The Sinocism China Newsletter For 09.04.12

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

Thanks for reading. The best way to see this daily post is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. You can also follow me on Twitter @niubi or Sina Weibo @billbishop. Feel free to donate through the button on the top right, and if there is a story you think I should include please send it to me. 

It is tiring always pointing to bad economic news but I guess we need to get used to it. The latest comes in the form of inflation, specifically rising food inflation. The August CPI may be above 2% which would limit some stimulus options–食品价格显著回升 8月CPI或至2%以上_宏观_证券时报网 . Perhaps one positive glimmer in the recent data is that while China manufacturing weakened, services grew :

Also Monday, the National Bureau of Statistics said its index of non-manufacturing activity rose to 56.3 from July’s 55.6. A sub-index for construction activity rose to 61.1 from July’s 60.4. The index also covers industries such as air travel and telecommunications.

Reuters asks does history suggest China growth is about to rebound? Arthur Kroeber is not so sure:

“It’s quite clear we have a pretty rotten industrial cycle coming on. I don’t see it getting a whole lot worse… but I don’t expect them to get back for a long, long time,” said Arthur Kroeber, managing director of GK Dragonomics in Beijing.

“I see things bouncing along at the bottom of the cycle.”

I guess at this point a bounce along the bottom is a good thing, kind of like being in the sink but not yet circling the drain?

At least the new Beijing-Shanghai high speed rail line is running ahead of plan and is almost at break even ex-depreciation, according to the latest issue of Caixin Magazine–京沪高铁超预期运营_财新网

Do not expect any significant economic moves until China gets through the political transition. The appointment of Li Zhanshu to head the General Office of the CPC Central Committee is likely a sign that many if not all of the important deals have been cut and the 18th Party Congress should open soon.

One of these deals apparently involved Ling Jihua, as detailed yesterday in the South China Morning Post (apologies, they have killed the Google backdoor for that link) and then followed up by BloombergReutersThe New York Times and The Telegraph, among others. All add interesting details to the lurid story of the tragic Ferrari crash, with Reuters citing one source saying Ling’s son was not killed while The New York Times says it has confirmed he was. For those wondering about the genesis of this story, see this New York Times blog post from March and Boxun takes back claim of Ling Jihua’s involvement in ‘coup’ from early June.

It is too early to conclude that Ling’s move to head the United Front Work Department is either a significant or a permanent demotion.

Ferraris are clearly an advanced weapon of “hostile foreign forces”, though as yesterday’s killing of a Bangkok police officer by the Ferrari-driving grandson of the Red Bull founder shows, the Italians did not solely design them to undermine China’s government.

On to today’s links:


Unprofitable China COSCO Holdings Still Gets Top Rating – Caixin Online – China Lianhe says shipping company is AAA in part because the government can bail it out//well ok then

China’s home prices rise for 3rd month – Xinhua |– New home prices in major Chinese cities continued to rise in August, signalling a moderately warming real estate market, according to data released by the China Index Academy (CIA) Monday. The average new home price in 100 surveyed cities rose for the third straight month to 8,738 yuan (1378 U.S. dollars) in August, an increase of 0.24 percent from July, the CIA said.

$119 billion in Australian projects up in smoke? | | MacroBusiness – “I will emphasise that prices are in decline relative to their peaks in 2011 and I don’t see that fundamentally changing. We might be in a bit of ­a down in terms of confidence at this moment of time in China, but nevertheless the issue is that prices continue to moderate and that is a function of increased supply coming on board now and into the future.”

Healthcare system to get 400b yuan injection |Society | – The central government will invest a total of 400 billion yuan by 2020 in the seven key projects, which also involve improvements to the grassroots healthcare system, psychological disease prevention, the construction of a digital public health information network, medical device innovation, the development of traditional Chinese medicine, and the training of general practitioners.

New loans to local governments criticized — Shanghai Daily | 上海日报 — English Window to China New – monetary heroin// CHINA’S four largest banks, except the Industrial and Commercial Bank of China, made new loans to local government financing platforms in the first half of this year, possibly against the regulator’s guidance, a Beijing newspaper said today. Local government loan balance in the four banks – ICBC, China Construction Bank, Agricultural Bank of China and Bank of China – rose 500 billion yuan (US$78.8 billion) from the end of last year to 2.6 trillion yuan in the first half of this year, the Economic Information Daily cited unnamed industry experts.

钢贸融资劫_杂志频道_财新网 – long article in Caixin about problems for steel traders and debt repayment, similar to recent Reuters story

New giant tower branded ‘pants’ – People’s Daily Online – It is called the Gate of the Orient, a new 300 meter high sky scraper with an arc at the top which is due to be completed at the end of this year, but the new structure is already gaining a towering following online after being dubbed the “long underpants”.The 69 storey building, in Suzhou, Jiangsu province, has been ridiculed by Internet users with more than 3,000 comments mocking the structure.

