WiC255 - Erwan Rambourg

Week in China
3 October 2014
Issue 255
www.weekinchina.com
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Talking Point
Week in 60 Seconds
China Ink
Environment
Economy
Property
Media
Society and Culture
And Finally
The Back Page
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Are they still buying?
Turbulence in Hong Kong is making it worse, but luxury goods firms
were already suffering from sagging Chinese demand
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Week in China
3 October 2014
Talking Point
Trouble in store
Luxury lags in Hong Kong but new book has high hopes for China’s shoppers
Fewer of them this week: big-spending Chinese tourists were put off coming to Hong Kong by protesters
R
Photo Source: Reuters
oads blocked by thousands of
demonstrators, confrontations
with police using pepper spray and
tear gas, and even thunderstorms
and torrential rain.
After days of civil unrest on Hong
Kong’s streets it’s no wonder that
shops selling brands like Tiffany
and Van Cleef & Arpels in Hong
Kong have chosen to stay shut since
last weekend.
But it’s also no surprise that visitors from China are showing less interest in shopping for luxury items
in Hong Kong’s vibrant malls and
flagship stores. The problem for the
luxury labels is that some of the
biggest protests are going on near
the most-visited retail areas,
prompting fears that the current
slowdown in luxury sales in the city
will soon show signs of a much
steeper decline.
In fact, retail sales in Hong Kong
rose 3.4% in August from a year
earlier to $5.15 billion (they got a
boost owing to the timing of the
Mid-Autumn Festival, which fell in
early September). But sales of luxury goods were much less robust,
falling by 6.1% that month.
The luxury sector’s performance
has been lacklustre for months,
with fewer visits from mainland
tourists blamed by most industry
spokesmen. Even before this week’s
events, the mood was apprehensive
among retailers, with the potential
for civil unrest said to be putting off
visitors. One travel agency told
Reuters that Chinese tours had
dropped by almost a third, boding
ill for the holiday period that
started on Wednesday this week.
Ricky Tse Kam-ting, chairman of the
Hong Kong Inbound Tour Operators
Association, told the South China
Morning Post that mainland
tourists would be down by half during the holiday compared with last
year, when 920,000 mainlanders
visited in the first six days of October. That leaves some luxury bosses
wondering whether Hong Kong can
recover its reputation as a haven for
luxury retail. More broadly they
also fear whether the boom in
spending by Chinese shoppers is
showing signs of abating too.
Blame the austerity campaign?
Luxury labels were reporting disappointing results long before Hong
1
In the future, finance will
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Week in China
3 October 2014
Talking Point
Kong’s streets went into lockdown
with announcements about falling
profits from brands like Prada,
Gucci and LVMH. Richemont, the
Swiss giant behind Cartier watches,
also said it has been suffering from
anaemic sales as demand from
China wanes.
Most analysts are blaming President Xi Jinping’s austerity programme, saying it has curtailed
gift-giving in the public sector and
the wider business world.
WiC has tracked this new mood
for some months with stories ranging from plummeting baijiu sales
(see issue 252 for the most recent
mention) through to hotels that are
dumping their five-star ratings (see
WiC225).
The estimates are that as many as
half of luxury sales to Chinese customers were motivated by gift-giving in the past, which is why
Beijing’s crackdown on corruption
and lavish spending has been so significant.
For some product categories like
watches and jewellery, the pain has
been greater. Sales have dropped by
as much as 40%, it has been reported.
Photo Source: Reuters
Longer term, the prospects look
rosier?
Nobody knows how long the antiextravagance campaign is going to
last. But looking beyond the immediate horizon, the future for the luxury industry looks a lot brighter,
suggests Erwan Rambourg in The
Bling Dynasty: Why The Reign Of
Chinese Luxury Shoppers Has Only
Just Begun, which was recently published.
Rambourg is global co-head of
consumer and retail research at
HSBC and begins his book by introducing the different types of luxury
consumer in China. This is useful in
adding some narrative colour to the
bigger-picture estimates of market
sizes and spending patterns that
Causeway Bay has long been a favoured Chinese shopping destination
feature in so many accounts of the
Chinese luxury scene. But what is
soon clear is that these different layers of customer – ranging from
entry-level “everyday luxury” shoppers to the most sophisticated
“ultra high end” elite (see chart on
next page) – make up a pyramid of
purchasers, representing about a
fifth of total luxury consumers
worldwide.
They contribute even more than
that in purchases – just over a third,
globally – as the Chinese spend
more than other nationalities too.
Apart from its size, what’s obvious about Chinese demand for luxury goods is its diversity. The
pyramid structure makes that case
plain, although Rambourg adds perspective by contrasting China with
Japan.
Here he mentions the work of
Professor Yamada Masahiro, who
coined the term “parasite singles”
for young, unmarried Japanese who
live at home with their parents so
that they can spend more of their
income on luxury goods and travel.
The best-known members of this
group – the “office ladies” – went
mad for luxury brands in the 1990s,
Rambourg says, and 10 years ago
half of Louis Vuitton sales were
made to Japanese consumers.
But as the office ladies have got
older they have lost their enthusiasm for luxury. And worryingly for
the labels, there’s no new segment
of shoppers replacing them.
In China the market looks in better shape because demand is more
varied: from the newer shoppers in
poorer cities excited about a visit to
Starbucks through to the most experienced, affluent consumers trying to affect disinterest as they tour
the most exclusive boutiques in
Shanghai.
The overall prospects for growth
look solid too. Benchmarking from
a minimum income level of $23,800
a year, Rambourg says that there
will be about 75 million luxury
shoppers from China by next year.
By 2025, the qualifying threshold
will be higher at $30,500, but the
total customer base will have grown
significantly, doubling at least to
150 million, with spending on luxury items set to triple over the same
period.
So the pyramid is going to keep
on getting bigger as existing consumers trade to higher price points
and are replaced by new shoppers
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Week in China
3 October 2014
Talking Point
entering at the base level.
“The 2015 pyramid is, in reality,
only the emerged tip of the iceberg,”
Rambourg predicts.
Sounds good for Hong Kong?
The surge in demand highlights another key aspect of the Chinese impact on the luxury world. Despite
being home to 35% of the world’s
luxury customers, only 12% of luxury sales take place inside mainland
China.
The point is that many Chinese
are choosing to shop overseas, a
trend that is likely to accelerate as
more of them start to travel internationally.
Hong Kong’s success in attracting
mainland spending is the best example of this phenomenon, with a
city of seven million people reporting the same luxury sales as China
itself, with a population of more
than 1.3 billion. Visitors from the
mainland are said to account for
60% of the handbags sold in the
city, for instance, and as many as
80% of the watches.
Hong Kong’s allure for the mainland Chinese is widely
understood. Tourists
enjoy the status of
going on overseas shopping trips and they are
more confident that the
goods they are buying
aren’t fake. Most of all,
they can save 30% by
avoiding import and
consumption taxes, as
well as the VAT, charged on
the same items at home.
Hong Kong’s experience fits with
the latest findings from Nielsen’s
Mainland Chinese Luxury Shopper
survey (from August) in which 97%
of respondents said that shopping
is the key activity when they travel
overseas. And although the shopping may look frenzied, it is actually
quite well organised. About 90% of
shoppers said they have planned
Rambourg’s pyramid of Chinese luxury consumers
where they will shop before travelling, while 38% know exactly which
products they will buy.
Further, Rambourg explains in
The Bling Dynasty how the pyramid
effect reappears in the way that Chinese shoppers head for different
districts in Hong Kong.
Take three examples: Canton
Road on the Kowloon
peninsula is a magnet for
the group tours shopping in the city for the
first time (which is also
why it is home to more
than 20 Chow Tai Fook
stores, the world’s largest
jewellery retailer); Pacific
Place on Hong Kong island is looking to attract a
savvier shopper with a
more understated, less frenetic experience (“It feels empty –
which for a luxury shopper is actually the right feeling,” Rambourg
says); while Hysan Place in Causeway Bay is dedicated to shoppers
who want a hipper experience, especially younger visitors who like
to hang out as well as shop.
