March 2015

Latin Rhythms: What China Wants in South America

SOCIETY

Tragic Justice: Wrongful Conviction Crisis

CULTURE

Tearaway Titan: Jiang Wen on Cinema

New sChi na p redi cts t he

$4.99 www.newschinamag.com

year to

com e wi th th e he lp o f

our fron t lin e an alys ts

Volume No. 079 March 2015

INTERNATIONAL

EDITORIAL

Published by China Newsweek Corporation Publisher: Liu Beixian Executive Director: Liu Beixian Editor-in-Chief: Wang Xiaohui Editorial Office Managing Editor: Zheng Zhonghai Advisor: Liu Dizhong Senior Editor: Ruan Yulin Copy Editors: Jack Smith, Alex Taggart Lead Writers: Yu Xiaodong, Li Jia Editors: Wang Yan, Yuan Ye, Xie Ying, Sun Zhe, Du Guodong First Reader: Sean Silbert Address: 5th Floor, 12 Baiwanzhuang South Street, Xicheng District, Beijing, China Post Code: 100037 Tel: 86-10-88395566 Fax: 86-10-88388045 Email: readers@newschinamag.com www.newschinamag.com Art Department Art Director: Wu Shangwen Art Editor/Designer: Zhang Dawei Publishing and Development Office China Newsweek Corporation President: Wang Xiaohui Chief Executive: Fred Teng 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 Changan Address: 51 Halstead Drive, Markham, ON Canada L3R7Z4 Tel: 1-905-604-6150 Fax: 1-905-604-6170 Email: canada@newschinamag.com Marketing Director: Wang Chenbo Account Manager : Ren Jie Tel: 86-10-88388027 Circulation Manager: Yu Lina Tel: 86-10-88311834 Advertising Director: Gao Weiwei Tel: 1-212-481-2510 Marketing Promoter: Jerry Meng Tel: 1-212-481-2510 New York Office: Wang Yongzhi, Ruan Yulin, 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: Huang Xiujun Manila Office: Zhang Ming Berlin Office: Huang Shuanghong Sydney Office: Zhu Daqiang Legal Advisor: Allen Wu Brussel Office: Shen Chen Astana Office: Wen Longjie Rio de Janeiro Office: Mo Chengxiong Johannesburg Office: Song Fangchan Jakarta Office: Gu Shihong Katmandu Office: Fu Yongkang ISSN 1943-1902

CN11-5826/G2

NEWSCHINA I March 2015

Deregulation is the key to a robust financial system and a healthy economy

O

n January 4, Premier Li Keqiang vis- financial institutions to meet their needs. ited Weizhong Bank, located in ShenThis has become a major problem for China’s zhen’s Qianhai district. Also known as economic development, especially as the existing WeBank, the bank is funded by Tencent, Shen- growth model, driven by State-led investment, has zhen Baiyeyuan Investment Co. and Shenzhen proven unsustainable. As China experiences an ecoLiye Group, and has a regisnomic slowdown, it is imperatered capital of 3 billion yuan tive for the country to reform It is imperative for (US$484m). Earlier in 2014, its financial sector, breathing China to reform China’s banking regulator islife into private business. sued permits for the developThe liberalization of the its financial sector, ment of more than five private financial sector to allow the breathing life into banks, and WeBank is the first establishment and developprivate business to be established under the ment of private banks will no new policy. doubt solve some problems.

During his visit, Li said Since these banks will be lothat the founding of WeBank cally based, they can specialize marks a major step forward for China’s financial re- in serving smaller, regional businesses. form in China, indicating that the government has For example, in the US, there are more than begun to tackle some of the fundamental problems 7,000 community-based financial institutions speembedded within the country’s banking system cializing in providing tailored financial services to and its economy. small and micro-businesses.

With strict State controls, China’s banking sector Moreover, the fact that China’s first private bank has long been dominated by State-owned giants, has been set up by Tencent, China’s leading Internet which favor large, rich State-owned enterprises over company, also means that the new round of financompanies in the less powerful private sector. The cial liberalization will be closely related to the rise result is that the private sphere, largely made up of of Internet finance. With its massive database, wide small- and medium-sized enterprises (SMEs), is se- coverage, and relatively low maintenance costs, Inriously cash-starved. ternet finance has already seen rapid growth, and It is estimated that SMEs account for 60 percent has proven to be an innovative and revolutionary of China’s annual GDP, 50 percent of national rev- force in the State-owned banking sector. enue, and 80 percent of urban employment. But, As the government is further liberalizing finanin comparison, the loan and credit they obtain cial regulation, we can assume that major reform is from the banking system only accounts for 40 per- already underway. By introducing more competicent of the national total. tion and innovation into the sector, reform will not Although SMEs face difficulty obtaining loans only make China’s financial system healthier and from banks anywhere in the world, the problem is more balanced; it will support China’s sustainable particularly acute in China, given the lack of local economic development in the long run.

1

Contents

NEW YEAR, NEW START

P14

Editorial

politics

Cover Story

society

01 Deregulation is the key to a robust financial system and a healthy economy 10 Wrongful Convictions:

The Blame Game

14 2015

New Fiscal Faces/Boom and Boom/Restructure the Pollution

Complex/’Money Itself is No Guarantee of Pollution Control’/

Soaring Ambitions, Tough Realities/Unending Reform/Better

Ecosystem, Brighter Future/Tube Rules/Dynamic Demography/

China Gets Globalized

40 Taiwan University Elections:

All in the Game

2

P40

P64 NEWSCHINA I March 2015

Photo by CFP

NewsChina asks a range of prominent thinkers, analysts and opinion leaders: what can the world expect from China in 2015?

Contents

P52

P10

P60 P56

international

42

47

China in Latin America: Buenas Vistas China and Russia: Beijing to the Rescue?

interview

50 John & Doris Naisbitt:

Game Changers economy

52 Heilongjiang Reform:

Fool’s Black Gold culture

56 Interview:

Jiang Wen: ‘The most important thing is to have

something to say, even if you don’t speak well’

OUTSIDE IN

64 Tranquil Xinjiang: The Silk Railroad Commentary

72 It is time for Asia’s voice to be heard 04 MEDIA FOCUS 05 What They Say 06 NEWS BRIEF 08 Netizen Watch 55 China by numbers 66 real chinese 68 ESSAY 70 CULTURAL LISTINGS

visual REPORT

60 The Outside World

NEWSCHINA I March 2015

3

NewsChina, Chinese Edition

Caijing

January 19, 2015

December 29, 2014

Road Rage

Rural Land For Sale

Many Chinese local governments have recently cracked down on unlicensed taxis operating through car-booking smartphone apps, resulting in a backlash from the public, who find privately booked cars more convenient and professional than licensed taxis. For their part, taxi drivers complain that they have to pay large fixed management fees to their companies every month, while privately booked cars take a share in the profit their company makes from each transaction.

Taxi drivers have organized strikes in a number of cities. Although car-booking app operators argue that their higher prices are aimed at a different market to traditional taxis, analysts believe that the conflict will force the government to reform China’s often-criticized taxi management system, which many say runs as a racket.

Southern Metropolis Weekly December 22, 2014

Busy Confucius Among the 640,000 population of Qufu, Shandong province, the birthplace of Confucius, 130,000 share a surname with the Great Sage, many of them running schools, giving lectures and attending events on the theme of his teachings – in short, the city thrives on the image and legacy of Confucius. “NeoConfucianism,” an often controversial modern interpretation of the school of thought, has also received significant attention, with its proponents regularly appearing in mainstream media. In recent years, the nation’s top leaders have also made positive comments concerning “traditional culture,” sometimes directly referencing Confucian values. Some experts interpret this revival of traditional values as a backlash against the pursuit of pure material success since the beginning of Reform and Opening-up, which has left a “faith vacuum” among many Chinese.

4

A three-year trial project will be launched in 2015 to make it possible for rural residents to cash in on their land at market prices. It includes giving rural residents the ability to transfer land use and occupation rights directly to cross-village or urban users, and share in the revenues of businesses built on their land. It will also increase land supply for urban expansion through limiting land appropriation by governments. Trading of buildings on rural land has underwritten the industrialization of some small towns in eastern coastal provinces, where the economic take-off has led to a booming local property market where residents are rushing to build more houses than they are permitted to sell or rent to others. While such deals are defined as illegal in the existing land system, certain local governments have recently taken the risk of granting them legal status. These trial projects may be a valuable lesson in striking a balance between land planning and farmers’ interests.

Economy & Nation Weekly January 11, 2015

Reinventing Made-in-China The core competitiveness of China’s manufacturing industry lies in its cheap prices, market share and developed value chain. Still focusing on processing for foreign brands, Chinese manufacturers continue to struggle with meager profit margins, and significant systemic barriers stand in the way of their endeavors to innovate. Private capital and State-owned enterprises (SOEs) take advantage of the strong financial and political support enjoyed by SOEs, ensuring that SOEs have little incentive to be competitive. Meanwhile, small and mediumsized private enterprises face market access restrictions and heavy financing and tax burdens. All businesses are trying to keep pace with the fast changing, technology-driven market. Those who have reinvented their business model and invested heavily in technological innovation, from furniture and home appliance manufacturing to gene sequencing and IT services, have a better chance of survival.

Oriental Outlook January 1, 2015

Rise of the Machines China overtook Japan as the world’s largest robotics market in 2013, with annual sales of industrial robots amounting to 37,000. In a speech in June 2014, President Xi Jinping said that the “robot revolution” will be the third industrial revolution. Chinese enterprises have since begun to explore the industry’s potential, and have begun to get involved in the robot manufacturing industry. The problems with domestic robot research and production are insufficient software development, and a lack of expertise in producing a number of key components. Domestically produced robots have thus failed to compete with robots built using foreign technology in high-end manufacturing industries.

NEWSCHINA I March 2015

“My father taught me to take short-cuts.”

“China’s anti-corruption campaign has suppressed the symptoms, but has yet to fix the root causes. A permanent cure would be to improve and re-design the system.”

Economist Wu Jinglian calling for deeper institutional reform to tackle corruption.

“It was my first time using a squat toilet, in full view of 10 inmates and a guard, with another person coming in to wash his hands.

It was the biggest comedown of my life.”

Taiwanese movie star Ko Chen-tung, also known as Kai Ko, on conditions in the mainland prison where he has been incarcerated since August 2014 for drugs offenses.

“It is quite hard to have a clear understanding of any country, and even harder to understand a rapidly changing China. He who can explain China well should win a Nobel prize.”

Jin Canrong, a professor of international relations at Renmin University, on the complexity of China.

“Although China long ago waved goodbye to poverty and is developing rapidly, people still have a strong sense of inferiority. Having no clear idea about China’s new status, they have little confidence in their country, still seeing her as backward in all areas.”

Peking University professor Zhang Yiwu arguing against pessimism.

NEWSCHINA I March 2015

Illustration by Wu Shangwen

Liu Decheng, son of disgraced ministerial-level official Liu Tienan, on his family values.

“Lacking legal protection, an investor will have no way to claim compensation if a cultural product is banned by government censorship. If censorship is determined by people rather than by law, where’s the incentive to create?”

Director Guo Baochang calling on the government to end arbitrary censorship.

“It is a global trend that the more a country has, the more it demands from others. It tells us that an unbalanced growth model is unsustainable.”

Zhang Monan, a researcher from the China Center for International Economic Exchanges, on China’s plan to adjust its economic model.

“The Internet enables everyone to have a voice, and oppositional critics will push us to think about how to criticize and to receive criticism.”

Professor Gong Fangbin of the Academy of Military Sciences of the People’s Liberation Army, on the public reaction to the arrest of Xu Caihou, former deputy chairman of China’s Central Military Commission.

“Economics always develops through dispute and argument, but some academicians have fallen to fundamentalism, believing that the market could solve all economic problems and believing that even the worst free market is better than the best regulation.”

Tsinghua University researcher Zhou Wen warning against die-hard free marketeers.

5

Top Story

Prize For New Drilling Technology

The Chinese government held its 2014 Scientific Progress Awards ceremony on January 9. The top accolade went to an ultra-deepwater semi-submersible drilling platform developed by the China National Offshore Oil Corporation (CNOOC).

According to CNOOC, work on the platform, the first to be developed entirely in China, began in 2006, with the finished product entering service in 2012. In 2014, the platform caused public jitters after discovering a high-capacity oil flow in the northern seabed of the South China Sea. With a variable load of 9,000 tons, the platform is able to work at a maximum depth of 3,000 meters, ten times that of China’s previous generation of drilling platforms, and is capable of drilling as deep as 10,000 meters into the seafloor.

“The abundant resources and

poor conditions for exploration in the South China Sea pressured us to make major progress,” Xie Bin, deputy director of CNOOC’s deep water laboratory, told NewsChina.

According to media reports, the South China Sea may hold around 23-30 billion tons of oil and gas reserves, most of which are in the area’s deepest regions.

“If we rent a foreign platform and equipment, it will cost us US$1 million per day,” Su Jing, the deputy manager of CNOOC’s deep water drilling platform project, told NewsChina.

CNOOC’s ultra-deep-water platform has already drilled a total of 17 oil wells, four of which are currently productive. CNOOC’s president Wang Yilin told NewsChina that his company will continue to concentrate on refining their tech and rolling out institutional reforms in the coming years.

Politics

Another Tiger Falls Ling Jihua, once dubbed former Chinese President Hu Jintao’s “chamberlain” after his tenure as director of the CPC general office, was placed under investigation for alleged corruption at the end of 2014.

Media said that Ling’s fall could be traced back to 2012 when he was transferred from the CPC general office to the less prestigious United Front Work Department, the Party body responsible for dealings with non-Party affiliated organizations and individuals.

No official source has revealed the details of the charges against Ling, but media reports alleged that he had woven a large relationship network com-

6

prising members of the Party elite, senior officials and influential businessmen in his hometown in Shanxi Province. Fiscal journal Caixin further alleged that Ling might have formed an alliance with Zhou Yongkang, the detained former member of the CPC Politburo Standing Committee currently facing corruption charges, and Bo Xilai, the former Party Secretary of Chongqing who was sentenced to life imprisonment for corruption in 2013.

On December 29, 2014, the Politburo convened an anti-corruption conference during which Party members were warned against forming alliances and cliques.

Ling’s case is still under investigation.

NEWSCHINA I March 2015

Trade

New Real Estate Rules

China Abolishes Rare Earth Export Quota

On December 22, 2014, China’s State Council approved its Temporary Regulation on the Registration of Real Estate, which will come into effect as of March 1, 2015.

In addition to private residences, the regulation also covers maritime real estate, arable land, grassland, forestry resources, industrial zones and other collectively-owned holdings.

According to the government, the temporary regulation is designed to better protect ownership rights and interests while streamlining government planning and land use practices.

Most analysts believe that the regulation will have little influence on China’s notoriously high housing prices, but will pave the way for introducing inheritance and property taxes, a reform the government has been planning for years.

Given that real estate often serves in place of a cash bribe to corrupt officials, many believe this latest regulation will further promote China’s anti-corruption campaign, but many others remain skeptical, claiming that the move fails to make enforcement of China’s real estate and land regulations any more transparent.

Society

Stampede in Shanghai On New Year’s Eve, 2014, along Shanghai’s historic waterfront, 36 people were crushed to death in a stampede during a New Year lantern show.

The tragedy occurred close to midnight at around 11:35 PM, when crowds blocked a passageway between the waterfront and a nearby plaza. Although additional police were dispatched to help ease traffic and lessen congestion, they were overwhelmed by the crowd and failed to halt the stampede.

Most of the dead were young people, and casualties ranged in age from 12 to 37. Blame has been placed on the municipal government’s failure to deploy sufficient police officers and traffic control personnel, despite the historic Bund being a popular destination for New Year’s Eve revellers.

Indeed, the lantern show most of the crowd had turned out to see had been mostly relocated due to fears of overcrowding, but the authorities had failed to adequately publicize the change of venue, causing thousands to descend on the Bund close to midnight.

China’s Ministry of Commerce (MOFCOM) has announced that it would remove the export quota on rare earths from 2015, an action believed to be in response to WTO requirements for China to reduce government interference in the marketplace.

A commodity principally used in the worldwide defense and manufacturing industries, rare earths comprise 17 metal elements, 23 percent of which are reportedly found within China’s borders. Despite the quota system, China has seen an epidemic of illicit rare earth extraction and trading which has devastated local ecosystems.

Given a currently sluggish world market and existing tariffs on rare earths, however, analysts said that the move by MOFCOM will have little influence on global prices.

Some have suggested that the government replace tariffs with a resource tax to truly curb wasteful and destructive mining activity.

Economy

Potato to be China’s‘Fourth Staple’ China’s Ministry of Agriculture (MoA) recently announced that they plan to make the potato the country’s fourth staple food after grain, wheat and corn.

The strategy, according to MoA officials, is a new measure designed to give a boost to the country’s food security. Customs statistics show that China imported 88.6 million tons of food over the first 11 months of 2014, nearly 4 million tons more than in the whole of 2013.

NEWSCHINA I March 2015

While commonly viewed as a vegetable by many Chinese, the humble potato, a rich source of carbohydrates which is adaptable to various weather conditions and soil types, is seen as the best prospective supplement to China’s traditional staples.

In 2013, China planted 4.88 million hectares of potato fields with a total crop yield of 70.86 million tons , accounting for 20 per cent of the world’s total annual crop.

7

Photos by CFP, IC

Policy

Amazing

Poll the People

A Shenzhen man living in a vegetative state for over 200 days was allegedly awakened by a 100-yuan (US$16.7) bill, dangled over him by a nurse.

When someone seated beside the man said: “See the money? It is yours,” he suddenly reached out his arms and tried to grab the note.

Hainan Province has taken the lead in implementing a “treatment before payment” policy in all local public hospitals. What do you think?

I support it and suggest promoting it nationwide.

Controversial Shi Jiaxing, secretary-general of the municipal Party committee of Harbin, Heilongjiang Province, found himself under fire after he was photographed wearing a luxury Moncler flight jacket while inspecting the scene of a local fire. Shi later argued that the coat was bought on sale by his daughter while abroad, but netizens remained unimpressed.

Embarrassing

Moving

I doubt if it is feasible.

I oppose it, since I don’t think the policy matches China’s status quo.

Source: www.infzm.com

Most Circulated Post Retweeted 68,600 times by January 8 China mourned five young firefighters, all born after 1990, who lost their lives in a fire which engulfed a warehouse in Harbin, capital of Heilongjiang Province.

Believing too much cleavage is detrimental to social morality, Chinese censors suddenly stopped the broadcast of popular costume drama The Empress of China, before re-issuing a new cropped version minus the show’s more distracting décolletage.

Netizens mocked the series’s new incarnation as a “headshot showcase,” while also slamming the censorship authorities.

8

In order to save his father from leukemia, Mo Shuangyi, a tenyear-old boy in Jiangxi Province, has been making money by picking through garbage. Despite facing a US$100,000 hospital bill, Mo wrote in his diary that he would never give up. Under pressure from netizens, the local government has now offered financial assistance to the boy’s family.

“Now, wherever you are, please retweet this post to mourn the five post-90s heroes. In order to extinguish the flames as quickly as possible, they rushed into the blaze and were buried when the building collapsed. Let us remember their names and salute them!”

NEWSCHINA I March 2015

WHO’S

Top Five Search Queries On

HOT? WHO’S NOT?

over the week ending January 12

Sing My Song 383,844 Sing My Song, a reality TV singing contest produced by State broadcaster CCTV, is gaining growing popularity for encouraging contestants to perform their own compositions.

Intergenerational love 343,280 26-year-old man Li Qiang (alias), from Yunnan Province, remains in pursuit of his 62-year-old love interest, despite having been dumped twice and given her all his money.

Alcohol Gambling 278,783 A number of netizens entered a drinking competition, with the winner consuming six liters of the Chinese grain spirit baijiu. He later admitted that his entry was faked, and that the “alcohol” he drank was actually water.

Xi’s Red Telephones 169,945 Two red telephones on Chinese President Xi Jinping’s desk aroused public interest when seen in the background of the leader’s televised New Year address.

Media revealed that these telephones are secure lines for the sole use of senior leaders.

Top Blogger Profile Zhang Zetian Followers: 1,274,483 Zhang Zetian, the 21-year-old host of Super Brain, a popular reality show

by Jiangsu Television Station, has been affectionately referred to as “Sister Milk Tea” by Chinese netizens after a photo of the attractive star holding a cup of the popular beverage was circulated in 2009.

Zhang’s popularity rose once again in April 2014 when she was revealed to have dated Liu Qiangdong, millionaire founder of JD.com, China’s biggest B2C retailer. Due to the celebrity status and 19-year age gap between the two, their romance fed the gossip mill until early January 2015, when Zhang deleted all of her tweets about Liu Qiangdong. On January 7, Liu left a post on JD’s microblog account implying that he and Zhang had separated, but refused to reveal the reason behind the split. Online speculation alleged that Zhang, daughter of the president of a Jiangsu investment company, intends to enter the entertainment world, and that she may already have begun a new relationship with an investor in that area.

NEWSCHINA I March 2015

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

Costly Fix 306,725 Chinese customers recently lashed out at the iPhone 6, when complaints emerged that repairing a cracked screen cost as much as a brand-new handset.

Scale Production Ling Jihe, a private businessman from a county in Jiangxi Province, recently granted around 2.9 million yuan (US$480,000) as part of a bonus to 80 farmers, plus a free trip to Hainan Island.

The farmers are employed

by Ling to farm over 1,200 hectares of paddy fields contracted to Ling, and managed to double the yield in 2014.

Good Son, Bad Father A seven-year-old boy in Yizhou, Guangxi, was hailed as “the best son in China” for single-handedly driving a motorized tricycle 20 kilometers to take his drunken father home.

Mr Moneybags In protest at a parking fine, a BMW owner in Hefei, capital of Anhui Province, threw down two full bags of cash totalling tens of thousands of US dollars in the traffic police station.

The police, however, returned the cash to him and ordered him to pay the fine in a normal way.

Grab a Seat As final exams are approaching, competition for seats in school study rooms is hotting up, with some students using iron chains to secure their desks.

9

politics

Wrongful Convictions

The Blame Game Although the government’s pledge to establish rule of law in China has led to the overturning of a number of wrongful convictions, a lack of a robust accountability mechanism is holding legal reform back

By Xie Ying

T

he now notorious Hugjiltu wrongful conviction case has continued to develop, with Feng Zhiming, former head of the police investigation team detained for alleged dereliction of duty.

18 years ago, Hugjiltu, an 18-year-old ethnic Mongolian working in a tobacco fac-

10

tory in Inner Mongolia, was sentenced to death for the rape and murder of a woman in a public lavatory in the provincial capital Hohhot. Nine years after Hugjiltu’s execution, however, another man, alleged rapist and murderer Zhao Zhihong, confessed to the crime.

