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Oil Diplomacy: Late to the Party POLITICS

Taiwan Consensus: New Terms, Old Battles SCIENCE

Paleontology: The Fossil Frontier


Does community activism hold the solution to rural decline?


Volume No. 046 June 2012





Published by China Newsweek Corporation Publisher: Liu Beixian Executive Directors: Liu Beixian, Zhou Jianming Editor-in-Chief: Wang Xiaohui

Kill Rumor-mongering… With the Truth


n recent months, the authorities have source of concrete information than the State melaunched a large-scale campaign against the dia. “rumors” they claim are destabilizing China. There is an alternative, if less conventional, apPeople have been arrested, and social media out- proach to dealing with embarrassing rumors. The lets have received ominous warnings. A recent authorities could tackle the problem at its source – primetime ad campaign on CCTV, China’s State their own lack of transparency during a crisis. The broadcaster, urges citizens: more information you give “Don’t start rumors. Don’t freely, the less people may spread rumors. Don’t bebe inclined to fill in the The more information you lieve rumors.” gaps by themselves. give freely, the less people Nobody seems to be Even those in power are may be inclined to fill in actively encouraging ruadmitting this is the only the gaps by themselves. mor-mongering, however viable solution. In a recent many have questioned interview, Wu Heping, the precise definition of a spokesman for the Min“rumor,” particularly the istry of Public Security, application of the term in agreed that the best stratthe context of convicting egy for tackling rumor is someone of “rumor-mon“to release relevant inforgering.” mation to the public in a timely and open fashion.” To harass and even imprison people for “spread“When government agencies are afraid to tell the ing rumors,” without bothering to confirm, deny truth in times of crisis, they simply hand that right or even acknowledge their allegations, is unlikely to over to others,” he added. solve anything. Such an approach could even exacEven government mouthpiece the People’s Daily erbate the problem of social instability – the public acknowledged in an editorial published September may see the arrest of a “rumor-monger” as a sign of last year that a deep-rooted distrust and suspicion an attempted cover-up. of official announcements exists throughout ChiSina Weibo, China’s most popular microblog- nese society, something “more harmful than ruging service, has been particularly singled-out as mors themselves.” a major contributor to the spread of harmful ru“Rumors can only flourish within a society that mors. The authorities’ increasing hostility toward does not trust the official version of events,” the social media, which has been responsible for bring- commentary ran. ing many crises and scandals to light, also looks less Confucius summed this problem up neatly cenlike a war on misinformation and more like simple turies ago: “When the people do not believe in it, self-interest. the State cannot endure.” To restore popular confiSocial media is only a tool, as capable of inform- dence in government, real effort must be made to ing as it is of misinforming. Despite their fallibil- increase transparency and respect the people’s right ity, by allowing a variety of voices a platform when to know. Only then can a government claim to be a news story breaks, microblogs are often a better accountable to the will of the people.


Editorial Office Managing Editor: Zheng Zhonghai Advisor: Liu Dizhong Senior Editor: Yang Yi Copy Editors: Jack Smith, Alex Taggart Lead Writer: Yu Xiaodong Editors: Wang Yan, Yuan Ye, Xie Ying, Sun Zhe, Li Jia First Reader: Stephen George Address: 5th Floor, 12 Baiwanzhuang South Street, Xicheng District, Beijing, China Post Code: 100037 Tel: 86-10-88395566 Fax: 86-10-88388045 Email: Art Department Art Director: Wu Shangwen Art Editor/Designer: Zhang Dawei Marketing Office China Newsweek Corporation President: Wang Xiaohui Chief Executive: Fred Teng Tel: 1-212-481-2510 Fax: 1-212-481-2503 Address: Suite 1101, 15 East 40th Street, New York, NY 10016, USA Email: Toronto Office Director: Lai Hailong Address: 51 Halstead Drive, Markham, ON Canada L3R7Z4 Tel: 1-905-604-6150 Fax: 1-905-604-6170 Email: Marketing Director: Wang Chenbo Account Manager : Ren Jie Tel: 86-10-88388027 Circulation Manager: Yu Lina Tel: 86-10-88311834 Advertising Director: Gao Weiwei Tel: 1-212-481-2510 Marketing Promoter: Jerry Meng Tel: 1-212-481-2510 New York Office: Jing Xiaolin, Wei Xi, Sun Yuting Washington Office: Wu Qingcai, De Yongjian Los Angeles Office: Zhang Wei San Francisco Office: Liu Dan London Office: Wei Qun Tokyo Office: Sun Ran Paris Office: Wu Weizhong Bangkok Office: Yu Xianlun Kuala Lumpur Office: Zhao Shengyu Moscow Office: Tian Bing Legal Advisor: Allen Wu ISSN 1943-1902




Back to Their Roots



02 Kill Rumor-mongering… With the Truth 10 24 26

Hong Kong Election : A New Era Cross-Straits Relationship : A New Consensus? Civil Service : Bloated Bureaucracy

Cover Story

12 HATCH POINT : Back to Their Roots/Homeland Security The Collaborators/Farm Academy


28 Paleontology : Fossil Fuel


32 Cosmetic Injections : Saving Face


Photo by CFP

To many, China’s rural culture is simply a relic of a long-lost past. To others, it is a living part of the country’s heritage which is worth fighting for. NewsChina meets some of the grassroots activists who may yet halt the march of urbanization 34 37

Illegal Lotteries : Luck of the Draw Real-name Registration : Bare Bloggers

special report

40 Oil Diplomacy : Late to the Party economy

46 Government Car Procurement : Car Clash international

48 52

BRICS : Union Divided? South China Sea : China Cornered


54 Pollution Control : Water Watch


57 London Book Fair : Book Diplomacy sports

58 Stephon Marbury : Ducks’ Darling

visual report

60 Beyond Femininity outside in

64 67

Mount Emei : Peak Season Flavor of the Month : East Treats West

04 MEDIA FOCUS 05 What They Say 06 NEWS BRIEF 08 Netizen Watch 47 China by numbers 66 real chinese 68 ESSAY 70 CULTURAL LISTINGS 72 Commentary


Sanlian Lifeweek March 30, 2012

NewsChina Chinese Edition April 16, 2012

Poor Neighbors Oil Hike In late March, the Chinese government raised the price of petroleum to eight yuan (US$1.18) per liter, double the price in 2005. The resulting backlash led pricing authorities to argue that they have fallen into a Catch-22: if they do not raise prices concurrently with international rates, China’s oil suppliers will milk the government for compensation. At the same time, any price hike results in public condemnation. Full marketization continues to be rejected as an option by policymakers in light of China’s low reserves and concerns that, given the chance, the country’s immensely powerful oil monopolies would further inflate prices.

Century Weekly April 2, 2012

Ward Wars Believing, incorrectly, that the doctors had complicated his treatment, a 17 year-old patient stabbed three doctors in a hospital in Harbin, Heilongjiang Province, one of whom later died. Media reports warned that “violent and/or abusive” conflicts between doctors and patients have escalated since the government required that all hospitals be self-sufficient, with corner-cutting and poor patient care common complaints. On one hand, patients, especially the poor, cannot afford the escalating cost of medical care. On the other, doctors complain of long hours and meager wages. While pharmaceutical salesmen and hospital administrators can make a fortune from the status quo, those in the front line – nursing staff, doctors and their patients, continue to chafe under rigid State restrictions.


Around China’s capital, Beijing, an expanding poverty zone now covers a total of 25 neighboring counties, with the wealth gap between the two blocs, according to media reports, growing at an annual rate exceeding 140 percent. In order to ensure the capital’s development, these surrounding areas have to provide Beijing with natural resources, specifically water, and curtail polluting industries which impact the capital’s air and water quality, receiving minimal compensation and no extension of the welfare programs enjoyed by Beijingers. Experts have suggested establishing a cooperation system between the two sides which might compel Beijing to offer more assistance to its neighbors, rather than the current policy which critics have labeled “extortion.”

China Economic Weekly April 17, 2012

Rare Earths Too Tempting Despite the central government’s tightening of official controls, underground exploitation of rare earths, China’s most lucrative natural resource, remains rampant in certain provinces. China’s biggest reserves of rare earths in Jiangxi Province have continued to be excavated, with officials and captains of industry creaming off a hefty slice of the profits. Environmental officials dispatched by the central authorities to enforce official bans often face abuse or even the threat of violence from local communities reliant on their rare earth deposits. Similarly, without support and cooperation from the local government, major State-owned enterprises have failed to establish national standards for the exploration of rare earth deposits, preferring instead to continue with business as usual. With so many special interests involved, it seems unlikely government pledges to curb rare earth mining will be fully realized.

Southern Metropolis Weekly April 5, 2012

E-Legacy? As China’s Internet population continues to expand, more and more people are discussing the notion of an “electronic legacy” comprising blog posts, online photos and diaries, and online gaming assets, which could be bequeathed to their families after their death. Internet service suppliers argue that users only have the right of use, not ownership, of all self-created online content, fearing mass copyright infringement lawsuits if they were to extend ownership to Internet users. Although lawyers have called for legislation to protect individual “electronic legacies” since 2004, the ownership of electronic assets, now possessed by millions of people, is an issue which refuses to go away. NEWSCHINA I June 2012

Illustration by Wu Shangwen

“The education system is fighting against panicky parents, who are forcing their kids into fierce competition earlier and earlier. First it was for college entrance, then middle school, then elementary school. Now, kids are competing before they’re born or even conceived.” Yang Dongping, director of education science at the Beijing Institute of Technology, on the scourge of pushy parents “Our ignorance of copyright law is astounding. At the NPC [National People’s Congress], one delegate cursed me, saying ‘Shame on you! Why do you always want money? Why can’t you be selfless?’” Gu Jianfen, a renowned composer, talking about copyright protection at a conference debating revisions to China’s copyright law

“If Steve Jobs had lived in China, even he would have been speculating on the real estate market. China will never have its own Steve Jobs if the investment environment doesn’t improve.” Gu Shengzu, vice-director of the China National Democratic Construction Association, lamenting the difficulties faced by Chinese private enterprises at an economic forum in Beijing

“The more expensive the brand, the safer it is. It’s generally those who can’t afford well-known brand names that are most at risk from tainted food.” Fan Zhihong, associate professor at the China Agricultural University, reflecting on media reports that a local brand of set yogurt had been made from old leather shoes

“If you’re a university principal, professors might disagree with what you say, since theories are relative. If you’re a mayor, nobody disagrees with you, since power is absolute.” Wu Song, mayor of Baoshan, Yunnan Province, in an interview with local media

“Most Chinese companies are actually using the market to earn money for themselves, rather than making money for the market, let alone stockholders.” Xie Guozhong, a renowned Chinese economist, blogging about China’s back-to-front stock market NEWSCHINA I June 2012

“Many Chinese directors are willing to spend billions to make a film that nobody understands. I admire their imagination.” Peng Haoxiang, a Chinese director, believes many Chinese movies are divorced from reality

“It is a total failure that despite several hundred attempts, the government has been unable to control the spending of public funds on lavish banquets. I suggest a ban on all reimbursement for these kinds of expenses.” Liu Binjie, president of China’s Administration of Press & Publications, on his microblog

“Can I curse? No? OK, I have nothing to say.” A man in Jiaxing, Zhejiang, declining to offer a vox-pop in an on-the-spot television interview about China’s gasoline prices


Top Story

Bo Xilai Falls Bo Xilai, former Party secretary of Chongqing, has been placed under investigation for “involvement in serious disciplinary violations.” The Central Committee of the Communist Party of China (CPC) has suspended his membership of the Politburo and the CPC Central Committee. Bo’s removal, according to an official statement from State outlet Xinhua News Agency, came alongside allegations that his wife, Gu Kailai (named “Bogu Kailai” in Xinhua reports for undisclosed reasons) has been implicated in the suspected murder of British businessman Neil Heywood, who died in suspicious circumstances in Chongqing last December. “Bogu [sic] Kailai and her son were previously on good terms with Heywood. However, they eventually had a conflict over economic interests, which later intensified…” ran the official Xinhua statement on April 17 after Gu Kailai and Zhang Xiaojun, an orderly at the Bo family home, were detained. “A subsequent investigation has shown that Heywood was a victim of homicide, in which Bogu Kailai and Zhang Xiaojun are implicated.” The homicide allegations against Bo’s wife came from Wang Lijun, Chongqing’s former police chief, who entered the US general consulate in Chengdu, a city close to Chongqing, “without authorization” on February 6, 2012, remaining there for one day. Earlier that month, Wang had been removed from


his post as director of the Chongqing Public Security Bureau amid rumors of corruption. Wang shot to fame for his widely publicized six-month crackdown on organized crime in Chongqing beginning June 2009, a crackdown believed to have been enabled by then Chongqing Party chief Bo Xilai. On March 15, the central committee of the CPC announced Wang Lijun’s removal from his post as vice-mayor of Chongqing. The same day, Bo Xilai was removed from his post as Chongqing’s Party secretary. The son of late CPC veteran Bo Yibo, Bo Xilai, 63, enjoyed a meteoric rise through China’s political ranks after serving as mayor and Party secretary of Dalian, Liaoning Province, and was credited with rebuilding a struggling industrial city into a viable tourist destination and hi-tech hub. By absorbing investment through a variety of expositions, fairs and official visits, Dalian’s budget surplus grew from 2.1 million yuan (US$300,000) to over 28 million yuan (US$4.1m) during Bo’s tenure. After a brief spell serving as China’s minister for commerce between 2004 and 2007, Bo was transferred to Chongqing. His professed concern for people’s livelihoods seemed to be backed up with actions, leading to the concentration of government funding on medical reforms, raising the minimum wage, building affordable housing and increasing urban and

rural infrastructures, earning him widespread popularity among Chongqing’s citizenry. However, Bo’s sweeping 2009 crackdown on organized crime, while winning him plaudits from many, prompted fear that his strong-arm politicking might bring China back to the excesses of the Cultural Revolution (1966-76). His subsequent campaign to return China’s populist politics to its Maoist roots, promoting “Red Party” philosophy through the singing of “red songs” and the “reddening” of local TV station, has somewhat reinforced the critics’ suspicions. Not surprisingly, Wang Lijun’s suspected defection attempt combined with the Heywood case triggered a wave of rumors tying Bo’s downfall to internal conflicts in the highest echelons of the Party in its year of leadership change. “This criminal case shall not be interpreted as a political struggle. China’s development will not be hindered by these unrelated incidents… Anyone who has broken the law will be handled in accordance with the law and their actions will not be tolerated, no matter who they may be… In this sense, the investigation into Bo’s disciplinary violations can be interpreted as a move to better supervise the use of power,” read a Xinhua commentary.


Food Security


Toxic Capsules

Cold Medicine Made into Crystal Meth

Above: Waste leather processing Below: Tainted capsules discarded in a ditch

China’s food and drug quality supervisors have once again come under fierce public criticism since China Central Television (CCTV) revealed in early April that many edible medical-use capsules are made from waste leather. According to the CCTV reports, while capsules should be made from “edible glue,” many manufacturing plants use cheaper industrial glue made from leather, which contains excessive amounts of cadmium, a chemical that can harm the lungs and kidneys, and potentially cause cancer. In the wake of the exposure, China’s supervisory authorities for medicine quality launched an investigation into the country’s medicine manufacturers, which found that 13 varieties of capsules from nine different pharmaceutical companies contained excessive levels of cadmium, with one of them containing 90 times the legal limit. While China’s Ministry of Health has ordered a recall of the tainted medicine, the Chinese public are once again left wondering how many unsafe products were consumed before the problem was detected.


100,000 More Evacuated from Three Gorges Area Another 100,000 people will be forced to move out of the area surroundThree Gorges ing the Three Gorges Dam, according to China’s Ministry of Land and Resources. Liu Yuan, director of disaster prevention at the ministry, told domestic media on April 16 that the Three Gorges area faces a growing threat from geological disasters, such as landslides and collapsed riverbanks, according to the results of three tests in the past three years. “Tests have indicated a 70 percent chance that the rise and fall of the water level will cause a disaster, and that figure is still growing,” said Liu. Besides excavation, the ministry also plans to monitor and deal with over 5,000 sites that are currently under threat. According to official data, over one million people have so far been evacuated to make way for the Three Gorges Dam project.

Police in Liaocheng, Shandong Province, in early April cracked two large crime syndicates thought to be manufacturing crystal meth from Contac NT, a popular cold and flu medicine brand. Police were alerted when sales of the over-the-counter capsules skyrocketed across the province, despite a government restriction on purchase volume. According to medical experts, Contac NT contains a higher level of pseudoephedrine hydrochloride, a decongestant, than most cold medicines. Though not addictive itself, the chemical can be refined into ephedrine, a primary component in the manufacture of crystal meth. Police told media that they had seized roughly 60 grams of crystal meth from the site, together with a large amount of semi-processed narcotics. Depending on the level of technology, a lab can manufacture more than a gram of meth from just 10 boxes of Contac NT capsules, earning a tenfold profit.


Financial Reform Promoted in Wenzhou


Photos by CFP

Plans to set up a pilot project to promote financial reform in Wenzhou, Zhejiang Province, were announced at a regular meeting of the State Council on March 28. With a circulation of about one trillion yuan (US$147bn) in private funds, Wenzhou saw an explosion in private credit in recent years. However, the city was plunged into financial crisis last year, when dozens of private finance companies saw their capital chains severed, affecting thousands of borrowers. The government’s new scheme is designed to guide the private finance industry back towards rational development by establishing new types of financial organizations, and expanding investment and financing channels for small enterprises. According to the plans, Wenzhou will establish 120 new small loan companies by 2013, and encourage village-level banks and financial co-operatives. Most experts welcome the scheme, seeing it as a breakthrough for private businesses to be incorporated into the mainstream finance system, but some have called for detailed legislation to further regulate this emerging industry.


What’s Making China Angry? Over six hours after receiving endoscopic sinus surgery at the Hubei Yichang City No. 1 Hospital in late March, Zhang Hua began to experience pain in his throat and mouth coupled with nosebleeds and coughing up blood. Doctors assured him these were side effects of his procedure, until Zhang regurgitated an eightcentimeter plastic tube that had been left in his throat after the operation.

Poll the People Two seniors were verbally abused by a bus driver when they helped one another onto a rammed public bus during rush-hour, then disembarked, despite the fact that commuters offered them their seats. Should the elderly skip the rush hour? Respondents: 71,657 as of April 25 11.4% Yes, they should. 63,495 (88.6%) No, they have every right to travel at rush hour. 8,169 (11.4%)

What’s Shocking China? While strolling on a sidewalk in Beijing in early April, a sinkhole opened beneath 27-year-old Yang Erjing, dropping her into a pit of boiling water. Despite being rescued by passersby, Yang had suffered burns to her entire body, and died three days later.



Most Circulated Post Retweeted 124,220 times

What’s Making China Sad? 12 critically endangered finless porpoises were found dead in central China’s Dongtinghu Lake between March 3 and April 18. Autopsies found that all the animals’ stomachs were empty, leading to expert claims that overfishing had caused their deaths. The species, known locally as the “river pig,” is on the brink of extinction due to habitat destruction, overfishing and pollution. Only a few hundred are known to survive in the wild.


A Weibo post helped a lorry driver recover almost all of his lost cargo: “Seven boxes of garments worth 600,000 yuan (US$95,000) fell from Mr Wang’s truck on April 3, and were immediately looted by passersby. Mr Wang only made 200 yuan (US$32) from his trip, so please mail any stolen goods to Mr Wang, or call him to come reclaim it.“ NEWSCHINA I June 2012

Xu Xiaonian

W ho ’s Ho t?

Top Blogger Profile Follower: 3,493,503 This 59-year-old professor of economics and finance at the China Europe International Business School was named by Business Week as one of China’s most powerful people in 2009. Renowned for his outspoken criticism of excessive government interference in the Chinese economy, Xu earned particular praise for criticizing “anti-market” housing regulations which have increased the scrutiny of homebuyers.

Dalian Airport

The airport employed a cheerleading squad to placate more than 5,000 passengers stranded by fog.

Top Five Search Queries On

Heze Dowries

In Heze, Shandong province, the going rate for securing an engagement is 1.65 kilos of 100 yuan banknotes paid to the potential bride’s family.

Over the week to April 25 Youthful Cadre 439,038 A 20 year-old woman appointed as deputy director of a government bureau in Xiangtan, Hunan, was suspended after netizens raised questions about her qualifications.

Anthony Wong 308,682 The 40-year-old singer came out as gay during a concert in April. Secret Agent Bigamist 303,983 Deng Jianhua, director of the Heyuan, Guangdong Province official secrets bureau was dismissed for keeping a mistress, amidst widespread mockery of his inability to keep secrets.

Child Rape Statistics 228,141 A report by the Women’s Federation of Guangdong found that about three quarters of victims of statutory rape in the province are female, with more than half under the age of 14. The report also concluded that two thirds of statutory rapes are carried out by people known to their victims.

Zhang Jinyou

Zhang donated his own skin to allow his 16 yearold daughter, disfigured by burns, to have skin grafts.

Plane Stopper

A group of passengers infuriated by the meager compensation offered after a delayed flight rushed onto the runway to halt another plane’s takeoff.

Her death sentence for illegal fundraising, which had caused widespread outrage online, was rejected by the Supreme People’s Court. Many highprofile critics of her initial sentence have called on the government to abrogate the crime of “illegal [private] fundraising.” NEWSCHINA I June 2012

W ho ’s No t?

Wu Ying 216,612



A New Era

Leung Chun-ying’s unexpected election victory raises questions about Hong Kong’s future By Wing Y. Lam

Photo by CFP

Hong Kong Election

Leung Chun-ying waves to audiences after winning the chief executive election in Hong Kong on March 25, 2012


hree weeks after winning a narrow election race, Leung Chun-ying was formally appointed the fourth chief executive of Hong Kong by Premier Wen Jiabao in Beijing on April 10. For the next five years, Leung will serve as the territory’s top official. Chosen by an electoral committee rather than a public ballot, Hong Kong’s chief executives are often considered to be effectively hand-picked by Beijing. But to the surprise of many observers, this year’s election played out like a genuine political contest, which not only tested the mettle of the three candidates, but also captured the interest of the general public. Popularly known as “CY” (the initials of his given name), 57-year-old Leung, a former Hong Kong government adviser, won over 689 members, or 58 percent of the vote. The electoral committee included 1,193 businesspeople, professionals, educators, social representatives, politicians and religious figures. His main rival Henry Tang, son of a


wealthy Shanghai industrialist and a senior government official for 9 years, received 285 votes while Albert Ho, a pro-democracy candidate, finished a distant third with 76 votes. An unprecedented abstention rate of 7 percent – or 82 votes – was recorded.

