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The following translation and commentary comes to Danwei via Jonathan Rechtman, a freelance writer based in Dalian. His writings on China, language, life, and philosophy can be found at The Art of Living.
Finance and Family Values
or, How I Learned to Stop Worrying and Love My Kid
By Jonathan Rechtman
Dr. Phil, you're fired....we're calling an accountant. According to a recent interview in Southern Weekly, newly available financial planning tools are changing the way Chinese parents love their children.
Chen Zhiwu—a finance professor at Yale—says the availability of retirement plans means parents no longer depend on their children to provide for them in old age, and are becoming more sentimental as a result.
When parents stop viewing their children as social security, as a form of investment, they don't have to worry so much....After these parents buy insurance, retirement plans, etc, they don't need to rely on their children economically, and can focus their relationship on emotional communication.
What we're talking about here is a real shift in family values—exactly what kind of value do children represent to their parents? According to Chen, that value is becoming less about economic security and more about fuzzy lovey feelings.
Skeptical? Chen has the research on tap:
[We] conducted two questionnaire surveys. Respondents were asked: "Why do you want to have children?" and could choose from a number of answer choices. One answer was "to care for me in old age," another was "because I like kids/affection," another was "to carry on the family heritage," etc. We discovered that...aside from location [rural versus urban], the second most important factor was whether or not the respondent had purchased insurance or used any other market-based financial tools to provide for retirement. Respondents who had purchased insurance or had retirement plans or investment funds were more likely to respond "I want to have children out of love/affection," and less likely to respond "to take care of me in old age." In comparison, household income did not have a large influence on the motivation for having children. The use of modern financial products was a much more decisive factor, which was something we didn't expect.
Get it? Love has nothing to do with how much money you make...it's all about your 401(k).
But the fun doesn't stop there. Financial tools not only affect why parents have kids, but how they interact with them as well. Retirement plans also seem to be punching a few more nails into the coffin for Confucianism.
When you look at the style of communication between parents and children in Shanghai, Beijing, these big cities, you're going to find...it's not a top-down, "I give the orders" kind of relationship. On the contrary, you'll find more parents are using a very "equal" method of communicating with their children, trying to create a heart-to-heart dialogue. This obviously runs contrary to the Confucian hierarchical system, is essentially contrary to Confucian traditions.
Chen goes on to note several other side effects: less stifling of children's individuality, greater self-dependence for both parents and children, a broadening of people’s economic spheres, the wonders go on and on.
The bottom line is: more freedom.
This, essentially, is what Chen's work is focused on: how finance and the market economy is making Chinese people freer. Free enterprise, free trade, and yes: freedom from Mom and Dad.
The most important role being played by financial markets is their ability to liberate individuals from their reliance on authoritative organizations, whether they are households, churches, or governments. They no longer have to be subordinate to these power structures to survive.
If this sounds too risqué, it can easily be framed in much more politically correct terms.
Freedom + Love = Harmonious Society?
Ahh, the beauty of finance in China.
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This article is from Danwei.org
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 We can't get a loan! reports:
Chinese property developers are suffering an acute lack of capital, the chief executive of newly listed Beijing commercial property developer Soho China told the Financial Times on Monday.
Zhang Xin said Chinese developers had little access to bank financing beyond very short-term loans for working capital. The central government has in recent years told banks to limit loans to developers in a largely unsuccessful effort to cool soaring property prices.
“The biggest constraint, by far, is capital,” said Ms Zhang, one half of the husband-and-wife team managing the company. “If we choose one project, we are giving up five or six other opportunities.” [The husband is media figure Pan Shiyi.]
Soho China, whose shares rose 15 per cent on its first day of trading in Hong Kong on Monday after raising $1.7bn in an initial public offering, is one of several Chinese property developers to tap Hong Kong’s capital markets for funds through initial offerings recently...
...Ms Zhang said that the majority of roughly 500 Beijing-based developers are little-known, privately held companies that have to rely on pre-selling units to raise funding.
Oh those poor, suffering real estate developers!