Under public and media pressure, the High People’s Court of Inner Mongolia reopened the case in late 2014, ultimately rescinding its previous death sentence, exonerating Hugjiltu. While the verdict came as a comfort to his parents, struggling with the grief and humiliation brought on by their NEWSCHINA I March 2015

riages of justice have been held directly responsible. Despite nine years of petitioning and appeals from Hugjiltu’s parents, his case was not re-investigated until this year, casting doubt over the effectiveness of the China’s judicial accountability system. The overturning of the death sentence has now become a landmark test of the government’s pledge to establish a fair and impartial legal system.

Photo by Wu Hailang

Controversial

Zhao Jianping, deputy president of the High People’s Court of Inner Mongolia, delivers the verdict to Hugjiltu’s family in their home, December 15, 2014

son’s execution, they are now seeking out those responsible for the false conviction.

China’s judiciary has overturned a number of false convictions since the Xi Jinping administration began to emphasize “rule of law” in its reform agenda. However, so far, few judicial officials responsible for miscarNEWSCHINA I March 2015

On April 9, 1996, Hugjiltu, who like many ethnic Mongolians used a single name, heard someone screaming for help while he was walking alone from a restaurant where he was drinking with a colleague named Yan Feng, to a small store to buy gum. Hugjiltu asked Yan to investigate the cries with him, and both men discovered the body of a woman on the floor of a public toilet, apparently strangled to death. The two men immediately called the police, only to find that Hugjiltu was named as a suspect. Police claimed that he had no witnesses to support his claim that he merely responded to the cries for help – investigators alleged that he could have committed the murder, then sought out Yan as an alibi.

It took only 62 days for a court to convict Hugjiltu, mostly based on the findings of the police investigation into the case. Lawyers have since claimed that the basis for the conviction was questionable, with media reports claiming that investigators had not even run a semen analysis on body fluid samples taken from the dead woman’s body. The samples later disappeared.

Additional forensic evidence provided by police to convict Hugjiltu was blood taken from under one of his fingernails, which was claimed to match a blood sample from the victim. However, one police source told media that no corresponding marks or wounds were discovered on the woman’s body at the crime scene.

After Yan Feng came forward, allegations emerged that Hugjiltu was tortured by police during the investigation. Yan claimed he heard his friend “shouting” in the interrogation room, and the noise of furniture being

knocked over. At trial, Hugjiltu claimed that his interrogators refused to allow him to use the bathroom, but his accusations were ignored by the court.

The People’s High Court of Inner Mongolia finally exonerated Hugjiltu on the grounds of insufficient and inadequate evidence. On December 15, Zhao Jianping, the court’s deputy president, delivered the verdict to Hugjiltu’s family in person in their own home, bowing before them in apology. “[The verdict] cheers us greatly, but I hope all [those responsible] will be punished according to the law,” Li Sanren, Hugjiltu’s father, told media.

Accountability

Until now, no official source has revealed the detailed charges against Feng Zhiming, the first police official detained in relation to the case. Feng’s lawyer Wang Zhenyu argued that his client should not bear full responsibility for the miscarriage of justice.

“We cannot define what responsibility lies with Feng before the investigation,” Wang told the Beijing News. “Although he was the head of the investigation team, he did not have sole jurisdiction in the case.”

China established an accountability system for miscarriages of justice in the 1990s, applicable to police, procurators and judges responsible for each stage of the judicial process. However, as this system operates independently in individual local judicial branches, it has not worked as well as planned.

According to the People’s Daily, China has overturned wrongful convictions in 23 major cases since “rule of law” was emphasized as part of the national reform agenda at the Communist Party of China (CPC)’s 18th National Congress in November 2012.

However, few police or judicial officials connected to these wrongful convictions have subsequently been prosecuted. Many of those exonerated have attempted to approach relevant government departments to discover who should be held responsible for their treatment, but with little success.

He Rikai, a law professor from Nanjing Normal University, conducted one month of

11

politics

terplay between the public security [police] organs, procurators and the courts has little effect on preventing miscarriages of justice, but will play a big role in the blame game.”

“Besides, some cases might be defined by [the presence of] senior leaders who may have since been promoted to even higher ranks, making it more difficult to apportion blame,” he added.

Photo by IC

‘Closed’ System

Zhao Zhihong, who confessed to the crime for which Hugjiltu was executed, stands trial, Inner Mongolia, January 5, 2015

research into the Jiangsu Provincial People’s Court system in 2002, four years after the accountability system was put into effect. He found that various courts differed greatly in their definition of wrongful conviction cases and, consequently, the penalties applicable to those responsible.

In April 2014, the Politics and Law Commission of Zhejiang Province, the department charged with managing local judicial institutions, came under fire after it announced that several judges connected to two high-profile wrongful convictions (one a rape and murder case, the other a robbery-murder) had been “disciplined.” Many netizens criticized the department for shielding its personnel by giving them too light a punishment.

“The penalties differ based on the magnitude of the error, and how it came about,” Qi Qi, president of the High People’s Court of Zhejiang Province, remarked in response

12

to the controversy. “During the investigation, we found that the judges and prosecutors involved were in too much of a hurry to crack the case to make an accurate judgment, but they did not do it intentionally.”

Qi’s argument, however, was not accepted.

“If those related to the [two] Zhejiang cases could be exempted from actual penalties through their actions being ‘unintentional,’ why couldn’t [Hugjiltu investigator] Feng Zhiming?” asked a commentary in the Beijing Youth Daily. “Actually, nearly all the judicial organs could absolve themselves of blame with such an excuse, if they wished,” it continued.

“To find out who is to blame is much harder than to claim State compensation, since it involves balancing the interests of different [judicial] organs,” Zhu Mingyong, a lawyer involved in one of the Zhejiang wrongful conviction cases, told the local media. “In-

China’s judicial system consists of three main branches: the public security organs, in charge of criminal investigations; the procuratorates, charged with bringing an indictment to trial; and the courts, which determine trial proceedings and issue the final verdict.

However, the details that have emerged in the wake of the overturning of several major wrongful convictions has exposed the limitations of the judiciary’s accountability system.

In many cases, responsibility seems to rest with front-line police officers or lower-level judges, a fact that is a cause for concern to lawyers like Wang Zhenyu, who are responsible for defending officials implicated in wrongful convictions.

In 2005, Pan Yujun, a policeman involved in the controversial She Xianglin homicide case, committed suicide, leaving a suicide note consisting of three words, written in blood – “I am wronged.”

After his wife disappeared in mysterious circumstances, She Xianglin was imprisoned for 11 years for her murder. He allegedly confessed to the crime under torture, partly at Pan’s hands, though the latter was not the senior investigating officer. When She’s wife reappeared alive, his conviction was overturned, but despite public outcry and intense media scrutiny, local authorities did not launch an investigation into the circumstances surrounding Pan’s suicide, instead giving him a funeral with full honors, causing many NEWSCHINA I March 2015

NEWSCHINA I March 2015

“It is obviously improper to allow someone to investigate and punish himself,” said He Weifang, a law professor from Peking University, in an exclusive interview with the Chinese Business Morning View, a newspaper based in Liaoning Province. He Weifang has called to move the case of Nie Shubin, convicted in circumstances similar to Hugjiltu, out of the jurisdiction of Hebei where Nie’s case was originally heard.

“A better alternative is to introduce a third party in the re-investigation [of cases] and encourage more external supervision from lawyers and the National People’s Congress [NPC], or it will be very hard to ascertain where responsibility lies,” said He. The NPC is the highest supervisory body in Hugjiltu’s mother Shang Aiyun holds a photo of her son the Chinese judiciary according to law, but many legal professionals have criticized the body for failing to adequately a task force to investigate judicial culpabildischarge its duties. ity in Hugjiltu’s wrongful conviction, with Thanks to media attention and public out- spokesperson Li Shengchen pledging that the cry against wrongful conviction, much of it investigation would involve all relevant perfueled by the government’s new emphasis on sonnel in a just, fair and open manner. “rule of law,” China’s Supreme People’s Court For now, lawyers and government organifinally ordered the High People’s Court of zations are continuing to push for the broader Shandong Province to reopen Nie’s case in supervision of China’s judicial branches. “The December 2014. That same month, both ultimate goal for me in caring so much about the high people’s court and the high people’s Nie’s case is to promote profound reform of procuratorate of Inner Mongolia established the judicial system,” said He Weifang. 

13

Photo by CFP

to suspect that Pan might in fact have been a “scapegoat” for some higher-level officials that had interfered in She’s case.

Similar suspicions of foul play surrounded the conviction of Zhao Zuohai, a 62-yearold farmer living in Henan Province, who was convicted of murdering a neighbor and jailed until his “victim” later turned up alive.

Several policemen involved in the case were detained, one of whom, according to unconfirmed media reports, subsequently committed suicide.

In both cases, accountability ended with a handful of convictions for obtaining a confession through torture.

“The tripartite judicial system is designed to facilitate mutual cooperation and supervision, but now it has turned into a closed community of interests which has impaired supervision,” Ma Changshan, a law professor at the East China University of Political Science and Law, told China Youth Daily.

A typical example was that of Ding Zhiquan, which took place in Heilongjiang Province. In 1992, Ding was arrested and convicted of murdering his wife. Another man, Zhang Lun, confessed to the crime four years later. However, Zhang was forced to retract his confession by the local county-level public security bureau, the procuratorate and the presiding court, with police detaining all Ding’s defense lawyers. If a higher-level provincial court had not urged leniency in the case due to a lack of evidence against Ding, he would have been executed.

Besides legal appeals from those falsely convicted, most miscarriages of justice officially recognized by the Chinese judiciary are investigated as part of the internal “selfinspection” system already in place. However, given the close and opaque relationship between the three judicial branches, lawyers have pointed to this system as being a law unto itself.

cover story

HAPPY NEW

14

NEWSCHINA I March 2015

YEAR?

NEWSCHINA I March 2015

I

n a rapidly changing China, it is becoming harder than ever to predict the country’s future direction. While economic growth continues to slow – the government may miss its GDP target for the first time in over a decade this year – a changing sociopolitical landscape is providing new opportunities for those formerly frozen out of the nation’s boom.

This month, NewsChina talks to a range of experts representing diverse and crucial fields on the front line of China’s transformation, from finance and the Internet to cinema and healthcare. These analysts and opinion leaders give us their vital insight into what the year 2014 meant for China, and, more importantly, what the world can expect in 2015 from its number two economy

15

cover story

Economy

New Fiscal Faces China’s economy will not relive the breakneck narrative of the last three decades. It will likely undergo not just a change of gear, but a change of engine. The uncertainty lies in the tempo of these coming changes

By Zhang Yu, Meng Shan and He Jun

A

ny predictions concerning China’s economic situation and policy in 2015 have to be rooted in understanding of the country’s brand new concepts of “the new normal” and “micro-stimulus,” buzzwords coined in 2014 by both the government’s economic planners and international analysts.

In essence, the “new normal” refers to a process of economic restructuring. “Micro-stimulus” ensures that this process, which is not without hardship, is neither too volatile nor painful for the national economy to withstand. Instead, this new brand of stimulus, unlike previous tools wielded by China’s economic planners, does not seek to remedy outbreaks of boom and bust inherent in any economy.

With its strong grip on economic operations, the Chinese government has huge impact on the path of growth and the performance of the market in both the medium and short term. Therefore, China’s economic prospects in 2015 will depend upon how the government will shape the new normal and utilize its available micro-stimulus.

The trajectory of both the new normal and micro-stimulus is defined by reforms designed to give the market, now generally viewed as the best determining channel, a decisive role in efficiently directing basic production materials to where they are most needed. Currently,

16

the misallocation of financial resources in China’s economy is probably more serious and extensive than the misuse of other resources.

Nowhere is this problem more apparent than in the present growth model, which is rooted in systematic inefficient investment. Now, the Chinese government is trying to replace this with its vision for a new economic model.

Meanwhile, the international market will increasingly affect the value of the Chinese yuan, as China consolidates her dual role as the world’s leading trader and investor. Financial reform to liberalize pricing and capital flow, both within China and across her borders, will continue to be high on the government’s agenda in 2015.

The most difficult and most controversial question, therefore, is how to set the right tempo for all these intertwined changes.

Bitter and Sweet

There is an essential consensus on what China’s new economic normal should look like. The term “new normal” itself, first deployed by Chinese President Xi Jinping in May 2014, is thought to describe the moderation of GDP growth blended with a shift towards a growth powered by an invigorated service sector, more brisk rates of conNEWSCHINA I March 2015

Photo by IC

sumption and greater innovation. The country’s current growth is thought to be unsustainable and inefficient, as it has been fueled by lavish investment of cheap labor and capital into the country’s assembly lines, rather than the efficient allocation of resources to a diverse range of sectors.

Analysts are divided on whether or not the coming transition will be a long, bumpy journey. The gloomy picture painted by pessimists shows China’s economy already on the brink of collapse, with both the property market and banking sector at serious risk of replicating the 2008 US subprime crisis and the “Lehman Brothers moment” that engulfed first the US and then the world economy. A rosier future anticipated by optimists entails a swift transition towards a better economic structure. Stimulus policies during the transition will give buoyancy to the national property and stock markets.

Indeed, which scenario is the more likely largely depends on the interpretation of the term “micro-stimulus.” It is one of several buzzwords coined by financial institutions or analysts in their interpretation of China’s economic policy, words which rarely feature in official documents.

The Financial Times was the first to use the term “micro-stimulus” NEWSCHINA I March 2015

in reference to the State Council’s decision to issue tax rebates and increase investment in the national rail network in July 2013 in a bid to boost growth. This was a correction of the “no stimulus” policy, previously regarded by the international investment bank Barclays Capital as one of the three pillars of Premier Li Keqiang’s so-called “Likonomics,” the others being deleveraging and structural reform. By stressing the restrained application of pro-growth measures, the concept of micro-stimulus also distinguishes the attempts to boost growth from the “strong stimulus” measures first described by analysts in 2009.

In retrospect, previous cases of government intervention in crucial periods of economic uncertainty have provided important lessons.

Some of these interventions began bitterly but had happy outcomes, such as the reform of State-owned enterprises (SOEs) conducted in 1998. In other examples, the reverse was true, notably the government’s 2009 stimulus package.

As a consequence, it is clear that the results of reform vary greatly, depending on whether policies tread the right path and are implemented with the right tempo.

The timing and magnitude of micro-stimulus issued in 2014 is evidence of the government’s aim to secure a growth rate steady enough not to disturb its “new normal,” rather than placing growth back on its former high speed track. It is therefore unlikely that a robust rebound in the growth rate will be seen in 2015. At the same time, it is likely that hardship resulting from a slowdown will be tolerated in a measured way, and that the transition towards a new economic structure will be more gradual than expected.

It is safe to assume that, in 2015, the government will choose to sacrifice short-term comfort for a better future, rather than deploying sweeping stimulus measures for the sake of immediate relief, barring a sudden and major crisis in international or domestic markets. If reform is effective enough to achieve significant progress in economic restructuring, a steady growth rate comparable to the years immediately after 1998 can be maintained.

Flexibility and Flow

Distorted capital pricing is probably the biggest threat to China’s market dynamics. Cheap money has been wasted on overcapacity in government-backed projects or government-backed, loss-making “zombie” enterprises, leaving too little access, with too high a price tag, for the more efficient private sector. In addition, with China consolidating her position in the world financial order, reform and opening up of the yuan on the international market will have to be accelerated. Given the possibility of domestic resistance due to concern about the potential risks of a more open Chinese currency, the gap between market expectations and quantifiable breakthroughs may not be significantly narrowed in key areas of financial reform.

In terms of interest rates, the pricing of money on the domestic market, after several years of gradual progress, resulted in mandatory floors for lending rates finally being removed in 2014, leaving only

17

cover story

China’s new strategy for overseas expansion is expected to not only highlight the importance of the internationalization of the yuan and the continued progress of necessary domestic financial reforms, but to accelerate both processes

ceilings for deposit rates intact. These ceilings provide cheap deposits for banks, thus guaranteeing their profits even if they lean heavily on lending at very low rates to government-backed projects and enterprises.

On November 30, 2014, a government draft of deposit insurance regulations was opened to public perusal and feedback. Once this system is deployed, there are no technical barriers remaining for the final liberalization of China’s interest rate system. Whether or not this can be achieved in 2015 depends on political will, which has to be strong enough to preserve government awareness of the urgency of financial reform, and allow officials to stand their ground in the face of defiance from State-owned banks.

China’s status as the world’s top trader and investor means that the yuan is increasingly integrated into the international market, for better or worse. Theoretically, a more market-oriented interest rate system will also help avoid drastic cross-border capital flows triggered by more market-oriented future fluctuations in the yuan exchange rate.

After ten years of reforms that have introduced more flexibility into the forex rate system, the yuan has ceased to unilaterally appreciate in value. Instead, China’s currency is now typically traded either at a discount or a premium against the parity rate set by China’s central bank. Fluctuations have become more frequent, but have also remained within reasonable bands. The pace of China’s forex reform has thus been revealed to be basically reasonable, and should be maintained as is.

Division among analysts on pace and path of the internationalization of the yuan, mainly involving the free flow of the capital, however, has made it the most controversial aspect of China’s fiscal reform.

Advocates of speeding up argue that China has deeply integrated into the global economy to the point that making the yuan an international currency is both an economic and political objective requiring a forceful push.

Opponents, however, have warned that so long as domestic financial reforms, including those of interest rates and the capital market, are yet to be completed, allowing the fully free inflow and outflow of capital, as required by the internationalization of the yuan, could bring a short-term capital flood into China, precipitating property

18

and stock bubbles, or a drastic appreciation in value of the yuan that would hurt Chinese exporters.

Excessive concern about the aforementioned risks has slowed down the opening of the capital account. Anbound Consulting sees progress on the internationalization of the yuan as disproportionately small in relation to China’s position as the world’s third largest trader (after the EU and the US), and the world’s third largest investor. In addition, foreign investment in China’s yuan-denominated assets will help underwrite their value. China’s local government infrastructure bonds, which will generate or augment future cash flow, for example, might be preferable to foreign investors over unproductive US and European government bonds used to cover government bills. Capital account controls have so far hindered foreign access to China’s bond markets.

Speeding up the opening of the capital accounts market would not put the stability of the value of the yuan at risk. Medium- and longterm prospects for steady, reasonable growth in China’s economy provides the best guarantee of a general trend of appreciation of its currency. Moreover, there is no lack of successful international examples for China to learn from in putting its cross-border capital flows under proper scrutiny.

China’s new strategy for overseas expansion is expected to not only highlight the importance of the internationalization of the yuan and the continued progress of necessary domestic financial reforms, but to accelerate both processes. In 2015, concrete steps will be taken on mega-projects initiated by China or with its joint leadership, including the Maritime Silk Road in Southeast Asia, the New Silk Road in Central Asia, the Asian Infrastructure Investment Bank and the BRICS Development Bank.

The participation of and cooperation between Chinese and foreign financial institutions will probably motivate China to move faster, and with bolder strides, towards its central goals of an internationalized currency and a reformed domestic financial structure. Zhang Yu and Meng Shan are researchers with the China Research Foundation for Economic Reform. He Yun is a senior researcher with Anbound Consulting NEWSCHINA I March 2015

Internet Industry

Boom and Boom

Having seen unprecedented growth in 2014, 2015 will likely be another iconic year for Internet businesses in China, the world’s largest e-commerce market

By Zhang Yanan

China is now home to 650 million netizens

T

he year 2014 was one of the most successful in the history of China’s Internet industry. Top of the bill was Chinese ecommerce giant Alibaba, whose record-breaking US$25 billion IPO on the New York Stock Exchange made it the world’s largest NEWSCHINA I March 2015

e-commerce company.

Earlier, in May, China’s second-largest e-commerce company JD.com raised US$1.78 billion as it prepared to list on the Nasdaq.

In March, Weibo, often referred to as China’s Twitter, raised US$500

19

cover story

Acknowledging the importance of the Internet as a platform upon which to upgrade China’s industry, the Chinese government has also launched a number of policies to support the development of Internet companies

million. At least eight other Chinese Internet companies also went public in 2014.

Besides these high-profile IPOs, the country’s major Internet enterprises experienced exponential growth in 2014. Alibaba’s revenue in the third quarter of 2014, for example, reached US$2.7 billion, equivalent to 54 percent year-on-year growth.

2014 in Retrospect

To a large extent, the boom in China’s Internet industry has been fueled by the sheer number of Internet users in the country. By the end of 2014, the number of netizens in China reached 650 million, accounting for 48 percent of the total population, a 2 percent increase on the previous year.

In the meantime, the number of mobile Internet users has reached 554 million, with a growth rate double that of PC-based Internet users. As most new mobile users are under 25 years old, a new Internet landscape is reshaping the software and hardware development, as well as the overall business models, of e-businesses.

With the rapid expansion of the mobile Internet customer base, China witnessed unprecedented penetration of mobile Internet companies into many traditional industries in 2014.

Acknowledging the importance of the Internet as a platform upon which to upgrade China’s industry, the Chinese government has also launched a number of policies to support the development of Internet companies.

In February 2014, the authorities announced the establishment of the central Internet security and informatization leading group, to be headed by Chinese President Xi Jinping, who has vowed to make China a “strong Internet power.” In the meantime, in his government report presented to the National People’s Congress (NPC), Premier Li Keqiang launched a policy package he called “broadband China,” aiming to increase both the geographic scale and speed of Internet coverage. According to a more detailed plan released jointly by 14 different ministries, the “broadband China” policy package aims to extend Internet coverage to 13,800 villages, covering 30 million more families.

20

In November 2014, China hosted the World Internet Conference, evidence of the Chinese government’s growing interest in promoting its status in the global Internet landscape.

Alibaba vs Tencent

The most phenomenal development in China’s internet industry in 2014 was the emerging rivalry between heavyweights Alibaba Group and Tencent Holdings, which have established a dominant role in China’s Internet landscape in recent years.

Establishing its dominance in the field of e-commerce, Alibaba expanded into various fields through a number of acquisitions throughout 2014. These mergers and acquisitions were not limited to online retail companies such as FirstDibs, a New York-based retailer of interior design and fashion products, but also a variety of fields such as education (Tutorgroup), entertainment (ChinaVision and Wasu Media), travel (Byecity), messaging apps (Tango), online video (Youku), logistics (China Smart Logistics and Singpost), group buying (Meituan) and soccer (Guangzhou Evergrande FC).

To counter Alibaba’s dominance in the online retail sector, Tencent Holdings, another Chinese Internet giant, established a strategic alliance with JD.com, China’s second largest online retail platform. Tencent sold its own business-to-customer (B2C) platform QQ Wanggou and consumer-to-consumer (C2C) platform PaiPai to JD.com, in exchange for 15 percent of JD in March, and another 5 percent when JD.com went public in May. However, at the core of Tencent’s strategy is its popular messaging and social networking smartphone app WeChat. With more than 600 million users, Tencent launched a host of promotions that succeeded in attracting millions of the app’s users to link their bank accounts to its payment function. Meanwhile, Tencent also began allowing vendors to open storefronts on WeChat, turning the app into a powerful tool for traditional businesses.

Although Tencent has embarked into other fields by spending over US$2 billion on US Internet firms like the e-commerce company Fab, as well as gaming companies Riot Games and Epic Games, its acquisitions have focused on promoting its business ecosystem.

