(02/22/13)
Newswire
China, Hong Kong shares post hefty losses on tightening worries (Reuters).............. 4
China’s Stocks Fall Most in 14 Months on Property Concern (Bloomberg) .................. 5
Print
China drains cash to curb liquidity (The Financial Times) ............................................... 6
China’s looking to take over another industry—wine (The Globe and Mail) ............... 7
China hacking claims: tech firms move to front line in US cyberwar (The Guardian)
............................................................................................................................................................... 8
China's Regulator Gets Tougher on IPOs (The Wall Street Journal) ............................. 10
Hong Kong pinning hopes on IPO surge (The Financial Times) .................................. 12
Online
Plenty of Productivity Still in Store for China, Economist Says (THE WSJ CHINA
REAL TIME REPORT BLOG) ....................................................................................................... 14
Hong Kong Property Investors Turn to Hotel Loophole (THE WSJ CHINA REAL TIME
REPORT BLOG) .............................................................................................................................. 15
Chinese Companies Getting Good at Attracting Talent (THE WSJ CHINA REAL TIME
REPORT BLOG) .............................................................................................................................. 16
Electric Cars Going Out of Style? Not in China (THE WSJ CHINA REAL TIME REPORT
BLOG) ................................................................................................................................................ 16
China's Velo, Didatuan Announce Integration (chinatechnews.com) ......................... 18
A brief history of the Chinese growth model (China Financial Markets Blog) ......... 18
Baidu’s $15 Million Lawsuit Against Qihoo 360 Headed to Court (techinasia.com)
............................................................................................................................................................ 26
Two Chinese Web Giants Get Approval for Online Insurance Business
(techinasia.com) ........................................................................................................................... 27
Are China’s Gamers Looking Forward to Next-Gen Game Consoles Like the PS4?
(techinasia.com) ........................................................................................................................... 28

China Adds 13 Million New 3G Subscribers in January, China Mobile Sees Big Jump
(techinasia.com) ........................................................................................................................... 28
Weibo Generated $66mn in 2012 for Sina, Other Businesses in Decline
(technode.com) .............................................................................................................................. 29
Overview of Top 7 Online Retailers in China (chinainternetwatch.com) ................... 30
Newswire
Anti-Waste Call Sobers Up China Luxury Food Market (The Associated Press) ..... 31
China's Bo Xilai not cooperating on probe, been on hunger strike: sources (Reuters)
............................................................................................................................................................ 31
Pakistan hands management of strategic Gwadar port to China (Reuters) .............. 33
EU and China stumble towards solar trade war (Reuters) ............................................... 34
Print
New Leader Of China Plans a Visit To Moscow (The New York Times) ....................... 35
China’s cyber-hacking; Getting Ugly; If China wants respect abroad, it must rein in
its hackers (The Economist) ..................................................................................................... 36
Online
Chinese Soldiers Ordered to Make Fried Rice with Leftovers (THE WSJ CHINA REAL
TIME REPORT BLOG) ................................................................................................................... 37
China’s Red Hackers: The Tale of One Patriotic Cyberwarrior (Time World Blog) . 38
Scrutinizing The Mandiant Report: Taking A Hard Look At What It Proves And,
More Importantly, What It Doesn’t (beijingcream.com) ................................................. 39
Shanghai Security Chase Off CNN Crew Filming Presumed Hacking Headquarters;
BBC Journalist Detained (beijingcream.com) ..................................................................... 41
Citizen Mistrust Grows as China’s Real Estate Ownership Becomes More Opaque
(tealeafnation.com) ..................................................................................................................... 42
In Face of Mainland Censorship, Taiwanese Revisit Reunification Question
(tealeafnation.com) ..................................................................................................................... 44
Everyone Hacks Everyone: Stop Assuming All Hackers Come From China
(techinasia.com) ........................................................................................................................... 45
Newswire
China to introduce carbon tax: official (Xinhua) ................................................................ 45
Print

China tensions await new pope (The Financial Times) .................................................. 46
China: Come on in, the water is toxic (USA TODAY) .......................................................... 47
Online
Murder Case Digs Up Ghosts of Cultural Revolution (THE WSJ CHINA REAL TIME
REPORT BLOG) .............................................................................................................................. 49
Jookin From Memphis to Colbert, By Way of China (THE WSJ CHINA REAL TIME
REPORT BLOG) .............................................................................................................................. 50
Looking Back At Tracy McGrady’s Inaugural Season In China (beijingcream.com)
............................................................................................................................................................ 51
Headlines You Don’t See Every Day, Except Maybe If You Live In Henan: “Man
Scalps Parents” (beijingcream.com) ...................................................................................... 53
About That Chinese Carbon Tax (theatlantic.com) ........................................................... 53
Duplitectural Marvels: Exploring China's Replica Western Cities (theatlantic.com)
............................................................................................................................................................ 54
‘Gas Explosion’ Kills Chinese Official’s College-Age Daughter (tealeafnation.com) 56
Absurd racism claim and attacks on Chinese culture (chinahush.com) ..................... 57
Newswire

Thu Feb 21, 2013
By Donny Kwok http://www.reuters.com/article/2013/02/21/markets-china-stock-close-idUSL4N0BL1GI20130221
HONG KONG/SHANGHAI, Feb 21 (Reuters) - Hong Kong and China stocks fell on Thursday, with a key mainland index suffering the biggest intraday drop in over a year, on worries about monetary tightening by the Chinese central bank in the months ahead and further curbs on the property sector.
China's CSI300 index, which tracks the largest listed firms in Shanghai and Shenzhen, slid 3.4 percent, its biggest intraday decline since late 2011. The blue chip Hang Seng lost 1.7 percent to end at 22,906.67, its lowest closing since the year began.
Moves by China's central bank to aggressively drain funds from the interbank market startled mainland investors, said Chen Shaodan, analyst at New Times Securities, and led to a selloff on fears that a sustained drain on liquidity is in the offing, which could depress stock prices.
The China Enterprises Index of the top Chinese listings in Hong Kong fell 2.2 percent and the Shanghai Composite
Index ended down 3 percent at 2,378.8, its lowest close since late January.
The property sector took a hit after China's cabinet on Wednesday restated its intention to extend a pilot property tax programme to more cities and urged local authorities to impose price control targets on new homes.
In Hong Kong, the blue chip property sub-index fell 1.5 percent to its lowest close so far in 2013 with Cheung Kong
(Holdings) Ltd losing 2.4 percent, Sun Hung Kai Properties falling 1.5 percent, and New World Development Co
Ltd sliding 2.5 percent.
"The selling pressure was a bit overdone and investors trimmed their holdings in whichever stock they think is overvalued," said Alex Wong, a director at Ample Finance Group. "But players were also cautiously doing bottom-fishing, and that suggest that their risk appetites are still there."
China Overseas Land, which has dropped 5 percent so far this year, gained 0.9 percent on Thursday, while China
Resources Land climbed 1.4 percent.
Shares of Belle International Holdings Ltd dived as much as 18 percent after China's top footwear retailer said its
2012 profit would come in at the lower end of estimates, just marginally higher than in 2011.
"The reason for the drop was due to overestimation of sales results by analysts," said Patrick Yiu, a director at
CASH Asset Management. "Most of the analysts were still quite bullish on the China retail sector."
Belle shares, which closed at a record high on Wednesday, ended down 16.8 percent at their lowest close since
November 2012. Smaller rival Daphne International Holdings Ltd also fell 6.4 percent.
However, investors were keen to bet on fundamentally strong companies. Shares of Italian fashion house Prada
SpA rose 5.2 percent, in the second straight day of gain, to end at their record close, as consumer confidence in the world's second largest economy improves.
Goldman Sachs reiterated a "buy" rating on the stock after the luxury bags maker posted strong revenues growth.
Macau gambling stocks remained weak for the third consecutive day as analysts said short-term consolidation may last one to two months as the sector pulls back from recent gains.
LIQUIDITY PUZZLE

The People's Bank of China let a net 910 billion yuan ($145.89 billion) drain from the interbank market this week.
In addition, the central bank this week returned to using longer-term forward repos to drain funds, instead of reverse repos which inject funds, for the first time since June.
But money market dealers in China's interbank market said that the PBOC operations were mostly intended to offset the record-high injection the central bank made prior to the Chinese Spring Festival holiday, which saw markets close for a week.
Money rates increased slightly but liquidity remained ample, dealers said, thanks to the influx of funds flowing into the market as a result of foreign exchange purchases by the central bank.
($1 = 6.2376 Chinese yuan) (Additional reporting by Chen Yixin and Gabriel Wildau; Editing by Pete Sweeney and
Sanjeev Miglani)
l
By Weiyi Lim - Feb 21, 2013 http://www.bloomberg.com/news/2013-02-21/china-s-stock-index-futures-fall-on-property-curbs-concern.htm
China’s stocks fell, sending the benchmark index to its biggest loss since November 2011, on speculation more restrictions on the property industry will hurt demand for bank loans and construction materials.
A gauge of Shanghai developers slid 2.1 percent, poised for the biggest weekly drop since July, after the government told local authorities to halt real-estate speculation using measures such as home-price control targets and the expansion of a property tax. Anhui Conch Cement Co. (600585) slumped 5.4 percent. China
Construction Bank Corp. (939), the largest mortgage lender, lost 2.9 percent. Jiangxi Copper Co. and PetroChina
Co. led declines for metal and energy stocks after minutes from the Federal Reserve’s last meeting showed debate over further stimulus action.
The Shanghai Composite Index (SHCOMP) retreated 3 percent to 2,325.95 at the close. The CSI 300 (SHSZ300) tumbled 3.4 percent to 2,610.55, the most since August 2011. The Hang Seng China Enterprises Index (HSCEI) in Hong Kong slumped 3.2 percent. The Bloomberg China-US Equity Index (CH55BN) slipped 1.1 percent yesterday.
“There are expectations of more details on property measures today or tomorrow,” Huang Cendong, an analyst at
Tebon Securities Co., said by phone today from Shanghai. “If the property curbs extend to second- and third-tier cities, economic growth may be impacted.”
The Shanghai index has fallen about 5 percent after gaining as much as 24 percent during a bull-market rally that started on Dec. 3. The measure’s valuation of 9.68 times projected 12-month earnings was the lowest in a month.
Trading volumes were 9 percent above the 30-day average today.
Home Purchases
The Shanghai measure has lost 4.4 percent this week, heading for the biggest drop since Sept. 12, amid concerns about tighter liquidity. China’s one-year interest-rate swaps climbed to the highest level in two weeks. The central bank drained 910 billion yuan ($146 billion) from the financial system this week, according to Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong. That was the biggest withdrawal since Bloomberg started compiling the data in 2008.

Chinese cities that have had “excessively fast” price gains should promptly impose home-purchase restrictions if they’ve not done so already, according to a statement released yesterday after a State Council meeting headed by Premier Wen Jiabao. Provincial capitals and municipalities reporting directly to the central government should also publish annual price-control targets to keep new-home costs “basically stable,” according to the statement.
Wen also said China will expand property-tax trials, the Xinhua News Agency said.
Property Bubble
The Shanghai property index has fallen 6 percent this week. Poly Real Estate Group Co. dropped 0.7 percent to
12.30 yuan toda, while China Vanke Co. slid 1.1 percent to 11.31 yuan.
In an almost three-year effort to tighten the property market, the government has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, and enacted home-purchase restrictions in about 40 cities. Home prices rose 1 percent last month from December, the most since January 2011, according to data from SouFun Holdings Ltd. (SFUN), the nation’s biggest property website.
Anhui Conch, the biggest cement producer, slid 5.4 percent to 18.72 yuan. Huaxin Cement Co. declined 6 percent to 15.21 yuan. SAIC Motor Corp., the largest automaker, plunged 5 percent to 17.14 yuan.
China Construction Bank, the nation’s second-biggest lender, declined 2.9 percent to 4.67 yuan. Its mortgage loans accounted for 20 percent of the total loan portfolio at the end of June, according to earnings reports.
Industrial & Commercial Bank of China Ltd., the second largest mortgage lender with a ratio about 14 percent, slumped 1.4 percent to 4.18 yuan.
Commodity Producers
Gauges of energy and material stocks in the CSI 300 fell 4.3 percent and 4 percent respectively. Jiangxi Copper, the biggest producer of the metal, retreated 5.9 percent to 24.32 yuan. PetroChina, the largest oil producer, fell
2.7 percent to 9.05 yuan. Coal producer China Shenhua Energy Co. slid 4.5 percent to 22.93 yuan.
The Standard & Poor’s GSCI Spot Index of 24 raw materials declined 1.1 percent yesterday for the biggest loss in more than two months amid speculation a hedge fund was selling and as Fed minutes showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds until there is
“substantial” improvement in the U.S. labor market.
To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
Print
By Simon Rabinovitch in Beijing
February 21, 2013 http://www.ft.com/intl/cms/s/0/10aa5b68-7c03-11e2-99f0-00144feabdc0.html#axzz2LOXtWrY7
China drained a record amount of cash from its banking system this week, counteracting an explosion in credit growth that had stoked concerns about inflation.
The central bank withdrew Rmb910bn ($146bn) from the economy via open market operations over the past three days, its biggest weekly cash drain ever.

The Chinese stock market, which is driven heavily by liquidity conditions, sold off sharply after the central bank’s move. The Shanghai Composite, the country’s main index, shed 3 per cent.
The move was partly a technical reversal of liquidity injections made before last week’s Chinese New Year holiday, but analysts said it also heralded a cautious shift to tighter monetary policy as the world’s second-largest economy heated up.
“It is a signal that they are going to change the policy stance. It’s just too loose,” said Shen Jianguang, an economist with Mizuho Securities. “The credit issuance in January was scary.”
Chinese credit issuance – which includes lending by banks and financing provided by non-bank institutions – surged to a record Rmb2.5tn in January, surpassing the monthly totals in early 2009 when the government unleashed a stimulus surge to battle the financial crisis.
In a monetary policy report published at the start of February, the People’s Bank of China said that controlling inflation was a priority as the economy’s recovery strengthened. China slipped to 7.8 per cent growth last year, its slowest in more than a decade, but it has been speeding up since the end of the third quarter. The surge in lending could presage faster growth and higher inflation this year if left unchecked.
In its regular open market operations this week, the central bank allowed Rmb860bn of previously issued reverse repurchase agreements to expire, in effect undoing short-term liquidity injections made before the New Year holiday when demand for cash spikes.
On top of that, it also issued a further Rmb50bn in repurchase agreements, draining extra cash from the economy.
Moreover, it used longer tenors for a portion – as long as three months instead of the usual 7-day or 28-day duration – to keep the money locked up for longer.
“It’s a normalisation of monetary policy. There is no doubt that there is simply too much liquidity in the system,” said Yao Wei, an economist with Société Générale.
The government has also started to tighten its grip on the property sector after a rebound in housing prices. On
Wednesday the State Council, or cabinet, said that cities with excessively fast price increases must implement stricter curbs on purchases. In recent weeks local governments in the wealthy provinces of Guangdong, Zhejiang and Jiangsu have all taken steps to increase the cost of mortgages to homebuyers.
China’s new home prices rose 1 per cent in January from a month earlier, according to Soufun Holdings, a real estate website that surveys 100 major cities. A property recovery bodes well for the construction industry, a key driver of the Chinese economy, but the government is determined to keep the housing market under control after working for nearly three years to deflate bubbly prices.
DAVID BERMAN
Published Thursday, Feb. 21 2013 http://www.theglobeandmail.com/report-on-business/rob-magazine/chinas-looking-to-take-over-another-indu strywine/article8924426/
The chateau seems to say you’re in France, and so do the roses and grapevines. But you’re not even close. You’re in a vineyard in Miyun County, near Beijing, that is being tended by Chinese workers.
If the centuries-old London-based wine merchant Berry Bros. & Rudd is right, China will lead the world in wine production in the next 45 years. And if that prediction seems outlandish, consider that China is already

outproducing the likes of Chile, Argentina and Australia. Chinese wine is also starting to get noticed on the world stage after years of being dismissed as plonk by Western oenophiles. A Chinese Bordeaux blend won Best in Show at the Decanter World Wine Awards in 2011, along with these words of praise: “big, quite leafy black fruit with exciting minty perfume.” A less expensive Chinese Bordeaux also won top honours in 2012 (Judges: “lovely fruit intensity”).
China’s emergence on the world wine stage is in part a result of its investments in vineyards abroad, which have given Chinese vintners first-hand knowledge about production techniques. Since 2008, wealthy Chinese buyers have snapped up dozens of French vineyards. Meanwhile, Moët Hennessy is planting a vineyard in China, to produce red wine for the domestic market. That follows a similar expansion into China by Domaines Barons de
Rothschild, announced in 2009.
It also helps that wine consumption in China has increased by 20% annually, overtaking the United Kingdom as the world’s fifth-biggest wine consumer in the world. China could well be No. 1 within 20 years. Already, the country’s influence on global wine markets is evident: Prices for high-end vintages rise and fall based on the shifting tastes of wealthy Chinese palates.
The question is, when can we expect to see rows of Chinese wines rivalling bottles from Italy, France and Spain in our local stores? Since China is mostly focused on its own domestic consumption right now, exports remain novelty items. Ontario’s LCBO recently carried a Great Wall Cabernet Sauvignon 2008, but it is now reduced to clear. Though as production rises in the People’s Republic, it is plain where the market is headed: China has dominated export markets for everything from toys to shoes to electronic gadgets—and it seems bound to work its way up the value chain for wine, too.
Mandiant founder reveals how balance of power in US cyberwar has shifted to multibillion-dollar computer security firms
Thursday 21 February 2013 http://www.guardian.co.uk/world/2013/feb/21/china-hacking-claims-tech-firms
When Kevin Mandia, a retired military cybercrime investigator, decided to expose China as a primary threat to US computer networks, he did not have to consult with US diplomats in Beijing or declassify tactics to safely reveal government secrets.
He compiled a 76-page report based on seven years of work by his company, Mandiant, and produced the most detailed public account yet of how, he says, the Chinese government has been hacking major US companies.
It was not news to his commercial rivals, or the US government, that systematic attacks could be traced to a nondescript office block outside Shanghai that Mandia believes was run by the Chinese army.
What was remarkable was that the extraordinary details – code names of hackers, one's affection for Harry Potter and how they stole sensitive trade secrets and passwords – came from a private security firm without the official backing of the US military or intelligence agencies responsible for protecting America from a cyber-attack.
The report, welcomed by both government and industry, represents a notable alignment of interests in
Washington: the Obama administration has pressed for fresh evidence of Chinese hacking that it can leverage in diplomatic talks without revealing secrets about its own hacking investigations, and Mandiant makes headlines with its sensational revelations.
It also shows the balance of power in America's cyberwar has shifted to the $30bn-a-year (£19.7bn-a-year)

computer security industry.
"We probably kicked the hornet's nest," Mandia, 42, said at the Alexandria, Virginia, headquarters of Mandiant.
"[But] tolerance is just dwindling. People are tired of the status quo of being hacked with impunity, where there's no risk or repercussion." China has rejected the allegations.
Mandiant, which took some $100m of business last year, up 60% from the year before, is part of a lucrative and exploding market that goes beyond antivirus software and firewalls. These "digital forensics" outfits can tell a business whether its systems have been breached and, if the company pays extra, who attacked it.
Among Mandiant's staff are retired intelligence and law enforcement agents who specialise in computer forensics and promise their clients confidentiality and control over the investigation.
In turn, they get unfettered access to the crime scene and resources to fix the problem (Mandiant will not say exactly how much it charges, but it is estimated to average about $400 an hour).
The growing reliance on contractors like Mandiant has been compared to the dependence of the military and state department on private contractors, such as the one formerly known as Blackwater, to provide physical security to diplomats and other VIPs during the Iraq war.
Officials inside and outside government believe contractors can often act more quickly than the government and without as much red tape. There are also serious privacy concerns: Most US citizens do not want the government to access their bank accounts, for example, even if China is attacking their bank.
"The government doesn't have the capacity," said Shawn Henry, a former FBI executive assistant director who works for CrowdStrike, a Mandiant competitor. "There are a lot of people working hard. But the structures aren't there."
Michael DuBose, another former senior justice department official who works for a similar firm, Kroll Advisory
Solutions, added: "I think there's a recognition that the government can't stand at the entry point of the internet to the US and shield it from all bad things coming in."
Since Mandiant released its report this week, government officials and legislators have publicly embraced its findings.
Senator Dianne Feinstein, the Democratic chair of the Senate intelligence committee, hailed Mandiant for exposing the issue of Chinese hacking. She called its report "sobering" and said she hoped it would spur an international agreement to protect companies from cyber-espionage.
Mandiant's report raises questions, too, about the extent to which private companies are in control of defending
America's most crucial networks, such as power companies and water treatment plants. Another question is what rules of engagement private companies might rely on. When does a company strike back?
Mandia and his competitors said they are beholden to US and international laws that prohibit the type of intrusive acts they accuse China of committing. Mandia also said his clients are not interested in starting a cyberwar with foreign hackers, in part because they are so vulnerable.
"The only time (retaliatory hacking) would really work is if we got all the bad guys out of our networks in the first place," he said. "Then you can start playing that game." Still, publishing the hacking report was an offensive shot across China's bow.
Mandia launched his company in 2004 after several years in the private sector because, he said, there was no company focused on investigating intrusions. With a master's degree in forensic science from George Washington
University, he became Mandiant's sole employee and, two years later, got a cash injection from a friend.

