it is not uncommon for Chinese enterprises to undercut each other’s prices or use vicious competitive tactics. As a result, Chinese companies are generally not very profitable in their overseas ventures.

NC: How can these issues be addressed?

YD: A risk-control system based on the joint efforts of the Chinese government, enterprises and third parties is urgently needed to get prepared for the quickly increasing business, political, security, legal, environmental and social risks in One Belt, One Road projects.

The government should speed up writing legislation on overseas investment and building an insurance system for said investment. It is responsible for creating a secure investment environment through diplomatic efforts and information disclosure.

Chinese companies operating overseas need to install internal risk control and build good relationships with local communities by observing local laws, respecting local religions and customs, and engaging in corporate social responsibility.

Third parties like intermediaries, chambers and think tanks can provide professional services in risk assessment and prevention.

NC: What are your suggestions for Chinese enterprises about which areas and strategies they should prioritize to get a foothold in One Belt, One Road countries?

YD: Infrastructure to connect One Belt, One Road countries has already been identified as the initiative’s priority. Chinese companies can focus on the construction of railways, roads, ports and airports, or public utilities like electricity, power grids and telecommunications networks.

These projects can also boost China’s domestic investment in mining and manufacturing, in areas such as steel, construction materials, and oil and gas extraction and refining.

It is an opportunity for China to develop a global supply chain led by NEWSCHINA I March 2016

Respectively: year-on-year decline in China’s trade with One Belt, One Road countries, China’s exports to them and imports from them, January-October 2015

US$6.5 billion

Investment in China from One Belt, One Road countries, January-October 2015 Share

Y-o-y change

8%

806%

4% 6%

82%

203% 8%

Singapore

Singapore Malaysia Saudi Arabia

Malaysia Saudi Arabia Others

US$13.2 billion

China’s investment in 49 One Belt, One Road countries, mainly Singapore, Kazakhstan, Laos, Indonesia, Russia and Thailand, JanuaryOctober 2015

US$64.5 billion

Value of construction contracts signed by Chinese enterprises in One Belt, One Road countries from January to October 2015, up by 22 percent year-on-year Source: Ministry of Commerce of China

Chinese enterprises. This can be made possible through pairing up Chinese enterprises’ technology, capital and industrial edge with One Belt, One Road countries’ local markets and resources. Big Chinese companies can jointly build industrial, tech or trade parks with foreign governments or industries in One Belt, One Road countries. This will also facilitate the going abroad process for small and medium-sized Chinese businesses, which in turn will help forge a global supply chain integrated by Chinese multinationals. 

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Society

Fashion Designers

Finding Their Voice

While they’re finding some success abroad, young Chinese designers say China’s budding fashion industry has work to do before it can flourish

By Fu Yao

I

n the past few years, China’s fashion industry has begun to walk the international runway. More and more young Chinese designers are leaving their homeland to study the trade abroad, and the US has become the main stage where they sharpen their skills. Some have already achieved a name for themselves, earning top jobs in the industry or striking out with their own lines.

Their collections are showcased regularly on catwalks in fashion hubs around the world.

These talented young designers, alongside increasingly famous Chinese models, have begun to put China on the world fashion map.

New York, New York

“How did you get that job?”

This is the question that Cai Pengji is asked most frequently after he tells people he works for Oscar de la Renta. He is an assistant designer and draper for the world-renowned luxury goods firm.

The 28-year-old Chinese graduate of Par-

30

sons School of Design became the only Asian member of the brand’s core design team within two years of arriving in New York.

Even after three months on the job, at times colleagues from other departments still mistook the youthful Cai for an intern.

Before meeting Cai, the Oscar de la Renta team had spent nearly a year interviewing hundreds of applicants in hopes of finding a suitable designer with excellent draping skills. Cai landed the job shortly after his May interview. Things progressed quickly – just four months later, when Oscar de la Renta creative director Peter Copping listed the designers at the brand’s New York Fashion Week show, Cai’s name was among them.

In the US, in contrast with industries such as IT and biotechnology in which Chinese faces abound, the fashion industry notably lacks Chinese representation. This void is even more evident among those major fashion brands that guide mainstream American culture and drive high-end trends. Chinese

students who come to the US to study fashion are met with sparse job options. According to one industry insider, no more than three Chinese people have been able to push their way into the core design team of a top fashion firm in the US. That is why Cai, a designer born and bred in China, is a wonder.

After graduating from Sichuan Fine Arts Institute in 2011, Cai worked in Beijing for two years, during which time he received an investment to launch his own label. His fate changed in 2013 when he participated in a competition run by State broadcaster CCTV called Creative Sky. The winners would be eligible for admission to Parsons School of Design, which is ranked among the world’s top fashion schools.

The contest was extremely challenging.

The judges included Vogue China’s editor in chief Zhang Yu, established designer Jason Wu and former Parsons dean Simon Collins. After defeating numerous competitors, Cai and four other designers entered the final NEWSCHINA I March 2016

Photo Courtesy by the interviewee

Models wear Huang Qiaoran’s designs for New York Fashion Week

round, for which he designed a set of clothes with printed patterns of Chinese medicinal herbs, a concept that was inspired by the Chinese martial arts film A Battle of Wits. His innovative idea and exceptional skills won him third place, earning him a full scholarship to a Parsons master’s program.

The prize thrilled Cai. A great many household fashion names have come out of this school, such as Marc Jacobs, Donna Karan, Isaac Mizrahi and Chinese American Alexander Wang. The scholarship allowed him to walk through a door that had rarely opened for other Chinese.

“Grueling”

Very few Chinese mainland students have majored in fashion design in the past. Huang Qiaoran is one of the few. After she graduated from Donghua University, she decided to apply to Parsons in 2008 to fulfill her dreams.

When she looked for Chinese Parsons students or alumni to consult about it, however,

NEWSCHINA I March 2016

she was surprised to come up empty-handed.

It was not until she actually arrived at Parsons that she learned there was another Chinese student in her graduating class.

More recently, however, there has been a striking increase in the number of students from China applying to fashion schools. Take Parsons as an example: For the 2012 fall term, Parsons admitted 80 Chinese students to its fashion and design programs, 40 times more than the two students accepted in 2002. At the Pratt Institute, another famous art school in New York, the number of Chinese applicants tripled from 2010 to 2013.

Many of these applicants may subscribe to the romanticized version of a designer’s lifestyle as portrayed in the media, equating entrance into this exclusive club with enviable clothes, world travel, international fashion shows and celebrity parties. But according to Cai Pengji, industry insiders know the true bitterness beneath this sweet facade. Months of hard work, countless failed drafts and un-

imaginable effort is woven into the fabric of each finished piece.

“Horribly grueling” – that was how Cai remembers his first month at Parsons. “Two or three weeks’ of work there is equivalent to a one-year graduation project at Chinese design colleges,” Cai told NewsChina. “By contrast, study [requirements] at China’s fashion design schools [are] too relaxed.”

In the past, Cai had always considered himself a disciplined person, but when he came to New York and worked with his foreign classmates he was totally overwhelmed by his peers’ extraordinary diligence. “They can work on a project for one or two months, sleeping for only two or three hours each night,” he said. “Everyone around you is like this – working, working, working all the time.”

Xu Xingyuan, 21, a senior at Parsons, also spoke to NewsChina about the hardships of college life in New York. “I need to muster all of my courage every time I fly back to the US

31

Society

Left: Cai Pengji Right: A model in one of Cai Pengji’s designs Babyghost designers Huang Qiaoran and Josh Hupper

for the next semester, because I know what is waiting for me,” she said.

In her earlier days at Parsons, Xu was surprised to find that her classmates at this prestigious design school were not conventionally “fashionable.” They tended to dress quite simply, often sporting a black T-shirt and a pair of skinny jeans. At first, she thought people here were following a special “Parsons” look, but she later realized that the fashion choice was only motivated by convenience.

“Parsons students cannot spare extra time focusing on our own clothes,” said Xu. She hasn’t had a free weekend since her first year at the design school. She usually does not leave school until 2 or 3 AM, and the next day she often wakes up early to buy fabric. She remembered once working on a project from Saturday afternoon to Monday morning without taking a break. She later realized the reason she could constantly taste blood was because of an open canker sore.

But she loves the work. “In New York, when I start on a new piece, the love and passion I have for creating immediately flows into my body,” Xu told NewsChina. “I really enjoy the moment when I am fully absorbed in my own work.”

This level of diligence is not only neces-

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sary for aspirants who are still in school, it is also a must for designers who are already established in the fashion world. One of Cai Pengji’s friends who interned with Jason Wu’s company told him that Wu, who found fame after designing multiple dresses for First Lady Michelle Obama, is always the first to arrive at work. “Outsiders only see the shiny surface of the fashion industry; the insiders see the bitterness,” Cai said.

“The fashion industry is highly advanced in New York, Paris, Milan and London,” he continued. “China is always saying it’s ‘stepping out’ and ‘catching up.’ But merely in terms of diligence, we’ve already lost too much.”

Originality

If they don’t enter top fashion firms like Cai Pengji, many young designers try to create their own brand in an attempt to make their own voices heard.

Huang Qiaoran interned for Diane von

Furstenberg after she graduated from Parsons in 2010. During her internship, she met her current design partner, Josh Hupper, who shared a similar vision. Both she and Josh had a strong desire to work on something original. The duo decided to found their own label. That same year, they launched feminine streetwear line Babyghost, which often features geometric silhouettes and edgy embellishments. Huang and Hupper held their second New York Fashion Week runway show this past September.

Huang’s father runs a garment factory in her hometown in Shandong Province, which offers support for Babyghost as part of its supply chain. With the studio in New York and the factory in China, Huang travels across the Pacific every few months. As a designer and entrepreneur, her hand is in every pot; along with designing the clothes, she orders the fabric, supervises the manufacturing and organizes promotional events.

“No matter how terrible a situation you might face, there is always a way to settle it,” Huang said, when asked about the past five years with Babyghost. “In the end, you can always overcome it.”

NEWSCHINA I March 2016

Photo Courtesy by the interviewees

Left: One of Xu Xingyuan’s designs Right: Xu Xingyuan

Interestingly, Babyghost actually owes much of its growth in popularity in the US to support from well-known Chinese supermodels, such as Liu Wen, Ju Xiaowen and Xi Mengyao.

Huang and Hupper consider Ju Xiaowen to be Babyghost’s muse. Ju is Hupper’s longtime roommate, and the three are close friends. Huang has also formed ties with other Chinese supermodels; for example, she met Liu Wen during New York Fashion Week in 2009 when she was still studying at Parsons. After Babyghost launched, Liu and other Chinese models helped spread the word about this fledgling label by attending its promotional events and wearing its products in their daily life. Thus, Chinese models became Babyghost’s best advertisements.

When Huang and Hupper first formed Babyghost, they did not have a clear, concrete objective or plan. But with the label constantly maturing, they now have hopes for a much greater future. “[New York] is very energetic – everyday, countless people come here with their hopes and dreams,” Huang told NewsChina. “In New York, if you want NEWSCHINA I March 2016

to do something, nobody will say that you can’t. Instead, everyone will encourage you.

Such a dreamer-friendly environment makes me feel very comfortable.”

Designed in China?

This generation of Chinese designers has become a rising force in the international fashion world. “They are educated in both China and the US, so they can think from both perspectives,” said Zhang Yu, editor in chief of Vogue China. “They always come up with new ideas. And what’s more, Chinese are fast learners!”

The young designers usually shy away from featuring strong Chinese elements in their pieces. Accomplished, internationally known Chinese designers, such as Masha Ma, Haizhen Wang and Huishan Zhang, as well as their younger counterparts, such as Cai Pengji, Xu Xingyuan and Huang Qiaoran, seldom highlight typical Chinese imagery in their designs.

But the designers are not rejecting their own culture. They say they weave Chinese culture into their creations instead of making icons associated with China visible just to cater to Western perceptions. “I prefer a style with a traditional core and a modern look,” Cai Pengji said, explaining his outlook on design. Huang Qiaoran holds a similar opinion. “My way of thinking and doing things is typically Chinese,” she said. “My cultural background certainly will influence my designs, but it does not mean that I will use symbols like Chinese knots or a cheongsam to emphasize Chinese characteristics.”

Cai admitted that while the Chinese fashion industry has grown rapidly in recent years, it’s still too early to boast of an upcoming Chinese design renaissance. “As far as I know, many local fashion firms are trapped in the copying-ideas-and-modifying-them mode.” Plagiarism plagues China’s fashion industry. During Shanghai Fashion Week last October, independent designer Liu Xiaolu claimed another brand stole some designs from her 2014 spring and summer lines. This incident roused a huge storm of controversy within the industry.

“Chinese designers, including those of my generation, still have a long way to go,” Cai said. 

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Photo by Wang Fei

Environment

Winter Pollution

Sounding the Siren

Beijing’s first two “red alerts” for pollution highlight the city’s infamous winter smog, which is mainly caused by indoor heating and vehicle exhaust fumes, neither of which can be mitigated in the short term

By Wang Yan

“

Since November, for nearly two months this winter, we’ve had to keep the lights on at home even in the daytime because of the frequent gloomy days caused by heavy smog,” 60-year-old Beijinger Yan Li told NewsChina in late December. The blanket of pollution that smothered the capital in late 2015 confined Yan and her two-year-old grandson to their home for much of the season.

In December, for the first time, Beijing issued “red alerts” for pollution, the highestlevel alert in a four-tier warning system. There were two: the first spanned from December 8-12, and the second from December 19-22. The city’s concentrations of PM2.5 – those fine particles less than 2.5 microm-

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eters (0.0025mm) in diameter that can penetrate deep into the lungs – rocketed above international standards. Concentrations of PM2.5 greater than 250.5 micrograms per cubic meter are considered “hazardous” by the US Environmental Protection Agency, which sets the highest acceptable average concentration over a 24-hour period at 35.

The World Health Organization’s (WHO) standard of 25 micrograms is even more strict. At its worst in late 2015, Beijing’s concentrations exceeded 500 micrograms per cubic meter in most parts of the city and its surrounding regions, 20 times the WHO’s highest acceptable amount.

The red alerts triggered a series of actions across the capital. Schools closed down, vehi-

cles were pulled off the roads, and construction projects and factory production slowed under temporary limitations. The two alerts were perceived by the general public as a sign of the government’s willingness to take real action to curb pollution in response to increasing discontent from the people regarding the country’s environmental problems.

Action and Inaction

According to definitions from the China Meteorological Administration, there was an annual average of five “smoggy days” during the 1960s, while that number climbed to 26 in 2013. Visibility also dropped from an average of 26 kilometers in the 1960s to 22 kilometers in the 2010s.