NEWSCHINA I March 2015

Photo by IC

With the expansion of mobile Internet, Internet companies will infiltrate into conventional industries on a massive scale.

International Internet consultancy IDC predicts that by 2020, 66.7 percent of business transactions in China will be related to e-commerce. In 2015, Internet companies will expand their presAlibaba founder Jack Ma speaks at a press conference during the Singles’ Day shopping festival, November 11, 2014 ence into fields like healthcare, education, transportation and entertainment.

In the meantime, online retail Tencent bought a 20 percent stake in Dianping, China’s leading will remain a major battleground for China’s Internet giants. With crowd-sourced review website, and in June, purchased 20 percent of Alibaba and Tencent locked in a race in developing China’s online-tooffline (O2O) market, both will be looking to newly emerging fields.

58.com, China’s Craigslist equivalent, for US$736 million.

In August, Tencent reached an agreement with Dalian Wanda For example, with Chinese demand for foreign products rapidly on group, China’s largest commercial property company, and Baidu, the rise, Alibaba and JD.com have been promoting cross-border eChina’s leading online search engine, to set up a 5 billion yuan commerce. Currently, quite a few American retail companies, such as Costco, have begun cooperating with Alibaba to sell their goods (US$814 million) e-commerce joint venture.

Tencent’s efforts in penetrating in the “online-to-offline” (O2O) directly to Chinese consumers.

Another key field will be Internet finance. In March 2014, Chifield pose a serious challenge to Alibaba’s dominance in e-commerce, and the competition between the two will be a major theme of Chi- na launched a pilot project to allow the establishment of five banks owned entirely by private companies. While Tencent has officially na’s Internet market in 2015. launched its Internet bank, Shenzhen Qianhai Weizhong Bank, also known as WeBank, Alibaba is also preparing to launch its own InterLooking Ahead With new infrastructure investment, it is expected that Internet ac- net bank, Zhejiang Internet Commerce Bank, which analysts predict cess will further penetrate into China’s third- and fourth-tier cities, may open in 2015.

The changes that private online banking brings to China’s financial aiming to reach the 400 million rural people who are not yet consector will be a major focus of that industry. Other Internet-related nected to the Internet.

It is estimated that 450 million smartphones will be sold in 2015 in fields to watch include automobiles, wearable technology and InterChina, accounting for 31 percent of the world’s total, or three times net security. the number sold in the US, the world’s second largest smartphone market. 71 percent of the smartphones sold in China will be 4G- The author is a research manager at the China office of the Internet Data ready.

Corporation (IDC), an international Internet consultancy NEWSCHINA I March 2015

21

cover story

Environment

Restructure the Pollution Complex Given that China’s smog is largely caused by the country’s coal-fired, road-bound heavy industry, industrial restructuring is essential in the fight against pollution

By Ma Jun

W

hile my team has been conducting research into reducing PM2.5 (fine particulate matter with a diameter no larger than 2.5 micrometers) for over two years, supported by think tanks the Boyuan Foundation and Energy Foundation China, the future quality of China’s air remains difficult to predict. Given that China’s economy is dominated by heavy industry, with coal the primary energy source and road freight the preferred mode of transport – a combination that sits at the very root of China’s pollution – I believe mere administrative controls or technical improvements are far from enough to control the problem.

‘End-of-Pipe’

At a work conference hosted by our team in October 2013, He Kebin, director of the School of Environment at Tsinghua University, told me he was delighted to see a group of economists finally casting concern over China’s pollution control and prevention methods.

As Professor He said, the environmental conundrum is not a simple quibble that can be settled by laboratory tests. Despite implementing all sorts of pollution-control measures, the problem is worsening, indicating that there are deeper economic reasons behind it.

22

In 2013, China’s Ministry of Environmental Protection proposed to reduce the country’s average level of PM2.5 to 35 micrograms per cubic meter by 2030. The same year, the Beijing government issued its Air Pollution Prevention and Control Action Plan, pledging to reduce PM2.5 levels in the city to an average 60 micrograms per cubic meter by 2017.

The pity is that most of the measures taken so far to fulfill these targets are what are known as “end-of-pipe” solutions – either technical improvements like desulfurization and improvement of oil quality, or temporary administrative controls like the enforced factory shutdowns imposed during the APEC conferences in November 2014. In the long run, these will have little effect.

According to our PM2.5 prediction model, designed to simulate the influence that industries and public policy has on air pollution, if the government does nothing to restructure its industries and energy consumption, PM2.5 levels nationwide will remain as high as 46 micrograms per cubic meter by 2030, long after the effects of the “end-of-pipe” controls have dissipated.

This is because China’s current heavy industry economy and coal consumption have overburdened the environment. In order to solve NEWSCHINA I March 2015

the problem, we must use economic means to set industry on a greener path, including raising taxes on natural resources and carbon emissions, tightening emissions standards, controlling the use of land for industrial purposes, reducing taxes on less polluting sectors and increasing government subsidies for the use of clean energy.

How to Reduce PM2.5 to 35µg/m3

Over-development of Polluting Industries

A deep-set cause underlying China’s severe pollution is the government’s excessive support for heavy industry, which has not only encouraged emissions but also restricted the development of less polluting industries.

In the previous decade, many local governments put too much emphasis on GDP growth statistics, trying to ensure rapid growth by increasing exports and boosting the real estate and manufacturing industries. Due to the local government’s dominance in secondary industry, the price of industrial land, for example, is now only oneeighth of that of residential land, and is half or even one fourth of the price of industrial land in developed countries.

Local governments have ignored the fact that this kind of industry brings four times more pollution to cities than other industries with the same output levels, while heavy industry causes nine times more.

Even if heavy industry maintained a growth rate of around 6.8 percent (almost as fast as national GDP growth) while controlling pollution with 80 percent efficiency, it would be impossible for China to reduce its PM2.5 to 35 micrograms per cubic meter by 2030, as the current policy aims to do.

China’s heavy industries now contribute 40 percent of GDP growth, but represent 80 percent of the country’s total coal consumption. It is time to promote the less-polluting industries while curbing heavy polluters. According to our calculations, if the government could reduce indirect tax on the service sector by 2 percent while raising the average price of industrial land by 200 percent, plus increasing taxes on natural resource consumption and carbon emissions, it would be possible to reduce coal consumption by more than 10 percent, which would be greatly beneficial to air quality.

Market Regulation

In a free market economy, pollution would be out of control if the government were to fail to guide the market as necessary. Without regulation, for example, the price of coal would become too low to curb over-consumption. Furthermore, given that clean energy benefits citizens rather than users, producers feel reluctant to use it due to its low turnover. Although the Chinese government has granted subsidies for the use of clean energy, they are too tiny to interest polluters – clean energy only takes up around 14 percent of China’s total energy consumption, 30-50 percent lower than the average level in developed countries.

Another example of market failure is that air pollution is spreading between the regions. Around 40 percent of the PM2.5 present in Beijing originates from neighboring regions, especially Hebei

NEWSCHINA I March 2015

Secondary Industry

65µg/m3

Clean Energy

The simulation shows that if China accomplishes this structural adjustment as mentioned above, in addition to sufficient end-of-pipe controls, its annual average PM2.5 level will fall from 65 µg/m3 to 35 µg/m3

Urban Rail Transit

35µg/m3

Province, the country’s largest steel production base. However, if the government forced Hebei to restrict its heavy industry with harsh taxes, or even shut down high-polluting plants, the province would see mass unemployment. If the local government is unable to create enough new jobs, such controls would see strong opposition.

Therefore, a more appropriate solution would be for Beijing to provide financial support to Hebei, helping it to install emissions control equipment and alter its energy structure, by shifting from power generation by coal to natural gas. With Beijing’s help, the heavily polluting enterprises in Hebei will have more incentive to improve themselves, which will in turn be beneficial to Beijing’s pollution control efforts – a win-win situation.

Notably, all of the aforementioned economic measures are reliant on support from enterprises and consumers – the two subjects of the market. However, due to poor awareness of environmental protection and a lack of transparency in government, many enterprises and consumers have little sense of social responsibility – perhaps a big obstacle to establishing effective air pollution controls in China.  Ma Jun is Chief Economist with the People’s Bank of China

23

cover story

Environment

‘Money itself is no guarantee of pollution control’ F

ollowing the release of Tsinghua University’s annual report on China’s low-emissions progress, Qi Ye, director of the Brookings-Tsinghua Center for Public Policy in Beijing, will deliver his yearly speech on China’s air pollution controls to international leaders and media in Washington and at the European Commission in Brussels. Although China’s worsening smog problem often leaves Qi red-faced in front of foreign audiences, he remains optimistic about the likelihood of controlling the problem.

“Similar to other previously smoggy cities like London, Los Angeles, Pittsburgh and Tokyo, China will see blue skies again, and I hope we can shorten this process from decades to a few years,” he told NewsChina.

NewsChina: As a public policy researcher, what did you make of “APEC blue,” the fleeting blue skies seen during the APEC conferences in Beijing?

Qi Ye: Many people began using the term “APEC blue” as a synonym for “fleeting,” since the smog returned – even worsened – the day after the APEC conferences finished. This is understandable, since the blue skies depended on an array of temporary measures, including factory shutdowns and stricter traffic controls. A high price was paid to achieve such an effect, especially in cities neighboring Beijing, so these measures could not feasibly be the new norm.

24

However, we have to note that those measures proved that smog is mainly formed by burning fossil fuels like coal and petroleum.

So, in the long run, I believe the solution to the smog problem is to reduce energy consumption and emissions by restructuring industries and optimizing energy structure, as well as controlling private car ownership by developing public transport.

NC: Is there any good news for smog controls in 2015?

QY: China has been making long-term plans to control smog for the past two years. The government issued the Air Pollution Prevention and Control Action Plan in 2013, and worked out a program the following year to assess local implementation. The Action Plan can be viewed as a milestone in China’s efforts to fight smog, which will reach new heights when China’s Law of Air Pollution and Control, currently awaiting approval, is propagated.

Based on this plan, and the new law, I think local governments and related enterprises will invest more in pollution controls in the coming years. In early 2014, the Beijing government announced it would invest 760 billion yuan (US$126.7bn) in smog control in the coming three years, over 250 billion yuan (US$41.7bn) per year. Similar measures will also come into force in other regions nationwide to financially support a “green, low-emission economy,” as emphasized at the government’s 2015 economic conference.

However, money itself is no guarantee of pollution control. We NEWSCHINA I March 2015

Photo by IC

Runners and spectators alike wear pollution masks for the 2014 Beijing Marathon

will not see the sky turn blue without the support of and response from the public. Tests have shown that 30 percent of the PM2.5 [fine particulate matter with a diameter no larger than 2.5 micrometers] in Beijing comes from emissions from private cars, and the traffic control measures implemented during APEC also demonstrated the effect that can be achieved by having fewer cars on the road. That is not to say that I support the method of controlling private car traffic by restricting license plate numbers, but public participation is definitely a necessity in controlling air pollution in a large, densely populated city like Beijing.

Besides, the dropping price of crude oil worldwide is also beneficial to smog control. Although a lower price might help increase consumption, it will promote optimization of the energy structure.

Given that gas prices are dropping as well – the price of natural gas has dropped by 30 percent within one month in the US – it is increasingly possible for clean energy like natural gas to replace high-polluting energy sources like coal. More importantly, the lower price of crude oil will allow oil producers to improve on the low quality of their oil, which in China is often picked out as the reason behind worsening air pollution.

NC: Do you think that 2015 will be a turning point for China’s air pollution controls?

QY: The smog has pushed the government to take more meaNEWSCHINA I March 2015

sures to control energy consumption, which have been implemented in some regions like Beijing and Tianjin. For example, Beijing has pledged to reduce its coal consumption to 10 million tons by 2017, 13 million tons less than in 2012. Tianjin plans to reduce coal consumption by 10 million tons by 2017, and Hebei Province 40 million tons.

Some experts predicted that China’s coal consumption would reach its peak in 2020 and then gradually drop in the following years. Judging from current policies and measures, this trend is inevitable. Other experts even have claimed that this peak was already reached in 2013. I believe that in the coming years, clean energy will gradually replace coal. This will be a heavy blow to the coal industry, but it is definitely helpful in terms of controlling smog, which is directly linked to coal burning.

The country’s micro-economic trends will also impact coal consumption. As the government has proposed to steer China’s economy into a “new normal” in which fast growth will be replaced with stable, high-quality growth, the consumption of steel and raw energy like coal will fall, along with sluggish real estate development, the slowdown of investment in infrastructure and fixed assets, and the drop in export volume.

In short, the economy in 2015 will not offer enough stimuli for coal consumption. Instead, the “new normal” will give a new chance to further control coal consumption and smog.

25

cover story

Education

Soaring Ambitions, Tough Realities

In 2014, China began implementing a round of reforms in both elementary and higher education.

However, problems and challenges still abound, with a consensus still yet to be reached on where the country’s education system should be headed

By Yang Dongping

A

ccording to the test results of the 2012 Program for International Student Assessment (PISA) published by the Organization for Economic Cooperation and Development (OECD) in late 2013, 15-year-olds in Shanghai ranked first in the world in mathematics, reading and science, the second time China’s economic hub earned the top spot since 2009.

Shanghai’s performance in the PISA test made headlines worldwide and boosted public confidence in China’s education system. The success, at least in terms of OECD criteria, of Shanghai’s education system has been variously attributed to certain characteristics including strong incentive mechanisms, continuous faculty training and a considerable teacher workload.

The PISA test results weren’t all good news. Researchers also found that Shanghai’s school students topped the charts in terms of both relative length of study time and fatigue, making them among the world’s most overworked.

Some of the unique features of China’s school system are difficult to adapt to Western circumstances. While some schools in Shanghai are eager to export their successful teaching experience, many parents in the city are still eager for their children to be educated abroad.

At this critical juncture in its history, what does it mean to be a student or teacher in China? And, perhaps more importantly, where is Chinese education headed?

26

Elementary Problems

China currently has to provide compulsory education to 100 million students under 17 each year. While standards in cities are constantly rising, many impoverished and rural areas in China still lack the basic conditions to run schools – poor faculty availability, a dire shortage of kindergarten teachers and a lack of educators qualified to teach English, music, physical education and the arts.

Roughly one third of rural areas do not have English classes at all, and many schools are dependent on temporary teachers. The unequal distribution of education resources between rural and urban areas has exacerbated an overall imbalance in the availability of elementary education termed “crowded cities, quiet towns and empty villages.”

In early 2014, the State Council, China’s cabinet, initiated a 200 billion yuan (US$32bn) project to improve conditions in elementary and high schools nationwide. This package, however, did not include a pay rise for rural teachers. By the end of that year, a series of protests swept Heilongjiang and Henan provinces, with striking teaching staff demanding higher salaries.

Other than the rural-urban pay gap, another serious problem has been educational provision for the children of migrant workers. Statistics have shown that China is home to 12.8 million children studying in cities where their parents are working. Conversely, only 2.1 million children have remained behind to study in the rural areas where they NEWSCHINA I March 2015

Photo by GETTY

A total of 9.39 million students participated in the national college entrance examination in 2014, an increase of 270,000 on 2013

were born.

Most of these “left-behind children” do not enjoy consistent care at home and study in inadequately equipped boarding schools. The prevalence of physical, developmental and psychological problems is well documented. China’s household registration system has also abolished urban education rights for the children of migrant workers living in urban areas. In the summer of 2014, Beijing and Shanghai, China’s two biggest cities, raised school admissions requirements for migrant children, forcing many into temporary schools or back to their hometowns.

High Expectations

In both rural and urban areas, however, the most prominent problem facing elementary education has proven to be China’s exam-oriented education system. The slogan “do not let your children be left behind at the starting line” has deluded many parents into placing unnecessary emphasis on pushing forward that line, with some making their offspring commence elementary education while in kindergarten, and others relocating to already overcrowded districts in close proximity to well-regarded schools. This has led many high schools to excessively pursue enrollment.

Despite the obvious shortcomings of the system, the response from the general public has been mixed, with praise as likely as condemna-

NEWSCHINA I March 2015

tion. As the public served by schools has failed to reach a consensus on education, with parents joining ranks to defend an exam-oriented system, reform objectives are hard to refine.

The principal reason for China’s exam-oriented education is the emphasis on the gaokao – the national college entrance examination.

In September 2014, the State Council rolled out a comprehensive reform package aimed squarely at the gaokao, with students no longer required to choose between either a liberal arts or science track when they graduate from junior high school. The reform was piloted in 2014 in Shanghai and Zhejiang Province, and is expected to be expanded nationwide in 2017, with full implementation by 2020.

The new gaokao reform package was primarily aimed at increasing fairness, rather than bolstering the scientific sorting of talent by discipline. The government in particular aimed to raise school enrollment in the country’s relatively undeveloped central and western provinces, as well as those areas suffering from overpopulation, and also boosting the proportion of students from rural backgrounds attending key universities. The reform package also abolished a “bonus score” scheme that awarded extra merit points to students with particular sporting or artistic accomplishments, mainly because of the alleged corruption undermining the scheme.

The key to gaokao reform is to establish a recruitment system based on nationwide, standardized gaokao scores, high school performance

27

cover story

assessments and college enrollment interviews. This system has been put into practice in several universities including the South University of Science and Technology of China and New York University Shanghai, as well as more than 20 universities in Zhejiang Province.

Higher Bar

Peking and Tsinghua universities, China’s two foremost academic institutions, have rolled out their own reform packages to promote a modern university system, boost human resources, and enhance training and innovation.

Specific measures include the “de-bureaucratization” of higher education, expanding autonomy for departments and institutes, building more core liberal education courses and pairing large-class lectures with small-group seminars. Tsinghua University has also pledged to establish more independent academic programs.

The move towards modernity is not without its pitfalls. Peking University recently announced plans to convert historic buildings on its Jingyuan Park into the Yenching Academy containing classrooms for foreign students enrolled on its China Studies program.

This move has drawn strong opposition from both staff and students, who have objected to administrators turning historic buildings into modern classrooms. Others have attacked the China Studies program itself, with many claiming it to be a rip-off of similar programs in the US, while still more have questioned the decision making process.

Peking University finally abolished the plan.

Another controversial topic is the alleged cancellation of the 985and 211-project universities. The 985 project aims to promote Chinese higher education by founding world-class universities in the 21st century. The 211 project is a government-led endeavor to academically strengthen about 100 institutions.

Zhang Raoxue, president of Central South University and former head of the higher education department of the Ministry of Education has revealed that China will probably cancel the 985- and 211-project titles and grant funds to universities based on their academic performance and teaching quality rather than rankings. While the Ministry of Education later denied Zhang’s claims, the public has remained skeptical of the management style exhibited in Chinese higher education.

China is currently home to 39 985-project universities and roughly 100 211-project universities. However, the public funding divide between these centrally favored colleges and their regular counterparts has been widening. In recent years, higher education accounted for 30 percent of total national education spending in China, compared to 20 to 25 percent in OECD countries. Most of this money was allegedly funneled into 985- and 211-project institutions.

According to data for 2013, 985- and 211-project universities received an average 30 percent of government funding allocated to higher education, with China’s remaining 2,000 universities sharing the remainder.

28

Many continue to debate overhauling this discriminatory allocation of funding to allow for more efficient investment in education.

Another concern has been the management and use of scientific research grants by universities. In October 2014, China’s Ministry of Science and Technology announced that seven professors in five universities had been accused of defrauding national research funds to the tune of 25 million yuan (US$6m). In recent years, China has seen State research funding grow by 20 percent year-on-year, but, according to the China Association for Science and Technology, only 40 percent of this total has actually been spent on research.

Going Global

According to data from the Ministry of Education, 413, 900 Chinese students went abroad to study in 2013, an increase of 3.58 percent year-on-year. Previously, 10 percent year-on-year growth was recorded over five consecutive years. In the future, China is expected to see fewer students pursuing Master’s degrees overseas, but also a growing number seeking high school and undergraduate education.

For the academic year 2005-2006, 47,000 Chinese nationals entered the US as graduate students, accounting for 76 percent of the total number of Chinese students abroad. Of those, 15 percent were pursuing bachelor degrees. For the academic year 2012-2013, this number increased to exceed 100,000, but the overall proportion declined to 44 percent, indicating a rise in the number of overseas students, but also a more diversified range of academic destinations.

What’s more, almost 40 percent of overseas Chinese students, some 93,000 in total, were pursuing bachelor degrees.

The number of Chinese nationals enrolled in private high schools overseas has also been on the rise – in the academic year 2005-2006, only 65 Chinese nationals were attending private schools, a number that leapt to 4,503 only three years later, rising to 23,000 in the academic year 2012-2013.

At the same time, China saw an influx of students return from overseas study. In 2000, only 9,121 Chinese nationals returned to live and work in China, but in 2013, 353,500 returned, just 60,000 fewer than the total number who left the country for overseas study in that year.

However the Ministry of Education’s reform programs are implemented, the success of China’s education reform will hinge on a continued commitment to improving standards, diversifying scholarship, and the country’s ongoing efforts to redress the yawning urban-rural divide. With around 100 million full-time students to care for in any one year, hopes are high that China is up to the task.

The author is director of the 21st Century Education Research Institute, a China-based nonprofit educational think-tank. The organization, established in 2002, focuses on research into public educational policy, and also engages in policy advocacy NEWSCHINA I March 2015

Photo by CFP

Patients in a local hospital in Shenyang, Liaoning Province

Healthcare

Unending Reform

2015 will be a crucial year for revitalizing China’s stalled attempts to overhaul its healthcare system

By Jiang Yu

NEWSCHINA I March 2015

29

cover story Private investment in healthcare services has been stimulated, land purchased to construct hospitals, and high-end healthcare services are being opened to the private sector

T

he pace of healthcare reform in China in the year 2014 was hesitant. Like a mountaineer hitting a wall after their initial burst of euphoria has worn off, the country will have to learn endurance if it is to realize its goal of an overhauled healthcare system.

From theory to practice, the national reform agenda was dogged from the very beginning with signs of uncertainty. China has pledged to provide affordable, equitable access to basic quality healthcare for all its citizens by 2020. Theoretically, the already-set target for its main reform agenda – incorporating elements of government and public interest into the existing system – is facing challenges from various quarters.

Indeed, since the beginning of this century, the debate on whether to adopt nationalization or marketization as a guiding principle for healthcare reform has never ceased. The central government’s official policy document released in 2009 declared a clear choice of the former route of government-, rather than market-led, reform. However, the debate rages on, albeit in a modified form.

Swing

Since the end of 2013, voices advocating market-led healthcare reform have risen in prominence. Some major points have emerged to support their argument.

First of all, the Third Plenum of the 18th Central Committee of the Communist Party of China (CPC), convened in 2013, resulted in the assertion that the government should decentralize its control over the market, and return the profits back into society. The healthcare sector, the thinking goes, should not be an exception to this trend.

Secondly, with a downturn in economic growth, the government is struggling to adequately fund healthcare. Thirdly, since 2013, the government has launched policies to encourage the development of the healthcare service industry and commercial healthcare insurance, relax restrictions on social capital investment in hospitals, relax price controls over private hospital services, and strictly restrict the development of public hospitals.