Now, he oversees some 330 employees and the field is growing rapidly. He says he used to see about three major incidents a month when he started his business; now he estimates there are between 30 and 100 incidents a month.
Mandia is hardly alone. A former colleague, Stuart McClure, recently started a company called Cylance. He received $15bn in venture capital funds for his business, which he says is distinctive because of its focus on prevention.
McClure said he sees the future of cyber-defence residing in the private sector, which has deeper pockets and less red tape.
As for any problems they might cause in diplomatic or security circles for the federal government, Mandia and his competitors say that is not a concern, although he has been hiring lawyers to help monitor US policies and regulations. But as a tech expert, he said he has been focused on stopping intrusions. "We're security guys,"
Mandia said. "We're not diplomats."
By SHEN HONG
Updated February 21, 2013 http://online.wsj.com/article/SB10001424127887323864304578318101227205828.html
SHANGHAI—In the five years since it joined a long queue of companies applying for government approval to list on the Shenzhen Stock Exchange, Zunyi Titanium Co.'s fortunes have plummeted.
The state-owned company in China's southwestern Guizhou province reported a financial loss for the first nine months of last year, blaming it on fierce competition, and disclosed it has been booted out of its factories by the local government.
In late December, Zunyi announced it was giving up its attempt to list on the smaller of China's two stock exchanges, without elaborating.
It isn't alone. The China Securities Regulatory Commission said that from late December through the end of
January, it had terminated IPO applications from another 15 companies. The dropouts represent a modest victory in an effort by the commission to try to improve the quality of companies issuing shares in Shanghai and
Shenzhen.
The regulator still has nearly 900 applicants to review amid a three-month campaign aimed at weeding out loss-making IPO candidates that no longer qualify or those that have committed accounting fraud. Underwriters and auditors are being required to scrutinize applicants' financial records more closely.
Fraudulent accounting practices, poor corporate governance and inadequate information disclosure have been among the major stumbling blocks to the healthy development of China's capital markets. Such problems have also garnered widespread attention in the U.S. and elsewhere, where a few prominent cases of financial fraud involving Chinese firms listed on overseas markets have emerged in recent years.
"Our view is that a lot of Chinese companies decorate their financial statements for IPOs. We normally start buying a company at least two to three years after their IPO," said Yuming Ying, managing director of China Eagle
Asset Management in Hong Kong, which manages $40 million in assets.
Mr. Ying said many Chinese companies' share prices tend to drop by more than 50% within two to three years

after their IPOs.
The exercise is part of a flurry of overhauls launched by Guo Shuqing, the chairman of the China Securities
Regulatory Commission, that are intended to fix the country's stock markets, whose modest gains lagged behind other markets in Asia last year.
Pressure for change has taken on added urgency at a time when China is remaking its economy to rely more on consumption as a driver of growth. That will require, among other things, channeling more funds to companies in the private sector rather than the state-owned behemoths that have historically sold shares through the stock market.
But market watchers wonder whether the crackdown is merely a short-term exercise designed to boost stock indexes or represents the start of a more fundamental overhaul of China's IPO system.
Regulatory officials couldn't be reached for comment. Mr. Guo, the commission chairman, hasn't commented on the crackdown.
A big part of the problem is an IPO approval system, administered by armies of local bureaucrats, that has long favored influential but often poorly managed state-run companies and discriminated against more innovative and ambitious private firms. The results haven't been pretty.
As of Tuesday, 64 of the 154 companies that were listed last year were trading below their IPO prices, according to data tracker CapitalVue. Moreover, an unprecedented 873 companies now clog the approval pipeline for initial public offerings.
In comparison, a total of 123 companies have publicly filed with the Securities and Exchange Commission to launch IPOs in the U.S., according to Ernst & Young. An unknown number of companies covered by the Jumpstart
Our Business Startups Act have also privately filed for offerings.
U.S. companies typically file about six months before their public debuts, according to Ernst & Young, but some companies file and then wait for years before launching their IPOs.
The waiting period for Chinese IPO aspirants is much less predictable, varying from a few months for certain major state-owned enterprises to years for smaller, private firms.
Winnowing out the worst candidates has given some hope to stock investors. Some analysts believe as many as half the companies on the list could be rejected in the crackdown.
Those expectations were one of the factors, including a smooth handover of China's top leadership and a steady economic recovery, that have helped boost the Shanghai Composite Index 2.5% this year, said Zhang Zhizhou, an analyst with CEBM Group Ltd., an investment advisory firm.
The index slid 3% on Thursday amid signs that monetary conditions at home and abroad could tighten, even as growth in China is expected to quicken this year.
Gary Rieschel, founder and managing director of Qiming Venture Partners, a venture-capital firm that invests in companies including IPO aspirants, said he believed the campaign is "the beginning of structural reforms that will focus on improving the listing process."
In part to boost confidence in the stock market, the regulator has since last year launched a series of longer-term overhauls, including developing a more rigorous delisting system, encouraging listed companies to boost dividend payouts and expanding the pool and investment quotas of foreign investors.
"Generally speaking, the CSRC is finding the right direction…but the key is execution and being fair to everyone.

Sure there will be political pressure in China but the person in charge needs to strike a balance between pressures from interest groups and carrying out some real reforms," said Eddie Chow, portfolio manager at Templeton
Emerging Markets Group, whose team manages $53 billion in assets.
He said the commission's decision shouldn't be affected by whether a company is a state-owned entity or private firm.
"The capital market will naturally give higher valuations to companies with better dynamics," he said.
China's IPO approval process is notoriously cumbersome. A company needs to secure the green light from local authorities, typically provincial governments, as well as government ministries before it submits its application to regulators for a lengthy review.
While major state-owned enterprises—including the Big Four state banks—have enjoyed express service, smaller firms can wait for years to get listed.
The main difference between a listing in China and overseas markets such as the U.S. is that China has an approval-based system, in which the regulator decides who and when a new listing should be, while in the U.S. and Hong Kong, market forces have the final say, according to Edmond Chan, a partner with PwC Capital Market
Services Group in Hong Kong.
As the IPO process wears on, the business environment for companies can change significantly.
When Zunyi Titanium yanked its application to list, its underwriter said the local government had taken away the firm's offices and factories for new development projects. A recent prospectus for a bond issue disclosed that it recorded a loss in the first nine months of last year.
Officials at Zunyi Titanium and the local government couldn't be reached for comment despite numerous requests.
—Amy Li and Telis Demos contributed to this article.
Write to Shen Hong at hong.shen@dowjones.com
By Josh Noble in Hong Kong
February 21, 2013 http://www.ft.com/intl/cms/s/0/fc8908be-7bfd-11e2-99f0-00144feabdc0.html#axzz2LOXtWrY7
On the face of it, Hong Kong’s market for new equity listings has perked up. Deal volume in the year to date is at its highest since 2010, while retail investors have finally returned. But, with many of the recent deals faring poorly in secondary trading, and China’s equity rally losing steam, the market for new offerings may stall before it gets out of first gear.
So far this year, Hong Kong has seen six deals, which have together raised $788m, compared with $452m by this time last year and $256m in 2011, according to Dealogic. Retail activity has also picked up, with heavy oversubscription in a number of this year’s offerings.
Hong Kong was the world’s top listing venue in 2009, 2010 and 2011. But last year it sank to fourth in the global rankings, only narrowly edging out Kuala Lumpur, the Malaysian capital, amid concerns about the Chinese economy.

“However you want to look at it, 2012 was a bad year. A lot of companies that couldn’t list last year, we expect them to come back and try again”, says Paul Lau, partner at KPMG China, who forecasts IPO volumes to reach
$16.1bn in 2013, up from $11.4bn in 2012.
Most already see signs of improvement.
“The IPO market will be more active now that [Chinese] new year is behind us,” says Jeff Zajkowski, head of Asia
Pacific equity capital markets at JPMorgan. “The second quarter is going to be pretty good.”
There are two sizeable Hong Kong deals in the works. Chinese brokerage Galaxy Securities is planning to raise around $1.5bn, while oil company Sinopec aims to list its engineering unit for a similar amount. Both deals are expected to go to market before June, and their performance is likely to be seen as a litmus test.
Meanwhile, bigger deals are getting away elsewhere in Asia. Mapletree is due to list a China-related real estate investment trust in Singapore, which is tipped to raise around $1.3bn. Bankers see the Mapletree listing as an important boost to Asia’s IPO market, which could provide a catalyst for similar deals in Hong Kong.
In Indonesia, CVC-backed Matahari is preparing a share placement – which will in effect serve as a re-IPO due to the tiny existing float of shares on the Jakarta exchange – that could raise up to $1.5bn.
The last big deal in the region, PICC’s $3.1bn debut in December, has since risen 24 per cent, providing a further boost to sentiment.
Issuers now “feel comfortable doing a deal” and are more confident of success, says Damien Brosnan, head of
Asia equity syndicate at UBS. Instead, their focus has shifted to timing, and how – amid rallying markets – to achieve the best price.
This “wait and see” mentality, and the upcoming earnings season, go some way to explaining why new IPO applications have failed to materialise in the days following Chinese new year.
Global uncertainties, such as the selection of a new Bank of Japan governor and the US sequestration, may also have given potential issuers cause to hold fire, says Rupert Mitchell, head of equity syndicate at Citi.
But there are other factors that could further delay the hoped-for rebound in activity.
Though retail investors have returned to the market, they have not been well rewarded. Of the six deals to take place so far this year in Hong Kong, only one – the $104m listing of Time Watch – is still above its issue price. The others range from a fall of 4 per cent, to a dive of more than 30 per cent.
“People will pile into deals when the risk-on button is on,” says one banker. “Everyone is ready to hit the risk-off button in a hurry.”
Concerns are also mounting that the Chinese equity rally is running aground. Following a 2.2 per cent slide on
Thursday, the Hang Seng China enterprises index – mainland companies listed in Hong Kong – is now in negative territory for the year, having risen 27 per cent from last September to the end of 2012.
“There are a number of issuers in the wings waiting to come to Hong Kong,” says Alexis Adamczyk, co-head of equity capital markets for Asia Pacific at HSBC. “The next two months are going to be important. We need the
Hong Kong market to be supportive to push these deals through.”
One hopeful sign is the increasing interest in equities from private banking clients, who were heavily biased towards fixed income last year. In recent weeks such investors have been looking to commit new money to stocks, which could provide support to the IPO market.

“It’s not a flood yet, but it is a noticeable change. The clear trend is for inflows into equity,” said Mr Zajkowski.
Longer term, there are a number of supportive factors. The mainland Chinese equity market remains closed to new listings, despite a backlog of more than 800 companies. China’s regulators have been loosening restrictions in order to make it easier for mainland companies to seek overseas listings. Much of that business is expected to come to Hong Kong.
“We’re seeing more and more IPO inquiries from Chinese companies looking to list in Hong Kong”, says Mr Lau, including some that had previously sought a Shanghai listing.
Online
February 21, 2013 http://blogs.wsj.com/chinarealtime/2013/02/21/plenty-of-productivity-still-in-store-for-china-economist-says/
?mod=WSJBlog
Nearly everyone now agrees that the days when China could enjoy double-digit growth year after year are behind us – but there is still plenty of room for debate about the country’s potential growth rate.
Referred to in economist speak as the trend rate, the potential growth rate matters because it represents the maximum speed an economy can grow without generating excessive inflation.
Louis Kuijs, a former World Bank and IMF economist now at RBS, lays out the case for a gentle moderation in the trend rate for China in a Feb. 21 report.
He plumps for a figure of around 8.5% in the next few years, falling to 7% by 2020 and 5% or 5.5% by 2030. He isn’t too worried that the size of China’s workforce seems to be near or at its peak, and will soon start shrinking as the Mao-era baby boomers retire.
China may have drawn the last of its demographic dividend, but productivity gains have a lot further to run, Mr.
Kuijs says.
Some of those gains will come directly from the continuing flow of surplus farm workers into the industrial and service sectors, where productivity is much higher than in agriculture. Mr. Kuijs calculates this reallocation of workers added an average 1.4 percentage points a year to potential GDP growth from 1995 to 2012.
But aside from this benefit of workers switching to more productive sectors, he adds, pure productivity gains within sectors were much more important, adding 7.0 percentage points a year. Considering that a smaller workforce may shave half a percentage point off GDP growth each year from 2016 to 2020, it looks like higher productivity can easily compensate for a shrinking workforce.
Improvements in productivity come from things like investment, education, better infrastructure and technological progress – the kind of things China is good at, according to Mr. Kuijs.
Investment, which at 45% makes up an exceptionally high proportion of the country’s GDP, will eventually give way to higher consumption – but that is bound to happen only slowly, Mr. Kuijs predicts.
Overinvestment is a perpetual worry for China bears, who fear the country’s capital-intensive development model is unsustainable. Those fears have only intensified since the stimulus program of 2008 to 2010, which saw a huge wave of development spearheaded by local governments, each one keen to have taller buildings and wider highways than its neighbors.

Mr. Kuijs is agnostic on the idea that the stimulus wasted capital on a huge scale, saying it is still too early to tell.
In any case, he says he thinks politics will get in the way of any rapid reduction in the level of investment, despite the government’s stated goal of rebalancing the economy toward consumption.
He is skeptical that the current leadership transition, with Xi Jinping taking over from Hu Jintao as president last year and Li Keqiang set to pick up Wen Jiabao’s role as premier, will lead to a dramatic change in the pace of reform.
Financial reform is ticking along, with some liberalization of interest rates last year, and measures to raise minimum wages, spend more on welfare and help farm workers move into the cities all go down well with the masses. But there are still some political red lines. Those who hope to see a more level playing field between state-owned companies and the private sector had better not hold their breath.
-Richard Silk
February 21, 2013 http://blogs.wsj.com/chinarealtime/2013/02/21/hong-kong-property-investors-turn-to-hotel-loophole/?mod=
WSJBlog
Frustrated by dizzyingly high home prices in Hong Kong, investors are buying up something new: hotel rooms.
This week, news that local developer Cheung Kong was selling all 360 units in its Apex Horizon hotel prompted hundreds of buyers to line up for the chance to plunk down cash. The units were all sold, netting the company—controlled by local billionaire Li Ka-shing—nearly $181 million.
Two-bedroom units sold for prices starting at $425,000, a good value for the area, despite rules that prohibit redecoration or other alterations to the unit, according to Ricacorp Properties’ Andy Jim. “It’s all investment,” said
Mr. Jim, adding that speculators were keen to jump on a low-priced opportunity.
In addition to restrictions on redecoration, a Cheung Kong spokesman said, occupants are also barred from flame or barbecue cooking.
Apart from the low price, rooms in the hotel might not seem to be the most obvious investment opportunity, given the Apex Horizon’s location near the city’s container port in Kwai Chung, an industrial area filled with large swathes of public housing.
But the Apex Horizon sales come on the heels of government efforts to tame the city’s property market, which has seen residential prices double since late 2008. In October, Chief Executive Leung Chun-ying slapped the city’s most draconian taxes on transactions yet, levying a 15% stamp duty on residential properties sold to non-locals, and a 20% tax—intended to deter speculators—on residential properties resold within a short period of time.
Since the Apex Horizon hotel is a commercial property, a Cheung Kong spokesman said, buyers aren’t liable for such additional duties.
Still, Vincent Ho, vice president of the Hong Kong Institute of Surveyors, said buyers are rushing into murky legal territory and opening themselves up to potential prosecution through these purchases, which he called unprecedented in the city. A number of local politicians have also echoed this concern. The government says that if a buyer tries to occupy a unit as though it was a normal residence, they could be subject to fines of $13,000 and

jail stints of up to two years.
Mr. Ho said that the government will have trouble ensuring whether owners of the units are using the hotel rooms as regular residences. Still, he says, “They may need to do so. They can do things like keep a very close surveillance of the building.” Mr. Ho says he doesn’t anticipate many other developers will try to mimic Cheung
Kong’s sales tactics—at least not until the legal gray areas associated with such sales are clarified.
Since the government enacted its latest round of cooling measures, investors have poured money into everything from parking spots to shops, as well as the industrial sector. In the last quarter of 2012, the number of strata-title deals—in which buyers purchase individual units of a building—leapt to highs not seen since 1999, according to brokerage Colliers.
– Te-Ping Chen. Follow her on Twitter @tepingchen.
February 21, 2013 http://blogs.wsj.com/chinarealtime/2013/02/21/chinese-companies-getting-good-at-attracting-talent/?mod=
WSJBlog
As China’s economic clout grows, its largest companies are giving foreign firms a run for their money in securing the best talent in the country.
Though the hunt for the best employees remains a challenge for businesses world-wide, the scenario is no less competitive in China, General Electric Vice Chairman John Rice said in an interview at The Wall Street Journal’s
Unleashing Innovation conference.
“In China, in particular, there has been an emergence in the last 10 years of local champions, really good quality local companies that now we have to compete with for people, so we’ve got to be at the top of our game…if we are we can win our share, but it’s definitely competitive,” he said.
Mr. Rice added that Chinese workers value the opportunity for professional growth, so training and building relationships with schools could help in attracting talent.
Though China has become known for cheap knock-offs of everything from Hermes scarves to iPhones, local businesses can be just as innovative as their foreign competitors, said Gary Wang, founder of Chinese video site
Tudou.com.
Mr. Wang said ideas from China’s innovators are “up there along with Silicon Valley startups,” though fledgling businesses often fail in the execution.
“The percentage of success relative to similar businesses in the U.S. is much lower but if you look at the ideas, they’re all briliant ideas…I think it’s really more a matter of execution that’s lacking,” he said.
February 21, 2013
By Michael Dunne http://blogs.wsj.com/chinarealtime/2013/02/21/electric-vehicles-going-out-of-style-not-in-china/?mod=WSJBl

og
What is China seeing in electric vehicles that the rest of the world is missing?
Chinese car companies are behaving like they really know something. If history is any guide, the answer could reside with Xi Jinping and a future master plan for cars and energy in China.
This week, Geely Automobile, Dongfeng Motors and other Chinese automotive firms are bidding to take over
Fisker, maker of the Karma premium electric sedan. And Buffett-owned BYD plans to launch the Denza — a brand new electric car developed in a joint venture with Daimler – later this year.
China’s Wanxiang Group received U.S. government approval just last month to purchase A123 Systems AONEQ
-10.81% for $256 million. Before bankruptcy, A123 Systems had been America’s most advanced developer of batteries for electric cars and a recipient of $133 million in grants from the federal government.
“The future is bright for A123,” Pin Ni, president of Wanxiang America Corp., said last month. “It is a company with exceptional talent and potential.”
China’s relentless pursuit of electric cars looks curious because it comes at a time when confidence in electric cars in the U.S. and elsewhere appears to be hitting new lows.
Electric vehicle sales remain a mere drop in the automotive sales ocean. For all the news headlines they generate, electrics still account for a tiny fraction of one percent of cars bought each year. Private buyers just are not convinced yet.
Take for example the Leaf, Nissan’s highly touted all-electric car. Despite aggressive marketing, the Leaf managed to win over just 9,819 customers in 2012 – less than half of the annual sales target. “It was a disappointment for us,” said Carlos Ghosn, Nissan’s respected CEO.
Electrics got another black eye this month when a New York Times test-drive of the highly acclaimed Tesla Model
S resulted into the car having to be towed to a nearby station after it lost power.
Holding back sales are two stubborn shortcomings:
First, batteries can add up to $10,000 to the cost of a conventional sedan. Case in point: The gasoline-powered
Chevrolet Cruze outsells the electric–powered Chevrolet Volt by 10 to 1 even though they are built on the same basic platform.
Second is range anxiety. If you get an edgy feeling when your mobile phone battery flashes low, imagine running out of juice on a cold winter day on a highway between cities, as happened with the Tesla.
So, how to explain China’s accelerated pursuit of electric vehicle technology? Companies like Geely, BYD and
Wanxiang are essentially betting that Beijing will follow through on its promise to have five million electric vehicles on Chinese roads by 2020.
Officials in the capital have a strong desire to avoid American-like addiction to oil from volatile regions like the
Middle East. And Chinese citizens are growing increasingly irate as sections of the country get blanketed with hazardous air pollution.
To move beyond oil into electrics, look for Xi’s lieutenants to start with buses, taxis and government fleets — vehicles that tend to have fixed routes that can be served easily by a set of local charging stations. Cities like
Beijing, Shanghai and Shenzhen can ramp up demand for electrics with a single stroke of the pen because they directly own vehicle fleets that number in the tens of thousands.