Of course, visits to each of those
shopping areas is going to be dis-
rupted by the street protests this
week, which have arrived during the
National Day holiday, a peak period
for travel from China.
That could contribute to a trend
Rambourg identifies: more Chinese
have been looking at alternative
shopping destinations to Hong
Kong. Japan is getting more interest
as the yen has weakened, while Taiwan is more popular too, because of
improved transport links with
mainland China and the shared cultural ties. But South Korea is the
most fashionable new spot, benefiting from the ‘new cool’ of Korean TV
series and pop music (see WiC252).
So while Hong Kong is going to
remain as a profitable hub for the
luxury brands, it seems that other
cities in Asia are going to increase
their share of Chinese business.
Of course, another option is for
jetset Chinese to buy top brands in
Paris, London or even Venice (where
WiC spotted a lot of this activity in
August). But Rambourg says luxury
sales in Europe are weaker too, in
part because of the stronger euro,
but also because retailers have been
pricing their goods much more aggressively, aware that the same
4
Week in China
3 October 2014
Talking Point
items are still more expensive in
China itself.
How about other new trends in the
luxury business?
China’s luxury market started out
as male-dominated. This is changing – and the pace of the shift may
even quicken because of the clampdown on gift-giving.
The future of luxury is much
more likely to be female, Rambourg
says, which should be good news for
firms that sell jewellery and handbags, but less so for sellers of
watches, for example.
How about another question: if
millions more Chinese are going to
start buying luxury brands, will
they still regard them as ‘exclusive’
enough to justify the higher prices?
Rambourg remembers this as a
danger for Louis Vuitton in South
Korea, where the label earned a
nickname as “the three-second bag”
because you would see it every
three seconds when walking around
parts of Seoul. (He spent eight years
as a marketing manager with LVMH
and Richemont prior to going into
banking.)
Factor in that the surge of these
new luxury customers from China
is going to be one-and-a-half times
the size of the South Korean population and the dangers for brands
suddenly being seen as too ‘mainstream’ are more apparent.
One response is to create
scarcity value by restricting sales
to small audiences at the highest
prices. That’s the approach of some
of the ‘max-lux’ brands, like topend jewellers Leviev or Graff. But
in modified format, the same idea
can be applied in limiting the
number of outlets at which a
brand sells its goods. The more
stores, the more sales potential.
But opening too many shops creates the wrong impression – a
brand that seems to shoppers
more Golden Arches than gold
Planet China
Strange but true stories from the new China
Back in WiC251, we looked at the debate
about whether China’s school children should receive military training.
Last week the controversy moved to university campuses, where the
same principles in military training are in force too. But what sparked debate this time was a photo showing the head of Anhui Xinhua University
reviewing a parade of student cadets. Netizens were bemused that he did
so standing in an open-topped, black Audi, in a posture reminiscent of a
North Korean despot.
As the university’s Shi Xiuhe drove past the 6,000 assembled students
(all in military fatigues) he offered a few words of encourgement, calling
out: “Students thank you for your hard work” and “Strive to win glory for
Xinhua University”.
Netizens were soon scoffing at Shi for having delusions of grandeur,
but he defended himself, saying it was a matter of practicality. Covering
the 400 metres on foot would have taken 20 minutes, he explained, “while
it takes just five minutes by car”.
However, Shi must be worried by the publicity and may fear his exploits
could backfire. Tellingly, the Liberation Army Daily commented that a university administrator participating in a parade car review was inappropriate, and not to be encouraged.
Beijing Times also reported that PLA parade regulations reserve such
reviews for state leaders and are to be used only in major national festivals
or if the country is going to war or celebrating a military triumph.
(with stores popping up with the
frequency of McDonald’s outlets).
Another tactic for brands is to
highlight their heritage. This is an
inviting strategy for firms with storied histories, as newcomers can’t
respond in kind. Cartier makes clear
it was founded in 1847, while
Vacheron Constantin – the world’s
oldest watch manufacturer – goes
back even further to 1755. Consumers seem to respond to this too
– “established heritage” mattered
for four out of 10 respondents to
the Nielsen survey of Chinese luxury shoppers in August.
A third strategy for the luxury
firms is to go ‘lifestyle’ by extending
the brand across a broader range of
products rather than concentrating
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Week in China
3 October 2014
Talking Point
on a single one. Labels that try this
may be suffering from stalling
growth in their key product category, Rambourg suggests, or feel
that they are losing some of their
edge to fresher competitors.
One example of a label taking
the ‘lifestyle’ route is Coach, the
American leather goods brand,
which has diversified from handbags into shoes, apparel, fragrance
and jewellery.
Louis Vuitton has also undergone the ‘lifestyle’ makeover. After
leading in luggage for almost a century and a half from its founding
in 1854, the French firm began to
offer men’s leather goods and
other accessories in 1993. Then it
started selling apparel and shoes,
and has also launched fine jewellery, watches and eyewear. In
2016, it is expected to start selling
fragrances too.
How the luxury firms handle the
influx of new demand from China
will determine much of their commercial future. And as an example
of a brand that is prospering, the Financial Times suggests Paris-based
Hermès, which opened its latest
‘maison’ or flagship store in Shanghai last month, bucking the
gloomier mood about China pervading the rest of the sector.
Hermès is certainly outperforming. Like-for-like sales at LVMH, the
world’s largest luxury group, grew
just 3% in Asia ex-Japan for the first
six months of the year, while revenues at Hermès jumped 17% in the
same period.
Why? Hermès has fewer outlets
in China than its peers, which might
have protected it from some of the
wider slowdown.
By focusing on the handcrafted
nature of its products and offering
less in the way of logo-heavy design,
it may have been less affected too
by the gift-giving clampdown (see
WiC227 for an earlier report on the
advantages of its positioning).
Also important is that fans of the
brand’s silk scarves and leather
goods are less often purchasing
them to give away. “Instead, consumers tend to buy Hermès products for themselves,” the FT reports.
And in fact, this is the Holy Grail
for most of the finer brands selling
to Chinese customers. By offering
goods that appeal on the basis of
their fundamental quality rather
than as a way of showing off to
others, the luxury labels hope to
wean clients from their earlier
taste for gaudy conspicuous consumption and outsized logos.
At the more mature end of
China’s luxury market, consumers
are increasingly embracing the
ethos of style guru Coco Chanel:
“You live but once, it might as well
be amusing”. In other words, worry
less about impressing others; instead indulge in the very best and
do so for your own gratification. ■
A rotten apple
Illustration: www.benitaepstein.com
The wait in China to buy an iPhone 6 will soon be over
with the smartphone now gaining permission to be sold
in the Chinese market, after licencing delays. The
devices will go on sale on October 17.
But as the Chutian Golden Newspaper reports, one
sales boss has already capitalised on the frenzied
demand for the product. The newspaper says that a
man surnamed Liu, who ran a sales team in Wuchang,
was worried that his group would not hit their monthly
goal of Rmb300,000 ($48,864) in revenues. So at the
end of a Glengarry Glenross-style sales meeting he told
team members they would each get an Apple 6 (the
literal translation of an iPhone in Mandarin ) if they
reached their targets.
This certainly got the juices flowing and by
September 20 the group blew through Rmb300,000 in
sales. However, the staff were to be disappointed.
Rather than give them the new phone (which Liu would
have had to import via the Hong Kong grey market), he
handed each an apple (yes, the fruit) with a number 6
painted on it. They were furious and didn’t seem to get
the joke (if one was intended).
The newspaper then spoke to a lawyer with the
Hubei Zunerguang law firm, who said the five
employees wouldn’t have much chance of suing their
boss as there were no outside witnesses to verify his
verbal commitment or any formal confirmation that he
really meant an iPhone 6 versus an ‘Apple with a 6’.