NEWSCHINA I March 2016

Smog engulfs the city of Tianjin, December 2, 2015

The government has been fighting worsening air pollution with a new series of environmental policies. The National Action Plan on Air Pollution Control issued in 2013 set objectives for areas of Beijing, Tianjin and Hebei Province (a region abbreviated to BTH) to reduce concentrations of PM2.5 by 25 percent by 2017, based on their 2012 levels. Beijing specifically would need to keep its average concentration of PM2.5 within 60 micrograms per cubic meter. To accomplish these goals, Beijing issued the Clean Air Action Plan 2013-2017 and announced it would invest 760 billion yuan (US$117bn) in air pollution controls by 2017.

In mid-2013, Beijing instituted an emergency response program for air pollution that included a four-tier alert system used for “heavy pollution” days, made up of blue, yellow, orange and red alert levels. Red alert, the most serious, is supposed to be announced at least 24 hours before experts predict the city will be shrouded in hazardous-level concentrations of air pollution for three or more consecutive days.

Yet, until last December, the local government failed to announce a single red alert since the program’s launch in 2013, despite the city’s frequent strings of hazardous air quality days. The silence was allegedly to avoid the economic and societal costs.

According to Wang Bin, head of the emergency response department of the Beijing Municipal Environmental Protection Bureau, Beijing issued red alerts in December because of upgraded standards that imposed stricter regulations for air quality. “It does not necessarily mean air conditions are worse than in the past,” Wang added.

When the Beijing emergency response program underwent revisions in March 2015, the conditions required for a red alert changed from three consecutive days of “hazardous” air pollution (where the Air Quality Index [AQI] is 301 or more) to the present three consecutive days of “very unhealthy” air pollution, classified as AQI levels of 201 or higher.

Over the past few years, China has started to show more transparency regarding its air quality, and the red alerts have been hailed as further evidence of this new openness.

NEWSCHINA I March 2016

The reasons Beijing tightened its red alert standards in early 2015 are threefold, according to Zou Ji, vice director of the National Center for Climate Change Strategy and International Cooperation. The first is the city’s geography – the mountains along its northern and western borders trap pollution; the second is Beijing’s important role as the country’s capital, which requires stricter environmental standards to maintain the country’s international image; and the third is the city’s massive population of over 25 million, which elevates the need for tougher regulations. “The purpose of the red alerts is emissions reduction,” Zou told State-funded media site The Paper during a recent interview.

He added that, considering the harsh reality that eliminating pollution cannot be realized in China in the short term, stiffening red alert standards could be a temporarily effective measure in treating some symptoms of the chronic affliction that has haunted China for decades.

Indeed, in 1999, Xie Zhenhua, then the director of what is now called the Ministry of Environmental Protection (MEP), stated publicly that “air pollution will not be the country’s legacy in the new century.” However, the nation’s substandard air quality continues to draw headlines from around the world. At the same time, the government invested a lot into improving its air qualitymonitoring technology in recent years, allowing measurements of pollution to become significantly more precise and timely than in the past.

During the red alerts in December, more than 2,000 factories and 3,500 construction sites in and around Beijing were ordered to either reduce production or close entirely.

Half of the city’s vehicles were kept off the road through restrictions based on whether their license plates ended in an odd or even number. Beijing authorities dispatched a large number of extra police officers to ensure drivers were following the rules.

Cheng Shuiyuan, a professor of environmental science at Beijing University of Technology, evaluated the effectiveness of the red alerts. He concluded that they helped reduce PM2.5 density by 20 to 25 percent, and cut airborne pollutants by an average of about 30

percent.

Sources

According to the China Meteorological Administration, from December 19 to 22, heavy smog blanketed a large swath of northern China, stretching from the mid-western city of Xi’an, through Beijing and up to Shenyang in the country’s freezing northeast.

At a December 22 press conference, MEP spokesman Tao Detian said that the total affected area was as expansive as 660,000 square kilometers, with 470,000 square kilometers suffering “heavy pollution.”

Along with Beijing, another 10 cities in neighboring areas issued red alerts.

After years of monitoring air quality and analyzing data, Chinese researchers concluded that the five major sources of PM2.5 in Beijing are vehicle emissions, coal burning, industrial production, dust and pollution produced in neighboring regions.

Local emissions make up over 50 percent of Beijing’s PM2.5 problem, according to a December article in the journal Atmospheric Environment. In 2013, the industrial sector (44 percent) and residential sector (27 percent) were the dominant contributors to urban PM2.5 in BTH. During the winter, the residential sector surpasses the industrial sector to become the largest contributor to air pollution. According to the article, residential sources, such as coal-burning stoves and furnaces, may even make up as much as 48 percent of contributions in January, while they only account for some 10 percent of total emissions at other times of year.

A Peking University paper published in October in the journal Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences drew a similar conclusion.

From the research team’s analysis of pollution data collected from 2010 to 2015, “the heating has contributed a more than 50 percent increase (on average) in PM2.5 in the winter months in Beijing since 2010. This means that one-third of the PM2.5 [during these] months is due to heating.”

Meng Fan, an air pollution researcher at the Chinese Research Academy of Environmental Sciences, agrees that coal burning from private households is a major contribu-

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Environment Nationwide Air Quality Indexes (AQI) on December 25, 2015

Severely Polluted (>300μg/m3) Heavily Polluted (200-300μg/m3) Moderately Polluted (150-200μg/m3) Lightly Polluted (100-150μg/m3) Good (50-100μg/m3) Excellent (0-50μg/m3) Source: China National Environmental Monitoring Center

tor to the region’s recent air pollution, adding that it introduces a significant amount of carbon monoxide into the air. The fact that Beijing itself is like an island of heat trapped by mountains to the north and west worsens the situation. Without strong winds blowing in from the northwest to blast the bad air out of the city, the capital’s air just keeps circulating in a closed system. At present, there is no scientific model available that can precisely imitate the complex patterns of air circulation within Beijing’s borders.

According to Peng Yingdeng, a researcher at the National Engineering Research Center for Urban Pollution Control, Beijing’s general air quality in November and December was not any worse than usual. “Yet due to this year’s severe weather conditions caused by El Niño, which reduced the [amount of] cold air, the resulting stable atmosphere made Beijing prone to spells of low air pressure that trapped air pollutants closer to the ground,” Peng told NewsChina.

Although the largest source of winter smog has been identified, it is hard to implement regulations that successfully restrict coal burning in China’s sprawling cities. Beijing’s municipal government started to install new natural-gas heating facilities in 2011 to phase out coal-based heating sources in the city center. However, outside the downtown region,

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most furnaces in Beijing are still coal-burning and have yet to be renovated. A recent inspection of a few districts in the BTH region organized by the MEP found substandard coal quality remains a key problem in many places.

Among 10 major winter heating providers, the coal used by seven of them fell short of the required standards.

According to a statistical analysis released in late 2015 by the Institute for Energy Economics and Financial Analysis, coal production and coal imports in China peaked in 2013, and both declined at an accelerating rate throughout 2014 and 2015. Chinese coal consumption was down 5.7 percent year-on-year for the first nine months of 2015. Yet despite the positive trends of surging renewable energy and slower growth in the demand for power, the latest MEP statistics indicate coal still dominates as the biggest energy source for much of northern China, accounting for as much as 90 percent of total energy consumption. Even more paradoxically, a Greenpeace analysis released in November found that, despite falling coal demand and major overcapacity in coal-fired power generation, China issued environmental approvals to 155 coal-fired power plants from January to September 2015, averaging out to about four plants per week. In total, these plants have a capacity of 123 gigawatts, more than twice the size of Germany’s entire coal

power output. This apparent coal bubble represents a widespread, outdated mentality towards conventional energy, in spite of its damaging effects on the environment and human health.

Every year, outdoor air pollution is a contributing factor in the deaths of an estimated 1.6 million people in China, according to a scientific paper released by Berkeley Earth in August. That comes out to about 4,400 people a day.

China has begun to take big steps to tackle air pollution caused by power plants and other industrial contributors in the past decade, shutting down some of the least efficient fossil fuel-burning power plants and committing trillions of US dollars to clean energy. In fact, the average PM2.5 concentration in Beijing from January to October 2015 was 69.7 micrograms per cubic meter, an impressive 21.8 percent lower than the previous year.

Winter smog in November and December, however, failed to sustain this achievement.

The Beijing Municipal Environmental Protection Bureau announced in early January that the city’s PM2.5 density decreased by just 6.2 percent in 2015 compared to 2014 figures, although that still exceeded the goal of a 5 percent reduction set at the beginning of 2015. The annual average PM2.5 concentration in 2015 was 80.6 micrograms per cubic meter, compared to 2014’s 85.9 and 2013’s 89.5.

A source working in the environmental sector who spoke on condition of anonymity told NewsChina that emissions cut during the red alert periods from vehicle exhaust, factory production and construction projects have been nearly maxed out, so there is little else that can be done to further lower emissions during future pollution emergency periods.

From a long-term perspective, the restructuring of the energy and industrial sectors is still essential to successfully tackle air pollution, said Chai Fahe, vice president of the Chinese Research Academy of Environmental Sciences, at an MEP conference in early December. At the same time, to mitigate the intensity of each wave of pollution, local governments should aim to forecast them early and initiate quick countermeasures, which are equally important in solving the problem. Li Teng and Chen Fei also contributed to this story NEWSCHINA I March 2016

Biodiversity Decline

Saving Species Photo by CNS

A new WWF report has detailed the massive decline in China’s wild animal populations over the past 40 years, a problem scientists, government officials and local communities are now working to reverse

By Wang Yan

The Chinese alligator is listed as Critically Endangered on the IUCN Red List

F

rom 1970 to 2010, global populations of mammals, reptiles, amphibians and fish have shrunk by about 52 percent. China is right in the middle of the global pack with a 50 percent loss of its land-based vertebrate population, according to a first-of-its-kind report published by the World Wide Fund for Nature (WWF) in November 2015. The situation grows more stark when population data for the country’s surviving amphibian and reptile species are examined separately.

Over that 40-year period, numbers of these two groups fell by 97 percent. Habitat loss, poaching and climate change all contributed to this devastation.

Yet despite these dismal statistics, recent data are also sprinkled with kernels of optimism – such as China’s growing bird population and an increasing number of nature reserves – which give experts encouragement. Coupled with recent shifts in policy and public awareness, environmentalists are hopeful that China can step up to the plate as a major player in future global conservation efforts.

Decline

The WWF’s Living Planet Report – China 2015 was a combined effort between the China Council for International Cooperation on Environment and Development (CCICED), the Global Footprint Network, the Institute of Geographic Sciences and Natural Resources Research and the Institute of Zoology (IOZ) of the Chinese NEWSCHINA I March 2016

Photo by CNS

A female snow leopard and her cub in the Wolong Nature Reserve, Sichuan Province

Academy of Sciences (CAS). While the CCICED and the WWF have collaborated before, this report is the first to combine three indices – the Variation Trend Index of Chinese Vertebrates, ecological footprint and water footprint – to create a more comprehensive look at China’s current situation.

Researchers analyzed data from 1,385 representative populations of 405 vertebrate species in China, which account for about 6.4 percent of the country’s total number of vertebrate species. Those species comprised 161 mammals, 184 birds and 60 amphibians and reptiles, which have far and away suffered the most of all the vertebrates studied.

IOZ researcher Yang Qisen said that there are two factors depressing amphibians and reptile numbers in particular: excessive hunting of certain species whose parts are used in traditional Chinese medicines, and the fact that these animals are particularly vulnerable to habitat loss, population isolation and climate change. Amphibians and reptiles are more sensitive to humidity and temperature shifts (studies indicate that populations plummet in dry years) and have less ability to migrate compared to birds and mammals.

River systems, particularly those in southern China where humidity and warm temperatures create an ideal habitat for amphibians and reptiles, have become severely polluted due to decades of rapid economic development, according to IOZ associate researcher Xie Yan.

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Environment

The 2015 report is not all bad news. Research shows that the bird population remained relatively stable from 1970 to 2000, and then began to rise significantly, resulting in an overall increase of 43 percent by 2010. The report suggests they bucked the trend because of the benefits of an increased number of reserves and the

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Photo by CNS

Revival

protection of recently enacted laws and regulations. China’s wildlife protection law, adopted in 1988, and its principles on nature reserve management, implemented in 1994, have both effectively curtailed poaching.

In the 1990s, enhanced awareness of environmental protection and biodiversity led to a significant change in the public’s attitude towards animal protection. “According to my personal experience in the field, I think the general [biodiversity] situation has improved since the 1990s, when protection measures were adopted,” Yi Shaoliang, senior national resource management specialist at the International Center for Integrated Mountain Development, told NewsChina during an interview in late November. According to Yi, wolves that had almost disappeared in some mountain regions in Yunnan and Sichuan provinces started to reappear in the early 2000s. “In 2014, the last time I went to that area in northwestern Sichuan, locals told me more wolves were coming back, which also posed a big threat to their livestock,” Yi added.

Some of China’s conservation campaigns for certain species, particularly crowdpleasers such as the panda, have shown encouraging results in reviving lost populations. During an event at the Paris climate conference, world-renowned primatologist Jane Goodall said that there has been a “huge change in awareness” in China since she first visited 17 years ago. “Think of the panda: No Chinese person I’ve ever met would be happy if the panda went extinct, and now they are beginning to realize that the other animals are important, too,” she said.

Over a 10-year period, from 2003 to 2013, the number of pandas living in the wild increased from 1,596 to 1,864, according to China’s State Forestry Administration.

“Often people’s engagement starts around what we refer to as a charismatic animal… the panda, the tiNumbers of Tibetan antelope have ger, the snow leopbeen growing since the late 1990s ard, things that people Photo by CNS

Breakneck development along China’s eastern coast has also destroyed habitats, leading to further population decline.

Aquatic animals suffer alongside their terrestrial brethren. A typical example is the Yangtze River dolphin, which scientists declared functionally extinct in 2006. The Yangtze finless porpoise, the world’s only freshwater porpoise, has begun to face a similarly fatal situation to that of its cousin. The species was upgraded from Endangered to Critically Endangered on the International Union for Conservation of Nature (IUCN) Red List of Threatened Species in July 2013. Fewer than 1,000 of them remain.

Despite an overall decline, Chinese land-based vertebrate populations experienced a short-term increase during the 1980s. Yang Qisen explained that a possible reason for the temporary fluctuation was the turbulence China experienced during the mid-20th century.

When people were starving during famines in the 1960s and 1970s, they killed bats and rats for food, causing huge losses in vermin populations. As the country’s economic and political situation changed in the 1970s and 1980s, high fertility rates caused the same populations to explode.

Another possibility, according to Xie Yan, was the nationwide campaign to stop the killing of large mammals such Wild bird populations as tigers that in China rose kicked off in the significantly from early 1980s. Their 2000 to 2010 numbers increased for a few years, but took a turn for the worse in the following decade due to habitat loss caused by human activities, including the widespread adoption of pesticides in the agricultural sector.