On November 25, the National Development and Reform Commission (NDRC), China’s foremost macroeconomic planning agency, issued a draft plan for the promotion of pharmaceutical price reform, stating its intention to redesign pharmaceutical pricing mechanisms, cancel the government pricing system and shift to a market-oriented pricing alternative. All these procedures deliver a signal to the market that healthcare reform has shifted focus. Private investment in healthcare services has been stimulated, land purchased to construct hospitals, and high-end healthcare services are being opened to the private sector.

30

There is a case against the arguments that likely inspired the above reforms. Opponents to greater marketization point out that securing a decisive role for the market and improving the government’s role in healthcare are two sides of one coin. In terms of reform, providing every citizen with basic universal healthcare constitutes an urgent social necessity, while promoting the private sector’s role in hospital management and expanding the healthcare service industry are mostly just icing on the cake, at least at the moment. Some commentators have even criticized the actions of the NDRC in removing pharmaceutical price controls, ostensibly to combat corruption, as both lazy and irresponsible.

The entry of private investment into the healthcare service industry was particularly widespread under the new policies inked in 2013.

This trend did play a positive role in increasing the availability and diversity of health resources, going some way towards meeting growing demand from an aging and more upwardly mobile population.

However, at the same time, the expansion of the market in the healthcare sector has sometimes appeared to be irrational.

The domestic market generally overestimates the potential scale of the industry. Considering the scale of overall spending on healthcare in the US (18.5 percent of GDP) and Europe (10 percent), projected healthcare spending in China by 2020 will amount to at least 9 trillion yuan ($US1.45tn). In the same period of time, meanwhile, the country’s GDP is predicted to hit 90 trillion yuan (US$14.5tn).

Private capital only tends to see huge potential profits in healthcare, ignoring that, in the US at least, healthcare spending is a major factor dragging down economic competence, widening social divisions, increasing the costs of private companies and, in part, contributing to the 2008 financial crisis. Some investors in China have taken to buying up both hospitals and land as an easy path profit, which might even create new economic risks.

Professor William Hsiao from the Harvard School of Public Health published a print article in 2014 in The Lancet, claiming that China’s current healthcare reforms have laid important foundations, “however, substantial challenges in the reform of its delivery system, together with a new policy to promote private hospitals could derail China from achievement of its goals.”

Hsiao also added that “The motivation behind privatization can be interpreted partly as a strategic move to use private sector competition to stimulate changes in the otherwise stymied public hospital reform, partly as a swing back in government ideology towards a more promarket approach to improve productivity in the health sector, and partly naively treating the health sector as another sector to boost the economy.”

NEWSCHINA I March 2015

Reimbursement rates applicable to healthcare costs

Stagnation

Tangible reform in the healthcare sector, particularly of the public hospital system, has moved forward slowly. Before 2012, focus was placed on strengthening China’s primary healthcare networks, ultimately securing historical achievements including nationwide basic healthcare insurance coverage, enhancing access to and convenience of medical treatment for all citizens. However, public hospital reform, a crucial element in this drive, could not be fully implemented. Profitoriented pharmaceutical dispensation augmented by inflated pricing, and kickbacks for prescribing expensive medicines or subjecting patients to medically unnecessary screenings remain commonplace in most Chinese hospitals.

Indeed, the conflict of interest between doctors and patients when it comes to cost of care remains unresolved. Skyrocketing medical costs in public hospitals have effectively canceled out achievements made through primary healthcare reform. Compared to 2007, total health spending increased from 1.12 trillion to 3.2 trillion yuan (US$180bn to 515bn) in 2013, massively outpacing growth in average earnings. Reimbursement rates applicable to healthcare costs for urban workers are 53.8 percent. Urban residents can expect to recoup an average 44.9 percent of the cost of care, while rural residents can expect slightly less – around 38 percent. These rates contrast alarmingly with the effective risk share level of 70 to 80 percent across all three demographics.

There have been, however, a few success stories. Sanming City, Fujian Province is one such example. Public hospitals within Sanming’s jurisdiction have launched a raft of innovative measures including supervised pharmaceutical bidding, fixed salaries with regular pay rises for all employees and performance evaluation for hospital presidents.

The results were significant. From 2011 to 2013, average per-patient spending on hospital care dropped from 4,082 yuan (US$657) to 3,876 yuan (US$624), with total annual healthcare spending falling from 900 million yuan (US$145m) to 567 million yuan (US$91.3m).

While special interest groups, particularly pharmaceutical companies who had formerly profited from overpriced drugs and high rebates, opposed these measures, the overall impact on public health in Sanming has been remarkable.

Repeating such successes, however, remains a challenge. Difficulties lie ahead in breaking up the profit chain in pharmaceutical circulation and uptake.

Readjustment

Due in part to the uninspiring state of current reforms, relations between medical professionals and patients have deteriorated. In early

NEWSCHINA I March 2015

Urban workers

Urban residents

Rural residents

Effective risk share level

Source: Development Research Center of the State Council

2014, a number of cases occurred in which patients or their family members physically assaulted doctors, drawing an immediate response from the central government.

In March 2014, President Xi Jinping emphasized in his speech at the National People’s Congress that the “normal order” in hospitals must be maintained, and the personal safety of medical workers guaranteed, with those abusing doctors or nurses punished.

In December 2014, Xi made a visit to Zhenjiang, Jiangsu Province, during which he stated that without guaranteeing health of body, the national goal of securing the people’s wellbeing could not be achieved.

“The government should provide the general public with safe, effective, convenient and cheap public health services, to solve existing problems within the system.”

Such remarks from the head of State have been a strong indicator of a new direction for healthcare reform. According to Xi, the overhaul of China’s healthcare sector should be based on “the equalization of basic public health services,” rather than marketization or diversification. Universal healthcare, in other words, is a public good, rather than an economic, priority.

In 2015, with the deepening of the Party’s anti-corruption drive strengthening the government’s executive power, healthcare system reform might well be rescued from chaos. This year will be a vital one for healthcare in China.  The writer is an assistant researcher with the Development Research Center of the State Council

31

cover story Cinema

Better Ecosystem, Brighter Future

By Liu Cuiping

A packed movie theater in Shijiazhuang, Hebei Province

W

hile box office takings fell in a number of countries in 2014 - including Japan, the UK, Germany, Russia and Australia - China’s cinema industry had a bumper year.

The 320 movies released on the Chinese market last year brought in total box office income of 29.6 billion yuan (US$4.8bn) - a yearon-year increase of 36.15 percent. While takings in the US fell by 9 percent, the overall size of China’s movie industry grew to over 66.8 billion yuan (US$10.7bn).

Domestic Strength

Among the movies released on the Chinese market in 2014, 245 were domestic and 75 were foreign - by December 22, 2014, 48 percent of the national box office income was from tickets to imported movies.

Since 2012, when China raised its quota for imported movies from 20 to 34, increased competition has accelerated the development of the Chinese movie industry. By December 25, 2014, 64 movies released in China that year had broken 100 million yuan (US$16m) at the box office, of which 34 were domestically produced. Of the 15 movies that broke 500 million yuan (US$80m), eight were domestic productions. While 80 percent of the year’s 40 most competitive Hollywood movies were shown in Chinese cinemas, Chinese domestic movies also held their own.

This increase in income boosted growth in the opening of new

32

Photo by Chen Jianyu/IC

China's movie industry saw continued growth in 2014, and its increased openness is making waves in Hollywood. Are we seeing the birth of an industrial giant?

movie theaters. By December 22, 2014, 1,026 new theaters had been opened, with a total of 5,227 new screens - an average of 2.8 cinemas and 14 screens per day.

Global Influence

China accounted for 12 percent of the US$37.5 billion total global box office takings in 2014, and 85 percent of the US$1.6 billion growth in global box office income, a notable increase on the 65 percent China contributed to the US$1.2 billion global increase in 2013.

These blockbuster figures from the Chinese market have clearly caught the attention of the global movie industry, and have undeniably influenced global strategy at Hollywood studios. In July 2014, Universal Pictures announced the opening of its China office, making it the last of the six major Hollywood studios to establish an official presence in China. The European movie industry has also stepped up communication and cooperation with China – Wolf Totem, an adaption of a Chinese novel directed by French director Jean-Jacques Annaud, is scheduled for release in China this year.

96 of the 320 movies released in 2014, or 31 percent, were classed as “romance” movies. Almost all of these were domestically produced, and generated a total box office income of some 5 billion yuan (US$804m). The 51 action and animation movies also fared well, together accounting for 16 percent of the total number of movies released. However, 12 imported science fiction movies were the bigNEWSCHINA I March 2015

Growth rates of box office takings in China and North America, 2007-2014

gest earners, taking 7 billion yuan (US$1.3bn), or 25 percent of the total market share, despite only accounting for 4 percent of the total number of movies screened.

A clear difference in strategy has emerged between Chinese and Hollywood movie studios. While the majority of Chinese movies were made on small and medium budgets and often overlapped in terms of subject matter, few have been able to establish a brand, develop into a franchise, or bring value to the industry as a whole. Hollywood studios, particularly those producing science fiction, animation and action movies, have been able to form strong brand identities, creating valuable intellectual property (IP) and reliable movie franchises that support the stable development of the industry.

Hopefully, the Chinese movie industry has now realized the value of defending IP. Many of China’s movie studios have begun to purchase IP in the form of Internet novels, computer games, comics and traditional literature. Internet giants such as Baidu and Tencent have also begun to deploy their sizable online literature resources in their respective movie businesses. There is significant space for the development of IP protection in China’s movie industry.

9.6

9.6

10.6

10.6

10.2

10.9

10.8

9.9

4.6

0.5

0.7

1.6

1

2.1

3.5

2.7

North America (US$bn) China (US$bn) Growth rate of box office takings in China

Source: EntGroup China’s box office income contributions by domestic and imported movies, 2009-2014

Capital Operation

In 2014, a number of large mergers and capital operations also significantly altered the shape of China’s movie industry.

In the first half of 2014, there were 13 instances of listed companies in traditional industries purchasing movie companies, involving a total of 21.3 billion yuan (US$3.4bn), or 43 percent of total merger capital in China’s cultural industries. Many of these purchases were attempts by listed companies to transform their business models due to declining growth in traditional sectors. However, most of these mergers failed to generate much profit, often due to listed companies’ lack of understanding of the movie industry.

Meanwhile, major movie companies have been forging ahead.

Movie companies like Huayi Brothers, Enlight Media, Huace Film & TV and New Culture Group have completed several rounds of mergers and investments, many of them investing in online games, a sector predicted to be a key area for IP development. Movie companies are also pursuing further development, re-designing their overall “ecosystems” in order to avoid relying solely on movies and TV dramas.

Internet companies, particularly heavyweights like Baidu, Alibaba and Tencent, have all stepped up their activity in the movie industry. Since 2010, Chinese online video websites have been producing their own video content in-house, with “micro-movies” a particularly popular format. The movie and Internet industries have become more closely intertwined than ever before – director Jiang Wen’s latest work Gone with the Bullets was produced by Huace iQIYI, a joint venture formed in August 2014 between Huace and Baidu. Ailibaba founded Alibaba Pictures Group Limited by merging with China Vision Media Group Limited, and also became a shareholder in Youku Tudou Inc., one of the largest online video companies in China. Meanwhile, Internet giant Tencent and online video platform Youku have founded their own respective movie companies. Internet companies will bring more diversity to distribution channels and financing options for movie companies.

NEWSCHINA I March 2015

13.3 9

8.8 4.44 2.7 3.5

5.73

6.08

14.5 12.77

7.03

8.27

Domestic (bn yuan)

Proportion of income from domestic movies

Imported (bn yuan)

Proportion of income from imported movies

Source: EntGroup

Besides private movie companies and Internet giants, large-scale State-owned movie companies have also increased capital operations.

China Film Group Corporation and Shanghai Film Group have made several IPO applications. Shanghai Media Group (SMG) is also pressing forward with plans to list its subsidiary companies on the stock market. Yet due to their often complex internal structures, Stateowned enterprises will likely struggle to compete with more nimble Internet companies.

In 2017, China’s quota for imported movies will be increased, a sign that the movie market is gradually opening. Cooperation between Chinese and foreign movie companies will be an important trend. While a bigger and more active movie industry ecosystem is under construction, the next five years will see explosive growth in the Chinese movie market and related industries. The author is deputy director of research at Chinese entertainment industry consultancy EntGroup

33

cover story

34

Zhou Xun in the TV adaptation of the Zhang Yimou film Red Sorghum

Photo by CFP

Numbers of viewers watching TV series on traditional television sets fell drastically in 2014

NEWSCHINA I March 2015

Television

Tube Rules

A new policy has spurred the improvement of TV show production in China. However, the growing popularity of online video platforms poses an unprecedented challenge

By Feng Jun

A

new government policy known as “one drama, two satellites,” which rules that any individual TV series may only be simultaneously broadcast by two satellite TV channels, announced in April 2014 and introduced on January 1, 2015, has had a profound impact on the production of TV series in China. The policy, which will likely raise costs for satellite TV stations and increase diversity and competition in the market, is being hailed as a step forward for the industry.

Increased competition certainly proved to be beneficial to overall production standards in 2014, with new high-quality, big-budget TV series such as All Quiet in Beijing, Divorce Lawyers and A Servant of Two Masters generating significant buzz. Megastars like Zhou Xun, Yao Chen and Liu Ye all returned to the small screen. Divorce Lawyers, starring Yao Chen and Wu Xiubo, received investment of 130 million yuan (US$21m). Investment in The Empress of China, released at the end of December 2014 and starring Fan Bingbing, reached 300 million yuan (US$48m).

Meanwhile, “IP value” has become an industry buzzword. Ever since the 2011 success of The Legend of Zhen Huan, a smash-hit TV series adapted from an Internet novel by a young writer, Chinese companies have been competing to discover and secure the rights to the next big domestic hit. A typical copyright fee for a TV adaption of a popular Internet novel has increased from around 1 million yuan (US$160,000) in 2013 to 3 million yuan (US$480,000) in 2014.

Some of the most popular novels can earn the rights owners up to 10 million yuan (US$1.6m).

The decline in the popularity of various TV show formats, such as news programs and talk shows, has meant that only reality TV can now hope to compete with TV drama serials. In 2014, reality shows saw another round of growth, with 87 reality TV series broadcast over the course of the year. In 2015, more than 200 reality and game shows will hit the nation’s screens. The trend of music and entertainment reality shows kicked off by singing contest The Voice of China in 2012, has retained momentum despite increased competition from emerging formats, including those focusing on parenting, travel, cuisine, NEWSCHINA I March 2015

fashion and sports. Pop stars are now frequently making guest appearances on these shows.

While the quantity of reality shows has certainly increased, the same cannot be said for quality or originality. A creativity deficit ensured that shows based on imported franchises dominated the list of most popular shows in 2014. Industry insiders have revealed that China spends 200 million yuan (US$32m) per year on purchasing TV show copyright from overseas – of the top 25 shows on the Chinese Internet in 2014, foreign imports accounted for 70 percent. Shows from South Korea performed particularly well, 11 of them placing in the top 25.

With the continued improvement of Internet connection speeds, TV producers are under pressure to shift towards the online market.

While in 2012, a popular TV series could expect a total of 100 million plays across all episodes, by 2014, top shows can now garner 2 billion. Big hitters such as Swords of Legends broke 8 billion plays across all video platforms. The Empress of China was watched 800 million times in five days – experts expect the show to eventually hit 10 billion plays.

Numbers of viewers watching TV series on traditional television sets fell drastically in 2014 - no series earned a rating higher than 2 percent last year. Meanwhile, research found that there were only five TV shows that placed in the top 10 both on the Internet and on television, suggesting that the two markets are becoming increasingly distinct. Research on the different needs of the two will guide the industry in the future.

For reality shows, consumer demand for high-quality programming and increased competition for foreign copyright will force the domestic market to invest in creativity. A number of original domestic shows have already been well received by Chinese audiences, such as the campus reality show Grade One and the songwriting contest Sing My Song. The author is an industrial analyst at Chinese entertainment industry consultancy EntGroup

35

cover story Demographics

Dynamic Demography

Given that China’s efforts to tackle its demographic problem in 2014 have brought limited results, the country is gearing up to launch a new policy package this year, billed as its most diverse and comprehensive yet

Photo by CFP

By Wu Fan

China’s society is aging rapidly

W

hen China adopted a selective “two-child policy” in early 2014, allowing couples to have two children if either prospective parent was an only child themselves, experts predicted that it would lead to an additional two to four million births in the first year of the policy.

On the contrary, statistics from the National Health and Family Planning Commission (NHFPC) show that only 700,000 of 11 million couples eligible to have a second child under this policy applied to do so in the first ten months of 2014.

With the policy, the NHFPC aimed to increase the birth rate to 1.8 children per couple, but most demographers have conceded that the policy has failed to achieve this goal. The birth rate itself is disputed – although statistics from China’s census in 2010 showed a birth rate of about 1.2, the NHFPC has adopted a higher rate of 1.5 and 1.6, due to a belief that many children born in violation of the One Child Policy were not registered during the census.

With evidence of so many parents reluctant to have a second child, it is believed that the birth rate reported in the census is close to accurate, leading many to advocate replacing the One Child Policy with a two-child policy. But according to Zhao Yanpei, a senior NHFPC official, there is currently no timetable for nationwide implementation.

Many attribute the reluctance of the government to replace the One Child Policy with a two-child policy to an earlier report jointly

36

released by more than 20 demographers, which warned that a twochild policy would send the birth rate surging to 4.4 in its first year, decelerating to 2.4 in the long run.

However, given the unexpectedly ambivalent response to the policy revision in 2014, there have been growing calls from academics for further relaxation.

Pension Fund Deficit

As China’s birth rate has stagnated in recent years, the population of senior citizens has been steadily increasing. In 2013, the number of people over 60 reached 202.43 million, accounting for 14.9 percent of the whole population. According to Vice Premier Ma Kai’s report to the National People’s Congress (NPC) in December, the proportion of elderly people will have risen to over 19.3 percent by 2020, and to 34.2 percent of the total population by 2050.

The prospect of an aging population not only poses a threat to macroeconomic development, but has become an acute social problem.

In recent years, China’s pension system has begun to feel the strain, as growth in revenue has lagged behind growth in expenditure.

According to a report released by the China Academy of Social Sciences, pension funds in 14 provinces were already running at a deficit in 2011, with a total shortfall of 67.9 billion yuan (US$10.7bn).

Since then, the management of China’s national pension fund has NEWSCHINA I March 2015

been under close public scrutiny, as many are concerned about the sustainability of the current social security system.

Under China’s existing pension system, the national retirement fund is composed of two accounts, the “social pooling” account, a pay-as-you-go fund paid for by employers at the rate of 20 percent of an employee’s salary, and the “individual account,” to which each employee is entitled upon retirement, paid for by themselves, at a rate of 8 percent of their salary.

In theory, while funds in the social pooling account can be used to pay the pensions of retirees, the funds in the individual account belong to individual employees, who can make a lump-sum withdrawal upon retirement.

In reality, as the funds in the social pooling account have depleted, individual accounts have been tapped to make up the shortfall. In 2013, deficits in the national individual account reached 3.1 trillion yuan (US$535bn), 50 percent more than in 2011.

The authorities have repeatedly reassured the public that rather than a self-sustaining system (such as that in the US), China’s social security system is a State-guaranteed fund, and as such, there is no risk of default. However, many are becoming concerned that given the sheer volume of potential deficit, even a State guarantee is shaky.

For example, the deficit in the individual account fund in 2013 alone accounted for 24 percent of total government revenue that year.

Between 2011 and 2013, the government subsidies provided to the social security fund increased from 227.2 billion yuan (US$36.6bn) to 301.9 billion yuan (US$48.7bn) with an average annual increase of about 15 percent.

According to the estimates of a research team led by Li Yang, deputy president of the Chinese Academy of Social Sciences (CASS), the deficit in China’s urban pension fund will reach 80.2 trillion yuan (US$12.9tn) in 2050, expected to account for 91 percent of annual GDP.

New Policy Package

On December 28, at a legislative session of the Standing Committee of the NPC, a delegation of several ministers led by Vice Premier Ma Kai outlined a new policy package to address the problems in China’s social security programs.

Included in the policy package was a plan to include 40 million civil servants, Party officials and staff at public institutions in the public social security program. By contrast, public servants, who pay no pension premiums, currently enjoy an 80 percent replacement ratio on retirement, much higher than that enjoyed under the public pension system, which is estimated to lie somewhere between 40 and 60 percent. The proposed reform is considered a major breakthrough, as earlier efforts to reduce the retirement welfare allotment for public servants have repeatedly stalled.

Another major policy change is a plan to postpone the retirement age. Discussion around taking this step has been underway for years, and has long faced strong public opposition.

Under China’s current policy, female employees can claim their pension at 50 (55 for female party cadres), while male workers claim theirs at 60. According to research released by CASS on December 26, 2014, China should gradually postpone the retirement age to reduce the societal impact of an aging population.

NEWSCHINA I March 2015

Figures for‘empty nesters’over 65 Unit: 10,000 people By 2013, the total number of empty nesters amounted to over 100 million

Nationwide Urban Rural

Living alone

Living with spouse

Source: National Bureau of Statistics

The research advises that China firstly drop the dual-track retirement age that distinguishes between female party cadres and all other women, to adopt 55 as a unified retirement age. Then, beginning from 2018, the retirement age for both men and women should be postponed by one year every three years, so that by 2045, both men and women will retire at 65.

A similar plan proposed by experts at Tsinghua University in late 2013 proposed that China postpone the retirement age gradually - one year every year for women, and six months every year for men. It is not yet known which plan the government will ultimately adopt, but it has become clear that postponing the retirement age is on the policy agenda.

Other policy changes include plans to channel more dividends of State-owned enterprises to social security funds. Currently, Stateowned enterprises submit only about 10 percent of their profits to the treasury, a rate that will increase to 30 percent in 2020, according to Finance Minister Lou Jiwei.

Ma also stressed that the government will encourage the private sector to enter the social security market. In November, China launched a series of pilot programs in different localities, whereby the government provides subsidies to encourage a market-oriented approach in senior care. As the government has begun to consider senior care as a new source of GDP growth, it is expected that the government will be more active in pushing forward market-oriented programs.

But for demographers, the policy package only address the symptoms of the aging population, not the root causes. According to Cai Fang, vice president of the Chinese Academy of Social Sciences, to deal with China’s demographic problem, further relaxation of the One Child Policy is inevitable. Moreover, China needs a systematic approach to policy in various field like education, healthcare and social security to prevent or delay the imminent aging population problem.

37

cover story Migration

China Gets Globalized

In the globalization age, competition for international talent is expected to heat up, constituting a growing challenge for Chinese policymakers

By Wang Huiyao

D

uring the APEC summit in Beijing in November 2014, US president Barack Obama announced plans for a new visa agreement between the United States and China.

From now on, the maximum validity of student exchange visas will be five years, and up to 10 years for business and tourist visas.

