China Readings for October 14th

  • Sina Rises Most in 3 Months as Official Backs Microblog Use – Businessweek – Government agencies and officials should “actively” use microblogs to communicate with people, disclose official information, respond to “societal concerns” and improve the government’s work, the official Xinhua News Agency reported, citing a speech by Wang Chen, chief of the Information Office of China’s State Council, at a meeting in Beijing today.

    “The Chinese government acknowledging Weibo’s positive impact mitigates concern on Weibo’s regulatory risk.” C. Ming Zhao, an analyst with Susquehanna Financial Group in Boston, wrote in a research note today. “Street attention will be shifted toward commercialization of Weibo.”

  • Sina Shares Soar On News Of Government Embrace | DigiCha
  • Illegal mining causing Great Wall to disappear — Shanghai Daily | 上海日报 — English Window to China New – MANY sections of the "wild Great Wall" in north China's Hebei Province have been damaged or disappeared completely due to illegal mining.

    The 150-kilometer stretch of the Great Wall in Laiyuan County was constructed during the Ming Dynasty (1368-1644).

    Unlike the typical landmark tourist attraction in Beijing, the wild Great Wall has not been renovated but instead left untouched as an archeological site.

    But illegal mining has been widespread along the wild Great Wall in Laiyuan – an area rich in metals such as nickel and copper – causing mountainsides to collapse and damage the wall, People's Daily reported yesterday.

  • Shaolin Temple rejects ‘vicious lies’ about abbot and a mistress — Shanghai Daily | 上海日报 — English Window to China New
  • Information Dissemination: AirSea Battle: A Politically Charged Doctrine? – FEAR UPSETTING CHINA? FOR WHOM DO THESE PEOPLE WORK? THEN AGAIN, I NOW BELIEVE US AND CHINA ELITES HAVE SO MUCH MONEY AT STAKE (ESP US POLICYMAKERS ONCE THEY LEAVE GOVERNMENT) IN A STABLE US-CHINA RELATIONSHIP THAT WE SHOULD NOT WORRY TOO MUCH ABOUT CONFLICT. FOLLOW THE MONEY//

    Officially, the Pentagon has said the new strategy is not directed at China.
    But unofficially China is the focus, and everyone including China knows that. Here is where AirSea Battle is heading.
    Officials in the Obama administration who fear upsetting China also are thought to have intervened, and their opposition led Mr. Panetta to hold up final approval.

    The final directive in its current form would order the Air Force and the Navy to develop and implement specific programs as part of the concept. It also would include proposals for defense contractors to support the concept.

  • Romney sharpens attack on China’s economic policies – Yahoo! News – Republican presidential candidate Mitt Romney on Thursday threatened trade sanctions against China if the world's No. 2 economy does not halt what he said was currency manipulation, unfair subsidies and rampant intellectual property theft.
    "As president, I will present China with a clear choice," said Romney in an advance copy of a speech to be delivered later on Thursday near Seattle. "Either abide by your commitments, open your markets, and respect our property, or else the days of open access to our markets, our ideas, and our companies, are over."
    Romney, who is to address Microsoft Corp employees at its Redmond, Washington, headquarters, said the United States should impose duties and tariffs on Chinese goods, and block the transfer of some technology, if Beijing continues these practices.
  • Alibaba hit by internet protest – FT.com – High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/a849c9f8-f59b-11e0-94b1-00144feab49a.html#ixzz1ahsEAxLz

    Alibaba Group has triggered a vast internet protest of small online vendors by introducing steep fee increases on its business-to-consumer site, highlighting the weight the e-commerce group carries in the Chinese economy.
    Close to 50,000 people were logged in on Thursday to an online voice chatroom for small vendors on Taobao Mall, China’s largest business-to-consumer marketplace, complaining about the price hikes and arranging attacks on large Taobao Mall vendors.

  • The Great Wall of China is falling down – Telegraph – The Great Wall of China may have survived the Huns and Mongol hordes, but widespread neglect, underfunding and mining means that it is now falling down.
  • China Export Growth Dwindles to Slowest Pace in Seven Months as Yuan Gains – Bloomberg – China’s exports rose the least in seven months and the customs bureau warned of “severe” challenges as the global economic outlook dims, giving Premier Wen Jiabao’s government less incentive to let the yuan rise.

    Exports rose a less-than-forecast 17.1 percent in September from a year earlier, the bureau’s data showed in Beijing. The trade surplus was $14.51 billion, the smallest since May. Growth in shipments to Europe, China’s biggest export market, slumped to 9.8 percent, from 22 percent, amid the sovereign-debt crisis in euro-region nations.

  • Inside the Ring – Washington Times – AIR SEA BATTLE FIGHT

    The Pentagon is engaged in a behind-the-scenes political fight over efforts to soften, or entirely block, a new military-approved program to bolster U.S. forces in Asia.

    The program is called the Air Sea Battle concept and was developed in response to more than 100 war games since the 1990s that showed U.S. forces, mainly air and naval power, are not aligned to win a future war with China.