More pieces of the puzzle start to come together when you realize that the Shanghai Auto Industry Corporation
(which is owned by the city of Shanghai) formed a joint venture in 2009 with now Chinese-owned A123 Systems.
This brings the market, the battery maker and the vehicle producer into a tight circle around Shanghai.
For most countries in the world, gasoline engines prevail over electrics because of their superior range and affordability. The market has the final word.
But China is different. The world’s second-largest economy can go much further to induce electric vehicle growth with generous rebates (electric vehicle buyers in Beijing now qualify for a $9,600 subsidy), rapid installation of charging stations in key cities and, most powerful of all, direct purchase mandates.
As the Chinese like to say about business in the People’s Republic: “Look at the mayor, not the market.”
A leading expert on China’s auto industry, Michael Dunne has been consulting to global and Chinese automakers in China for over two decades. He speaks fluent Mandarin and has lived in China, on and off, since 1986. He is the author of “American Wheels, Chinese Roads: The Story of General Motors GM -2.18% in China.” Follow him on
Twitter @DunneCarsAsia.
February 22, 2013 http://www.chinatechnews.com/2013/02/22/19141-chinas-velo-didatuan-announce-integration
Chinese coupon provider Velo and group buying website Didatuan.com announced via internal emails that the two companies have completed a formal integration.
After the integration, a new company will be established and maintain the Velo brand. Song Zhongjie, former chief executive officer of Didatuan.com, has been appointed chief executive officer of the new company.
According to Didatuan.com, Velo and Didatuan will implement independent operations with their respective brands after the integration. The detailed business integration plan will be released soon. Meanwhile, the company said former Velo executives' positions in the new company are yet to be decided.
Velo is headquartered in Shanghai, while Didatuan.com is headquartered in Beijing. The two companies have respective offices in major Chinese cities. After the integration, the offices of the two companies will not be relocated.
Founded in 2006, Velo is an offline coupon information terminal operator. It focuses on offline coupon terminal deployment. Users can gain coupon information from its terminals and the company charges advertising fees from vendors. At present, Velo claims to have over five million users across China and it had gained three rounds of investments so far.
Founded in 2010, Didatuan.com once gained investment from IDG Capital Partners and currently claims about ten million registered users. In addition, statistics from the Chinese group buying navigation site Tuan800.com showed that in December 2012, the user base of Didatuan.com ranked eighth among Chinese group buying websites.
Posted by Michael on February 21, 2013 http://www.mpettis.com/2013/02/21/a-brief-history-of-the-chinese-growth-model/

As regular readers know I have often argued that the Chinese development model is an old one, and can trace its roots at least as far back as the “American System” of the 1820s and 1830s. This “system” was itself based primarily on the works of the brilliant first US Secretary of the Treasury Alexander Hamilton (see especially his report to the Congress on manufacturing and his two reports on public credit and banks).
This development model was also implicitly part of the debate in France that led to one of the most important financial innovations of the 19th Century, the creation of the Crédit Mobilier in France in 1852. The debate concerned one of the great economic questions in France, especially after the defeat of Napoleon: why had
England, a country that one hundred years earlier had been poorer than France, managed to surpass France and all other countries economically and technologically, even though in the pure sciences and engineering the French were at least the equal to the British and perhaps superior?
One obvious reason had to do with the financing of the commercial application of new technology. The French banking system, dominated by rentiers and the landed aristocracy, seemed to specialize in protecting savers, in part by mobilizing capital and investing in gold or in government obligations. The English banking system did this too, but it also seemed much more willing to finance infrastructure and manufacturing capacity.
In fact more generally I have argued that the main reason “industrial revolutions” have occurred largely in
England and the United States is because industrial revolutions are not driven by scientific developments but rather by the commercial application of scientific developments. For this to happen it seems that a robust financing system is key. England, and the US later, benefitted from a financial system that seemed to do better than others in financing new infrastructure and technological ventures.
A well-functioning financial system, one that allocates capital to new ventures, in other words, may have been the key difference between England and France at the end of the 18th Century, and for this some historians blame the brilliant but erratic John Law and his Mississippi Bubble. This concern about the inefficient French banking system led to the creation of Crédit Mobilier, whose role was to break the constraints of the existing Rothschild-dominated financial system, mobilize the savings of the middle classes, and allocate these savings towards financial projects, such as infrastructure development, that would, over the longer term lead to more rapid economic development.
I will come back to this issue of the financial system, but the point here is that there have been many versions of this development model, and at least two major economic theoreticians – the German Friedrich List in the
19thCentury and the Ukrainian-American Alexander Gershenkron in the 20th – have formally described variations on the investment-driven growth model. Michael Hudson, one of my favorite economic thinkers, wrote twenty years ago a brilliant and provocative book (Trade, Development and Foreign Debt), which traces many aspects of this model to debates in England at the end of the 18th Century.
Aside from Alexander Hamilton, its intellectual and political godfather, the main proponents of the American
System were figures like Henry Clay, Henry and Matthew Cary, John Calhoun, and even Abraham Lincoln himself.
Their vision of economic policymaking was looked down upon as naïve and even foolish by most American academic economists – schooled as they were in the laissez faire doctrines then fashionable in England – but I think it is hard for any economic historian not to feel relieved that neither the academics nor the Jeffersonian and
Jacksonian factions had the clout to force “good” economic policy onto US development. America got rich in part by doing the wrong things.
Many countries in which the academics had real influence at the time – Chile in the 1860s under the tutelage of the famous French economist Jean Gustave Courcelle-Seneuil, for example, or Mexico at the turn of the century under the expert guidance of José Y. Limantour, finance minister under President Porfirio Díaz – never achieved the kind of growth that the less capable student-countries experienced. I write about some of these cases in my
1996 article for Foreign Affairs, for anyone who might be interested.
To get back to the main story, in another, also brilliant and provocative, book (America’s Protectionist Take-off,
1815-1914) Michael Hudson refers to a leading member of the second generation of proponents of the American

System, a Columbia University graduate by the name of E. Pechine Smith. What is especially interesting about
Smith in the context of China is that in 1872 he was invited to Japan to serve as advisor to the Mikado, becoming the first of a stream of economists and lawyers – most of them proponents of the American System – to advise and help shape Japanese development after the Meiji restoration.
Smith thus creates a direct link between the American System and the Chinese development model. It was of course the post-War Japanese development model, itself based on Japan’s experience of economic development during and after the Meiji restoration, that became the standard for policymakers throughout East Asia and China.
I think of China’s growth model as merely a more muscular version of the Japanese or East Asian growth model, which is itself partly based on the American experience.
There were three key elements of the American System. Historian Michael Lind, in one of his economic histories of the United States, described them as:
· infant industry tariffs
· internal improvements, and
· a sound system of national finance
These three elements are at the heart, explicitly or implicitly, of every variation of the investment-led development model adopted by number of countries in the last century – including Germany in the 1930s, the
USSR in the early Cold War period, Brazil during the Brazilian miracle, South Korea after the Korean War, Japan before 1990, and China today, to name just the most important and obvious cases. For this reason I think it makes sense to discuss each of them in a little more detail.
Infant industry tariffs
The “infant industry” argument is fairly well known. I believe Alexander Hamilton was the first person to use the phrase, and the reasoning behind his thinking was straightforward. American manufacturing could not compete with the far superior British, and according to the then- (and now) fashionable economic theories based on Adam
Smith and David Ricardo, the implications for trade policy were obvious. Americans should specialize in areas where they were economically superior to the British – agriculture, for the most part – and economic policy should consist of converting US agriculture to the production of cash crops – tobacco, rice, sugar, wheat and, most importantly, cotton – maximizing that production and exchanging them for cheaper and superior British manufactured items.
In this way, as Ricardo brilliantly proved, and assuming a static distribution of comparative advantages, with each country specializing in its comparative advantage, global production would be maximized and through trade both the British and the Americans would be better off. While most academic US economists and the commodity-producing South embraced free trade, Alexander Hamilton and his followers, mainly in the northeast, did not (in fact differing views over free trade as well as over slavery and state rights were at the heart of the
North-South conflict that led eventually to the Civil War).
Hamilton was convinced that it was important for the US to develop its own manufacturing base because, as he explained in his Congressional report in 1791, he believed that productivity growth was likely to be much higher in manufacturing than in agriculture or mineral extraction. Contrary to David Ricardo, in other words, Hamilton believed that comparative advantage was not static and could be forced to change in ways that benefitted less productive countries. What is more, he thought manufacturing could employ a greater variety of people and was not subject to seasonal fluctuations or fluctuations in access to minerals.
Given much higher British efficiency and productivity, which translated into much lower prices even with higher transportation costs, how could Americans compete? They could do it the same way the British did to compete with the superior Dutch a century earlier. The US had to impose tariffs and other measures to raise the cost of

foreign manufacturers sufficiently to allow their American counterparts to undersell them in the US market. In addition Americans had to acquire as much British technological expertise and capacity as possible (which usually happened, I should add, in the form of intellectual property theft).
This the US did, and in fact I believe every country that has managed the transition from underdeveloped to developed country status (with, perhaps, the exception of one or two trading entrepôts like Singapore and Hong
Kong, although even this is debatable), including Germany, Japan, and Korea, has done it behind high explicit or implicit trade tariffs and stolen intellectual property. The idea that countries get rich under conditions of free trade has very little historical support, and it is far more likely that rich countries discover the benefits of free trade only after they get rich, while poor countries that embrace free trade too eagerly (think of Colombia and Chile in the late 19th century, who were stellar students of economic orthodoxy) almost never get rich unless, like Haiti in the
18th Century or Kuwait today, they are massive exporters of a very valuable commodity (sugar, in the case of
Haiti, which was the richest country in the world per capita during a good part of the late 18th Century).
But rather than just embrace protection I would add that there is one very important caveat. Many countries have protected their infant industries, and often for many decades, and yet very few have made the transition to developed country status. Understanding why protection “works” in some cases and not in others might have very important implications for China. I won’t pretend to have answered this question fully but I suspect the difference between the countries that saw such rapid productivity growth behind infant industry protection that they were eventually able to compete on their own, and those that didn’t, may have had to do with the structure of domestic competition.
Specifically, it is not enough to protect industry from foreign competition. There must be a spur to domestic innovation, and this spur is probably competition that leads to advances in productivity and management organization. I would argue, for example, that countries that protected domestic industry but allowed their domestic markets to be captured and dominated by national champions were never likely to develop in the way the United States in the 19th Century.
I would also argue that companies that receive substantial subsidies from the state also fail to develop in the necessary way because rather than force management to improve economic efficiency as a way of overcoming their domestic rivals, these countries encourage managers to compete by trying to gain greater access to those subsidies. Why innovate when it is far more profitable to demand greater subsidies, especially when subsidized companies can easily put innovative companies out of business? Last April, for example, I wrote about plans by
Wuhan Iron & Steel, China’s fourth-largest steel producer, to invest $4.7 billion in the pork production industry.
The company’s management argued that they could compete with traditional agro-businesses not because steel makers were somehow more efficient than farmers, but rather because their size and clout made it easier for them to get cheap capital and to get government approvals. They were able to invest in an industry they knew little about, in other words, because they knew they could extract economic rent. This clearly is not a good use of protection.
The lessons for China, if I am right, are that China should forego the idea of nurturing national champions and should instead encourage brutal domestic competition. Beijing should also eliminate subsidies to production, the most important being cheap and unlimited credit, because senior managers of Chinese companies rationally spend more time on increasing access to these subsidies than on innovation, a subject on which, in spite of the almost absurd hype of recent years, China fares very, very poorly.
There is nothing wrong with protecting domestic industry, but the point is to create an incentive structure that forces increasing efficiency behind barriers of protection. The difficulty, of course, is that trade barriers and other forms of subsidy and protection can become highly addictive, and the beneficiaries, especially if they are national champions, can become politically very powerful. In that case they are likely to work actively both to maintain protection and to limit efficiency-enhancing domestic competition. It was Friedrich Engels, not often seen as a champion of capitalist competition, writing to Edward Bernstein in 1881, who said that “the worst of protection is that when you once have got it you cannot easily get rid of it.”

Internal improvements
The second element of the American System was internal improvement, which today we would probably call infrastructure spending. Proponents of the American System demanded that the national and state governments design, finance and construct canals, bridges, ports, railroads, toll roads, and a wide variety of communication and transportation facilities that would allow businesses to operate more efficiently and profitably. In some cases these projects were paid for directly (tolls, for example) and in other cases they were paid for tax revenues generated by higher levels of economic activity.
It is easy to make a case for state involvement in infrastructure investment. The costs of infrastructure can be very high, while even if the benefits are much higher they are likely to be diffused throughout the economy, making it hard for any individual company to justify absorbing the costs of investment. In this case the state should fund infrastructure investment and pay for it through the higher taxes generated by greater economic activity.
For me the interesting question, especially in the Chinese context, is not whether the state should build infrastructure but rather how much it should build. In fact this is one of the greatest sources of confusion in the whole China debate. Most China bulls implicitly assume that infrastructure spending is always good and the optimal amount of infrastructure is more or less the same for every country, which is what allows them to compare China’s per capita capital stock with that of the US and Japan and conclude that China still has a huge amount of investing to do because its capital stock per capita is so much lower.
But this is completely wrong, and even nonsensical. Infrastructure investment is like any other investment in that it is only economically justified if the total economic value created by the investment exceeds the total economic cost associated with that investment If a country spends more on infrastructure than the resulting increase in productivity, more infrastructure makes it poorer, not richer.
In China we have problems with both sides of the equation. First, we don’t know what the true economic cost of investment in China might be. In order to calculate the true cost we need to add not just the direct costs but also all the implicit and explicit subsidies, most of which are hidden or hard to calculate.
The most important of these subsidies tends to be the interest rate subsidy, and this can be substantial. If interest rates in China are set artificially low by 5 percentage points, for example, which is a reasonable estimate, an investment of $100 million receives an additional subsidy of $5 million for every year that the loan funding the investment is outstanding – and loans are almost never repaid in China. Over ten to twenty years of outstanding debt this can add 30-40% to the initial cost of the investment. This means that the recognized cost of an infrastructure project is much lower than the true economic cost, with the difference being buried in explicit and implicit subsidies.
But the bigger problem is in the value created by the investment. We can think of the value of infrastructure primarily as a function of the value of labor saved. In countries with very low levels of productivity, each hour of labor saved is less valuable than each hour saved in countries with high levels of productivity. For this reason less productive countries should have much lower capital stock per capita than more productive countries.
This should be obvious, but it seems that often it isn’t. When analysts point to high quality infrastructure in China whose quality exceeds comparable infrastructure in rich countries, this is not necessarily a good thing. It might just be an example of the amount of waste you can achieve when spending is heavily subsidized, when there are strong political (or pecuniary) incentives for expanding investment, and when there is limited transparency and accountability.
Other things matter too. If a country has low levels of social capital – if it is hard to set up a business, if less efficient businesses with government connections can successfully compete with more efficient businesses without government connections, if the legal and political structure creates problems in corporate governance