Debate to Debacle

Officially a three-horse race, the real competition was between the two frontrunners, Leung and Tang, both from the so-called “pro-establishment” camp, a loose description of politicians who support the central government’s “one country, two systems” policy towards Hong Kong. Opposition, or so-called “pro-democracy” candidates, are generally considered to stand little chance of winning, as their anti-Beijing stance is considered too risky. Presenting himself as a leader willing to listen, Leung set his policy priorities on housing, the wealth gap and upward mobility for the region’s youth, all deep-seated issues facing Hong Kong, a strategy that earned him

a head-start before his rivals had even begun their campaigns. With backing from political and business heavyweights, Tang was initially seen as Beijing’s preferred candidate, and so could afford to begin his campaign later. While taking a similar position to Leung on many key policy fronts, Tang was generally considered to be more left-leaning than Leung, with more ambitious plans. For instance, he was the only candidate to promise universal pensions, a subject of intense controversy. As the race gained momentum, the candidates competed on policy visions and implementation strategies. With fanfare reminiscent of election campaigns in the West, they presented detailed manifestos and reached out to different groups in the community. Political groups, media, universities and think tanks ran rolling opinion polls. For the first time in Hong Kong’s history, the public felt engaged in the election. More surprisingly though, this increased public participation may have been welNEWSCHINA I June 2012

comed by Beijing. According to Ming Pao, a major Hong Kong newspaper, the central government saw the competitive election between the two candidates as valuable experience, considering its promise to allow universal suffrage for the 2017 chief executive race. But to the dismay of those who had hoped for a clean fight, the battle soon turned ugly, descending into finger-pointing and mudslinging. Tang was first to fall from grace, with an infidelity scandal that was followed swiftly by allegations that he had added various illegal extensions to his home. Backed into a corner, Tang disclosed confidential information discussed within the Executive Council, the top advisory committee to the chief executive, indicating that Leung had moved to mobilize riot police to suppress demonstrations against state security legislation in Hong Kong in 2003. Leung was also accused of a conflict of interest when judging a competition as part of a government-backed cultural development project a decade ago, when members of his campaign team were seen in the company of an alleged gangster. He is currently under questioning in a special legislative inquiry into the matter. Leung’s popularity ratings immediately plummeted, sliding from a high of over 50 points to barely 30 in just a few days. Ironically, Leung’s confidence and political skill in handling the crises gave him an opportunity to demonstrate his toughness, a quality that the current chief executive and his administration are generally thought to lack. Nevertheless, increasingly farcical campaign tactics on both sides prompted many on the electoral committee to opt for a hung outcome, which would have forced a re-run of the election process. Tang’s supporters, most of them business-people who opposed Leung, also pressed for a re-run, as they saw their man losing public support, and more importantly, Beijing’s blessing. With a “blank vote campaign” threatening to disrupt proceedings, Elise Leung (no relation to Chun-ying), deputy director of the Basic Law Committee with the National People’s Congress (NPC) and former secretary for justice of Hong Kong, publicly expressed her concern, warning the electoral committee that a re-run would have serious implications for the administration of Hong NEWSCHINA I June 2012

Kong and its international reputation. Leung’s victory in the first round of ballot was no doubt a big relief, not only to himself and his supporters, but also to the central government. It was reported that the central leadership was furious to see the campaign veering away from policy debate, and decided to follow public opinion, backing Leung instead of Tang. Many said Leung’s success was largely thanks to the backing of pro-Beijing voters eager to ensure a smooth leadership transition in the city.


“Faced with grave doubts and jitters about his leadership, Leung has come to power with the worst possible start,” commented Chris Yeung, a senior editor at the Hong Kong Economic Journal. Facing the challenge of assembling a cabinet, Leung will certainly have his hands full when he assumes his post on July 1. Perhaps the most pressing issue is the need to bridge the unprecedented political divide the election race exposed between the elite and the masses. For the business community, Leung’s image as a reformer who plans to shake up Hong Kong’s political and business establishment is worrying. Having vowed to tackle “deeprooted problems,” such as the enormous wealth gap and perceived collusion between government and business, Leung has taken a hawkish stance on housing and other social policies. At his victory press conference, however, Leung pledged for cooperation, unity and inclusiveness, reassuring an anxious public and business leaders that there would be no major shake-up. Ray Yep Kin-man, a professor of public administration at the City University of Hong Kong, is pessimistic about Leung’s program of change. During an interview with business consultancy website, he said that despite Leung’s tough stance on property developers and big business, he could not change the fact that the Hong Kong economy is heavily dependent on property development, and that big businesses are a necessity for Beijing to consolidate its influence in Hong Kong. He said that regardless of who won the election, changes in policy were unlikely.

However, for Leung, failure to stand by his commitments will no doubt cause a backlash. “Change” was a key message throughout his election campaign and a major reason for his popularity among certain demographics. It is unclear how Leung’s changes, if any, will affect his popularity over his time in office. It can be safely said, however, that there will be no honeymoon period. Some suggest that a chief executive in a weak position may be a good thing. For example, an editorial in am730, a free daily newspaper in Hong Kong, argued that Leung cannot afford to neglect the demands and expectations of the people, and that over the next five years, he will have to work very hard to convince the public and his critics that they have nothing to fear. According to veteran political commentator James Sung Lap-kung, it is crucial that Leung lives up to his promise to build more public rental housing to maintain his popularity. “The public will watch him very closely on the public policymaking front, especially in solving the housing issue. If he succeeds, it will boost his popularity,” he told Metropolis Daily. A more touchy issue is Leung’s relationship with the central government. While closer ties to Beijing are necessary to reshape Hong Kong’s sluggish development, the general public are concerned that getting too close to Beijing could jeopardize civil rights and liberties the region has enjoyed so far. “Most people have reservations about Leung because he is seen as beholden to Beijing’s support,” said Willy Lam, a history professor at the Chinese University of Hong Kong. To some extent, it is a test every chief executive has to face against the backdrop of Hong Kong’s political culture and its unique relationship with the mainland. But to pave the way for universal suffrage by 2017 will require exceptional political wisdom and courage on Leung’s part. For many in Hong Kong, running counter to Beijing’s initial preference, Leung’s election breaks the monopoly of big business and marks a new era. “It brings a glimpse of a new chapter, and new hope for the people of Hong Kong,” commented an Oriental Daily column. (The author is a Hong Kong-based public policy consultant)


cover story



Rural Reconstruction

Back to Their Roots By Yuan Ye

For many urban Chinese, rural society is little more than a relic of an outdated way of life. For others, it’s a source of romantic nostalgia for a simpler time. For roughly two thirds of the population, however, it’s part of their immediate heritage, or so say new data compiled by the National Bureau of Statistics. Over the past three decades, tens of millions of rural workers have left their homes to join the migrant workforce in China’s big cities. While propping up breakneck industrialization and urbanization with cheap labor, the rural communities they left behind have been in constant decline, both culturally and environmentally. A recent report by the Chinese Academy of Sciences claimed that rural Chinese society has been “hollowed out,” and its sustainability is under serious threat from all angles. As young, able-bodied rural workers leave children and aging parents behind and move to the cities, the traditional family-centric structure of rural society has begun to buckle. Meanwhile, the millenia-old Chinese tradition of small-scale farming is unable to compete with industrialized agriculture, which is engulfing rural land and raw materials, with little compensation for farmers. It has been a fast process. In 1978, China’s urbanization rate was 17.9 percent. By 2000, it had risen to 36.2 percent, and has since maintained an average increase of more than one percent per year, reaching 51.3 percent in


2011, according to figures from the National Bureau of Statistics. Today, China has an urban population of 690 million people. However, urbanization has resulted in air pollution and endemic overcrowding in cities, and poorly supervised industrial agriculture has led to one food safety scandal after another. Meanwhile, a large section of the population still maintains immediate ties with the countryside. 660 million Chinese people live in rural areas, and of the 690 million urban residents today, roughly one-third are rural migrants. Voices calling for reform are getting louder, with many sociologists arguing that urbanization has become unsustainable. Wen Tiejun, a renowned expert on rural issues, said that since China’s population will continue to grow over the next two decades, probably to somewhere between 1.6 and 1.8 billion, cities will reach their capacity, and without reform, rural communities will offer no relief. The situation is comparable to China’s “golden decade”(1927 to 1937), when annual industrial growth averaged 8 percent, and GDP growth reached 9 percent. However, as colonial expansion was impossible for China at the time, growth turned inward, cannibalizing rural resources to feed urban development and expand industrial agriculture. As a reaction, a “rural reconstruction movement,” was launched in the 1920s by the pioneering educator, philosopher and social activist Yan Yangchu (1893 - 1988), who

conducted various rural societal experiments in a county in Hebei Province. Over the following decade, hundreds of schools and organizations were established and over 1000 rural development projects were carried out under Yan’s supervision. New farming technology was introduced, health care systems were set up, and culture flourished. However, the Japanese invasion in 1937 put an end to the movement, and while a round of post-war land reform in the early 1950s temporarily reallocated farmland to rural inhabitants, it was soon pooled into the collective farm system under the newlyfounded communist China. Reform and opening-up in 1978 did away with collective farms and revived traditional small-scale farming, but history began to repeat itself. With a drastically larger population than in the 1920s and 1930s, the issue has become even more pressing. In the early 2000s, the concept of a rural reconstruction movement saw a renaissance among intellectuals. Recently, debate has sprung up around the importance of protecting the countryside from collapse at the hands of modernization, with various projects across the country looking for viable alternatives to urban development. From architecture to finance, villagers and academics are trying new methods to save China’s rural communities from the bulldozer


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Rural Reconstruction

Homeland Security

A reconstruction plan drawn up by local residents and sociologists aims to preserve the traditional way of life in Hongren, a village torn apart by urban development By Gao Shengke and Yuan Ye



Photo by Liu Ranyang

Villagers in Hongren, Yunnan Province, gather twice a month in a local temple for ritual fasting, a centuries-old village tradition


n the east bank of Dianchi Lake near Kunming, capital of Yunnan Province, the centuries-old village of Hongren has in the last decade undergone drastic changes. With round after round of demolition and re-construction, Kunming’s urban expansion projects have turned Hongren, a former farming economy, into an urban-rural hybrid, where little farmland remains. Livelihoods in the village have also changed, with former agricultural workers now making a living from odd jobs, or by renting their spare rooms to migrant workers. Yet, traces of a traditional rural community still linger. In the village, populated mostly by people of the ethnic Yi minority, temples, wells and other ancient architectural features are well preserved, and many families still live in traditional Yi dwellings. In the older part of the village, many of the original streets remain largely intact. In 2010, roughly a decade after infrastructure projects split the vil-


lage into “old Hongren” and “new Hongren,” the local government’s latest urban development plan moved to demolish the new apartment blocks the villagers had built for themselves in the new district. The government’s plan aimed to transform the area into a modern business hub. Losing their homes as well as their traditional rural lifestyle, the villagers were reluctant to adapt to a new existence as semi-urbanites. Over the past 15 years, more and more villages like Hongren have become entangled in the rapid urbanization process engulfing the country. In these villages, large tracts of farmland become modern apartment-lined streets, while old residential areas remain intact, creating the impression of “villages within cities,” populated by landless farmers and migrant workers. In Hongren, fierce confrontations flared up between locals and developers. Several villagers were jailed after violence broke out in


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Photo by Gao Shengke

July 2010, when the two parThe next day, Mo Zhengcai ties fought over ownership of and another village representhe new village hall, a meeting tative Li Shaorong handed a place built by the villagers in copy of the plan to the Yiliu an effort to retain a semblance sub-district office of Guandu of their former rural lifestyle District, the authority in charge and traditions rooted in social of the demolition. Gan Qin, interaction. In a desperate provice director of the office, said test against demolition plans, the plan would be forwarded a man from a neighboring vilto Kunming’s Urban Planning lage jumped to his death from Bureau for “consideration.” the fifth floor of an apartment The plan aims to preserve building. the 8-hectare “old district,” Thanks to the media storm which centers on two ancient surrounding the situation, the temples and a number of other plan was put on hold, presentimportant historical buildings. ing the villagers with an opThese unmovable cultural relportunity to suggest an alterics will be preserved, while the native solution. With the help district’s infrastructure will be of Peking University socioloupdated with a new sewage sysgists, they decided to propose tem, electrical grid and modan experimental reconstrucern communication facilities. tion project, in an effort to Living conditions will also be save their community from a improved, with modern kitchbleak future. The plan was deens and bathrooms fitted into signed to cater to the villagers’ the area’s traditional residences. Mo Zhengcai, 79, is a respected village elder and one of the key proponents needs while preserving the old of Hongren’s self-conducted reconstruction project Also, the proposal contains a architecture and culture, and provision that will allow villagas a compromise, it yielded ers to build their own stores and significant portions of the reentertainment facilities in the maining village land to Kunming’s urban development scheme. old district, all of which must remain below a height of three stories. Some have called the village a “second Wukan,” referring to the In the view of Zhu Xiaoyang, a sociologist who served as a technivillage in south China where violent clashes over development cal advisor on the plan, the goal is to find some common ground eventually led to the holding of villager-run democratic elec- between tradition and modernization. “It’s about moving forward, tions (see: “Fishermen’s Fury,” NewsChina 043, February 2012). not backward,” said Zhu. Meanwhile, the 8.5 hectares of Hongren that fall outside the vilProposal lagers’ scheme will be transferred to the urban planning authorities to On March 21, 2012, the residents of Hongren held a meeting in accommodate the continuing expansion of the city. The income from the village square to discuss their proposal. 79-year-old village rep- selling the land, plus funds raised by the villagers, will be used for the resentative Mo Zhengcai led the discussion of the plan, a layout de- reconstruction of the old village. signed by the villagers themselves and revised by Zhu Xiaoyang, an Hongren village is only one and a half miles from Dianchi Lake, associate professor of sociology from Peking University, as well as sev- one of the province’s most popular tourist attractions, and at the end eral other experts. The plan was finalized, and signed by the village’s of last year, the Kunming municipal government mapped out a plan 1,052 adults. for a development project centering on the lake. Zhu Xiaoyang said



Hongren’s reconstruction plan was completely in accordance with the lake project, and believed the two could co-exist.

said she spent most of her time sitting in her new apartment staring at the television. “People still call us farmers,” said villager Mo Chunhua, “but how can we be called that, now that our farmland is gone?” “Hongren is being destroyed,” said Zhu Xiaoyang, “but the villagers are resisting the process, and trying hard to retain their traditional way of life.” The new village hall was an embodiment of this effort. Funded by the villagers themselves, the hall had become a general meeting place, where villagers would congregate to chat, drink tea, and play cards or mahjongg.

Homeland Lost

Photo by Liu Ranyang

For Zhu, Hongren is a “second hometown.” Born in 1957 in a small town south of Kunming, Zhu spent his youth in Hongren during the Cultural Revolution (1966–76), when Chairman Mao Zedong had the country’s educated urban youth sent to work in the countryside. In the 1990s, while Zhu was reading sociology at university, he often returned to Hongren to carry out field studies. In the 1990s, Hongren was a traditional village, with crissRural Roots crossing canals and beautiful “Rural life is at the root of scenery. But change came at the human social history,” said end of the 20th century, when poet Yu Jian, a friend of Zhu farmland was appropriated for Xiaoyang’s. Yu visited HonBoth old dwellings (above) and new houses (below) are facing demolition in the expansion of Kunming. gren several times in the 1990s Hongren village In 1999 and 2003, two mawith Zhu, and between 2007 jor roads were built, splitting and 2009 they shot a fourthe village into fragments and hour documentary entitled The claiming much of its farmland in the process. In the following years, Hometown, which showed that Hongren’s once-bountiful farmland real estate development spread along the two roads, and several major was gradually disappearing, and how the villagers were struggling to projects, including shopping malls and a huge stadium, swallowed up maintain their traditional way of life. what was left of the village’s arable land. Yu Jian said that villagers should be given the freedom to choose the With nowhere left to farm, the villagers were allocated the “new way of life most suited to them. “What we learned from Wukan was district,” west of the old residential area, where they were encouraged the viability of grassroots democratic elections. Now, from the Honto build identikit apartment buildings, and find new livelihoods. gren project, we have seen that people are learning how to determine While the majority of older residents chose to stay in the old district, their own way of life,” said Yu. The villagers await the Urban Planning Bureau’s decision. If the many young people, eager for a taste of modernity, made the move to west Hongren. Yet they soon found that life in apartment blocks was project is approved, it will not only be a victory for the villagers of Hongren, but also an acknowledgement of the validity of more honot what they had expected. “We miss the farming life a lot,” said Fu Lili, a woman living in listic paths to development. However, regardless of the outcome, the the new district. “Though our income was lower back then, life was Hongren incident is certain to cause widespread reflection on China’s simpler and happier. Now we’re overwhelmed by new troubles.” Fu rampant urbanization. NEWSCHINA I June 2012


cover story Rural Reconstruction

The Collaborators Rural co-operatives, a grassroots effort to encourage economic collaboration within village communities, are gaining in popularity, but are they attractive enough to bring migrant workers back from the cities? By Han Yong and Yuan Ye

In today’s market economy, the interests of dispersed groups of rural residents are often ignored, leaving them in a weak position,” said He Zhixiong, vicedirector of the Liang Shuming Rural Reconstruction Center (LRRC), a Beijing-based rural policy NPO. “However, through collaboration, their ability to bargain and profit is strengthened.” Existing largely as a subsistence agricultural civilization for thousands of years, China has a long tradition of frugal, labor-intensive farming. Yet today, China’s small-scale farmers are up against a capital-intensive agricultural industry involving widely industrialized production, leaving them too isolated from the profit drawn from the long industrial chain that links farms to the market. Their disadvantage is further consolidated by a lack of market knowledge, due to poor communication and limited education. As China’s policy of reform and openingup continued into the 1990s, tensions rose in the countryside, with farmers facing a combination of diminishing profits, rising agricultural taxes (finally abolished in 2006) and widespread corruption. Tax reform in 1994 delivered the majority of tax income to the central government, and to compensate for


the funding gap, local governments transferred much of the tax burden to rural inhabitants which, with little supervision, often led to more corruption. The result was chaos in the countryside. The LRRC, founded in 2004 and named after Liang Shuming, a well-known academic who led the revival of China’s Rural Reconstruction Movement in the early 20th century, aimed to remedy the situation. Focusing on promoting “rural co-operatives,” where rural communities are encouraged to collaborate in order to improve their economic clout, the center organizes training programs, lectures and volunteer projects in rural areas.

Man on a Mission

Yang Yunbiao is a village activist who has used the LRRC’s resources to great effect. After graduating with a law degree, Yang returned to his home village of Nantang in Anhui Province in 1998, at which time tension between villagers and local cadres had been building for several years. Yang helped the villagers with legal issues ranging from rights protection to petitions. In one case in 2000, Yang exposed pervasive corruption within the village committee, attracting the atten-

tion of the provincial government and leading to the collective dismissal of every one of the village’s officials. Yang earned himself a name in the village, as well as a set of powerful enemies. Clannism remains rife in rural society, and many of the dismissed village cadres were from families with influence. The village was split, and Yang had become a divisive figure. A year later, Yang was elected accountant of the Nantang village committee, and began to develop a deeper understanding of the broken system within which his predecessors had operated. “The position of a village cadre has become distorted,” he told NewsChina. “They are elected by villagers, but answer only to the supervising town government. They have little independence, and exist mainly to do the bidding of their superiors. Their performance is judged by their supervisors, not voters.” Yang resolved to shape a village culture that would pacify conflict and benefit the villagers themselves. In 2000, following his battle to expose the corrupt committee, Yang had founded a rural rights protection society. The experience of organizing his fellow villagers into a collaborative effort proved valuable, and laid a base for further development. NEWSCHINA I June 2012

Members of a rural co-operative plant herbs, Shanxi Province, December 24, 2011



Photo by Gao Xinsheng/CFP

Longstanding internal friction had left Nantang divided. With help from the LRRC, Yang first attempted to revive village cohesion by conducting various cultural activities including folk dance performances, singing contests and sports competitions, which soon became popular among villagers. The atmosphere was improved, and neighborly trust gradually returned to the village. Taking the concept a step further, villagers realized the potential for economic return through their collaboration. With social cohesion improved, Yang proposed to establish an institutional “co-operative� which might benefit the villagers economically. With only 12 members, the Xingnong Co-operative, with Yang as its president, was founded in 2003. Its first move was to organize a bulk purchase of fertilizer directly from manufacturers, guaranteeing quality while reducing price by 10 to 15 percent, and offering a further discount to co-operative members. By the end of the year, some 60 families had joined Xingnong. Due to the high risk and relatively low return on loans to farmers, who generally only borrow 30,000 to 50,000 yuan (US$4,800 to 7,900) at a time, Chinese banks are reluc-


Photo by CFP

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Village activist Yang Yunbiao

and costs involved in the management of a dispersed group of villagers, a lack of young labor has also hindered development. Nearly 90 percent of the 1,700 young, able-bodied people registered in Nantang have left home to work in China’s big cities, meaning the majority of the village’s residents are either children, middle-aged or elderly. Until recently, 39-year-old Yang Yunbiao was the youngest participant in any of Nantang’s various co-operatives. In an effort to encourage rural youth to stay or return to the countryside, the Xingnong Co-operative has set up a Youth Center to offer training programs and other forms of youth support.