NEWSCHINA I March 2016

Photo by CNS

just don’t want to lose,” IUCN director general Inger in the last two or three Andersen told our reporter. “And that’s very good years, more effective because this is a symbol for people for nature as financial support has a whole.” been invested into Protecting “cuddly“ animals may have realprotected regions world as well as symbolic benefits, according to and reserve manXie Yan. These animals, like the Siberian tiger agement has visin northeastern China and the snow leopard ibly improved. in China’s west, are often “umbrella species,” Xie Yan said that, meaning they are more or equally sensitive to while governdeviations in their habitats than surrounding ment funding animals, so by monitoring and looking after the in this sector is umbrella species, scientists can theoretically also significant, there With sound protection measures, its protect many other animals under its umbrella. is still a long way to common to see wild animals, like They also tend to have large habitat ranges, so safego.

“Reserves that prothe Tibetan gazelle (pictured), on the Qinghai-Tibetan plateau guarding these animals may lead to a more intact ecotect forested areas have logical environment for entire regions. shown great progress, but Over the last two decades, as urbanization has driven rural the degree of protection [alfarmers to China’s sprawling cities, swathes of farmland have been lotted to] grasslands, wetlands and left unattended. Former mountain slopes that farmers had previously particularly river systems is far from suffiharnessed for agricultural purposes have now returned to nature. This cient,” Xie said. “They will require more attention in the future.” habitat shift is particularly apparent in southwestern China, including China’s National Development and Reform Commission has signed Yunnan, Sichuan and Guizhou provinces. As a result, some species have contracts with the Paulson Institute to set up a national system of parks seen their numbers tick upward. Yunnan golden monkeys, which were and protected areas. The goal is to research the optimal model for China’s thought to be extinct until the 1960s, have begun to grow in number, park system that will fit the country’s unique circumstances and meet from a few hundred to the present few thousand in the wild. international standards at the same time.

The Tibetan antelope is another good example. Poachers hunted the The change isn’t just happening at the top – effective pilot programs animal for its soft and warm wool known as shahtoosh, driving the ante- for animal protection are sprouting up across China because of grassroots lope to endangered status. The animal, also known as the chiru, started initiatives. The protection of the snow leopard in the Qinghai-Tibetan to attract international attention in the late 1990s. With an effective anti- Plateau region is a prime example of the combined efforts of community poaching movement, the population has increased from some 60,000 to members, scientists and local governments. Tibetans, under the support the present 200,000. In the newest China Species Red List of Vertebrates and guidance of related NGOs, are practicing animal protection and that was released by the Ministry of Environmental Protection and the monitoring measures. Such activities, coupled with strict government CAS in December, the Tibetan antelope has been moved from the En- regulations on rifles, have made great strides in the protection of certain dangered section to Near Threatened. local animals. “Despite being listed as Endangered on the IUCN Red List, the possibility of a recovery for snow leopards is very high,” Gao Prospects Yufang, executive director of Everest Snow Leopard Conservation CenChina ranks eighth among the world’s 17 “megadiverse” countries, ter, told NewsChina. “Hopefully China can play a leadership role in the which have been so identified based on their exceptional biodiversity. Its protection of this species.” vast land area supports more than 30,000 higher plant species (half of With more and more young people starting environmental NGOs, which are endemic to China) and 6,347 vertebrate species – that is 10 the Chinese public is growing more environmentally aware. “That is percent and 14 percent of the total number of recorded global species, how environmental voices start, and that voice echoes with the governrespectively. ment of China when they are talking about eco civilization... [which is] In recent years, China has gradually shifted the focus of environmental imperative to support biodiversity,” Anderson said. protection and sustainable growth to the more integrated approach of Li Lin, executive program director of WWF China, expressed his aspi“ecological civilization,” a concept that aims to achieve the benefits of rations for the future in a statement after WWF’s 2015 report was pubdevelopment in “harmonious coexistence” with nature. These principles lished: “We hope that China can detach economic growth from ecologiare reflected in numerous policy documents and government actions. cal degradation and incorporate biodiversity protection into its going One step in the right direction is the increasing number of the coun- global strategies such as [the] One Belt, One Road strategy and [the] try’s nature reserves. From 100 in the 1980s to the present 2,700, they ‘South-South’ cooperation strategy, to contribute to global sustainable now make up more than 18 percent of China’s land area. Particularly development within the limits of our one planet.”  NEWSCHINA I March 2016

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International

North Korea Nuclear Test

Stuck in the Past

North Korea’s recent nuclear test exposes differences between the regional strategic considerations of the US and China

By Yu Xiaodong

I

n the past couple of years, the issue of North Korea’s nuclear ambitions has been one of a few issues that the US and China have sought common ground on, despite differing opinions on how the phenomenon should be addressed. At various summits, Presidents Xi Jinping and Barack Obama have emphasized that a further North Korean nuclear test would be unacceptable.

However, in the wake of the detonation of a nuclear device close to the Chinese border, which Democratic People’s Republic of Korea (DPRK) state media claimed was a hydrogen bomb, the fragile common ground between the US and China on the North Korean nuclear issue has apparently given way to fresh disputes.

Pressure

Since successfully detonating its first atomic bomb in 2006, Pyongyang has carried out four nuclear tests in 10 years. In a conversation between China’s foreign minister Wang Yi and US Secretary of State John Kerry on January 7, Kerry stated that previous approaches to the North Korean problem have not worked. “We cannot continue business as usual,” Kerry was quoted as saying.

As North Korea is almost completely reliant on China for its fuel and food supply, Western analysts tend to see Beijing as Pyongyang’s only lifeline. Kerry’s comments were widely interpreted as both a criticism of China’s failure to bring Pyongyang under

40

control, and a demand for a tougher stance from its leadership.

While Wang Yi didn’t directly respond to Kerry’s remarks, China Foreign Ministry spokesperson Hua Chunying stressed in a press conference held on January 8, without directly naming specific countries, that China is not “the cause” of the peninsula’s nuclear crisis, adding that the key to resolving the North Korean nuclear issue was not China.

Earlier in January, Hua reiterated that China is “firmly opposed” to North Korea’s nuclear experiments, and that China had summoned the North Korean ambassador to make “solemn representations.”

Hua went on to say that it is not only China that should play an active role in persuading North Korea to give up its nuclear ambitions, but the international community as a whole. She then called for the early resumption of the long-dormant Six-party Talks aimed at securing North Korean nuclear disarmament.

The English-language edition of Global Times, a State-owned newspaper whose views often reflect those of the Chinese government, was more explicit in rejecting criticism of China’s approach to North Korea. “There is no hope [of putting an] end to the North Korean nuclear conundrum if the US, South Korea and Japan do not change their policies toward Pyongyang. Solely depending on Beijing’s pressure to force the North to give up its nuclear plan is an illusion,” ran an editorial published January 8.

Softer or Tougher?

Such remarks reveal some emerging fundamental differences in the perception of the North Korean issue. Given that past diplomacy, which included offers of incentives to the DPRK, has failed to result in cooperation from Pyongyang, the US government has deemed it meaningless to engage North Korea diplomatically.

For Beijing, however, the failure of past diplomatic efforts partly lies in US refusals to entertain the notion of an enduring peace with North Korea. Unlike Iran, whose leaders explicitly declared that they did not seek to normalize their country’s diplomatic relationship with the US, obtaining a security guarantee from the US through a formal peace treaty lies at the very heart of Pyongyang’s approach to diplomatic negotiations with the US and other parties.

Unlike Iran, which is a powerful player in its own backyard, the DPRK is considerably weaker than its neighbors, a situation that induces its leadership to believe that nuclear weapons are their best option to deter potential coercion and aggression. In its statement announcing the nuclear test, Pyongyang framed it as a “defensive move” to counter the “threat of nuclear war presented by American imperialists.”

According to Chinese experts, instead of focusing on lifting sanctions, the US NEWSCHINA I March 2016

cerned that the fall of the Kim government would result in hundreds of thousands of refugees flooding into China.

Photo by Xinhua

Failure

Kim Jong-un reviews troops, January 10, 2016

should place all options on the table during negotiations with the DPRK, including a meaningful peace treaty, an idea that has been categorically rejected by the US, whose leadership believes a “softer” approach would only reward Pyongyang’s provocations. For the US, the key to solving the crisis lies in a “tougher” stance characterized by strict economic sanctions, and a highly visible military deterrent.

However, China is concerned that increased pressure will push Pyongyang further into isolation and desperation, increasing the volatility of the regional situation and likely resulting in evermore unpredictable and aggressive provocation, possibly military conflict or the collapse of Kim Jong-un’s government The fate of the Kim regime is precisely where the US and China disagree most glaringly. The US continues to welcome its collapse – it considers the regime to be the foundation of a failed and illegitimate state.

Although perceptions of the DPRK government in the eyes of both China’s general public and the Chinese government have become increasingly negative in recent years, China does not yet appear ready to abandon Kim Jong-un. In addition to its strategic goal of keeping North Korea as a strategic buffer zone between US military bases in South Korea and China’s border, Beijing is also conNEWSCHINA I March 2016

Under the Xi administration, China has made various attempts to use its influence to persuade Pyongyang to cooperate with international efforts without completely pulling the plug on North Korea.

Since the DPRK’s previous nuclear test in 2013, China has increasingly distanced itself from North Korea, downgrading its “teeth and lips” alliance with Pyongyang to a “bilateral relationship between normal countries.”

In the meantime, China has also been establishing closer ties with South Korea. Xi and South Korean President Park Geun-hye have held six summit-level meetings in three years, while Xi has never met with Kim Jongun. It has also been reported that China has scaled down oil shipments to North Korea.

This shifted strategy appears to have had minimal impact on Pyongyang’s unpredictable behavior. In October 2015, as an incentive to seek cooperation from Pyongyang, China sent Liu Yunshan, a high-ranking Politburo member, to Pyongyang. However, this diplomatic effort collapsed two months later, when North Korea’s State Merited Chorus and the pop group Moranbong Band suddenly canceled scheduled performances in Beijing and returned home.

Neither country offered an official explanation, but, according to a widely cited report, the spat was triggered by a statement made by Kim on December 10, which hinted that North Korea was developing a hydrogen bomb. According to another report, North Korean officials became indignant when Chinese counterparts, after viewing a rehearsal of the performance, requested that the Moranbong Band not perform a particular song idolizing the Kim family.

North Korea conducted its controversial nuclear test less than a month after the fracas, placing Beijing under yet more pressure to take a firmer line on Pyongyang.

‘Strategic Patience’

Despite its much tougher rhetoric, US policy towards Pyongyang has also come in

for criticism in the wake of North Korea’s nuclear test. To a certain extent, the US has found itself in a similar situation to that of China. Under the so-called policy of “strategic patience” adopted by the Obama administration, the US has chosen neither to actively engage with Pyongyang, nor to draw clear lines of response to provocations.

Just as China has chosen a middle way between maintaining its traditional alliance with Pyongyang and unplugging the lifeline, the US has also constrained its policies to sanctions and shows of force, while avoiding bolder policy options such as appeasement or direct military action.

In response to the December nuclear test, the US deployed nuclear-capable B-52 bombers in a flyover of the Korean peninsula.

However, few believed that the deployment would make a difference, given Pyongyang’s contempt for previous US shows of force.

Moreover, China is wary that the US refusal to engage with North Korea diplomatically may be rooted in Washington’s overall regional policy. Professor Han Xiandong, an expert on Northeast Asian studies at the China University of Political Science and Law, argues that “strategic patience” is the byproduct of the “strategic re-balancing” of the Obama administration. As the US considers the rise of China as its number one global challenge, the relative importance of a nuclear-capable North Korea has faded, instead becoming subject to the needs of the so-called US “pivot to Asia.”

By holding China accountable for North Korea’s behavior, the US appears to be using North Korea as leverage to forge a trilateral alliance with South Korea and Japan, and to deploy more military assets in the region.

Japan and South Korea already appear to be mending damaged ties in response to the North Korean nuclear test.

As the UN Security Council is working on a new resolution against North Korea, it is expected that the US and China will agree to impose new sanctions. However, there is no sign that the two countries are ready to change their fundamental approaches.

Without strategic trust and full cooperation between these two major powers, the North Korean nuclear crisis will persist.

41

International

Middle East Policy

Shifting Sands

Photo by Xinhua

While China’s recent diplomatic interactions with Iraq and Syria may indicate that it is ready to play a more active role in the Middle East, fundamental policy appears unchanged

By Yu Xiaodong

Iraqi Prime Minister Haider al-Abadi lays a wreath at the Monument to the People‘s Heroes in Beijing, December 23, 2015

G

iven China’s rising international influence and its vital interests in the region, the nation’s diplomatic position in the various conflicts of the Middle East has become a focal point for international attention, especially after Russia began to launch airstrikes in Syria in October, leading to a clash with Turkey over the downing of a Russian aircraft and a further shift in the regional diplomatic landscape.

‘Proactive’

Although China has consistently opposed both the spread of terrorism and externally imposed regime change, a position sympathetic with that of Russia, its leadership has largely kept out of conflicts in the region, making no specific commitments to any involved parties.

In recent months, however, China appears to have suddenly stepped up its diplomatic activities. On December 22, 2015, Chinese President Xi Jinping met with Iraqi Prime Minister Haider al-Abadi in Beijing, with both men pledging to upgrade their respective countries’ relationship to a “strategic partnership.”

On the same day, China’s Foreign Minister Wang Yi announced at the foreign ministers’ meeting of the International Syria Support

42

Group (ISSG) that China would like to host talks between representatives of the Syrian government and the country’s opposition groups that do not have extremist ties.

Beijing has previously hosted both Syrian government representatives and opposition leaders at different times, but Wang’s offer marked the first time the Chinese government has explicitly offered to facilitate direct talks between the various sides in the Syrian civil war.

The next day, on December 23, both Wang and State Councilor Yang Jiechi held meetings with the Syrian deputy prime minister, also serving concurrently as the country’s foreign minister, Walid al-Moallem. Two weeks later, on January 6, Beijing hosted President Khaled Khoja of the Syrian National Coalition (SNC).

Whether or not China’s mediation efforts bear fruit, China’s recent diplomatic efforts in Syria have led many to believe that Beijing is ready to take a more proactive position, especially as the regional diplomatic landscape is in flux due to waning US influence and soaring tension between regional powers.

China’s recent diplomatic exchanges with Iraq and Syria have led some to speculate that Beijing is leaning towards the so-called RussiaNEWSCHINA I March 2016

Syria-Iran-Iraq (RSII) coalition, particularly given seeming commonalities between China’s Middle East position and that of Russia.

Taking Sides?