Skyscraper fervor causes concerns |Industries | – BEIJING — Clusters of skyscrapers are elevating the urban skyline in many Chinese cities. However, recent reports of a craze to build more of them have sparked concerns of inadvisable investment.

Chopped Liver, Gutter Oil and China’s Private Borrowers – China Real Time Report – WSJ – Some 600 private enterprises, feeling the financial pinch amid a global economic slowdown, have petitioned the government in east China’s Zhejiang province for help – saying that their bankers have been calling in loans and refusing to extend fresh credit, according to local media. They are pushing for three years of no cutbacks in lending.

China Eastern Quickens Capacity Growth to 10% on Overseas Travel – Bloomberg – Expansion will focus on overseas routes after a 19 percent increase in nationwide outbound passenger numbers in the first half, Zeng Yongchao, an executive vice president, said in an interview yesterday in Hong Kong. The Shanghai-based airline expanded passenger capacity 4.6 percent through June.

Travel in private jets soars 43% this year — Shanghai Daily | – Traffic of business jets at Shanghai’s two airports increased 43 percent in the first eight months amid growing demand, the city’s business aviation base announced today.

PICC Said to Plan $3 Billion H.K. IPO, Delaying Shanghai – Bloomberg – The state-owned insurer, which initially planned a dual listing in the two cities, may put the Shanghai portion of the sale on hold as Chinese regulators have yet to approve the deal, according to the people, who asked not to be identified as the deliberations are private.

U.S. Short Seller Eyes China PICC P&C in a Trademark Case-Caijing – if this is true then hong kong authorities should investigate// The short seller, which has frequently attacked Chinese companies, reached out to Dalian Xingtai and offered to cooperate with the smaller insurance insurer to profit from short selling PICC P&C, people familiar with the matter told Capital Week, when Dalian Xingtai the compliant to a local court in the coastal city of Dalian in northeast China as early as this spring that the trademark of “through train” it registered and put into use in 2003 was infringed by PICC P&C. The short seller said they could short PICC P&G on the grounds that the insurer failed to disclose adverse information, the source said. The proposal has already been rejected by Dalian Xingtai and its proxy, the source added, citing the fact they would not “collaborate” with U.S. short seller and engage in misdoings to harm the interest of investors.

Rumors That CITIC Loses CNY2.9Bln Faked up by Two Retail Investors, Investigation Shows -Caijing – Two retail investors who suffered heavy losses in the stock market have faked up rumors that China’s leading brokerage CITIC Securities lost as much as 2.9 billion yuan from overseas investment, and that its chairman Wang Dongming was taken away for investigation, China Securities Regulatory Commission said today following an investigation

Short Seller Draws Criticism in China Over Research – – surprised SEC has not looked at pre-report trading// Led by Kai-Fu Lee, former head of Google’s operations in the country, a group of than 60 executives, investors and entrepreneurs signed a letter accusing China-focused short sellers—particularly Citron—of “targeting legitimate companies with either no problems or minimal problems,” manipulating information to write reports that “boldly tell lies

E&Y and state secrets | China Accounting Blog | Paul Gillis – While the firms like to hold themselves out as a one firm, that is not how they are structured. E&Y cannot have it both ways. They cannot claim to be a Chinese firm to Chinese regulators, yet use their Hong Kong firm to sign off reports. That practice is deceptive to both investors and regulators.  And it violates auditing standards. A firm cannot blindly sign off on work done by another accountant. The Public Company Accounting Oversight Board in the U.S. has banned firms for this practice. E&Y Hong Kong and E&Y Hua Ming are separate firms.

CIC sells most of its BlackRock stake: FT | Reuters – China Investment Corp (CIC) has sold most of its stake in BlackRock Inc (BLK.N), the world’s biggest asset manager, as part of a wider strategy to trim holdings in global financial institutions, the Financial Times reported on Monday.

反贪腐新晋利器:手表_财经频道_一财网 – first financial on the dangers for officials with nice watches in the weibo era. bad news for luxury watchmakers…//

茅台出厂价涨两至三成-中国证券报·中证网 – moutai wholesale increase to increase 20-30%//



Chinese media apologize for “false corruption reports”: Duowei| Chinese media outlets Shandong-based Economic Observer and the Hainan-based New Century Weekly [Caixin] published formal apologies creating false reports on the corruption of Liu Zhijun, the former minister of the Ministry of Railways, says Duowei News, a news site operated by the overseas Chinese.  The New Century Weekly said that their report on Aug 18 titled “Dangerous Relations” had used unauthenticated information regarding illegal “transactions” between Liu and a businesss woman named Ding Shumiao from Shanxi province. “Because our reporters did not use the correct information provided by the authorities, we apologize the public unrest caused by our report,” said the magazine. The Economic Observer made similar statement as well on Aug 29.