Photo by Wei Liang


Farmers buy discount fertilizer in a co-operative store in Zaizi, Shanxi Province, March 24, 2012

tant to lend money to rural communities. In 2005, the co-operative launched its own microcredit service. Yang encouraged villagers to invest in the co-operative’s credit fund, which could then be used to provide loans within the village community, the profits from which were then paid back into the fund. Predictably, convincing the villagers to part with their money was not easy. To set an example, Yang piled nearly all of his savings into it, and gradually, the idea caught on. Last year, a particularly rich villager invested, bringing the fund to a total of around 2 million yuan (US$317,500). The microcredit business, often a risky domain, was aided by a quirk of Chinese rural culture. Desperate to avoid “losing face,” the villagers of Nantang turned out to be reliable


debtors. “Since 2005, not a single loan in Nantang has gone bad,” Gao Lin, a volunteer in the co-operative, told NewsChina. In its first year, the return on each of the fund’s 2,000-yuan (US$317) shares was 14.5 yuan (US$2 at the time). Seven years later in 2010, it had reached 150 yuan (US$23 at the time) per share. The microcredit business has now become the co-operative’s main source of income. Meanwhile, several other co-operatives have sprung up in Nantang, focusing on interests including organic farming, group purchase of agricultural production materials, and tailoring. In keeping with the renewed spirit of collaboration, villagers worked together to build their own library and sports facilities. However, the co-operatives face significant obstacles. Besides the inherent complications

In 2007, the Law Regarding Professional Farming Co-operatives, the first law to encourage and regulate the development of cooperatives in China, was issued. According to figures from the Ministry of Agriculture, there were a total of 522,000 registered rural co-operatives by the end of 2011, with the participation of 41 million rural families, or 16.4 percent of rural households. The pioneering efforts of Nantang’s cooperatives have been acknowledged nationwide. In 2006, South Winds magazine, an influential Chinese news publication, named Yang one of its “People of the Year.” While presenting a more balanced alternative to China’s heavily urban-focused development, rural co-operatives face some daunting challenges. “There is an urgent need for proper funding, better management and land for related constructions,” said Zhou Chunlian, a rural entrepreneur in Jilin Province and a member of the National People’s Congress, China’s parliament. While many point out that financial shortcomings are the concept’s biggest obstacle, the current low standard of living in the countryside has also hindered the attraction of skilled workers. Additionally, observers argue that increased participation, the most basic necessity for the development of rural cooperatives, will require a gradual reversal of rural-urban migration, and improved communication between isolated communities. However, having gained basic legal backing and a steady increase in popularity, there may be a future for these collaborative organizations. NEWSCHINA I June 2012

Rural Reconstruction

Farm Academy Taiwanese professor Kuo Chung-i’s academic eco-commune in rural Anhui Province is an oasis of calm amid China’s relentless urbanization

Photo by CFP

By Zhu Yuchen

Taiwanese Professor Kuo Chung-i on his hillside eco-farm in Anhui Province NEWSCHINA I June 2012


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Chuang Hui-ying teaches elementary school students at the Vanilla Farm, October 2009


n 2004, when Taiwanese physics professor Kuo Chung-i first arrived in his ancestral hometown of Mingchuan, Anhui Province, he had far more in mind than a simple vacation. Disaffected with the monotony of daily life in Taiwan, and sensing a coming tide of political discrimination against descendents of mainlanders on the island, Kuo was looking to build his own personal eco-utopia – right in his ancestors’ backyard. Though commonplace in the West, modern eco-communes are an unfamiliar concept in China. In 2004, with the country’s economic engine running at full steam and urbanization rapidly transforming rural communities, a subsistence farm run by a highly educated family man like Kuo would have seemed impossibly against the grain. Eight years later, the Kuo family’s efforts have resulted in The Vanilla Farm, a self-contained, non-commercial eco-farm, boasting a wide variety of plants and animals. The farm’s concept of cultivation goes beyond simple agriculture, though – with its own academy where residents devote themselves to the pursuit of knowledge, the project can also be considered a cultural and sociological experiment.

Pastoral Fantasy

When Kuo first visited the mainland in 2004, industrialization and urbanization in Anhui Province were yet to gain momentum. Some 30 miles east of Anhui’s provincial capital Hefei lay Mingchuan, a small village remained untouched by the effects of development. Bumpy dirt trails over barren hills were the area’s only infrastructure, and the night sky was jet black, striking a sharp contrast with Taipei’s world-famous skyline. It was this unspoiled beauty that captured Kuo’s imagination. At the time, there had been reports of a woman in Taiwan who, upset at the disappearance of fireflies from her town, initiated a campaign to bring them back by banning the use of pesticides, regulating the waste water disposal system and dimming her town’s street lights. Eventually, she was successful, and the fireflies returned. The story left a deep impression on Kuo, and set him thinking about the simple lifestyle changes that can bring man and nature back into harmony.


Vanilla Farm guests and residents thresh grain together, October 2009

Meanwhile, Kuo and many of his peers were becoming increasingly dissatisfied with life in Taiwan. A group of his academic friends suggested they find a piece of land and build an eco-farm, which could later double as a retirement community. However, with space at a premium in Taiwan, a piece of undisturbed land was near impossible to come by. As a group of mainland-descended intellectuals, the group decided to look for their rural paradise in the land of their ancestors. Kuo’s 2004 visit offered a chance to carry out some preliminary research. After he reported the situation to his friends back home, the group drew up plans for an ecological farm, and a 40 million yuan (US$5m) investment was provided in 2006 jointly by all members of the group.

Going with the Flow

Kuo and his wife Chuang Hui-ying took charge of finding the location, eventually settling on an abandoned quarry on a small hill in Mingchuan, a piece of land long deemed worthless by locals. In the summer of 2006, while Kuo was engaged in a protest against a multibillion-dollar arms purchase, Chuang brought the couple’s two sons to Mingchuan and broke ground on the farm, having 1,000 truckloads of earth brought from the base of the hill in order to thicken the soil on the farm site. Three years later, Kuo resigned from his university teaching post, and joined his family on the mainland. No pesticides or artificial fertilizers were allowed on the farm, which created difficulty in summer, when the site became infested with mosquitoes. Some suggested that planting peppermint could help alleviate the problem, and a mass planting of the herb across the entire farm not only drove away the mosquitoes, but other pests as well. The farmers harvested the peppermint leaves, and finding themselves with a surplus, processed them into various other products, such as mint tea and mint essence. Later, Kuo and Chuang cultivated other herbs on the farm, and the herb business gradually became the commune’s main source of revenue. After six years of operation, the farm now sees a considerable income. Once a week, Kuo Chuang-i’s elder son Yantuo goes to Shanghai with NEWSCHINA I June 2012

Photo by Xiang Chunlei/CFP

Photo by Zhang Zhaowei

Kuo Chung-i examines mulberry leaves, August 2007

other commune residents, and delights in selling produce at the market. Kuo makes similar weekly trips to Beijing. “Our current production chain is totally different from what we initially planned. It’s been a free-flowing evolution,” said Chuang. “It has progressed slowly, going with the flow, always maintaining the general idea of building an ecosystem.” More than 100 different plant species are now grown in seasonal rotation on the farm, and wild animals wander the grounds, including more than 25 different species of wild birds. The large earth pits left by the initial building process have now become natural ponds, and are home to a wide range of aquatic life.

Farm Studies

The academy, the other side of Kuo’s vision for The Vanilla Farm, can be seen as an extension of the farm’s ecosystem. The roughly 30 residents are all both students and teachers, including Kuo and his two sons. With a PhD in physics from Tufts University, Kuo is a versatile scholar, attaches great importance to self-initiated study. He thinks little of examination-oriented education systems, which led him to pull both of his two sons out of school to study on the farm, among its rich culture of learning and its colorful collection of residents. Having been outside of the State education system for two years now, Yanji, Kuo’s younger son, has an educational background quite unlike anyone else of his age in China. While his former classmates trudge through the narrow scope of the prescriptive Chinese education system, Yanji has been working his own way through the teachings of China’s great thinkers, while making excellent progress in biology and advanced mathematics. Understandably, Yanji was worried about his future when he left the school system. However, as he continues to gain confidence in his own desire and ability to learn, as well as acquiring a broad knowledge of various fields of study, he now feels that he is leaving his former classmates behind. Since 2007, Chuang Hui-ying has been teaching English to children from nearby villages. With a postgraduate degree in education from a


US university, Chuang found that one of the major disparities between China’s rural and urban areas was the level of English. To help narrow the gap, she has taught English to more than 100 rural children in the past five years. Along with obvious improvements in their test scores in English, these students have also improved in other subjects. According to the students themselves, their improved English helped them gain confidence in learning in general. In keeping with Kuo’s holistic view of academia, many of the farm’s staff have non-traditional educational backgrounds. Cao, a migrant worker in his 40s, is responsible for the farm’s construction and logistics. Cao arrived at the commune with no knowledge of technology, but with the help of young Kuo Yanji, he learned to use a computer, and is now the farm’s IT administrator. Commune resident Li Zhuoni is a music graduate of Huazhong University in Wuhan, Hubei Province. Having volunteered to work on the farm, she holds music and singing classes every day for other commune residents and children from nearby villages.

Hermit Scholars

Kuo cherishes the value of self-initiated learning above all else. “Every day, people here are learning for themselves. Even if I were to disappear one day, they would still be able to continue their learning,” he said. “Intellectuals today are not independent. They are too physically fragile for any challenging manual work, and they depend on organizations like schools or the government to survive,” said Kuo. “However, in ancient China, scholars were able to support themselves by working the land while studying, only later becoming officials. After retirement, they would return home and go back to farming.” While Kuo’s radical reaction to modern life may have been inspired by the ancient Chinese ideal of the hermit scholar, the colossal risks and financial outlay involved will most likely ensure that rural ecoacademies are unlikely to catch on in the mainland. However, the fact that The Vanilla Farm continues to thrive shows that, at least for the moment, it is still possible to find a quiet corner amid China’s relentless development.



Cross-Straits Relationship

A New Consensus? By promoting “one country, two areas,” are the Taiwanese authorities making concessions to the mainland’s reunification policy? By Yu Xiaodong and Han Fudong

President Hu Jintao meets with Wu Poh-hsiung, March 22, 2012


Photo by Xinhua


ver the last two decades, relations between the Chinese mainland and Taiwan have fluctuated considerably depending on who has been in power in Taipei. The pro-independence Democratic Progressive Party (DPP), and supporters of the One China policy the Nationalist Party (Kuomintang or KMT) are at loggerheads in the political debate that has dominated politics on the island for decades. At the core of the current altercation are varying attitudes toward the “1992 Consensus,” reached between the semi-official organs of the mainland’s Association for Cross-Straits Relations Across and Taiwan’s Exchange Foundation. Despite being referred to as a “consensus,” the KMT and Beijing have subsequently revealed different interpretations. While the KMT described the consensus in terms of “one China, different interpretations,” the mainland has stressed that the consensus is “one China,” with other matters open to negotiation. The 1992 Consensus was aimed at enabling both sides of the Taiwan Straits to put aside debate over Taiwan’s official political status in order to pursue closer and more amicable political, economic and cultural ties. This is why Wu Poh-hsiung, former MP and now honorary KMT chairman, raised eyebrows that cross-Straits matters be handled under the framework of “one country, two areas” during a March 22 meeting with President Hu Jintao.

‘One Country, Two Areas’

During the meeting at the fifth annual NEWSCHINA I June 2012

Communist Party of China (CPC) annual forum with the Kuomintang (KMT), currently Taiwan’s ruling party, President Hu reiterated mainland opposition to Taiwanese independence and its support for the 1992 Consensus as the foundation for cross-straits relations. Acknowledging that the 1992 Consensus has provided “the most important basis” for developing political trust between the KMT and CPC, Wu said that the two sides should “shelve their differences and seek common ground,” before proposing the “one country, two areas” formula. Wu also stressed that the cross-strait relationship is not a relation between two countries, and for that reason the relationship is handled by the “Mainland Affairs Council,” instead of the “Foreign Affairs Ministry.” Wu’s proposal drew criticism from the DPP, recently ousted from power by the KMT. Party representatives urged Wu to withdraw his proposal and apologize to the Taiwanese public. Chen Chu, acting chairman of the DPP, remarked that endorsing the principle of “one China” does not help Taiwan, as the vast majority of countries officially knowledge the “People’s Republic of China,” not the “Republic of China.” The KMT quickly responded that the notion is neither new, nor a departure from Taiwan’s constitution and relevant laws, which officially claim both the mainland and Taiwan as constituent parts of the Republic of China (ROC). According to Taiwan’s Act Governing the Relations Between the Peoples of the Taiwan Area and the Mainland Area, the ROC is divided into the “Taiwan Area,” including the islands of Taiwan, Penghu, Kinmen, Matsu, and all other Taipei-controlled territories, and the “Mainland Area.”

Different Ideas

Opponents of the “one country, two areas” proposal in Taiwan are concerned that to officially reach an agreement with the mainland on terminology might make changes to the status quo and mark a deviation from the KMT’s traditional stance of “one China, different interpretations.” In practice, the KMT has interpreted the 1992 Consensus to mean “one country, two governments” and “one country, two areas” alternately. Lee Teng-hui, the pro-indepen-


dence former KMT chairman who ruled Taiwan from 1988 to 2000, expressed a preference for “one country, two governments,” a concept strongly opposed by the mainland at the time. When the DPP officially rejected the 1992 Consensus after winning elections in 2000, cross-Straits relations deteriorated drastically and did not show signs of improvement until 2008 when Ma Ying-jeou’s KMT returned to power. “The notion of ‘one country, two governments’ stresses that the Taiwan government and mainland government enjoy equal status, And ‘one country, two areas’ implies the de facto division of the mainland and Taiwan,” Associate Professor Chu Jingtao, an expert on Taiwan studies from the Chinese Academy of Social Sciences, told NewsChina. “Both notions were unacceptable to the mainland.” Instead, the Chinese mainland has been advocating the formula of “one country, two systems,” which has so far been applied to the agreement reached with the former European colonies of Hong Kong and Macau, which have retained autonomy outside of the fields of military and foreign affairs since 1997 and 1999 respectively. Both the KMT and the DPP have rejected this notion, claiming it “dwarfs” the status of Taiwan. Beijing has not publicly rejected the notion of “one country, two areas,” but, according to researcher Chu Jingtao, is also hesitant in accepting it. Chu argues that given the political reality in Taiwan, the mainland should adjust this uncertain stance. “Under nearly 20 years of rule by the pro-independence Lee Teng-hui and his successor Chen Shui-bian of the DPP, Taiwan has undergone dramatic changes,” he told NewsChina. “The theoretical framework for Taiwan as an independent state has been considered roughly completed. It is time for the Chinese mainland to readjust its crossStraits policy accordingly.” During its eight-year tenure, the DPP implemented a host of policies to strengthen the identity of Taiwan as a separate country, rather than a part of China. Even KMT officials began to talk in terms of “China and Taiwan,” which, to mainland politicians, sailed dangerously close to a declaration of independence. Only after the KMT returned to power

in 2008 were some of the DPP’s policies reversed. In 2011, for example, Ma Ying-jeou required that all official government documents use the term “Chinese mainland,” instead of “China,” to refer to the mainland. Terminology remains a hugely sensitive area for authorities on both sides of the Straits. Many experts have taken Wu Pohhsiung’s proposal as evidence that Taiwan’s government is taking a step closer to Beijing’s position. “It is a gesture of goodwill from Ma Ying-jeou in response to Beijing’s various preferential policies toward Taiwan in the past few years,” said Zhang Wensheng, a professor on Taiwan studies from the mainland’s Xiamen University. In his column for the Singapore-based Lianhe Zaobao newspaper, Cai Yiru, a professor from Taiwan’s Chinese Culture University, argued that by adjusting their stances, Beijing and Taipei may be able to find a new route to strengthen relations. So far, the mainland, which has never ruled out the use of force to retake Taiwan, has neither accepted nor rejected the KMT’s new terminology. In its previous dealings with Taiwan, including the negotiations that yielded the 1992 Consensus, Beijing continued to emphasize the “one China” aspect of policy, refraining from making any clear-cut definition of Taiwan’s political status beyond reiterating that the island was part of china’s sovereign territory. The mainland’s silence has fed speculation. Although Wu’s proposal is believed to have the support of Ma Ying-jeou, it still falls short of being an official stance, given that it did not come directly from Taiwan’s current leader. Observers believe that by raising the notion through Wu, Ma is testing the waters. Immediate acceptence from Beijing could jeopardize Ma’s popularity. During Ma’s election campaign earlier, he announced his intention to sign a peace treaty with the mainland (technically both sides remain at war) within the decade. It is believed that Ma, whose second and final leadership term begins in May, may try to break the deadlock in cross-Straits relations in order to secure his political legacy. A formal proposal to modify the rubric, if not the reality, of cross-Straits relations is anticipated as the centrepiece of Ma’s inaugural address on May 20. 



Civil Service

Bloated Bureaucracy Overstaffed government agencies have become a burden on China’s economy, derailing all attempts to make governance more efficient By Min Jie and Yu Xiaodong

The number of public servants in China has been increasing at a rate of 1 million each year, from 6 million in 2006 to 10 million in 2010,” said Liu Xirong, vice chairman of the Legal Committee of the National People’s Congress (NPC), during an NPC panel discussion in March. “Although the Chinese people are known for being hardworking, they are simply unable to support such an enormous contingent.” Liu’s remarks were a remarkably bold admission of how bloated China’s vast bureaucracy has become. To limit the damage caused by his inflammatory remarks, the State Administration of the Civil Service (SACS) immediately responded that the number of public servants in 2010 stood at 6.89 million, representing only 0.5 percent of the total population. Liu refused to back down, claiming that his figure came directly from Zhao Qizheng, the spokesman for the Chinese People’s Political Consultative Conference (CPPCC).

A Game of Numbers

Pundits stepped in to defend Liu’s claims, stating that official figures on the scale of China’s civil service are misleading. Unlike Western countries, which include anyone on the public payroll as a public servant, in China the term refers exclusively to a specific group of government employees, who are officially listed as civil servants, enjoying a wide range of benefits including the virtual guarantee of a job for life as well as privileged access to healthcare and pension provision.


According to Professor Zhou Yongtian from the Central Party School, a huge number of officials and employees of Party organs and government institutions which operate under the guise of social organizations, labor unions, the State media and State-owned enterprises are not recognized as civil servants, despite being on a government payroll. It is estimated that in China around 1.26 million social organizations funded at least partially by the government currently employ more than 30 million people. There also exist a considerable number of retired government employees living entirely on State pensions rather than on social security funds, who constitute an ever-increasing burden on the public purse. Currently, no unified data on the scale of China’s bureaucracy exist. The SACS, the Ministry of Human Resources and Social Security and the Ministry of Finance all calculate numbers independently in line with each ministry’s policy priorities. “To figure out the exact number of government employees is a sheer game of numbers,” Professor Wang Yukai at the China National School of Administration told NewsChina. However, some old data may shed some light on the true figure. In 2005, Ren Yuling, a consultant for the State Council led a campaign against the overstaffing of government agencies. According to Ren, there were 45.72 million people on the government payroll in 2004, with 5 million more living on various fees and fines they are authorized to collect. In total, these people accounted for about 4

Applicants prepare to take the civil service examination in Wuhan, Hubei,November 27, 2011 NEWSCHINA I June 2012

percent of China’s total population. Accommodating recent increases in staffing for certain government agencies, the total number of government employees may be reach 60 million by 2011, according to one estimate.

Photo by CFP


The central government has launched several rounds of institutional reform in recent decades aimed at downsizing overstaffed government agencies. Ironically, these reforms appear to have increased the public payroll. For example, a major reform in 1982 cut the number of ministries, agencies and administrations under the State Council from 100 to 61. But the number of “cadres” in the State Council system increased from 2.8 million in 1979 to 8 million in 1997. To deal with overstaffing, the then Chinese Premier Zhu Rongji launched a high-profile institutional reform in 1998 aimed explicitly at “cutting down the government’s size and increasing its efficiency,” which further reduced the number of ministries under the State Council to 29. While the reform claimed to have reduced the number of the central agencies by 50 percent, the total number of “government cadres” showed a steady, and somewhat paradoxical, increase. By 2004, it was estimated that the number of “government cadres” at county level and below alone had hit 13 million. Immediately following the campaign against government overstaffing in 2005, the National People’s Congress passed the Law on Civil Servants to regulate the size and management of the country’s civil service. However, this law was powerless to regulate the majority of government employees not officially recognized as public servants. In 2008, yet more institutional reforms were launched to merge various departments into a more compact government structure. Meanwhile, efforts were being made to streamline the government hierarchy from five levels (province-ministry, city, county, township and village) to three levels (province, county and village). The impact of these measures on the scale of the civil service is unknown, as no data have been made public. One direct result, however, was a burgeoning number of deputy posts in many governNEWSCHINA I June 2012

ment departments which were compelled to accommodate the deputy leadership of dissolved agencies. In Foshan, Guangdong Province, for example, many bureaus have more than 10 deputy directors, and the city’s land resources bureau has 19. This is by no means an isolated case. Tieling, Liaoning Province, has nine deputy mayors and 20 vice secretaries-general. Xinxiang, Henan Province has 11 deputy mayors and 16 vice secretaries-general. Even within the State Council, the newly established Ministry of Human Resources and Social Security has nine vice-ministers. According to Mao Shoulong, a professor of public administration at Renmin University, the root cause for the explosion of deputy chiefs lies in the country’s unique administrative culture, which fails to accommodate an “exit strategy” for officials of a certain rank. “Once a government employee becomes an official, they will remain an official forever,” Mao told our reporter. “Worse still, the reality is that officials can only take higher posts, never lower posts.” Therefore, when an agency is abolished or merged into other government body, the total number of officials remains much the same, as many of them are simply transferred to the new agency, regardless of how many others hold the same post. In many cases, new social organizations on the government payroll are created simply to accommodate former government employees of newly-defunct bureaus. Such a system effectively blocks any attempt to streamline it, further bloating government and undermining its efficiency as new civil servants are presented with their “iron rice bowls” each year.