The fact that Abadi’s visit to China came as the Iraqi prime minister rejected the idea of deploying US ground troops in Iraq and protested Turkish incursions in northern Iraq has further strengthened such speculation.

In an interview with China’s State-controlled Xinhua News Agency, Abadi reiterated criticism of the US-led coalition, which, Abadi said, has not provided adequate support to Iraq in its fight against Islamic State (IS), and asked for close cooperation with China on security issues. Abadi also repeated his protests against Turkey.

Beijing made no direct response to Abadi’s criticism of the US-led coalition and Turkey. In the joint statement issued by China and Iraq, Beijing pledged to support “Iraq’s unity, territorial integrity, sovereignty and independence” and mutual efforts “to maintain national security, stability and to fight against terrorism,” but offered no specific commitments to the Iraqi government other than limited personnel training and humanitarian aid.

Earlier in October, the Iraqi defense ministry released a video showing the launch of a Chinese-made CH-4B combat drone, which the Iraqi defense minister, speaking during the broadcast, said took off for its first combat action against IS militants in Iraq. While analysts believe that China may have increased its arms sales to Iraq, material support is mainly targeted at increasing the Iraqi government’s capabilities in fighting IS, particularly in defense of its remaining oil fields, a vital source of imports for China. In August of last year, Iraq emerged as the third-biggest supplier of oil to China, and energy cooperation has been a major focus of relations between Beijing and Baghdad.

So far, there is little evidence that China will begin actively taking sides in the increasingly complicated conflicts and tensions in the Middle East. Even with this more proactive approach, Beijing has been treading carefully to avoid being dragged into disputes between major regional powers.

On the Syria issue, China and Russia have vetoed four previous UN Security Council resolutions insisting on President Bashar alAssad’s removal as a precondition for peace talks. Other than that, however, Beijing has largely taken a back seat as Russia, the West, and other regional powers have competed for influence.

Beijing’s mediation initiative, announced only after the UN Security Council reached consensus on December 18 and endorsed a road map for a peace process that did not require Assad to step down, also follows the same prudent approach, avoiding direct conflict with the interests of other major powers.

More recently, in the aftermath of a diplomatic fallout as Saudi Ara-

NEWSCHINA I March 2016

bia and its regional allies severed diplomatic relations with Iran, Chinese foreign ministry spokesperson Hua Chunying announced that China had sent the country’s vice foreign minister Zhang Ming to both Saudi Arabia and Iran for “an exchange of views” on the regional situation in an effort to ease tensions.

Stability

As the Middle East remains the primary source of China’s crude oil imports, stability in the region has been a top priority for China.

Without the colonial burden of other major powers, Beijing has enjoyed solid ties with almost all major regional players. Russia, Turkey, Saudi Arabia and Iran are among the founding members of the China-led Asian Infrastructure Investment Bank (AIIB), one of the few international bodies in which all four nations are members.

While Russia has become one of China’s closest partners in the past couple of years, Turkey has also been named a key component of China’s One Belt, One Road initiative. The first overseas high-speed railway project built by Chinese companies was completed in Turkey in 2014. Although alleged Turkish involvement in smuggling ethnic Uyghurs out of China and anti-Chinese protests in Istanbul in 2015 have dampened the enthusiasm of their respective governments, China and Turkey reiterated in November their commitment to continue to push forward the One Belt, One Road initiative during the G20 summit held in Antalya, Turkey.

In response to Turkey’s downing of a Russian jet, China’s official position has been that the incident was “a loss to the anti-terrorist efforts of the international community,” a position viewed as favoring Russia’s. However, Beijing has refrained from directly criticizing Ankara’s decision to shoot down the plane.

China also appears reluctant to embroil itself in the row between Saudi Arabia and Iran, as both are major sources of oil imports. Although Iran went from being China’s third-biggest source of oil imports in 2012 to the sixth-biggest in 2014 after the UN imposed sanctions against the country, Tehran remains an important source of fuel for Beijing. As economic sanctions are being lifted imminently according to the agreement on the Joint Comprehensive Plan of Action to end Iran’s strategic nuclear program, China is expected to increase imports of Iranian oil.

Due in part to the increasingly chaotic geopolitical situation in the Middle East, China has already begun to diversify its sources of oil imports, as oil-producing countries compete for the Chinese market.

Nevertheless, as long as China remains reluctant to become more deeply committed to its Middle Eastern partners in terms of security cooperation, the resources Beijing will likely be willing to invest in resolving regional conflicts will remain limited. As tensions escalate, particularly between Saudi Arabia and Iran, the chances of China’s newfound diplomatic activism making a major impact seem remote. 

43

Economy

Financial Discipline

Battles in the Boardrooms

As China’s anti-graft campaign creeps into the country’s financial market, the impact will be both fiscal and political

By Yu Xiaodong

Guo Guangchang

44

Photo by CFP

W

hen billionaire Guo Guangchang, chairman of Fosun International, one of China’s biggest privately owned enterprises, disappeared on December 11, 2015, it caused quite a stir. Guo, who is often described as “China’s Warren Buffet,” reappeared three days later, and, according to a statement released by his company, had been “assisting in certain investigations” undertaken by Chinese authorities.

Guo’s detention came shortly after Yim Fung, chairman of Guotai Junan International, the Hong Kong wing of one of China’s biggest brokerage firms, disappeared from public view on November 18, before resurfacing on December 24, alongside a similar announcement from his company which made a vague reference to “assisting with investigations.”

High-profile

Guo and Yim are the latest executives to be implicated in China’s NEWSCHINA I March 2016

expansive anti-graft drive, which in recent months has extended into the financial sector. Launched after a sharp decline in the Chinese stock market in July, during which the domestic market plunged by more than 40 percent, several high-profile traders and officials involved in stock trading have been detained.

On November 1, the official Xinhua News Agency reported that Xu Xiang, a trading floor legend often compared to George Soros, had been arrested on suspicion of “insider trading and other offenses.”

As the manager of hedge fund Zexi Investment, Xu had generated more than 300 percent in annual gains for two of his funds in 2015 alone at the time of his arrest, which stood in stark contrast to a meager 3 percent uptick in the Shanghai Composite Index over the same period.

In August and September, a total of 11 top executives, including company president Cheng Boming, employed by Citic Securities, China’s biggest brokerage firm, were put under investigation for suspected insider trading. Citic Securities was one of the major securities companies tasked with rescuing China’s stock market in the aftermath of the market’s sharp decline last summer, and it is suspected that Citic has taken advantage of the information it obtained as a result of its privileged standing with the government to engage in insider trading through a foreign shell company.

In November, major securities firms Haitong Securities and Guosen Securities also announced that they were under investigation by the China Securities Regulatory Commission (CSRC).

Alongside the anti-graft campaign, Chinese authorities have also taken steps to address other irregularities in the markets in an effort to restore investor confidence.

From September until the end of 2015, the CSRC handed down over 5.3 billion yuan (US$815m) in penalties for various financial misdemeanors, 11 times the total fines levied in the whole of 2014.

Among those punished were China’s largest securities company, trading technology companies, major shareholders in publicly traded companies, and institutional and individual investors for violations of various regulations, insider trading and market manipulation.

Officials

A number of high-profile financial officials came under investigation in the same period. On September 13, the Central Commission for Discipline Inspection (CCDI) announced that Zhang Yujun, an assistant chairman overseeing brokerages and fund houses at the

NEWSCHINA I March 2016

CSRC itself, was suspected of “serious disciplinary violations.”

Zhang is said to have leaked inside information and conspired with securities companies to conduct insider trading. Then, on October 23, following Zhang’s fall, his former deputy Chen Hongqiao, president of Guosen Securities, committed suicide. That same day, the CCDI released a statement that it would “inspect” 31 financial institutions, including China’s central bank, national regulatory authorities, China Investment Corporation (CIC), China’s sovereign wealth fund, and most of the country’s major banks and insurance companies.

Then, on November 2, the Agricultural Bank of China, China’s third-largest bank, announced that its president Zhang Yun had resigned, though there was widespread speculation that he had actually been placed under investigation. In the same month, seven executives from China Construction Bank, China’s second-largest bank, were also reportedly under investigation, the latest in a string of top bankers to fall, joining former Minsheng Bank president Mao Xiaofeng and Bank of Beijing board member Lu Haijun, both of whom were arrested earlier in 2015.

Finally, on November 15, the CCDI announced that Yao Gang, vice chairman of the CSRC, had been placed under investigation. Yao is the most senior official to fall so far during the cleanup of the financial sector, but as anti-graft efforts continue in 2016, more financial tigers are expected to tumble in the coming months.

China’s so-called “underground” banking system, a major means of money laundering, has also been hit by the crackdown. According to a November report in the People’s Daily, flagship paper of the Communist Party, 170 illegal money transfers involving a total of 800 billion yuan (US$123bn) had occurred in China since April that year.

‘Coup’

Despite the scale of the ongoing investigation, no formal criminal charges have been publicly announced, with the details of most arrests leaked by anonymous sources. The apparent secrecy surrounding the ongoing investigations leads many to believe that the anti-graft drive in the financial sector has major political significance.

The authorities have long suspected that the market plunge last July 2015 was an “economic coup” – a politically motivated and coordinated attack made by opponents of Chinese President Xi Jinping’s leadership in collusion with those who have a vested interest in the current system, in short, China’s stock market fall was a deliberate attempt to sabotage the leadership’s reform agenda.

45

Economy china

bynumbers According to those who have put forward the “coup” theory, by shutting down the stock market, investors could blame the leadership for their losses, undermining Xi’s authority and harming the prospects of his reform plan.

While many remain skeptical that the market plunge was man-made, few would dispute that China’s stock market, with its close ties to political interests, is a hotbed for corruption. Political interference, insider trading and market manipulation by well-connected players have long been a feature of China’s stock market.

For example, in the case of Xu Xiang, the arrested hedge fund manager, it is suspected that the extraordinary performance of his funds, which did 100 times better than the market average, was obtained through collusion with his politically powerful customers and their associates in control of various companies.

To a large extent, the anti-graft drive in the financial sector is an integral part of the overall anti-corruption campaign Xi launched in 2012, which continues to be played out as a political battle of wills between the president and the opponents of his reforms.

In the first couple of days of 2016, almost all of China’s major State publications ran various front-page features highlighting past remarks made by Xi on the fight against corruption, re-emphasizing the leadership’s resolution to push forward the anti-graft campaign in the coming year.

However, just as the leadership continued to highlight its tough stance on graft, China’s major stock exchanges tanked on the first trading day of 2016 (January 4), with the CSI 300 – the index of the largest listed companies in Shanghai and Shenzhen – falling 7 percent, marking its worst trading day since market equilibrium was largely restored in late August 2015. The plunge triggered the government’s newly established “circuit breaker,” suspending the day’s trading.

Walking the tightrope between maintaining market stability and a continuing need to expose corruption, Xi’s anti-graft drive in the financial sector in 2016 is apparently facing a double-bladed challenge.

46

0.8% Year-onyear growth of yuan deposits in Hong Kong banks over the first 11 months of 2015

Annual change in yuan deposits in Hong Kong banks, %

300 260 220 180 140 100 60 20 -20

Source: Hong Kong Monetary Authority

2006

2007

2008

2009

2010

2011

2012

2013

2014

9.3%

45%

Fall in China’s cotton output in 2015 compared with 2014, marking a three-year consecutive decline

Fall in the average price of China’s crude oil imports in 2015, coming alongside an 8.8 percent increase in total import volume

China’s cotton output, million tons

7 6 5 Source: Ministry of Commerce of China

4 3

US$400m

2

(US$1= 6.56 yuan)

1

2015 sales revenue of Chinese mainland films in overseas markets

0

Chinese mainland films in overseas markets, US$m 600

2012

2013

2014

2015

Source: China National Bureau of Statistics

500 400 300

US$11.8bn

200

China’s outbound foreign direct investment in manufacturing in the first 11 months of 2015, up 95.4 percent compared to the same period in 2014

100

Source: Ministry of Commerce of China

0

2009

2010

2011

2012

2013

2014

2015

Source: China State Administration of Press, Publication, Radio, Film and Television NEWSCHINA I March 2016

Advertorial

Participants in the 2015 “Solve for Tomorrow” National Youth Scientific Innovation and Experiment Contest visit the Samsung Innovation Museum

Samsung Electronics: Nurturing the Dreams of Future Scientists A leading participant in Corporate Social Responsibility 3.0+, Samsung Electronics has focused on its own CSR projects while looking to benefit more members of the public by fully integrating its global resources

By Zheng Qin

O

n December 15, 2015, the winning team of the “Solve for Tomorrow” National Youth Scientific Innovation and Experiment Contest gathered at the Korean Cultural Center in Beijing. They were en route to South Korea, where they were scheduled to visit the headquarters of Samsung Electronics.

With its own cutting-edge technology, Samsung Electronics, the contest’s exclusive sponsor, offered young students a platform to exchange and showcase ideas. The high-profile contest, jointly held by the China Association for Science and Technology and the Central Committee of the Communist Youth League, and a part of Samsung Electronics’ key global corporate social responsibility drive, did not come together by accident.

Samsung Electronics commands resources across the globe, offering participants fertile soil in which to germinate the seeds of innovation.

The first contest kicked off in 2013, attracting nearly 10,000 participants. The following year, the contestant base doubled. Last year, the contest attracted nearly 30,000 participants in 7,224 teams from 1,016 universities.

In a bid to arouse broader interest in science and technology and boost its public profile,

NEWSCHINA I March 2016

Samsung Electronics has teamed up with China’s Internet giant Tencent Group to launch the “Wonder Lab.” This online interactive science video sharing site has aroused interest among young students in China, with the total number of individual visits topping 100 million.

Innovation

Over the past three years, Samsung’s drive for innovation in China has been reflected in the launch of on-campus and online activities. Experts from a range of areas and industries have participated in the program, contributing to the wider promotion of scientific and technological knowledge among the youth in China.

Ample global resources have allowed Samsung to provide a more globalized platform, organizing overseas trips for contest winners and facilitating visits to top global companies, including Boeing and Microsoft, as well as internationally renowned research institutions.

With the aim of sharing high-quality resources and the fruits of innovation with young people, “Solve for Tomorrow” has become an attractive science and technology platform for young people in China. Since it coined its motto “Innovation is Everything” in 1993, Samsung has become one of the world’s

leading investors in technology innovation and R&D. “Solve for Tomorrow” calls on young people to address pressing social issues using solutions based on science and technology. The contest has changed the lives of its participants. Liang Fengyan, from Sichuan University, a two-time contestant and champion title winner in the Chengdu area, has gone from a student hesitant to choose a specialization to a determined innovator.