Editor at Communist Party mouthpiece blasts leaders | South China Morning Post –Linked to the originals on Caijing a few days ago, remarkable essays, sad mostly gone//  Offering a contrasting view to the official line, which has hailed the decade-long reign of President Hu Jintao and Premier Wen Jiabao as “golden and glorious”, Deng Yuwen, a deputy editor of the newspaper, which is run by the party’s central school, said they had “created more problems than achievements”. The rare, scathing critique of the political legacy of incumbent state leaders came at a particularly sensitive time, with Beijing scrambling to finalise preparations for the upcoming national party congress. Highlighting the sensitivity of the topic, two-thirds of the article, believed to have first appeared on the website of Caijing Magazine late last week, has been removed by government censors. However, the full version of Deng’s article could still be found on blogs.



In Beijing, Clinton to Discuss Island Disputes – – During her visit, part of a 10-day, six-nation swing through Asia that is likely to be her last to China as secretary of state, Mrs. Clinton is planning to urge China to enter discussions with its neighbors over conflicting claims in the South China Sea, Obama administration officials said… In the case involving the Philippines and China, the Obama administration quietly negotiated a deal in May that called for Filipino and Chinese vessels to leave the Scarborough Shoal, known as the Huangyan Islands. But as the Chinese sailed away, they left behind a rope that still blocks the entrance to the lagoon, said two Asian diplomats familiar with the situation, who declined to be named according to diplomatic protocol. The Chinese have resisted holding such talks with the Association of Southeast Asian Nations, saying the time was not right.

Clinton Pushes for Protocol on Sea Disputes – – During a visit to Indonesia and a day before flying to meet with leaders of China, Mrs. Clinton said Monday that China and countries with competing claims in the South China Sea need to push for the long-delayed completion of a code of conduct to settle their differences.

South China Sea issue should be resolved by directly concerned parties: FM spokesman – Xinhua | – “Countries outside the South China Sea should respect the choice of the relevant parties, hold an impartial position on the issue and make more efforts in favor of regional peace and stability instead of bringing harmful effects,” he said.

Hillary reinforces US-China mistrust – – How the US and China look at each other will largely decide international relations in the Asia Pacific in the new century. We hope Clinton can reflect upon the deep harm she is bringing to the Sino-US relationship in the last few months before she leaves office and try to make up for it.

Chinese navy training vessel “Zhenghe” arrives at Indonesia – Xinhua | – People wave flags to welcome the arrival of the Chinese Navy training vessel “Zhenghe” at Tanjung Perak port in Surabaya, Indonesia, Sept. 3, 2012. The vessel “Zhenghe”, which is named after a famed Chinese maritime explorer who sailed overseas about 600 years ago, has a scheduled route of more than 30,000 nautical miles, and is expected to pay port calls to 11 countries and working visits to three countries during its global voyage.

PLA diplomacy to ease tensions |Politics | – Defense minister spearheads key mission to Asia…A flurry of diplomacy by People’s Liberation Army officials is conducive to reducing miscalculations amid recent territorial disputes and neighbors’ concerns about China’s military strength, analysts said.

China helps bust US drug websites|Business| – An operation by China and the US has shut down illegal Chinese-language websites in the US selling counterfeit date-rape drugs and Viagra, Christopher Hickey, director of the Food and Drug Administration’s China Office, told China Daily in an exclusive interview.



China’s biggest search engine Baidu enters mobile browser fight | Reuters –  The Baidu Mobile Browser, which will compete with UCWeb Inc’s UC Browser, Google Inc’s Chrome and default Android browser, and Apple Inc’s Safari, is about 20 percent faster than its rivals based on internal tests, Li Mingyuan, Baidu’s general manager of mobile and cloud computing, told reporters on Friday at a pre-launch briefing.

Hollywood’s Mr China: Dan Mintz, DMG – Forbes  did not realize he was married to one of his partners. glad to see this profile, one of most successful foreigners in China// The path to Dan Mintz’s office starts in a dimly lit penthouse lobby of glass panels, Buddha heads and traditional Chinese wooden doors. Take a right at the stone bridge that arches over a carp-filled pond. Pass a room filled with fresh-faced staffers brainstorming over laptops and go inside.  You’ve just entered the DMG zone, where marketing, movies and chutzpah collide. It’s a zone that is becoming familiar to Hollywood executives jostling for a bigger share of the world’s hottest box office, worth $2 billion last year, more than double the take in 2009.