According to data from the UN Department of Economic and Social Affairs, more than 9.34 million Chinese nationals emigrated in 2013, up from 5.5 million in 2000, making the country the world’s fourth largest source of migrants. The United States, Canada, Australia and New Zealand are the preferred destinations for Chinese seeking a new life abroad.

With the issuance of new immigration and visa policies pertaining to Chinese nationals in most of these countries in 2014, the global race for talent is expected to heat up in 2015, which is expected to be a landmark year.

Talent

In February 2014, Citizenship and Immigration Canada (CIC) announced the abolition of the country’s single-entry visa and introduced multiple-entry visas which allow successful applicants to visit Canada for six months at a time over 10 years without needing to reapply before each individual visit. A week later, CIC declared that it would also terminate its Immigrant Investor Program (IIP) and Federal Entrepreneur Program (FEP).

In effect for nearly 30 years, the IIP had become increasingly popular among wealthier immigrants worldwide because of its relatively low cost and risk. Thanks in part to these two schemes, Canada has become one of the most popular destinations for Chinese immigrants. Data from Canada’s Globe and Mail has showed that over the past 30 years, more than 130,000 immigrants, most of them from the Chinese mainland and Hong Kong, became legally resident in Canada through investment in the country.

The cessation of the IIP and the unveiling of 10-year multipleentry visas was aimed at deterring immigrants wishing to relocate to Canada simply for a green card and social security, rather than those looking to study or invest in the country. Generally speaking, attracting money and talent is now a trend in all countries with high levels

38

of immigration.

On January 15, 2014, Ed Fast, Canada’s minister of international trade, launched a new International Education Strategy (IES) designed to maintain and boost Canada’s global prestige in higher education. Fast pledged annual government investment of 5 million Canadian dollars (US$4.2m) into the scheme, which hopes to attract a total of 450,000 highly skilled international researchers and students to Canada by 2022.

The number of Chinese students studying in Canada has been on the rise. According to the Annual Report on the Development of Chinese Students Studying Abroad published by the Center for China & Globalization (CCG) in December 2014, 88,000 Chinese students were studying in Canada in 2013 compared to 67,000 in 2011, accounting for 33 percent of all overseas students in the country. China has been the largest source of overseas students in Canada for five years, and is also the primary contributor of overseas students to the United States, Great Britain, Japan and Germany.

The influx of overseas students has been shown to boost economic growth in their destination countries. In Canada in 2010 alone, international students’ spending on tuition, accommodation and living expenses hit 8 billion Canadian dollars (US$6.7bn), higher than total revenue in its entire heavy equipment manufacturing industry, which includes airplanes and spacecraft.

Even more importantly, the immediate financial dividends from enrolling large numbers of overseas students translates into a larger and richer talent pool which can in turn boost long-term economic growth.

One-way

On December 16, 2014, the same day that the White House published Obama’s new immigration policy, Shen Danyang, spokesman for the Chinese Ministry of Commerce (MOFCOM) told media that it was probable that China’s outbound investment volume in 2014 would exceed that year’s volume of inbound investment.

China is now the world’s largest trading nation. However, in terms of capital and talent flow, China still lags far behind developed countries. Today, the three principal waves of globalization are cargo, capiNEWSCHINA I March 2015

Global Reach

In addition to the growth in numbers of Chinese students overseas, Chinese enterprises are also seeking to expand their global reach more rapidly, particularly in recent years.

According to the Annual Report on Chinese International Migration published by the CCG in 2014, Africa’s Chinese population was nearly 800,000 in 2009, and had increased to 1 million just four years later. This increase was partly attributed to the rise in the number of workers who went to Africa at the behest of small-scale Chineseowned small enterprises in the hospitality, retail, construction and trade sectors. These workers were lured by the chance to make money in an unfamiliar marketplace, but the situation has changed in recent years, with increasing numbers of local employees working under a few Chinese managers.

In the countries that comprise the Silk Road Economic Belt, a term proposed by Chinese President Xi Jinping during a tour of Central Asia in September 2013, similar migration trends are reported. A

NEWSCHINA I March 2015

Photo by CFP

tal and talent.

In 2011, over 157,000 Chinese students were enrolled in US colleges, but only 14,000 US students were studying in China. In 2012, China had 1.13 million students studying abroad, but only welcomed 330,000 overseas students to its academic institutions. Less than half this number were pursuing degrees in China.

According to data from the Organization for Economic Cooperation and Development, international students make up 8 percent of enrollments in higher education in developed countries, with the ratios even higher in Australia and Great Britain. In China, only 0.4 percent of the national student body is from overseas.

The imbalance between outbound and inbound students reflects China’s severe “immigration deficit.” Official statistics show that from 1978 to 2008, China sent nearly 1.4 million students abroad, with less than 30 percent of them ultimately returning to China. Since 1985, 80 percent of Tsinghua University graduates and 76 percent of Peking University graduates, holding degrees from China’s two foremost academic institutions, left China for the United States.

In the 21st century era of globalization, the worldwide race to attract talent is becoming increasingly heated. China has not been voluntarily exporting its talent worldwide – on the contrary, China has a small talent pool in relation to its large population. The country now has a sizable pool of mid- and low-level talent but still lacks highly skilled personnel.

For China, now the world’s second largest economy, brain drain has become an important factor restricting both the sustainable growth of its economy and its social development.

On December 12, 2014, Chinese president Xi Jinping called for greater efforts to promote overseas studies during a conference highlighting both Chinese students abroad and international students in China. The government has stated that it aims to attract 500,000 overseas students to its academic institutions by 2020.

Over 10,000 Chinese students take part in the American SAT exams in Hong Kong

month after his Central Asian tour, while on an official visit to Indonesia, President Xi proposed a 21st century Maritime Silk Road, a trading belt stretching from the Strait of Malacca to India, the Middle East and East Africa.

In 2014, China’s “belt and road” initiatives entered a phase of concrete international cooperation after years of laying groundwork through strategic planning. Both initiatives focus heavily on infrastructure construction – a sector in which China is a strong and capable player.

International cooperation with China’s widespread anti-corruption drive is another new factor influencing Chinese migration trends in recent years. In November 2013, during the Third Plenum of the 18th Communist Party of China (CPC) Central Committee, China released new restrictions on “naked officials,” – classed as any government functionary whose spouse, children and material assets have been relocated overseas.

In November 2014, after the publication of the Beijing AntiCorruption Declaration, APEC member states decided to establish a multilateral law enforcement network to strengthen transnational anti-corruption cooperation in a bid to crack down on trans-border corruption in the Asia-Pacific region.

According to statistics published by the Chinese Academy of Social Sciences, since the mid-1990s, about 18,000 corrupt Chinese officials absconded with some 800 billion yuan (US$129bn), most of whom secured residency overseas. Greater international cooperation to combat corruption is expected to deter “naked officials” hoping to escape overseas with their ill-gotten gains.

A hot topic in most parts of the world, immigration, in policy and practice, will likely be an issue central to China’s 2015. The author is Director of the Center for China & Globalization (CCG), an independent China-based think tank comprising international academics, business leaders and public policy experts. The CCG’s research focuses on globalization in relation to Chinese migration trends, while exploring the opportunities and challenges that globalization presents for China

39

society

Taiwan University Elections

All in the Game

As Chinese mainland students in Taiwan begin to get involved in student politics, they face mudslinging, manipulation and prejudice

By Wang Sijing and Wang Yan

C

ai Boyi, 22, from Zhejiang Province, is currently a senior majoring in mass communications at Tamkang University (TKU) in Tamsui District, New Taipei City. In October 2014, she launched her campaign for president of the TKU student union – the first mainlander ever to run for office at the university.

While Cai ran unopposed, only 691 of the university’s total 27,487 students voted, and only 653 ballots cast were declared valid – a voter turnout rate of 2.4 percent, a far cry from the 15 percent required for the result to stand. Cai expressed to NewsChina that while she had expected the result, the controversy caused by her campaign demonstrated the difficult situation faced by mainland students in Taiwan. “If I were Taiwanese, my campaign would not have met so many obstacles,” said Cai to NewsChina.

In 2011, Taiwan opened the gates of its universities to students from the mainland, over 6,200 of whom are now studying in Taiwan. Despite sharing a comparable cultural background, many mainland students claim to feel relatively detached from Taiwanese society. Cai’s election campaign caused the tensions underlying this separation to bubble to the surface, resulting in a smear campaign, and eventually a boycott.

Playing Dirty

The “obstacles” to which Cai Boyi referred

40

began to emerge at the very beginning of her election campaign. In May, as a member of the Tam Kang Wu Hu Gang Student Association in TKU, association chairman and native Taiwanese student Chung Meng Hsuan put forward Cai as the association’s candidate for student union president. “I recommended her because she is smart and passionate,” Chung told NewsChina. “She cares more about social issues in Taiwan than most Taiwanese.”

On August 1, Cai, one of only 260 mainland students at TKU, submitted her campaign registration materials to the studentrun election committee. A week later, she noticed that China’s red national flag had been added to the photo on the Facebook page promoting her campaign. According to Chuang Chi Cheng, acting president of the student union, this was in order to “thoroughly publicize the background information of the candidate, and secure students’ right to know.”

This move aroused the attention of local media, who began to question whether a mainland student was qualified to run for president of the student union. “I was dumbfounded,” said Cai Boyi, citing TKU’s regulation that any student enrolled at the university enjoys the right to run for student office.

Cai’s Facebook account drew fire from angry Taiwanese netizens, many of them suggesting she return to the mainland if she

wanted to run for office. Cai responded: “I study here, so of course I should run for election here.” A webpage was created entitled “Oppose Mainland Student Cai Boyi’s Election Campaign,” featuring a photograph of Cai covered with a large red cross. Cai also received a curse in the form of a poem. “These people are so naïve,” Cai told NewsChina.

In response, Chung Meng Hsuan wrote on August 9 on his personal Facebook page: “She loves Taiwan even more than us locals, why do you insult her to such an extent?”

Chung could not understand why Taiwanese people were so spooked by 6,254 mainland students in their universities.

Mainland students at other universities on the island were also disheartened by Cai’s situation. Yu Zelin from Chinese Culture University told NewsChina: “Cai Boyi is very brave. Some locals have been harsh towards us, but we can hardly change their attitude.”

The student election committee also opposed Cai’s campaign. According to Yu Zelin, the committee representative tried to persuade him not to support Cai publicly.

On September 15, the election committee declared that the election had been suspended due to “controversy.”

“The suspension meant that all our efforts, including our campaign team’s total 10,000 new Taiwan dollars (US$318) expenditure, went to waste,” said Cai. “The election was unfair, since the committee was able to maNEWSCHINA I March 2015

nipulate our resources.”

By October 16, the university’s higher authorities ordered that the election be relaunched. The other two presidential candidates, however, refused to participate. As the only remaining candidate, Cai continued her campaign in an attempt to draw more votes and obtain the 15 percent turnout necessary to make the result valid. On October 29, Cai and her team launched an on-campus campaign, but failed to attract much attention.

“The election ended in a farce,” said Cai.

Stereotypes

While Taiwan’s university enrollment rate was at 100 percent as recently as 2008, plunging birth rates and aging population on the island have seen this figure drop rapidly.

Analysts have predicted that within 10 years, over one third of Taiwan’s universities, particularly private ones, will face bankruptcy due to lack of students.

Facing this existential crisis, private Taiwanese universities opened up to mainland students in 2011 and enrolled 975 that year.

Cross-straits students are often held up as a symbol of improving relations between the mainland and Taiwan. During his leadership, Ma Ying-jeou, Kuomintang chairman and current Taiwan leader, pledged a yearly increase in the annual quota of mainland students admitted to Taiwanese universities, which resulted in record enrollment of more than 2,600 students from the mainland last year. In addition, since May 2014, a total of 49 public universities have joined the government program to absorb mainland students, which was previously restricted to private universities.

Some Taiwanese media accused mainland students of spying, or attempting to seek political influence over Taiwanese students.

Taiwan’s government even set up a so-called “three restrictions and six nos” policy, banning mainland students from taking courses concerning local security, receiving national health insurance, getting scholarships, working part-time jobs off campus, taking civil service examinations or working in Taiwan after graduation.

Social prejudice was also widespread. “Tai-

NEWSCHINA I March 2015

Kong-based Apple Daily newspaper: “As long as Taiwan allows mainland students to study in its universities, mainland students should enjoy the same rights and obligations to take part in school activities as local students.

Boycotting or excluding them leads to unfairness or prejudice. Furthermore, we send our students to study in the mainland, and from an equal perspective, we do not expect our students to encounter the same difficulties as Cai Boyi.”

Democracy Cai Boyi

wanese media does not deserve its lofty reputation. They paint mainlanders either as vulgar nouveau-riche or extremely poor, which is not objective at all,” said Cai Boyi.

Chung Meng Hsuan admitted to NewsChina that, before he met Cai, he disliked people from the mainland. “I should not have stereotyped them, and after I knew Cai, I realized that mainlanders were not all like what I had supposed them to be,” he said.

“We mainland students have our own circle,” said Yu Zelin, chairman of the Association of Mainland Students at Taipei’s Chinese Culture University in an interview with NewsChina. “Most prefer to limit their social activities within that circle.” In general, students from both places get along with each other well, added Yu. Still, he admitted the existence of an invisible line separating mainland students from mainstream culture in Taiwan.

Different from most mainland students who care more about their academic performance and employment opportunities rather than local social movements, Cai is a social activist who has participated in a number of campaigns since she first arrived in Taiwan in 2012. “Most mainland students are cautious about expressing ideas, and they avoid direct debate with Taiwanese students,” added Cai. “In this free society, mainland students are sometimes not free.”

In mid-December, Kong Lin-Shin from Ming Chuan University School of Communication wrote in an article in the Hong

Cai Boyi is not alone. Shortly after her failure in the TKU election, in December, Dong Menghang, another Chinese mainlander running for a student representative post at National Taiwan University (NTU), became the subject of controversy amid claims that she was a member of the Communist Party of China (CPC). Election results on December 19 indicated that Dong placed dead last in the election. On NTU’s online forum, many commentators expressed doubts about Dong’s previous work as a journalist in the mainland, accusing her of being a spy.

Addressing these comments, Hong Xincheng, a mainland student at NTU, wrote in the Taiwan-based China Times: “Taiwan is a democratic society, and NTU is regarded as a cradle of freedom and democracy. I hope we can uphold righteousness and safeguard campus democracy. Whatever her background, and whether you like her or not, Dong Menghang is, above all, a student at NTU, so why not listen to her and let voters decide the result?”

Four years living in Taiwan have fostered feelings of both tolerance and detachment in Cai Boyi. She told NewsChina that she could be more considerate and patient in understanding others who hold different opinions and views, and “try to feel the world from their perspective,” said Cai. Before coming to Taiwan, Cai once thought democracy and voting were one and the same, but experience and observing the social movements in Taiwan taught her that “voting is the form democracy takes, while civil society determines its outcome and its future.”

41

international

China in Latin America

Buenas Vistas

China and the US seem to have avoided misreading each other’s intentions in Latin America. Beijing’s interests in the region appear largely economic, and though China has avoided repeating the mistakes of others, it has yet to learn from its own missteps elsewhere

By Li Jia

S

everal third parties were mentioned in President Obama’s December 17, 2014 statement on restoring diplomatic relations with Cuba. China, as “a far larger country also governed by a Communist Party,” was referred to as a precedent for the US building normal ties with the Caribbean island nation. Obama’s opponents, meanwhile, have also raised China as an example – of how diplomatic engagement does not equal effecting political change.

Given China’s special relationship with both the US and Cuba, China’s role in this case seems a little more complicated than such claims would suggest. China has long been one of the major providers of political and economic support to the Castro administration.

The uncertainty surrounding whether a Sino-US strategic rivalry can avoid the familiar trap of conflict between an emerging and an existing power is probably the biggest concern for today’s complex global geopolitics.

From a broader perspective, the US-Cuba détente is widely expected to greatly improve waning US influence in Latin America.

Cuban leader Raúl Castro confirmed on December 20, 2014 that he would attend the Summit of the Americas in Panama in April 2015 for the first time since the summit was first organized in 1994 by the Washington-led Organization of the American States (OAS). The OAS suspended Cuba’s membership in 1962, and when it attempted

42

to reinstate the country’s status in 2009, Cuba rejected the offer.

As the US has struggled to retain its regional influence, China’s star in Latin America has been rising in the past decade, a trend that looks set to continue. In early January 2015, Beijing hosted the first ministerial meeting of the Forum of China and the Community of Latin American and Caribbean States (CELAC). The forum is an initiative designed by China to provide a much better platform to get closer to Latin America as a whole, a more efficient alternative to existing country-by-country or less representative regional organizations.

Such moves have aroused questions in the context of a US-Cuba rapprochement. For China, will this breaking of the ice complicate relations with both countries? And has China been factored into US calculations regarding its Cuban and Latin American policies?

For now, there seems to be no easy answer.

New Reality

Besides being a communist ally, China is an important economic partner for Cuba. According to US Central Intelligence Agency (CIA) data, China was Cuba’s second largest trading partner in 2012 in terms of both exports (behind Canada) and imports (behind Venezuela). The United Nations Economic Commission for Latin America and the Caribbean (UNECLAC, more commonly called by NEWSCHINA I March 2015

Photo by ic

The First Ministerial Meeting of the Forum of China and the Community of Latin American and Carribean States (China-CELAC), Beijing, January 8, 2015

its Spanish-language title, NU CEPAL) estimated in a January 2015 report that China became Cuba’s largest trading partner in 2013.

The report detailed how, since 2000, China went from a “minor partner” to a “central actor” in Latin American foreign trade. In his interview with Latin American media on May 31, 2013, just before his first visit to the region as China’s head of state, President Xi Jinping announced that China had become Latin America’s second largest trading partner in 2012, three years ahead of the UN’s previous forecast.

New goals have been set at the first China-CELAC ministerial meeting, including a target of US$500 billion in annual trade volume by 2024, nearly double the current level, along with massively increasing China’s total direct investment in Latin America. Xi’s remarks suggested that China hoped to contribute a total US$250 billion to the region by 2025, nearly triple its entire US$90 billion contribution to date. China’s commitment to providing billions of dollars in preferential loans and funds for joint projects in the region, declared during Xi’s second presidential visit to Latin America in July 2014, could help realize these ambitious goals.

The recent forum in Beijing shows that China has completed her global network of “collective cooperation mechanisms to include all developing countries,” according to Chinese Foreign Minister Wang NEWSCHINA I March 2015

Yi, speaking at a seminar in Beijing on December 24, 2014. All 33 countries in the region are members of CELAC, which launched in 2011 to facilitate regional integration and reduce US influence in the region.

The US, by contrast, has seen her position in this region, though still unparalleled, begin to diminish in recent years. While the US remains overwhelmingly the largest trading partner and investor in Latin American countries, with China lagging way behind, the latter is gaining momentum. The US and Latin America may be providing rapidly growing markets for one another, but data in a September 2014 report by NU CEPAL proves the continuation of an upward trend in regional trade volume with China, growth which has outpaced that between Latin America and the US since 2006. Negotiations on the Free Trade Area of the Americas, a US-backed initiative, have made little progress nearly ten years after it missed its main deadline, as a result of strong resistance from many Latin American countries.

“If there was an era of US hegemony in Latin America, it is over,” concluded the Council on Foreign Relations (CFR) Task Force led by former US trade representative Charlene Barshefsky and former commander of US Southern Command General James T Hill in a report issued in 2008. This conclusion was attributed to dramatic

43

international

Photo by xinhua

Academy of Social Sciences, explained to NewsChina that an improvement in US-Cuban relations will pave the way for Venezuela, whose oil supply has been crucial to Cuba’s economy, to improve its own ties with the US – another major customer and a potential investor in the country’s newly designed and more relaxed market structure.

This would, according to Wu, consequently soften the attitude of the Bolivarian Alliance for the Peoples of Our America, a transnational leftist political camp led by Cuba and Venezuela, towards the US. Wu went on to say that the Cuba issue had long been the “only common source of political criticism” against the US among Latin American countries, and thus rapprochement would “greatly ease” tensions between Washington and Latin America.

Wu also stated that, in using the Cuba deal to tell Latin Americans that the US seeks friendship with all countries in the region, the US is trying to counterbalance China’s increasing influence there. This stems from a belief that Americans think China has taken advantage of their declining regional influence.

Not everyone agrees with this assessment. While concurring that the new Cuba policy could provide a considerable boost to US-Latin American ties, Professor Shi Yinhong with the Renmin University of China, a prominent figure in the study of Sino-US relations, does not think it necessary to look at each power’s every single move in all places and at all times from the perspective of rivalry. President Obama’s decision, he told NewsChina, has simply written off “an extremely bad policy of hostility” which should have been abandoned long ago, a fact acknowledged in Obama’s December 17 announcement. Even without existing competition with China, Shi stressed, Obama’s actions would have been the same, as they were taken out of consideration for both long-term US interests and his own political legacy.

Moreover, China does not have to worry about a change of heart towards China on the part of Cuba simply because the US has reached out to Havana. Both Shi and Wu agree that normalized USCuba relations will, in fact, alleviate concerns over possible US oppo-

A China-funded solar power plant in Cuba goes online , November 4, 2013

political and economic “diversification” within Latin America, and “Americans’ lack of interest” in the region. The report called for policy shifts to reflect this “new reality.” China, which at the time did not have its current status as the world’s second largest economy, was not mentioned.

No Shock

In recent years, any moves made by China or the US in Latin America have begun to be perceived by some analysts as responses to a strategic rivalry between an emerging power and an existing hegemony.

The Obama administration has been trying to rebuild the image of the US in Latin America, and the Cuba deal could help achieve this aim. “The era of the Monroe Doctrine is over,” declared US Secretary of State John Kerry in November 2013. His reference to Latin America as the “backyard” of the US in April that year drew criticism from regional powers. The Monroe Doctrine has been synonymous with US interventionism and hegemony in Latin America since the 1820s. Julia Sweig, a Nelson and David Rockefeller Senior Fellow for Latin American Studies, commented in a recent interview with CFR that the change in its Cuba policy gives the US a chance “to restart a conversation and rebuild its standing in Latin America.”

Chinese analysts generally agree that Obama’s change of heart on Cuba will improve US relations with Latin America. Professor Wu Baiyi, director of the Institute of Latin America with the Chinese

44

NEWSCHINA I March 2015

sition to its dealings with Cuba. As Shi pointed out, even in the case of Myanmar, which shares a border and a history of uneasy relations with China, improved relations with the West would translate into long-term dividends for Beijing by making it easier for Beijing to balance her ties between former geopolitical outsiders and the West.

Moreover, after decades of enmity and crippling sanctions, Cuba is unlikely to rush to embrace the US at the cost of ties with a long-term ally like China. In Washington, meanwhile, a Republican-dominated Congress is equally unlikely to make it easy for Obama to proceed with his Cuba plans.

No More, No Less

In reference to its growing presence in Latin America, China has been repeatedly described by some Western media and analysts as “a dragon in the backyard.” Evan Ellis, research professor of Latin American Studies with the US Army War College Strategic Institute recently warned the US government not to give a wrong message to China and Russia that the US “re-engagement” with Cuba was “a retreat from weakness.”