In the era of Corporate Social Responsibility 3.0+, the definition of CSR has broadened to include fully mobilizing all resources to attract wider public participation. As a leading participant in Corporate Social Responsibility 3.0+, Samsung Electronics has focused on its own CSR programs while looking to benefit more members of the public by fully integrating its global resources.

Other than “Solve for Tomorrow,” Samsung Electronics has launched the training program “Tech Institute” in the fields of technology, education, medical care and employment; a “SONO School” aimed at improving medical care in less developed regions; and an Internetbased “Smart School” looking to change the lives of ambitious young people.

47

Photo by CNS

Profile

Childless Parents

Sole Survivors

Family planning official Han Shengxue has become an unlikely champion of the rights of those families left childless by the restrictions imposed by China’s now defunct One Child Policy

By Fu Yao

A

t 9 PM on December 1, 2015, Han Shengxue landed at Beijing Capital International Airport, his flight delayed by half a day due to the city’s serious air pollution. Prior to his arrival, more than 700 parents who had lost their only children had gathered in front of the Beijing headquarters of the National Health and Family Planning Commission (NHFPC) for a whole day, demanding compensation from the government for having restricted them to a single child.

Director of a regional family planning office in the city of Huaihua, Hunan Province, Han heard after he arrived in Beijing that four people from his city had joined the petitioners, and that they wanted to see him.

48

They sent a message to Han to reassure him that they had not come to Beijing “to criticize the local government.”

Han replied that nor was he in the capital to “persuade them to come back.” Han was in fact in Beijing at the invitation of Peking University, which was to convene an academic seminar on December 3 to discuss the recent adjustment of China’s Population and Family Planning Law that would allow all married Chinese couples to have two children.

Han was invited in his capacity both as a local family planning official and for his activism on behalf of China’s so-called shidu parents – those who have lost their only child. China is home to over a million such

families, with an estimated 76,000 couples nationwide experiencing the death of their only child every year, according to Chinese Academy of Social Sciences (CASS) data published in 2013. CASS has also predicted that the total number of shidu families in China will reach 2.7 million by 2030, and 11 million by 2050.

Plight

The day before the seminar, Han met with several bereaved parents in his hotel to accumulate material for his ongoing investigation into the problems faced by shidu families, an issue he has been observing for more than 10 years. Over the years, he has formed a habit of interviewing shidu families, experts or volNEWSCHINA I March 2016

Huang Peiyao, 54, cries as she shows a picture of her dead son to reporters during an interview at her home in Zhangjiakou, Hebei Province, November 22, 2015

unteers assisting bereaved parents whenever he has free time during business trips.

Since Han published a report on shidu families in the November issue of Woodpecker, a Chinese literary magazine focused mainly on legal issues, a growing number of bereaved parents across the country have come to him for help.

Qing Er, a shidu mother from Xi’an, Shaanxi Province, met Han the evening before the Peking University seminar. Qing Er, 62, lost her only daughter to illness in 1995.

Four years later, at the age of 46, she gave birth to a second daughter. The new birth brought her both hope and fear – she had to bring up the child on her meager pension because her husband died when their second daughter was only one year old, depriving the family of its main source of income.

“I can hardly think of my life after retirement, and what is always on my mind right now is how to raise this child,” she told NewsChina.

Starting in 2013, the NHFPC announced that local governments would provide monthly subsidies to parents aged 49 or over who had lost their only child – 340 yuan (US$53) for urban families and 170 yuan (US$26) for their rural counterparts. The pledge added that this financial assistance was considered a form of charity, not a formal part of the country’s social welfare system.

China’s Population and Family Planning Law, however, stipulates that these subsidies are only available to “families whose only child is disabled or dead as a result of an accident, and that did not bear or adopt another child.” Qing Er, consequently, is ineligible for government aid.

“I will try my best to convey your pleas in the meeting,” Han told Qing Er during their meeting. “It may not work, but it is better than doing nothing.”

Formerly a teacher, Han was transferred to NEWSCHINA I March 2016

“Every single-child family is walking a tightrope and the loss of that only child is nothing short of a catastrophe.”

Han described himself as “content” with his only daughter, and disagrees with the Chinese prejudice in favor of male children in the interest of continuing the family line.

It was only when he began to receive thanks from bereaved families for “speaking up for their rights” that Han began to comprehend the reasons why some people wanted to have more children.

Devotion

his local family planning office in 1992 and remains one of the few staff members in his workplace with a college degree. There, he witnessed local government officials punishing families who were found in violation of the One Child Policy by confiscating their property or tearing down their houses; the alternative, Han told our reporter, was demotion or even dismissal. This led to tensions between some local residents and family planning officials – the middle school-aged son of one of Han's colleagues in Huaihua, he said, was even murdered in an apparent revenge attack.

A former devotee of the Malthusian theory of exponential population growth, now largely discredited in the West, Han told NewsChina that he never questioned the national family planning policy, particularly after witnessing the hard lives of rural families who had given birth to five or six children.

More than 20 years ago, Han was an avid reader and also wrote poetry and fiction.

However, while still working as a teacher, Han turned his hand to journalism, reporting on the murder of the daughter of an old woman in Huaihua, a case which was only resolved when Han’s story was printed on the front page of the local newspaper. Han was shocked by the power of the media to make a difference in the lives of disadvantaged people.

In the late 1990s, Han began to write occasionally for various magazines on the subject of population control and family conflict in China based on his first-hand experience working for the family planning authorities.

In 2004, Han began to write his first novel on China’s gender imbalance in China, titled Don’t Cry, Girls, which awakened him to the looming social problem of shidu families who had begun to assemble in ever-greater numbers to demand compensation from his employers.

“It made me sad after hearing their tearful complaints. If they were allowed to have a second child, the situation would be totally different,” he said.

In 2014, Han successfully secured a stipend from the Hunan Writers’ Association to cover shidu families. For a family planning official to touch on such a topic in writing was viewed with suspicion, and Han kept his work secret from his colleagues and employ-

49

ers. He also concealed his identity as an official when interviewing shidu families.

Han began by interviewing acquaintances and local families, who in turn introduced him to new interviewees. He also joined online forums for bereaved parents to broaden the scope of his research. After conducting many interviews, Han’s real identity was exposed, and he was shocked to find that virtually all his interviewees expressed understanding of what he was trying to do.

“I inform my interviewees in advance that I am the father of an only daughter. I tell them: ‘If an accident happens, your sufferings will be my sufferings,’” Han told NewsChina.

Amiable and approachable, Han has interviewed more than 100 bereaved parents so far. His interviewees included a woman who went to Africa to find solace by helping local children after her only daughter died. In another case, a bereaved mother went to Inner Mongolia and helped to plant over 2.5 million trees in the space of 13 years.

“Some of [my interviewees] were surprised to find that a family planning official would like to speak for them,” Han told our reporter.

“I have never harmed any of my interviewees and I feel no guilt... But I can never forget their eyes. A miserable world is buried deep within them.”

Han once interviewed his former classmate He De, who is also a county-level family planning official in Huaihua. Over the years, He has been involved in more than 1,000 sterilizations, which saw him praised by the government as a “model worker” for several years in a row. However, when He’s only daughter died in an accident, this former enforcer of China’s family planning policy also joined the ranks of petitioners outside the NHFPC headquarters in Beijing in early December.

“My pet phrase used to be: ‘The national family planning policy benefits the nation and the public as well as each individual

50

Photo by CNS

Profile

Han Shengxue talks with bereaved parents at his hotel in Beijing, December 2, 2015

family,’” He told NewsChina. “Now I have to suffer in silence. Every single-child family is walking a tightrope and the loss of that only child is nothing short of a catastrophe.”

Truth

Even though Han sent away his last visitor at 11 PM on December 2, he rose at 4 AM the next morning to prepare for his speech.

From the gender imbalance in newborns and the plight of shidu families to concealed illegal births and the difficulties faced by local family planning officials, Han spoke at the seminar for more than 20 minutes, despite a 10-minute limit.

“I came to Peking University to discuss the issue [of shidu families], Han told our reporter. “This is not a place for clichés and unsubstantiated lies. I believe experts also want to hear the truth from a local family planning official.”

On October 29, during the Fifth Plenary Session of the 18th Communist Party of China Central Committee, China announced the end of its controversial One Child Policy – opening the way for all Chinese married couples to have two children. However, as

most of the shidu families interviewed by Han are already too old to have more children, he will continue to raise awareness, though he admits his work will have to be modified to fit the new conditions.

“Administrative interference was the main job of local family planning offices, but in the coming years, these offices will move towards serving the public,” Han said. To those who mock the perceived irony of a family planning official also serving as one of the country’s most high-profile advocates for shidu families, Han has a curt response: “It is not a joke, and there is someone speaking for them.”

Han has already written over 150,000 words in his report on shidu families, and plans to publish his findings in book form early next year.

“I will try to expose the pain of bereaved parents, and, most importantly, appeal to the government to stop treating them simply as a disadvantaged group or a target for ‘stability maintenance,’” he continued.

“If my writings can be a reference for the authorities when formulating population policies in the future, it couldn’t be better.”  NEWSCHINA I March 2016

NEWSCHINA I March 2016

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Profile

Lu Qi

The Love Guru Best-selling self-help author and blogger Lu Qi has made a career out of preaching relationship advice to Chinese women. How did this selfproclaimed feminist become the country’s resident expert on love?

Photo by CFP

By Wen Tianyi

52

NEWSCHINA I March 2016

“

In the New Year, I hope you all will grow a little wiser, and not just a little older…

That you will walk your own path, and not just do as you’re told. That you will remember your own dreams, and not just always be the one who sacrifices. Look for a man who will support you, don’t just be someone else’s support. God bless you, good night everyone.”

As usual, after Lu Qi tweeted his daily “good night” post on Twitter-equivalent Sina Weibo to his mostly female followers, more than 5,000 fans retweeted it and more than 2,000 “liked” it.

He calls his posts “chicken soup” for his readers.

“I know some girls are waiting for my chickensoup words to have a good night’s sleep,” he wrote.

After publishing a series of books on relationships and marriage and spending five years publishing chicken-soup posts on Sina Weibo, Lu has become a well-known “bestie” to Chinese women. As China’s most famous relationship guru and a best-selling writer, he has earned his fame by advising women on how to solve relationship problems of all kinds. The public’s opinion of him is mixed – some are crazy about him and treat him as a love mentor, while others detest him and regard his writing as claptrap.

Smart and shrewd, Lu is also a successful businessman who has pinpointed the huge market stemming from urban women’s relationship and marital problems. He has cut out a large piece of the “love economy” for himself, using pragmatism and business savvy.

Business Sense

Smartly dressed and sporting a pair of gray glasses, this clean-shaven man spoke exceedingly fast during our interview, with a hint of guile in

NEWSCHINA I March 2016

his tone and a touch of a Zhejiang accent.

Born into a wealthy merchant family, Lu has an instinctive head for business. Pragmatism, he stressed, is the standard that he uses to guide his actions.

Unlike most idealistic literary youths who extol writing as a way to achieve self-realization, Lu never shies away from admitting that his primary aim in putting pen to paper is to “make money.”

Before he became a professional writer, Lu tried his hand at several other occupations: designer, photographer, and co-founder of a tech company with a friend. His friend, Lu recalled, betrayed him and cheated him out of a large sum of money. Lu’s company went bankrupt and he had to take out huge loans. He remembered that in his poorest time, he only had 50 yuan (US$7.67) left in his bank account.

At one point, he went into a bookstore and discovered that, even with all the money he had in the world, he still could not afford a book. At that moment, he was struck by a sudden realization: Out of work and broke, he was at the end of his rope.

“I was 30 at the time,” Lu recalled. “At that moment, as I stood outside of that bookstore, I made a promise to myself – within a year, I’d earn my first million.”

But this is not a Cinderella story, nor any other kind of fairy tale. This is a story in which a man, based on his mindful assessment of his own strengths and weaknesses, his careful calculation of market opportunities and his long-term study of certain subjects, struck quickly and managed to change his fate in a very short amount of time.

He knew his assets. He was a good storyteller, a knowledgeable bookworm, a perceptive ob-

server of others’ psychology and behavior, and a persuasive analyst who could use logical reasoning to throw light on complex topics.

He first spotted a business opportunity in writing a series of books about the workplace.

He taught young employees who were new to the white-collar world how to achieve success amid complicated office politics. With sharp words and penetrating insight, his books were welcomed warmly by office newcomers. Each has sold over one million copies.

After attaining a certain amount of fame and fortune with this book series, Lu shifted his focus from white-collar workers to an even larger group: women.

Love Industry

Lu detected an impressive market and enormous commercial opportunities based on the fierce landscape of relationships and marriage in modern China.

These days, well-educated, single urban women are under tremendous pressure to find spouses, both from society and from their families. They are often the targets of harsh media scrutiny and tend to face a severe lack of prospective partners.

These “leftover women” have become a hotly debated social phenomenon. Ever since the term was first coined by the All-China Women’s Federation in 2007, State media, surveys, news reports, columnists, TV shows and movies have all assigned single and educated women over the age of either 27 or 30 to the leftover-women category at various times.

Despite the fact that China is home to 34 million more men than women as of last year, young, educated urban women still find a good

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man is hard to find. Chinese men tend to “under-marry,” choosing a wife who is “inferior” in terms of socioeconomic status, educational background and professional accomplishments.

In his book Marriage is a Woman’s Lifelong Choice, Lu writes: “In China, A-quality men tend to look for B-quality women, B-quality men look for C-quality women, and C-quality men look for D-quality women. And thus, Aquality women and D-quality men are left over in the marriage market.”

Matchmaking agencies and dating websites have been popping up like daisies as a result of this societal pressure. Reality TV shows about dating have become exceedingly popular with Chinese audiences. Matchmaking show If You Are the One has become the most-viewed dating show in the Chinese-speaking world, once breaking rating records in 2010 with 50 million viewers tuning in for every episode, an audience second only to State broadcaster CCTV’s evening news program, Xinwen Lianbo, which has the advantage of being simultaneously broadcast on all major State channels.

Under such circumstances, Lu gradually realized there was an even greater demand for relationship advice than advice about office politics.

Yet as a young, unattached man – Lu was just a little over 30, single and never married – he seemed to have a serious lack of advantages when it came to writing about relationships, a topic that was long dominated by a group of female writers who had abundant experiences in love and marriage and could easily relate to their mostly female readers.

Flexible as he is, Lu drew experiences from his previous workplace-related writing and soon found his own strengths that made him stand out from the crowd.

He read a great many books on psychology and relationships, then collected data, stories and

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Photo by CFP

Profile

Lu Qi leads a “breaking up support group” in Wuhan, May 27, 2012

case studies from myriad sources, trying to use scientific methodology to analyze, summarize and file the accumulated information. His aim was to draw universal rules that could be applied to deal with different problems and situations in romantic relationships.