Vested Interests

According to Professor Wang Yukai, with both the power to establish new bodies and to hire and fire any and all State employees, the government has a vested interest in maintaining the status quo. “Personnel management is entirely in the hands of the executive, and is undertaken in an ad hoc fashion, with no national legislature regulating the field.” Wang told NewsChina that fellow researchers and specialists have repeatedly urged the drafting of a law to curb this trend, but their-

pleas have fallen on deaf ears. “The government’s answer is that it is still premature to make current institutional arrangements into law, as China is in the process of constant reform, with institutional structures yet to be finalized,” he said. As China’s legislature lacks any official powers over government personnel and budget, change can only come from the government itself. In the meantime, a draft plan of yet another reform to the composition of ministries under the State Council, expected to be launched after China’s new leadership is unveiled in the fall, is circulating online. According to the unconfirmed draft, China’s 29 current ministries will be reduced to 17. Observers believe that the reform ostensibly aims to streamline overlapping government agencies to boost the functions of government. Even China’s top leadership is increasingly aware that the excessive number of government agencies has long impacted negatively on the country’s mounting rate of inflation, and prevents the development of a strong consumer society, which has become an acute problem given slowing economic growth. On April 16, the State Council released guidelines on reforming social organizations over the next five years. Through streamlining disparate organizations according to their functions, the reform is intended to reduce the overall scale of government-based social organizations. Some social organizations with administrative responsibilities will be turned into fully-fledged government agencies, while those operating under a more business-oriented model will be removed from the public payroll, freeing up resources for those organizations that directly provide public services. In addition, the guidelines pledged that “No more social organizations that do not provide public services will be allowed to be set up.” None of these reforms, however, has addressed the issue of transparency in China’s bureaucracy, or called for greater supervision. For Liu Xirong, the vice chairman of the NPC’s legal committee, only a new, enforceable law slapping strict staffing restrictions on China’s immense civil service can avert a similar fudging of reform in the sector as has happened in the past.



Major Fossil Discoveries (2006-2012) Tyrannosauroid Guanlong wucaii

Wucaiwan, Xinjiang 160 million years old


Coelodonta thibetana Qinghai-Tibetan Plateau 3.7 million years old

Maludong hominid Mengzi, Yunnan 11,000 years old


Fossil Fuel With an abundance of research funding and unparalleled fossil resources, over the past decade China has become a mecca for paleontologists from across the globe. However, Chinese institutions are finding themselves hamstrung by a lack of domestic talent in the discipline By Wang Yan



Feathered dinosaur Yutyrannus huali

Beipiao, Liaoning 160-120 billion years old


n a laboratory at the Institute of Vertebrate Paleontology and Paleoanthropology (IVPP) in west Beijing, a pair of workers wearing masks and ear plugs are cleaning a set of freshly excavated fossils. To paleontologists, the lab looks like a treasure-trove. An enviable array of untouched fossils, from large chunks of rock to pocket-sized slabs, await treatment. From newly discovered dinosaurs to missing links in the human evolutionary chain, rarely a month has gone by in recent years that didn’t see the unearthing of a game-changing fossil within China’s borders. In mid-April, the largest Jurassic dinosaur fossil ever discovered in China, a 165-million-year-old sauropod, was found in Xinjiang. “We have a lot of newly excavated fossils in our labs,” fossil technician Ding Jinzhao, 35, told our reporter. “Every day, all 30 of our technicians are fully occupied with cleaning fossils.”



Euporosteus Yunnanensis Zhaotong, Yunnan 409 million years old

Prehistoric turtle

Odontochelys semitestacea

Photo by Zhaob Bing/CFP

Guanling, Guizhou 220 million years old

In March and April, two research papers authored by Chinese paleontologists and paleoanthropologists and their foreign colleagues were published in international science journals. Causing a stir not only in the scientific community, but also in the world’s mainstream media, the quiet rise of Chinese paleontology is becoming difficult to ignore. One paper, published in the US science journal Nature and leadauthored by Dr Xu Xing from IVPP, was on the largest feathered dinosaur ever discovered, the 125-million-year-old yutyrannus huali, found in a quarry in northeastern China earlier this year. The discovery provided new evidence in support of the close evolutionary link between the dinosaur and the modern bird. The other, on the discovery of a previously unknown human species, the Maludong or “Red Deer Cave” people of modern-day Yunan Province, was published in the journal PLoS One by Professor Ji Xueping of the Yunnan Institute of Cultural Relics and Archaeology. The joint research, conducted by Chinese and Australian scientists on human remains dating back to between 11,500 and 14,300 years ago, revealed a mix of archaic and modern characteristics, indicating a possible new human lineage. “The discovery,” said the study’s Australian co-leader Darren Curnoe, “opens the next chapter in the latest stage of the human evolutionary story, the Asian chapter.” According to Dr Corwin Sullivan, associate professor at IVPP and co-author of the feathered dinosaur paper, since the turn of the century, more breakthrough dinosaur discoveries have been made in China than in any other country. “The pace of discovery is just so fast,” Corwin told NewsChina.


Fossil storage room in the Beijing Museum of Natural History


Since the early 1990s, accelerated industrialization and fast urban expansion across the country have led to the digging of countless tunnels and mines, inadvertently resulting in the discovery of a huge variety of prehistoric remains. Fortunately for scientists, this yield of raw



Photo by Sun Peng

material has resulted in a monumental injection of financial support been significant change in these 20 years.” A large number of foreign researchers now work full-time with from the government. In the paleontological community, China has earned a reputation IVPP. Dr Sullivan said that a significant advantage of working at as a hotbed of fossil resources, and has seen something of a goldrush IVPP is the concentration of expertise, both domestic and foreign. in recent years. “Valid fossil resources account for 50 per cent of re- “There aren’t many institutes across the world that have so many versearch results in paleontology. Thus, the large number of fossil discov- tebrate paleontologists and anthropologists all working together,” he eries [in China] has attracted researchers from all over the world,” Dr told NewsChina. Xu told NewsChina. Since the late 1990s, the pages of the world’s most Stuck respected scientific journals, such as Nature and Conversely, this range of international expertise Science, have been steadily filling up with pabelies Chinese paleontology’s biggest weakness: pers contributed by Chinese paleontologists. none of these aforementioned published “Chinese vertebrate paleontology is really studies was conducted by Chinese scienthriving. People in Western institutions tists alone. have been amazed by the interesting “Honestly, Chinese research in basic discoveries coming out of China,” said science still lags behind that in Western Corwin Sullivan. Corwin himself got countries,” said Dr Xu. He told our hooked on China after obtaining his reporter that despite significant progPhD at Harvard. ress, the research methods of wholly China sees a constant flow of visiting Chinese paleontological teams are far scholars from Europe, North America, behind world-class levels, and compeAfrica, South America and occasionally tition for the small pool of prominent South Asia, who come to collaborate with Chinese researchers is fierce. It can take months to finish Chinese paleontologists, or view their col“For one single project, the formation the fossil cleaning process lections and collect data. of a research team requires various qualified researchers from different fields, and we’re lacking manpower,” said Xu. “For example, there are only Funding two experts in stratigraphy [the study of rock layers] in the Aside from abundant resources, another major factor powering China’s paleontology is the funding. The central govern- whole country, and we cannot guarantee that they’ll be willing to join ment’s financial support for the National Natural Science Foundation our team, so we have to seek co-operation with foreign experts.” Dr Xu told NewsChina that the general situation may in fact be even (NNSF) has been constantly increasing for several years. From 1986 to 2012, the annual funding for natural science research has ballooned more frustrating. For some as-yet unqualified researchers at IVPP or from 80 million yuan (US$12.7m) to 15 billion yuan (US$ 2.38bn). in local museums and research institutions, their role in a research The situation in national-level research institutions such as IVPP, project is often no more than that of a fossil provider. In order to get which falls under the Chinese Academy of Sciences, is even more publishable results as quickly as possible, these researchers depend on promising. Aside from State funding, support also comes from the their foreign colleagues throughout the entire research process, from Academy itself. “We’re currently number one worldwide in research basic fossil description to in-depth analysis. “While the Chinese side provisions for funding and equipment,” IVPP marine reptile re- may not even contribute a single idea in the whole course of research, searcher Li Chun told our reporter. his or her name is still included in the published paper. In some cases, In 2008, Li published one of his most important research pa- they are listed as the lead author,” said Xu. pers in Nature about a Late Triassic fossil, an ancestor of the turtle, Li Chun agreed with Xu’s opinion, adding: “Another major obstafound in southwest China. According to Li, the total funding for the cle is the sub-standard level of English [among Chinese researchers]. three–year project was 300,000 yuan (US$47,556), while his latest As a result, almost all research papers submitted in English are edited four-year research project could receive up to 800,000 yuan (US$ by Western experts.” 126,815) from the NNSF. In spite of this, the gap between Chinese and Western paleontoDr Xu recalls that when he joined the IVPP in 1992 upon his grad- logical research is narrowing. “Traditionally, Chinese paleontologists uation from Peking University, the whole institute could only get one didn’t have much experience in paleo-biology, the ecology of fossil or two research projects each year that were important enough to re- species, and had limited exposure to evolutionary trends. But now, I ceive support from NNSF. Each of these projects had a humble fund- believe, more and more Chinese scientists are starting to [learn about ing of 100,000 to 200,000 yuan (US$15,852 to 31,704). “When I these],” Corwin said. “Certainly this is happening in our institute.” was working on my Master’s dissertation in the early 1990s, I was unable to find a single piece of proper fossil to study on. There has Disparity



Photo by Sun Peng

fossils in China, particularly in smaller Compared with top institutions institutions. The problem is still rife, such as IVPP, local museums and despite widespread media and acaresearch departments have even demic coverage from both inside greater problems. Ji Xueping told and outside China. Li Chun estiNewsChina that most lead remates that more than 95 percent searchers in paleontology or paof museums in China have bought leoanthropology concentrate on and are still displaying faked or artitop institutes such as IVPP or the ficially engineered hybrid fossils. Nanjing Institute of Geology and “Due to a lack of professional suPalaeontology, both of which are pervision, fossils are often improperly affiliated to the Chinese Academy of treated and cleaned in small museums Sciences. “Because of this, while local Ding Jinzhao works in IVPP’s or institutions, severely damaging the sciresearch institutes in this field might have laboratory entific value of the specimen and weakening found great sources of valuable fossils, they follow-up research,” Li said to the reporter. are struggling to find personnel qualified to carry Despite the problems, the stream of new discoveries out the follow-up research,” Ji told our reporter during a telephone interview. “Thus, quite a lot of new fossil discoveries shows no sign of drying up, and is gradually turning China into the have to stay in storage for a long time before we can set up a proper paleontology capital of the world. But with foreign researchers providing the lion’s share of academic expertise, China’s scientific commuresearch team.” Worse still, lack of expertise has led to serious ethical transgressions. nity is in dire need of qualified paleontologists. However, increasing In late 2010, Science published an article entitled “China’s Faked Fos- media coverage and a prominent funding boom may be just what the sils Problem,” addressing the notorious issue of faked or reconfigured discipline needs in order to increase its popularity.




Cosmetic Injections

Saving Face Quick-fix cosmetic injections have gained widespread popularity in China, but with lax regulation, the longterm effects may not be pretty By Wang Yan and Chang Qing


n China’s cosmopolitan big cities, “lunch-break facelifts” have enjoyed a boom in popularity since their arrival half a decade ago. Popular in the West since the 1990s, these quick, painless injection-based beauty treatments have become a fashionable choice among those in China looking to improve their relationship with the bathroom mirror. Treatments such as botulinum toxin (often taken as a synonym for one of the industry’s most popular brands, Botox) have been widely adopted in China in recent years, and a drastic decline in their cost has brought them into the price range of the average middle-class office worker.

‘Lunch Break Beauty’

One lunchtime in late March, Guo Mei (pseudonym), a female office worker in her thirties, walked into a beauty salon in Beijing’s CBD area, shopping for a treatment to raise the bridge of her nose. Guo told the NewsChina reporter that she had spent some 10,000 yuan (US$1,590) on rhinoplasty a few years ago, but the results had left her unsatisfied. Having heard that cosmetic injections were a quick, economical route to improving her appearance, she came to the salon to investigate, and eventually decided to undergo treatment. Feng Qian, a cosmetic therapist at the salon, asked Guo to lie down on the treatment table and applied local anesthetic cream to her face, while delivering a subtle disclaimer: “The most common side-effects are minor reddening and swollen pockets of facial skin, but these will disappear within a week.” In 10 minutes, the process was complete. “I come here often, mostly on weekends or during my lunch break. This salon is very popular, so sometimes there is a long wait for treatment.” A cosmetic treatment enthusiast, Guo has undergone laser bodyhair removal and botox treatments in the past. “The injection is painless, and very effective. More importantly, I can become more attractive, without anyone noticing any drastic change,” she said. “More and more people are choosing this cheaper and safer way



of improving their looks,” Feng Qian said to NewsChina. According to Feng, the salon carries out multiple separate injection-based treatments every lunchtime, mostly for white-collar female office workers in the CBD area.

Photo by CFP

use non-State approved materials such as sheep placenta, skinwhitening chemicals, stem cells and other dermal fillers. The Internet offers even more choice for the less discerning facial alteration enthusiast, with over 100 different brands of hyaluronic acid Magic Needle? fillers available on major online According to statistics released shopping portals. by the American Society of Plas“Some people buy cosmetic tic Surgeons (ASPS), in 1997, A popular beauty salon in Shanghai receives customers from all parts of China products online and have the in1,126,200 separate non-surgical jections administered in beauty cosmetic treatments were carried salons, or carry out the procedure out in the US. By 2009, the figure “The injection is painless, and very effective. for themselves at home, which is had exceeded 8.5 million, more very unsafe,” said Wang Jigeng than a sixfold increase in 12 years. More importantly, I can become more from the Chinese Medical DocOver the past few years, China attractive.” tors Association. “Regulations has shown signs of a similar trend. on beauty services issued by the According to Wang Guoquan, Ministry of Health impose strict director of the China Plastic and requirements on the issuance of Reconstructive Surgery Center, in qualification certificates for instimany hospitals, profit from non-surgical treatments has outstripped tutions, professionals and the technologies they adopt for treatment. that generated by traditional cosmetic surgery. Consumers should always ensure that their cosmetic skin treatments “Thanks to the diverse range of non-surgical cosmetics, clients can are being carried out by highly qualified health professionals,” he undergo thirty- to sixty-minute treatments without worrying about added. the pain,” said Wang to the reporter. Another advantage is that cusDespite the regulations, “the reality is that the market remains tomers can return to work immediately after the treatment, since re- largely unregulated. A lot of customers come to me for facial reconcovery time is minimal. struction treatment due to failed injections or negative side-effects Currently, non-surgical cosmetic injections in China are based on caused by operations performed by unqualified hospitals or personone of three major types of materials: collagen, botulinum toxin, and nel,” said Xue Hongyu, a plastic surgeon from Peking University No. hyaluronic acid. 3 Hospital, in an interview with the Beijing Morning Post. Dr Xue said Collagen products were approved for cosmetic use by the US FDA that improper injections can cause swelling, tissue stiffness, necrosis, in 1981, followed by the approval of botulinum in the late 1990s. infection, and various other problems. In the past decade, the use of botox in beauty therapy has generated According to statistics released recently by the China Consumer Asannual profits of over US$1.3 billion worldwide. In China, only two sociation, an average of 20,000 complaints are filed against cosmetic botulinum products have gained official approval: Botox, produced surgery practitioners each year, and in the past decade, failed cosmetic by American pharmaceutical company Allergan, and Chinese-man- surgery procedures have left a total of 200,000 people disfigured. Inufactured Hengli, produced by the Lanzhou Institute of Biological ternet news portal Zhejiang Online reports that in 2011 alone, a total Products. of 5,000 failed cosmetic procedures were reported in Hangzhou, ZheThe injection that Guo Mei purchased was Restylane, a Swedish- jiang Province, 3,000 of which were caused by cosmetic injections. made, US FDA-approved hyaluronic acid treatment that costs 4,000 While regulations do exist, the reality is that even in big cities such yuan (US$635). However, as with all cosmetic injections, the chemi- as Beijing, illegal cosmetic injections are rife, and are routinely carried cals wear off after roughly six months, so patients have to repeat the out by unqualified surgeons in private beauty salons. process in order to prolong the effects. Even qualified hospitals are not effectively regulated. During a telephone consultation, a female doctor surnamed Yang from the cosDangers metic surgery department of the Air Force General Hospital, a top So far, only six non-surgical cosmetic injection brands have been medical institution, told the reporter that the effects of a 11,770 yuan approved by China’s State Food and Drug Administration. Quan Yu- (US$1,870) collagen nose reshaping procedure would last an entire zhu, vice director of the Cosmetic Injection Center at the Chinese lifetime. According to industry insiders, no procedure has yet been Academy of Medical Sciences, said: “Apart from these six brands, no developed whose effects last longer than a year. others are licensed for use.” However, there are a wide range of unli“If you want lifelong results from a cosmetic injection,” said Dr censed treatments available in private beauty salons, many of which Yang to the reporter, “you should come and try the procedure.” NEWSCHINA I June 2012



Illegal Lotteries

Luck of the Draw In Hunan Province, betting on the outcome of Hong Kong’s Mark Six lottery is now a popular pursuit. But with many players unaware that lottery numbers are random, the market for fraudulent tipsters is growing By Sun Zhe



n a village in rural Hunan Province, an old hawker goes door-to-door, selling books on how to win the lottery. A ludicrous premise it may seem, but the old man knows his market. “If you fully understand these books, you can make a fortune,” said the seller, who identified himself as “Old Liu.” He claimed that with the help of his books, a man in a neighboring village had won the lottery five times in a row. “But don’t be foolish and buy lottery tickets just for entertainment, or else you’ll go bankrupt, and ruin your family,” he warned. The front pages of Liu’s shoddily bound tome claim, in large, bold characters, to be issued by the Hong Kong Jockey Club (HKJC), one of Hong Kong’s oldest gambling institutions. However, it takes little more than a glance to determine that these books probably did not come from Hong Kong. The text is printed in simplified Chinese characters, NEWSCHINA I June 2012

Photo by Anoymous

Police raid an illegal lottery den in Changsha, Hunan Province, October 27, 2011

which are not used outside of the mainland and Singapore. However, this glaring fault has not prevented these publications from becoming a must-have in Hunan Province, where many remain convinced that they contain inside information on future lottery results.

Betting on the Lottery

These counterfeit publications sprang up alongside a boom in the popularity of “private lotteries,” unofficial side-bets on the result of the HKJC’s “Mark Six” lottery, which were introduced into Hunan roughly a decade ago. The Mark Six lottery, initiated in 1975, works like any other: seven numbers are ran-


domly drawn from a machine containing colored balls numbered 1 to 49. Draws take place every Tuesday, Thursday, and Saturday night. Players choose six numbers, but a total of seven numbers are drawn by the lottery machine,the last being the “extra number.” Anyone who correctly picks the first six numbers wins the jackpot, roughly half of the prize fund; five correct numbers plus the extra number wins second prize, and so on. A ticket costs HK$10 (US$1.29). Though the Mark Six lottery is only open to players in Hong Kong, side bets on the lottery’s result became popular on the mainland during the 1990s, first in Guangdong Province, then Fujian and Guangxi, and then fur-

ther afield, according to a report in Southern Weekly magazine. When the phenomenon reached Hunan a few years later, the rules were much simpler – players only bet on the extra number, and winners can earn 40 times their original stake. Xin Liang, a 51-year-old construction materials dealer in Yueyang, Hunan Province, was recruited as a sub-bookmaker by rich Cantonese private lottery bookmakers who came to town in search of new players when the game first appeared in the city. In turn, Xin recruited some of his relatives as agents. Both the sub-bookmaker and the agents receive 10 percent commission on the stakes they collect. With the alluring prospect of a fourtyfold return, the private lottery ex-



panded quickly, and soon took the city by storm. “What number did you bet on?” is now the question on everyone’s lips. Shortly after the results come out around nine o’clock on Tuesdays, Thursdays and Saturdays, mobile phone networks become jammed with lottery-related chatter. Before long, Xin started taking small bets for himself, rather than submitting them to the Cantonese bookmaker. The one-in-fortynine odds of winning ensured he made money, and eventually he broke away from his employers, and partnered up with a group of relatives to start his own lottery betting business.

also owned a fireworks factory in Liuyang, Hunan, killed himself by swallowing rat poison when he could not afford to pay out for a winning bet.

Lost Cause?