Your correspondent, like many entrepreneurs in China, has tried to get a tiny bank loan in China for a small but stable services company with collateral and a proven financial track record; I was laughed at. This article is from Danwei.org
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 Jack's back by Tim Clissold is one of the most entertaining books about China and business published in the last few years.
The 'Mr China' of the title is a larger than life investment banker who first came here in 1992, was smitten, and then employed Clissold to help him lose a lot of money.
Now several years after the publication of the book, Mr China is back, and apparently making boatloads of money.
He also has a blog: Managing the Dragon. Written with several other contributors, it's off to a promising start, with formally written articles about a range of themes relating to business in China.
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Last week The Daily Telegraph published an opinion piece titled China threatens 'nuclear option' of dollar sales by Ambrose Evans-Pritchard. It makes the following claim:
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
According to Richard McGregor in The Financial Times, the story "was initially dismissed in China but prompted testy responses from US President George W. Bush and Hank Paulson, the US treasury secretary" (Link: China affirms dollar’s global reserve status.)
According to the FT article, the Harvard-educated Chinese economist whose views were quoted as government policy by Ambrose Evans-Pritchard says his views were misrepresented. The FT quotes several sources who pooh pooh the idea that China will dump its greenbacks.
Writing on Salon.com, Andrew Leonard asks the question 'Will China Drop the bomb on the U.S. dollar?' His answer is no: He takes apart Evans-Pritchard's panic piece, and examines that writer's record of espousing conspiracy theories (The article is reproduced on Howard French's blog here.)
The China Daily quotes an announcement by the People's Bank of China that 'the US dollar plays an important role in the global monetary system and dollar assets are an important part of China's foreign exchange reserve'. The article confidently predicts that the announcement "should scotch rumors that Beijing would sell off its US dollar reserve in response to Washington's pressure to revaluate the yuan."
Despite the fact that the recent rise in panicky thinking seems to have been triggered by a piece of sloppy journalism, such official statements from China are not going to reassure everyone. The U.S. website Counterpunch for example, has published a piece by Paul Craig Roberts, a former Wall Street Journal editor and Assistant Secretary of the Treasury in the Reagan administration. It's called China's Threat to the Dollar is Real, and it accuses anyone who does not agree of being 'greatly mistaken'.
Roberts disagrees with some clear-thinking people who see that it is in no one's interests for China to dump its dollars. But the fact that a sell off is unlikely to stop the growing sense of unease in the U.S. about the exposure of the world's greatest economy to the central bank policy of the it's uppity new rival.
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Would you pay this man for stock tips? On July 10, police in Jilin detained Wang Xiujie, known online as "Pioneer Eldest Brother 777" (带头大哥 777), who is suspected of having used the Internet to provide illegal investment services. Reportedly a captivating speaker who whipped crowds into a frenzy with his lectures, Pioneer Eldest Brother ran a service through QQ that sent stock tips to subscriber's mobile phones. He also wrote a blog that attracted millions of readers and ranked, for a time, as China's most popular.
The details of his wrongdoing remain sketchy. It seems obvious that he misrepresented his skills. He claimed that his stock market forecasts were more than 90% accurate, and he referred to himself variously as a "stock god" and "guardian angel." Apparently, he also lied about his resume. On his blog, he claimed to have had 18 years of experience in the securities industry. In fact, he worked at the China Construction Bank in the deposits and receivables departments, and later he worked for the housing administration.
While Pioneer Eldest Brother's QQ subscription service appears to have been quite profitable (making ￥10 million by one report), the authorities haven't yet accused him of misappropriating money. Moreover, while a group of his QQ subscribers say that they're planning a law suit against him, accusing him of defrauding and swindling them, the press reports don't suggest that Pioneer Eldest Brother took money other than in exchange for services, like his QQ stock tips or his lectures.
All in all, precisely what got Pioneer Eldest Brother in trouble is unclear: has committed some genuinely heinous act? Is it that he's a charismatic imposter whose popularity made the authorities uncomfortable? Or did his subscribers include one or more government officials who followed his advice and lost money?
Unfortunately, the news commentary doesn't shed much light on the subterranean motives at play. Xinhua warned that Pioneer Eldest Brother is just one of many con artists who have emerged in the wake of China's booming economy, and that shareholders should be careful about hidden fees associated with stock market transactions.