An article in June 2014 published by the Council on Hemispheric Affairs, a Washington based think tank, claimed that “China’s attempt to balance US global power is clearly present in Latin America.” The launch of the Nicaragua Canal mega-project by a consortium led by a Chinese private company on December 22, 2014 immediately triggered speculation on whether the project was driven by China’s strategic, or even military, interests, though US and European companies were also included in the consortium.

Chinese analysts categorically dismiss this vision of China’s strategic presence in Latin America. Professor Shi, for example, stressed that China’s prevailing interests in Latin America are economic. In addition, he believes that China’s economic gains in the region, no matter how significant, are not going to help Beijing “balance the pressure of the US efforts towards strategic rebalancing in East Asia, the area still at the top of China’s diplomatic agenda.”

Indeed, trade, investment and finance have been identified by the China-CELAC Forum as its three pillars of cooperation. Even in this economic mechanism, Professor Wu said, China bears neither the intent nor the capability to play a politically decisive role in the forum’s operations.

Indeed, it is a belief widely held by Chinese analysts that China’s political interests in Latin America focus on wresting regional diplomatic ties away from Taiwan and garnering support for China in multinational frameworks on global affairs, for example, climate change action, or unconventional security issues, such as the safety of Chinese citizens living and working in Latin American countries. So far, 12 Latin American states, including Nicaragua, have not established for-

NEWSCHINA I March 2015

mal diplomatic relations with Beijing, more than in any other region in the world.

Wu noted, reflecting on the Soviet attempt at establishing a military presence in Latin America during the Cold War, that China did not, and would not “make the same mistakes as the former Soviet Union did in this region.” Chinese analysts argue that US policymakers, though uncomfortable with increasing competition from China in the Latin American market, are not concerned about China’s strategic intentions in the region. Moreover, China and the US have maintained a dialog platform on Latin America since 2006. Generally, Chinese analysts have not seen any sign from the Obama administration of excessive concern regarding China’s activities in Latin America.

Indeed, the Renmin University of China’s Wang Yiwei, writing for the Singapore-based web journal zaobao.com on January 9, 2015, found that some Latin American countries hoping that China might become a regional counterweight to the US were disappointed by China’s consistently reiterated position that it has no intention of challenging the existing world order.

Old Lessons

Of course, Beijing’s focus on trade does not mean that China and Latin America will immediately become ironclad business partners.

Issues yet to be addressed revolve around frictions commonly experienced between industrial and raw material traders, the lingering weakness of China’s efforts to go truly global and Latin America’s lack of a clear multilateral agenda to promote business opportunities.

At an ECLAC workshop hosted in Chile in September 2014, Latin American experts and government officials expressed concerns over the “risk of deindustrialization” in trade dealings with China, that is, “a return to exports based on natural resources and involving lower productivity.” Currently, Latin America mainly sells commodity products to China, particularly oil, gas and copper. China’s investment in the region is also heavily concentrated on raw materials exploration and extraction.

Research by Wu’s team, compiled in 2013 into the book Opportunities Along with Transformation, found that Latin American market demand for imports of labor-intensive products with mid- and lowtech input from China had already reached saturation point. This focus on cheap exports, it says, should be replaced partly by investment in local manufacturing and also by hi-tech exports, both of which are needed by Latin America to build an indigenous value chain.

Diversification of China’s trade and investment with Latin America has already begun, and is a trend that looks set to continue. A joint feasibility study has been launched by China, Brazil and Peru on a railway project that would connect the Atlantic and Pacific coasts via both Latin American countries. In the road map of cooperation is-

45

international

46

criticized by local communities for only negotiating with Ecuador’s central government and ignoring local interests.

Such examples of underestimating local political risk and shunning talks with non-governmental organizations have been made by Chinese enterprises in other markets, including African states and Myanmar.

The report advises Chinese companies to learn from Japanese experience in setting up low-key, small-scale manufacturing plants, collaborating with local or international companies, training local workers and communicating with local media.

The UN report calls on Latin American countries to formulate “active” and “coordinated” policies “overcoming known lags in innovation, competitiveness, science and technology, infrastructure, trade facilitation and business internationalization.” For example, it says, the complicated visa application system used in the region could deter Chinese tourists from visiting Latin America.

While trying to avoid balance-of-power game-playing with the US in Latin America, China will find political considerations no less important than the bottom line in terms of pursuing business partnerships. 

Photo by xinhua

sued by the China-CELAC forum, special emphasis is placed upon Chinese investment in “high-tech and high-value-added manufacturing sectors.” Chinese auto and electronics companies are building footholds in Latin America in a view to tapping both local markets and the US market. The CASS book suggests that, in Brazil at least, petroleum transportation and refinery facilities are possibly an even better area for Chinese investment than exploration. ECLAC, meanwhile, has recommended more exports of Latin American food products and business services to China, which is experiencing strong demand for both.

The complexity of the Latin American business environment is highlighted in the CASS book, including the region’s broad political diversity, particularly in terms of political parties, a continent-wide reinforcement of nationalist and populist politics, powerful trade unions and the strong role played in governance by NGOs. Barriers to foreign investment are common in the natural resources sector, including market access restrictions and unpredictably enforced tariffs, taxes and charges on oil exploration. In the manufacturing sector, meanwhile, Latin America’s labor markets lag behind most world economies in the international rankings in terms of cost, flexibility and productivity.

These prove the importance of due diligence, particularly concerning the prevailing political climate and operational considerations, for any foreign investors looking to gain a presence in any of Latin America’s 33 states. It is implied in the CASS book that Chinese enterprises are at a disadvantage both in their understanding of the importance of regional differentiation in Latin America, and also in their experience of dealing with non-governmental interests. Some try to sidestep these necessities by neglecting trade unions and NGOs and maintaining close contact with senior officials.

Such practices have merely led to the unexpected entanglement of Chinese enterprises in local feuds between different political interest groups, attracting protests against their insufficient contributions to local employment and environmental protection, causing disruptions in production.

In Peru, for example, Chinese steel maker Shougang Group has been struggling to cope with frequent strikes at its local iron mining operations for more than 20 years. This case has been repeatedly cited

by Chinese media and analysts as an example of Chinese companies’ weakness in dealing with labor issues in overseas markets.

In 2012, a mass protest was organized by the Confederation of Indigenous Nationalities of Ecuador (CONAIE) opposing a contract approved by President Rafael Correa that was awarded to the Chinese-funded El Mirador open-pit copper mine project, which was seen as threatening forestry resources belonging to the indigenous Shuar community.

President Correa, who won the election in 2006 largely with the strong support of indigenous minorities, tried to appease campaigners by ordering the Chinese company to surrender half their profits to the national government. Ecuacorriente, the Chinese company, was

Workers at an air conditioner factory in Manaus, southern Brazil, built by Chinese giant Gree Electric Appliances, April 17, 2007 NEWSCHINA I March 2015

China and Russia

Beijing to the Rescue?

Photo by ic

Debate over whether China should help Russia stabilize its currency amid denials from Moscow that it needs Chinese help reflects the subtle complexities of this newly established quasi-alliance

By Yu Xiaodong

Shoppers outside Moscow’s Kapitoly mall

A

mong the many Chinese diplomatic ventures embarked upon in 2014, a major achievement has been what many call a “quasi-alliance” with Russia. The two sides have strengthened cooperation in a variety of fields, with China providing vital political support to an embattled Russia, which is facing increasing political and economic pressure from the West.

As the Russian rouble experienced a steep decline in value in December 2014, China even expressed willingness to help Russia to stabilize its currency. Despite the existing partnership between China and Russia, China’s gesture to bail out the Russian economy NEWSCHINA I March 2015

if required has garnered wide attention both at home and abroad.

Not only has China’s offer proven disturbing to the West, it has also been met with a lukewarm Russian response, and ignited strong suspicions domestically.

Financier

The first hint that China might be willing to extend Moscow a helping hand emerged in a speech made by Premier Li Keqiang at the Shanghai Cooperation Organization (SCO) summit held in Kazakhstan on December 16, 2014. Li told delegates that China would like to expand financial cooperation with

SCO members “including Russia” within the SCO framework.

As Moscow gave no response to Li’s remarks, Chinese Foreign Minister Wang Yi told Hong Kong’s Phoenix TV on December 20, 2014 that, if Russia so required, China would provide “necessary assistance within our capacity,” though he added that China was confident that “Russia has the ability and the wisdom to overcome this current kind of challenging situation.”

On December 21, China’s Commerce Minister Gao Hucheng told journalists that China could expand an existing bilateral currency swap agreement in order to help Rus-

47

sia.

It is not surprising that China’s willingness to step in to help the Russian economy is a concern for the West, which has been escalating economic and financial sanctions against Moscow in a bid to force Russia to back down from its present position on Ukraine.

China’s offer to bail Russia out not only undermines the goals of Western sanctions, but also poses a systemic challenge to the existing international financial order, which remains under Euro-American control.

In the past year, China’s role in establishing various new international financial organizations such as the BRICS Development Bank and the Asian Infrastructure Investment Bank has proven Beijing’s increasing interest in playing a more active role in the global financial system.

It is also a cause for concern among some nations that China, with its US$4 trillion foreign reserves, acts as a lender to countries in financial distress which are shut out of the international capital market. This serves to undercut the International Monetary Fund (IMF)’s role as the go-to financier for these economies. As many recipients of Chinese loans have tense relations with the West, many in the developed world are disturbed by such arrangements.

For example, China lent US$4 billion to Venezuela in November 2014, as Caracas struggled with falling oil prices and low foreign reserves.

“Beijing’s move to bail out Russia, on top of its recent aid for Venezuela and Argentina, signals the death of the post-war Bretton Woods world,” ran one Bloomberg commentary. “ It’s also marks the beginning of the end for America’s linchpin role in the global economy and Japan’s influence in Asia.”

While the validity of such predictions in the long run cannot be discounted, objections to the bailout offer from within China, and, more surprisingly, a cold response from Moscow, have cast doubt on whether Beiing’s

48

Photo by IC

international

China’s vice premier Zhang Gaoli with President Vladimir Putin and Gazprom’s management committee chairman Alexei Miller at a ground-breaking ceremony held near the Russian village of Us Khatyn for the first length of a new Russia-China gas pipeline built jointly by Gazprom and the China National Petroleum Corporation

offer of a helping hand will be taken up by Russia.

Objections

Despite Russian President Vladimir Putin’s popularity among the Chinese general public and overall mainstream support for greater strategic cooperation with Russia, there are strong voices opposing closer ties in both academia and the public sphere, many of which stem from a bitter recent history.

For many Chinese nationalists, China has suffered far more at the hands of both Tsarist Russia and the Soviet Union than it has at the hands of Western powers. Many see an enhanced partnership with Russia as a threat to China’s efforts to elevate its global status, a view reinforced by the Russian currency crisis.

As the rouble plunged in value, major Sino-Russian trade deals, including a threeyear, 150-billion-yuan (US$24 billion) cur-

rency swap and a three-decade US$400 billion natural gas deal, have been subjected to criticism.

In a widely circulated article first published on sina.com, one of China’s biggest news portals, it was reported that China suffered huge losses under its currency swap arrangement with Russia. The allegations led the People’s Bank of China (PBoC) to publish a chart on its microblog account detailing how a swap agreement works. The PBoC chart showed that the swap amount is not pre-determined according to a fixed exchange rate, and can be adjusted to allow for changing circumstances and fluctuating currency values.

Then, a Bloomberg report in late December claiming that in November 2014 China paid an average US$90 per barrel for imported Russian oil led to similar criticism of SinoRussian energy cooperation, with some arguing that the deal has tied China to an inflated price even as the global market for crude oil NEWSCHINA I March 2015

fell below US$60 per barrel in December.

Energy experts have responded by stating that the purchase price paid by China for Russian oil, which is calculated based on the previous month’s Crude Oil Brent (CB) futures price (as high as US$87 in October), is not far off the market price.

Although much of the popular criticism of Sino-Russian trade deals lacks technical accuracy, its spread reflects the existence of strong suspicions regarding closer ties with Russia, also evident in Chinese academia.

Following China’s explicit offer to help Russia, the Global Times, a State-owned newspaper with a strong nationalistic bent, published a series of editorials and commentaries in both its print and online editions, debating whether China should take a more active role in offering financial assistance to Russia.

Several of these articles favored closer ties.

“Russia is an irreplaceable strategic partner on the international stage,” ran one editorial.

In another, Li Jianmin, an expert on Russian, Eastern European and Central Asian studies from China Academy of Social Sciences, argued that “politically, morally, strategically and economically, China has every reason to lend a hand to Russia when it needs it.”

Conversely, there are many other Chinese strategists who are wary of closer ties with Russia. In a commentary published in the Global Times online edition at huanqiu. com, Feng Yujun, an expert from the China Institutes of Contemporary International Relations, argued that there was no way that China could address the fundamental problems in Russia’s economy, such as its excessive reliance on energy exports.

Feng also questioned the very rationale behind China’s relationship with Russia, which is, in his view, primarily aimed at diverting strategic pressure from the US. According to Feng, as China emerges to become a world power, with an economy five times the size of Russia’s, closer ties with Moscow will NEWSCHINA I March 2015

prove futile in diverting the US attention away from China. Feng argued that China should not expect to “hide behind Russia” in its competition with the US, but instead deal with its problems with the US directly.

‘A World Player’

Compared to the debates within China on its offer of economic assistance, Russia has appeared rather detached from the issue, with officials simply brushing aside the idea of China bailing out its economy in a cool, if polite, manner.

For example, Dmitry Peskov, a spokesman for President Putin, told assembled media on December 20, 2014 that “Russia isn’t in talks with China about any financial aid.”

In an interview with the Global Times conducted on December 25, 2014, Russia’s ambassador to China, Andrei Denisov, said that Russia seeks political support from China, but not financial assistance.

In the interview, Denisov repeatedly stressed the reciprocal nature of the bilateral relationship, apparently a direct refutation of a popular view among many Chinese that Russia benefits more than China from the bilateral relationship.

Just as Chinese strategists are wary about what China can really gain by helping Russia, their Russian counterparts are concerned about what price Moscow would ultimately have to pay if it accepted a Chinese offer of financial assistance. Many deem China’s overtures to Russia an attempt to take advantage of Russia’s economic crisis, especially when Chinese strategists have argued for a more realistic approach to the bilateral relationship.

Indeed, Russia may share Western concerns that China will establish primacy in regional leadership, undermining Russia’s efforts to regain some of its past glory. “Russia is a world player, not a second-tier country,” stressed Denisov during his interview with the Global Times.

The acceptance of financial assistance from

China, either directly or within the multilateral framework of SCO or BRICS bank, as some Chinese experts have suggested, would likely be perceived by Moscow as a symbolic submission to the Beijing leadership, a move hardly in line with President Putin’s vision of a stronger, more assertive Russia.

In the past couple of years, Russia has launched a new Asia strategy dubbed as “eastward pivot,” through which it seeks to play a greater role in Asia. The strategy does not only mean closer ties with China. On the contrary, Russia has been seeking to strengthen ties with various Asian countries including Japan, North Korea, India and Vietnam, many of which are seen by China as its competitors.

Just like China has not offered its full support to Russia over the Ukraine crisis, Russia is also half-hearted in countering US strategy in the Asia-Pacific region. In an article published on tsrus.cn, the Chinese version of the Russia Gazette, a Russian government-owned daily newspaper, Dmitry Suslov, deputy director at the Center for Comprehensive European and International Studies Of the Higher School of Economics in Moscow, argued that Russia’s aim was to not to support a Chinese win in its Asia-Pacific rivalry with the US, but to support China to confront the US to the extent that no one plays a dominant role in the region. “Only then, Russia will have an opportunity to establish itself as a third power in the region,” he argued.

As the rouble has recovered much of its December losses later, with a crisis temporarily averted, the issue of Chinese financial support has quietened down. But for experts such as Feng Yujun, the dynamics of strategic realignment in the region mean that the tripartite relationship between the US, China and Russia cannot be interpreted from a traditional perspective. Instead, China must take a more prudent and realistic approach in its relationship with its largest neighbor to the north.

49

interview

John & Doris Naisbitt

Game ChangeRS

NewsChina sits down with John and Doris Naisbitt, authors of the new book Global Game Change, to discuss China’s role in what they have termed the ‘global southern belt’ that, they believe, will soon be driving the world economy

By Wang Yan

NewsChina: How and why did you start focusing on China issues?

John Naisbitt: I’ve been coming to China since 1967, particularly in the late 1970s and early 1980s when Deng Xiaoping’s policies began to change China a lot. Together we’ve been doing books about the changing of the world. Global Game Change is a book about the world and we’ve done another three books wholly about China since 2000.

Doris Naisbitt: It’s actually China making a transition that brought us together as publisher and writer in the first place. Our keen interest in writing about China is because it is the most dynamic place in the world.

NC: As you addressed in the book, Western countries won’t remain

50

the center of the world economically and politically, and China will instead play an important role. Do you mean China will replace the US? What is the difference between the leading roles played by each country?

DN: The question is driven by the mindset we had in the twentieth century.

The Chinese edition of It is a mindset dominated by the West and Global Game Change the Cold War counterbalancing between America and the Soviet Union. Now we carry a hangover from the twentieth century. What we need to do is to change our mindset of a Western-centric or bipolar world to a multi-centric one. That’s the overall change we have to go through.

JN: The Western mindset is that we used to have the US and the Soviet Union and now we are going to have the US and China. That’s not going to happen, but the West cannot let go of the bipolar world.

DN: China is giving weight to many nations in the global southern belt which boast over 80 percent of the world’s population. By doing so, it is giving those nations a stronger voice in the global community.

This is a very different way from what the West was giving to these socalled emerging economies. China has a very different approach“Let me help you to develop because together we will all be stronger.”

JN: Despite there being many forms of democracy, the West often holds on to a mission to make all other counties like the US. China doesn’t do this. China says, “Your government is your business, what we want to do is to make economic alliances and arrangements with countries all over the world.”

Photo by xinhua

J

ohn Naisbitt, a well-respected futurist and author of the bestselling 1982 book Megatrends, has, since its publication, devoted himself to the “prediction business,” producing a series of books addressing global economic and political trends.

On January 8, the Chinese translation of Naisbitt’s latest book Global Game Change: How the Global Southern Belt Will Reshape Our World, co-written with his wife Doris, hit shelves in Beijing. In their new book, the Naisbitts coined the concept of a “global southern belt” comprising Asia, Africa and Latin America, which is home to over 80 percent of the world’s population and will, according to the Naisbitts, establish themselves together with the currently dominant economic and political powers of North America, Europe and Oceania. The authors postulate that the nations of the global southern belt are wellplaced to become the world’s leading economies, with China playing “a key role in global development.”

The Naisbitts met with NewsChina reporters in Beijing to discuss their new book and shared their views on the future of global and Chinese development paths. Far from sharing Western skepticism towards China’s recent attempts to reach out internationally, the Naisbitts describe China’s emerging role “not as a colonial power,” but demonstrating a desire for “a partnership with different countries.”

NC: What’s the key area for China in securing a central role in the tripartite relationship between itself, Africa and Latin America?

DN: If the question is for the Chinese government, I think the Chinese government would say “We are not up to a central role.” It is not NEWSCHINA I March 2015

Photo by cns

John and Doris Naisbitt in Beijing, January 13, 2015

as if China appears as the center like the West has done. The central role is coming from the bottom up. Naturally, China enjoys a central role due to its being economically stronger.

JN: I would resist the term “central role.” China has set up alliances with countries and companies in the global southern belt for a decade.

It has a connecting role between all those countries. Indeed, the 150 nations on the belt are creating alliances and economic arrangements [between themselves], country by country. China is not trying to orchestrate this process.

DN: In our book, we make the comparison that the world economy is like the Internet, in which everybody is linked to everybody, and everybody can feel they are the center.

NC: Now you see a multi-polar world. Why don’t you see more conflict rather than peaceful coexistence?

JN: For those countries that link up, the transcending consideration becomes economics. What is driving the world is economic growth, which is a different ball game. Ideally, the world will be so economically interconnected that things like wars between big nations will be less possible. Countries are increasingly interdependent, thus mutual bonds will drive the world in the direction of peace rather than conflict.

NC: Western media and academics often criticize China’s investment model in Africa as encouraging already existing dictatorships.

But you express different opinions, how will you convince Western readers to change their mentality?

JN: The West, especially the US, has said for years: “Ok, we’ll give you some aid but you’ve got to have more democracy like our democracy.” China just wants to do economic deals.

DN: From a Western point of view, it is understandable to be angry with leaders in many African nations who steal people’s money. So far, we know that Western aid has very little benefit, and has brought very little change. China builds a factory, or a road, in those same countries, and yes, it might “support” a dictatorship, but at the same time, NEWSCHINA I March 2015

it helps local people enjoy easier access to the market. We should revalue what helps people on the ground. It seems that China is acting on the ground, investing directly, which helps the people more than politically-based aid based on unkept promises.

NC: Are China’s environmental problems a hurdle for its economic development?

DN: It is both a hurdle and it is an incentive. Because of its environmental problems, China is moving ahead on renewable energy. Pollution problems also cause a country to not be politically sustainable.

You may hide other things, but you certainly cannot hide the pollution that’s right in front of your face. So it fits very well into the global trend that China needs to move from being the factory of the world to being an innovation nation.

NC: What inspired your new book, and how did you start your research?

DN: The concept was global reformation. We saw so many parallels with the [European] Reformation in the 15th century, where the explosion of the written word caused by the European invention of the printing press was connecting people in a new way. It was a real economic and scientific push, which cut down the power and hegemony of the church. The decline of the Catholic Church is a parallel with the decline of the West. The period of Western domination is over. It was a great opening up of opportunities to all these emerging economies.

Finally we say this is a global game change. The forming of the idea and the gathering of information took us about two years.

NC: Why did you first launch this new book in Chinese rather than in English?

JN: This is the first book by any established author launched in Chinese. We gave global rights to our Chinese publishing house. This is indeed part of the game change. We launched the first edition in Chinese, then will spread it to the rest of the world from China.

51

economy

Heilongjiang Reform

Fool’s Black Gold Heilongjiang, a province long reliant on oil, is struggling to scrub its economy up to meet looming challenges

By Wang Quanbao in Heilongjiang

I

n late December, a heavy snowfall swept over Daqing, a city near the Russian border in Heilongjiang Province known throughout China for its iconic oilfields. The oil drilling platforms, usually crawling with workers, stood obscure and lonely amid the blizzard.

Meanwhile, at the city’s high-tech industrial park, workers were busy on the assembly line at a Volvo manufacturing plant – as the oilfields fell silent, one car was assembled per minute.

Since June 2014, when Volvo’s XC Classic model went into production at the

52

company’s Daqing plant, a total of 1,400 vehicles have rolled off the production line, with 2,150 expected to be finished within a year – an output value of 800 million yuan (US$128m) – making Daqing one of Volvo’s most productive manufacturing bases worldwide. For many, the factory is symbolic of Daqing’s industrial transition strategy over recent years.