Bookmakers are caught redhanded by police, Changsha, Hunan Province, October 27, 2011

The speed with which enterprising locals took to the private lottery was astounding, according to a local police officer in Yueyang, surnamed Li. “There is no easier or more profitable business than this,” said Li. The overheads are miniscule: a pen, a piece of paper and a phone are all that is needed. Since bets are generally taken between friends, relatives or neighbors, stakes are usually paid after the result is revealed. The only component of the lottery that is not entirely localized in Hunan is the draw itself, which still takes place in Hong Kong. Since the Mark Six lottery draw is broadcast live by television stations only available in Hong Kong, many mainland players have no idea that the result is drawn randomly by a machine. Under the notion that the numbers are predetermined, there is now a lucrative market for literature on the science of predicting the result. Lottery publications, which claim to have prior knowledge of the result, are full of cryptic hints downloaded from overseas-hosted websites, according to the Southern Weekly report. Vague hints such as “Hold an umbrella on March 3, as the spring breeze strokes your face” are commonplace. These popular predictions have made the private lottery a very time-consuming game. Gao Wenchang, a 67-year-old farmer, said he was in the habit of locking himself away and looking over his lottery book for an en-


Photo by Anoymous

False Hope

Confiscated lottery publications, Changsha

tire morning before deciding which numbers had the best chance of winning. Despite his devotion, Gao only wins an average of one in every ten bets. But his commitment to his research is unwavering: “I wouldn’t dare to put down a bet without any clue at all,” he said. Of course, the hints these publications provide are entirely nonspecific, and any number from 1 to 49 could be related to the text in some way. According to Li, the local police officer, people are more inclined to put down a big bet when they believe they have a reliable tip. “It is tragic that people are made to believe that they can get rich overnight with research provided by these publications,” said Li. Cases of bankruptcy and suicide are not unusual among both bookmakers and players. After losing all his savings and pawning his house, Liu Yong, a middle-aged fruit seller from Yueyang, chopped off his left index finger and vowed to quit the game. Before the wound had healed, Liu had relapsed into gambling, only now with smaller bets. 38-year-old bookmaker Deng Zhihao, who

China’s first government lottery was launched in 1987, the profits from which were injected into the public welfare fund, as is the case in most countries. Tickets for the government lottery, China’s only legal lottery, are generally only available from authorized distributors in urban areas. With the rise of private lotteries, government lotteries are now confronted with competition. He Bin, a government lottery distributor in Changsha, Hunan, said that his clients were spending less on legal lottery tickets, as private lotteries offered a bigger chance of a windfall, and tickets were available in both rural and urban areas. In November last year, the Hunan lottery administration launched a virtual auto-racing sweepstake, emulating off-track betting in Hong Kong. The game has more favourable odds than any lottery ever launched in China, possibly an effort to win players back from illegal lotteries. On the other hand, the government is taking a tougher stance on private lotteries. In China’s criminal law, private lottery bookmaking now falls into the category of “illegal business,” a crime reserved for those who illegally deal in State-controlled commodities such as salt, tobacco and telecoms. On the nights when the Mark Six lottery results are drawn, trucks carrying loudspeakers roam the streets of Yueyang to try to dissuade locals from playing. But police officer Li said that since the gambling culture had taken root, the government’s efforts were now largely meaningless. While most players now stick to small bets, lottery fever has been known to flare up unpredictably. In January this year, the Mark Six extra number draw turned up an odd number three times in a row. For the fourth draw, there was a rush on even numbers, with many players doubling their stake in the hope of recouping their losses. The odd numbers continued for five more draws. Many families lost their life savings. NEWSCHINA I June 2012

Real-name Registration

Bare Bloggers The Beijing city government has made real-name registration compulsory for microblog users on the pretext of “screening for rumors, spam and online fraud.” However, critics argue the new measures will help the authorities weed out political troublemakers. NewsChina investigates Rate of Microblog Use

By Xie Ying

Microblog Users

Microblog Growth Source: Internet Realtime Public Opinion Index (IRI), Communication University of China

This might be my last entry, since I may not be allowed to write anything after 12 o’clock,” wrote an anonymous netizen on his microblog just before midnight March 16, 2012. This date, for China’s millions of microbloggers, will live in infamy as the day when they were forced to surrender their secret online identities to the Beijing municipal government’s Internet watchdog. A local regulation on blog management issued at the end of 2011 states that “all users should register with their real names before they use microblogs to deliver, forward or NEWSCHINA I June 2012

comment on information.” “Real names are required in registration alone, and people can still choose to issue information under a pseudonym,” Tong Liqiang, the vice-director of Beijing’s local Internet management bureau, claimed at a press conference. Major portals like Sina and Sohu publicly supported the policy, claiming it would help reduce rumor-mongering and spam. However, both portals have struggled with implementing the policy, which requires significant and expensive alterations to their operating systems and user databases. Internet users, however, have widely condemned the policy as an attempt to track down people participating in debate on sensitive issues, effectively silencing online critics of the government.


Initiated in 2009, China’s microblogs, which allow users to maintain profiles which fuse similar features to Facebook and Twitter, both of which are blocked in China, have seen explosive growth in the last couple of years, with user numbers reportedly peaking at 500 million. According to a 2011 report by the Internet Realtime Public Opinion Index (IRI), a think tank from the Communication University of China, altogether 3,655 hot news stories in 2011 were originated on the Web, with Sina’s microblog portal ranked as the country’s fourth top news source, after the State news agency Xinhua and two lead-

ing State-run Beijing newspapers. Zhao Xiaobo, editor-in-chief of the Huaqiao University Journal, tested the circulation speed of China’s microblogs in 2010. Zhao asked netizens to forward a microblog tweet, and 13 hours later, he found it had been reposted over 10,000 times in more than 10 countries including the United States, Great Britain, Japan and South Korea. A popular saying compares the influence of microblog accounts with 10,000 followers to that of magazines. Accounts with 100,000 to 1 million fans are the equivalent of newspapers, and those with over 10 million are equivalent to TV stations. By this rationale, Sina’s 300 million microblog users are as influential as 23 TV stations. It is unquestionable that microblogs in China have been breeding grounds for gossip and rumor as much as for genuine news. A well-known example was the tweet which, during the scare which swept Asia after the meltdown at Japan’s Fukushima nuclear power plant in March 2011, claimed that iodine could protect people from nuclear radiation. Swiftly re-tweeted across China, this misinformation contributed to the panicbuying of iodized salt, with salt sales increasing fifteenfold in a single day. “Japan’s nuclear crisis caused various rumors to spread through the Chinese online community, and we were so busy spiking [deleting] misinformation that the company had to add 30 new staff,” Tan Chao of Sina’s “rumor spiking” team told NewsChina.



According to Tan, Sina’s war on rumors began on March 15, 2011, when the portal told all its users in an open letter that “no Chinese media or government department has ever issued any warnings concerning nuclear fallout.” “People were spreading rumors that nuclear fallout from Japan would soon arrive in the Philippines and might ultimately hit China,” said Tan. “Such rumors affected people’s real lives.” A clampdown on “rumor-mongering” has long been the standard official justification for introducing real-name registration to China’s blogosphere. The government white paper says, “Accompanying the fast development of microblogging, increasing amounts of rumor, spam, and Internet fraud… are doing harm to society and to people’s interests…[and] real-name registration is an effective tool to keep this trend in check.” “Real-name registration is helpful to create a healthy and harmonious Web environment,” Peng Shaobin, Sina’s vicepresident, said at a recent press conference. “It fits the future development of the Internet.” “Real-name registration will effectively reduce irresponsible and harmful information from being circulated on the Web,” said Liu Xinzhi, Sohu’s business manager. “This is beneficial to the longterm development of the microblog.”


In fact, real-name registration has existed in China’s blogosphere for two years. In 2010, Sina began to promote a verification system for its celebrity users who were expected to draw more grass-roots followers with their fame and influence. This system classified the portal’s most-followed users as “V” (for “verified”). In 2011, Sina began to encourage users to bind their microblog accounts to cellphone numbers, or apply for an “e-ID.” Liu Qi, Sina’s official spokesman, has predicted that “about 60 percent of Sina users will complete real-name registration before the cutoff date.”


Wang Sijing, a journalist from the 21st Century Business Herald, whose microblog has over 130,000 followers, told NewsChina her account was verified at Sina before the new policy, but she also maintains two other accounts for “private tweets.” “It is reasonable to register my major account, which many see as representative of the media itself, with my real name, so that I am responsible for what I say online [in a professional capacity]. Why does this have to be extended to my private accounts?” she said. “Unlike the mainstream media, it is tolerable for individuals to post incomplete or even false information,” Yu Guoming, a professor of public opinion with Renmin University, told China Youth Daily in the wake of the 2011 salt crisis. “By reading different microblogs about the same story, we can get a complete picture. During this process, it is crucial for the government to disclose what the public wants to know.” “If the public believes in the government, the rumors will declare their own bankruptcy,” he continued. “Obviously, at present, this is not the case.”


Source: Internet Realtime Public Opinion Index (IRI), Communication University of China

Liu’s optimistic prediction fell short of the reality, as indicated by Sina’s own polls. One such poll entitled “Would You Like to Use a ‘Real-name’ Microblog?” showed that 73 percent of the respondents would not use a microblog that required them to give their real names during registration. “Real-name registration was optional, but now we have no other choice,” Du Chao, a Beijing-based blogger, told NewsChina. “There’s a big difference between removing one’s clothes voluntarily and being forcibly stripped.”

Like Professor Yu Guoming, most bloggers believe the excuse given for requiring them to register with their real names is a smokescreen to conceal government monitoring of individual Internet users. Even Sina’s Tan Chao admitted to NewsChina that his “rumor-spiking” team is now engaged in different work, due to increased incidences of “selfcleaning,” whereby netizens purge false information from microblogs without the intervention of webmasters. Yu Guoming told the China Youth Daily that microblogs are “not a source of rumor but of truth,” adding that opponents of real-name registration are worried that freedoms are being curtailed. “Maybe it is because many officials have had a taste of the sting of microblogs,” Zhang Min, a professor at China University of Political Science and Law, NEWSCHINA I June 2012

however, many local governments have proven merciless in their efforts to track down and imprison people found to be exposing sensitive issues online. “People can steer clear of such risks by remaining anonymous or by using different microblog accounts,” blogger Du Chao said. “Now, all such efforts would be pointless.” “I have found no legal grounds for realname registration. It is a step backward in judicial system, with the authorities viewing all microbloggers as potential criminals,” Li Xuepeng, a renowned online critic, wrote on his microblog. “If they are, why not view all officials as potential bribe takers, and demand they publicize their assets?”


In the light of recent events in Beijing, the issue of government interference in microblogs has continued to raise hackles. On March 31, Sina and Tencent users found they could not comment on any microblog post, instead receiving a popup notice informing them that the “comment” function had been disabled for four days “in order to examine and remove rumors.” These “rumors,” according to Xinhua, concerned the arrival of military trucks in the capital, which had allegedly been dispatched to deal with an “emergency.” This unspecified “emergency” was widely believed to have something to do with the removal of Party boss Bo Xilai from his Chongqing post. Six people who had blogged about the trucks were detained by police, and 16 websites

found carrying their posts were closed down. “This is a sensitive period full of rumors and noise,” commented the People’s Daily. “The microblog boom indicates increasing demand for the right to freedom of expression,” Dou Hanzhang, editor-in-chief of IRI, told NewsChina. “The real solution to the negative effects of microblogging lies in better communication between the government and the public.” Celebrity blogger Han Han, himself no stranger to the damage caused by Internet gossip, commented that “[the ban] is government muscle-flexing, warning the people that, if they wanted to, they could shut down the whole blogosphere.” While vociferous in their support of the policy, portals like Sina and Sohu declined to inform NewsChina how its implementation would potentially impact their businesses. Soon after the March 16 deadline, many netizens found that they could use their microblogs as normal, without registering their real names. “After all, no website wishes to lose users,” a staff member from Internet portal, who chose to remain anonymous, told our reporter. “We have several ways of skirting the realname registration policy,” said Du Chao. “I have found that if you give a false ID number, the website will still allow you to blog. However, I am concerned about how long we can get away with exploiting these loopholes,” he added.  (Yang Di and Li Jingrui also contributed reporting)

Photo by CFP

posted on his microblog. “Thus, they are eager to have a ‘harmless Internet community.’ It seems we can talk about nothing but entertainment.” A great many public officials in China have indeed been disciplined or removed from their posts after their scandals were exposed by enterprising microbloggers. In June 2011, for example, the director of a local health bureau in Jiangsu Province was dismissed from office after he accidentally re-tweeted online flirtations with a woman on his microblog. Two months later, another two officials in Yunnan and Henan provinces were put under investigation for “licentious sexual behavior” following their exposure by bloggers. The true power of the microblog was seen most acutely in the aftermath of the July 23 2011 high speed train accident in Wenzhou. An attempt at a cover-up was exposed by victims tweeting from the site of the crash, meaning the blogosphere broke the story two hours before reports appeared in the State media. It was microbloggers, not professional journalists, that subsequently forced the Ministry of Railways to explain their impromptu burial of the train cars only hours after the crash, and their failure to accurately report the death toll. “Despite rumor, microblogs have made remarkable contributions to promoting people’s right to freedom of expression, participation and supervision, as well as their right to the truth,” commented the State-run People’s Daily in the wake of the Wenzhou train crash. Despite plaudits in State newspapers,



Russian Prime Minister Vladimir Putin opens a throttle during the opening ceremony for the Russian section of the Russia-China oil pipeline in the far eastern region of Amur, August 29, 2010 (AFP/ Alexey Druzhinin, Ria Novosti, Pool Photography)

Photo by Anoymous




Oil Diplomacy

Late to the Party Lacking adequate strategic reserves, securing China’s oil supply has become Beijing’s major foreign policy priority, and is at the root of the country’s controversial relationship with many unpopular countries By Li Jia




4.4 %



China’s energy consumption 2010 68%


hina National Petroleum Corporation (CNPC), the State-backed monopoly specializing in upstream oil and gas production has always enjoyed a comfortable position in its home market. Internationally, however, things are getting more complicated. China’s reliance on imported crude has continued to increase since it officially became a net oil importer in 1993. According to official figures, imports account for 55 percent of China’s total oil consumption. As the country continues its march toward industrialization, this rate looks set to rise, with domestic output, already stymied for over a decade, remaining stagnant. This heavy reliance is coming in an era of unprecedented volatility in the international oil market. In 2008, the price of crude rocketed to US$150 a barrel before nose-diving to about US$40. In the second quarter of 2009, the market rallied, and prices have remained at a relatively high level ever since. Fluctuations that would once have appeared anomalous are now being factored into global market strategies. The fallout from the ongoing global financial crisis, coming alongside unrest in the Middle East and North Africa, is hitting China, a nation seriously deficient in domestic oil resources, particularly hard. The International Energy Agency (IEA) has predicted that China will constitute 45 percent of total global growth in oil demand in 2012, adjusted down from the 60 percent predicted in 2011 which was moderated by robust growth in other emerging economies. The IEA also declared that the era of cheap oil prices “has ended,” due to the rise in both demand and upstream costs. For China, this means the risk of supply shortfalls and higher manufacturing costs, in turn fueling domestic inflation.


Beijing is facing some unique dilemmas, particularly given its relatively recent entry into the international oil marketplace. In short, Beijing has arrived late to a dance where most of the best partners are taken.

Oil Dragon

“China’s problem is more serious [than that of developed countries],” said Lin Boqiang, a Chinese energy expert with Xiamen University. Unlike OECD countries, whose oil demand has already stabilized or even declined in recent years, China has seen demand continue to rise, mak9.4% ing China what energy re4.3% searcher Xu Xiaojie of the Chinese Academy of Social Sciences calls an “oil 9.8% dragon.” Moreover, the Obama administration’s recent proposal to restrict global speculation in oil futures reflects the strong bargaining position enjoyed by developed countries. “As both buyers and sellers on the international oil market, [the US and EU] have many more resources at their disposal. China is only a buyer, and can only accept the rules and prices set by others,” said Lin. The World Bank asserted in its China Quarterly Update, published in April, that China would benefit from cheaper oil prices due to the global economic recession, Ardo Hansson, the organization’s leading China economist, told our reporter it remains important not to lose sight of the impact of turmoil in international financial markets and supply disruption


China’s energy output 2010 Coal Crude Oil Natural Gas Hydro, Nuclear, Wind Source: National Bureau of Statistics of China


Photo by Anoymous

Staff from Sinopec, ranked fifth on the Forbes Global 500 index in 2011, in Sudan, January 18, 2006 (CFP) Middle East Other Asia




in the Middle East on China’s fortunes. China has higher exUS posure to geopolitical 23% and Canada risks than many other 10% countries, largely due Africa to its choice of suppli(primarily Sudan ers. Middle Eastern and and Angola) Former Soviet Union (primarily Kazakhstan African nations currently and Russia) experiencing major geopolitical upheaval account for 80 percent of China’s oil imports and 60 percent of China’s overseas oil investment. Moreover, about 80 percent of China’s oil imports Chinese outbound oil and gas are shipped through the volatile Malacca Strait. investment by region Exploration of offshore oil, once touted as a (% of total deal value US$135 potential source of relief for China, has proven bn, Q1 2006 – Q2 2011) difficult in practice, with the richest nearby Source: Ernst & Young analysis of data reserves located in disputed areas of the South from IHS Herold, Inc. China Sea. Were any nation to attempt drilling in this volatile region, it would likely be drawn into a full-blown naval conflict with its neighbors. With dangerously low strategic reserves, even a short-term disruption in China’s supply of oil from the Middle East and Africa could be potentially disastrous for its economy, a fact which often forces China into partnerships with regimes the US and EU perceive as a threat.


Other Americas (primarily Brazil and Venezuela)


18 %

Difficult Diplomacy

When former Russian President Boris Yeltsin proposed an oil pipeline from Russia to China in mid-1990s, he did not encounter much enthusiasm. At the time, China was hungry for greenback, and despite rapid modernization was largely able to meet its domestic oil requirements through internal supply. Rising domestic demand and rocketing world oil prices led to a major U-turn. Since


2000, energy has topped the agenda of nearly all meetings between Chinese and Russian leaders. Oil and gas pipelines stretch across borders between China and her Russian and Central Asian neighbors. China’s State banks offer loans to Russia, Brazil, Venezuela and other countries in exchange for oil. China’s leaders spend a good percentage of their time meeting with the leaders of oil producing countries. “The Iraq War in 2003 taught China that oil as a strategic resource is not always accessible,” Wang Haiyun, director of China Foundation for International Studies’ Energy Diplomacy Center, told NewsChina. CNPC’s web site shows that most of its overseas projects were launched after 2002. However, in its 2011 report the IEA noted that China had to start with “leftover assets in politically risky areas,” putting the country at an immediate disadvantage. Most of China’s major oil partners have suffered major downturns in relations with the US, with Sudan a typical example. CNPC entered the country in the late 1990s at the invitation of a Sudanese government struggling under US sanctions. In 2004 and 2006, China abstained in a vote on a UN resolution aimed at pressurizing the Bashir administration to disarm Arab militias and allow the deployment of UN peacekeepers. When the country erupted into a full-blown civil war, China was singled out for particular criticism, with Western leaders accusing Beijing of placing its oil interests ahead of human rights considerations. Similar criticisms have been leveled at China’s policy in Myanmar and Iran. Less reported in the international media has been the fact that China has also consolidated oil relations with US allies, such as Saudi Arabia and Canada as well as the US itself in the past two or three years. Saudi Arabia, along with other Gulf states, is reportedly interested in ex-



Growth of China’s crude oil import

250 200 150 100 50 0

Source: General Customs Administration of China/National Bureau of Statistics

panding oil deals with China. “Tension between China and the US may increase,” said Wang. “The US is wary of China’s stronger presence [in the Middle East] due to its strategic resources such as oil.” “Our oil security has always been overshadowed by the US,” he added. Chinese companies seeking to exploit overseas oil resources are at a natural disadvantage as latecomers to the game. “Multinational oil giants had already built up their global profile when this political shift began, but Chinese companies were just getting started,” said Dale Nijoka, Global Oil and Gas Sector Leader at Ernst & Young.

Insider Angle

countries with significant untapped natural resources, whether oil and gas in Nigeria, uranium in Namibia or copper in Zambia. A perceived preference for “imported” Chinese workers over local hires has also discredited China’s claims that its overseas investment is designed to benefit all parties. China’s State media and several independent analysts reject the neocolonialist argument as Westernfabricated “China threat theory.” At the same time, however, the country has kept silent on the role of oil in its foreign policy. Wang believes China’s failure to answer critics with transparent dialog is allowing these critics to determine China’s international image. The bitter legacy of colonialism in Africa, combined with a rise in nationalistic political movements and economic development has led some countries to be reluctant to allow Chinese firms access to their valuable natural resources. In 2006, China stated in its Africa Policy Paper an intention to “establish a new type of strategic partnership” with African countries, with the government’s mantra of “win-win economic cooperation” set as a paramount priority. This is in direct contrast with the policy of “Chinese assistance without the expectation of returns” of the past, a pledge which simply didn’t exist in practice. According to Wang, this moderately open recognition of the role of China’s national interests in relations with other developing countries is “a big step toward building an image of honesty.” However, modified semantics will not be sufficient to sway international opinion in favor of further Chinese engagement in overseas resource exploration. Xu argues that “It is difficult to balance our national in-

One particular battle that China needs to engage more proactively in, according to domestic analysts, is the struggle for hearts and minds. In late 1990s, international opinion held that China’s economic growth Spot crude prices 1999-2011 (ICE Brent, US$/barrel) would not prove sustainable enough to boost flagging demand for oil. When 120 the country outperformed all expec100 tations in the wake of its accession to the WTO, critics argued that China’s 80 unprecedented demand was fueling 60 skyrocketing world oil prices. China’s subsequent move to exploit 40 overseas oil reserves, particularly in 20 Africa, was painted by Western media as “neocolonialism.” China has not 0 helped improve this negative image by Source: IEA/US Energy Information Administration investing almost exclusively in African



Crude oil and NGLs (natural gas liquids) supply in 2011 (million barrel/day) terests and the interests of our host countries, but this is what we have to aim for.” Without many of its own resources to trade, China instead offers infrastructure in exchange for contracts in both Africa and the Middle East. Chinese analysts remain almost universally in favor of this model as a hallmark of the “win-win” strategy pledged by the central government. However, many have also suggested that the opaque operations of major Chinese firms overseas has made both State-owned enterprises and their local partners vulnerable to criticism. Opposition parties in several African states, notably in Zambia, have begun to run on anti-China platforms, accusing incumbent parties of brokering shady business deals with Beijing. Xu argues that China’s claim to a non-interventionist foreign policy is being undermined by its visible collaboration with regimes perceived as corrupt. A preference for dealing directly with politicians rather than businesspeople in its overseas resources projects also leaves China opens to attack. However, international oil resources are increasingly under the control of their respective governments. Xu Xiaojie estimates that 80 percent of the world’s oil reserves are now held by State-controlled companies. Argentina’s recent takeover of its largest oil company, previously owned by Spanish giant Repsol, a move slammed by multinationals, is indicative of this ongoing trend which is reversing neo-liberalist economic policies in developing countries. Greater engagement with international energy organizations could help China to stabilize its oil supply while also improving its image. Wang described China’s current practice of “sending low-level officials to meetings as silent witnesses” as unhelpful. Although domestic analysts are divided on whether or not China should join the IEA itself, there is a general consensus that greater cooperation with the IEA, OPEC and the relevant UN agencies, would help erode perceptions of China as a unilateral, resource-hungry behemoth. The IEA has also stated that multinationals are also keen to partner with China in both domestic and foreign oil exploration projects. However, any such cooperation would likely come with strings attached. China’s bargaining power in the global oil trade remains almost non-existent. In order to secure a dependable oil supply, a factor which could make or break its continued rise, Beijing may have to embrace a radically different business model. NEWSCHINA I June 2012

35 30 25 20 15 10 5 0

Source: OPEC

China’s 2011 crude imports - top 10 countries of origin Saudi Arabia: 21% Angola: 13% Iran: 11.6% Russia: 8.2% Oman: 8% Iraq: 5.8% Sudan: 5.4% Venezuela: 4.8% Kazakhstan: 4.7% Kuwait: 4% (Total: 86.5%) Source: General Customs Administration of China

US 2011 crude imports - top 10 countries of origin Canada: 25% Saudi Arabia: 13% Mexico: 13% Venezuela: 9.7% Nigeria: 8.5% Iraq: 5% Colombia: 4.3% Angola: 3.8% Russia: 3% Brazil: 2.6% (Total: 87.9% of total US crude imports) Source: The US Energy Information Administration



Government Government Car Car Procurement Procurement

Car Clash Photo by Xinhua

The Chinese government has cut foreign brands from a list of cars eligible for official procurement, but the benefits for domestic automakers may be negligible By Sun Zhe


hen authorities released their new list of cars approved for government purchase earlier this year, many were shocked to find that all models made by foreign and joint venture brands had been dropped. In 2009, the latter made up half of the total cars on the list. The draft list, released in late February by the Ministry of Industry and Information Technology (MIIT) was one of a string of recent policies targeting the auto industry. For many, the apparent willingness of officials to forego the comfortable, reliable surroundings of a foreign car stood out as a sign that the government was serious in its effort to bolster the country’s car makers. Among eligibility requirements released along with the list, besides a mandate that intellectual property rights for any given model had to be fully Chinese-owned, automakers were required to show that more than 3 percent of their sales revenue was invested in local research and development. The rule was tailored to keep out joint venture automakers, who traditionally produce the models already popular on western markets in China, meaning their cars are rarely locally designed, and do little to benefit domestic industry. While foreign brands see tens of billions of yuan in sales revenue each year, their research costs are unlikely to reach the 3 percent bar, said Marvin Zhu, a Shanghai-based automobile industry analyst with J.D. Power. In contrast, domestic brands spend on average more


than 5 percent of their revenue on developing new models. However, initial hopes were soon proven to be wishful thinking, when it was revealed that the list would only regulate the purchase of the government’s “general fleet,” limited to vehicles used for ordinary official occasions, police activity, tax collection and other such comparatively menial tasks. According to comments made in March by Li Yizhong, former head of the MIIT, the nation’s upper ranks would not be giving up their ubiquitous black Audis. Li’s explanation came shortly after the EU Chamber of Commerce in China vowed to retaliate against the policy, which it claimed would deny it fair competition in the Chinese market. China has yet to ratify the WTO’s Government Procurement Agreement, which stipulates that governments must not discriminate against domestic suppliers with foreign involvement.