That said, Liu might find it hard to motivate the team
in future…
6
Week in China
3 October 2014
The Week in 60 Seconds
Hong Kong in the headlines
The major news items from China this week were...
1
The HSBC China Manufacturing Purchasing Managers’ Index, a measure of nationwide manufacturing activity, had a final reading of 50.2 in September.
This was slightly lower than HSBC’s preliminary September PMI of 50.5, announced last week. “The data in
September suggest that manufacturing activity continues to expand at a slow pace,” said HSBC China Chief
Economist Qu Hongbin. “We think risks to growth are
still on the downside and warrant more accommodative
monetary as well as fiscal policies.”
2
Since September 28, tens of thousands of demonstrators have surrounded government offices and
filled major roads around Hong Kong, in spite of an attempt on Sunday to use tear gas to disperse them. Their
main demand is that the people of Hong Kong be allowed to vote for any candidate of their choosing in elections for the post of chief executive in 2017 (the first in
which citizens would have such a vote). They also demanded the resignation of Leung Chun-ying, the territory’s chief executive (for more see China Ink).
3
China celebrated its National Day holiday. The China
Tourism Academy said it expects 480 million people
to travel during the week-long break from October 1 to
October 7, up 13% year-on-year. But many tourists will
likely give Hong Kong a miss, because of the pro-democracy protests. The China National Tourism Administration told tour operators not to organise tour groups to
the city (though people who booked before this week
would not be affected).
Jiang appears with successors Hu and Xi on Monday
4
Jiang Zemin, China’s former president and Communist Party chief, made a rare public appearance on
Monday in the Great Hall of the People in Beijing, to
mark the approach of National Day on Wednesday. Jiang,
88, has often been rumoured to be in poor health. His
last public appearance was in May.
5
To Tim Cook’s relief, Apple has announced that the
new iPhone 6 and iPhone 6 Plus will go on sale on October 17 in China, one of the biggest markets for the company, with huge demand expected from existing iPhone
users. The devices will be on sale via all three of China’s
mobile carriers and will support both 4G network standards used in China, TDD and FDD LTE. Analysts reckon
that if 70% of existing iPhone users upgrade, Apple could
end up shipping as many as 3 million units a month to
China for the next year, putting it among the top five
smartphone vendors in the country.
6
Photo Source: Reuters
Available in China from October 17: the iPhone 6
Alibaba Group’s financial affiliate won approval
from Chinese authorities to establish a privatelyowned bank. The company said the bank would be
headquartered in Hangzhou, the eastern Chinese city
where Alibaba is based, and that Alibaba will own a
30% stake. The CBRC said Shanghai Fosun High Technology will hold a 25% stake in the bank (the rest will
be owned by several private investors). Setting up a
bank will allow the e-commerce giant to collect deposits and give it greater freedom to offer other banklike services. ■
7
Week in China
3 October 2014
China Ink
What will he do?
Hong Kong’s CY Leung faces a crisis
Photo Source: Reuters
The Chinese language press says
The key issues
The English language press says
The state media is deeply displeased at the scenes in Hong
Kong. “Photos of Hong Kong police being forced to disperse
demonstrators with tear gas have been widely circulated
online across the world,” the Global Times noted. “These
activists are jeopardising the global image of Hong Kong,
and presenting the world with the turbulent face of the city.”
The China Daily was also upset, blaming an “illegal
assembly” for the clashes on Hong Kong’s streets.
Ming Pao Daily, one of the more moderate
newspapers in Hong Kong, reckons that both sides are to
blame: “It seems more persuasive to say the police's
attempt to quell the demonstration with tear gas resulted
from interactions. Had the police managed to keep
demonstrators at bay by setting up barriers, police
officers on duty might not have been ordered to use
pepper spray. Had demonstrators been deterred with
pepper spray, tear gas fumes might not have been seen.”
The reaction to the
use of tear gas on
Hong Kong’s
pro-democracy
protesters?
The New York Times calls the use of tear gas “heavyhanded”, while The Economist points out that an image
of a lone protester holding his umbrella aloft in a cloud
of tear gas recalls memories of brutal crackdowns in
China in the past.
Meanwhile, the Guardian quoted the UK foreign
secretary, Philip Hammond, as saying that the British
government was against the use of CS gas – a type of
tear gas – against the protesters. The newspaper also
reported that Chemring, the British company that sells
tear gas to the Hong Kong authorities, will review its
sales policy after the canisters were fired at unarmed
protesters on Sunday.
Xinhua said that Beijing is “fully confident” that Hong
Kong’s government could handle the “illegal” democracy
movement, while Li Shenming, deputy director of the
National People's Congress Internal and Judicial Affairs
Committee, argued that Hong Kong’s people are not ready
for democracy. In an op-ed published in the People's Daily,
Li wrote: “In today's China, engaging in an election system
of one-man-one-vote is bound to quickly lead to turmoil,
unrest and even a situation of civil war.”
The Hong Kong Economic Journal reckons that while
President Xi Jinping hasn’t made a public statement
about the ongoing protests, he will be paying close
attention to events. “The Occupy Central protest
becoming the spark that set the prairie on fire is the last
thing Beijing wants to see. If things are not handled
properly, it could really threaten the regime.”
What are the
ramifications?
The Financial Times says Beijing faces “a choice
between repression and a humiliating climbdown”. The
Wall Street Journal sees it is a “turning point” in the
city’s quest for democracy. “For years the people of Hong
Kong avoided direct conflict with Beijing in the hope that
Chinese authorities might be persuaded to grant them
self-government. Now they realise that their only chance
for democracy is to demand it,” it declares.
While CNN reckons the road ahead isn’t going to be
easy, it also thinks the demonstrators are having a
potentially significant impact. “Xi and the Communist
Party are unlikely to shift from the short-term tactic of
censorship and suppression… But they (the protesters)
are carving out a space for civil and political participation
throughout Greater China.”
The stock market in Hong Kong continued to fall on
Tuesday, losing another 1.3% after falling 1.9% on
Monday. The situation was especially grim for Hong Kong
retailers, given that the October 1 National Day holiday is
one of the main shopping weeks in Hong Kong and the
protests threatened to keep tourists away. On Tuesday,
Australia, Italy, Singapore and the US issued travel alerts
for Hong Kong too. As the Hong Kong Commercial Daily
says: “The Occupy Central movement seriously hurts
Hong Kong’s economy and the longer it drags out, the
more damage it wrecks.” Oriental Daily News concurs,
saying that whatever the outcome, the movement is “a
fight with no winners”.
Bad for the
economy?
The South China Morning Post agrees that the protest
has affected local shops worst, reporting too that Beijing
had suspended travel visas for group tourists from the
mainland, while the Wall Street Journal said that retailers
specialising in jewellery and cosmetics – which are both
heavily taxed in China – were hardest hit by the protests.
Shares of jewellery chains Luk Fook and Chow Tai Fook
Jewellery Group both fell this week. A series of luxury
goods labels also closed their stores near the
demonstration sites in Central and Causeway Bay, both
of which are prime Hong Kong shopping areas (see
Talking Point). ■
8
Week in China
3 October 2014
Environment
Debate warms up
Beijing signals it will curb carbon emissions
F
Photo Source: Reuters
ive years ago China annoyed the
world’s climate experts by sending a second tier official from the
NDRC, the economic planning body,
to negotiate with global leaders at
the climate change talks in Copenhagen. While Barack Obama sat
through the night with 50-odd
other leaders trying to salvage a climate deal, China’s then Premier
Wen Jiabao, was conspicuously absent.
Instead, a certain Xie Zhenhua sat
opposite the US president, blocking
almost every suggestion and at
times even wagging his finger at
him. When the final deal was agreed
– Premier Wen Jiabao did turn up for
the signing – it was virtually meaningless, disappointing developed and
developing nations alike.
One country which walked away
happier, of course, was China, because the Copenhagen meeting
failed to reach any decision on binding curbs on emissions. Today, perhaps as a result of rising anger at
pollution at home, China seems
willing to do more, even if the tone
is still a mite on the defensive side.