(the “agency” problem, especially), if the legal framework is weak, if property rights are not respected, if intellectual property can easily be lost – then much infrastructure spending is likely to be wasted.
In fact it turns that it may be far more efficient to focus on improving, say, the legal framework than to build more airports, even though (and perhaps because) building airports generates more growth (and wealth for the politically connected) today. Weak social capital becomes a constraint on the ability to extract value from infrastructure, and this constraint is very high in poor countries with weak institutional frameworks,
Journey to the West
This issue of how much investment is enough is a very important topic that deserves much more discussion, but
I think there is a very good example of why we need to be worried about how useful additional infrastructure investment in China might be. This shows up most clearly in China’s push to create development in the western part of the country.
Often when I question the economic value of China’s push to the western, poorer parts of the country (by the way economic value is not the same as social or political value, the latter of which may nonetheless justify projects that are not economically viable) I am almost always treated with the story of the American West. In the 19th
Century, as everyone knows, the US went west, and most economists agree that this made economic sense for the country and was an important part of the process that led it to becoming the wealthiest and most productive country in history.
But we must be very careful about drawing lessons from the American experience. The US is not the only country in history that “went West”. Several other countries did so too, but for some reason we ignore their experiences altogether when we discuss China. Brazil, for example, went west and north in the 1950s and 1960s as it expanded from the rich southern coastal areas into the Amazon and the Caribbean. The Soviet Union did something similar after the Second World War as it went east into Siberia.
Most economists today agree that the Brazilian and Soviet experiences were economically unsuccessful and left those countries burdened with such enormous debts that they were at least partly to blame for Brazil’s debt crisis in the 1980s and the collapse of the Soviet economy in the 1970s. It turns out, in other words, that there are both successful and unsuccessful precedents for China’s going west.
What are the differences and how do they apply to China? Again, I can’t say that I can fully understand or explain them, but one major difference leaps out. In the US it was private individuals, seeking profitable opportunities, that led the move into the American West, and government investment followed. In Brazil and the Soviet Union, however, there was little incentive for private individuals to lead the process. It was the government that led, and private businesses followed only because government spending created great opportunities for profit. Once government spending stopped, so did business.
My very preliminary conclusion is that large-scale government ambitions allied to strong political motivation and funded by cheap and easy access to credit can lead very easily to the wrong kinds of investment programs. The
US experiences of government investment in the 19th Century, in other words, may be a very poor precedent for understanding China’s current policy of increasing investment spending, especially in the poor western part of the country.
Brazil and the Soviet Union may be much better precedents. At the very least these gloomier experiences should not be ignored when we think of China’s policies. “Going West” isn’t always a great idea from an economic point of view and has led to at least as many, and probably more, bad outcomes as good outcomes. It is not clear why these lessons cannot possibly be applied to China.
A sound system of national finance
The third pillar of the American System was the creation of an appropriate financial system. But what does that

mean? It is hard to describe the American financial system in the 19th Century as stable and well-functioning. In fact the American banking system was chaotic, prone to crises, mismanaged, and often fraudulent, and yet the US grew very rapidly during that time.
China’s banking system, on the other hand, is far more stable – in fact the favorite cliché of Chinese bankers is that while the system may not be efficient, it is very stable. What makes the Chinese banking system stable, of course, is that it is widely believed that the government stands fully behind the banks. It makes no difference, in other words, how weak the credit allocation decision is, because by controlling credit and the deposit rate, and by limiting alternatives for Chinese savers, the government guarantees both the liquidity and solvency of the banking system. As long as government credibility is intact, the banking system is unlikely to fail.
In that sense you can easily make the case the Chinese banks today are sounder than American banks in the 19th century. This might bode well for the future of the financial system in the short term, but in the long term it is not clear to me that monetary soundness and financial stability are necessarily correlated with more rapid growth.
I say this because I have seen no evidence that countries with sound and conservative financial systems grow faster than countries with looser and riskier financial systems (although they do seem to have fewer financial crises). In fact I have more than once made reference to Belgian bank historian Raymond de Roover’s provocative and profound comment that “perhaps one could say that reckless banking, while causing many losses to creditors, speeded up the economic development of the United States, while sound banking may have retarded the economic development of Canada.” Canada was blessed (or cursed, according to de Roover) in the 19thCentury with being part of the Britain, and so inheriting England’s much better managed financial system.
“Reckless” banking is hard to define, and certainly it is easy to make the case the Chinese banking has been reckless, especially in recent years, but it is a very different type of recklessness. Once again I cannot say with complete confidence how China’s version of its development model differs meaningfully with the American
System on the subject of banking, but I would suggest there are at least two very important differences.
First, the American financial system then (and now) has been very good at providing money to risky new ventures.
It provides capital on the basis not only of asset value but, more importantly, on future growth expectations, and risk-taking has been actively rewarded In China it isn’t clear that this is the case at all. Chinese banks favor large, well-connected, and often inefficient giants at the expense of risk-takers.
Second, although both systems were prone to bad lending, the American banking system tended to correct very quickly – in the form of a crisis – and bad loans were written down and liquidated almost immediately. This was certainly painful in the sort term – especially if you were a depositor in the affected bank – but by writing down loans and liquidating assets three important objectives were achieved. Financial distress costs were quickly eliminated (writing down debt does that in ways I won’t get into because they are well-known and much discussed in corporate finance theory), capital allocation was driven by profitability, not by implicit guarantees, and assets were returned to economic usefulness quickly.
A classic example of the last of these objectives may be the response to the railway bubble of the 1860s. During and after the 1873 crisis, a number of railroads went bankrupt, including major lines like the Union Pacific and the
Northern Pacific, the latter of which even brought down Jay Cooke & Company, the leading financier of the US government during the Civil War. After the crisis some major railway bonds traded as low as 15-20% of their original face value, and so they were purchased and reorganized at huge discounts. The new buyers were consequently able to cut freight and passenger costs dramatically, in some cases by over 50%, while still earning more than enough to cover the costs of buying the railroads, and this led to a collapse in transportation costs in the US.
Liquidation, in other words, provides an important economic value to the economy. It allows assets to be re-priced, which creates a boost to the economy and prevents those assets from acting as a deadweight loss. If the railroads hadn’t been liquidated, in other words, any reduction in costs was likely to be minimal and the railroads would have been far less useful to the development of the US economy.

Comparing development models
This issue of the newsletter is long, and I plan to write about this a lot more in the future, but for now I think it makes sense to summarize some of the important points about the American System and other similar growth models, like the Chinese version.
1. Infant industry protection has worked to promote long-term development under certain conditions and has not worked under other conditions. I would argue that the key difference is that in the former case there were powerful forces that drove managerial and technological innovation and rapid growth in efficiency.
In the US case this seems to have been brutal domestic competition. If China wants to benefit from its own protection of infant industry, it is important that there be similar domestic drivers of innovation and efficiency.
Note that access to cheap capital cannot be such a driver, even though it is one of the main sources of Chinese competitiveness. Access to cheap capital is just another way to protect infant industries from foreign competition.
2. Every country that has become sustainably rich has had significant government investment in infrastructure, but not every country that has had significant government investment in infrastructure has become sustainably rich.On the contrary there are many cases of countries with extraordinarily high levels of infrastructure investment that have grown for a period and then faltered.
I would argue that the difference is almost certainly the extent of capital misallocation. In some countries it has been much easier for policymakers to drive capital expenditures, and in those countries it seems to have been relatively easy to waste investment. If this is the case in China, as I believe it is, the key issue for China is to rein in its spending and develop an alternative and better way to allocate capital.
The point is that there is a natural limit to infrastructure spending, and this limit is often imposed by institutional distortions in the market economy. When this natural limit is reached, more investment in infrastructure can be wealth destroying, not wealth enhancing, in which case it is far better to cut back on investment and to focus on reducing the institutional constraints to more productive use of capital, such as weak corporate governance and a weak legal framework. The pace of infrastructure investment cannot exceed the pace of institutional reform for very long without itself becoming a problem.
3. Any economy looking to achieve sustainable long-term growth must have a “good” financial system that allocates capital efficiently and rewards the correct level of risk-taking. It is hard to determine what the characteristics of a “good” financial system are, but we shouldn’t be too quick to assume that this has to do with stability.
What’s more, while obviously the capital allocation process is vitally important, I would also suggest that the liquidation of bad loans is just as important. Bad loans, as Japan showed us in the past two decades, can become a serious impediment to growth in part because financial distress distorts management incentives in the way widely understood and described in corporate finance theory and in part because they retard the process by which bad investment is absorbed by the economy.
4. One thing I have not discussed above is the role of wages. The American System was developed in opposition to the then-dominant economic theories of Adam Smith and David Ricardo, in part because classic
British economic theory seemed to imply that reductions in wages were positive for economic growth by making manufacturing more competitive in the international markets. A main focus of the American System, however, was to explain what policies the United States, with its much higher wages than in Europe at the time, had to engineer to generate rapid growth Sustaining high wages, in fact, became one of the key aspects of the American
System.
The Japanese version of this development model, as well as many of the various versions implemented in other countries throughout the 20th Century, shared its view of wages not with the American System but rather with

classic British economic theory. Rather than take steps to force up wages and keep them high – thereby both driving productivity growth and creating a large domestic consumption market for American producers – many of the later versions of the American System sought to repress growth in household income relative to total production as a way of improving international competitiveness. This is perhaps the main reason why the United
Sates, unlike many other countries that have implemented similar development strategies in the 20th Century, tended to run large current account deficits for much of the 19th Century
This different focus on whether high wages are to be encouraged or discouraged is, I believe – although very little discussed in the theoretical literature as far as I know – nonetheless perhaps the most important difference between the American development model and its many descendants in the 20th and 21st centuries. I would even argue, although I cannot prove it, that one consequence of this difference is that growth in demand tends to be more sustainable when it is balanced between growth in both consumption and investment.
In analyzing China’s growth in the past three decades we seem to forget that there have been many growth
“miracles” in the past two hundred years. Some have been sustainable and have led to developed country status but many, if not most, were ultimately unsustainable. Nearly all of the various versions have had some similar characteristics – most obviously infant industry protection, state-led investment in infrastructure, and a financial system that disproportionately favored producers at the expense of savers – but the way these characteristics played out were very different, in large part because the institutional structure of the economy and the financial sector created a very different set of incentives.
I would argue that in understanding China’s growth and its sustainability we need to have a clear understanding of why these characteristics worked in some cases and not in others. Most economists who focus on China seem to know little about economic history, and when they do, their knowledge tends to be limited to a very superficial understanding of US economic history. But there are many precedents for what is happening in China and not all suggest that further Chinese growth is inevitable.
On the contrary, the historical precedents should worry us. In most cases they suggest that China has a very difficult adjustment ahead of it and the closest parallels to its decades of miracle growth suggest unfavorable outcomes. Understanding why the growth model has succeeded in some few cases and failed in most will help us enormously in understanding China’s prospects.
Feb 22, 2013 by C. Custer http://www.techinasia.com/baidus-15-million-lawsuit-qihoo-360-headed-court/
It’s no secret that Baidu and Qihoo 360 aren’t friends. So it likely shouldn’t come as a surprise that Baidu’s $15 million lawsuit against Qihoo couldn’t be settled out of court between the two parties and is now headed into the court system for legal proceedings.
The dispute revolves around Baidu’s robots.txt files. Nearly all websites have robots.txt files that serve as a notification of what “spiders” — the web-crawling bots that search engines and other web services use to index websites — are allowed to crawl the site. This function exists to allow people to control where their sites are listed, and to protect their servers from being overrun by web-crawling spiders that have gone amok. Generally, if a spider sees in a website’s robots.txt file that it has been disallowed from indexing the site, it simply moves on to the next website without indexing the site in question.
But when Baidu added Qihoo’s spiders to robots.txt files on its services like Baike to stop Qihoo from making use of Baidu’s content, Qihoo apparently reprogrammed its spiders to ignore the robots.txt file and crawl Baidu’s site anyway. Baidu’s lawsuit contends that this constitutes a violation of industry practices and amounts to an illegal

seizure of Baidu’s intellectual property, and the company is seeking 100 million RMB ($15 million) in damages.
Speaking with the China Business News, a Qihoo representative characterized the robots.txt file as a good-faith request, not a hard-and-fast requirement. Qihoo also stated that content from Baidu Images, its Baike wikipedia service, Baidu Music, Baidu Knows, and more should not be considered Baidu’s intellectual property under copyright law because much of their content was submitted by users. (Not coincidentally, these are the same services Baidu is accusing Qihoo of using its web spiders to copy from).
It’s not clear what will happen with the lawsuit in court. The robots.txt file is not explicitly addressed in the law, but Baidu may be hoping to take Qihoo down with one of China’s commerce laws that, in rather vague language, suggests that companies must compete fairly and respect publicly-known industry standards. But it’s also possible that this lawsuit — not the first public spat in China’s web industry over a robots.txt file — could spur the government to clear things up once and for all by passing legislation that addresses the robots.txt file directly.
Baidu declined to comment on this story but did confirm to Tech in Asia the basic details of it were correct and that the case will indeed be heard by the court. We have also contacted Qihoo for comment and will update this story if we hear back.
(China Business News via Sina Tech, image source)
Feb 21, 2013 by Steven Millward http://www.techinasia.com/alibaba-tencent-approval-for-online-insurance-business-zhongan/
China’s insurance regulator has confirmed approval, say sources, of a major new online insurance joint-venture between two Chinese web giants. As was first proposed last August, the new business sees e-commerce company
Alibaba teaming up with social and gaming-oriented Tencent (HKG:0700), who – along with the country’s top insurer, PingAn (HKG:2318) – will soon launch this online-only joint-venture that will be called ZhongAn.
Neither Tencent nor Alibaba have commented on the apparent approval, pending official word from the China
Insurance Regulatory Commission (CIRC) itself.
Unlike traditional insurers – like PingAn – the forthcoming ZhongAn company will not open brick-and-mortar stores across China. The new business will reportedly focus on liability and guarantee insurance, such as for homes and possessions. It’s not clear how much of a financial investment this entails.
Alibaba, which runs online malls like Tmall and Taobao, will be the top shareholder in ZhongAn with a 19.9 percent stake. Tencent (makers of QQ and WeChat) and PingAn Insurance will each own five percent. There are also six smaller shareholders, including online travel booking site Ctrip.
E-commerce rivals forced to work together
With China having over 200 million e-commerce shoppers at present, and an anticipated 420 million e-shoppers by 2016, these companies will be hoping that the populace is ready and keen to handle its financial services online as well.
Both Tencent and Alibaba are old hands in the online finance business, as they run major e-payments platforms
(Tenpay and Alipay, respectively). Plus, Alibaba has been micro-lending to small businesses on its e-commerce platforms for quite some time. Nonetheless, it’s still a major business move by the two web companies.

Tencent also has its own e-commerce business, making it a rival to Alibaba in several areas. But it’s likely that
China’s strictly regulated financial sector necessitated the two rivals working together for this new business.
(Source: GlobalTimes; Image from Techweb.com.cn)
Feb 21, 2013 by C. Custer http://www.techinasia.com/chinas-gamers-nextgen-game-consoles-ps4/
At 6 A.M. Beijing time this morning, Sony announced what basically everyone in the world already knew: the company is producing a new game console called the PlayStation 4. Obviously, Western gamers are pretty excited about the PS4 and about Microsoft’s Xbox 360 follow-up, which has yet to be announced but is likely to be released sometime late this year. But what about Chinese gamers? Consoles are banned in China, yes, but they’re still easily available on the gray market, so it’s not difficult to get your hands on one if you want it. So are China’s gamers looking forward to the new consoles Microsoft and Sony are planning to give the world?
Netease Games asked just this question in its weekly Dispute feature, and the results were decidedly mixed. Even though a question like this is likely to produce a self-selecting crowd of respondents who are especially interested in consoles, only thirty percent of respondents suggested they were looking forward to the new consoles, with more more than 50 percent opting to wait and see how they turn out or just not caring at all.
(See Chart)
Netease’s poll was conducted before the PlayStation 4 reveal, so it’s not clear what might have changed now that we know more about the newest member of the PlayStation family. I watched the live stream and didn’t see anything that jumped out at me, but it’s still a long way to the system’s release, and how much appeal the console holds for Chinese gamers will become more clear as more games are announced.
A number of commenters pointed out that this newest crop of game consoles will face tougher competition from mobile and web games, and many said that the selection of games these consoles offer — especially the games offered in the first few years — could go a long way towards determining whether the devices are welcomed by
Chinese gamers or not.
That shouldn’t come as much of a surprise, of course; the rest of the world mostly feels the same way.
(Via Netease Games, image via Kotaku)
Feb 21, 2013 by C. Custer http://www.techinasia.com/china-adds-13-million-3g-subscribers-january-china-mobile-sees-big-jump/
As February prepares to give up the ghost to March, China’s big telecoms are reporting their final user numbers for January. And, as you would expect, 3G user subscriptions continue to climb across the board. In total, China gained more than 13 million new 3G subscribers. But here’s something a bit surprising: more than half of them

signed up for China Mobile.
China Mobile reports that it gained 7.05 million new 3G subscribers in January, pushing its total 3G user count to nearly 95 million. China Unicom picked up 3.67 million new 3G subscribers, bringing its total 3G users above 80 million. China Telecom just barely broke the 3 million mark with its new 3G users, which puts its latest 3G user count at just above 72 million.
That’s a lot of numbers, so here’s a chart with the telecoms’ total mobile subscriber numbers included for scale
(yellow).
(See Chart)
So, while China’s 3G industry is growing fast (keep in mind the red bar in the graph above represents just one month of growth), there’s still a long way to go. China still has fewer than 250 million 3G users, out of a total of well over one billion mobile subscribers.
(Source: Sina Tech, Sina Tech, and Sina Tech; image via China Daily)
By Tracey Xiang on February 20, 2013 http://technode.com/2013/02/20/sina-weibo-generated-66mn-in-2012/
Sina reports fourth quarter and fiscal year 2012 financial results. From the top line numbers, it’s hard to tell the company, apart from the existing news portal, runs a social product with 500 million registered users, as the company claims, and a handful of advertising services. Its total revenue saw a mere 4% increase year-on-year in
Q4 2012. That for the whole year only increased 10% year-over-year — 21% for the previous year even though
Weibo didn’t make any money then.
Sina Weibo made USD 66 million, or 13% of the total revenues, in 2012. About two thirds was generated in the second half of the year after advertising products were launched and starting taking revenue cuts with its gaming platform. 77% of Weibo revenue is from advertising and 23% from value-added services such as membership fees and gaming revenue cuts.
The promoted-story advertising system, released in Q4 2012, is under testing and won’t be open to everyone until
Q2 2013. The Micro-task ad system, a platform for advertisers to pay verified Weibo accounts to promote their content, isn’t meant to make much money, as its CEO Charles Chao put it on the latest earnings conference call.
It’s no wonder that Weibo advertising revenue is mainly from brand advertisers, customers of Sina news portal’s, in the form of display ads.
According to the management, Weibo ad orders are handled by third-party distributors in the same way they sold news portal ads to brand advertisers. Hence, so long as the model isn’t changed or the promoted-story advertising takes traction, we cannot expect Weibo advertising to grow any faster. Mr. Chao said the major format of advertising would still be display ads in the first half of 2013. Good news is the company didn’t see any seasonality effect on Weibo.
Non-ad Weibo revenue was 7.2million in Q412. As Charles Chao put it, this is a surprise which means he didn’t expect much revenue to be generated from membership sales and games other than advertising. It’s a natural decision that the company to “reallocate its resources away from the low-margin MVAS business to Weibo VAS”.
Wang Gaofei, the former head of the company’s mobile business was assigned the new head of Sina Weibo at the end of 2012.