But commentary elsewhere on the web suggested that, whatever it was that got Pioneer Eldest Brother detained, the upshot should be decreased freedom for Netizens. Pinglun.eastday.com exhorted its readers:
Without the platform of the Internet, "Pioneer Eldest Brother" would've been unable to gain influence.
. . .
Thus it can be seen that [we need to] keep a watch on the Internet, and keeping a special watch on blogs, etc., and public platforms seems particularly urgent. Otherwise, not only regarding the stock market, but also in other areas, "Pioneer Eldest Brothers" can still use the characteristics of the Internet [to con people]. If we fail to keep watch, then there will be a public outcry, and it will stir up trouble.
In light of the questions abounding about the Pioneer Eldest Brother fracas, this response seems particularly ill-considered. A better approach would take account of the irrefutable facts underlying Pioneer Eldest Brother's scam: China's stock market and securities industry are new and exploding. Investors are inexperienced, but eager. They want information about how to invest, but they can't get it: after years of having been censored and co-opted for propaganda purposes, most Chinese media outlets aren't up to the task of meeting investor demand for accurate, timely and detailed information.
Pioneer Eldest Brother exploited this combination of investor naiveté and information vacuum, but scouring the Internet for charlatans is not the best way to reduce the opportunities for exploitation. Such an undertaking would be hopeless, even for China's Internet police: charlatans are as much a part of the Net as html.
Rather than bucking the nature of the Internet, the Chinese government should harness the Net's strengths and develop reliable online information channels for investors. Increasing the credibility and accuracy of available information about publicly-traded companies and the stock market seems the best prescription for the investor gullibility. Such an approach, moreover, would extricate Chinese Internet regulators from their no-win stand-off against the flow of information online. After all, the free flow of online information is as much a part of the Net as charlatans.
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 Noodle prices marked down to government-mandated levels. Noodles are serious business in Lanzhou, the capital of Gansu Province. Last year, the city's noodle vendors were caught up in a price-fixing scheme that pushed the price of a bowl up 15% in just a few weeks, leading to investigations by both the media and the city's pricing department (see the New York Times story).
Now this year, as the price of goods is rising across the country, the city government has become the focus of controversy after its announcement of a ceiling on noodle prices. Here's the China News story:
Recently, after "weighing" the pros and cons of "big beef bowls," the Lanzhou Department of Price Administration announced first-ever limitations: the price of a large bowl of beef noodled at all normal-class beef noodle shops in Lanzhou may not exceed 2.5 yuan, and the difference between a small bowl and a large bowl must be 0.2 yuan. Violators will be punished.
In Lanzhou this year, the topic of beef noodles has been as hot as the noodles themselves. During the May Golden Week, the art of making beef noodles was put on the city's intangible cultural heritage protection list, and in June, the sudden rise in beef noodle prices perplexed the general public to no end.
On 16 June, the people of Lanzhou's Xigu District discovered that their beloved "big beef bowls" had jumped 0.5 yuan overnight. Small bowls of beef noodles climbed from 2.3 yuan to 2.5 yuan, while large bowls rose from 2.5 yuan to 3.0 yuan. There was an uproar when the news came out. Many residents exclaimed: We can't afford to eat beef noodles! Indeed, the 20% jump in the price of this popular, economic snack, a Lanzhou specialty, was for many average-income households and laid-off workers a weight that their income could not sustain.
The majority of shop-owners expressed their helplessness toward the situation. "The price of beef, oil, and seasonings has risen considerably; if we don't raise prices then we'll have a hard time managing," said the boss of one noodle shop near Xiguan who was waiting for an opportune time to raise his prices. He also worked out a "beef account" for the reporter that demonstrated that the majority of beef noodle shops in Lanzhou are currently operating on slim margins.