At the UN Climate Change Summit in New York last week vice-premier Zhang Gaoli told delegates that
his country was committed to “tackling this grave challenge” but added
that it was “not doing this at others’
request but on our own initiative”.
“We will announce post-2020 actions on climate change as soon as
we can, which will bring about
marked progress in reducing carbon intensity, increasing the share
of non-fossil fuels and raising the
forest stock,” Xinhua reported him
as saying. Zhang also reiterated Chinese plans to reduce its emissions of
carbon per unit of GDP by 45% by
2020, compared to 2005 levels.
China’s position on carbon emissions – the main driver of climate
change – has always been that it
should be allowed more leeway because it has a huge population and
began industrialising much later
than Western nations.
Even today Beijing will not commit to giving a date for “peak carbon” saying only that it hopes to get
over the hump and onto a downward trend as “early as possible”.
But as a recent report shows, the
argument that China only emits
much more carbon than other countries because it has so many people is
getting weaker. Crucially, its per
capita emissions are catching up too.
Published ahead of the talks in
New York, the Global Carbon Report
indicates that China’s emissions now
account for 28% of the world total
and are greater than the US and the
EU’s combined.
Furthermore, the 60 international scientists who compiled the
study say that Chinese emissions
will rise significantly by 2019, when
they will be equal to the output of
the US, the EU and India together.
In another key datapoint, the
study also says that China’s emissions have been rising so fast that
they now exceed Europe’s on a per
capita basis – 7.2 tonnes per person
to 6.8 tonnes per head respectively.
Of course Europe and the US
(which has emissions of 16.4 tonnes
per person) “export” a lot of their
emissions by buying goods pro-
China’s contribution to the issue
duced in China. Even so, the report
estimates that these goods account
for about 16% of the mainland’s
emissions, leaving China close to European levels in a like-for-like comparison.
The Chinese media largely ignored the report, with only Xinhua
picking up on it. It accused “Western researchers” of adopting a “selective attitude” to carbon emissions
data, and added Western countries
were trying to “force China to accept
excessive responsibilities and obligations when it came to reductions”.
“Chinese also have the right to
pursue a higher living standard.
When Western countries criticise
China’s carbon emissions they are
ignoring our stage of development.
By asking us to take on discriminatory responsibility for the reduction
of carbon emission they are trying
to hold back the development of
China,” it said.
Fortunately, the environmental
statistics out of China aren’t all bad.
The Financial Times reported this
week that the country set a new
record in the third quarter for
spending on solar power ($12 billion versus $8.8 billion in Europe).
It added that China’s solar installations are set to reach a generating
capacity of 14 gigawatts this year,
which the FT says is almost a third
of the world’s total. ■
9
Week in China
3 October 2014
Economy
China’s newest city
The elevation of Khorgas is part of Xi Jinping’s new Silk Road initiative
F
or much of its 300-year history,
Khorgas in western Xinjiang has
led a pretty unglamorous existence
as an imperial outpost and garrison
town.
But on Friday, as part of President
Xi Jinping’s plan to resurrect the old
Silk Road, it became China’s newest
city.
With a population of only
85,000, Khorgas – which can also
be spelt Horgos – didn’t qualify automatically for city status, so the
State Council had to issue a special
edict in June to ensure its elevation.
The hope is that a change in status
will enable it to attract more investment and that its addition to
the Silk Road project will help to
quell a rising wave of separatist violence in the region.
“Development is the key to addressing all issues in Xinjiang,” Xi
said during a visit there in early
May. But as he was ending his tour,
three people were killed and 79 injured in a bomb attack on the railway station in the regional capital,
Urumqi.
So just what is the ‘Silk Road Economic Belt’ and how will it help Beijing regain control over this restive
region?
As with the 21st Century Maritime Silk Route (see WiC253), details on some of Beijing’s grander
plans can be vague. But like the
original Silk Road, which was really
a network of dozens of routes weaving their way over the Eurasian
landmass, the newer version is ostensibly about trade. It also leverages the fact that Xinjiang shares
borders with eight countries: Mon-
The new city of Khorgas
golia, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan and India.
The idea appears to be focused
on increasing transportation links
through Xinjiang to make it easier
to facilitate trade with neighbouring countries. To that end the local
government has built, or is in the
process of building, three ‘free’ land
ports: one in Khorgas, which is already functioning, another near
Kashgar (which has just opened)
and a third about 20 kilometres
from the border with Pakistan.
One hope: that the initiative will
allow more goods from Central Asia
to arrive in China more easily (and
play to a cultural preference among
Xinjiang’s Turkic-speaking ethnic
group in dealing with peoples from
this area too).
Longer term, the plan is that
companies from China’s wealthier
eastern seaboard will see the opportunities of being closer to untapped
markets to China’s far west, and thus
set up factories in the region that
create new jobs.
If China and Pakistan ever build
the long-mooted Khunjerab rail link
– officials in Kashgar have hinted
that this will be included in the next
five-year plan – companies based in
southwestern Xinjiang might also
export their goods to the wider
world via the Arabian Sea.
But there are risks associated
with the project too, as government
officials admit in their less guarded
moments. If it works as the central
government envisages, the Silk
Road programme will mean even
more Han Chinese moving to Xinjiang – an area traditionally populated by several non-Chinese minorities, the dominant being the
Uighurs.
Past migrations of Han Chinese
to Xinjiang have irked this group, as
many Uighurs feel the objective is to
dilute their culture and their Muslim faith.
In retaliation some locals say that
their only recourse is to use the
state’s Uighur-friendly family planning policy against Beijing by having as many children as possible so
as to outnumber the migrant Han
families who can only have one
child each.
Another worry for the Chinese is
that increased contact with countries such as Pakistan and
Afghanistan might lead to an influx of Islamic fundamentalists. In
this fear, the Han even find common ground with some of the
Uighurs. As one Uighur told WiC of
his fears of radical Islam recently: “I
want my own state if it is like
Turkey. If it is like Pakistan or Saudi
Arabia, I would rather we stayed
part of China.” ■
10
Week in China
3 October 2014
Property
Everything must go
Real estate developers are offering surreal deals to lure buyers
O
Photo Source: Reuters
n previous occasions when
China’s property market was in
the doldrums, developers offered
the prospect of free BMWs to entice
people into buying new apartments.
And in a sign that the property
market is struggling desperately,
they are resorting to unorthodox
methods once more as they try to
drum up interest.
Last week Sina, a news portal, reported that a property developer in
Guangxi was trying to lure homebuyers with free poultry. The marketing stunt offered to give away
1,000 chickens – on a first-comefirst-grab basis – to people who
showed up at a promotional event
for an apartment complex it was trying to sell units in. “A thousand
chickens are free to grab. They’re
yours if you can catch them,” the
promotional material promised.
Thousands of people – mostly retirees – showed up at the event,
causing chaos (the crowds were so
large that some people lost their
shoes, local media reports).
China News Net says that all the
chickens were snapped up in 15 minutes. The property development was
rather less popular. Most attendees
left without even asking about the
prices for the new homes.
Poly Real Estate, one of China’s
largest developers, is also trying to
tempt buyers with an innovative
strategy: it is offering sales discounts proportionate to a client’s
weight (to qualify for this quirky
offer, customers have to agree to
diet for a few weeks).
Empty apartments at a residential area in Shanghai
China’s largest residential developer Vanke is also trying to be creative. It has partnered with Alibaba’s Taobao site, and has offered
anyone who spends on the e-commerce platform a discount of
Rmb10,000 ($1,629) when they buy
a home featured in one of its promotions.
However, the marketing ploys
seem to have done little to resuscitate the property market. September, which is traditionally peak sea-
son for housing purchases, posted
negative results. Average new home
prices fell 0.9% from August, dropping at a faster rate even than the
0.6% decline witnessed between August and July.