Domestic Weakness

“With the new policies, the MIIT wants to boost the sales of domestic brands,” said Zhu, of J.D. Power. After the withdrawal of tax breaks for the purchase of subcompact cars (a market sector in China dominated by domestic brands) introduced in 2009 to stimulate car consumption and prop up economic growth during the recession, the market share of domestic passenger cars shrank to 30 percent in 2011 from 32 percent in the previous year. China aims to

get this back on track, having set a target of 40 percent or higher by the end of 2015. China’s automobile sales in 2011 only grew 2.5 percent year-on-year, to total 18.5 million vehicles, far slower than the growth of 32 percent and 46 percent respectively in the previous two years. But the country is still expected to remain the world’s biggest auto market in the coming years, taking into account the fact that every 1,000 Chinese residents owned only about 60 cars by the end of 2011, less than half the global average of 130. Currently, domestic brands are still largely focusing on producing cheap compacts, due to a lack of the technical expertise required to build high-end models, and the fact that their target markets are mostly small and mediumsized cities. However, due to the weakness of previous policy toward the industry, domestic brands have failed to gain a significant proportion of government procurement in comparison to joint venture brands, especially among vehicles for senior officials, most of whom favor Audi sedans. This is widely seen as a symbol of the failure of the country’s auto industry development policy, in place since the early 1980s, whereby China allowed foreign brands access to the market in return for technology. For the top management of the State-owned enterprises (SOEs) that make up the Chinese side of all joint-venture automakers, investment in technical innovation and development is not as attractive as spending on marketing. Higher NEWSCHINA I June 2012

sales figures are likely to earn managers promotion, often into government positions. The comparatively slow-burn profits from spending on technological innovation is a deterrent, according to Zhu. Along with its dubious effort to boost shortterm sales for domestic brands, the government is also eyeing meaningful technology transfer from foreign automakers to their Chinese joint venture partners, according to Zhang Zhiyong, a Beijing-based independent industry analyst. “If the two parties could design a model together, the Chinese side would at least own half of the intellectual property rights, and learn some technological know-how from their foreign partners,” said Zhang.

Little Impact

While the effects of the new procurement list are debatable, the numbers involved appear insignificant in comparison to the private market. Individual car buyers make up the biggest chunk of the Chinese auto market, owning about 70 percent of the cars in the country, according to the traffic administration under the Ministry of Public Security. Even Audi, the largest supplier of official sedans, has introduced into the Chinese market a variety of sports-car models in a bid to cater to rich private buyers, and to attempt to move its image away from being the official car supplier to the government. In a statement in late February, Audi said government supply accounted for less than one-fifth of its sales in China. Given that private consumers make up the majority of buyers, the new government procurement policy is not expected to do any significant harm to joint venture car makers, according to Sunny Xu, a marketing manager with Dongfeng-Nissan, a joint venture between State-owned Second Auto Works and Japan’s Nissan. Xu estimated that government procurement made up less than 5 percent of DongfengNissan’s yearly sales. Those expected to benefit from the new procurement policy also have reservations about its effects. Yang Xueliang, spokesman for private Chinese automaker Geely, said that while the new list was in principle good news for the country’s automakers, it was difficult to predict how the industry would be affected, if at all. Yang said that the real effects of policy more often than not depend on the government’s determination to carry it out to the letter.



bynumbers US$164m Losses reported by China’s major iron and steel companies for the first quarter of 2012, the first major loss for the industry as a whole since 2000. Source: China Iron and Steel Association

+94.5% Growth in outbound overseas direct investment in non-financial sectors in Q1

-2.8% FDI inflow in the same period, the fifth monthly decrease since November 2011 Changes in China’s outbound and inbound FDI FDI out FDI in 200










-50 -100

Nov 2011

Dec 2011

Jan 2012

Feb 2012

Mar 2012


Nov 2011

Dec 2011

Jan 2012

Feb 2012

Mar 2012

Source: Ministry of Commerce of China



The total value of yuan deposits in the City of London in 2011, of which US$5.6bn were customer deposits and US$11.7bn were interbank deposits.

The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) remained below 50% in April, showing a continued contraction in China’s private sector.

Offshore yuan spot forex market 18% 26%

PMI data by the China Federation of Logistics and Purchasing (CFLP – major SOEs) and HSBC (private SMEs) 60




( Jan 2011- Mar 2012 ) Hong Kong London New York, Singapore and other centers

Source: Bourse Consult

136 Chinese companies listed on the Forbes Global 2000 index, making China the third most-represented nation after the US (524) and Japan (258). Source: Forbes



Union Divided? The key issue for the emerging BRICS nations is whether or not an increasingly muscular China can take her partners’ priorities into consideration By Li Jia


his was the response from China’s export sector to enquiries from CCTV, China’s State TV network concerning a noticeable dropoff in productivity in what should be the peak season for the factories that manufacture the West’s Christmas cheer. Reports indicated that half the production lines in Guangdong and Zhejiang, China’s export manufacturing hubs, were standing idle, along with half the workforce. Such is the alarm over plunging demand for Chinese goods in Europe, Japan and North America that China’s entire export sector, still the major contributing factor to national GDP growth, is attempting to find new sources of demand in the developing world. Zhong Shan, China’s vice minister for commerce, announced this year that Beijing would expand its trade with about 30 emerging markets in order to make trade with developing nations account for at least five percent of the country’s exports. Zhong did not, however, reveal details of which markets would be developed, or how the five percent

Customers crowd the carnival attire store Turuna, in the popular Saara market in Rio de Janeiro, Brazil, February 14, 2012 (AFP/Vanderlei Almeida)


Photo by Anoymous



target would be met. The last two years have seen more Chinese products appear in developing markets. An AFP report said most of the costumes for the 2012 Rio Carnival’s legion of samba dancers were made from Chinese textiles. Chinesemade vuvuzuelas irritated soccer fans worldwide throughout the 2010 FIFA World Cup in South Africa. An HSBC survey released at the end of February showed that 62 percent of Chinese companies involved in overseas trade were “interested” in developing business ties with China’s BRICS partners - Brazil, Russia, India and South Africa - in the next five years. All four nations are distinguished by their strategic locations, rich natural resources, large, young populations and relatively smallscale existing trade partnerships with the US and EU. At the fourth BRICS Summit in New Delhi on March 29, the development banks of all five members signed two agreements aimed at facilitating multilateral trade in all five national currencies. The possibility of a “South-South Development Bank,” widely regarded by the media as a challenge to the dominance of the World Bank and, by extension, the US dollar, was also mooted. Despite media jitters over the development of a new, influential trade bloc potentially hostile to US and European interests, however, few of these ideas are likely to be realized in the near future. All four of China’s BRICS partners have taken action against Chinese imports in recent years, fearing a US-style trade deficit with the world’s number two economy. Senior Ministry of Commerce (MOC) officials, including Zhong Shan, have recognized that trade disputes with emerging economies have become a new headache for China. Some officials have argued that these disputes have gone beyond jostling for market dominance and begun to appear strategic and territorial.


The IMF forecasted in January that even South Africa, the slowest growing BRICS nation, will enjoy a 2012 growth rate twice that of the major developed economies. Trade in emerging markets is expected to accelerate beyond growth in developed and developing


markets in both 2012 and 2013. Demand for consumer goods from developing nations, a by-product of improving standards of living, favors export-driven economies like China. After a US court ruled it was illegal for the US Department of Commerce to impose countervailing duties on products from countries without market economy status (i.e. China), pressure from US industrial lobbies paved the way for the overturning of the court ruling in March 2012. The European Commission is planning trade investigations into Chinese imports to the EU, despite no report of official complaints from European industries. Trade among BRICS economies currently makes up merely 3 percent of the global trade. “That means great potential for bigger trade volumes among us,” said Chinese Commerce Minister Chen Deming at the BRICS Summit in India. China is ready to exploit that potential. About 80 percent of that 3-percent share takes place between China and other BRICS countries. Between 2008 and 2011 China became the largest trading partner of all the other four BRICS economies, beating the US and Germany.

Not So Friendly

The CCTV documentary on BRICS broadcast images of BRICS nations working in harmony in their respective areas of expertise - Chinese assembly line workers, Indian software engineers, Russian oil workers, iron ore giant Vale’s Brazilian executives, and South African diamond magnates. However, the reality is less harmonious. Under its new left-leaning President Dilma Rousseff, Brazil will change its price-based textile import tariff to a quantitative one, strictly limiting the volume of imported textiles, a move damaging to China’s exports. “Most of our exports are priced low. We can’t afford the duties imposed by quantitative-based systems,” said an official surnamed Zhou with the trade office of the city of Yiwu, Zhejiang Province. India, seeking to develop overseas markets for its growing manufacturing sector, has launched more trade investigations than any other world economy against China. These actions have intensified since the 2008 financial crisis.

“The number of cases and amount of money involved in disputes with other BRICS economies has increased in the last few years,” said Fu Donghui, senior partner at All Bright Law Office in Beijing, one of the few Chinese law firms specializing in international trade disputes. “Chinese exporters have found they have to take it very seriously now.” All the BRICS countries, with the exception of South Africa, have enjoyed trade surpluses with China for many years. Brazil’s surplus in particular has soared in the last two decades. Dominance in raw materials prevents occasional Russian and Indian deficits with China from becoming major causes for concern. China’s role as the only manufacturing power in BRICS, importing raw materials and exporting finished products, worked well in the past, but with BRICS nations also developing their manufacturing sectors and limiting raw materials exports, China’s position looks increasingly shaky. Reducing heavy reliance on commodities exports and strengthening manufacturing remain cardinal goals for China’s BRICS partners, inevitably setting them at odds with the union’s single manufacturing powerhouse. Since 2008, Russia, India, Brazil and South Africa have all worked out industrial strategies based on similar principles: innovationoriented engineering products for long-term competitiveness and labor-intensive products to boost immediate employment. India, for example, aims to double its exports by 2014, while upholding restrictions on iron ore and cotton exports. With their national strategy for industrialization at stake, the four BRICS economies are beginning to pull away from China, their erstwhile partner. “China’s products seem to be backed by the country’s limitless manufacturing capacity,” All Bright’s Fu Donghui told NewsChina, adding that this capacity made China of greater concern to its BRICS partners than emerging manufacturing nations like Vietnam and Thailand.

Political Rift

Diplomacy has proven another sticking point. According to Reuters, upon her return from the New Delhi summit, President Rousseff lashed out at “predatory competi-


international tion” from undervalued currencies of developed countries like the US and developing countries like China. In June 2009, soon after the inaugural BRICS Summit in Russia, Moscow shut down Cherkizovsky Marketplace, notorious for its Chinese merchants selling cut-price imports. “It is naïve for us to believe that our BRICS partners will refrain from taking action against us just because we are in the same camp,” said Fu. Huo Jianguo, head of the Chinese Academy of International Trade and Economic Cooperation, told our reporter “It is easier for BRICS to reach consensus on issues like gaining more say as a group than it is to cooperate in the field of tangible interests.” Huo also noted that a competitive mentality has reduced exports of natural resources and commodities from other BRICS nations to China. China’s economic might remains reliant on these exports. Indian and Russian newspapers are filled with anti-Chinese polemics, while China’s State media continue to trot out a banal image of cooperation and harmony with its BRICS partners. Chinese exporters and the government in Beijing seem to be equally hesitant to defend their interests in court, fearing political fallout and China’s relative weakness in the field of international trade law.

“Resorting to law, whether domestic laws in BRICS countries or even WTO statutes, not only gives [China] a better chance of defending her interests, but also wins the respect of competitors,” remarked Fu. Fu added that, unlike China, other WTO members do not regard trade lawsuits as “hostile diplomatic gestures.” In fact, he argues, the WTO dispute settlement mechanism provides parties involved in disputes an opportunity for close engagement outside of mainstream diplomacy. Huo Jianguo believes that China needs to acknowledge other nations’ priorities in its trade relations. “Despite the strategic concerns of the other four BRICS countries regarding economic ties with China, they are all eager to do business – on their own terms,” he told our reporter. “You can’t just go there, buy up their resources and leave. The better choice is to invest and show you are ready to build a long-term, reciprocal relationship with local industries and communities,” he added. The MOC cited a local Russian media report that Russian officials were at pains to stress their desire for Chinese investment in high-value projects in Siberia, particularly resource-intensive ones. Some of China’s overseas projects were “hastily launched” before due diligence had

been done “just to have a signing ceremony attended by political leaders,” according to Huo. In an interview with China’s Caixin magazine at the end of 2011, Zhong Jianhua, China’s former ambassador to South Africa, criticized Chinese investors in that country, claiming that “rather than undertaking careful market research, they [Chinese investors] mistakenly believe everything will be all right as long as they can develop connections with local politicians.” BRICS countries also have increasing appeal as export and investment destinations for US and EU businesses. The US business community, and some congressmen, are urging the removal of US laws which they argue prevent American exporters from benefiting from Russian entry to the WTO. Huo Jianguo believes China’s unique selling point – its rapid growth rate – is in danger of collapse, taking foreign investor interest along with it. “If China cannot sustain growth by upgrading its current growth model, [foreign investors] will disappear,” he told our reporter. With GDP growth slowing, and little progress being made on economic reforms, China’s economy, still reliant on manufacturing and exports, looks increasingly vulnerable to the rise of its erstwhile BRICS partners.

In 2010, China invested US$1.5 bn, 2% of its total FDI outflow in BRICS nations

BRICS trade with China in 2011 Total value: US$283 billion Breakdown of China’s trade with BRICS nations

In 2010,BRICS nations invested US$129m in

Brazil: 30%; India: 26%; South Africa: 16%; Russia: 28%

China, 0.1% of China’s total FDI inflow

China’s trade growth with other blocs (2007 - 2011)




































South Africa






Source: General Customs Administration of China/Ministry of Commerce






China is stretching its patience and sincerity to the maximum in order to give peace a final chance,” commented Rear Admiral Luo Yuan in a column in the nationalist daily Global Times on April 9, referencing China’s response to the Philippines’ “provocative activities” in a disputed area of the South China Sea, including “harassment” of its fishermen in the region, and repetitive efforts to “internationalize” the dispute. Since tension began to mount last year in the South China Sea, home to some of the world’s busiest shipping lanes as well as rich natural resources, all or parts of which are simultaneously claimed by China, Vietnam, the Philippines, Indonesia and Malaysia among others, the Chinese foreign ministry and the military have developed a habit of “warning” neighbors off activity in the region. Often interpreted as bellicose posturing, these warnings have gone largely unheeded. Since the beginning of 2012, a new round of confrontations between nations over this immense stretch of ocean dotted with barely-populated archipelagos, is threatening to embroil some of the world’s major military powers.


The Philippines has recently emerged as the most belligerent nation in its pursuit of territorial claims in the South China Sea. Following a February statement inviting foreign oil companies to explore resources in the waters adjacent to the Nansha (Spratly) Islands, the Philippines announced on March 20 that it would “exercise sovereignty” over Zhongye (Thitu) Island, one of the five shoals of the Spratlys claimed by China but under Manila’s de facto control. A port and an airstrip would be constructed, and a tourist industry developed. In early March, the Philippines pledged to launch joint patrols with Vietnam. The Philippines went on to press ASEAN members to forge a consensus in dealing with China regarding the South China Sea disputes during an ASEAN ministerial meeting in early April. Backed by Vietnam, the move met with opposition from several ASEAN member states. Indonesia, for example, insisted on prior consultation with Beijing. On April 10, just one day after Rear Ad-


South China Sea

China Cornered China is on high alert as the world’s major powers weigh in on the escalating sovereignty disputes in the South China Sea By Yu Xiaodong

miral Luo’s warning, the Philippine Navy entered a fortnight-long standoff with Chinese surveillance vessels following its efforts to seize several Chinese fishing boats in a lagoon near the Huangyan Island (the Scarborough Shoal), the largest island of the Zhongsha (Macclesfield) Islands, which China claims to control, as the Chinese ships placed themselves between the Philippine warships and the Chinese fishing fleet. This came after a March standoff between two Chinese maritime surveillance ships and a Philippine survey ship, during which the Philippines deployed a military aircraft.


Many in China have accused the US of presiding over Philippine saber-rattling as part of its “encirclement of China.” During her visit to the Philippines in November 2011, US Secretary of State Hillary Clinton reaffirmed the Manila-Washington military alliance, controversially referring to the South China Sea as the West Philippine Sea, a name only recently coined by the Philippines. Prior to that, the US Embassy in Manila was quoted as saying that the US will stand by the Philippines in the event of an armed conflict with China over the Spratly Islands. The high-level talks in Washington between the two countries on April 30 are expected to further increase US military presence in the Philippines.

As the standoff between the Chinese and Philippine vessels developed, annually-scheduled American and Philippine naval exercises kicked off on April 21. Unlike previous exercises, which have always been held east of Palawan Island in order to give disputed territory a wide berth, this year they were staged to the west of Palawan Island, close to the Spratly oil deposits, with the exercises revolving around the staged retaking of a hijacked oil rig. Observers from Vietnam and Malaysia, two other nations with interests in the South China Sea, as well as Japan, a country engaged in ongoing sovereignty disputes with China in the East China Sea, are among those invited to observe the drills. Japan has recently approached to ASEAN to provide assistance in “maintaining security in the South China Sea,” and it is reported Japan will soon be allowed to use the US military base in the Philippines. Observers also came from Australia, where the US has also increased its military presence, and Singapore, which will soon receive its first deployment of US littoral combat ships. In this context, China’s concerns over encirclement seem to have some foundation. “It has become clear that the US intends to deploy its military forces along the island chains running from Guam to South Korea and Japan and all the way down to Australia,” said Professor Gao Zugui from the China Institute of Contemporary International RelaNEWSCHINA I June 2012

tions. “The involvement of the Philippines would reinforce a weak link along this chain.” On April 22, just one day after the USPhilippine war games, China and Russia launched their first joint naval exercises in the Yellow Sea. Interpreted as an effort to counter the naval bravado of the US and Japan in the region, the six-day exercises involved more than 20 destroyers and frigates from both sides. However, although China and Russia may share common interests in north-eastern Asia, China can hardly count on support from Russia in the South China Sea, as Russia has its own stake in the region. In 2009, Russia agreed to deliver six Kiloclass diesel submarines to Vietnam, another belligerent opponent of China’s claims in the South China Sea. The deal, valued at US$3.2

billion, was the largest overseas sale of Russian naval equipment in history. Only 10 days prior to the Sino-Russian naval drills, Russian natural gas producer Gazprom made a deal with Vietnam to exploit two gas deposits off the coast of Vietnam in the South China Sea. It is estimated that the areas have reserves of 55.6 billion cubic meters of gas and 25 million tons of condensate.


India is also among those interested in South China Sea oil and gas reserves. Following a joint agreement with Vietnam on oil exploration in disputed areas in October 2011, Indian Foreign Minister Somanahalli Mallaiah Krishna told media in early April that “India stands for the South China Sea as

China-Russian joint naval exercises US-Philippine joint military exercises China-Philippine standoff near Huangyan Island (Scarborough Shoal) Zhongye (Thitu) Island Proposed deployment of US littoral combat ships US Marine Base in Darwin


the world’s property.” Adopting an official policy of “putting aside the disputes and joint exploration,” China upheld that the disputes should be solved through bi-lateral negotiation between related countries, and has condemned the involvement of “countries outside the region.” However, with major countries having already joined the oil exploration boom in the region, many argue that China’s current policy is increasingly untenable. “While the idea of ‘joint exploration’ is far from feasible, ‘putting aside the disputes’ means acquiescence to other countries’ exploration and encroachment,” argued Ju Hailong, associate professor from Southeast University, “China should be more flexible in seeking an alternative strategy.” Professor Yang Xiyu from the China Institute of International Studies opined that China should employ its economic power to strengthen its position. “There are currently two races in the South China Sea, the arms race and the race for actual control. China is not losing the first race, but lags behind in the second,” Yang told State-run China Central Television. “China should consider using economic tools to punish offending countries, making them see that they cannot benefit economically from China’s preferential policies when they disrespect China’s interests in the South China Sea,” he added. Currently, there appears to be a lack of consensus within the Chinese government on what kind of new strategy China should adopt. So far, China has refrained from an economic backlash, as this would further alienate its neighors. Nor is China likely to resort to a military solution, which might draw in the US navy. Public opinion, however, is turning against Beijing’s perceived weak response in the face of growing crisis, and China appears to have taken a more assertive stance in recent months. On April 20, China announced that it had dispatched its most advanced fishery patrol ship, the 2,580-ton Yuzheng-301 to the Huangyan Island (Scarborough Shoal) to confront the Philippine vessels stationed there. As tensions remain high and the world’s major powers are drawn into the disputes, the risk of more serious clashes is looming.