Subtracting the Weibo revenue, the rest, generated from 2G mobile services and the news portal, actually decreased by 4%. It’s no secret the 2G value-added mobile business has been declining, with a 38% decrease in
Q4 2012; however, it also must be true the growth of advertising on Sina’s news portal decelerated. It’s unclear whether it’s that existing brand advertisers just split budget between Weibo and news portal, or they really think
Weibo a more effective channel and started placing less budget on the news portal.
The news portals ran by Tencent and Sohu grew much faster than Sina’s when it comes to revenue, for the video services the former built started to generate advertising revenues. Charles Chao mentioned on the earnings conference call that they’d invest in video content but wouldn’t spend too much on purchasing content in this year.
The mobile end is a big problem for portal advertising. As a majority of users access online news and Weibo through mobile devices, Sina saw only 5% of portal advertising would be from the mobile end in Q1 2013 while
30% with Weibo. The mobile advertising rates will be raised in the second quarter this year when the promoted-story ad system is open to everyone, according to Chao.
Charles Chao expects 2013 to be the year of returns.
Is it still an early stage for Weibo monetization? You may mind me that Charles Chao also mentioned that 75% of active users access Weibo with mobile terminals and more and more promoted-story ads would be featured there, or the company tried out flash sales for Xiaomi phone and vehicles that would generate sales cuts in the future.
Yes, those are the potential of Sina Weibo in terms of monetization. But I kept hearing people say that they didn’t spend that much time on Weibo than before.
As disclosed, the daily active users are 46million, 9% of the registered accounts, and the average time spent decreased. Charles Chao blames WeChat, or Weixin in Chinese, and others for stealing users’ time. While I don’t believe users spend less time on Weibo is because of that, what’s true is advertisers like Nike said that they’d spend time, or marketing budget, on exploring marketing potential of WeChat.
by CIW TEAM STAFF on FEBRUARY 21, 2013 http://www.chinainternetwatch.com/1927/overview-of-top-7-online-retailers-in-china/
The chart above will give you an overview of China’s online retail market.
Tmall.com: 100 million registered users and total transactions is reaching 200 billion yuan (USD32 billion),which may reach 380 billion yuan (USD60.91 billion) in 2013
360buy.com: 40 million registered users and total transactions is reaching 60 billion yuan (USD9.62 billion),which may turn to 100 billion yuan (USD16.03 billion) in 2013
Suning Appliance: 10 million registered users.
E-commercial revenue account for approximately 13.2% of its total revenue.
Gome Appliance: 1 million registered users. and the whole sale is reaching 47 billion yuan (USD53 billion) in
2012.E-commercial revenue account for approximately 0.1%
Tencent e-commerce: 240 million registered users ,and the whole sale is reaching 17.1 billion yuan (USD2.74 billion),this year may turn to 30 billion yuan (USD4.81 billion) in 2013
Walmart: 24 million registered users. and the whole sale is reaching 43 billion yuan (USD6.89 billion) in
2012.E-commercial revenue account for approximately 2.4%
Carrefour: 24 million registered users.E-commercial revenue account for approximately 9.51%

Newswire
Feb. 20, 2013 http://world.time.com/2013/02/20/anti-waste-call-sobers-up-china-luxury-food-market/
(BEIJING) — China’s suppliers of shark fin, abalone, pricey liquor and other luxury items have been taking a beating since new leader Xi Jinping ordered officials to cut out lavish living.
The Ministry of Commerce said Wednesday that business for high-end caterers in Beijing has plunged 35 percent since Xi’s order two months ago.
Xi, who took power in November as Communist Party general secretary, ordered the elimination of banquets and other pomp that has alienated a public that is struggling with high living costs.
During last week’s Lunar New Year holiday, sales of shark fin soup at Beijing hotels plunged 70 percent, the ministry said. Sales of abalone and bird’s nest soup fell 40 percent.
Makers of expensive liquor have seen sales weaken, and some have cut prices by up to 30 percent.
At a December meeting of the all-powerful Politburo, Xi ordered that arrangements for leaders’ visits and the trappings of power be drastically pared back. Under the orders, elaborate welcoming ceremonies are to be eliminated, traffic disruptions avoided, and staid, often worthless reporting on the doings of the leadership dispensed with.
He later called for people to be more frugal and avoid excess following a “Clear the Plate” campaign by netizens calling on restaurants to cut down food waste. His words sparked an anti-food waste campaign in state media and an order by the country’s TV watchdog that all radio and television channels cut advertising promoting the culture of giving luxury watches, rare stamps and gold coins — a practice often associated with corruption.
Bearing the brunt of Xi’s austerity drive, government officials and state-owned companies reportedly canceled their Lunar New Year banquets at luxury hotels this year.
The anti-waste campaign also extends to the military. The Chinese People’s Liberation Army issued an order this week that leftovers be better used, the official Xinhua News Agency said Wednesday.
The report cited the new measures as saying unfinished rice and other dishes should be re-cooked into fried rice with eggs, while leftover vegetables be pickled or made into appetizers.
The measures also forbid the ordering of luxury dishes at military receptions and ban hotels run by the army from imposing minimum spending requirements for their events, Xinhua said.
By Benjamin Kang Lim and Ben Blanchard
BEIJING | Thu Feb 21, 2013 http://www.reuters.com/article/2013/02/21/us-china-politics-bo-idUSBRE91K0D520130221
(Reuters) - Disgraced former senior Chinese leader Bo Xilai is refusing to cooperate with a government investigation into him and has staged hunger strikes in protest and at one point was treated in hospital, sources

with knowledge of the matter said.
Almost a year after Bo's fall from grace under a cloud of lurid accusations about corruption, abuse of power and murder, the government has given no definitive time frame for when he will face court, and has not even announced formal charges.
Bo was ousted from his post as Communist Party chief in the southwestern city of Chongqing last year following his wife's murder of a British businessman, Neil Heywood.
Before that, Bo, 63, had been widely tipped to be promoted to the party's elite inner core. His downfall came after his estranged police chief, Wang Lijun, fled briefly to a U.S. consulate last February and accused Bo's wife, Gu
Kailai, of poisoning Heywood.
Gu and Wang have both since been convicted and jailed.
No criminal charges against Bo have been revealed but the ruling Communist party has accused him in statements carried by the official Xinhua news agency of corruption and of bending the law to hush up Heywood's killing.
Two independent sources with ties to the family said Bo's trial was likely to be delayed until after an annual full session of parliament and its top advisory body in March because he was not physically fit.
"He was on hunger strike twice and force fed," one source told Reuters, requesting anonymity due to the sensitivity of the case. It was unclear how long the hunger strike lasted.
"He was not tortured, but fell ill and was taken to a hospital in Beijing for treatment," the source said, declining to provide details of Bo's condition and whereabouts which have been kept under wraps since his downfall.
The stability-obsessed ruling party is determined to prevent anything, including Bo's trial, from disrupting the final steps of Vice President Xi Jinping's ascent to becoming top leader.
Xi, who assumed leadership of the party and military in November, will take over from Hu Jintao as state president during the annual session of parliament, beginning on March 5.
Aware of public anger about a succession of officials caught up in graft cases, Xi has made fighting graft one of his main themes, saying that nobody, no matter how senior, is above the law. He has said that the party's survival is at stake if the issue is not tackled.
"TOO MUCH TIME"
A second source confirmed that Bo had been on a hunger strike and also said he had refused to shave to protest against what he saw as his unfair treatment.
"His beard is long, chest-length," the source said.
"He refused to cooperate," the source said. "He wouldn't answer questions and slammed his fist on a table and told them they were not qualified to question him and to go away."
His family could not be reached. The government declined to comment, as did one of his lawyers, Li Guifang.
Reuters was unable to reach his second lawyer, Wang Zhaofeng.
Bo's is the most sensational case of elite political turmoil in China since the fall of the "Gang of Four" after Mao
Zedong's death in 1976, and has transfixed the public, unused as they are to having party scandals aired in public.

The recent lack of information about the case - Bo has not been seen in public since last March - harms the government's credibility in the eyes of the people, said Bao Tong, the most senior official jailed over the 1989
Tiananmen protests.
"It's not normal, too much time has past," Bao told Reuters, referring to the lack of information from the government about the case.
"This is not good for the party's image. They have not thought about this clearly. If they are able to properly deal with a big shot like Bo Xilai then they will increase people's trust in the party," he added.
Bao, one-time trusted aide to former Communist Party chief Zhao Ziyang, a man purged and put under house arrest for sympathizing with the student protests, has experience of government investigations into suspected wrongdoing by senior officials.
Bao was jailed for seven years for his opposition to the government decision to send in troops to crush the pro-democracy demonstrations.
"They won't torture or beat him," Bao said of Bo's treatment at the hands of investigators.
"I was not tortured, and he was a former Politburo member, so I don't think they will mistreat him."
(Editing by Bill Powell and Robert Birsel)
ISLAMABAD | Mon Feb 18, 2013 http://www.reuters.com/article/2013/02/18/us-pakistan-port-idUSBRE91H0IU20130218?irpc=932
(Reuters) - China took over management on Monday of Pakistan's Gwadar port, en route to key Hormuz Straits oil shipping lanes, in a move which has prompted nerves in India about its fellow Asian giant's growing strategic clout.
China financed more than 80 percent of the $248 million development cost of the port on the Arabian Sea, as part of a plan to open up an energy and trade corridor from the Gulf, across Pakistan to western China.
When complete, the port could be used by the Chinese Navy, analysts say, and Indian Defence Minister A.K.
Antony told reporters on February 6 that Chinese control of the port was "a matter of concern."
Indian policy-makers are wary of a string of strategically located ports being built by Chinese companies in its neighborhood, as India beefs up its military clout to compete.
China has also funded ports in Hambantota, Sri Lanka, and Chittagong in Bangladesh, both India's neighbors.
After a signing ceremony on Monday, Pakistani President Asif Ali Zardari said he hoped Gwadar would soon be a
"hub of trade and commerce in the region".
In January, Pakistan's cabinet approved the transfer of Gwadar port from Singapore's PSA International to
Chinese Overseas Port Holdings Limited.
(Editing by Jason Webb)

By Robin Emmott and Michael Martina
BRUSSELS/BEIJING | Thu Feb 21, 2013 http://www.reuters.com/article/2013/02/21/us-eu-china-trade-idUSBRE91K0J920130221
(Reuters) - China's leadership transition is complicating talks to resolve a multi-billion-dollar dispute with the
European Union over solar panels, pushing both sides closer to placing punitive tariffs on each others' exports and risking a trade war.
The newly appointed chief of China's Communist Party Xi Jinping is set to take over the presidency at a national congress in March. But the full line-up of government officials is not yet in place and China's current commerce minister is likely to step down after what some have said was a political snub at the party's congress in November.
EU leaders want to avoid following the United States' decision last year to impose duties on Chinese solar power products, aware that Europe needs China to help it emerge from three years of economic crisis.
But EU officials and diplomats say they have made little progress, accusing the Chinese of "stonewalling", and are unable to get beyond the outgoing commerce minister, Chen Deming. They complain of a limbo in the ministry that will not end until after the March congress.
"There is no clarity on what the new leadership thinks about trade," said a senior EU official involved in talks with
China. "They are stonewalling and the window of opportunity for a solution on solar panels is closing."
China's commerce ministry spokesman Shen Danyang told reporters in Beijing this week that officials are
"conducting consultations and relevant response work with the concerned parties", but did not comment on any impact China's leadership transition is having on negotiations.
Germany, the United States and China are the world's biggest solar markets and companies are in a race to win contracts as countries seek to limit pollution and global warming.
In a non-binding vote, EU countries approved on Wednesday a request from industry to register solar panels from
China, which would allow for retroactive measures if the European Commission agrees to registration and does impose duties.
But the Commission, the EU executive, denied on Thursday that the decision by member states signaled Brussels was closer to blocking Chinese solar products. "Let's not interpret this as suggesting anything - it is simply administrative procedure," EU trade spokesman John Clancy said in a statement.
RACE AGAINST TIME
European solar panel manufacturers, led by Germany's Solar World, accuse their Chinese counterparts of receiving state subsidies to flood the EU with panels sold below cost and putting Europeans out of business to corner the market.
The Commission launched an investigation last September into Chinese solar panels, the biggest import sector it has ever targeted. China exported more than $25 billion worth of panels to the European Union in 2011.
Highlighting the risk of a trade war, Chinese solar companies also accuse the European Union of wrongdoing.
China says Europe illegally favors it domestic solar panel producers and Beijing is considering its own duties on EU exports of polysilicon, which is used to make solar panels.
Complicating things further, some European distributors and installers of Chinese panels say EU tariffs on China

would be damaging for Europe's efforts to develop clean energy. They say solar energy is only efficient using
Chinese products that are up to 45 percent cheaper than those made in Europe.
"Even without the (leadership) transition, this is a very difficult issue," said Scott Kennedy, director of the
Research Center for Chinese Politics and Business at Indiana University. "I really don't see a negotiated outcome."
Time is of the essence because many expect Beijing to make a decision on polysilicon duties as soon as the end of February.
The EU's investigation must culminate in a decision by June. In reality, that is likely to come by mid-April, when diplomats from the EU's 27 countries make their recommendation to the European Commission, which is handling the case.
Such a timeframe does not give a new trade minister in Beijing much time to get acquainted with the issues and reach a settlement. EU Trade Commissioner Karel De Gucht said there is no chance of tweaking the investigation's deadline.
"They know exactly what it is about, the solar panel case. We are consulting them, it is up to them," De Gucht told
Reuters. "You cannot have something like a prolongation of that period because there is a transition in China."
In the past four years, the Commission has only chosen to end one trade defense case in China without imposing duties.
(Additional reporting by Philip Blenkinsop and Ethan Bilby in Brussels, Aileen Wang in Beijing and Swetha
Gopinath in Bangalore; Editing by Jeremy Laurence)
Print
By JANE PERLEZ
Published: February 21, 2013 http://www.nytimes.com/2013/02/22/world/asia/new-chinese-leader-xi-jinping-to-visit-moscow.html?smid=t w-share&_r=1&
BEIJING — The Chinese leader, Xi Jinping, has selected Moscow as his first foreign capital to visit as president, to be followed immediately by a trip to South Africa for a summit meeting of the group of leading emerging-market countries.
His predecessor, Hu Jintao, also chose Moscow as his first overseas stop after assuming office, but Mr. Xi’s journey to Russia has a special significance, analysts say. It comes as China tries to answer the Obama administration’s shift toward Asia, a policy that is viewed with suspicion in Beijing as an effort to contain China.
By going to Russia, Mr. Xi will be working to ensure that China’s relationship with Moscow — a sometimes prickly affair in which the balance of power has tilted sharply in China lately — is in good shape before he meets with
President Obama later in the year, analysts said.
There have also been indications that Mr. Xi and the Russian president, Vladimir V. Putin, would try to hammer out a long-sought energy deal that would provide China with Russian oil and gas. “China wants to consolidate its position with Russia before dealing with the United States,” said Jin Canrong, associate dean at the School of
International Studies at Renmin University. In particular, he said, China is likely to seek Russian support in its territorial dispute with Japan, an American ally, over islands in the East China Sea.
Mr. Xi is not expected to meet Mr. Obama until September, when both leaders will attend a summit meeting of the

Group of 20 nations in St. Petersburg, Russia, Chinese officials said.
The Chinese have not released a precise date for Mr. Xi’s visit to Moscow, largely because he will not formally become president until the National People’s Congress meets in Beijing starting on March 5. He is now leader of the Communist Party, a post he assumed in November.
In Moscow on Tuesday, Mr. Putin said he looked forward to the visit of Mr. Xi “soon.” The Chinese foreign minister,
Yang Jiechi, who was in Moscow on Tuesday, confirmed the planned visit.
Chinese state media reported this week that Mr. Xi would stop in Russia on his way to the meeting of the leaders of the so-called BRICS nations in Durban, South Africa, on March 26 and 27. BRICS stands for Brazil, Russia, India,
China and South Africa.
There were few expectations that Mr. Xi and Mr. Obama would meet earlier than September, although the men are expected to speak by telephone once Mr. Xi assumes the presidency, officials said. Mr. Obama welcomed Mr.
Xi to the White House in February 2012 when Mr. Xi was vice president.
Word of Mr. Xi’s itinerary comes as the new American secretary of state, John Kerry, is starting his first overseas trip this weekend, a nine-country tour of Europe and the Middle East. In contrast, his predecessor, Hillary Rodham
Clinton, departed from tradition and visited Asia first, including China.
Tensions between China and the United States have grown lately over a variety of issues, including accusations that China’s military is responsible for cyberattacks of American companies. Those strains mean there are hazards in delaying a face-to-face meeting for very long, according to Bonnie S. Glaser, senior adviser for Asia at the
Center for Strategic and International Studies in Washington.
“In the absence of presidential dialogue, there is risk of intensifying suspicion and potential for the relationship to drift apart,” Ms. Glaser said. “An early summit would be undoubtedly welcomed by the entire region, which is somewhat anxious about U.S.-Chinese friction.”
China and Russia, on the other hand, have drawn closer lately on major international issues, displaying common interests on issues that are important to the United States, like the conflict in Syria and the nuclear ambitions of
Iran and North Korea. Those matters are likely to be on the agenda for Mr. Xi’s visit to Moscow, along with increased cooperation on energy policy.
Bree Feng contributed research.
Feb 23rd 2013 |From the print edition http://www.economist.com/news/leaders/21572200-if-china-wants-respect-abroad-it-must-rein-its-hackers-g etting-ugly
FOREIGN governments and companies have long suspected that the Chinese hackers besieging their networks have links to the country’s armed forces. On February 19th Mandiant, an American security company, offered evidence that this is indeed so. A report, the fruit of six years of investigations, tracks individual members of one
Chinese hacker group, with aliases such as Ugly Gorilla and SuperHard, to a nondescript district in residential
Shanghai that is home to Unit 61398 of the People’s Liberation Army. China has condemned the Mandiant report.
On February 20th America announced plans to combat the theft of trade secrets.
Mandiant claims that hackers at Unit 61398 have stolen technology blueprints, negotiating strategies and

manufacturing processes from more than 100, mainly American, companies in a score of industries (see article).
Its report does not name the victims, but a related New York Times investigation has found evidence that hackers targeted a company providing internet security for American spooks. The hackers also gained access to the systems of an American defence contractor. Perhaps most worrying, they broke into networks of a company that helps utilities to run North American pipelines and power grids. Nobody knows how many billions of dollars cybercrime costs businesses. But pretty much everyone has come to believe that China is the most egregious offender.
America is not an innocent in the world of cyber-spying. It does plenty itself, and acknowledges that these operations are a legitimate part of national security. At the same time, however, it should do more to promote the idea that everyone would gain from “cyberarms control” to set the rules of engagement.
The Mandiant report shows China’s definition of national security includes outright theft. One lesson is that all companies need urgently to upgrade their defences. President Barack Obama has announced measures for greater co-operation between American firms and government agencies to share information. Many companies have been too scared to admit they have been hacked, for fear of alarming clients and investors. In their own interests, they need to open up.
America also needs to make it clear to China that state-sponsored crime is unacceptable. Until now the United
States has tended to complain about China’s cyberthieves behind closed doors in discussions with Chinese officials.
But with more evidence emerging of China’s flagrant abuses, more naming and shaming should be considered.
Control, Alt, Delete
There are lessons for China’s new leader, too. Xi Jinping has come to power suggesting that China must embrace reform and show more respect for the rule of law. Now he has the chance to demonstrate that he really means this.
China claims the Mandiant report is flawed and lacks “technical proof”. That is a missed opportunity. Though it goes against every instinct of the secretive Communist Party, Mr Xi could acknowledge that cybercrime emanates from state-sponsored entities and that his government will now rein them in. If he does not, China will be taken less seriously when it decries the West’s talk of a “China threat”. And Chinese companies will continue to be treated with suspicion when they seek to buy or work with businesses abroad. China should bring its army of thieves to order.
Online
February 21, 2013 http://blogs.wsj.com/chinarealtime/2013/02/21/soldiers-ordered-to-make-fried-rice-with-leftovers/?mod=WSJ
Blog
China’s soldiers are arming themselves in the country’s war on extravagance with a new weapon: leftovers.
The General Logistics Department of the People’s Liberation Army has mandated that all military personnel adopt
“frugal diet habits,” according to a report from China’s official Xinhua news agency.
Military members have been asked to reuse uneaten food for second-day leftovers, Xinhua said. “Unfinished rice and other dishes should be re-cooked into fried rice with eggs and fried steamed bread, and leftover parts of vegetables be made into various pickles and appetizers,” Xinhua said.
The report did not specify whether “uneaten food” includes scraps from individuals’ bowls and plates.
The new waste management diet is part of China’s crackdown on excess, particularly outward signs of

government extravagance. Showiness on the part of people employed by the government is frequently assumed to be evidence of corruption, which leaders have portrayed as a dire threat to the Communist Party.
Average citizens have been increasingly vocal about corruption in the government. Users of China’s social media sites have pored over pictures of public officials, looking for evidence of profligacy—typically expensive watches or other luxury accessories—to highlight the disparity between the high times enjoyed by bureaucrats and the struggles of the country’s regular citizens.
So Communist Party leaders have taken it upon themselves to enter an era of austerity. In particular, they’ve taken aim at luxury banquets, establishing a ban on them last year and demonstrating in February their willingness to punish violators. New Chinese leader Xi Jinping has taken a personal interest in the campaign, helping establish a guideline – “four dishes and a soup” – for what official banquets should include.
Now the military is being forced to watch its waste. The PLA’s new dining rules demand army hotels to drop their requirements for minimum spending and prohibit luxury dishes from being ordered at official receptions.
Serving up leftovers to the army has major savings potential, Xinhua said, though it did not provide a specific estimate of how much might be saved.
In 2011, the country spent $93 billion on the armed forces, much of which went to feeding 2.3 million soldiers,
Xinhua said.
– Laurie Burkitt. Follow her on Twitter @lburkitt
By Hannah Beech
Feb. 21, 2013 http://world.time.com/2013/02/21/chinas-red-hackers-the-tale-of-one-patriotic-cyberwarrior/
In the latest report by a Western cybersecurity company to finger Chinese state hackers, Mandiant earlier this week accused the People’s Liberation Army Unit 61398 of having orchestrated years of cyberattacks on more than
100 U.S. firms from a base in Shanghai. Hacking by the Chinese, whether by state technicians or patriotic individuals who are not directly employed by the government, has turned into a serious global risk. Although the
Chinese government has repeatedly denied a state-sponsored hacking campaign, the list of cybertargets—from
Western competitors of Chinese companies to human-rights groups that are critical of Beijing’s record—leaves little room for doubt that these raids originate from China. “These attacks only benefit the Chinese, not anyone else,” says Dr. Murray Jennex, a cybersecurity expert at San Diego State University. “They have so many more people who are able to hack than any other country.”
In a story in this week’s magazine, TIME profiles Wan Tao, once one of China’s most feared hongke, or red hackers, cyberwarriors motivated by patriotism to attack foreign digital victims:
While Chinese hackers boast about their exploits online, it’s rare to hear one articulate why he chose to hack for nationalist reasons. The story of Wan Tao, now 41, and his China Eagle Union—which at its height boasted hundreds of members who attacked foreign computer systems with the government’s tacit approval—gives an inside glimpse into the underground world of Chinese hackers: their motivation, exploitation and, in some cases, redemption.
Wan emphasizes that he never hacked officially for the government and didn’t steal information. He says he began his online forays because he was lured by a kind of independent, rebellious ethos shared by hackers worldwide. But there’s no question China Eagle Union’s hacking, which starting in 2000 infiltrated everything from