“Although sales volumes in
China’s property market are likely
to improve in September and October – months that typically have the
highest sales in the year – the increase won’t be enough to offset the
weak sales so far in 2014,” says ana11
Week in China
3 October 2014
Property
This one’s unsold too...
Photo Source: Reuters
lyst Christopher Yip from Standard
& Poors.
The slowdown in the property
market has already prompted a
number of regional governments
to ease or cancel their home purchase restriction schemes. Meanwhile, state-owned banks have
started giving the market a muchneeded boost by relaxing access to
credit for some homebuyers. Some
of the criteria for loans to first-time
home buyers is being eased, while
existing mortgage holders may
also be eligible for the more attractive loan rates that first-home buyers are offered, even when buying a
second property, reports 21CN Business Herald.
But looser credit shows little sign
of reviving the sector so far, says
the Xi’an Evening News, as potential buyers are cautious about getting into the market when home
prices seem to be on a steadily
downward trend.
“The easing of home purchase
curbs will not boost house sales significantly, with only Hohhot posting an obvious market rebound and
a few cities including Wenzhou,
Hangzhou and Chengdu seeing
short-term surges in house transactions,” agrees property brokerage
Centaline.
To prepare for what could be a
long winter, many developers are
tapping the equity market for cash.
In late September, Guangzhoubased Agile announced a rights issue, joining Country Garden and
Yuexiu Property in asking shareholders for new funds. Agile has a
net debt-to-equity ratio of 99%,
compared with the average of 61%
among Chinese developers.
For smaller developers, the situation is tougher still. One firm on the
brink of bankruptcy is Golden Century, a real estate player in Handan,
a third-tier city in Hebei province.
Its chief executive Shi Yubao has
vanished. But the problem at Handan is deeper than one AWOL developer. Shi is said to have borrowed at
least Rmb1 billion from local private
lenders, while a total of 32 other
property firms in Handan were
found to have raised Rmb9.3 billion
from illegal fundraising or high-return deposits, according to Xinhua.
The local police have detained 94
people and are pursuing another
43 in a crackdown on such activities – with the sweep also netting
small-loan companies and rural cooperatives.
One result is that construction
has halted at dozens of projects in
Handan and most of the city’s resi-
dents are now afraid to purchase a
home. They worry that developers
could default on their shady loans
or simply run away with homebuyers’ deposits. Accordingly, new
home sales in Handan plunged 32%
between January and June, says
SouFun (a mere 903 units sold in
the entire six months). Unsold
apartment space also jumped 17%
to 1.4 million square metres (15 million square feet), according to the
local statistics bureau.
Golden Century is one of the
more visible examples of the challenging environment. “More small
property developers will face default risk in the fourth quarter, as
financial institutions become increasingly cautious in lending to
them,” says Zhang Hongwei, research director at Shanghai-based
property consultancy ToSpur.
“We will also see large developers
grabbing more market share
through acquisition of smaller developers.”
If the real estate business sounds
grim, the furniture industry is on
life support. Already, some of largest
furniture makers are calling it quits,
because its fortunes are so closely
linked to the ailing property sector,
reckons Time Weekly.
Housen, one of the biggest furniture manufacturers in Shenzhen,
has just closed down, for instance,
and two other furniture firms have
stopped production since early
September. Previously, FZD, another large furniture maker from
Shenzhen, also shuttered its production line. The company reportedly owed its workers over Rmb10
million in wages.
“Based on the current economic
condition, it’s no wonder that the
furniture industry is in trouble,
given that it is downstream of the
property business,” says Jiang
Hongyuan, president of the Zhejiang Province Furniture Association. ■
12
Week in China
3 October 2014
Media
Paper losses
Launch of a Huffington Post-like news website in Shanghai causes stir
T
Photo Source: Reuters
he People’s Daily started out as
a highly sought after publication (it sounds unlikely, we admit).
But its origins lie with journals run
by underground Party members in
the 1940s in Northeast China, a region which was first under Japanese
occupation and then (during the
Chinese civil war) controlled by the
KMT. At that time it was widely read
by intellectuals, despite the great
risks. Those who helped circulate it,
or sometimes simply just possessed
a copy, might be tortured.
Today, it’s hard to imagine anyone risking jail for the chance to read
it. Propagandist monotone and
tightly-censored content has undermined much of its initial appeal. The
newspaper also has plenty of competition. By the end of 2012, there
were nearly 3,500 state-run media
firms publishing newspapers and
magazines (and on top of that, more
than 1,416 state broadcasters or
movie producers). Most of them are
struggling financially. The website
of the People’s Daily, which was
listed in Shanghai in 2012, only survives on hefty state subsidies too.
The leadership in Beijing is well
aware that the state media is declining in effectiveness. After chairing a powerful committee on reforms in August, President Xi
Jinping called for measures to be
taken to develop new media organisations that are “diversified, advanced and competitive”. Xinhua
quoted Xi saying he wants: “Several
new media groups that have
strength, communication capacity,
credibility and are influential to be
established.”
For those who prefer not to go online to get their news
Shanghai has been leading the
charge for this sensitive initiative.
Late last year two of the city’s oldest
newspapers merged to form Shanghai United Media Group (or SUMG,
see WiC218). It is now the biggest
print media group in China by assets and its creation is being trumpeted as a turning point for staterun newspapers, which have been
losing readers to online news
providers and weibo commentators.
In July, SUMG began the counteroffensive by launching The Paper,
an internet newspaper. Its Chinese
name Pengpai sounds like “paper”
but it is also an adjective for raging
sea waves. And indeed the new venture has been making a pretty big
splash.
Some say that The Paper is supposed to resemble the popular
American internet newspaper the
Huffington Post. Also available via
mobile apps such as Tencent’s
WeChat, The Paper has already become “one of the hottest words on
China’s social media”, says the
Global Times. Financial Times
columnist Xu Danei has blogged too
that The Paper is the most ambitious debut in the Chinese media
world since 2010 when influential
journalist Hu Shuli kicked off
Caixin, publisher of Century Weekly.
What is so special about The Paper? Financially it is backed by the
Shanghai government but also by
private sector investors such as
Hony Capital, an investment firm
linked to PC-making giant Lenovo. It
is also the first internet media firm
to be awarded a licence to cover politics and current affairs. (Other licence holders: the websites of traditional newspapers, which remain
tightly censored.)
The Paper’s editorial staff largely
come from SUMG’s Oriental Morning Post, one of the country’s more
highly regarded newspapers (it
broke the news in 2008 that Chinese
dairy firm Sanlu was one of the culprits behind a tainted milk scandal).
13
Week in China
3 October 2014
Media
According to Foreign Policy magazine, The Paper looks like a “news
site trying to find the sweet spot
where public service journalism
converges with Party objectives”.
One of the objectives is to bolster
Xi Jinping’s anti-corruption drive.
Since commencing operations a
couple of months ago The Paper has
already published two exclusives on
graft involving government officials. It also appeared to be testing
the censor’s bottom line when it
wrote a glaring exposé about health
problems at a mercury mine in
Guizhou province.
State-run counterparts are giving
The Paper positive reviews, including comments in the China Daily
that the launch is “one small step
for the internet but a giant leap for
the newspaper industry”.
But others still need to be convinced.
Shanghai Jiaotong University
professor Wei Wuhui told Foreign
Policy that The Paper faces an uphill
battle as a new media platform. For
such sites to be successful they normally require more interaction with
readers, as well as user-generated
content, he says, and that is something that is extremely difficult to
police.
In fact, while The Paper offers tentative hopes for a freer media sector, the authorities are also ratcheting up the scrutiny of business
journalists. Last month police detained eight reporters from the financial newspaper 21CN Business
Herald on allegations that they have
been collaborating with public relations firms to extort money from
listed companies in return for positive coverage (see WiC252). Last week,
the 21CN’s chief editor and general
manager were also detained.