For a decade, oil production in Daqing has been in decline. Crude oil output has dropped from a peak of 50 million tons per year in 2003 to 40 million tons in 2013.

In the first quarter of 2014, economic

growth in Daqing dropped significantly – industrial added value declined by 1.6 percent year-on-year to 58.7 billion yuan (US$9.3bn). While Daqing used to account for over 80 percent of the total industrial added value of Heilongjiang Province, that proportion is now 50 percent.

With the economic slowdown in Daqing, provincial industrial growth declined accordingly. In 2013, the province’s economic growth rate ranked third-lowest in the country. In the first three quarters of 2014, it fell to dead last, with an economic growth rate of 5.2 percent.

NEWSCHINA I March 2015

Fossil fuels are central to life in Qitaihe City, Heilongjiang Province

Beginning early 2015, crude oil production in Daqing will decrease by 1.5 million tons every year, a trend expected to pose a existential threat to the already flagging economy of China’s northernmost province.

Resources Crunch

Chen Yongchang, a scientific and economic adviser with the Heilongjiang provincial government, told NewsChina that the economic slowdown in Heilongjiang was mainly due to the decline of the Daqing oilfields and the falling price of oil worldwide, coupled with the depletion of coal resources in the

NEWSCHINA I March 2015

province. Currently, the resources industry accounts for 70 percent of industrial added value in the province.

Amid the 13 major cities in Heilongjiang, seven are heavily dependent on resources.

Chen added that these cities have been plagued by a “resources crunch” in recent years, and their economies are “lacking structural diversity.”

A report on sustainable growth in Daqing published by the provincial government recently indicated that the city has proven oil reserves of 100 million tons per year, but recoverable quantities are low thanks to poor

oil quality and limited drilling techniques.

Over the 56 years since Daqing’s first drilling platform was built in 1959, the discrepancies between its reserves and yields, its investment and profits, and its production and processing capacities are becoming increasingly prominent.

“The oil equipment and petrochemical industries, as well as other industries more distantly related to oil, are affected by the economic downturn,” Chen said.

Since January to May 2014, the four coalproducing cities of Jixi, Hegang, Shuangyashan and Qitaihe in Heilongjiang have wit-

53

economy

Despite falling profitability, coal remains a core industry in Jixi City, Heilongjiang Province

nessed an average 31-percent fall in economic growth. Heilongjiang Longmay Mining Holding Group (HLMHG), the biggest coal mining company in northeast China, suffered a loss of 2.34 billion yuan (US$374m) in 2013, and 45.8 billion yuan (US$7.4bn) in the first three quarters of 2014.

Chen told NewsChina that Heilongjiang has an acute structural imbalance in its economy and is trying to foster new sources of growth. However, resources companies still dominate the landscape, and the province has yet to find a new pillar industry.

“Even though alternative industries have been booming in recent years, they’re still comparatively small-scale, playing a limited role in driving economic growth,” Chen said.

“To make matters worse, the environmental problems resulting from the years of extensive economic growth are beginning to surface.”

Transition

According to Heilongjiang’s economic growth figures for the first three quarters of 2014, agricultural and service sectors have seen steady growth, but industry performed disappointingly, particularly State-owned enterprises (SOEs) relying primarily on natural resources.

“The overall economic slowdown in Heilongjiang is due to its single-industry structure,” Chen Qing, a researcher with the development center of the Heilongjiang provincial government.

The industrial restructuring plan in Heilongjiang was officially proposed by the central government in November 2002 in the report of the 16th CPC Central Committee.

54

It aimed to invigorate the industrial bases in northeast China and boost sustainable growth of resources-reliant cities, especially those in Heilongjiang Province. In October 2013, the State Council, China’s cabinet, issued a list of guiding principles to facilitate the transition.

Wang Shugen, a professor at Peking University’s School of Government, told NewsChina that the depletion of local resources will gradually lead to a series of economic and social problems. Wang used Daqing as an example, claiming that the city had made significant contributions to the country but three structural imbalances were now obvious – overreliance on oil, failed structural adjustment, and dependence on outdated economic principles in the city.

For a long time, the oil industry has accounted for over 80 percent of local GDP growth. In 2004, industrial added value in the city was 100.8 billion yuan (US$16bn), over 90 billion of which was derived from the oil and chemical industries.

In January 2008, Li Zhanshu, then acting governor of Heilongjiang, said in a local government report that the economy was dominated by direct sales of resources and semiprocessed products, leaving room for growth in hi-tech and high added-value industries in the province.

In response to the 2008 financial crisis, the Heilongjiang provincial government proposed a comprehensive development strategy to boost emerging industries and modern service sectors to curb the economic slowdown. Nevertheless, the economic structure of the province has seen little substantial change to this day.

Before the Reform and Opening-up policy was introduced at the end of the 1970s, Heilongjiang had long been unrivaled in China in terms of arable land resources, oil production, forestry area and grain yield, and its economic aggregate was in the top five in the country.

Wang Langling, director of the Regional Economy Society of Heilongjiang told NewsChina that this structural imbalance was partly due to the province’s long history of planned economics. She said Heilongjiang was the first province where the planned economy was put into practice, and the last to begin to adopt market principles.

“Even though State-owned resources enterprises were constantly deepening their reform efforts, their business models and thought processes were still affected by the planned economy tradition,” she said.

Data from the provincial statistics bureau show that in the first quarter of 2007, nonpublic sectors made up of 37.9 percent of Heilongjiang’s overall economy, whereas the proportion in the same period in eastern China’s Zhejiang Province was over 70 percent.

Fiscal Restraints

Nowadays, all consumption tax and valueadded tax revenues in Daqing, as well as the majority of corporate taxes, are submitted to the State treasury.

In 2013, Daqing had fiscal revenue of 117.6 billion yuan (US$18.7bn), 67.8 percent of which is handed over to the central government, 14.5 percent to the provincial government, and 18 percent to the local government.

NEWSCHINA I March 2015

NEWSCHINA I March 2015

china

bynumbers 92.8

100.0

In Q4, 2014, the SME Development Index, an indicator of the business climate for China’s small- and mediumsized enterprises, hit its lowest ebb since Q1, 2013.

Source: China Association of Small and Medium Enterprises

97.5

95.0

92.5

90.0

QI 2013

Q2 2013

Q3 2013

83,900

Q4 2013

QI 2014

Q2 2014

Q3 2014

Q4 2014

US$46.3bn

Number of renewable energy vehicles manufactured in China in 2014, a y-o-y increase of 400 percent.

China’s foreign trade deficit in agricultural products for the first 11 months of 2014, 1.8 percent more than the same period in 2013.

Electric passenger autos Hybrid passenger autos Electric commercial autos Hybrid commercial autos

Source: Ministry of Industry and Information Technology of China

14bn

The total number of packages delivered by Chinese couriers in 2014, making the country the world’s biggest delivery market.

Source: China State Post Bureau

Mining

Catering and hospitality

Retail and wholesale

Household services

Manufacturing

35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30

IT and information transmission

Changes of job vacancies by sectors over Q4 2013

Transportation, warehousing, postal

National vacancy/ jobseeker ratio in Q4, 2014, meaning one applicant for every 1.15 job openings in the same period of 2013.

Agriculture, forestry, fishing, husbandry

1.15

Energy, coal and water

While overall fixed assets investment in Daqing has been growing by 20 to 30 percent year-on-year, the rate among Stateowned enterprises is diminishing. The fiscal and tax systems have become an increasing hindrance to the development of the local economy.

Moreover, according to the China Pension Report 2013, nearly 78 percent of retirees in Heilongjiang were entitled to corporate pensions, the highest proportion in China.

In comparison, Guangdong Province had a proportion of only 11 percent.

In Daqing, a city with a population of roughly 3 million, the oilfields were put into operation before the establishment of the local government. Three companies, in turn responsible for oil production, petrochemicals and refineries, which employ a total of over 480,000 people, have long shouldered the burden of various social obligations, including education, health, culture and public transportation. Besides, these companies have to feed their retirees, as well as their employees’ offspring, an additional population of 204,100 people.

In the local coal industry, the situation is even worse. As of the end of April, 2014 four coal enterprises affiliated with HLMHG suffered losses, causing delayed wage payments of 820 million yuan (US$131m).

In June 2014, the Heilongjiang provincial government put forth a package of 66 measures to boost the local economy, with a planned investment of 300 billion yuan (US$48bn), most of which the government aims to attract in investment.

Shortly afterwards, Heilongjiang governor Lu Hao, the youngest provincial governor in China, made a number of fact-finding visits to major SOEs across the province. On November 21, Lu chaired a seminar on the industrial application of technology attended by experts from leading universities and research institutes in the province.

Wang Yalin, a sociology professor with Harbin Institute of Technology, told NewsChina that in order to solve the problems with Heilongjiang’s SOEs, comprehensive, systemic financial reform was necessary.

“Local governments in Heilongjiang lack money, and the solution lies in the central government’s financial support policy,” he said.

Source: Ministry of Human Resources and Social Security of China

55

culture

Jiang Wen

56

NEWSCHINA I March 2015

Interview

Jiang Wen: ‘The most important thing is to have something to say, even if you don’t speak well’ The release of Jiang Wen’s latest work Gone with the Bullets once again saw China’s superstar director singled out for praise and criticism in equal measure. NewsChina met with Jiang to discuss his ideas, his goals and how he deals with critics

By Wen Tianyi and Yuan Ye

B

esides acquiring an impressive acting resume, in his 22-year career as a director Jiang Wen has only directed five movies. While far from being prolific, Jiang has a reputation for controversy, and his work is rarely met with a low-key response from Chinese moviegoers.

Jiang’s sensual directorial debut, In the Heat of the Sun (1994), for example, depicted the Cultural Revolution through the eyes of a group of vigorous yet naïve youngsters living in Beijing. Jiang’s follow-up, Devils on the Doorstep (2000) was banned on the Chinese mainland for its nontraditional depiction of relations between the residents of a Chinese village and occupying Japanese soldiers, as well as including unorthodox representations of Kuomintang soldiers and communist guerrillas.

Jiang’s third work The Sun Also Rises (2007) tells four interconnected stories centering on the themes of madness, love affairs, gun crime and dreams. The movie was hailed as an artistic success but was a box office disaster. Its follow-up, Let the Bullets Fly (2010), managed to be both a critical and a commercial success in its home market, earning box office returns of 660 million yuan (US$106m), second only to Michael Bay’s Transformers: Dark of the Moon that year.

Probably one of the most beloved actors and directors working in China today, Jiang Wen has continuously manNEWSCHINA I March 2015

aged to surprise his audiences. Now, his latest directorial work Gone with the Bullets has opened China’s busy New Year season at the box office. Still set in China’s chaotic 1920s, as was Let the Bullets Fly, the action has moved from the provinces to the financial and cultural center of cosmopolitan Shanghai.

Based on a true story, Gone with the Bullets centers on the murder of a beauty queen, and the subsequent manhunt for her killer.

Released December 18, 2014, Gone With The Bullets became an instant hit, sparking fierce debate among moviegoers and critics. With its director in the leading role (Jiang Wen has starred in all three of his most recent works), the “new Bullets” as fans have termed the movie also included popular character actor Ge You and actress Zhou Yun, Jiang’s wife, both of whom led the cast of Let The Bullets Fly. Taiwanese actress Shu Qi, mainland stars Wen Zhang and Wang Zhiwen, singer Na Ying and celebrity publisher and writer Hong Huang rounded out the stellar cast. The movie’s equally impressive budget of 300 million yuan (US$48m) also made this Jiang’s most expensive work to date, costing more to shoot than his most recent four works combined.

In the first week of its release, Gone with the Bullets earned 335 million yuan (US$54m) at the domestic box office.

However, the movie did not enjoy the glowing reviews meted

57

culture out to its predecessor. While it shared qualities with Let The Bullets Fly such as breathtaking pace, pitch-black humor, rich use of satire, metaphor and an offbeat plot, many of these were taken to the extreme. For many critics, the pace was too fast, the art direction too surreal, the editing too jarring and the performances too heightened. On the popular cultural social networking website Douban, Gone With The Bullets received an aggregated audience rating of only 6.4 out of 10 after ten days on release, compared to a rating of 8.7 for its predecessor, and 9.1 for Devils on the Doorstep.

The reviews were highly polarized. With terms like “rubbish” and “incomprehensible” appearing in many negative user reviews, many others insist this latest offering is still a typical example of Jiang’s work, heavy with profound use of metaphor in depictions of historical reality, underpinned by unconventional and vibrant art direction.

Shortly before the release of Gone With The Bullets, NewsChina caught up with the 51-year-old director to discuss his career, and where he would like to take his work.

NewsChina: Why is it that most of your movies are set in chaotic historical periods?

Jiang Wen: Which period isn’t chaotic? Basically they are all the same. When it comes to the composition of drama, it’s easier to find stories and heroes in times of chaos. Once life is pushed to the extreme, it becomes easier to find an attractive story. It’s not just me. Shakespeare wrote about chaotic [historical] periods all the time. If life is too good, you’ll have to find stories in outer space.

NC: If given the chance to choose, would you prefer to live in a time of peace, or chaos?

JW: I guess I prefer peace. It’s safer on the

street! But it’s also an issue of your age. When I was young, even in my twenties, I longed for chaotic things to happen every day. Now I’m growing old, and of course prefer more peace and quiet. With your parents also growing old and your kids still young, you can’t be buzzing around. If people want to fight, let them fight at the South Pole. Don’t fight in the places where people want to live their lives.

NC: What is your view on the recent fashion for the style of the Republic of China?

JW: The “romance” of that time is all legend. The reality was not romantic. Republican-era society was a mix of filth, stench and semi-colonies. [China’s] GDP was very low. Even the national army wore straw sandals. I don’t see any reason for us to be nostalgic for such a society. In fact, the intellectuals of that time were not so intelligent. There were some new ideas, but in general, [intellectuals] were young and naïve.

But being naïve wasn’t something bad. What is ridiculous is to elevate naïveté into “stylishness.”

Let me give you an example. In an essay by Liang Shiqiu [1903-1987], he comments that many of his fellow students at Tsinghua University refused to take baths. It’s not that they had nowhere to bathe, they simply didn’t want to. So, what do you think the Republic of China smelled like?

NC: As a director, what inspires you?

JW: You don’t make movies without the desire for expression. One of my friends who’s also a director once told me that a good director has something to say, and he or she can speak well, simply and fluently. A qualified director may have not much to say but can still speak well. The worst thing is when a director has neither anything to say nor any skill in speaking. The most important thing is to have something to

Poster art for Gone with the Bullets

Jiang Wen and Ge You dance in a scene of Gone with the Bullets

58

NEWSCHINA I March 2015

Poster art for Jiang Wen’s directorial works

say, even if you don’t speak well.

People are full of perplexities which they can barely straighten out by themselves. Through movies and stories, we can communicate about these perplexities. They’re not a bad thing. I’m always thinking, every day, even though I know it’s useless. You can’t just stop thinking. You’re not God. So learn to love your perplexities.

NC: Are you speaking for yourself?

JW: I make movies because of my perplexities. Without them, there would be no good movies. Real creation allows you to forget some of them. When our attention is fixed on filmmaking and writing, perplexity finds its expression, and then it disappears.

NC: It’s been a long time since your first directorial work.

Have you changed a lot?

JW: Those who think I haven’t changed have changed with me. When I was 17, and had just enrolled at the Central Academy of Drama, I watched two movies, Rashomon by Akira Kurosawa and [Francis Ford Coppola’s] The Godfather.

As a young man, it was natural for me to prefer The Godfather.

I thought Rashomon was a terrible movie. I hated the gloomy visuals and the performances of the Japanese stars. Marlon Brando was cool, calm and unflustered. His lines were so appealing. However, as I grew older, I found Rashomon growing on me – everyone tells a totally different story about the same events, and even a dead man is revived to give his own account – brilliant!

It’s good that I didn’t pretend to understand and enjoy Rashomon when I was young. Other young students may pretend to understand the movie due to Kurosawa’s fame , but I really don’t care. Your views may change over the years. I still NEWSCHINA I March 2015

enjoy The Godfather, but I also have a new understanding of it.

NC: Is The Godfather your cinematic Bible?

JW: To call it my “Bible” is a bit excessive, but it certainly had a profound impact. [The Godfather] adopts an extremely simple form of expression, which is worthy of repeat viewings. It was accessible to my 17-year-old self. As I learned more about movie-making I came to realize that the director himself had very little to express – the actors and actresses did the job for him. If you watch Quentin Tarantino movies, you’ll see a strong fingerprint from the director, though that doesn’t restrict the performers or limit audience understanding. I prefer Tarantino’s way of interfering in his own movies.

It’s a lovely and childlike form of expression.

NC: But even now, many claim not to understand your works, like The Sun Also Rises.

JW: It’s true. Not only that they mocked me, but also, [many] didn’t watch the movie. They just said they didn’t understand it and therefore didn’t want to watch it. The box office returns were very low. But the investors didn’t blame me. Instead they encouraged me and asked what I wanted to make next. I was a bit embarrassed, but then I shot Let the Bullets Fly, which recouped all those costs!

I really don’t like to talk about box office income. Our time and energy should be spent on how to make movies more interesting and enjoyable. It’s better than always talking about money. My criteria as a filmmaker are very simple: enjoyable, enjoyable and enjoyable! Let the Bullets Fly and The Sun Also Rises pursued the same goal: entertainment. But the audience reaction to each movie was very different. I’ve no idea what happened!

59

visual REPORT

1 3 4

1. Artist Liu Yan 2. Xu Li, who is receiving treatment for autism, displays his work 3. The center encourages residents to experiment with different media 4. Artist Zhao Kai at work

60

NEWSCHINA I March 2015

2

The Outside World I

n Fuyuan community, Nanjing, Jiangsu province, the Tiancheng Art Center, an NGO jointly sponsored by the government and private donors, aims to help psychiatric patients reintegrate into society. Inspired by the “outsider”or “raw” art trend that began in the West after World War II, Guo Haiping, founder of the Tiancheng Art Center, launched the project to help people with mental illness. The center uses art not only as a form of supplementary treatment for psychiatric patients, but also as an important step to their re-engagement with society.

Many of the “outsider artists” in the center have demonstrated considerable talent, and the center is now planning to sign contracts with them, in order to help these artists market their works. Guo hopes the project can be promoted on a national level - his ultimate goal is to construct a museum devoted to outsider art.

NEWSCHINA I March 2015

61

visual REPORT

1 2 3

1. Artist Wu Tao makes pizza at home 2. Wu Tao displays his work 3. Wu Tao knuckles down 4. The center provides a broad range of materials 5. Wu Tao shows his daily prescription

62

6. Artist Tao Zi with an example of her work NEWSCHINA I March 2015

4 5 6

NEWSCHINA I March 2015

63

OUTSIDEIN perspectives from within China

Tranquil Xinjiang

The Silk Railroad

Few foreign visitors to Xinjiang in China’s northwest make the journey by train–even fewer would ever consider going during the region’s punishing winter. Our writer braves minus-20 temperatures in order to beat the tourist crowds

By Will Philipps

I

t’s fitting that a journey of such great scale, about 4,000 kilometers from Beijing to Kashgar, should start from such an enormous station. Beijing West Station is colossal and imposing, a wormhole of a building that sucks in passengers from the capital and spits them out at various locations over China’s western expanse.

Gliding up rows of escalators to the departure hall, I pass under a huge banner reading: “Let travelers embark safely, conveniently and pleasantly.” “Convenient” and “pleasant” would not likely be the first two adjectives that would spring to the minds of most tourists when faced with the prospect of a shared cabin on back-to-back 34- and 20-hour train rides, but I am determined to make the trip overland.

There is something about the slow passage of time while watching the changing terrain that makes a train ride feel like a true journey – at least, that’s how Paul Theroux justified spending the better part of a year on Chinese trains in the late 80s for his travelogue Riding The Iron Rooster.

And for a change of scenery as drastic as the transition from flashy Beijing to Silk Road hub Kashgar, populated largely by people of the Muslim Uyghur minority and surrounded by desert and mountain, such an elongated journey seems fitting. And when you’re locked in

64

a confined space for 30 hours with a handful of fellow travelers, you inevitably find yourself with a little time to swap stories.

One such traveler I meet is Junfeng, a mechanic from Turpan, an ancient city in Xinjiang close to Urumqi, the 3-million-strong regional capital. His ethnically Han family moved from Shandong Province two generations ago, and he continues to live in Xinjiang with his wife and son. He’s returning from a round trip to Beijing to pick up medicine for a kidney problem. He occasionally breaks into the Uyghur language while talking on his cell phone, and by the time we reach Gansu, the last province to traverse before we arrive in Xinjiang, he’s taught me a few essentials (a useful lesson I later find out, as few people in Kashgar speak Mandarin). He has no plans to move back east.

“Xinjiang will be very different in 20 years,” he says. “It’s a land of potential. My grandparents were sent to work out here in the 60s, but now there are plenty of reasons to stay.”

As well as inquiring as to why I – a Westerner – am traveling to Xinjiang by train in the dead of winter (temperatures rarely rise above minus-10 during the season), Junfeng is also very keen to establish whether all 193 centimeters of me can comfortably lie straight on the sleeper bed–while there had been some doubt when we first boarded, NEWSCHINA I March 2015

How to get there: Trains from Beijing West depart daily for various cities in Xinjiang, including Urumqi and Kashgar, with journeys taking upwards of 24 hours. 3-4 hour flights also leave the capital daily.

Photo by xinhua

Where to stay: Both Kashgar and Urumqi have plenty of small hotels and hostels to accommodate budget travelers. Both cities also have options for those who prefer the lap of luxury – the 5-star Grand Mercure in Urumqi and Radisson Blu in Kashgar, for example.

The Tur train pan rol Bas ls thr oug in h

the

Tianchi, or the “Heavenly Lake”

it turns out I can. In fact, both hard and soft sleeper cabins are perfectly comfortable – it’s the proximity to fellow travelers that provides most discomfort. Junfeng’s kidney problem seems to have given rise to a snoring problem, sounding something akin to a tuneless brass band, but it’s nothing some headphones and the hypnotic rumbling of the train can’t deal with.

A day after leaving the capital, we cross into Xinjiang Autonomous Region – the journey has allowed plenty of time to sit and gaze wistfully at the frozen desert that drifts past. The monotony and vast emptiness of the landscape highlights how undeveloped this autonomous region is. One of the few signs that we are still in modern China is the raised concrete bridge that will carry a new high-speed railway line connecting Beijing and Urumqi. The first leg of the line opened in November 2014, running from Urumqi six hours east to Hami, in the opposite direction to my journey. By the time the line reaches Beijing in 2017, it will have cut our 32-hour journey time to 16 hours.

Urumqi, at the foot of the Tianshan Mountains in eastern Xinjiang, is positioned to become a key trading hub for China with central Asia.

The hotels and large international airport that I see on my two-night stopover suggests the city is embracing the role. Modernity also exNEWSCHINA I March 2015

presses itself in other ways: walking through a shopping center I spot a Christmas tree: a large, self-consciously Christian decoration, in a largely Islamic region, part of secular China.