U.S. government sites to Japanese politicians’ email accounts, fit the Chinese government’s agenda. Wan released a manifesto called “Building Hacker Culture with Chinese Characteristics.” His hacking collective’s theme song only enhanced his rock-star status among a growing corps of hongke. A sample lyric: “It doesn’t matter how hard the enemy’s shield is, we want him to know our sharpness. We are the China Eagles.”
Then in 2005, when anti-Japanese riots convulsed Chinese cities, the Chinese government began tamping down on the very xenophobic sentiment it had cultivated through nationalist education and propaganda. Once free to excoriate foreigners online, Wan was ordered by the authorities to delete inflammatory content from his website.
He spent 20 hours erasing comments before collapsing from exhaustion and checking into a hospital. Wan’s own posts on domestic issues, such as the plight of Chinese farmers left behind by the country’s economic boom, were also censored. “I thought I had freedom online,” says Wan. “But I was wrong.”
At the same time, Internet crime began skyrocketing in China. From July 2011 to July 2012, nearly 260 million
Chinese were victimized online, according to official statistics. Red hackers were morphing into what Chinese call black hackers, computer geeks who were lured into illegality by money.
China has begun cracking down on computer malfeasance within its borders, ranging from online banking fraud to corporate data robbery. Chinese cyberpolice have shut down child pornography websites in stings run with
Americans, and new Chinese laws criminalize certain types of hacking. The head of a Chinese hacking school that used to openly advertise on the web—and at bus stations—was jailed.
Yet to this day, hongke have not been punished for their overseas assaults. It’s a double standard that raises troubling questions about China’s commitment to online lawfulness—even apart from the fact that the state is suspected of employing an army of hackers. “Even if hongke are doing it under the banner of safeguarding national security, hacking is not right,” says Wang Sixin, a law professor at the Communications University of
China.
Meanwhile, Chinese hackers are being blamed for an ever-increasing number of raids on foreign soil. “I don’t believe there are thousands of Chinese hackers sitting in a room hacking for the government,” says Wan. He clumsily dodges a question about the recent hacking of American media, which was blamed on Chinese techies.
“You can’t prove it came from China,” he says, explaining that just because an IP address is traced to China doesn’t mean the hacking originated there. But to go back to cybersecurity expert Jennex’s point, who else but
China has an interest in such online attacks?
During a separate conversation, Wan admits that there are, indeed, Chinese who end up working for the state.
Some, he says, are black hackers who have been caught by police and are pressured into government employment. He also gives the profile of the kind of kid who might end up hacking for China: “small-town boys who have little education and learned computers while their grandparents were supposed to be looking after them.” He dismisses them as “robots” and refuses to even call them hackers.
Today, Wan says he no longer hacks. He now runs a cybersecurity company with top Chinese firms and NGOs as his clients. Many of his employees came from China Eagle Union. (Other former union members are successful businessmen or in jail.)
Is Wan ever tempted to joust again with cyberwarriors across the globe? He shakes his head. Yet, he adds: “I’m still a hacker in spirit. I always will be.”
By John Artman February 21, 2013 http://beijingcream.com/2013/02/scrutinizing-the-mandiant-report-a-hard-look-at-what-it-proves-and-doesnt

/
Groupthink is an amazing thing. The publicity surrounding attacks on the New York Times, Wall Street Journal,
Washington Post, Facebook, Apple, et al. proves nothing except the saw about propaganda: if you say something often enough, it becomes truth.
A quick scan through English-language China news reveals that on the basis of one report, it is now indisputable fact that a Chinese military organization was responsible for the above-mentioned attacks. So far, the only substantive criticism of Mandiant’s report has come from Jeffrey Carr, CEO of the cybersecurity firm Taia Global, who says the report has “critical analytic flaws.”
In summary, my problem with this report is not that I don’t believe that China engages in massive amounts of cyber espionage. I know that they do – especially when an executive that we worked with traveled to Beijing to meet with government officials with a clean laptop and came back with one that had been breached while he was asleep in his hotel room.
My problem is that Mandiant refuses to consider what everyone that I know in the Intelligence Community acknowledges – that there are multiple states engaging in this activity; not just China. And that if you’re going to make a claim for attribution, then you must be both fair and thorough in your analysis and, through the application of a scientific method like ACH, rule out competing hypotheses and then use estimative language in your finding. Mandiant simply did not succeed in proving that Unit 61398 is their designated APT1 aka Comment
Crew.
And that about sums it up. With so many other actors out there, any attribution that does not conclusively exclude them (Russia, Israel, France, and others) should be taken with many grains of salt. Mandiant has made minimal effort to rule out other possibilities, demonstrating the type of confirmation bias that a wary and responsible press would do well to question.
On top of that, the New York Times even admits that while the email accounts of David Barboza (Shanghai bureau chief) and Jim Yardley (former Beijing bureau chief, now South Asia bureau chief) were compromised, no documents pertaining to the Wen Jiabao story “were accessed, downloaded, or copied,” in the words of Jill
Abramson, executive editor at the NYT.
“Computer security experts found no evidence that sensitive e-mails or files from the reporting of our articles about the Wen family were accessed, downloaded or copied.”
And the holes proliferate. Carr touches on several reasons why the NY Times’s claims — bolstered by Mandiant, which sees China as a “go-to culprit” (Carr’s words) — don’t stand up to critical analysis. Examples:
The Beijing Workday Argument. The hackers could have been from anywhere in the world. The timezone that
Mandiant imagines as a Beijing workday could easily apply to a workday in Bangkok, Singapore, Taiwan, Tibet,
Seoul, and even Tallinn – all of whom have active hacker populations.
The Lanxiang Vocational School Argument. The article mentioned that the hackers were traced back to the “same universities used by the Chinese military to attack U.S. military contractors in the past.” If memory serves, one of those was the Lanxiang Vocational School in Jinan, the capital of Shandong province and home to a PLA regional command center. Actually, Jinan is an industrial city of six million people and more than a dozen universities. IP
Geolocation to one school means absolutely nothing.
Furthermore, even if the Chinese government was involved in cyber espionage against the New York Times, it wouldn’t use its military for that. It would use its Ministry of State Security (China’s equivalent of the CIA). And they wouldn’t be stupid enough to run the attack from their own offices, which if you’re interested in checking IP addresses, is in Beijing – 274 miles from Jinan.

Again, this doesn’t mean that China is definitely not hacking. Rather, our perspective is skewed. Perhaps the question we should be asking isn’t “Who did it?” but rather “Who benefits?” So far, it appears to be US policymakers bent on beefing up cyber-security legislation using China as the go-to bogeyman. Naturally, lots of media have fallen in step, regurgitating a tired, not-at-all subtle narrative that we should know better than to accept at face value.
John Artman has been China-watching and covering tech since 2010. Follow him @KnowsNothing.
By Anthony Tao February 21, 2013 http://beijingcream.com/2013/02/security-chase-off-cnn-filming-hacking-hq-bbc-journo-detained/
Mandiant identified “Unit 61398” as a headquarters of sorts for Shanghai-based hacking outfit APT1, and traced it to a 12-story building in Pudong district.
Are they right?
Judging by Chinese security’s reaction, the answer is probably. In the below video, watch as officers, like T-1000s, chase after a CNN crew trying to make their getaway in a car. “Keep driving, drive away, drive away,” one of the voices in the car says. Another adds, very annoyed, “Drive away.”
“They said it was a military installation of some kind,” reporter David McKenzie explains.
(See Video)
The Brits are having a tough time, too. According to BBC, reporter “John Sudworth went along to investigate but was stopped and briefly detained.” See above for more info on that.
Imagine: authorities don’t want foreigners snooping around their military buildings.
(See Video)
Meanwhile, China has hit back, claiming the US is the bigger hacker. According to the Chinese Ministry of Defense
(brought to us by Atlantic Wire):
China is one of the main victims of cyber attacks. According to statistics, the Chinese armed forces access to the
Internet user terminal suffered a large number of foreign attacks, [and] according to the IP address of the display, a considerable number of attack sources from the United States, but we did not [use this] a pretext to accuse the
U.S. side.
It’s probably true, by the way, that people everywhere are hacking the hell out of one another.
Also, this, translated by CNN:
“There is still no internationally clear, unified definition of what constitutes a hacking attack,” Geng said. “There is no legal evidence behind the report subjectively concluding that the everyday gathering of online information is online spying.”
Which, again, is true. We all agree that in a perfect world, spying on someone, either in the real or virtual world, is bad and no one should ever do it. But in this real world, companies and governments are constantly gathering

information on one another all the time. This is the environment we live in, that we’ve willfully, in many ways, surrendered ourselves to: a closely integrated world with interlacing, overlapping networks, a widened public sphere, and evolving, expanding boundaries of privacy. The best defense is offense. Everyone is being hacked, so maybe, in a way, no one is.
Although we readily admit this: it completely and totally sucks to lose information, especially to a competitor.
People have every reason to be upset, as long as they don’t get hypocritical about it.
February 21, 2013 | by Yueran Zhang http://www.tealeafnation.com/2013/02/citizen-mistrust-grows-as-chinas-real-estate-ownership-becomes-mor e-opaque/
Over the last few days, new regulations on China ’ s real estate information system have provoked another wave of anti-corruption sentiment. According to the Southern Metropolis Daily (@ 南方都市报 ), the government of
Zhangzhou City, Fujian Province instituted a regulation on February 16 restricting access to the government-maintained real estate information system. The regulation prohibits searches for information about real estate ownership, unless the search is requested by the property owners themselves or law-enforcement agencies. Furthermore, searching may only be done using real estate registration numbers or addresses. In short, it has become tremendously difficult to discover how many apartments a person owns by using the official system.
A similar regulation was also instituted recently in Yancheng City in Jiangsu Province.
Although the news instantly went viral in public Internet forums, follow-up reports from the Oriental Morning Post
(@ 东方早报 ) show that in most cities, including Beijing, Shanghai and Guangzhou, it has long been impossible to conduct name searches in real estate information systems. The newly released regulations in these two cities only institutionalized a ban that was already an unwritten rule in some places.
Nevertheless, despite its practical insignificance, the news is symbolically important, and has led to a heated debate. At its core, the debate was not about real estate alone, but the fight against corruption, one of the most complicated factors in China’s state-society relationship.
Divergent interpretations
As suggested in the statement released by the Yancheng City government, the new regulation was meant to address citizens’ desire to protect their privacy. The regulation is indeed in line with standard practices in Western countries, where individuals are barred from searching for information about others’ assets through official systems. According to the government, the new measure is a legitimate way to enhance protection of personal privacy.
In contrast, Web users saw the policy in a different light. They believed that instead of protecting ordinary citizens, the measure primarily benefited corrupt officials. @ 险峰飞渡 , a user of Sina Weibo, China ’ s Twitter, explained how this was the case: “ Obviously, this ban has been proposed in the name of protecting citizens’ privacy in order to buy more time for officials to conceal their illegitimate assets. You can tell they are really afraid. Also, the ban shows that bureaucrats have already formed a class of solidarity, taking advantage of a variety of policy tools to defend their collective interests. This is really serious. If all of your income is legal, why are you afraid of a search by name?”
In an opinion poll conducted by Sina, 87.7% of participants opposed the ban. The sharp contrast between the government’s justification of the ban and Web users’ objection to it mirrored the public’s long-standing mistrust of the state, but was also exacerbated by the circumstances under which the regulation was put forward.

The issue of timing
The last several months have seen many grassroots anti-corruption campaigns online. Officials and their relatives whose real estate assets apparently exceeded what their legal income could conceivably acquire were variously called “house uncle,” “house sister,” “house wife” and “house grandpa” by Web users as they were identified and condemned. In most cases, the government caved to public pressure and investigated these individuals. Multiple officials have been removed and legal processes against them have begun. In the absence of effective top-down supervision and limited opportunities for political participation, many regard online sleuthing as a last resort for citizens who want to oversee their civil servants.
Even though it remains unclear how many of these cases began with use of the official information system, many
Web users believe that the new prohibitions are intended to counter the burgeoning sleuthing movement.
Netizens perceive policymakers’ denial of this connection as nothing more than a lie.
Online suspicion of the policy is rooted in recent developments. After the 18th National Party Congress last
November, the new Party leaders took a firm stance against corruption on various occasions. Rumors later abounded that the real estate information system, currently run by local governments independently, would soon be integrated into a nationwide network, making officials subject to more centralized top-down scrutiny.
As a result, fear rapidly spread among officials. As reported by Economic Observer (@ 经济观察报 ), bureaucrats in major cities have been furiously selling off luxurious real estate properties since last December. By January 19, when Economic Observer published the news, the Commission for Discipline Inspection of the Central Committee of the CPC had talked to more than 120 officers, asking their relatives to stop selling real estate and closing certain relatives’ banking accounts. Given this information, the public cannot but assume that officials devised the policy solely to secure their assets and careers, using the protection of personal privacy as an excuse.
A dilemma without end
In an editorial published on February 19, Global Times (@ 环球时报 ) argued that the ongoing debate reflects a contradiction between two incompatible goals. According to the editorial, because of their strong contempt for corruption, a great many people irrationally support fighting against corruption in whatever ways might work—even if it means sacrificing privacy, which is a basic human right.
But Global Times seriously misinterpreted Web users’ main argument. They are not prioritizing the cause of anti-corruption over the protection of privacy . Instead, they do not believe the ban is meant to protect personal privacy at all. For them, in an environment of selective law enforcement, administrators and law enforcement officers would only enforce rules and regulations that benefit themselves. Deeply mistrusting the government,
Chinese citizens think that discourse on privacy protection only serves to mask bureaucrats’ self-interest.
The fact that Western Countries have a comprehensive information disclosure system for officials’ assets and effective protection of citizens’ personal privacy proves that fighting against corruption and privacy protection are in fact compatible. The two goals could be achieved at the same time, but only if the state were dedicated to both.
The Beijing Youth Daily (@ 北京青年报 ) points out that the existence of an information disclosure system for officials ’ assets is a precondition for public support of privacy protection regulations.
What annoys Web users is the very different level of dedication the state shows to the two causes. The government tends to ignore any voice demanding information about officials ’ assets, yet is quite devoted to the protection of privacy. As @ 李凤仪 - wrote, “The government processes issues at two speeds. On things like disclosing officials’ assets, they move like turtles, procrastinating as much as possible and pretending they are deaf. But on things like banning search by name and protecting corruption, they act as quickly as possible.”
The snafu over real-estate searches has exposed the continuing gap between Chinese society and the state. In some ways, China is falling into the “Tacitus Trap”: when a government loses credibility, it will be perceived as

dissimulating whether or not it is telling the truth. Nefarious motives will be read into its every move. These conditions in turn act as a deterrent for any progressive interaction between state and society, and create a dilemma that may cast a shadow over China’s public sphere for some time to come.
February 21, 2013 | by Minami Funakoshi http://www.tealeafnation.com/2013/02/in-face-of-mainland-censorship-taiwanese-revisit-reunification-questio n/
Within twenty-four hours of registration, Sina Weibo (China’s equivalent of Twitter) deleted the microblog account of Frank Hsieh, former premier of Taiwan’s pro-independence Democratic Progressive Party (DPP). Ironically,
Hsieh’s last tweet before he lost the power to post on Weibo was: “Whether or not there is freedom of speech does not depend on how freely you speak when you criticize high officials or people in power, but whether you lose your freedom after you speak.”
What followed was a wave of Chinese netizen attack: they criticized the Chinese government of for infringing on freedom of speech, expressing concerns that such display of intolerance would antagonize the fellow Taiwanese people and diminish prospects of cross-strait reunification.
Some Taiwanese officials have uses this incident to highlight the incompatibility between Taiwan and the mainland, and to emphasise the need for Taiwanese independence. In a television interview broadcast by
Taiwan’s United Daily News Group, Su Tseng-chang, current chairman of the DPP who lost the 2012 DPP presidential nomination to Frank Hsieh, stated: “From this incident, you can see how precious and praiseworthy a free, democratic, and open Taiwan is, and what differences exist between Taiwan and China. Taiwanese people must treasure their own land and country. We must not have false hopes toward China.”
In the same interview, Hsieh stated that he created the Weibo account in an effort to better understand the
Chinese public and to share his own thoughts and experiences with them. When asked why his account was deleted, he replied, “I don’t know.” He then added jokingly, “Maybe there were some ‘hackers.’”
Some Taiwanese netizens echoed Su ’ s view, openly displaying their contempt for China. In response to a China
Times article reporting on this topic, Web user @ 詹耀程 commented, “ The two places ’ differences — how can we ever talk about reunification?
” Another user @ 淡水渔夫 wrote, “ If Taiwan falls into the hands of the Communist party, Taiwanese people will be like Li Houzhu [renounced poet and the final Southern
Tang ruler] — we will wash our faces with tears every day, then drink ourselves to death.”
Yet others rebuked Frank Hsieh, accusing him of trying to curry favor with the Chinese people. In response to an article written by Taiwan ’ s Central News Agency (CNA), Web user @ 為什麼北部叫天龍國 南部叫地蛆國 為什麼 commented, “ The party that shouts ‘ Taiwan Independence ’ every day goes and sets up a Weibo account—gaining popularity by selling Taiwan and seeking shelter from the Mainland?” Another user called
@hungyk5 wrote, “Hsieh tried so hard to gather ‘fans’ by washing his Weibo account with sensational comments, but he went too far…as a result his account got blocked. It serves him right!”
A few Taiwanese traditionalists seized this opportunity to call for the unification of Mainland and Taiwan—under the Republic of China’s rule. User @9527 commented on the same CNA article, “Fellow Mainland brothers—rise and revolt for your freedom of speech, throw yourself into to the arms of the legitimate, free, democratic Republic of China.”
In Taiwan, opinions toward the cross-strait relationship split not only between DDP and the pro-reunification
Kuomintang (KMT), its competitor, but also within the DDP itself. Last October, when Frank Hsieh privately visited