“Sometimes, I feel that I’m more like a scientist,” Lu told NewsChina. “For example, if I write about long-distance relationships, I will do a great deal of research and analysis on the topic, draw charts and analyze data in order to summarize some general rules, like the average length of time that a long-distance relationship may last, at what point the couple may have a fight, and when they may split up.”

He recognizes that using such a “scientific” approach to analyze love and relationships sounds a bit cold and emotionless, but he disregards this

sentimentality. To Lu, all the laughter, tears, and sorrow expressed in countless love stories are nothing more than data points in his massive emotional database.

In his aforementioned best seller, Marriage is a Woman’s Lifelong Choice, a 2011 work that sold 3.35 million copies, he utilizes a large quantity of case studies and data analysis to propose and solve an equation, which gives his female readers a fundamental formula for finding a suitable partner: A good husband is made up of equal parts “love, habits, personality, sense of responsibility and economic foundation; not one of these five factors is dispensable.”

He views his works as “reference books.” “It’s like consulting a dictionary,” Lu said. “If you have a problem, you find the right page and see the solution. I want to give my readers someNEWSCHINA I March 2016

thing concrete, real and useful.”

Apart from publishing books, Lu utilizes social media platforms, such as Sina Weibo and WeChat, to promote his brand. Since 2010, he has tweeted his 140-character chicken-soup messages to his 25 million followers on his microblog every day. He has also produced his own online talk show, Here Comes Lu Qi. Lu has capitalized on his mounting fame to sell love-related products. He launched his own clothing brand, and designed a series of crystal accessories, like blossom-patterned crystal bracelets and rings featuring a crystal heart, items which supposedly increase their owner’s luck in love. Lu registered his own company for this business venture and received 160 million yuan (US$24.5m) in financing.

“I’ve already turned love into an industry,” he told NewsChina.

Chicken Soup

One of the main controversies concerning Lu is his chicken-soup writing style. Some criticize his words as overly simplistic, empty and lacking in depth. They say all of his words and actions are solely meant “to please women.”

Lu himself is quite content with his “cheap” chicken-soup style. He thinks many other writers who specialize in writing about relationships share a common problem: “intelligence discrimination,” a term that Lu coined himself. “[The writers] are very complacent about their high intelligence. They like playing with words and usually use caustic language to show how much smarter they are than their readers. ‘Girl, how could you be so stupid?’ – That is their response to women who consult them for help,” Lu told NewsChina.

Lu believes that every woman, no matter how sharp she is in daily life, cannot think straight once she suffers from a huge emotional shock. At

NEWSCHINA I March 2016

that moment, she needs soothing words, not a long, vitriolic sermon.

“Don’t try to wake someone up with a harsh word,” Lu said. “Usually that just causes more hurt.” That is how he sums up the experience he has gained through his chicken-soup posts. “I have no literary ambition. I have no intention to become a ‘smarter’ writer. But I hope I can use my words to help people, a lot of people,” he said.

And Lu has helped people. One woman in particular stands out to him.

“I have a friend – she’s the typical smart, educated urban woman, the kind you would never think would read any chicken soup,” he said.

His friend fell in love with a man who cheated on her many times, and each time she withstood it. Finally, she broke down when she found out that he frequently used her bank account to buy gifts for other women.

“She thought about killing herself by burning charcoal,” Lu said, as this causes carbon monoxide poisoning. “When she turned on her cellphone to look at the price of charcoal online, she caught a glimpse of my posts on Weibo by chance. I don’t know which of my words spoke to her and gave her comfort, but the fact was, in the end, she decided not to go through with the suicide.”

This experience gave Lu a strong sense of fulfillment. “After writing chicken soup for so many years now – to have something like this happen, it’s already worth it.”

Each of Lu’s “good night quotations” on Sina Weibo ends with the same sentence: “God bless you, good night everyone.” His 140-word quotations are comforting, encouraging and easy to understand, a tone he chooses purposefully to make his messages easier to digest in times of trouble, he said. “I break the message apart, crumble it into bits and feed it to them,” Lu told NewsChina. “After they read it, if they sleep well,

that’s all I need.”

The Fire Within

Lu likes to call himself a feminist. He hopes that Chinese women can be truly independent and have the freedom to choose their own ways in life.

Lu receives an abundance of letters from female followers asking for help every day. The questions may vary, but the underlying meaning is often the same: What should I do if he doesn’t care about me any more?

He realized that it doesn’t matter if these women are everyday people or celebrities, born in the ’60s or born in the ’90s – “you will find that, on this point, there is almost no real difference between them,” Lu told NewsChina.

As a relationship consultant, he has encountered many women who appear to be independent and strong, but, according to his observations, still have a traditional inner core, wishing to attach themselves to a man through marriage.

“In fact, in today’s China, many women who call themselves feminists are essentially ‘pseudofeminists,’” Lu said. For example, he said that those who use the now-common slang term “nü hanzi,” which translates roughly to “tomboy,” may think of themselves as empowering women, when in reality that word is still cloaked in patriarchy.

“True feminism should be based upon the freedom of choice,” he said. “You have the right to choose whether or not to marry. You can choose to have a second child, or to not have a baby at all. A woman chooses her own path in life.”

He used the word “withered” to describe the souls of his female readers who are tortured by relationship and marital problems.

“I want to ignite the fire within them,” Lu told NewsChina.

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Culture

Xu Lei

Artist, Alone

Despite being one of China’s most successful and well-paid authors, Xu Lei, who writes under the pen name Nanpai Sanshu, struggles to balance celebrity with a deep-seated need to escape from reality

By Wen Tianyi

W

earing a black-and-white striped Breton top and a plaid scarf, the interviewee lounges on a sofa in a café situated in one of Beijing’s top hotels. His eyes, through the lenses of his signature black-framed spectacles, are somber.

A decade ago, then 24-year-old Xu Lei saw his first short story – a thriller about grave robbery – serialized online under the nom de plume “Nanpai Sanshu.” Today, Xu is one of the most successful popular fiction writers in China, with a mania for his Grave Robbers’ Chronicles series sweeping the country.

Described as a cross between Harry Potter and Game of Thrones, Grave Robbers’ Chronicles combines elements of the classic thriller with fantasy and the supernatural, weaving together a bizarre world full of myths, secrets and mystery which has intrigued millions of young Chinese people.

Commercial success has turned Xu from a storyteller into a man exhausted by having to constantly switch between multiple identities – writer, film and TV producer, and entrepreneur. In the virtual world that he has built, Nanpai Sanshu the celebrity is threatening to eclipse Xu Lei the human being.

Two Worlds

“Telling stories gives me the strongest feeling of recognition,” Xu

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told our reporter, emphasizing that he prefers to be described as a “storyteller” rather than an author. An avid reader since childhood, when he would systematically devour shelves of books in bookstore after bookstore, Xu is candid about his mastery of language and literary style. “I used to think I was a person who could play with words,” he said.

To give an example, Xu said: “If I want to write a book about royal conflicts in a Qing Dynasty palace I will read Eryue He’s historical novel, Yongzheng Emperor. After reading it, I can digest his writing style and adapt it into my own. My readers won’t know the difference.”

After graduating from Zhejiang Shuren University, Xu tried his hand at various occupations, from graphic designer to software planner. While working for a foreign trade company, Xu’s desire to write stories, from which he drew the strongest sense of personal achievement, soon overwhelmed his success in the workplace.

In 2006, Xu began to serialize Grave Robbers’ Chronicles on Baidu Tieba, China’s largest online forum, and then moved the franchise to Qidian China, an open-source website dedicated to publishing, writing and reading new fiction. Xu’s dark fable about graverobbers, rich in suspense and supernatural elements, soon earned a legion of fans. The enthusiastic comments from his readership gave Xu a sense of fulfillment.

NEWSCHINA I March 2016

Photo by Dong Jiexu

Xu describes his writing as a process of “digging a pit,” then “filling it in,” before “digging a new pit.” In five years, Xu has filled in nine “pits,” publishing nine separate novels in the Grave Robbers’ Chronicles series. With 20 million copies sold, Grave Robbers’ Chronicles has become the most popular serial in China, making Xu Lei the country’s second-richest writer in 2011, when he earned 15.8 million yuan (US$2.4m) in royalties.

During our interview, Xu is difficult to pin down, an almost rambling figure prone to flights of metaphysical fancy. Writing, for Xu, is a dream-like experience in which he can build another parallel world in his mind, one much more interesting than the real world. He has even concocted an imaginary friend as a companion in his lonely process of creation – a friend he calls “Mr. Charlie,” a name inspired by a forgotten foreign film Xu saw in his youth, which he pronounces with an exaggerated trilling of the tongue.

“When I am alone, my childishness emerges,” he said. “I seem to regress to my boyhood, crouching at the edge of the field near my grandma’s house, talking to a toad.”

Several years ago, Xu described coming across an actual toad while on a run in the mountains. This incarnation of “Mr. Charlie,” he explained to our reporter, was hiding in an insect trap lit with ultraviolet lights.

NEWSCHINA I March 2016

“I imagined writing as the vast ‘trap’ which my characters use to attract the ‘insects’ they need to survive,” he said. “How I wish I could simply stay in my imaginary world, telling fanciful stories, rather than endure reality. But I know if I continue to do so, I might face problems in my real-world interpersonal relationships. As the imaginary world grows, the real one may shrink.”

Struggle

Reality is proving hard to escape since Xu became one of China’s top authors. With adaptations of popular fiction a hot craze in China’s movie industry, the success of Grave Robbers’ Chronicles has led Xu, with the help of friends, to launch a film and TV investment management corporation to promote manga, video games, films, web series and TV shows based on his franchise.

A perfectionist, Xu felt that his sudden engagement with commerce and marketing meant his life was gradually spinning out of control.

He told our reporter that he felt “lost,” and struggled to find meaning in the real world.

“Everything has been quantified,” he said. “My value has been reduced to sales volume and royalties. The only connection between me and reality is a string of cold numbers.”

The situation deteriorated in 2013, when reports emerged that the

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Culture

celebrity author had experienced a total mental breakdown.

In mid-March 2013, Xu admitted, he suffered a severe depressive episode. On March 23 of that year, Xu announced his retirement from writing via microblogging platform Sina Weibo, saying, “I am so sorry, but it’s too much for me to carry on.”

Nearly one month later, on April 16, Xu tweeted a post claiming that he had had an extramarital affair and divorced, a claim later denied by his wife, who stated that they never got divorced, but rather that her husband had been suffering from schizophrenia and bipolar disorder since the end of 2011 and had “stubbornly” refused treatment. Three days later, on April 19, Xu’s father posted to Weibo stating that his son had agreed to be “hospitalized for treatment.” The post was retweeted over 100,000 times.

Xu told NewsChina that a heavy workload finally got the better of him. According to his friend and collaborator Chen Wen, Xu’s brain “always functioned at an exceedingly high speed.” Chen added that in 2013 Xu had suffered from severe insomnia – at one point, Chen claimed, his friend did not sleep for almost five days while revising the draft of Sha Hai, a follow-up to Grave Robbers’ Chronicles.

Sha Hai I and Sha Hai II were published in October 2013. In the afterword to Sha Hai II, Xu described his experience of “going mad” for the first time.

“That was a unique feeling. You are sitting in a place where few people are seated, watching the world and its people from a strange perspective. No matter how hard you try to describe it to others, they won’t understand what you’ve seen,” he wrote.

“I am a lunatic, or, scientifically speaking, a psychopath.” Xu wrote in a blog post on October 29. “But, even now, I still can’t accept this label.” On the subject of being institutionalized, Xu wrote: “It’s possible to get out, but you need a letter of authorization with a strong reason. ‘Saving the world’ is not good enough. If you say that, doctors will increase your meds. Telling a sob story to the nurses is useless as well, for the nurses here all have beards.”

It was not until June 2014 that Xu returned to writing, and to public life. Keeping a low profile remains challenging. On August 17, 2015, a huge group of fans flocked to Changbai Mountain in northern China. They were on a pilgrimage – in the internal mythology of Grave Robbers’ Chronicles, Kyling Zhang, the series’ most popular character, would return to the earthly world on that date. Zhang, according to Xu’s stories, had entered the mountain through a bronze door in 2005 in order to protect his family from reprisals by his enemies by withdrawing from the world to live as a hermit.

While Xu’s fans weren’t expecting to meet their favorite literary character, they were hoping for some degree of “closure” in the form of their beloved author making a surprise appearance. But it was not to be. Xu stayed in bed that day, and his fans were left disappointed.

Xu described the whole affair to our reporter as proof of “the connection between the novel and its readers, not with me.”

“Creepy,” was the term Xu used to describe how it would have felt

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to have given his fans what they were after. He drew comparisons with British writer James Hilton’s adventure novel, Lost Horizon, better known in China than it is in the West. “There was a time when numerous American readers, intrigued by [Hilton’s] novel, went to Shangri-La. This was a beautiful thing. This is the charm of literature.

But I can’t imagine Hilton himself appearing [there], waving to everyone, shouting, ‘Hi! You came!’”

“While showing up [in Changbai Mountain] would have appealed to my vanity, I don’t want be driven by my vanity,” he continued. “If I take that step forward, it will sever the connection between readers and my book.”

Solitude

Today, Xu is as busy as ever, and many old habits remain unchanged. “I feel so sleepy today. I didn’t sleep last night,” he apologized to NewsChina during our interview, going on to say that he still misses the past, when all he had to do was write.

“My life is hopelessly busy. There are always tons of distracting ‘incidents’ and ‘emergencies’ that have to be dealt with,” he said. “If someone spreads rumors online about me, I have to find a lawyer to resolve the issue, and then contact media outlets one after another, asking them to delete their false reports. Afterwards, when I try to get back to my writing, another annoying incident pops up.”

Xu hopes that he will still be able to find time to sort out his unfinished drafts, several of which are works on the subject of mental illness that he penned while institutionalized. These stories, he told our reporter, were inspired by a particular group of fellow patients whose doctors were unable to determine whether or not they were mentally ill. “I used to talk to them a lot, and then I conceived my stories and wrote them down,” Xu said.

He also wants to expand his literary horizons, but is finding it hard to get support for anything not on the subject of his previous mainstay subjects – grave robbery and treasure hunting. His current pet project is a story titled “One Hundred Years of Solitude,” unrelated to the prizewinning novel by Gabriel García Márquez.

“Every time I try to sell this idea to my editors, they look at me like they’re staring at a madman,” Xu told NewsChina. “They think I don’t know the meaning of my own title.”

Xu started the story when he was still a student. It is the product of the author imagining himself to be the only person left in the world, facing a lifetime of utter loneliness. “I considered what such a man would think about, and how he would feel about his loneliness.”

“At the thought of being absolutely alone in the world, you immediately forget about the bothersome trivialities in your life,” he continued. “As the only person in the world, you would know what you really want, and your decisions would follow your heart in the purest sense.”