  • China’s Next Revolution Is in Fitness – NYTimes.com – But as the country grows richer, the expanding middle class appears to be only slowly growing fitter. The athletic fields at Olympic Square one recent afternoon are all but empty, though the nearby McDonald’s is doing good business.

    Unlike Sydney, London and Paris, hardly a cyclist or jogger is to be seen in this city of six million, where bike lanes are clogged with cars and the only runners are pedestrians trying to get safely across eight-lane roads. The World Health Organization says that the obesity rate in some Chinese cities is close to 20 percent.

    But something is going on behind the scenes: it is hardly an athletic revolution of the people, but the foundation for one may be forming. Anecdotal evidence shows that more people are participating in amateur sports. Gyms, clubs and gear shops are growing in number. And the state is supporting not just future Olympians, but also fitness at the grass-roots level.

  • Open Source Center Views China’s Huawei Technologies | Secrecy News – The DNI Open Source Center produced a report this month profiling Huawei Technologies Co. Ltd., China’s largest telecommunications company.  See “Huawei Annual Report Details Directors, Supervisory Board for First Time,” October 5, 2011.

    The report is based primarily on Huawei’s own website, which released new details earlier this year about the company’s management team.  “The release of this information may be intended to counter media accusations that the company lacks transparency,” the OSC said.

  • Top Chinese Propaganda Official Urges Government Embrace of Microblogs | iChinaStock – Wang Chen, the second-highest ranking official in China’s Propaganda Department, today publicly encouraged all Chinese officials to “embrace Weibo [Chinese for microblogs] with more openness and confidence.”

    The unusually positive remark towards social media from a top government official signals that the possibility of a government shutdown of Weibo is remote. Investors, nervously following reports that the Chinese government is soon to issue new, tighter regulations for microblogs, may breathe a small sigh of relief.

    At a conference held by China’s Information Office of the State Council in Beijing discussing, “Microblogs Serves Society”, Wang Chen, vice director of CPC Central Propaganda Department, said all the organizations in China should “actively” use Weibo to provide contents of use to Chinese Internet users.

  • CEO Charles Chao Touts Sina Weibo “Government Edition” | iChinaStock – At the ”Microblogging Serves Society” conference today, Sina CEO Charles Chao touted the “Government Edition” of the popular Sina Weibo microblog (NASDAQ: SINA), an indication of Sina’s ongoing efforts to assuage Chinese government concerns over social media.
  • Placing the VIE story in history | China Accounting Blog | Paul Gillis – Dune Lawrence of Bloomberg Business Week published an excellent article that broke no new ground on VIEs, yet has ignited a firestorm in the blogoshere.  Check out the China Law Blog, China Hearsay, Digicha, and the China Finance Blog. While they express different and strongly held opinions I think they are all saying the same thing. The VIE structure is unusual, risky, and in trouble.  No one expects the Chinese government to suddenly shut down Baidu and Sina over their use of VIEs yet I think all would agree that the days for these structures are numbered. The questions that remain are how quickly will new IPOs of VIE deals be shut down and how are the respective governments going to deal with existing VIEs.   On the first issue I think that lawyers and accountants are going to face incredible pressure from many different directions that may stop new deals in their tracks. I will have a post on this later today.  

    The second issue is the most important. How does China find a way for its successful entrepreunerial companies to find capital?

  • The VIE Meta-Narrative: Illegal vs. Invalid | China Hearsay – And why would courts shut down VIEs? These are companies in good standing (i.e. with valid business licenses). As to validity of contracts, of course courts have not invalidated them — no one brings such a VIE dispute into a Chinese court. If they do, I haven’t heard about it, and I’m not the only one.

    To sum up here, the reason I slogged through all that was to make the distinction between VIE as illegal structure and invalidity of VIE contracts. I’ve been telling a lot of people recently that the latter is much more important than the former in terms of risk management, and the discussions of the past couple of days has given me a nice framework for conveying the distinction.

  • Bhutan royal wedding – in pictures | World news | guardian.co.uk – beautiful
  • North Koreans Woo Business to Rason Economic Zone – NYTimes.com
  • Mixed Signals: What Was Huijin Doing, And for Whom? – China Real Time Report – WSJ – Beijing’s move was aimed at such foreign investors, argues Yi Xianrong, a researcher with the Institute of Finance and Banking, which falls under the Chinese Academy of Social Science, a government research center. Foreign investors typically buy shares of Chinese companies in Hong Kong when making China plays, as Beijing restricts foreign buying in the mainland.

    “Huijin has sent a clear message to international markets: China’s government will not let the shorting of China’s economy, stocks and currency by hedge funds go unchecked,” he wrote in the Shanghai Securities News on Wednesday (in Chinese). He added that while China has its problems, “they do not amount to a reverse in China’s economic growth and won’t lead to a grave recession.”

    At about 200 million yuan ($31 million), Huijin’s purchase was tiny and wouldn’t have moved markets had it not been broadcasted.

  • Thaler’s JAT Tops Hedge Funds With Bet Against Chinese Internet Companies – Bloomberg
  • Vietnam, India Stand Firm on China Row – India Real Time – WSJ – India and Vietnam, whose leaders meet today in New Delhi, are squaring up for a fight with China over the right of a state-owned Indian oil and gas company to explore in disputed waters near Vietnam.