Pollution Control

Water Watch

With improved co-operation and an increasingly broad network of anti-pollution volunteers, the efforts of China’s environmental NGOs are becoming difficult for the authorities to ignore By Xu Zhihui and Xie Ying

Locals fish near a waste water outlet along the Xiangjiang river, November 2009




rudging his way towards the Xiawangang waste water outlet through the muddy shallows of the Xiangjiang River in Hunan Province, Mao Jianwei stopped, took a plastic bottle from his bag, and collected a water sample. An anti-pollution volunteer with the Xiangtan Environmental Protection Association (XEPA) in Xiangtan, Hunan Province, over the past three years Mao has been collecting samples from the discharge outlets in the area, believed to be one of the most seriously polluted sections of the Xiangjiang. Since the 1990s, hundreds of chemical plants and mines have been set up in Hunan to explore the province’s rich non-ferrous metal resources. The result of this trend was the unchecked pollution of the Xiangjiang, the major water source for many cities along its banks. According to the Hunan Provincial Environmental Protection Bureau, 90 percent of the water in the Xiangjiang is now below the international standard for drinking water, prompting more and more locals like Mao Jianwei to get involved in the fight against pollution. At times encouraged and at times obstructed, NGOs and their public volunteers are playing an increasingly nuanced role in the supervision of pollution, in Hunan and nationwide.

Photo by CFP

Public Involvement


Ad-hoc water testing by Xiangtan volunteers began in 2004, when locals formed a “water watch” group after finding the water from a local waterworks contained consistently excessive levels of cadmium for an entire year. In 2006, tests on 10 consecutive days found that water from all three local waterworks contained excessive amounts of mercury. For the first time, the volunteers’ data caught the attention of the local environmental bureau, which soon confirmed the problem after re-testing the water. The following year, XEPA was established to test and supervise the quality of the water in the Xiangjiang, collecting data on a daily basis, as opposed to the local environment bureau’s 10-day sampling. Vigilance was especially heightened in the dry season, when the river’s

ability to clean itself was weakened due to slow flow. “We can quickly mobilize more than 10 volunteers and a number of vehicles to the pollution site in case of an emergency,” Mao Jianwei told NewsChina, revealing that XEPA even had “informants” in villages close to potential pollution sources, who ensure that any abnormalities are reported as early as possible. Last December, XEPA organized a secret investigation into plants that discharged pollutants into the Xiangjiang at night, in the hope of escaping the water watch. Eighteen XEPA volunteers were posted around the suspect sites, keeping watch three nights in a row and testing water samples regularly. They found that under cover of darkness, levels of pollutants were several times those recorded during the daytime. XEPA then activated its state of alert, under which volunteers collect water samples every two hours for more comprehensive test results. Two days later, XEPA posted their results on a local Internet forum, revealing that 1.158 cubic meters of untreated polluted water were dumped into the Xiangjiang every second. The report triggered a public outcry and the local environmental authority eventually imposed a 940,000 yuan (roughly US$149,000) penalty on the offending plant. The environmental protection bureau in Zhuzhou, where the plant was located, made a public apology. “Different from other NGOs, many of whom concentrate efforts on promoting environmental awareness through publicity, we focus on collecting evidence. This is the main reason behind our achievements,” Dai Xiaoyan, head of XEPA, told NewsChina. The association now has a membership of over 600 individuals and 22 organizations, distributed across various at-risk sections of the river. “Public participation has helped greatly in supervising polluters, and their contribution has prompted the government to redouble its efforts on pollution control. Co-operation between the public and the authorities will hopefully translate into a new trend in China’s environmental protection,” said Li Jian, director of the environmental bureau of Changsha, Hunan’s provincial capital, which also lies on the Xiangjiang.



Government Support


Huaihe River, during an interview with sina. com in 2010.


Photo by Xu Zhihui

Since its inception, XEPA has maintained close ties with the Xiangtan city government. The association was founded by three members of the local people’s congress, and often sends water samples to the local environmental bureau for testing. The two organizations even share the same office block. “NGOs have made great contributions to the safety of Xiangtan’s drinking water. They are our invisible assistants,” said an official from Xiangtan’s environmental bureau, who asked not to be named, in an interview with NewsChina. Due to urban expansion, the borders of three neighboring cities along the Xiangjiang, Changsha, Xiangtan and Zhuzhou, are getting closer. In terms of water flow, this creates a logistical worry: the drainage outlet of the Xiawangang plant in Zhuzhou is now only 5 kilometers from the water inlets of Xiangtan, making XEPA’s sample collection and testing all the more vital. “The Hunan provincial authorities have introduced no unified supervision system along the Xiangjiang, so it is difficult for local governments to supervise the pollution control of another city. NGOs, on the other hand, can carry out cross-border environmental tasks,” explained the Xiangtan environmental official. Ma Jun, director of the Institute of Public & Environmental Affairs (IPE), the NGO behind the country’s pioneering Water Pollution Map, has also sensed a subtle change in the relationship between NGOs and the government. He told NewsChina that once, the local environmental protection department of Hebei Province ordered a local plant to explain to IPE why its self-published pollution statistics did not correlate with those collected by the NGO. “In the past it was unimaginable that the department would ask a plant to report to an NGO...We’ve also seen that the official ministry documents on environmental protection have cited IPE’s data directly,” Ma Jun said. “All this indicates that NGOs are now being acknowledged by the government.”

Volunteer Mao Jianwei collects a water sample from a Xiawangang outlet, March 15, 2012

More Transparency

However, while local governments appear to be relying increasingly on the work of NGOs, many are selectively ignoring or even obstructing pollution control, depending on vested interests. A recent report, for example, revealed that local authorities had forbidden hospitals in Chenzhou, another city in Hunan Province, from testing levels of lead in the water supply. Two years ago, it was exposed that over 50 percent of the 23,000 children in the city had excessive amounts of lead in their blood. Recently, when NGOs re-visited the city, they found that sufferers had not received the compensation they were promised, and that the polluting chemical plants, which had been closed down immediately after the incident, had all resumed operation. “Local governments often maintain their connections with local factories. There is nothing that we, as NGOs, can do about this,” said Huo Daishan, founder of the Huaihe River Guide, the first NGO in Henan Province for the protection of the

Last December, a group of 21 NGOs jointly submitted an open letter to the State Council and the Ministry of Environmental Protection, protesting against a draft regulation issued in 2009 that threatened to curtail the effect of public participation in environmental supervision. The draft stated that “approval is required from the relevant government departments for any environmental testing or supervision,” and “no organization or individual is allowed to publicize any information about the quality of environment without approval.” “The draft violates the public’s right to conduct tests and know the truth,” the NGOs claimed in the letter. Ma Jun believes that China’s increasingly serious environmental risks are due in large part to the public’s very limited access to relevant data. “Disclosing information helps put the factories and the government under public scrutiny, which will in turn urge the two to make more efforts to reduce pollution,” Ma Jun said. It was this idea that led Ma to set up IPE in 2006, hoping to promote freedom of information. Now, with 41 NGOs collaborating under Ma’s “Green Federation,” an NGO union, IPE’s maps of China’s water and air pollution contain environmental data on 75,000 factories. “Plants must improve their pollution controls based on our requirements, and no plant will be removed from the map without a unanimous vote from all 41 of our members,” Ma told NewsChina. He added that 560 of the listed plants had either explained their pollution situation to the Green Federation, or remedied the problems exposed by the pollution maps. “The Green Federation is also designed to hold its members accountable to each other, preventing a single NGO from being bought off by a polluter, while sharing the pressure from polluting enterprises and government departments,” Ma told our reporter. “It is a creative system for dealing with China’s unique situation.” NEWSCHINA I June 2012


London Book Fair

China’s literary community was the main attraction at this year’s London Book Fair, with the country’s authors, publishers and politicians introducing readers to a new, modern China By Xie Xin


s the event’s “guest of honor,” China took center stage at this year’s London Book Fair, held from April 16th

to 18th. 181 Chinese publishers, 30 percent of the country’s total, took part in the 41-year-old event. Over three days, some 300 Chinarelated activities were held, including cultural forums, copyright promotions, and artistic performances. The event also saw appearances from some of China’s most senior politicians. Li Changchun, a member of the Standing Committee of the Chinese Communist Party (CPC)’s Politburo, attended the fair’s opening ceremony during his four-day visit to the UK. In a speech at the ceremony, he said the fair would help spread Chinese culture overseas, and deepen mutual understanding. Liu Binjie, chief of the General Administration of Press and Publication (GAPP), China’s top publishing regulator, who also attended the fair, applauded the event as an excellent opportunity for cultural exchange. Zhao Qizheng, head of the Foreign Affairs Committee of the Chinese People’s Political Consultative Conference, the country’s top political advisory body, appeared at the venue as both a dignitary and as the author of two NEWSCHINA I June 2012

books on public diplomacy. China’s active participation in the event, according to Zhao, is a perfect example of public diplomacy. The prominence of Chinese material at the fair was in drastic contrast to the scarcity of Chinese books on display a decade ago, said Huang Youyi, editor-in-chief of China International Publishing Group (CIPG), a veteran attendee of the event. Official data supports Huang’s view: China’s copyright exports (excluding those to Hong Kong, Macao and Taiwan) this year totaled a record high of 3236 titles, more than ten times the figure of 318 recorded in 2001. Huang attributed the boom to China’s robust economic growth in recent years, which has piqued the interest of readers across the globe. Their tastes are also shifting from traditional favorites, like cooking, kung-fu and traditional Chinese medicine, to the modern side of China. While this nascent curiosity is far from the “China fever” trumpeted in the country’s domestic media, it offers potential for Chinese publishers, and attending international book fairs has proven beneficial in the past. The country’s copyright exports secured at the 2009 Frankfurt book fair totaled 2417 titles,

Photo by CFP

Book Diplomacy Representatives from China and Great Britain meet at the London Book Fair, April 17, 2012

nearly 60 percent of the Chinese industry’s total for that year. This year’s London fair also proved to be a gateway for those with a strategic mind. CIPG secured 88 external copyright licensing deals and 50 internal ones, while Qingdao Publishing Group secured increased cooperation with Quarto Publishing, a major UK-based international publisher. The role of policy in Chinese publishers’ enthusiasm for the book fair, and on a larger scale, for overseas expansion, cannot be ignored. In recent years, the Chinese central government has been striving to boost China’s soft power, in addition to strengthening its economic clout. In their latest five-year plan, authorities vowed to boost the cultural sector, making it a pillar industry. GAPP has also set the goal for annual exports to 7000 copyright titles, and aims to reduce the huge copyright trade deficit by increasing exports to half of imports by 2015. The publishing regulator, which has long encouraged Chinese publishers to look to international markets, is also preparing to offer preferential policies for copyright exporters. The Chinese publishing industry’s international outlook could also be due to the government’s plan to reform public sector institutions, which have long been financed by the national budget. Non-political publishers, which will no longer be entitled to government financial support, are setting sail in search of new markets.



Stephon Marbury

Ducks’ Darling

After an ignominious exit from the NBA, Stephon Marbury has staged a comeback in the starting line-up of the title-winning Beijing Ducks, with the country’s sports system and media making him the CBA’s new poster boy By Sun Zhe


ormer NBA All-Star Stephon Marbury stands out among other foreign players in the CBA, China’s professional basketball league. Unlike his American contemporaries in the CBA, he has little reason, or opportunity, to return home. Marbury left the US for China in 2009 in the wake of a series of widely publicized disputes with a succession of New York Knicks coaches. A feud with trainer Larry Brown led to Brown being fired at the end of the 2005-2006 season, though Marbury failed to establish a better relationship with Brown’s replacement, reportedly coming to blows with new coach Isiah Thomas after the latter removed him from the starting lineup following the team’s lackluster 2006-2007 season. Marbury was officially transferred to the Boston Celtics in 2009, but rejected his contract, instead signing with the Shanxi Brave


Dragons and relocating to China. Prior to his departure, Marbury’s fellow players had voted him the NBA’s “least popular teammate,” with US media predicting he would have a similarly toxic effect on his new Chinese teammates’ morale. He was frequently referred to as “selfish” by sports writers, fans and, at one point, his own cousin. His departure was welcomed by many Knicks fans, who were soon to discover a new icon in the form of Jeremy Lin. After winning the title-deciding fifth game of the CBA championships in March 2012, Marbury’s tearful coach embraced his star player, remarking afterward to reporters that the team could make do without a coach, but not without Marbury. This marked the pinnacle of Marbury’s China career, securing his place in the pantheon of ChiNEWSCHINA I June 2012

Photo by CFP

Stephon Marbury, the Beijing Ducks point guard, lifts the CBA championship trophy, March 30, 2012

PR Storm

Since joining the Beijing Ducks, Marbury has gone out of his way to appeal to Chinese audiences – appearing in traditional Chinese dress in sketch shows, riding the subway to practice, showing up at local soccer matches, and visiting sick children in hospital – all the while being carefully photographed and publicized by the State media as evidence of his cultural assimilation. Marbury has even been given a weekly column in the English-language State mouthpiece China Daily, in which he has credited his success in China entirely to his identification with Chinese culture. Marbury has acquired a legion of fans in China, while effectively vanishing from the memory of sports fans in the US. A statue of the 35-year-old point guard is reportedly to be erected in front of the city’s biggest basketball arena. Beijing’s Party Secretary even presented Marbury with the Great Wall Friendship Award, the city’s highest honor for foreigners. It’s the only official accolade Marbury is likely to receive in China – the country’s State sports system, unlike the NBA, does not allow foreign-born players to be named MVP. Tickets for the semi-final between the Beijing Ducks and the Shanxi Brave Dragons were scalped at more than seven times their official value. The game was ultimately moved to an 18,000-seat arena for the finals to accommodate demand for tickets. Upsetting seventime CBA champions Guangdong, Marbury, by this time already act-


ing as an assistant coach for the Beijing Ducks, led his team to their first national championship victory. Unlike the vast majority of foreign players in the Chinese league, Marbury is unlikely to make a return to the US, instead basking in the media-led PR campaign surrounding his life in China. He has launched a budget sneaker brand, Starbury, tattooing its logo on his head, and has voiced his ambition to coach China’s national team. His eldest daughter has appeared in a video, leaked by Marbury himself, singing a Chinese song with remarkable fluency. Without the risk of media attacks, and with China’s State-run sports system publicly taking him to its heart and promoting him as the foreign face of the CBA, Stephon Marbury has managed to cover himself in the glory he failed to find in his homeland, with tens of thousands of devoted Chinese fans replacing the New Yorkers who once booed him from the bleachers.

Marbury in tears after winning the CBA championship, March 30, 2012

Marbury at a charity event, March 21, 2011

Photo by CFP

na’s most-loved foreigners, helped in no small part by a carefully-orchestrated PR campaign beginning upon his arrival in China in 2009. While deplaning in Shanxi to join his first team, the Shanxi Zhongyu Brave Dragons, hundreds of fans were waiting in the arrivals lounge, chanting Marbury’s Chinese name. His popularity survived his new team’s failure to make the playoffs that year. Teammates described Marbury as “a role model” on the drill court, working out “like a rookie rather than an established player.” His positive attitude towards training and mentoring, a quality observed during his early NBA career, were heavily publicized. After two seasons with the Shanxi Brave Dragons, more than 10 clubs recognized Marbury as an “ideal international player,” offering him contracts. He eventually chose Beijing, describing the city as being as much of a draw as the team. The CBA’s desperation to improve its international standing has often led coaches to cut foreign players, particularly those from the US, a lot of slack, tolerating tardiness, absence and showboating that would be seen as unacceptable from Chinese players. The vast amounts of money and publicity brought in by the presence of a former NBA star on the court, plus their ability to improve scorecards, place them above their teammates, which often leads to resentment. Bonzi Wells, a small forward who was the first NBA star player to sign with the Shanxi Brave Dragons, failed to return from a “vacation” he took after only 14 games with his Chinese team. Many NBA players have returned to the US after only short stints in China, few remaining for more than a single season. Marbury even had to step in to dissuade J. R. Smith, the former the Denver Nuggets shooting guard now playing for the New York Knicks, from leaving China halfway through his 2011-2012 season after the latter fell out with the manager of a team in China’s Zhejiang Province.


visual REPORT



Beyond Femininity G

Photo by CFP

e Changjiang, 20, is a student at the Shaanxi Opera Research Institute. Since commencing his studies a decade ago, Ge has discovered a talent for playing dan - female - roles, appearing in his first production in 2005. Male performers skilled at playing dan characters are highly prized in opera circles, with connoisseurs often preferring them over female performers due to the sheer level of skill required for a man to pull off a successful performance. Mei Lanfang, China’s most famous opera star and also a dan specialist, once remarked that “some males can play females better than females can. This is because male actors that want to perform well spend more time and pay more attention to feminine movement, even learning to read female minds.” These words have become Ge Changjiang’s mantra, and he has devoted his career to observing and recreating the stylized femininity of great dan performers. His biggest challenge, he says, is to learn truly to empathize spiritually and emotionally with women - the goal of any aspiring dan superstar.

In full costume and make-up, Ge Changjiang prepares for his big entrance NEWSCHINA I June 2012


visual REPORT



Photos by CFP NEWSCHINA I June 2012


OUTSIDEIN perspectives from within china

Mount Emei

Peak Season

It’s possible to live out the Orientalist fantasy of stepping into a lush Chinese scroll painting at Mount Emei, Sichuan, even without standing in the four-hour line for its towering summit By Fenwick Smith


hinese schoolchildren, past and present, are raised on fanciful accounts of the country’s most beautiful and impressive natural landscapes. The tender grasslands of Inner Mongolia, the sugarloaf mountains of Guangxi, the skyscraping Himalayan steppe – all were once described in vivid detail to open-mouthed students by teachers just as untraveled as their charges. Overseas students of Chinese language and culture, myself included, are also spoon-fed romanticized visions of China’s most divine travel destinations, and certain “must-sees” are planted in the mental images all Sinophiles feed off of when singing the praises of the Middle Kingdom.

Photo by CFP


On the summit of Mount Emei, or the Golden Top of 3077 meters above sea level, a giant gold-plated statue of Samantabhadra

riding on elephant back welcomes devote pilgrim travellers


Somewhere at the top of the average Chinese person’s vacation Bucket list, alongside sights such as the Forbidden City, the Shanghai waterfront and Hangzhou’s West Lake, is Mount Emei. Said to be the place where the Buddhist sage Samantabhadra attained enlightenment, Mount Emei is the most sacred of China’s Buddhist peaks, and also the most famous. Its craggy rock formations, sparse pine forests and lush foothills speckled with vibrant bamboo groves and tea plantations have been NEWSCHINA I June 2012

Photos by CFP

popular subjects of classical paintings and poetry for centuries, with Emei’s plethora of temples a draw to Buddhist pilgrims for even longer. Mount Emei, as every Chinese person will gleefully relate, is where heaven meets the earth. Come a national holiday, therefore, hundreds of thousands of people make a beeline for its foothills, hoping to scale its golden peak, wander its forest pathways, sample its tender tea leaves and depart feeling fulfilled by their communion with nature. This is achievable, provided you don’t object to attempting to attain enlightenment alongside several hundred thousand other people. So it was that our hastily-hired minivan screeched into the cluster of hotels and restaurants lining the main drag alongside Emei’s bus station – gateway to the national park itself. We had arranged to spend one night in the town before making our ascent the following day, hoping to drink in all the mountain’s major sights in 16 hours before making our way back to Chengdu. “Not possible,” remarked the cheerful lady at the guesthouse’s front desk, before explaining that we’d need to be up with the lark to stand in line for tickets to the park, then for a bus to take us to the cable car station, then for the cable car that would take us to the peak. “If you get up at five,” she said brightly, “You’ll be at the peak just after lunchtime, if the lines aren’t too long.” My Chinese companions were devastated at the news that there was no such thing as a whistlestop tour of Mount Emei. Resigned, we rose at the more civilized hour of seven, having been told the majority of tourNEWSCHINA I June 2012

ing to ascend. No problem,” I said. “We can just climb.” We climbed. For twenty minutes. Then we hit another line – this one snaking up the two-person-wide pathway to the summit. “There’s been an avalanche,” explained one local woman selling overpriced water. “The people coming down say it’s taking four hours to walk up to the peak.” Our group fell silent. We glanced up at the tourists scrambling through the snowdrifts beside the only pathway in a desperate bid for the top. Most had ground to a halt. A young woman in unsuitable footwear slid backwards, knocking at least ten people over as she thrashed about for a foothold.

Serenity ists would have made their ascent just after dawn. We were rewarded with short lines for tickets and buses, and even the chance to sit down to a breakfast of sweet steamed bread and the excellent local spicy sausages. As our minibus rattled along the precipitous roads to the top of the sacred peak, we were slapping each other on the back, sharing congratulatory platitudes at “beating” the Chinese tourists at their own game. Our bus stopped, and we joined an orderly line climbing towards the cable car station. So far, so good.