top government officials in Beijing, some DDP members praised Hsieh’s efforts to improve the party’s ties with
Beijing, while others maintained that Hsieh’s political views and actions do not necessarily represent those of the entire party. As DDP’s chairman Su Tseng-chang acknowledged, “The DPP’s position [on its China policy] remains unchanged despite there being different opinions in the party.”
The belligerent and divergent reactions toward the news of Hsieh’s day-long Weibo career show that more than
60 years after the 1949 Civil War, the question of cross-strait relationship—and reunification—remain controversial as before.
Feb 21, 2013 by C. Custer http://www.techinasia.com/hacks-stop-assuming-hackers-china/
China has been involved in an awful lot of hacking incidents recently, from the New York Times scandal all the way up to the recent revelations about military hackers. So I suppose that when a new hacking story comes out, it does make some sense that people would suspect China. That’s understandable.
But privately suspecting something and publicly reporting it are two very different things. On the heels of Apple’s announcement that it had also been hacked, many media outlets strongly implied that China was responsible.
Others just came right out and said China was involved right in the headline. The problem with that is that it isn’t true. At all.
In fact, the hacks of Twitter, Facebook, and Apple all seem to have come from Eastern Europe, not China.
As I mentioned previously, it’s not unreasonable that people think about China first when they hear a high-profile hacking story, as the country has been involved in a lot of them. And China’s protestations that it doesn’t actively engage in hacking and other forms of cyberwarfare are patently ridiculous. Of course China is trying to hack other governments and foreign countries. But here’s the thing: everyone is trying to hack everyone all the time. In this day and age, there is simply no way that any country big enough to have its own intelligence agency does not also have government-funded web experts looking to attain valuable intelligence through the web via any number of means, including hacking. China may be involved in more hacking than other countries, but it could also just be less good at getting away with it.
Either way, let’s all try not to jump to the conclusion that it was China the next time you hear a hacking story. Or, if you do jump to a conclusion, at least try not to print it in The Atlantic before it has actually been confirmed.
Newswire
2013-02-19 http://news.xinhuanet.com/english/china/2013-02/19/c_132178898.htm
BEIJING, Feb. 19 (Xinhua) -- China will proactively introduce a set of new taxation policies designed to preserve the environment, including a tax on carbon dioxide emissions, according to a senior official with the Ministry of
Finance (MOF).

The government will collect the environmental protection tax instead of pollutant discharge fees, as well as levy a tax on carbon dioxide emissions, Jia Chen, head of the ministry's tax policy division, wrote in an article published on the MOF's website.
It will be the local taxation authority, rather than the environmental protection department, that will collect the taxes.
The government is also looking into the possibility of taxing energy-intensive products such as batteries, as well as luxury goods such as aircraft that are not used for public transportation, according to Jia.
To conserve natural resources, the government will push forward resource tax reforms by taxing coal based on prices instead of sales volume, as well as raising coal taxes. A resource tax will also be levied on water.
The article did not specify when the new measures will be implemented.
In 2010, MOF experts suggested levying a carbon tax in 2012 at 10 yuan per tonne of carbon dioxide, as well as recommended increasing the tax to 50 yuan per tonne by 2020.
China is among the world's largest emitters of greenhouse gas and has set goals for cutting emissions. The government has vowed to reduce carbon intensity, or the amount of carbon dioxide emitted per unit of economic output, by 40 to 45 percent by 2020 in comparison to 2005 levels.
Editor: Hou Qiang
Print
By Leslie Hook in Beijing
February 21, 2013 http://www.ft.com/intl/cms/s/0/3492228e-7b01-11e2-9c88-00144feabdc0.html#axzz2LOXtWrY7
As the sun streams through the stained glass windows of St Joseph’s Cathedral in central Beijing, members of the kneeling congregation pray for their country, each other, and for the Pope.
But these daily prayers mask a deep rift between the Vatican and the Chinese government. The two sides do not have formal diplomatic relations and are increasingly at odds over bishop appointments in the official Chinese
Catholic Church, which is run by a government body.
Meanwhile, Catholic groups in China are coming under growing pressure from state authorities, which have raided unlicensed churches and imprisoned clergy. The number of priests in China has been falling, and last year two seminaries had to shut down.
“The Chinese government has become more belligerent in selecting bishops and persecuting the church,” saysJoseph Kung, who heads a US-based foundation that provides support and training to underground Catholic priests in China. “Things are getting very difficult.”
He points to the fate of Bishop Thaddeus Ma Daqin, who was put under house arrest and stripped of his title by
Chinese authorities after he publicly resigned from the Catholic Patriotic Association last year. “Who is the Chinese government to take away a bishop’s title? Only the Pope can do that,” says Mr Kung.
The situation in China – a focus of Catholic evangelism for centuries – will be a key challenge for the new pope, after Benedict XVI steps down on February 28. Some members of the Church hope that his successor will turn over a fresh leaf with China through renewed engagement, high-level invitations and a resumption of the informal

dialogue between the two sides that was cut off by Beijing in 2010.
But on Monday, China signalled it would maintain its tough approach to Vatican relations. Beijing is willing to engage with the Vatican only if the Holy See “severs diplomatic ties with Taiwan” and “refrains from interfering in
China’s internal affairs”, said foreign ministry spokesman Hong Lei.
China’s Communist party is officially atheist, but the government has been tightening its control over organised religions. The Chinese Patriotic Catholic Association insists that it, not the Vatican, has the authority to ordain bishops in China – which Catholics say violates a core doctrine of their faith. Three Chinese bishops have already been excommunicated as part of the widening disagreement.
Benedict XVI started his tenure eight years ago with a keen desire to turn things around. In 2007, he issued an unusual open letter to the Catholic church in China, called for dialogue with the Chinese authorities, and suggested the Vatican would be willing to normalise diplomatic relations with Beijing. Boosted by his support, informal talks between the Vatican and Beijing appeared to be making strong progress.
Today the situation is starkly different. Those talks ground to a halt in 2010, and all informal communications with
Vatican representatives have been shut down.
Chinese authorities have denied visas to nearly two dozen Catholics with ties to the Vatican. Police and local authorities have cracked down hard on the underground “house churches” that are outside the state-sanctioned church system, and at least 10 Catholic priests are in jail because of their beliefs.
“For the Catholic house churches it has been very hard, because the authorities view them as being influenced by
‘outside forces’,” says a Chinese lawyer who works on religious freedom cases.
One result is that the size of China’s Catholic population is stagnant at around 12m, according to estimates from the Holy Spirit Study Centre, a Catholic research institute in Hong Kong, even while Catholic congregations are booming in the rest of the world. Roughly half of these worship in the underground “house churches” that are independent from the state.
“The Church certainly is not developing normally or properly as it should be,” says one church member.
Calum MacLeod
February 21, 2013 http://www.usatoday.com/story/news/world/2013/02/20/china-polluted-rivers/1933187/
BEIJING – Swim for a half-hour in a river in east China's Cangnan county and win $48,000.
Sound like easy money? Take a look at the river.
Chinese angry about their toxic and trash-choked rivers have made online offers of cash rewards to the chiefs of their local government's environmental protection bureaus to take a swim in the waterways they are in charge of protecting.
One Internet posting offers $32,000 if an official will spend 20 minutes in a river in Rui'an or $16,000 for a
10-minute river dip in Dongguan down south.
None of the Internet users expects the officials to take the bait. The social media campaign against water pollution that inspired these rewards leads some analysts to hope authorities will take action after the relative success of

a public movement to increase government transparency over the abysmal air quality in many Chinese cities.
China's water and air quality has long been sacrificed by the government to China's thirst for industrial growth in recent decades. Even the government releases grim statistics: 64% of groundwater in 118 Chinese cities is
"severely polluted," state news agency Xinhua reports.
To provide examples, Chinese journalist and activist Deng Fei, whose Twitter-like micro-blog has almost 3 million followers, asked people last week to post pictures of rivers in their hometowns as they traveled there for the recent Lunar New Year celebrations.
BLOG: See photos of the polluted waters
The strong response, by thousands of Chinese Internet users, "shows more Chinese pay close attention to pollution, and now they have the tools to express their opinions," Deng said.
Although China's citizens still lack formal channels, such as democratic elections, to influence their government, this social-media-driven campaign "has become a large-scale discussion topic that shows the will of the people," so China's "parliament," the National People's Congress (NPC), and ministries must take notice, he said.
Two delegates to next month's annual session of the NPC — when the ruling Communist Party's new leader, Xi
Jinping, will be appointed president — promised to raise the issue of water pollution, Deng said.
The rewards for hazardous swimming started Saturday when eyeglass entrepreneur Jin Zengmin posted photos online of a filthy river in Rui'an in Zhejiang province, with his $32,000 bet for the area's environmental protection director. Jin reminisced about swimming in the river as a child and watching his mother washing clothes there.
"Even animals don't dare swim in these rivers, much less officials," Deng said.
The offering of money "is an expression of anger and frustration over the dereliction of duty by local environmental officials and their failure to enforce the rules," said Ma Jun, director of the Institute of Public and
Environmental Affairs, a Beijing-based non-profit group.
Middle-aged Chinese "remember their rivers used to be cleaner, drinkable, swimmable and touchable, but no longer."
This social media push has the potential to grow into something similar to the air quality campaign, given that the problem of water pollution is as bad or even worse, Ma said.
"The local government still puts GDP (gross domestic product) rate ahead of environmental protection. We need the public to change that," he said.
The chief environmental official in Rui'an, Bao Zhenmin, blamed river pollution on rubbish discarded by residents and migrant workers, not shoe factories, as Jin alleged. Bao promised steps to reduce the problem, chinanews.com reported.
Deng said the answer is for the government to share more information with the public about water discharges, increase legal penalties against illegal discharges and ease restrictions on people filing lawsuits in environmental cases.
He said environmental offices should be controlled by Beijing, not the local governments often responsible for pollution.
Contributing: Sunny Yang

Online
February 21, 2013 http://blogs.wsj.com/chinarealtime/2013/02/21/murder-case-digs-up-ghosts-of-cultural-revolution/?mod=WSJ
Blog
The trial of an octogenarian for a murder he allegedly helped commit during the Cultural Revolution has ripped open historical scars in China, leading some to wonder whether the case might herald long-delayed recriminations from a violent era from which few emerged with innocence intact.
The defendant, identified in local media as Mr. Qiu, is accused of using a rope to kill a doctor surnamed Hong in
1967, according to a report by the state-run China News Service (in Chinese). The report said Mr. Qiu had been directed to kill Mr. Hong by a civilian militia that believed the doctor was a spy.
Mr. Qiu, who was tried in the city of Ruian in eastern China’s Zhejiang province on Monday, is alleged to have later cut off Mr. Hong’s legs in order to make it easier to bury him, the China News Service said, adding “and then he buried the corpse in a hole.”
News of the trial has sent ripples through Chinese social-media sites, where it has unleashed a debate about how
China should come to terms with the trauma of the Cultural Revolution.
Unlike with the Tiananmen Square massacre in 1989 or the Great Leap Forward in the late 1950s, the Communist
Party has tolerated a certain amount of discussion of the Cultural Revolution. Numerous stories of the brutal violence the country’s youth perpetrated on their elders and each other have earned the approval of censors, creating a body of cathartic “scar literature” and its cinematic equivalent, “scar film.”
Still, very few of the crimes committed during the Cultural Revolution were prosecuted—an omission some
Internet users were happy to see addressed in Mr. Qiu’s case.
“Every Cultural Revolution criminal should be resolutely pursued and held responsible. Murderers, instigators – not a single one should be left behind,” wrote one anonymous user of Sina Corp. SINA -2.75%’s Weibo microblogging service. “They can be treated leniently, but they must be made to take responsibility. Only then will we truly be able to come to terms with the Cultural Revolution.”
Many, however, criticized the pursuit of Mr. Qiu, arguing that there were others more deserving of punishment for the blood spilled in that era.
“The prime culprits of the Cultural Revolution get away scot free and decades later they chase down a minor murderer,” wrote Liu Xiaoyuan, a Beijing-based lawyer. “There were so many homicides during the Cultural
Revolution, to pursue one little old man is a failure of judicial justice and political wisdom.”
“Who was the biggest murderer during the Cultural Revolution? I think every Chinese person knows in their heart who it is: His last name was Mao!” wrote Yin Xiaogeng, a Dalian-based real estate executive. “Ten years, so many lives taken, so much talent wasted. Who should be made to pay? Don’t forget, the search is still on for escaped
Nazi criminals.”
A cascade of Cultural Revolution criminal cases could make things uncomfortable for a lot of people in China, in particular the country’s new crop of leaders, many of whom came of age in that era.
Thankfully for them, Mr. Qiu’s case appears to be an anomaly: As a judge with the Ruian court explained to the state-run Global Times tabloid, the statute of limitations for serious crimes in China is 20 years. Mr. Qiu had been

charged in the 1980s, meaning the charge fell within the 20-year range, the judge said.
Mr. Qiu spent 30 years as a fugitive and was arrested by local police in Ruian in July, according to the Global Times.
– Josh Chin. Follow him on Twitter @joshchin
February 21, 2013 http://blogs.wsj.com/chinarealtime/2013/02/21/jookin-from-memphis-to-colbert-by-way-of-china/?mod=WSJ
Blog
After performing with Yo Yo Ma, appearing on stage with Madonna at the Super Bowl and starring in his own Gap ad, street dancer Charles “Lil’ Buck” Riley is scheduled to attain a whole new level of pop culture cachet Thursday with an appearance on Comedy Central’s The Colbert Report.
And he has a 20-minute video of him dancing in China to thank for it.
“They said they wanted me to come on the show and talk about it, and talk about what I do,” Mr. Riley told China
Real Time recently. “A lot different people are inspired by that clip.”
Watching the mini-documentary, commissioned by the Asia Society’s new online magazine China File, it’s easy to see why Colbert’s producers were intrigued. Images of the 24-year-old from Memphis, Tennessee popping and locking in front Mao Zedong’s portrait on Tiananmen and gangsta walking the Great Wall to the bafflement of
Chinese tourists are perfect grist for the comedy show’s mock jingoism.
It’s also just great fun.
“I’m the only black person in a hundred-mile radius,” the dancer marvels as he makes his way toward the
Forbidden City.
The footage was shot during Mr. Riley’s visit to Beijing in November 2011 as part of the Asia Society’s inaugural
U.S.-China Forum on the Arts and Culture. Yo Yo Ma, Meryl Streep and filmmaker Joel Coen also came to Beijing to participate in the forum, but filmmaker Ole Schell told China Real Time he thought Mr. Riley’s experiences in the
Chinese capital would make for better video.
“I basically just wanted to see what would happen when Lil’ Buck got to China, because he’s such a contrast, not just with the other artists, but with China itself,” said Mr. Schell. “People were looking at him like they’d seen a
Martian land on their house.”
Mr. Riley doesn’t shy from contrasts: He’s best known for marrying the electric street dance known as Memphis jookin with the slow sounds of Camille Saint-Saens’ solo cello melody “The Swan” – an artistic feat that turned him into a viral sensation after director Spike Jonze uploaded video of him performing the piece with Mr. Ma in Los
Angeles.
That ability to embrace incongruity served him well in China, particularly at the Great Wall, which in the video almost seems as if it were built just so he could dance on it.
“It was almost like being a walking painting,” Mr. Riley said of the stares he got in China. “A lot of people thought
I was a famous singer or something. It was just crazy, a little overwhelming, but you know I got used it. I made it fun.”

The dancer was taking a similar approach to his impending encounter with Stephen Colbert. “He’s so quick and so on in terms of his come backs and everything, and he’s going to joke a little, but it’s going to be fun,” he said. “I’m ready.”
Mr. Riley said he was working on a project with Shannon Lee, the daughter of martial arts megastar Bruce Lee, that he hoped would eventually take him back to across the Pacific. “It’s going to be a dance show based on Bruce
Lee’s philosophy,” he said. “We definitely want to bring it to China.”
– Josh Chin. Follow him on Twitter @joshchin
By Nick Bedard February 21, 2013 http://beijingcream.com/2013/02/looking-back-at-tracy-mcgradys-inaugural-season-in-china/
Six months ago, seven-time NBA all-star Tracy McGrady shocked the basketball world when he signed a one-year contract with the Qingdao Double Star Eagles of the Chinese Basketball Association (CBA).
With Stephon Marbury already setting the standard as the ultimate CBA success story, McGrady was expected to further raise the profile of the top league in the world’s largest basketball market. He was already a fan favorite: during Yao Ming’s tenure with the NBA’s Houston Rockets, Chinese basketball fans embraced T-Mac, then a perennial All-Star.
But the season didn’t turn out as planned. The Double Star Eagles stumbled out of the gates and limped their way to a CBA-worst 8-32 record, with McGrady encountering hardship on and off the court and making international headlines on a monthly basis.
He played his final game this week, a 17-point loss to the CBA’s best team, the Guangdong Southern Tigers. On this occasion, we look back at the major happenings during his first — and hopefully not last — stint in China.
Oct. 2, 2012 – The Rumor: 361 Sport reports that two-time NBA scoring champion Tracy McGrady and his representatives are in discussions with the Qingdao Double Star Eagles. Sources indicate the 33-year-old was also working out with two NBA teams, the Knicks and Spurs, and wasn’t ready to retire from basketball.
Oct. 9, 2012 – The Deal: McGrady announces on his website, “Goodbye NBA, Hello China.”
He writes: “As I enter this next chapter, I am excited to play for Qingdao Eagles in China. I have been to China several times in the last few years and I love the people and the country. It will be an honor to play for them.”
The contract is reportedly a one-year, $1 million deal.
Oct. 24, 2012 – Now Landing, Flight T.M.A.C.: After a long flight, McGrady lands in Qingdao airport to a welcoming
2,000-plus fans. Video of T-Mac wearing a blue hoodie with tinted sunglasses being escorted through the airport goes viral across the basketball world.
His arrival to China is life-changing for some. China Daily reports:
His appearance drew hundreds of flashing cameras and loud shouts of his nickname, “T-Mac”, from the fans.
“I started to admire him as early as 2001. When I heard he would play in China I told myself that no matter which city he played in, I would move there,” said Xu Guobin, 30, a salesman who works in Qingdao, while holding a

poster of McGrady newspaper reports.
“When I heard he was going to play in Qingdao I was overjoyed. There are so many fans here. I just saw his waving hand, but that was enough for me to be in tears now.”
Oct. 25, 2012 – It’s Gotta Be The Shoes: During McGrady’s first practice in China, he wears a pair of shoes with a thick layer of white tape over the logo. The shoes appear to be a gift from the club. McGrady was hiding the logo to prevent conflicts with his sponsors.
After his first practice, CCTV reports, “The 33-year-old was obviously not in his best physical condition yet, as a missed dunk and awkward smile suggested.”
Nov. 22, 2012 – Preseason: McGrady’s first real sight of basketball with Chinese characteristics comes when his team takes on an international all-star team in a preseason game in Shandong province. After playing the first two minutes, McGrady takes a seat and doesn’t return to the court. Fans are outraged, and at the end they begin launching bottles, cups and lighters onto the floor in protest.
McGrady would take matter into his own hands. He grabs a microphone, walks to mid-court, apologizes to the fans and thanks them for their support.
Nov. 25, 2012 – McGrady’s Debut: The stars were aligning in McGrady’s season debut. With the shot clock turned off and the game tied at 92, McGrady has the ball in his hand with a defender guarding him at arm’s length. He dribbles once to his right, then goes to switch hands. But to his surprise, the quick defender strips him of the ball and calls timeout.
On the ensuing play, former Utah Jazz guard Sundiata Gaines banks home a three-pointer to win the game. Those final seconds would overshadow McGrady’s near-triple-double: 34 points, eight rebounds and nine assists.
Nov. 29, 2012 – You’re Fired: After losing their first two games of the season, the Double Star Eagles part ways with head coach Kang Jung-Soo. The season before, Kang led the team to a franchise-best 16-16 record. He also served as an assistant coach on the Korean national team.
Qingdao would soon after release McGrady’s foreign teammate and two-time NBA champion DJ Mbenga.
Mbenga struggled in his role as the key pick-and-roll man in the McGrady offense. He averaged 11 points and five rebounds at the time of Kang’s firing. He is replaced with undrafted center Chris Daniels, who has some NBA
D-League experience.
Dec. 7, 2012 – Diarrhea: It’s safe to say this might have been McGrady’s most physically uncomfortable CBA game.
Hosting Liaoning, a circuit malfunction cut off all heat in the Qingdao arena prior to tip-off. A basketball arena can get pretty cold in mid-December. On top of that, with 2:37 left in the first quarter, McGrady sprints off the court to the dressing room, leaving fans dumbstruck. A Double Eagles officials says after the game, “His stomach wasn’t feeling very well, no biggie.”
Qingdao loses by 30.
Jan. 9, 2013 – Three Blind Mice: “The CBA has to do a better job with these officials. My team plays hard every night and the 3 blind mice take it away from us!” That from an angry McGrady on his Sina Weibo account, venting his frustration after a loss to Bayi.
“This bad officiating has to change. No way I’m coming back if the officiating continues to be this errant,” he writes.
The CBA responds by handing McGrady a one-game suspension and fining him $1,600.