    China is embroiled in territorial disputes in the South China Sea with Vietnam, the Philippines, Malaysia, Brunei and Taiwan. India’s ONGC, a state-owned oil and gas company, is planning to begin exploration next year at a block in waters claimed by both China and Vietnam.

    Vietnam President Truong Tan Sang, who is meeting Prime Minister Manmohan Singh in New Delhi on Wednesday, is using one of his first trips abroad to rebuff China’s suggestions that ONGC’s plans amounted to a violation of Chinese sovereignty.

  • Cash Crash for Wenzhou’s Private Loan Network _英文频道 Caixin Online – Everyone can win and everyone can lose in a Chinese city that plays a risky game of high-interest rate, private lending

    Dubbed the nation's capital of private financing, the city of Wenzhou offers a textbook example of how non-bank lending has fueled private sector prosperity – and risk-taking – in China.
    A recent central bank survey said about 60 percent of all local businesses and the vast majority of households are interconnected through the city's private lending system.

    It's a tight financial network that interweaves lenders and borrowers collectively, often to their mutual benefit and sometimes to their terrible loss.

    If only a few debt-ridden companies collapse because they can't afford to repay the high-rate, short-term loans they've gotten from private lenders in the network, the ensuing financial trouble can ripple through the entire credit-connected community, exempting few from turmoil.

    Since early this year, according to the Wenzhou Public Security Bureau, some major Wenzhou-area private company owners have fled creditors to avoid repaying loans. In each of these cases, though, the system survived relatively unscathed, and community dealmaking continued.

    Yet a serious, domino-effect of financial trouble started to endanger the entire system in July after a well-known entrepreneur named Wang Xiaodong disappeared. A local banker familiar with the case said Wang abandoned a venture capital investment company he owned that owed up to 1.2 billion yuan to private lenders.

  • Foshan’s Policy Reversal Shows China Keeping Tight Grip on Real-Estate Sector – WSJ.com – A southern Chinese city that rolled back property-purchase restrictions on Tuesday reversed course just hours later, signaling that the country's top leadership remains determined to keep a tight grip on the overheated sector.

    The quick local policy U-turn by Foshan, a city of about seven million people in the southern province of Guangdong, indicated that Beijing hadn't given its blessing to the modest rollback in curbs announced earlier Tuesday. That dashed hopes among some property developers and observers that a weakening economic outlook may force China to loosen real-estate tightening measures in the coming months.

  • Hong Kong to Build Subsidized Homes – WSJ.com – Hong Kong Chief Executive Donald Tsang unveiled plans Wednesday to resume the construction of subsidized homes as property prices remain at record levels, in a move aimed at appeasing widespread social discontent over a growing wealth gap amid surging consumer prices and stagnant working-class wages.

    The plans involve the building of more than 17,000 homes over four years, starting from 2016-2017, he said. Analysts, however, said the number will fall short of demand.

  • Review & Outlook: China’s Bank Cover-Up – WSJ.com – BEIJING LEARNED FROM US FED?//

    Beijing is not pleased with the signals that the market for Chinese bank shares is sending about bank fundamentals or the state of the economy. So it is doing what it usually does with information it doesn't like: Cover it up. Central Huijin, an arm of China's sovereign wealth fund that is in turn an agent of the State Council, has started buying the shares of Chinese banks listed in Shanghai and Hong Kong to pump up prices.

  • Chinese Police Detained 37 in Wal-Mart Employees – WSJ.com – WALMART PR SPINNING AS "MISLABELING", BUT A SYMPTOM OF MUCH DEEPER ROT IN WALMART CHINA//

    The detention of Wal-Mart Stores Inc. workers in southwestern China involved 37 people, including two high-ranking employees of a store who were formally arrested, according to an official media report.

    The company and police in Chongqing had said employees were detained in an investigation of pork that was mislabeled as organic, but hadn't disclosed further details. On Wednesday, a Chongqing government spokesman cited a report in the city's official newspaper that laid out more details.

  • China Export Growth Dwindles to Slowest Pace in Seven Months as Yuan Gains – Bloomberg – China’s exports rose the least in seven months and the customs bureau warned of “severe” challenges as the global economic outlook dims, giving Premier Wen Jiabao’s government less incentive to let the yuan rise.

    Exports rose a less-than-forecast 17.1 percent in September from a year earlier, the bureau’s data showed in Beijing. The trade surplus was $14.51 billion, the smallest since May. Growth in shipments to Europe, China’s biggest export market, slumped to 9.8 percent, from 22 percent, amid the sovereign-debt crisis in euro-region nations.

  • Inside the Ring – Washington Times – AIR SEA BATTLE FIGHT

    The Pentagon is engaged in a behind-the-scenes political fight over efforts to soften, or entirely block, a new military-approved program to bolster U.S. forces in Asia.

    The program is called the Air Sea Battle concept and was developed in response to more than 100 war games since the 1990s that showed U.S. forces, mainly air and naval power, are not aligned to win a future war with China.

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