“Do you really know what you truly want?” Xu asked our reporter. NEWSCHINA I March 2016

NEWSCHINA I March 2016

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Visual REPORT

1 3 2 1. Jia and an Afghan employee make dumplings 2. Jia rarely goes outside; when he does, it’s to buy fresh food or exchange money 3. Diners have their IDs checked before they are allowed into Tang Chinese Restaurant

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NEWSCHINA I March 2016

Chinese Food in Kabul

As Afghanistan attempts to rebuild after the ongoing conflict that began with the US invasion in 2003, many Chinese people have moved across the border, attracted by potential business opportunities. However, even in the capital Kabul, peace has proven short-lived, with the security situation deteriorating rapidly since 2012. Threatened by Taliban militants, al-Qaida and now Islamic State, most of the city’s Chinese residents have fled the country.

Tang Chinese Restaurant is the only Chinese restaurant that remains open in Kabul, Afghanistan, operated by head chef Jia Yongxue and his six Afghan employees. The restaurant has been operating for 13 years, and it is the most well-known gathering place for Chinese people in the country. The Chinese holdouts that are Jia’s main clientele are always willing to recount nightmarish stories during dinner.

4. Local Chinese dine in Tang Chinese Restaurant, October 23, 2015

Jia leads a simple life here, with his time, he says, split between his kitchen and bedroom. He focuses almost entirely on cooking, and seldom steps outside the restaurant’s front door. His restaurant has consequently become an isolated haven for the few Chinese nationals remaining in Kabul, with Jia’s hospitality and the flavors of home a rare source of comfort in an uncertain world.

5. Jia’s pet dog, Beibei, was a gift from the Chinese embassy in Kabul

Photo by CFP

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NEWSCHINA I March 2016

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Visual REPORT

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4 5

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NEWSCHINA I March 2016

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1. An Afghan employee prepares food 2. A soldier patrols the area outside the restaurant 3. Jia speaks with his son in China via the Internet 4. Jia welcomes an American customer 5. Armed patrols are a routine sight on the streets of Kabul 6. Eggs are sourced from local farms 7. Many ingredients are still imported from China

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NEWSCHINA I March 2016

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OUTSIDEIN perspectives from within China

Captivating KL

The City of Many

Manglish Malaysia’s lively and fun hybrid version of English is known by the term “Manglish.” Since the 19th century, it has readily absorbed and combined words and grammar from different Chinese dialects, local Malay and English, and become a living repository of the peninsula’s cultural history. Here are a few examples of the amalgamated language: Can lah – Yes. A combination of English and the Chinese exclamation “lah,” which adds emphasis to the statement.

Gostan – To reverse (a car). Originally from the maritime English term “go astern,” meaning to sail a ship backwards.

Lim kopi – To drink coffee. A combination of Hokkien (lim, meaning “to drink”) and Malay (kopi, meaning “coffee”).

Kiasu – Afraid to lose. From Hokkien. This phrase literally means to be scared of losing, but more broadly describes the attitude of someone who is selfish and always chases after personal success. The phrase has also been adapted further to “kiasuism,” which can be loosely translated to Machiavellianism.

Kayu – Stupid, dumb. From Malay. Literally means “wood.”

Sotong – Stupid, dumb. From Malay. Literally means “squid.”

Kuala Lumpur is a kaleidoscope of mixing cultures, a constantly changing meeting place of language, food and religion

By Tom Baxter

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NEWSCHINA I March 2016

Malaysia

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steamy September afternoon and Kuala Lumpur’s Chinatown is abuzz with life.

Noisy chatter in the distinctive tones of southern Chinese dialects fades in and out of the thunder and rain, which drums incessantly on the iron and plastic awnings that haphazardly cover the narrow alleys. The rain drips and oozes across the traditional character adverts which clutter the pastel-washed surfaces, reminders of the trading culture which made and continues to make Kuala Lumpur and the Malay peninsula the eclectic mix of cultures that it is.

Geographically situated on the main route between East and South Asia, and rich in goods itself, the Malay peninsula has always been a vital trading hub. And these trading routes from all directions have brought people and cultures to its shores. Ancient Indian culture arrived as early as the fourth century, while Islam came ashore around the 10th century.

While Chinese trade with the Malay peninsula began as early as the first century AD, settlement came much later. Chinese settled the Malay peninsula in waves, beginning in the 15th century when the flourishing Ming dynasty began trade with the rich Malacca Sultanate. The famous Admiral Zheng He even paid a visit in an attempt to expand that trade. From then until the 19th century, communities came in small trickles from across southern China, sometimes to find wealth, sometimes fleeing famine and war at home.

The biggest wave of Chinese settlement NEWSCHINA I March 2016

Photo by Tom Baxter

Kuala Lumpur

and syllables fall in unfamiliar places, the language’s lilt playing to an altogether different tune than the Anglo-American English most of us are used to. It is also peppered with words from Malay and Chinese dialects.

Makan, for example, which is Malay for “eat” (and, as in its better known counterpart Singlish, can be readily adapted to English grammar – “makan-ing” for “eating”). Another common word in Malay English is yumcha, from the Cantonese phrase meaning, literally, “to drink tea,” and more broadly meaning “to meet up, to socialize.” The free and fun use of words from other languages is a sign of the rich diversity of cultures gathered in the Malay peninsula.

Friezes on the facade of the Chan See Shu Yuen Temple

Photo by Tom Baxter

China

came in the mid-19th century, when British need for rubber plantation and tin mine workers created an enormous job market.

Chinese and Indian workers crossed the seas in large numbers to fill this demand, although they were marked by a key difference – most Indian workers came as indentured laborers from British colonial territories, while Chinese workers came as wealth-seeking individuals, a 19th-century “Chinese Dream.”

By the time of the first census in 1891, towns in some coastal areas were recording majority Chinese populations.

Today’s Chinatown in Kuala Lumpur can at first sight seem like a tacky tourist mecca.

Petaling Street, where any taxi driver will invariably take you when you ask to go to Chinatown, is a crowded market street selling everything from fake and real, legal and illegal antiques to tie-dye T-shirts and soccer jerseys. For the most part, this central spine of Chinatown is a crowded mass of tourists hunting for bargain souvenirs. But running perpendicular to it is a network of narrow alleys in which hide a real taste of Chinese food markets, restaurants and mahjong gambling dens.

Just outside this cluster of alleys is the Chan See Shu Yuen Temple, nicknamed the Green Temple because of its striking jade-colored tiles. The intricately carved Buddhist templecum-ancestral shrine was built from 1897 to 1906 by the wealthy Chen family, who hired craftsmen from China to come to Kuala Lumpur especially to design it. Bedecked with phoenixes and crowned with dancing dragons, it is rich in auspicious symbolism and is one of the finest examples of southern Chinese architecture in Southeast Asia.

It is notable just how Chinese Chinatown is – a segregated ghetto for a single race. The city’s Little India has a similar feel. Despite centuries of these cultures living and working side by side, Malaysia is not quite the melting pot one might expect it to be. In fact, it can be striking just how isolated the different communities are.

One way the cultures have notably intermingled however is in the lively, bubbly English which is spoken in Malaysia. Stresses

Photos of members of the wealthy Chen clan, responsible for the temple’s construction

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travel

Back in Chinatown, long vowel sounds and choppy consonants fill the air, which is laden with the sweet smells of roasting pork and the ripe stench of durian. Familiar traces of Hong Kong are no mistake.

This is a Cantonese town.

The Chinese communities who came to Malaysia over the last 500 years came from different areas and spoke diverse and mutually incomprehensible dialects – variations of today’s Hakka, Cantonese and Hokkien dialects. The major port area Penang, on the west coast of the peninsula, is dominated by Hokkien, while over the straits in Sarawak, on the island of Borneo, it is Hakka and some Hokkien that prevail.

Since Malaysia gained independence in 1957, however, there has been a strong attempt to standardize the Chinese spoken across the country. This has come in the form of putonghua, or Mandarin Chinese. On the streets of Chinatown, a language gap between generations is evident. Schoolkids and students walk around conversing in standard Mandarin, while older generations chatter in their Cantonese mother tongue. All the Chinese schools in the area teach in Mandarin, and the Chinese language newspapers have begun to use simplified characters, instead of the traditional script still used in Hong Kong.

A woman I began talking to at a street-side stall serving fried niuhe, the wide rice noodles which are popular across southern China, told me more about the language change. When she was young, she said, her family would all talk in Cantonese. But when she started school and later entered the professional world, Mandarin slowly took over.

She is forgetting her Cantonese, her mother tongue, she said.

As we waited for the afternoon storm to dissipate, she told me that Malaysia is currently seeing a new influx of workers from neighboring countries – Indonesia, Nepal, Bangladesh, and even Myanmar. Not unlike the Chinese and Indians who poured into the rubber and tin industries over a century ago, this new wave of migrant workers are attracted by the comparative wealth of job opportunities in Malaysia. Though not always warmly welcomed, these new communities are establishing roots and making their own mark on contemporary Malaysian society.

As I walk away from Chinatown towards the Indian area of Kuala Lumpur, the red and gold angular characters of shop front advertisements give way to the cursive flow of Hindi script. This procession is occasionally interrupted by a Bengali or Thai sign, newcomers to the jostle for street space in this trading hub of Asia, newcomers to the multicultural mix that is Kuala Lumpur.

real chinese

quān

quanzi circle, community

Defined as a group of people who share the same interests, values or social background, the Chinese term “quanzi,” which translates literally as “circle,” describes the many social circles that make up human interaction.

The word traces back to ancient China, where it often referred to factions of officialdom in which officials behaved according to secret rules, like exclusive clubs. Once someone broke a rule, he would be elbowed out. The quanzi of officialdom frequently engaged in power struggles, a culture that has seeped into the modern era. It was so negative a phenomenon that the Party’s Central Commission for Discipline Inspection has explicitly forbidden its members to collude with one other.

The term is neutral, however, when used to describe groups of ordinary people, especially

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on the Internet, who form various quanzi on different social media sites. For example, on social media app WeChat, the “Moments” function – similar to Facebook’s Newsfeed in both purpose and ubiquity – is called “pengyou quan” in Chinese, meaning “friend circle.” Unlike microblogs like Sina Weibo, where posts are generally open to the public, a user’s pengyou quan is much more private because it is only open to his or her WeChat friends.

Many other apps provide a community-like function to let people with the same interests or values commingle. A fan of the detective genre, for example, can create a dedicated quanzi on an e-book application to gab about gumshoes with other readers. Experts believe that quanzi have greatly enhanced human communication in the Internet era by enabling like-minded

zǐ

people to socialize regardless of age, location, economic background or nationality.

However, the more that quanzi penetrate into daily life, the more prominent their negative effects. Many people found the culture of some quanzi, such as those of officials or the super-rich, to be quite clique-y, with the quanzi serving to further isolate those elite social groups. Others complain that once you enter a quanzi, you’ll feel uncomfortable vocalizing disagreement with any prevailing idea that the quanzi majority profess, or, if you do, you might be sidelined or labeled an outsider.

A recent China Youth Daily column warned that some quanzi are turning their members into blind followers, and others are just frivolous forums that newcomers join for superficial interests.

NEWSCHINA I March 2016

flavor of the month

Feeling Hot, Hot, Hot!

D

uring my first month in China, my friends and I were sitting in a restaurant, painstakingly making our way through the menu, translating item by item. I hadn’t yet instituted my current ordering technique: covering my eyes, pointing at a dish, checking there are no brains, heart or feet involved, and hoping it tastes good (works nine times out of 10). I found a section of the menu called huo guo. My cavewoman instincts kicked in – it literally translated as “fire pot,” I had to order it!

Excuse my naivete. Of course I now know what “hotpot” is, but I was new to authentic Chinese cuisine. A pot of boiling water was placed on a gas burner in the center of the table. My dining partners and I exchanged confused looks. The waiter noticed and motioned to the far corner of the restaurant where a buffet-style assortment of wafer thin shredded meats, chunks of fish, vegetables, herbs, noodles, dumplings and sauces were laid out and waiting for us. We quickly realized that the concept of hotpot is really very simple.

You handle things yourself, and, depending on what you choose, you’ll be ready to eat dinner in anything from a couple of seconds to, at most, a few minutes.

Hotpot has a muddled history, with possible antecedents popping up in Mongolia and what is today Chongqing as early as the Shang period (16th-11th century BC). Today, however, as most Chinese will tell you, the true hotpot experience awaits in Sichuan.

Don’t expect mellow and simple broths. A Sichuan ma la (numbing and spicy) hotpot is lethally spiced with the region’s infamous chili peppers, chili flakes, Sichuan peppercorns, and chili powders and oils.

Due to the cold but moist winters in this area of China, eating very spicy foods is said to cleanse the body of excess moisture by working up a sweat. Hotpot certainly does that!

This iconic dish, wherever you’re dining, can get as complicated as you like. Broths are meat-, fish- or vegetable-based. Sauces can vary from dark and soy-based, to fragrant coriander paste, to minced ginger, all the way down to the basic sesame paste. A sprinkling of fresh

NEWSCHINA I March 2016

red chili is always welcome.

The simplicity of hotpot doesn’t match its usual price tag, with restaurants generally charging 60-120 yuan (US$9-18) per head, pricey in China, with top whack charged even for a modest spread. Cheapskates can relax, however, as this is one of the easier dishes to create at home. Chinese supermarkets sell a variety of packaged broth mixes, but a decent result can be obtained with a crockpot of boiling, salted water flavored with garlic cloves and a shredded leek.

The Chinese really know their mushrooms, and hotpot is a great way to try the full range. A great personal find were jinzhengu – enoki or “golden needle” mushrooms. Individually thin and long, they grow together in diminutive bundles of tender protein, cook in a minute and have a delightfully subtle flavor and wonderfully robust texture. In China, these little beasts are also known by another name, “see you tomorrow,” owing to the fact that despite being really tasty, they are tricky to digest. Don’t think too much about that!

A less than great discovery I made was a vegetable that looked suspiciously like a knobbly cucumber. Don’t be fooled into expecting a refreshing and watery taste. Taking a bite out of raw kugua, or “bitter gourd,” a wildly popular addition to cuisines from Korea to Vietnam, was a rookie error – the clue is in the name, as this is without doubt one of the most bitter flavors out there. Even when tossed in a stir fry, this vegetable retains that bitterness. Indeed, it is prized for that very reason – bitter equals healthy in the Chinese eat-yourself-well mindset. Diced and thrown into hot broth, however, long simmering produces a surprisingly sweet and mellow version of this curious foodstuff.

Hotpot can work magic on even the most dubious ingredients, but is also a test of stamina, and a sensory smorgasbord. But when you and your pals are huddled round a table, all watery-eyed and numb-tongued, it’s an experience best shared – especially in the deep midwinter.