The 21CN is operated by the
Guangdong-based Nanfang Media
Group, which has nurtured some of
China’s more liberal newspapers including Southern Weekend and
Southern Metropolis Daily. But the
crackdown on privately-run media
organisations seems to be helping
the state press regain investor attention. For example, Guangdong
Guangzhou Daily Media has seen its
Shenzhen-listed stock climb nearly
80% this year. Shares at Zhejiang
Daily Media have also risen more
than 30% during the same period. ■
Who’s Hu: Fu Sheng
Profiles of China’s business leaders
China’s internet heavyweights are building their
business empires by acquiring promising startups (see WiC230). To do so, they are looking for
promising young entrepreneurs to become part
of their inner circles. Fu Sheng, the young CEO
of Cheetah Mobile, is one of the young tycoons
who thrives by “standing on the giant’s
shoulders”, reckons Caijing magazine.
Photo Source: Imagine China
Getting started
Born in 1978 in Jiangxi province, Fu studied
economics at the Shandong Institute of
Business and Technology. He could find only one
computer in his faculty, but he taught himself
how to use it. Still, the lowly reputation of his
college prevented him from getting a dream
job after graduation. That changed in 2002
when he joined software firm 3721 and met
Zhou Hongyi, who later founded Qihoo 360,
bringing Fu along with him as its product
manager.
Fu helped to develop Qihoo’s 360
Safeguard into one of China’s most popular
pieces of anti-virus software. But he later fell
out with Zhou and left Qihoo to join venture
capital firm Matrix China in 2008. A year later
he changed career path again, founding his
own software firm Conew Image so as to
compete with his former colleague Zhou.
Big break
Zhou has made few friends among tech tycoons
due to his readiness to confront his rivals (for
examples, see WiC86 about Qihoo’s legal tussle
with Tencent, and WiC163 for its ugly battle with
Baidu). So becoming the enemy’s enemy has been
a good way for Fu to forge allies. When he met
Xiaomi’s CEO Lei Jun – who also founded Kingsoft
Security, with Tencent’s CEO Ma Huateng as a coinvestor – Lei invested in Conew. In 2010 Conew
merged with Kingsoft Security and became
Cheetah.
Cheetah has since grown into a leading player
in internet and mobile phone security
applications. As of this week, it carries a market
capitalisation of $2.6 billion – having gone public
in New York in May – making Fu (owning 8%)
one of the richest internet tycoons under 40.
Need to know
Fu is a big fan of trendy American tech products
and he made headlines back home when he
wore a pair of Google Glass spectacles while
banging the opening bell on Cheetah’s trading
debut. He was also one of the first people in
China to buy a Tesla Model S. He wrote a weibo
post in July talking about his driving experience
in the electric car. And it began with a thank you
to Lei Jun....
14
Week in China
3 October 2014
Society and Culture
On the road
In a busy week for cinema releases, Ning Hao hopes for box office gold
I
Photo Source: Reuters
n the film Sideways, Paul Giamatti plays Miles, a divorcee and
failed writer, who takes off with his
longtime friend Jack (Thomas
Haden Church) for a week of bonding before Jack gets married. But the
two men quickly realise that their
definition of adventure is very different. Miles wants to spend the
week relaxing, golfing and enjoying
some good wine. Jack, on the other
hand, is on the prowl and wants one
last fling, before settling into domestic life.
Chinese director Ning Hao has
also made a film about two friends
hitting the road. Break-up Buddies
tells the story of a recently divorced
man who goes on a road trip in
southern China with his best friend
(and a pet dog), in this case to search
for a new lady.
The story sounds straightforward
enough, but the comedy has raised
eyebrows for being raunchy by Chinese standards. The film features a
couple having sex in a car while
grannies dance nearby, as well as
scenes featuring lesbians and sex
toys, says the Wall Street Journal,
which was given a preview before
the film opened on Tuesday.
The movie is being released during the lucrative one-week holiday
that began on Wednesday with
China’s National Day.
Director Ning has preferred to
focus on some of the other themes
in Break-up Buddies. “We are in a
transitional phase of the society
when absurdity and conflicts stand
out,” he says. “Modern China is very
absurdist, so I like to apply absurdist qualities to my films.”
Chang Chun-ning: stars in Black and White with Huang Bo
Yue Xiaojun, the scriptwriter, offers another interpretation. “The
film is about a middle-age crisis. The
crisis not only reflects on marriage,
it can also be on your career or
something else. When the time has
come, each one of them at their
middle age would have their own
problems. I think the film can reflect the feelings of the people who
were born in the seventies.”
Break-up Buddies reunites Huang
Bo and Xu Zheng, two popular comedians who also starred in the
15
Week in China
3 October 2014
Society and Culture
Photo Source: Reuters
(then record-breaking) 2012 comedy
Lost in Thailand. Dalian Evening
News reckons that the road film
genre, combined with the popular
duo, is going to dominate the box
office again over the holiday period.
But it is going to be a busy week
of promotion for Huang. In addition
to Break-up Buddies, the actor also
stars in two more films that are released this week. In Dearest, a drama
directed by Hong Kong filmmaker
Peter Chan, he plays a father who
struggles to cope with the disappearance of his young son. And
Huang is also one of the stars in
Black and White: The Dawn of Justice. The action thriller, which premieres on October 1, features Taiwan’s Mark Chao and actress Chang
Chun-ning.
To hear NetEase describe it,
“moviegoers can choose between
Huang Bo the comedian, Huang Bo
the tearjerker, and Huang Bo the
triad. The point is, Huang has thoroughly dominated the October National Day holiday week.”
It is not the first time that Huang
is effectively competing against
himself to attract cinema audiences.
Two years ago, the actor also starred
in three films – Lost in Thailand,
Journey To the West: Conquering the
Demons and the romantic comedy
Say Yes. The three hits raked in a total of Rmb3 billion ($489 million) at
the box office, says Dalian Evening
News. Critics say it remains to be
seen whether he can break his personal record.
Huang first became a household
name after the surprise success of
Crazy Stone, a low-budget comedy
also directed by Ning. The film’s success, along with its sequel Crazy
Racer, cemented Huang’s reputation. In 2009, he won Best Leading
Actor at the Taiwanese Golden
Horse Awards, one of the most prestigious in Asia’s movie calendar, for
his role as an idiotic farmer taking
care of his village’s cow during the
Huang: comedian stars in three movies released this week
Sino-Japanese War in the 1940s.
Huang reckons that his popularity is based largely on his regularguy appeal: “I don’t have the face
and body figure of a superstar, so
the viewers may find [me] more
identifiable. When people meet me
on the street, they won’t react in the
way [as they would if] they came
across Andy Lau or Tony Leung. That
doesn’t happen to me. The most
they do is to come over and tap on
my shoulder,” he told Time Out in
an interview.
This year’s week-long holiday is
going to be competitive for film releases. Ann Hui will also release her
highly-anticipated drama Golden
Era, starring Tang Wei (see WiC251).
There’s also Sun Honglei’s One Step
Away, a film about wartime lovers,
plus two Hollywood movies, Into
The Storm and Divergent. The battle
among animated films is likely to
be even more intense. In total, nine
animations will screen between the
end of September and early October, including the family-friendly
McDull: Me and My Mum and sci-fi
offering Kuiba III.
Mob money
Crowdfunding to boom?
A
merican television network
The CW scrapped Veronica
Mars in 2007 as the teen noir drama
was falling off in the ratings. The
show’s diminished but loyal viewership then called out for a movie sequel to their beloved series. And
their wish was finally granted this
year, thanks to crowdfunding service Kickstarter.
The show’s star Kristen Bell (who
plays the title character) launched a
fundraising campaign in 2013. Incentives such as T-shirts and cinema
tickets were offered to fans who
would donate more than $10. Although its backers wouldn’t receive
any financial return, the project
sailed past its $2 million fundraising
goal within 10 hours. Over 90,000
devotees contributed to the tune of
$5.7 million. And thus in March
Veronica Mars became the first
crowdfunded project to reach cinema screens.