Renren Shifts Focus to Mobile Games, E-Commerce – – still very overvalued unless you think it is a privatization candidate// Though it doesn’t have competition from Facebook—inaccessible in China—Renren has faced difficulties from microblogs, which are attracting growing numbers of users in the country’s hypercompetitive Internet market, and from advertisers’ hesitance to spend on social-networking ads.Now Renren is shifting its business model. Chief Executive Joe Chen said in an interview that he’s looking beyond online advertising for long-term drivers of revenue.

FluentFlix Wants to Take You to the Movies So You Can Learn Chinese – FluentFlix is a startup web service that aims to teach you Chinese using videos and film clips. On signing up, users can select their language level, what kinds of clips they want to see (i.e. film clips, news, commercials, music videos, etc.) and what genres they prefer (entertainment, business, science, tech, etc.). Once they’ve made their selections, the FluentFlix homepage becomes a customized dashboard that gives them access to videos of an appropriate language level on varying topics.



China Military Official Suspended After Flight Fight – China Real Time Report – WSJ – the power of Weibo. There may eventually be a positive place in Chinese history for Sina CEO Charles Chao// Col. Fang Daguo, a political commissar for the Armed Forces Department of Yuexiu district in the southern city of Guangzhou, was suspended from his post on Sept. 2 pending further investigation, the official People’s Daily reported Monday through its feed on Sina Corp.’s Weibo microblogging site.

南航一名乘客殴打空姐被拘留5天_网易新闻中心 –meanwhile a passenger with no background gets 5 days detention for fighting w a stewardess on another flight// 记者从广州白云机场公安局和南方航空获悉,8月26日,旅客朱某乘坐 CZ6060航班从柬埔寨飞往广州,其持普通经济舱机票欲乘坐高端经济舱,乘务员任某予以劝阻。后朱某责骂任某,并动手打人。后警方对朱某处以拘留5日的处罚

Mid-air fist fight forces Swiss flight to China to double back | The Australian – According to the online edition of Swiss-German daily Blick, the two passengers were Chinese citizens, aged 27 and 57.

All officials must work to change negative image – These incidents have repeatedly exposed how fragile the general image of Chinese officials is. As social aversion to power abuses is entrenched, the negative impact caused by the disclosure of such incidents is hard to offset by measures taken afterward. It’s hard to improve officials’ public image if they fail to stand up to public scrutiny and remain passive in communication with the people. In the era of new media, public watchdogs are everywhere. Each official exposed faces not only an outpouring of social criticism, but also the accumulating negative public mood due to previous cases.  All Chinese officials should be cautious and disciplined. Any of their misbehavior may reinforce the public image of their entire corps, and a generally fragile image of Chinese officials could, in turn, become a negative asset for each member.

Media dispute ‘reconciliation’ between official, stewardess –  The dispute between a flight attendant and a local government official that has sparked public ire took a new twist at the weekend as the Xinhua News Agency openly challenged the results of an investigation report offered up by the local government in Guangdong.  “Have you really conducted a comprehensive and objective investigation? Is what you found really what you published in the report?” Xinhua’s Guangdong bureau asked on its Sina Weibo account on Sunday, a rare move by official media.

Questioning Kristof on Chinese Education – – The question we need to ask is not “How have the Chinese produced such hardworking students?” but rather “Is it possible to instill such a work ethic without a high-stakes exam to scare students into submission?” Instead of “How have the Chinese achieved such measurable success?” we must ask, “Is it possible to succeed without revolving around tests?”


Sinkholes a Growing Problem in Urban Areas, Say Experts – Caixin Online – Sinkholes are becoming increasingly common hazards in some of China’s most populous cities, with experts pointing to poorly planned underground infrastructure as a major cause….Twenty years ago, Japan was faced with the sudden emergence of sinkholes in cities such as Tokyo and Nagoya. Hiroshi Tomita, CEO of technology service company GeoSearch, said that Tokyo once saw as many as 20 sinkhole collapses per year. Since increasing inspections of underground terrain with radar, the city now sees roughly two collapses per year. Wang said urban planning authorities in China must allocate more resources to mitigating sinkhole risks and the tougher enforcement of building regulations.

Milk Price War Puts Squeeze on China’s Dairy Farmers | ChinaFile Beta  lots of reasons to cheat on quality// The milk industry’s interests are laid out in a typical triangular structure, with farmers taking 3-5 percent of the profits, the dairy processing industry 20-30 percent, while vendors, packaging, and equipment manufacturers take 60 to 70 percent. The profit margin farmers receive is tiny, while they are being squeezed into smaller and smaller spaces. This compromises the quality of the milk.

Thanks for reading. The best way to see this daily post is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. You can also follow me on Twitter @niubi or Sina Weibo @billbishop. Feel free to donate through the button on the top right, and if there is a story you think I should include please send it to me.