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Photo by CFP

By Olivia Contini

essay

The Wheel Deal

By Joe Coroneo-Seaman

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It was the kind of scene one might come across in Brussels or Paris – in short, the very last thing I expected to see in Hangzhou.

Illustration by Liu Xiaochao

“What’s Hangzhou like?”

This question kept coming up in Skype calls with friends and relatives from the moment I arrived in China, but I couldn’t seem to put together a description of this iconic city that went any further than rattling off a list of scenic spots and population data that anyone with a solid Internet connection and access to Wikipedia could have discovered in 10 minutes.

After one semester of studying in Hangzhou, it dawned on me that I’d hardly gotten a taste for the city I had been living in for six months, I resolved to make a change. So I bought an e-bike.

An “e-bike” is an electric, chargeable moped. Anyone who has spent time in China will almost certainly be familiar with these beasts, not least because they are the principal source of danger for anyone attempting to navigate China’s chaotic, fast-paced cities on foot. Having so far barely seen anything of Hangzhou beyond my university campus, an e-bike seemed like the perfect way to explore the city’s hidden corners and get a taste of what life for its people was like. So, just under 2,000 yuan (US$304) lighter (I was assured I could sell it for a similar price on departure), I hopped on my e-bike and buzzed off into the wilderness.

Early one evening in my second semester, I was driving to a location somewhere across town, with a friend riding pillion, when, suddenly, I noticed that all the lights to the left of us seemed to have vanished. Where a few seconds before there had been the familiar glow of streetlights, blazing windows and glittering headlamps, there now was an expanse of utter darkness. It was as though we had reached the city limits and left the buzzing metropolis behind, yet to my right I could still see buildings, streets, people and shops stretching ahead. As my eyes adjusted to the darkness, I realized that what we had stumbled upon was not empty space, but an enormous cluster of identical, disused skyscrapers, looming over an eerie black hole in the middle of the city.

Not a single window was illuminated, and nary a soul could be heard or seen. Doubtless built to accommodate an expanding population and meet increased future demand for housing, these would-be homes were made utterly lifeless and somewhat sinister in the absence of human life.

No sooner had we passed through this shadowy forest of concrete, however, than we

emerged, startled, onto a bustling riverside boardwalk, lined with boutique shops, dimly lit restaurants and cozy cafés. It was the kind of scene one might come across in Brussels or Paris – in short, the very last thing I expected to see in Hangzhou. Reflections of the fairy lights hung between lampposts alongside the canal shimmered peacefully on the surface of the water while families sauntered leisurely by its edge. Before long, the dark, looming skyscrapers we had passed only minutes before were beginning to feel like a far-off memory, particularly when it became increasingly clear that we had taken a wrong turn.

As we drove on in what we assumed was the right direction, the warm, friendly buzz of the canal quickly fizzled away. The only buildings that could be seen were in the distance, and we began to see fewer and fewer cars, which was especially disconcerting given that roads in China’s city centers (where we should have been) are never quiet in the early evening. Although still far from the city limits, it appeared that we had driven into a gigantic construction site several acres wide that had been flattened, I presumed, in preparation for industrial or commercial development. In the process, the entire neighborhood had been turned into a ghost town.

The wind blew a cloud of orange dust across the quiet road. A single man walked along the pavement pushing a cart full of bricks and piping. His unrelenting stare made it clear we were not welcome. With the light fading fast, I checked the map on my phone and we made a hasty retreat.

In just one evening, I had seen more of Hangzhou than I ever expected to. I was (and still am) struck by how much its landscape could change in the space a few miles, and especially by how different it was to the Hangzhou I had experienced behind the comforting walls of my college campus.

What’s Hangzhou like? Having explored much of it on an e-bike, my answer is now to recount tales such as this. Like all Chinese cities, it transforms from block to block. NEWSCHINA I March 2016

For the Record

By Jessica Chang

NEWSCHINA I March 2016

One book full of “English idioms” made me say that two fathers meeting at a college orientation “pressed their flesh” together.

Illustration by Liu Xiaochao

At Beijing expat hub The Bookworm, 10 old China hands gathered at an open event to tell stories of their years in the Middle Kingdom. I settled into my easy chair with a glass of house red. Each raconteur narrated tales of mischief or near-misses that are only possible as a foreigner in China – wriggling out of an arrest, supplying white faces to internationalize Chinese trade shows, making fools of themselves on reality TV. A curly-haired woman took the mic. She talked about how she used to do part-time voiceover work to make money as a student, something I used to do as well (my voice is the one part of my Chinese-American self that remains undeniably alien here). Thankfully that was where our stories diverged, because she went on to say her first voice-over experience involved a middle-aged white male “acting coach” praising her sex sounds as “realistic.”

I got started doing voice-overs because a fellow Chinese language student knew I needed money.

He was a blond Colorado boy in the 15th month of his gap year. He took me to the makeshift recording studio, squeezed into the 12th floor of a residential apartment building that was checkered with nail salons, massage parlors and smalltime travel agencies. My future boss met us at the door. She was a high-strung 20-something from Henan Province who went by the name Little Zhang. I never knew if the white strands in her hair were streaks of stress or a genetic quirk. She looked at my Chinese face quizzically. “You’ll need to record a test session,” she said.

She handed me a few pages of photocopied teaching-English textbooks and ushered me through the narrow studio door. The recording space was clearly meant to be a closet. Little Zhang and her team had soundproofed it with worn children’s blankets and brightly colored pads that lined the floor and walls, sealing out external noise by duct taping the spongey insides of sofa cushions over the cracks in the door. They had managed to squeeze in an adult-sized plastic chair, a lamp, a music stand and a mic. Heat reverberated off the walls, trapped. After I sat down, Little Zhang handed me a Dixie cup of water, adding, “in the future, you should prob-

ably bring your own bottle.” Then she shut the door.

My Seattle-bred vocals must have passed, because shortly after the test session the flow of work rarely slowed. Three days a week, I walked to that northwestern Beijing apartment building and Little Zhang handed me a ream of photocopied English texts. As sweat formed on my forehead, I’d read famous female commencement addresses, trying to inject my mellow alto with the gravitas of Hillary Clinton or Meryl Streep. Most frequently, I’d act out the female roles in travel dialogs, playing countless airline hostesses asking countless traveling businessmen if they were checking one bag or two. The worst were the vocabulary lists. Occasionally I’d need to read and repeat a list of words that all shared the same starting letter or vowel sound. With no content to contemplate, the seconds grew slothlike and the pages seemed to multiply.

My favorite recording sessions were the oddball textbooks that had clearly been written by someone who didn’t make it past high school English. One book full of “English idioms”

made me say that two fathers meeting at a college orientation “pressed their flesh” together, an unfortunate way of describing what I believe to be a handshake. Then there was the textbook of conspiracy theories, for which I read the lines: “Then Fox News host Bill discovered that Soros and ACLU were conspiring to destroy Christmas… Thanks to ‘Glenn Beck Program,’ we eventually catch the truth.” That one made me so gleeful I took a picture of it.

Things went downhill at the studio, though, and Little Zhang could no longer afford her rent. When she took us to the new studio in a “place downstairs,” she surprised the Coloradan and I by first leading us outside, then across the parking lot, then through a door labeled BOMB SHELTER. We descended. At the bottom of the staircase, which would have felt at home in any of the six Saw movies, a narrow, grungy hallway extended beneath a low-slung ceiling that seemed to slump down further in the short time we were there. Cell-like concrete rooms lined the hallway like edges of a zipper, each one packed with one or five inhabitants. Women in dirty slippers lugged pink plastic buckets of water from the communal bathroom back to their plumbing-less hovels. One of those hovels was our new recording space.

As my piles of photocopies fattened and the bomb shelter environment somehow managed to grow drearier, my wages lost their luster.

When I went home for Christmas one year, I told Little Zhang I wouldn’t be back.

I never gave too much thought to where my voice would end up. It was just a funny notion that uniform-clad schoolchildren in Anhui Province may be required to listen to my recordings for English class, repeating after me every time their teacher paused the tape.

But the curly-haired speaker at The Bookworm learned what became of her recordings.

She revealed her sexual noises ended up in the movie American Dreams in China, a huge film that grossed US$50 million in its first week and was showered with accolades across Asia.

I gasped when I heard. Yet another example of how, in China, anything’s possible.

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Cultural listings Cinema

Code Cracker In the first 14 hours of its release on December 18, 2015, the China box office take of Mojin: The Lost Legend had topped 100 million yuan (US$15.2m). While the positive reviews piled up, the movie racked up almost 600 million yuan (US$45.6) in just three days. Meanwhile, user ratings on popular cultural social networking site and movie review aggregator Douban evened out at a rating of 7.9 of 10 after almost 200,000 people scored the film – a rare achievement for a domestic commercial blockbuster. Adapted from the popular online adventure novel Gui Chui Deng (Ghost Blows out the Light), the movie centers around three young grave robbers who experience unearthly encounters while robbing tombs. While hardly a think-piece, Mojin has been praised for cracking the Hollywood formula – mixing a grand, imaginative narrative and top-notch production design together with fast-paced action, pithy humor, romance, violence and conspiracy. Many agree that Mojin: The Lost Legend is a proof of the successful “Hollywoodization” of the mainland movie industry.

Music

Book

Aged Out? One of China’s earliest neo-metal bands Yaksa released its fourth album in early January 2016, the 20th anniversary of the band’s founding. Titled An Liu (Undercurrent), the album features 13 tracks and has been noted for its greatly improved production compared to the band’s earlier work. Though most tracks remain heavy, a few, including one that was heavily promoted during the album’s release, lean towards the soft and melodic, with looser vocals. While the band’s previous EP Zhuan Shan (Circling the Mountain), released in 2011, also marked a departure from Yaksa’s former hardcore signature style, some fans have begun to wonder if these aging rockers are losing their teeth. Despite the band’s following remaining strong, ratings of the album on music review aggregator xiami.com stand at around 7.8 out of 10, while all the band’s other albums have scores of 9 or higher.

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Yu Ju Lie Zhuan (Biographies of Fishing Gears)

By Sheng Wenqiang

Exhibition

Beyond Image: Laboratory of Light Inspired by the concept of light and its use in art, 20 Chinese artists brought their works together for the exhibition “Beyond Image: Laboratory of Light”at the Hubei Museum of Art in Wuhan, Hubei Province, from mid-December 2015 to early March 2016. Combining photos, video, projected images, installations and other art forms, the exhibition infused a comprehensive visual experience with imagination, technology, memory and history. Moreover, the diversity and their experimental use of light in the works on display was praised by critics as helping to examine the role of artificial light in modern life.

A largely agrarian society, ancient China had a somewhat distant relationship with the ocean. Yet, on the country’s extensive eastern coast, fishing and seafaring has been a way of life since time immemorial. Biographies of Fishing Gears, the first “anecdotal novel about fishing gear and maritime culture in China,” was published in December 2015. Author Sheng Wenqiang hails from the coastal resort city of Qingdao, where he was born in 1984.

In recent years, Sheng has sailed Bohai Bay, the Yellow Sea, East China Sea and South China Sea to conduct research into ancient maritime traditions. Besides historical records, he has collected fairytales and legends in the compilation of his “anecdotal novel” that integrates history and fiction to unfold a unique but vivid scene of China’s unknown seafaring history.

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Commentary

One Belt, One Road will benefit China – and the world China’s principal global project is about more than short-term gain

By Justin Yifu Lin

T

hroughout 2015, a major focus of the international com- “four Asian tigers” – Hong Kong, Singapore, South Korea and Taimunity has been China’s economic slowdown and the po- wan. tential impact on the world economy. To boost the econCompared to these economies, China’s existing manufacturing omy, the Chinese government has launched various initiatives in industries are far bigger and will present greater opportunities for the past few years, the most important ones other economies. For example, when Jabeing the Silk Road Economic Belt and the pan started to export its labor-intensive Maritime Silk Road (Belt and Road). industries in the 1960s, its manufacturing The Belt and Road Aimed at promoting regional integration industry employed 9.7 million workers. can greatly facilitate between China and other Asian, African and When the four Asian tigers upgraded their the transferring European countries covered by the initiative manufacturing industries in the 1980s, of manufacturing through improving infrastructure including their respective manufacturing sectors emindustries from ports, roads, railways and oil and gas pipeployed about 5.4 million. Today’s manulines, China’s One Belt, One Road initiative facturing sector on the Chinese mainland, China to low-income will enhance economic development in Chihowever, employs 125 million workers, economies to promote na and the other One Belt, One Road couneconomic development with 85 million of them working in labortries. With a vision to establish an “interindustries. As China seeks to upfrom Beijing to Brussels intensive national community with shared interests, grade its industries and relocate factories, it destiny and responsibility,” the One Belt, will sustain the industrialization of almost One Road initiative is also a Chinese effort all low-income countries along the Belt to assume more international responsibility. and Road.

China is now beyond doubt the world’s leader in terms of inThe development of manufacturing often hinges on the estabfrastructure building. Its economic development in the past three lishment of solid infrastructure. The Belt and Road can greatly fadecades has been partly driven by massive investments in infrastruc- cilitate the transferring of manufacturing industries from China to ture, and the country has obtained valuable experience and exper- low-income economies to promote economic development from tise in this field. In addition, China’s huge foreign exchange reserves Beijing to Brussels. can also provide adequate financing for its overseas investments.

However, China’s efforts to promote win-win cooperation have In 2015, China initiated the establishment of the Asian Infra- been described as a threat to the existing US-led international order. structure Investment Bank (AIIB) to facilitate realizing its grand vi- The irony is while China is often asked to shoulder more internasion for the One Belt, One Road project. With 57 founding mem- tional responsibility by the US, its very efforts in doing so are bebers, the AIIB is the first international financial institution designed ing simultaneously undermined by the latter. Recent moves by the to serve the investment needs of developing countries in the field of US, from its “pivot to Asia” to the Trans-Pacific Partnership and its infrastructure building. boycott of the AIIB, were all aimed at limiting China’s influence.

In the meantime, China has been trying to export its manufacAs the world becomes increasingly interdependent and China’s turing industries to other countries while simultaneously upgrading economic well-being becomes evermore enmeshed with economic its own industries. The economic development of many developing situations overseas, the international community needs to acquire a countries in the post-World War II era has shown that transferring better understanding of China’s global strategies in order to achieve labor-intensive industries from more developed economies to low- mutually beneficial outcomes.  income ones can sustain rapid economic growth in the latter for at The author is a former chief economist and senior vice president with the least two to three decades.

China itself benefited from absorbing labor-intensive industries World Bank, and is currently an honorary dean and professor with the Nafrom more developed economies, including Japan and the so-called tional School of Development, Peking University.

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