Jan. 15, 2013 – The $5,000 Interview: McGrady and company ride a four-game winning streak after T-Mac’s excellent individual performance vs. Jilin. But it’s revealed via a Jilin newspaper that he requires an upfront payment of $5,000 for one-on-one interviews.
Feb. 2, 2013 – McGrady the All-Star: CBA All-Star starters are decided by fans in online voting. McGrady leads everyone with 2,218,388 votes, more than 600,000 better than the second-highest vote-getter, Yi Jianlian. The
CBA holds its all-star game between the end of the regular season and the start of the playoffs.
Feb. 17, 2013 – Farewell, China: In McGrady’s final regular season game of the year, he pours in 30 points, grabs nine rebounds and dishes out five assists. The Double Star Eagles still lose, and remain two games worse than the second-to-last-place team.
And then, on Sina Weibo, McGrady announces that he will not be participating in the All-Star game because he needs to return home to be with his ailing grandmother.
His final words: “I loved playing for this great country and the amazing people of China. You are gracious, loving, passionate and supportive fans. You have all made me feel at home here and for that I am forever grateful. From my heart, I thank you for all your love and hope to see you all again soon.”
We hope so too, T-Mac. We hope so too.
By Anthony Tao February 21, 2013 http://beijingcream.com/2013/02/headlines-you-dont-see-every-day-man-scalps-parents/
On the evening of February 15, a university student in Kaifeng, Henan province tried to scalp his mom and dad at a traditional Chinese medicine hospital, according to NetEase. How antiquated is that?
It was a bad Spring Festival for the Zhou family. On February 10, young Zhou got into a money dispute with his parents and wounded his father with a knife in the process. Five days later, his mom was visiting his father in the hospital when Zhou attacked again. This time, we’re told, he stabbed his mother and then tried to remove her scalp.
The mother is currently in a coma in the intensive care unit.
The father, interviewed in the below video, said he had a tendon in his hand severed. He described how a large chunk of his wife’s head was pared off — while she was alive.
A family relative says the child doesn’t usually keep in touch, but whenever he returns home, he asks for money.
That was perhaps the cause of the dispute: the father wanted his son to be self-reliant.
It’s a heartbreaking story: the parents (and entire family, probably) work to send their child to college, only to see him repay them by trying to take their scalps. The father, in the hospital bed, breaks down and sobs just before the two-minute mark.
2 FEB 21 2013

http://www.theatlantic.com/international/archive/2013/02/about-that-chinese-carbon-tax/273365/
I mentioned yesterday that while the Chinese hacking story was, deservedly, getting headlines, the Chinese government's decision to impose a kind of carbon tax could be the more important long-term news.
There's a very good assessment by former Atlantic guest blogger Ella Chou at Dance to the Revolution of what this new policy will and will not mean for China and everyone else. Here are your talking points for the next time this topic comes up at a dinner party:
Environmental carnage of all sorts is a truly major emergency in China, both in the short term [Beijing at right] and as a potential limit on the country's development;
Chinese emissions are a problem not just for its own people but also for the world. It has now overtaken the U.S. as the biggest carbon emitter; most of the coal that is burned anywhere on Earth is burned in China.
Contrary to what you might think, China's economy is relatively less efficient, and more polluting, than those of rich countries. It takes more energy to heat and cool the standard Chinese building than one in Europe or the US;
Chinese farmers use more water, fertilizer, and pesticide per unit of output than is typical even with mechanized farming in the US; Chinese factories put out more air and water pollution per dollar of production than rich-country counterparts. On a per capita basis, the Chinese economy uses less energy than America's. On a per dollar (or per RMB) basis, it uses more. Simplest way to remember this point: China's economy is nowhere near as large as America's now, but it puts out more emissions.
China's pollution problems are a subset of the larger structural challenge for the Chinese economy -- in a way that is well explained at Dance to the Revolution. For more than thirty years price controls have been set to speed/subsidize the growth of huge export-manufacturing industries, and to increase farm output. Thus all these things have been kept artificially cheap: coal and gasoline; fertilizer, pesticide, water; plus financing itself, and use of the environment as a free good. Because they're cheap, companies and farmers have of course used these things freely and often wastefully.
Everyone in the Chinese economic world knows that the country is not going to move out of cheap-workhouse status, toward the realm of "real" rich-country corporate power and prosperity, unless (among other changes) it begins removing these price distortions. So that's the significance of a modest carbon tax, beyond its limited immediate environmental effect. It's part of the effort to "rebalance" the Chinese economy by removing some of its most distorting factors.
Bonus diplomatic-leverage point: Chinese officials have long used U.S. inaction on climate and carbon-tax issues as a rationalization for not taking steps of their own. On average, we're still quite a poor country, the spokesmen would say. If the rich U.S. can't "afford" to deal with emissions, how could we? Now the country is taking this carbon-tax step for reasons of its own reasons -- as a way to deal with pollution and as another step in un-distorting the economy. But as a bonus it gets talking points to prod the US to do its part.
FEB 21 2013 http://www.theatlantic.com/entertainment/archive/2013/02/duplitectural-marvels-exploring-chinas-replica-we stern-cities/273366/
Why's there a Paris in Hangzhou? Or a Holland in Shanghai? A new book examines China's copycat architectural movement.
Epcot, Universal City, and Historical Williamsburg are quaint tableaux vivant celebrating romantic fantasy, but they seem even more quaint next to China's massive replications of the world's most iconic buildings and

picturesque cities. What began with Shanghai's "One City, Nine Towns" plan—a massive, government-led project to build 10 satellite cities each in the architectural style of a different European country—has become a national pastime. The forthcoming book ORIGINAL COPIES: Architectural Mimicry in Contemporary China by Bianca
Bosker takes a close look at Chinese "Duplitecture," examining both the seeming contradictions of the country's copycat communities and the potential for future innovation that they hold.
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Bosker's began reporting on these wonders of the modern China when she realized Shanghai wasn't some isolated experiment in imitation, but part of a nationwide movement churning out replicas of the West's greatest architectural hits. "As I began to explore this phenomenon," she says in an email, "I was struck by the disconnect between architecture critics' contemptuous view of these themed developments—which they dismissed as kitschy, inauthentic knock-offs—and the burgeoning demand for them among Chinese homeowners, many of whom had put their life's savings toward buying a house in a faux-Sweden or copycat Orange County. Many Chinese don't just 'put up' with these copycats—they're proud of them."
To understand why, how, and to what end China was appropriating historical Western architecture, Bosker traveled to these themed developments and met with the house-proud people living in them, as well as the architects, officials, developers, designers, real-estate agents, and groundskeepers.
The suburbs are teeming with courthouses and government offices inspired by the White House or U.S.
Capitol—two of China's most-frequently copied buildings. Some have been financed by private developers. But the Chinese Communist Party has bankrolled their fair share.
"The state has historically had a fickle relationship with the country's rich and their displays of wealth, and just recently banned advertisements for luxury gifts in an austerity push," Bosker says. "Isolated, distinctive, and lavish, these expansive copycat communities could easily come under attack by officials or China's poor, many of whom have been left behind in China's economic 'miracle.' Perhaps because of these tensions, the 'haves,' in turn, have segregated themselves from the 'have-nots' behind layers of security cameras, guards and gates." (Though, of course, the same could be said of many of America's richest communities.)
Entering these themed cities, Bosker explains, visitors have the feeling of leaving China altogether. In Shanghai's
Thames Town, she found the straight streets and hulking high-rises typical of most Chinese developments replaced by meandering paths, cobblestone roads, and squat, low-density brick buildings.
"Honking horns and rumbling trucks gave way to birds chirping and an eerie quiet that's rare in a crowded country of 1.3 billion," Bosker says. 'The careful landscaping—manicured lawns, lots of trees, potted flowers—ensure even the air smelled different. The security staff wore the red uniforms of Buckingham Palace guards; streets had names like 'Chelsea Lane'; and the Chinese eateries were outnumbered by western pubs, wine shops, and cafes.
And just like in the West, there was at least one car in every drive."
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The marketers of these communities peddle a lifestyle associated with "courtly living" in the "land of aristocracy."
This seemingly presents a contradiction, Bosker points out: "China has emerged from several decades of strict communist rule that sought to eliminate socio-economic classes altogether, only to embrace styles and symbols from periods in European history when class distinctions at their most institutionalized."
Property developers ensure their buildings are true to the original by importing the architecture, building materials, and architects from abroad. Or at least they try, Bosker says: "In Shanghai's San Carlos development, for example, a real estate agent assured me the French Baroque style of the buildings had been designed by a
French actually working in France (I later met the designer: He was Chinese, but had traveled to France on several occasions)."
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Of course, China is not the only country that recreates foreign environments. What is Washington, D.C. if not mimicry of Paris? Yet when China recreates Paris, it isn't pay homage to France, says Bosker: "Rather, it's a monument to China, which has become so rich and so mighty it can figuratively 'own' its own City of Lights—or
Manhattan, or Venice, or White House." Even in pre-modern China, the country's leaders saw copycatting as a way to assert their status to both their subjects and rivals. Bosker explains in the book that in the third century B.C., the First Emperor celebrated his conquest of six rival kingdoms by rebuilding their palaces within his capital city.
In the time since then, "China has cultivated a more permissive and nuanced attitude toward copying," Bosker says. "Though China also prizes originality, replication is not only permitted, but also valued as a marker of skill and ability."
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And while this replication may bring to mind certain Las Vegas resorts, communities like Hangzhou's "Oriental
Paris" and Shanghai's Holland Village aren't tourist destinations—they're peoples' homes, intended as fully-functional residential communities. Still, they have something in common with America's commerce-driven fake towns. "China's architectural plagiarists seem to have borrowed from the theme-park playbook in order to ensure these copycat enclaves are convincing," Bosker says. "For instance, many developments are closed spaces—access into and out of the fantasy-land is carefully controlled—and strict rules are in place to ensure homebuyers won't make any chances to their homes that could temper the western style."
Through mimicry comes mastery: Architecture atrophied under Mao, and now, China's plagiarists believe they can advance more quickly by imitation than they can by direct innovation. After all, the building and design of brand-new communities takes skill and vision, no matter the source material. "Though Chinese architects may be replicating now, all this copying could quickly give way to creativity," Bosker says. "As a resident of Shanghai's
Thames Town noted. 'The hardware may be English, but the software is all Chinese.'"
February 20, 2013 | by Liz Carter http://www.tealeafnation.com/2013/02/mail-bomb-kills-chinese-officials-college-age-daughter/
The People’s Daily recently reported that an explosion killed one person in a residential complex in Shanxi province on February 18. Where the official account in state media lacked detail, however, online sources were quick to assert that the incident was more than a simple explosion. Li Xudong, an investigative journalist with
China Business Media, posted this account of the incident on Sina Weibo, China’s Twitter:
“At 9 AM on the 18, there was a big explosion affecting the family of a Shanxi province Xiangfen county tax bureau official. The government official living in the building received a phone call: ‘I’ve sent a gift for you. I set it in front of your door. Go down and get it yourself.’ The government leader sent his 22-year-old daughter (a college student home on vacation) to go pick it up. When she moved the box, it exploded violently. She was totally incinerated, and the building was structurally damaged.”
His post was quickly retweeted over 5,000 times. Other versions of the incident also included screenshots of the local news organization’s initial report from the scene, which confirmed that the girl killed was the daughter of a
Chinese Communist Party official, but did not include information about the telephone call.
Reactions to these accounts, in which the bombing was political in nature, were mixed. One Weibo user commented, “Class struggle is complicated.” Another, wrote “Killing the chicken to scare the monkey [a Chinese phrase meaning to make an example of someone]! It makes one so very happy.” Someone even summed up the general sentiment of the responses: “I only get one impression from looking at all these comments. The people

are extremely angry.”
Netizen @ 必须各种坑 responded to those voices:
What a bunch of idiots. A young girl in her twenties was killed in an explosion, and people are actually clapping and saying how great it is. They don’t even say what the government official did to anger people so. Even if he did do something terrible, it’s no excuse for killing his children. The kind of person who could have done this is no ordinary person; this leader probably stepped on the toes of some powerful person. All those truly corrupt officials are living great lives, who would be killed by shitzens [slang for ordinary Chinese people] like you?
Still more netizens questioned the veracity of the information. No one posting the information about the alleged phone call indicated the source of that detail, which presumably only the government official or the perpetrator would know. Some even stated that the explosion was probably not a bomb at all, but an accident that happened to kill the young girl. Such bombings are not unheard of in China, but the targeting of government officials is rare and more prevalent in countries with ongoing military conflicts or insurgencies.
An investigation into the cause of the bombing is underway, according to state-run media, and it may never be clear whether the telephone call is part of the true story or a baseless conspiracy theory. The gleeful responses to the incident, however, may serve as proof that public sympathy with local government officials is extremely low.
Mitch Blatt | February 21st, 2013 http://www.chinahush.com/2013/02/21/absurd-racism-claim-and-attacks-on-chinese-culture/
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This year’s Sports Illustrated swimsuit was photographed internationally in eight locals and included local flavor of each local. As such, it has been accused of racism by some notable bloggers, and the story has spread into mainstream media outlets.
The claims of racism go to such absurd lengths as to actually denigrate minority culture in China. Jessica Gomes was photographed standing with some members of a minority ethnic group in Guilin wearing traditional attire.
Anne V was photographed on a raft on the Li River guided by a Chinese person.
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Dodai Stewart at Jezebel thinks that the Chinese people look “quaint, backward and impoverished.” By included photos of minorities in their traditional attire or of raft guides, they “cement(ing) stereotypes, perpetuat(ing) an imbalance in the power dynamic.” Why didn’t China include some of the skyscrapers and “modern cities that make
New York look rickety” where ancient hutongs are being knocked down to make way for restaurant and bar streets?
For Stewart’s argument to make sense, you have to make a terribly closed-minded value judgment on the relative value of minority traditions versus modernization. The photos can only be viewed as racist if they are portraying one race in a negative light in comparison to the model. How is it that the local Guilin people are being harmfully misrepresented wearing the same clothing that they have worn for hundreds of years and still wear today?
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There’s nothing shameful about the minority people’s heritage and culture. The only problem with the photo is that the caption doesn’t say what minority is represented. China has 56 government-recognized ethnic groups,

with the Han majority making up 91% of the population. Minority ethnic groups are referred to as 少数民族 (shao shu min zu),and their traditions and culture are a national treasure in China that should be encouraged and protected. Having traveled through Guizhou, Yunnan, and Xinjiang, where there are large concentrations of minority ethnic groups, I have found that architecture, attire, cuisine, and other cultural aspects of China’s 55 minority groups are some of the most beautiful things in the country, which is probably why Sports Illustrated decided to include them in some of the photos.
The Li River and the karst mountains in its midst are also some of the most beautiful things in China, which is why they used that backdrop for some photos. But why is there a Chinese person guiding the raft the model is riding?
According to Stewart, it creates the image of ，“ A white person relaxing, a person of color working. Tale as old as time. A non-white person in the service of a white person.
”
Would Stewart rather have had a white person do the work and put the Chinese guy out of a pay day? Having been to Guilin, I know first hand that the people who guide tours down the Li River are all Chinese. A Chinese person guided the boat that I was on. The vast majority of people who live in China are Chinese, so it’s only natural that
Chinese people would get the jobs as guides.
Once again, this attack on Sports Illustrated comes back to a feeling of pity Stewart feels on the Chinese subject.
He’s so poor. “They didn’t have to use a dude with dental issues on a river raft,” Stewart wrote.
It’s unclear whether Sports Illustrated made dental health a qualification for the guide in the photo shoot, but dental health is certainly not a qualification for being a good raft guide. It all comes back to the fact that Stewart is uncomfortable seeing some indications of the poverty of China’s countryside.
Her major criticisms of the photo shoot come down to claims that it makes China–and the other locals–look poor compared to the West when each of the locals she mentioned also includes examples of bustling cities. She wants us to look at the cities and ignore the realities of daily life for hundreds of millions who have been left behind by
China’s economic growth.
She wants to whitewash the truth. The fact is, while government investment in China has largely been focused on
Eastern megacities like Shanghai, Beijing, and Guangzhou, the majority of the population living in the countryside still hasn’t been so blessed. Students in poor provinces where the government has spent little on education have to bring their own desks to school. Small and unsafe school buses crash in rural China killing students due to overcrowding, while advanced buses with safety features are reserved for transporting teachers.
But let’s forget the truth. Just take a picture in front of the Shanghai World Financial Center and talk about how all Chinese are doing great. China is doing much better since it reformed its economy, but it hasn’t caught up to
America or Europe, not even for the Chinese middle class.
There’s nothing shameful about guiding a raft down the Li River. It’s an important job for the tourism economy in the region, and it’s obviously necessary for the photo.
The idea of including local culture produced more interesting photos than would have been produced with models standing in front of the Apple Store in Century Avenue in Shanghai or the Uniqlo store in multinational brand mall on the “refurbished” Qianmen Street in Beijing.