16
Week in China
3 October 2014
Society and Culture
The project’s success has inspired
other filmmakers to turn to websites like Kickstarter and the trend is
catching on in China too. There, it’s
not only about diehard fans resurrecting a much-missed franchise.
Powered by the leading internet
firms and trust companies, Chinese
investors are looking at channelling
some of their savings into the
world’s fast-growing movie market.
Baidu is one of the internet giants that’s leading the charge. This
month the web search company
launched a film investment unit
known as Baifa Youxi together with
China Film Group and Citic Trust
(both are state-backed leaders in
their respective industries).
The first project raised cash for
Golden Era, starring Tang Wei and
directed by Ann Hui (see WiC251),
and got flagged to investors as a Chinese version of Gone With the Wind.
Golden Era is one of the fortunate
films scheduled for showing during
the week-long National Day holiday
period (see previous article). Baifa
Youxi allowed investors to put up as
little as Rmb10 ($1.65) but earn up to
a 16% return linked to box office performance. The Rmb15 million funding target was met within minutes,
raising a total of Rmb18 million from
over 3,300 supporters.
Baifa Youxi offers multiple plans
for investors. They can choose to bet
on different income streams generated by Golden Era, (such as its internet broadcasting copyright fee).
More personal perks range from getting the storyboards, free membership of Baidu’s video sites and even
a personalised message from popular starlet Tang Wei herself.
Li Zimin, general manager of Citic
Trust, told Xinhua that the crowdfunding initiative is a “win-win combination of the film industry and
consumer finance”.
In April, e-commerce firm Alibaba also launched a similar crowdfunding unit known as Yulebao,
which for the time being is focusing on financing TV content.
China Film Group is also hyping
Baifa Youxi as a new platform for
creative marketing. “It allows production firms and celebrities to understand the consumer better and
thereby meet their needs. It is a
good start to build a dream factory
for different elites, investors and
users,” the company’s CEO La
Peikang said.
Movie producers aren’t the only
ones reaching out to micro-financiers. Vanke, the biggest real estate developer by sales, is also testing the water. Last week, the
property firm launched a crowdfunding project to invest in a single
100-square-metre apartment at one
of Vanke’s residential projects. The
apartment is worth Rmb900,000,
Vanke claims, so investors that contribute to the Rmb540,000
fundraising target (the minimum
commitment is Rmb1,000) can expect a 40% return when the apart-
ment is then resold via an internet
auction.
The results? More than 500 investors filled the fundraising quota
in less than nine hours. Better still,
the scheme helped generate huge
publicity for the developer. More
than 30 million netizens forwarded
news of the offer on social media
(prompted perhaps by the chance
of winning film tickets by doing so).
Similarly, Vanke’s scheme featured
on the front pages of 120 newspapers, National Business Daily has reported.
Critics questioned the deal, however, including the China Daily,
which classed it as a “publicity stunt
that offers little real benefit to consumers”.
Strictly speaking, these crowdfunding projects fall into the scope
of shadow banking, as most are effectively wealth management products sold through trust firms or insurers. The Securities Times said the
China Securities Regulatory Commission is still compiling its rulebook on these schemes so as to provide a legal basis for the activity – so
as to better protect the rights of retail investors.
Other observers wonder if crowdfunding might serves as another
way in which policymakers might
try to erode some of the dominance
of the state banks in China’s financial sector. Conor Roche, a British researcher who is working to launch
an equity crowdfunding platform in
Pick your battles wisely
“You want to compete with tens of millions of disorganised individual fighters, farmers with broken down
guns, rather than with one elite Roman army”
Photo Source: Imagine China
☛ Renren boss Chen Yizhou tells the Wall Street Journal why he invested in Vipshop, the website specialising in discounted ‘flash sales’ of fashion goods. Chen says he realised that Vipshop isn’t competing
with the main internet players in China (the Roman army) but more with mom-and-pop apparel shops in
fourth-tier cities.
Chen Yizhou
17
Week in China
3 October 2014
Society and Culture
Shanghai’s free trade zone, told
Forbes that the trend could kick off
a new wave in crowdfunding that
might leave European and US-based
equivalents in the dust. Southern
Weekend agreed. “It is going to be
the golden era for crowdfunding in
China,” the newspaper predicted.
Instituting
changes
Confucius is embraced by
Beijing, rejected in Chicago
C
Photo Source: Reuters
onfucius preached harmony. So
one wonders what he would
have made of the war of words that
broke out over an international language institute bearing his name
last week.
On September 24, four days before the 2,565th anniversary of the
philosopher’s birth, the University
of Chicago announced that it was,
in all probability, closing its fouryear-old Confucius Institute.
The university had been negotiating with the Chinese government
for several months to extend the institute’s contract, it said, but “recently published” comments by the
official in charge of the dialogue
were “incompatible with continued
equal partnership”.
Precisely which of Xu Lin’s comments had caused the university to
“suspend negotiations” is not clear,
but it is likely they were given in a
long interview that she conducted
with the Jiefang Daily on September 19.
The Jiefang Daily recounts how
in April over a hundred of the university’s faculty members signed a
letter requesting that the institute
be closed down when its contract
came up for renewal this year.
Xu’s reaction – which was praised
by the newspaper – was simply to
Great sage: Confucius on a Chinese campus
write a letter to the dean saying: “If
your school decides to quit, I agree.”
Of course the newspaper did not
explain that the petitioners were
concerned about the institute’s potential damage to academic freedoms at the university, as well as the
Chinese government’s treatment of
academics back home (see WiC254
for news about Professor Ilham
Tothi).
“American universities should not
be taking money or institute funds
from governments that are jailing
professors and that do not provide
academic freedom in their own
country,” Professor Bruce Cumings
at the university told the Chicago
Maroon.
Of course these complaints are
nothing new (see WiC244 for an earlier article on a row over the institutes) but the University of
Chicago’s decision to distance itself
from Hanban, the Chinese government agency that fund and runs the
465 Confucius Institutes around the
world, will offend many in China,
not least because of its timing.
As well as being the anniversary
of the sage’s birthday, September 26
also marks the tenth anniversary of
the opening of the first Confucius
Institute in Seoul.
According to a new State Council
ruling, the same date is to be celebrated as Confucius Institute Day
from this year forward too.
Confucianism – which Mao tried
to eradicate – now seems to enjoy
greater support amongst China’s
current crop of leaders. That became unabashedly clear when the
Chinese President Xi Jinping hosted
a huge conference dedicated to the
philosopher in the Great Hall of the
People last week. “All countries and
nations should learn and draw on
the strength and essence of others’
ideology and culture. This is an important condition to encourage dignity, confidence and strength of native ideology and culture,” he told
the attendees.
Others suggest that the ruling
Communist Party is trying to resurrect Confucianism to fill some of the
void left by the redundancy of
Marxist and Maoist teachings,
which have been displaced by 30
years of capitalism.
Adherence to Confucianism
could instill a renewed sense of discipline and morality in Chinese society too – or, at least, that seems to
be the hope.
But not all of China’s leading
thinkers seem to be on board with
the idea of a new Confucian era.
Last week the head of the Chinese
Academy of Social Sciences spoke
out against the concept, suggesting
instead that more modern ideologies were more resonant themes for
China.
“Today, as a Communist country
18
Week in China
3 October 2014
Society and Culture
with its own characteristics, we’re still
in the historical era that classic Marxist writers defined – one in which socialism and capitalism are involved
in a fight to the death… We cannot remove class struggle from the international stage and we cannot remove
it from the domestic arena either,”
wrote Wang Weiguang in the Party’s
journal Qiushi.
Coupled with a newspaper warning that “hostile Western forces” were
guilty of overstating the death toll
from the Great Famine between 1958
to 1961 (to “negate the legitimacy of
the Party”), Wang’s comments
seemed to symbolise a fightback
from those who want Communist
thinking to endure.
Netizens were less convinced, with
some even questioning whether
Wang and people like him had lost
touch with reality.