Unlike the fast-changing urban Xinjiang, much of the surrounding countryside remains resolutely untouched. The autonomous region’s outstanding natural beauty is a big draw – mostly in summer though.

To answer Junfeng’s earlier question – why travel in winter? – a single word usually suffices: xuejing, “snow scenery.” Tianchi, the “heavenly lake,” two hours by bus from Urumqi, is one of the best examples. An outstandingly serene lake surrounded by snowcapped mountains, it’s a world away from metropolitan Urumqi, and in winter it’s almost deserted, unlike summer, when tourists are said to arrive in their droves.

As fascinating a city Urumqi is for the very fact it exists (thousands of miles inland, and as far from Beijing as Istanbul is from Paris) it doesn’t offer much to tourists. I continue on the second leg of the train trip, from Urumqi along the Tarim basin to Kashgar. The city lies at the foot of the Pamir Mountains, which cordon off China from Tajikistan and Pakistan. This journey in our four-man cabin begins in the same way as the previous ride: firstly, commotion as suitcases are crammed under beds; secondly, temporary relaxation as tea flasks are

65

travel

Photo by xinhua

ted with minarets and halal meat filled with hot water (although butchers, it does feel like a differI’ve forgotten mine); thirdly, ent world to the nation’s capital. doubts are cast aside as I prove It’s a city where taxi drivers my ability to lie comfortably in don’t speak Mandarin, the most my bed; finally, our group sits facpopular market among tourists ing each other on the bottom two sells livestock (not name-brand bunks, a little awkwardly, with no knock-offs) and Christmas trees one wanting to go to bed yet as in winter are a much rarer sight. I it’s only 10:30 AM. This routine, explore the night market, vibrant I suspect, will quickly die out and boisterous even in winter, with the arrival of the high-speed perfect for sampling the cuisine trains. that Xinjiang is famous for. This For all Urumqi’s replication of includes mutton kebabs, handa modern eastern China, Kashpulled noodles, and some zinggar – so-called “home of Uyghur Fellow passengers on the train from Beijing to Urumqi ing pomegranate juice. Traveling culture” – feels like it belongs to in winter can be a double-edged a different mindset. The ride between the two cities helps give some indication as to the scale of the sword at tourist-trap destinations – as one of very few visitors in region. For hours and hours we’re dwarfed by mountainous land- town, the sights feel unspoiled and “authentic,” yet the lack of tourscapes undulating in every direction. There’s an awful lot of space out ists means a lack of custom for merchants and peddlers, so visitors here, and as much as I wish these vistas would lull me into hours of should be ready for an onslaught of unsolicited attention. On balance deep philosophical introspection, I mostly wonder about why we all though, the smaller crowds make Xinjiang all the more appealing, and the train journey itself provides an interesting framework for the live crammed together in big cities.

An old couple I share a cabin with, who have traveled from Xi’an trip (although not enough to warrant forgoing a plane ride home to visit their daughter in nearby Hetian, speak of Kashgar as though the other way). The downtime also presents a more relaxed, tranquil it is a different country. With its large central square surrounding the Xinjiang, one which you feel with all the development and migration splendid Id Kah mosque, and the red brick lanes of the old town, dot- west, might not last much longer.

real chinese

chāo

dǐ

chaodi Bottom Fishing

On December 14, 2014 Warren Buffett’s Berkshire Hathaway announced the purchase of Charter Brokerage, a logistics company working in the petroleum industry. With petroleum prices in free-fall, Chinese observers may have termed the move “chaodi.”

With one of the meanings of “chao” being “raid” or “search,” and “di” meaning “bottom,” chaodi was originally a term associated with buying low and selling high on the stock market, with instances of chaodi

66

among traders cited when attempting to predict stock trends. In 2013, Chinese financial website hexun.com published a book Chaodi China, in which it analyzed China’s A-share market from different angles.

The term’s ubiquity soon saw it extended beyond finance to describe market trends in many tempestuous industries, from real estate to art. As developers raced to clear housing stock by cutting prices in 2014, when China’s housing market began to lose value, speculators wondered if the time had

come to chaodi some real estate.

The world of advertising has also embraced the term, with slogans appearing such as “Come take a look at my store, you can chaodi an iPhone 5,” or “Do you want to chaodi downtown Beijing real estate?”

Even the labor market has not remained immune, with low graduate employment rates leading some young people to complain that employers “chaodi” them, offering lower salaries than would even be paid to migrant laborers.

NEWSCHINA I March 2015

flavor of the month

Bean there, done that

By Sean Silbert

NEWSCHINA I March 2015

Photo by xinhua

W

hen Taiwanese order a drink, it’ll most likely be tea. But one of the best refreshments available is actually the local coffee, with the associated café industry now an integral part of the island’s food culture. With a focus on gourmet roasts and innovative brewing techniques, Taiwan could well be the easiest place to get a good cup of Joe in all of Asia.

For me, a lifelong coffee drinker, this is a blessing. Taipei in particular I found awash with excellent options on a recent visit. In fact, the BBC recently ranked Taipei one of the best coffee cities in the world. Gourmet coffee can be found on nearly every avenue, from no-name corner dives to chic, sleek artisan bean roasters.

I fell in love with Taipei’s legion of coffee shops situated in beautifully renovated colonial-era Japanese residences, and most of all with one occupying the gray stone pavilion where Generalissimo Chiang Kai-shek first ascended the rostrum as the island’s first leader.

Others recommended boutique coffee houses, like George House, which has a parade of exotic single-origins from around the world that taste so astronomically good they really should be kept in glass cases for further study.

Of course, the plain weird (this is the city of Barbie Bistro, lest we forget) also has a part to play in Taiwanese coffee culture. One of my favorite hangouts was Noise Café, attached to the Taipei Digital Arts Center, a cacophonous playground of xylophone tables and accordion drawers that incidentally serves hot beverages.

My Taiwan coffee trail began, however, at Paper St, where bay windows illuminated the sparse indoor tables. I stood at the bar, listening to the joint’s lone barista gleefully explain the subtle differences between honey and pulp natural bean processing. My head spun – and not just from the caffeine.

“Most Taiwanese are just starting to appreciate good coffee,” she told me, delicately pouring a kettle of steaming water over a filter

stuffed with grounds brought by hand from Japan. She claimed that most Taiwanese coffee drinkers seek out exotic blends, but only now is her clientele beginning to get savvy enough to know what to ask for.

That being said, Taiwan’s coffee heritage reaches back a long time. It can loosely be derived back to Japanese colonization. As Western culture – coffee included – was all the rage in Tokyo in the late 19th century, Japan brought coffeehouses to its Taiwanese holdings, and cultivated the beans throughout the island’s lush countryside.

Much as in 18th century Europe, Taiwanese coffee houses in the early 20th century commanded privileged status as venues for highbrow conversation and debate, meeting areas out of reach for the common man. That was until the economy skyrocketed in the 1970s, and coffee suddenly became affordable to the masses. Now, there’s a divide between mom-and-pop Taiwanese coffee shops, the big chains and specialist roasters, but between these and a good old home brew, Taiwan collectively consumes six million cups of coffee per year – that’s some serious buzz.

Even so, the trend of coffee shops as hangouts has never faded. Without a bustling pub culture, Taiwanese have utilized the coffee

shop as a place to meet friends, stage dates or enjoy a quiet weekend afternoon with a book.

It is a key part of the social fabric of the island, and caffeine junkies are all the better for it.

But coffee drinkers in Taiwan also enjoy their daily cup much as Americans do, with a preference for pour-over blends over Starbucks-style espresso. Everywhere, from hipster hangouts to multi-story chain cafes, single-origin, freshly roasted beans barely a week off the heat are de rigueur.

This is embodied in the Taiwanese siphon pot, an hourglass-shaped device originally from Japan that’s present on the counter at nearly every shop. Here’s how the ritual is done: freshly ground beans are put in the upper chamber, while a gas burner boils away beneath to draw water vapor upwards through a filter. After about five minutes, the procedure creates only one cup – but the clean, forthright flavor is enough to convert even an inveterate tea drinker.

Another common technique in Taiwan is the ice-drip – a three-chambered cylinder tower, each filled with ice cubes, that over hours produces a stronger, more vibrant chilled concoction. This process has grown in popularity over the past decade, and its cousin, cold-brewed tea, has become so trendy that its has inspired studies of its molecular chemistry.

Even big chains get on down with local trends. Starbucks, for example, has 303 outlets in Taiwan and counting. It’s competing with a wide variety of domestic chains, from Mr Brown, which has a broad hold over the canned coffee market, and 85°C, which made waves with its sea-salt coffee blend (it tastes much better than it sounds).

Taiwan is just the place to get your fix while also indulging your desire for a more highbrow brew. Right outside my hotel, a little mom-and-pop corner store regularly served up steaming Americanos for less than the price of a subway ticket. Every day I spent in Taipei I grabbed a quick cup – in my eyes, there was no other way to start my morning.

67

essay

Christmas Miracles

By Alec Ash

68

The silence draws out uncomfortably. Then, he flashes me a smile – and breaks into song

Illustration by Liu Xiaochao

I have lived on an alleyway in the Drum Tower district of Beijing’s old town for over two years now.

The entrance to the courtyard where my flat is hidden is between a mahjong parlor and the public toilets. Opposite is a rum bar and Moroccan bistro.

More recent additions, all within a stone’s throw of my roof, are a shop that sells Japanese manga figurines, a homemade muesli and granola store, and a cosplay club. Needless to say, the neighborhood is changing.

At Christmas time there’s a certain magic to the labryinth of alleyways I call home. If you squint and don’t breathe in, you can imagine the smog is a wintry mist. The jingling of peddlers on their three-wheeled carts calling out for repairs and knife sharpening could be Santa’s sleighbells. The sparks of electricity from loose wires bundled overhead are better than any fairy lights. There are a few Christmas miracles to be had too. This year I had three, in visits from the ghosts of present, future and past.

The first visitation is from my landlady, whom I had called over to look at my broken heater. If it didn’t get fixed, it was set to be a mirthless and freezing holidays. My landlady is 64 and insists I call her Auntie. She swiftly identifies the problem, the heater is started, frostbite is averted. Then she notices I am cooking noodles for dinner. She narrows her eyes at me suspiciously.“Cook!" she says ominously. “I will watch.”

Terrified, I start to wash the greens. Auntie points to all the dirt I missed. I chop them up. She tells me I am cutting off the bits with the most nutrients. I skin the tomatoes, something I learned from a cooking teacher and thought would impress her.

She tells me I’m an idiot. Looking over my ingredients with sudden horror, she asks if I have a leek.

I do not. This loses me even more face. Auntie tut tut tuts and goes to the market downstairs to get one. When she returns, by a wordless and complicit understanding I step aside and she takes over.

While I eat, Auntie tells me about her childhood

during the Cultural Revolution. When I have finished, she nods her approval. Then, like a departing spirit, she is gone, leaving behind a gently warming apartment and the lingering smell of boiled leek.

The next miracle comes on Christmas morning, when I wake up craving dumplings for breakfast.

As I walk down from my flat into the shared courtyard, I meet my neighbor, Uncle Shi, a smiling man of an unguessable age between fifty and ninety. He is in his pajamas, taking out the trash. We shoot the breeze, and I wish him a merry Christmas.

I ask Uncle a question I have harbored since I

moved in. Who in our complex sings such beautiful Chinese opera? Every now and then I hear it coming faintly through the walls, in between the construction drilling. Uncle looks at me obliquely. I wonder if I have committed a faux pas. The silence draws out uncomfortably. Then, he flashes me a smile – and breaks into song.

For it is he! Uncle belts out a Peking opera refrain first, in a rich baritone you would better expect from an Italian in a tux than an aging Chinese man in his PJs. Next is a rendition of “I Love You, You Love Me,” which Sarah Brightman sang at the closing ceremony of the Beijing Olympics. Finally, just for the occasion, he sings “Silent Night” in butchered English.

The performance ends, and Uncle bows. He goes to deliver his trash bags to their bin, I go for dumplings, and Christmas day is off to a festive start.

The final visitation, from the ghost of the past, comes on a biting midwinter night after the glow of the holidays had faded. I am walking home after dark, and make the first turning into the alleyway.

Ahead, there is a small bonfire on the street, with two young women on either side. As I draw closer, I see they have drawn a circle around the fire in chalk, and are feeding it with pieces of cardboard and pages from an old newspaper.

I turn the corner, where a middle aged couple is stoking another fire. I walk on, past two charred, dead fires, and another one which an old man is trying to get going, striking matches into the wind.

I begin to think of them as cat’s eyes guiding me home.

At the final flame before my door, tended by a young chubby man, I stop to ask what it’s all for. He says that his father passed away last year. He explains it’s a Chinese custom, on certain days of the calendar, to light fires. “For the departed loved ones.”

I walk the last twenty yards home, and switch on all the lights. NEWSCHINA I March 2015

A Taobao Tale

By Isaac Beech

NEWSCHINA I March 2015

Think sending live scorpions in the post is a bad idea? Think again

Illustration by Liu Xiaochao

Anyone who lives in China orders a lot from Taobao, the online shopping hub. The last ten items I purchased were: foam ear plugs, a tea pot, a wooden moxibustion set, USB speakers shaped like pandas’ heads, a hemp cushion with a union jack design, dental floss, a piano stand clip-on light, a fridge magnet that you can snap open bottle caps against, a bottle of Bruichladdich whisky, and a tai chi sword. I have just revealed too much about myself.

Taobao has everything. Pining for Marmite from mother England? Taobao got it. Think sending live scorpions in the post is a bad idea? Think again. Want a pony instead? Happy birthday.

Where else could you buy cosmetics made from snail mucus and a plastic mould of Tom Cruise’s head in the same place? You can even rent fake boyfriends and girlfriends.

I tested the efficiency of the site by ordering a single pair of tie-dye socks from a young couple I knew who ran a Taobao store from their flat in Yanjiao, a town just outside the furthest reaches of Beijing. I wanted to see what happened to that order from the click of my mouse to the moment it arrives at my door. So here it is – the anatomy of a Taobao delivery.

Friday 1:28 PM, Xiguan hutong. It’s a lazy Friday afternoon in the hutongs. I have selected a fetching pair of tie-dye ankle socks, in psychedelic red, yellow and green. I will walk around my home wearing them and nothing else and contemplate growing dreadlocks. They cost 8.80 yuan (US$1.42), and delivery is 7 yuan (US$1.13). I’m hosting a rooftop barbecue the next afternoon, and wonder if they’ll arrive before then. I click process payment.

Friday 1:28 PM, Yanshunlu, Yanjiao. It’s an idle Friday afternoon in Yanjiao. Over the Chaobai river is the city itself, too expensive to live in, almost two hours away on a bus packed with beipiao, Beijing’s drifting population of young migrants and workers. On Sanhun’s laptop screen, almost constantly

open to Taobao, an alert pops up that a customer has placed an order for a pair of socks.

Friday 1:31 PM, Yanjiao. Sanhun glances at her screen and sees the order. She is 23, from Chongqing, and opened this Taobao store with her boyfriend Mengzi in 2012. She’s busy right now, because one of her three cats has just given birth to a litter of five and she’s worried the mother might accidentally crush one of them. Mengzi is out fishing in the river, one of his favorite hobbies, although he hardly ever catches anything. They’ll dye the socks later.

Friday 3:30 PM, Yanjiao. Mengzi is back from fishing, empty handed. He’s 28, from Hebei, and likes running a Taobao store because it gives him the freedom to be his own boss. Together, they tie

up two bundles of socks with elastic and place them on the metal grill over their sink, then squirt colored ink onto them, green, yellow and red like a Caribbean flag, before leaving them out to dry.

Friday 7:00 PM, Yanjiao. A guy from the delivery company Kuaidi knocks on their door, and takes an armful of packages away including a cardboard box with my address on the delivery slip. He drops the package at his local office, then knocks off for the day to go for dinner and beer, or look at Internet porn, or however he spends his Friday night.

Saturday 8.30 AM, Sihui delivery center. At some point between last night and this morning, my package made it from Yanjiao to Kuaidi’s processing center in Sihui, slightly nearer central Beijing. From there it found its way into the hands of Guo Yaoguang, a 23-year-old delivery boy from Hebei whose beat is the block of hutongs where I live. He’s been doing it for just a few months, having worked in a factory before, and is paid 3,000 yuan (US$484) a month. He likes the job because he gets to meet lots of different people, including foreigners, and peek inside their homes.

Saturday 12:11 PM, Xiguan hutong. Yaoguang is knocking on my door, his three-wheeled tuk-tuk parked in the hutong outside, but there’s no reply from inside. He rings the number on the box, and I pick up. I’m in the supermarket, buying supplies for the barbeque like the decadent tie-dye sock ordering expat I am. I ask him to come back after 1pm.

Saturday 3.11 PM, Xiguan Hutong. The mailman cometh, while I’m preparing burger patty mix. I sign Yaoguang’s slip to acknowledge receipt, and we chat for a bit. When he’s gone, I open the parcel, rip aside the plastic wrapping, and there they are – a single pair of tie-dye ankle socks. I put them on (a snug fit) and bask in the warm consumer satisfaction of wearing my Internet order the next day after placing it. It’s not always easy living in China, but whatever challenges are in store, thanks to Taobao I know I won’t get cold feet.

69

Cultural listings Cinema

New Year, Big Winner A big-screen adaption of the 1958 modern revolutionary-themed Peking opera The Taking of Tiger Mountain By Strategy, one of the most popular pieces in the genre, was released on the mainland market at the end of December 2014. With a career spanning three decades, Hong Kong director Hark Tsui has maintained a solid reputation for steering Chinese martial arts movies to box office success. Shot in 3D, The Taking of Tiger Mountain is a marvelous visual spectacle with fierce action and breathtaking special effects that occasionally slip into absurdity. The story itself, in which the titular Tiger Mountain is occupied by a group of vicious bandits who are eventually outwitted and seized by the Communist army, is widely known among China’s youth, and appeals to nostalgic older generations. In two weeks, the movie raked in over 700 million yuan (US$113m) at the box office, making it the biggest winner over the New Year period.

Music

Book

A Long Wait Dubbed “China’s first female rock singer” for over 20 years, Luo Qi has finally seen her debut solo concert staged on January 24, 2015, in a 18,000-seater stadium in Beijing.

Legendary rocker Luo Qi shot to fame in the early 1990s as the singer of poprock band The Compass. The combination of Luo’s slightly androgynous, gravelly voice, and the band’s idealistic and critical lyrics, made a lasting impression on China’s early rock audiences. However, in the following years, Luo developed a drug problem, which gradually ruined her singing career.

She left for Germany in 1998 and disappeared from the Chinese music scene for years. Despite returning to her rock career in the mid-2000s, she failed to re-build much of a profile until the end of 2013, when she became a contestant on the TV reality show I’m a Singer. Her powerful voice and story gained her a large number of new fans, and the media is hotly anticipating her 2015 nationwide tour.

70

PM2.5: Economic Measures for Carbon Emission Reduction

By Ma Jun and Li Zhiguo

Exhibition

Painting the Dragon Gate Longmen, literally meaning dragon gate, is one of the four largest Buddhist grottoes in China.

Built in the latter half of the fifth century AD, with a construction that lasted for four hundred years, the Longmen Grottoes hold some of the finest ancient art in China, with a discernible influence from the countries to its west. Based in Shanghai, painter Li Xiaocheng was well known for his international vision and persistent pursuit of a Chinese artistic spirit.

His latest solo exhibition, titled “Longmen: Li Xiaocheng Art Work Exhibition,” was held in January 2015 at Beijing’s Today Art Museum, featuring works that center on the images of the Buddha and calligraphy from Longmen Grottoes, in both ink and oil paintings. Some of the more radical works combine images of Buddha with references to consumerism and modern politics, creating a surrealist and almost psychedelic effect.

How should China counter its worsening nationwide air pollution problem? The current policies mainly include decarbonization and denitration of coal, improving the standards of vehicle emissions and the quality of petroleum products, and accelerating the scrapping of substandard vehicles. However, well known economists Ma Jun and Li Zhiguo believe the underlying cause of today’s air pollution is mainly the extensive economic development of the past few decades, and that this should be the focus of pollution control. In their latest work PM2.5: Economic Measures for Carbon Emission Reduction, they conduct meticulous economic analysis to indicate how structural distortions in areas including the economy, energy and transportation contributed to China’s smog problem. The authors also suggest a series of measures which many observers find insightful and valuable.

NEWSCHINA I March 2015

NEWSCHINA I March 2015

71

Commentary

It is time for Asia’s voice to be heard There is simply no merit to continuing to exclude the views of the developing world when it comes to our financial future

By Julia Leung

T

advocated previously for Asia. Emerging he centre of gravity of global market economies in Asia and elsewhere economics and finance has been Asia’s criticism of were exposed to debilitating capital surgshifting towards Asia in the last Western double es in the roller coaster aftermath of un15 years. We are living through a wrenchstandards has left conventional Western monetary policies. ing period for the international economy lingering suspicions One consequence has been a series and the world monetary order, with the of go-it-alone Asian initiatives, ranging rise of China, the resilience and dynafrom China’s promotion of new organmism of many other Asian economies isations like the BRICS Development and a sluggish recovery in the US and EuBank to challenge the IMF and the World Bank, to Asian countries’ rope from the 2008-09 financial convulsions.

Yet hardly anything has been done to the global system that looks amassing of large, potentially disruptive foreign reserves to fight criless and less fit for purpose. Western institutions have done some ses. Asia’s criticism of Western double standards has left lingering soul searching and come up with serious recommendations. Once suspicions between Asia and the West – doubts that can and must again these are derived mainly from the Western experience and be dispelled in a new climate of co-operation. perspective.

Some would argue that multinational initiatives proposed by A decade before the global financial crisis, Asia suffered its own China and other emerging economies are at best supplementary disruption in the virulent flows of international capital that swept to the existing financial institutions. And it takes time to make or regional economies in the years 1997-98 . These episodes led to bit- implement changes that would give China and other emerging ter policy exchanges between many Asian countries and the West, countries more say.

In any case, an overhaul of the global system is urgently needed particularly the US Treasury, the Federal Reserve and the International Monetary Fund. But these vicissitudes made Asia stronger, before the current system is hit yet again by another debilitating helping a diverse yet rising continent recover more quickly and crisis. And Asian experiences and views need to be taken into account, not just as a counter-balance but as a source of inspiration in sustainably.

In 1997-98, in return for financial assistance, the world’s de facto re-shaping the global system. monetary rulers in Washington imposed on problem-hit countries draconian austerity programmes that many Asians resented as Julia Leung is a former Treasury undersecretary for Hong Kong credited damaging and unwarranted. When the 2008-09 upheavals broke with developing the territory’s offshore yuan market and author of The out, the US and its Western allies embarked on radical solutions to Tides of Capital, based on two decades of experience as a financial their own problems that were diametrically different from precepts decision-maker in Asia

72

NEWSCHINA I March 2015

NEWSCHINA I March 2015

73

74

NEWSCHINA I March 2015