I heard the gasps of dismay before I witnessed the line for the cable car myself. However, even these didn’t prepare me for just how immense a crowd of people were wait-

The decision to turn back was the best we could have made. Below the cloud canopy, the weather on Emei was gorgeous. The emerald forest was bathed in sunlight by the time we disembarked at another cable car station – this one practically deserted – which would grant access to Ten Thousand Year Temple. A short, silent flight above dainty tea plantations left us at the temple gates, and with most of the day’s tourists still standing in line at the peak, the grounds were pleasantly quiet. Ten Thousand Year Temple is one of the most holy sites on Emei, boasting a scalloped pool filled with terrapins, beautifully landscaped bonsai forests and an intriguing Tibetan-style prayer hall among its creaking wooden buildings. Hawkers and tour guides brandishing loudhailers were mercifully absent, and instead we were treated to birdsong and the solemn sutra chanting emanating



from the inner cloisters. From Ten Thousand Year Temple we made our way through creaking bamboo, pausing for some buckwheat noodles, to the Qingyin Pavilion, which teeters above a small, forked gully which a fast-moving mountain stream has cut through the mountainside. Dodging a gaggle of sedan-chair bearers, we continued our hike through the forest to reach our most pressing destination – the mountain’s designated monkey sanctuary. Up until this point, we’d been tantalized with notices warning tourists that Emei’s resident Tibetan macaques were aggressive, prone to thievery and, somewhat paradoxically, “good friends of humanity.” However, we had so far failed to spot even one of these mischievous grey critters at any point on our trip. After passing huge rock faces adorned with

imperial calligraphy (the Kangxi emperor was an enthusiastic visitor), waterfalls filled with splash-happy children and rows of determined hawkers selling monkey-themed memorabilia, our efforts were rewarded with the sight of a placid mother macaque and her infant seated comfortably in a tree, surrounded by a boisterous gaggle of at least three dozen Chinese tourists, who held out their cellphones in an attempt to provoke a theft. The macaque, however, seemed mildly amused by the behavior of this strange crowd of clothed, camera-wielding apes, and after watching us for a while, loped off back into the canopy, where others from her troop kept their distance in nearby trees. Having succeeded in our quest, we retraced our steps back through the meandering river valley to a waiting return bus. As we

Getting There Mount Emei is easily reached by train or public bus from Chengdu, the capital of Sichuan Province. Private minivans can also be rented at major transport hubs, and though prices can vary widely, a one-way trip usually costs around 500 yuan (US$79). Chengdu Shuangliu International Airport has multiple daily flights to all major Chinese cities as well as to destinations in Thailand, Japan and Korea. Getting Around Your 150 yuan (US$24) entry ticket to the park includes transport on the countless shuttle buses that ply the twisting roadways up and down Mount Emei. Drivers are none too careful about the rules of the road, often speeding ahead of slower vehicles on blind corners, so brace yourself for some fairly nail-biting journeys. Committed

piled aboard, I glanced around at our fellow passengers, and wondered how many had seen anything other than the back of other tourists’ heads as they waited in line for the peak cable car. I nodded off to the sound of our group’s Chinese contingent, all of them enthusing about how we’d done the right thing by skipping the peak. It may have been Emei’s summit that drew Buddhist sages to this dew-sprinkled, lush landscape, but the real magic lies in the glorious, serene foothills which, even during a national holiday when the upper reaches of the mountain heave with tourists, remain tranquil and full of rewards for the intrepid backpacker. It is here, below the clouds, one can truly find the peace that supposedly allowed the sages of old to achieve enlightenment.

hikers can, of course, scale the mountain at their leisure, stopping in temples overnight. Where to Stay Skip the guesthouses clustered around the bus station unless you’ve arrived late at night, and head straight up the mountain. Almost all temples have accommodation – tourists can expect to pay anywhere between 80 and 150 yuan (US$12 to 24) for a simple bedroom. The standard of temple accommodation can vary widely, from relatively plush quarters with antique furniture and color TV sets to damp, crowded bunkhouses. However, for a memorable experience, rising to the gentle hum of chanting from the prayer hall as one of Emei’s legendary sunrises illuminates your room takes some beating.

real chinese

diao si Rejects Tens of thousands of young Chinese men, who have been thwarted in their attempts to woo a mate, have a new nickname – diao si. Similar to other popular online slang terms in China, diao si evolved from a derogatory term for online fans of a popular Chinese soccer star named Li Yi. Yi’s given name is the Chinese equivalent of the Arabic number 1, and its resemblance to a straight line has given rise to its use to symbolize the male genitalia. With diao a Mandarin slur that roughly equates with the English “dick,” and si a shortened version of fensi, a transliteration of the English “fans,” diao si literally means “fans of a dick.” Through the convoluted and ever-shifting logic of Chinese


Internet parlance, this odd epithet soon extended beyond soccer player Li Yi’s online following to include anyone seen as an outcast. Soon enough it was reappropriated by its intended targets, who took pride in their implied status as social rejects. Soon, all those who felt that fate had dealt them a poor hand in life, including young men who self-defined as ugly, short and/or poor, and thus who struggled to find girlfriends, were becoming self-described diao si. The antonym of diao si is gao fu shuai, which simply translates as “tall, rich, handsome.” This select group of men are, as in most cultures, the privileged class of China, seen as having first pick of the dating pool, a reputation enhanced in no

small way by the stated position of countless female netizens. Consequently, female diao si, which is a non-gender specific term, are known as bai fu mei – “fair, rich, beautiful.” The prevalence of this appearance and income-based caste system already entrenched in China’s online world is being seen as a sign of the cynicism which has taken root in the country’s youth culture. With the average apartment costing several times the average citizen’s lifetime salary, young men outnumbering women due to a gender imbalance rooted in the One Child Policy, and the cult of beauty creating countless pop culture figures with no discernible talent beyond looking good in the latest fashions, it’s easy to understand why diao si might despair. NEWSCHINA I June 2012

flavor of the month

East Treats West By Jacob Bailes


fter finally presiding over the installation of that most-hallowed of kitchen implements – without which European cuisine may have never amounted to more than salad and boiled meat – an oven, my apartment’s miniscule cuisine was primed and ready for action. Now to engage in the Great Experiment – the launch of authentic British cooking on an unsuspecting Chinese partner, while at the same time, having the latter teach me the finer points of Chinese culinary art. With eating the ultimate cultural exchange (it beats karaoke hands down), surely this effort would be rewarded. The results were fascinating, to say the least. Years went by, during which the pair of us would occasionally add a European flourish to a Chinese standard – Nutella appeared in mooncakes, chopped mint in lamb dumplings, and our favorite hongshao rou (belly pork stewed in a toothsome mix of soy sauce NEWSCHINA I June 2012

and spring onion until it’s meltingly tender) became an oven-baked dish, with the wok looking enviously on. Similarly, Chinese twists were put on dishes I had been raised on. Star anise and Sichuan pepper infused my soups and savory sauces, chicken soup benefited from the addition of shredded spring onion and China’s magical “abalone” mushrooms, and, most successfully, my signature Eton mess (a mix of crushed meringue, whipped cream and strawberries) was enhanced with the tang of a haw reduction, incorporating one of China’s most distinctive flavors. What amazed us about our experimentation was how much more successful we felt these dishes were than the so-called “Western-style” fare offered by Beijing restaurants. Moreover, they kung-fu kicked the rear end of most all the food mislabeled “fusion” that we had tried in Britain and America (note to US chefs – putting ginger or wasabi in something isn’t “fusion.” It’s “seasoning”). Anyone who has lived in China, and a good many tourists, will have, at some point, given in and gone out for Western food. We can’t help it. As with the vast bulk of Chinese food overseas, you are aware that what you are eating is an approximation of a style of cooking, and not necessarily what people from that culture sit down to whenever they get the munchies. I’ve never seen a fortune cookie in China. Or sesame toast. Or deep-fried seaweed. And Chinese takeout in China never, ever comes in a neatly-folded paper lantern box. Most Chinese friends of mine find the food served in Chinatowns in the West to be almost uniformly inedible – at best a poor imitation of the real thing, and at worst an overly sweet, overly sticky deep-fried atrocity that shames five millennia of Chinese chefs. One might assume, however, that European or American cuisine would make the transition to China with few modifications. After all, KFC and McDonalds are pretty much the same in Beijing as they are in Baltimore, and Western food done as it should be tastes

good to everyone, right? Guess again. The average Chinese palate is as fickle as that of any self-professed foodie in America, and the qualities we think our cuisine should be known for (freshness, richness, comforting simplicity) are not necessarily the qualities seized upon by those attempting to cook Western food to suit the expectations of the everyday Chinese diner. Sweet Japanese-style mayonnaise on salads. Grilled processed cheese on clams. Soups thickened to a rich goo with cornstarch and milk. Bean-flavored ice cream. These are the “Western” dishes aimed squarely at the (mercifully) gradually shrinking majority of Chinese people who know nothing about EuroAmerican cuisine other than it’s full of sugar, dairy and cheese. A similarly disenchanting menu will greet the aspiring chef who flicks to the back of a Chinese cookbook for the section dealing with Western food. The recipes are typically for Chinese food, just with a layer of grilled cheese on top, served with a knife and fork. This isn’t to say I haven’t taken guilty pleasure in scarfing down some of these indefensible concoctions. I am somewhat partial to Japanese-style mayonnaise (though not to the point I’ll have it in my house), and have also been known to frequent budget pizza parlors that consider thousand-island dressing a topping. However, it does sadden me somewhat that national attitudes to so-called “foreign” food can remain so unimaginative. Which is why, in our tiny apartment, an Anglo-Chinese alliance of culinary experimentation has produced some dishes that have pleased both local and foreign friends. There’s something truly wonderful about gathering people from both sides of the Pacific for a dinner that neither side fully recognizes, yet both enjoy in equal measure. Humanity is united by a love of eating, and reflecting the limitless potential within both Asian and Euro-American cuisine for exchange and extemporization should be the goal of anyone aspiring to cook for the world’s first truly globalized diners.



Tell it to the Birds By Sean Silbert


sands of worshippers descend on Wong Tai Sin temple, in the northern part of Kowloon, to offer glowing incense sticks, kneel before the main altar, and seek the advice of soothsayers. There are all sorts of readings available, from palm and face readings to the incomprehensible kau cim, a process not too far off from drawing lots, which apparently allows an elderly interpreter to answer any question about your future - for a fee. It was with this in mind that I went down to Temple Street. I went late – probably too late, as some of the soothsayers had already closed their curtains for a smoke break. There were plenty left, though, reading palms, shaking cylinders filled with sticks, and ticking away on notepads nearly blackened with auspicious formulae. I was accompanied by a local friend of a friend who swore by the

That’s pretty much what I wanted – some sort of brush with the magical, the inexplicable, the weird.

Illustration by Xiang Zhaohui

Walk past the tourist alleys around Hong Kong’s Temple Street, the ones lined with cheesy t-shirts, bootleg DVDS, and novelty cigarette lighters, and you’ll eventually stumble across the fortune tellers. There aren’t many of them – maybe ten or twenty at the most – but they’re hard to miss, sitting around under large tents waiting for the next client wanting to know something about the irresolute future. It’s not like some sort of carney convention, either; many of them are visited by local Hong Kongers who skip the night market behind them completely, waiting their turn in the yard precariously wedged between the soaring buildings of Kowloon long after the moon has risen. I, on the other hand, thought it was all a big joke. I can’t really recall how I heard about the fortune telling. Maybe it was one of those “weird travel” sites that pop up around the Internet, or maybe it was at a friend’s recommendation. Either way, my impression of what fortune tellers actually were was hardly on the ball. Ever see Big? That old Tom Hanks movie? There’s a part where the main character, frustrated with the restrictions of youth at a carnival, drops a coin into a fortune teller automaton called Zoltar Speaks, which then grants him his wish to become an adult. Secretly, that’s pretty much what I wanted – some sort of brush with the magical, the inexplicable, the weird. Temple Street was the place to do it. The outdoor night market might be where I could find my own Zoltar. Don’t get me wrong, though, I’m no sucker. I’m a full skeptic, having seen enough cheap tricks and legerdemains to feel like I can reasonably shrug off the predictions of some street-side seer. Hong Kongers, on the other hand, have long had an affinity for the supernatural. It’s a characteristic drawn from mainland ancestors, something not reflected in the gleaming shrines to capitalism lining narrow Victoria Harbor. Every year, thou-

predictions of mystics. One of them had apparently revealed her future a year previously, and she claimed that every prediction, down to the last, mundane detail had come to pass. We settled at a stall which stood out from the others. A little cage sat on the mystic’s desk which contained three white birds jumping, chirping, and cocking their heads at this oddly-garbed foreign gentleman. Trying to ignore these little critters, I braced myself for the fortune teller’s questions: the menu offered such colorful options as your love life, your career, and your luck. I opted for the latter – for fifty Hong Kong dollars (US$6.44), I wanted my money’s worth, and it seemed like a catchall. The fortune teller laid out a set of cards on the table, each of them containing a little preselected slip of paper. Then, to my astonishment, a little basket of birdseed was placed on top of the stack, and the soothsayer coaxed the little bird out of his cage to choose my destiny with his beak. It picked one. Then it was over. The soothsayer unfurled the card that held my fortune, making a grand dramatic show of it all. After some Cantonese hewing and hawing, he laid down the long scroll on the table, and interpreted the cryptic lines of characters laid out before him. In essence, I had good fortune, and my ship was meant to sail smoothly. He smiled, stuffed the scroll back into its cardboard folder, and asked me if I had any other questions for his birds – for another fifty dollars, of course. Does this mean I’ve had good fortune? I pondered this long after he set me loose and I returned back to the mainland. Since returning home, I’ve started a new job, had better luck with relationships, and even got invited to a few more dinner parties. It’s hard to say whether he was able to divine my status from the odd selection of a little white bird. What the heck would a bird know about my future? In the end, only one thing is certain: pay fifty bucks to get your fortune told, and you’ll never get it back. NEWSCHINA I June 2012

Sawdust While the Sun Shines I’ve lived through three winters in Beijing, each time in a different apartment, and that in itself has given me a wealth of experience. But it was only this year that it really dawned on me that a trend occurs at this time of year, no matter where I am in the city. Springtime in Beijing, it turns out, is drilling season. I cannot quite fathom why, but as soon as the high winds of spring have swept the last vestiges of the icy air and blown in a few short but enjoyably warm weeks, the call goes out to local handymen and DIY enthusiasts. Cupboards are ransacked, settled dust is blown away, boxes are rummaged through and wood and plaster everywhere quakes in fear. Maybe it is not everyone, but it seems incredibly coincidental that every year the person living upstairs or next door from me just happens to decide that this is the year for a major renovation. It’s not just domestic either, it happened in my former workplace. Out they come, like a flock of electronic, hibernating woodpeckers, arising from their wintry slumber and ready to begin a gnawing assault on my concentration and, I presume, that of everyone else around me. And there is absolutely no escape for the damned of the drill. These days I “work” from home, which is a flimsy pretext to cover all manner of procrastinations, but whatever it is I am up to, it is not a task that can easily be completed when accompanied by the persistent squeal of drilling. Watching television? Be prepared to miss many, potentially crucial, parts of the dialog. Reading or sleeping? Forget about it. Listening to music? Crank the volume way, way up. In my previous apartment, my roommate was a freelance photographer who would work long and late hours, often topped off with a hearty session at one of Beijing’s plethora of bars. I could thoroughly empathize with the sheer frustration with which he swore at the ceiling before scrabbling around for something to throw upwards, though the best case scenario was that said object NEWSCHINA I June 2012

Illustration by Xiang Zhaohui

By Philip Jones

It is only when you are at its mercy for a full working day that you realize the full range of sounds a power tool can make.

wouldn’t hit him on its way back down. Last year, in the midst of a freelance project that was consuming a lot of my time and emotion, the drills had been working relentlessly from 9 AM on a Saturday. A Saturday! It’s bad enough I was having to work on the weekend, without that racket to contend with. At 4 PM, after shouting my lungs out and slamming a door from time to time in

the somewhat naïve hope that someone, somewhere might get the hint, I stomped up the flight of stairs and, part in temper and part to be sure I was going to be heard, I hammered on the door. A man in full coveralls answered, with a surprised expression. In my broken and furious Chinese, I demanded to know what time he planned on stopping. He, presumably thinking I had got myself in such a lather and thundered on his door simply to ask the time of day, told me it was about 4 PM. It was just another moment to sap the energy on a never-ending spiral of frustration, a Kafkaesque take on DIY. When we finally got to the bottom of my query, he still seemed puzzled why I would even care what time he knocked off. But this is what I struggle to understand. What does the cold weather do to this city that necessitates punching it full of holes as soon as you’re out of longjohns? Or is it just that we only get four weeks a year when it’s not either too hot or too cold to do a full day’s work? It is only when you are at its mercy for a full working day that you realize the full range of sounds a power tool can make. Currently I would describe what I can hear as a Wookiee’s yawn topped off with a lion belching. At 8:30 AM today, it was more akin to a male grizzly bear stubbing its toe. Every morning my sleep is shattered by a vision of a deranged dentist looming over my helpless, quaking body. I’d prefer birdsong and the sound of bacon frying. Such is the steady march of progress and development – and, of course, it must continue. As you age, you learn to accept the seasons for what they are and so it must be in this case too. Sandwiched inbetween the static shocks of Beijing’s bone-dry winter and the approach of summer’s humming air-con units dripping water onto unsuspecting catnappers, we have talkative Mr Drill. And we still have mosquito season to look forward to. 


Cultural listings


Back Without a Bang After the cinematic release of Ning Hao’s 2010 film No Man’s Land was allegedly blocked by censors, fans had been left hoping for a triumphant comeback from the director. Ning’s latest offering Guns and Roses, a characteristically violent black comedy, finally reached cinemas in late April, causing a stir among eager moviegoers. However, many expressed disappointment in the movie’s lackluster storyline, contrived dialogue and unrealistic sets. While criticizing Ning’s apparent relapse, some critics have suggested that interference from censors may have strangled the director’s creativity. One of China’s most prominent young directors, Ning Hao rose to fame overnight at the age of 28 with Crazy Stone, a riotous black comedy released in 2006.



Lords of the Dance

Memory of the Storm

Mosaic, a band from Chengdu, the capital of southwest Sichuan Province, released their self-titled debut album earlier this year, having earned popularity with their blend of disco and modern rock and electro. The record’s catchy melodies, dance-oriented beats and lyrics in both Chinese and English give it a broad appeal, ensuring popularity with fans of both rock and pop music. Meanwhile, the band’s devotion to their retro image has also contributed to their popularity in China’s fashionconscious music scene.

By Various Authors


Beijing No.4 High School, one of the most prestigious middle schools in China, played a significant role during the Cultural Revolution (1966 – 1976), due largely to the Party and military family backgrounds of many of its students. When the revolution began, most of the students in the school were aged between 13 and 20. Plunged into political struggle, they lost their chance for a proper education, and in some cases even lost their lives. In the book, 17 of the school’s alumni share their memories of his turbulent era. Compiled by three of the students, including Bei Dao, who later became a leading figure of the “misty poetry movement” that took shape at the end of the Cultural Revolution, the book has received plaudits from critics and readers alike.

Speaking Silently Say, an exhibition of sculptures and installations by more than 30 young Chinese artists, was held from late April to May at the Zero Art Center in Beijing. With a powerful atmosphere of expression, the exhibition features a wide diversity of both materials and ideas. Spanning steel, ceramics, clay, wood, plastic and mixed materials, the works inspire reflection on issues including sex, religion, tradition and the future, among others. Despite the variety of media, the overall theme was evident – most of the works invoked the influence of urban life and modernity. With their still, silent works, these young Chinese artists project a strong, progressive voice.






We’ve made peace with the dollar China can now afford to lift control on foreign capital without first floating its currency By Tang Xuepeng


hina’s central bank recently announced that it would increase the fluctuation range of the exchange rate between the Chinese yuan and the US dollar from 0.5 to 1 percent, effective April 16. While observers applauded the decision, the exchange rate itself actually fell slightly from the previous week. Just one day later, on April 17, the IMF released its World Economic Outlook 2012, which substantially lowered its estimates for China’s current account surplus, reducing it from 5.6 to 2.3 percent of GDP. As an important indicator of how much the yuan has been undervalued, the decrease suggests that China’s balance of payments (BoP) has begun to approach parity. In other words, the yuan doesn’t appear to be greatly undervalued. Earlier this year, the central bank also moved to further open the domestic financial market. For example, China has increased the investment quota for international capital on the Chinese stock market by US$50 billion for international currency investors and 50 billion yuan (US$7.9bn) for yuan-backed investors. To understand these changes, we need to explore China’s approach in its “exchange reform.” Currently, both allowing greater fluctuation and more international capital into the domestic market are part of the formula, as they introduce more market mechanisms for the supply and demand of yuan, improving China’s BoP. Yet, when it comes to the relationship between the two strategies, economic planners seem to reject the notion of embracing free capital flow until the yuan has floated internationally. The strategy appears to be backed by both interest rate parity theory (which suggests that capital flows into countries with higher interest rates), and the Impossible Trinity theory (which posits that a country cannot have a fixed foreign exchange rate while also allowing free flow of capital flow without artificially controlling interest rates). Therefore, the concern is that allowing the free flow of capital prior to floating the currency may lead to a hot money avalanche which would ultimately force the lowering of China’s interest rate. The reality is the appreciation of the yuan on the international


markets has gone hand in hand with its depreciation in China’s domestic market. With huge trade surpluses and vast foreign exchange reserves, China has to use its central bank’s bill and deposit reserves as a counterweight, which has had a huge impact on inflation. This leads to a cycle of low interest rates and expansion in domestic industry and exports. As China’s low interest rates stimulate these two key areas, they boost trade surpluses, causing swelling in the country’s foreign exchange reserves, which in turn raises the rate of domestic inflation. This lowers interest rates even further, leading to even greater industrial expansion. The result is soaring costs across all sectors, particularly real estate, raw materials and the labor market. In the same period as the yuan has appreciated by about 30 percent against the US dollar, the average wage in China has almost quadrupled. Coming at a time when wages in the US have stagnated, it has made it more and more expensive to do business in China. To put it simply, the widely-held interest rate parity theory does not apply to China, as hot money investors are not attracted by the country’s barely-fluctuating interest rate, but by its asset bubbles, which offer far fatter profits. Now this cycle has reached a critical point, apparently achieving an equilibrium for the yuan and the greenback. China’s currency is now expensive enough to prevent a huge influx of hot money, while also cheap enough to forestall a sudden exodus of capital. Without the threat of hot money, the Impossible Trinity theory looks increasingly far-fetched. In short, it has become safe for China to loosen its restrictions over the flow of international capital, even without first fully liberalizing its control of the exchange rate. Were such an approach to be implemented, people would soon discover that the specter of an economic crisis sparked by an uncontrolled influx of capital is simply an illusion.  (The author is a senior editor with the 21st Century Business Herald) NEWSCHINA I June 2012





June 2012