“What era do they think we are
living in?” asked one bewildered
weibo user.
The Oriental Daily in Hong Kong
thought there was also something
ridiculous about the whole idea too:
“The vested interest class in China
these days are bureaucrats including Wang himself. They would become the targets of class struggle.
That’s why it is impossible for the
incumbents to launch a class struggle on themselves.” ■
World of Weibo: Faye Wong
From the moment Richard Burton and Elizabeth Taylor set eyes on
each other on the set of Cleopatra in 1962, they were infatuated.
The two fell in love quickly and furiously. But as difficult as it was
to live apart, they couldn’t live together either. The couple were
married and divorced twice.
Still, for Taylor, Burton remained her true love: “I was a fool to
marry so often (she had six other ex-husbands),” she told the
Telegraph. “If I had my time over again, I would never do that. The
truth is I now don’t give a damn about most of those men. Richard
is the only one I truly loved and still care about.”
Like Burton and Taylor, China’s Faye Wong, 45, and Nicholas
Tse, 34, can’t seem to stay away from each other for long. Ten
years after the two first broke up they are rumoured to have
rekindled their relationship.
After their first split, Tse went on to marry Hong Kong actress
Cecilia Cheung in 2006 and have two sons, but they divorced in
2011. Wong, too, married the actor Li Yapeng in 2005. But they got
divorced last year too (it was her second split with a husband).
News that Wong and Tse could be rekindling their romance
became a red hot topic on China’s blogosphere, surpassing news
about Alibaba’s mega-IPO, tennis star Li Na’s retirement, and
Scotland’s referendum. As of this week, there were 450 million
tweets and reposts about the rumoured relationship on Sina Weibo.
Netizens were split in their views about the couple. Some were
supportive of the relationship. Others blasted their chaotic love
lives, claiming the two were showing little consideration for their
children. Some voiced strong disapproval of Wong, saying that a
mother of two romancing a man more than a decade younger is
irresponsible and selfish.
“It’s such a mess. Why didn’t they marry each other in the
beginning?” asked one netizen.
Other netizens expressed sympathy for their former spouses,
saying that Tse shouldn’t abandon his ex-wife Cheung. “You
rejected a perfectly good wife and two beautiful children to be
with a woman who is not only 11 years older but has married
twice previously and has two children of her own. This is
nauseating. Two people who are so irresponsible certainly deserve
each other,” she lambasted.
Amid the growing criticism, some returned to the fray to defend
the couple. “Both of them are single, so what’s wrong with them
Wong: her love life fascinates millions in China
getting back together?” one fan wrote.
“Instead of criticising Wong Faye I actually admire here more
and more. More than 10 years ago, she didn’t care what people
thought and held the hand of a man who was only 23. Today, she
still doesn’t care what other people think… She’s always so honest
and true to herself,” was another verdict.
More perceptive netizens said that the negative comments
about Wong have a subtext – they are another example of China’s
cultural stereotyping of women, in this case a belief that stretches
back through the centuries that an older woman should not marry
a younger spouse.
“All the criticisms against Faye Wong mostly surround the fact
that she was married and divorced twice, a mother of two yet
dating a man who is 11 years younger. This suggests that women
in China are still being typecast for two roles: wife and mother. But
people are oblivious of women’s wish for self-improvement and
their pursuit for love,” one netizen mused.
19
Week in China
3 October 2014
And Finally
Under starter’s orders?
British Queen’s eldest grandson could lead horse racing revolution in China
T
he modern Chinese word for
street is malu, which translates
as ‘horse road’. The term derives
from the earliest race course in imperial China. Five British merchants
founded the Shanghai Racing Club
in 1850 and built a horse racing
track in the city. The path down
which the expats would ride their
horses from the course to the Bund
was known as the malu by Chinese
onlookers.
Bets were wagered on horse racing from the early days of the track’s
founding in Shanghai but in 1949
racing was banned by Mao Zedong
as an “immoral pursuit”.
That makes it all the more intriguing that punting on the horses
might be on the verge of being legalised again.
The latest sign of a new approach
was the launch of the China Jockey
Club at Beijing’s prestigious CPPCC
auditorium in September. In attendance at the event was Queen Elizabeth II’s grandson, Peter Philips,
who the Daily Telegraph says has
been “hired by the Chinese authorities to launch a horse racing industry to rival Britain’s”. The club intends to hold its first races next
year, it said in a statement on its
English language website, but the
form of betting is yet to be decided.
“The China Jockey Club will set
out the strategy for development of
the racing industry in China, working with a number of international
bodies to ensure the industry is sustainable… part of the income generated will be distributed to support
public welfare and give back to society,” the statement confirmed.
Soon to return to Shanghai?
A few places in China already allow horse racing but betting is still
illegal. In Wuhan a millionaire called
Ren Ningning built a state-of-theart track including stands for
30,000 people but has struggled
with the commercial practicalities
of attracting customers. At the moment punters get involved by way of
a lottery. Their tickets bear the numbers of one of the horses (brought to
Wuhan by Ren from Australia, Ireland and Japan). If the horse does
well, the ticket holder wins a small
gift like a bottle of wine.
The only money that changes
hands is the entrance fee and the
spectators don’t get to choose which
horse they back.
Under his stadium complex,
however, Ren has already installed
the infrastructure required for
proper bookmaking – a gambling
hall with windows for punters to
place bets and the spaces for screens
to display the odds.
Another city that has dreamt of
becoming China’s horse racing capital is Nanjing (see WiC79).
China already runs a sports lottery and, as we pointed out in
WiC244, it became much more active during the World Cup, and in a
way that implied the authorities
may be getting more relaxed about
gambling (perhaps realising that at
least Rmb1 trillion, or $163 billion,
is gambled with offshore bookies already, according to estimates from
Economic Information Daily).
For the first time the lottery allowed punters to make predictions
about World Cup match scores this
year, driving ticket sales up 93%
compared to the year before. Demand was boosted by internet giants Alibaba and Tencent helping local lotteries with online sales and –
in a key break with past practice –
offering odds on outcomes.
While notably less generous than
the terms offered by the black market offshore, any winnings at least
had the advantage of being legal.
(Though notably the odds-offering
approach seems to have been
adopted as a temporary measure
during the World Cup, perhaps as an
‘unofficial’ pilot scheme.)
The hope for horse racing fans is
that the government will back the
China Jockey Club initiative and allow the trial of a more fully-fledged
gambling system similar to Hong
Kong’s. This might see the state as
the only bookmaker – with a decent
proportion of the financial proceeds
recycled into good causes. ■
20
Week in China
3 October 2014
The Back Page
Photo of the Week
In Numbers
20%
The proportion of their loans that Hong
Kong banks made to mainland Chinese
clients last year; up from 16% in 2013. The
Wall Street Journal reports that the
territory’s banks are now scaling back this
lending.
$30 billion
Photo Source: Reuters
The amount of Macau gambling by highrollers financed by China’s junket
operators. That is two thirds of Macau’s
gaming revenues, but these shadow
financiers are finding business tougher as a
result of the anti-graft campaign.
A giant Snoopy balloon in Shanghai’s financial district (in case you’re
wondering, a nearby mall was holding a Snoopy exhibition)
Where is it?
Some of the places referred to in this issue
61.9 million tonnes
China’s crude steel consumption excluding
net exports in August. The China Iron and
Steel Association reports this number fell
1.9% and was the first decline in domestic
steel consumption for 14 years.
266 minutes
Xinjiang
Beijing
China
Nanjing
Chengdu
Hubei
Wuhan
Anhui
Shanghai
Hangzhou
Zhejiang
The amount of time that a 43 year-old man
maintained the plank position. Mao
Weiding, a member of the Beijing SWAT
team, recently subjected his body to an
incredible four hours and twenty-six
minutes in plank mode, breaking the
Guinness World Record for “longest time in
an abdominal plank position”.
Guizhou
Guangdong
Hong Kong
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