This was a popular topic on the op-ed pages today. Here's an excerpt from Zhao Zhijiang's piece in Beijing Youth Daily:
The pricing departments acted swiftly in response to a wave of price increases. Surprisingly, rather than being grateful for this, the majority of the public is dubious about the pricing departments' actions - was the government's direct intervention into beef noodles, a freely competitive industry, reasonable? And what will be the ultimate consequences of this intervention? In a society whose prices are soaring upward, the majority of Lanzhou's beef noodle shops are operating on slim margins, so if they have no way to increase prices in response, then skimping on materials seems to be their only way out. If that is the case, then even if the price does not change, I'm afraid that so-called "beef noodles" will no longer live up to their name.
Going from 2.3 yuan to 3 yuan, the price of beef noodles has truly "risen repeatedly," but do these "repeated rises" end with beef noodles? Tuition has risen 20 times over 15 years, medical expenses have risen 19 times over 15 years, not to mention lofty housing prices. Even so, there are still scholars who say, "conservatively speaking, over the next decade, housing prices will rise another three times." Even worse, compared to the freely competitive market for beef noodles, no shadow of competition can be found in the three predicaments mentioned above.
Though the rising price of beef noodles does receive endless complaints from one segment of the public, the direct consequences are that "noticeably fewer customers are coming to eat noodles." The continuously increasing payout for medicine, housing, and education has for a long time been much more than a simple matter of endless complaints, but even so, the majority of the public has no other choice and nowhere to run. This naturally includes the proprietors of those beef noodle shops. I do not mean to suggest that price limitations will drive those proprietors into more precarious states of existence; I just wonder whether adjustments that attend to minutiae at the expense of the big picture might not be a bit of a lazy solution?
From Guangming Online, Hong Qiaojun writes:
From the price limits on beef noodles, I thought of another piece of news about "setting limits." The State Council Legislative Affairs Office recently issued a notice, the Draft Rules for Energy Conservation in Public Buildings, that stipulated that the state would put limits on the interior temperatures of air-conditioned public buildings. Aside from special use buildings, no inside temperature shall be lower than 26 degrees Celsius in the summer. But this type of regulation met with similar opposition; one popular viewpoint was that the government could limit air conditioning temperatures in official buildings, but it should not be able to limit temperatures in non-governmental buildings. Since non-governmental buildings like hotels and malls pay their own electricity bills, the market price will automatically adjust their power usage, thus automatically solving the power shortage problem. Similarly, beef noodles are not a monopoly product, so the market will naturally adjust their price and will automatically resolve the problem of a reasonable price for the city's residents. Under this argument, isn't the Lanzhou Price Administration Department a bit too broad in its management?
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As part of its revamped commentary section, Southern Weekly moved its "Letters to the Editor" page to the business section and retitled it "Taxpayer's Voices: What's Annoying Me."
This week's gripe comes from Hong Er:
Several years ago I was working for a Shanghai company in Guangzhou. My employer set up an account for me at Shanghai's Minsheng Bank. During that year, I think I did right by Mingsheng Bank - every time I made a withdrawal in Guangzhou, I had to pay "out-of-area withdrawal processing fees." I later moved and lost my card. I noted that there were not many Mingsheng Bank branches in Guangzhou, and my card didn't have much money on it anyway. Today I passed by a Minsheng Bank, so I took out my ID to check - it said I had 83 yuan left.
So how can I withdraw 83 yuan?
A Minsheng Bank teller told me with a smile: first I would have to go to Shanghai to report my card lost and then get a new card. Then I could withdraw 83 yuan. It would take seven business days to replace the card.
I've not been to Shanghai for quite some time. Doing the sums, I would need two round-trips - four tickets - to withdraw that 83 yuan, not even figuring in the time cost. Or I could send my ID to a friend in Shanghai and have him report the loss and apply for a new card, but that would at least require two express deliveries plus my pal's time standing in line, as well as the fees for replacing the card...
Think about it - if I had better things to do, then I'd just give the money to Minsheng Bank.
The girl at the bank heard this and corrected me: you can't say that! True, even if I wanted to give Minsheng Bank that 83 yuan, it wouldn't accept my contribution if I didn't follow this procedure, even though the money is lying in the Minsheng vault and is assessed small-balance maintenance fees every year.
According to Minsheng Bank regulations, only after waiting for the sum to be slowly eaten away would I'd realize my wish to give them 83 yuan.
I know, this regulation is not unique to Minsheng Bank. China's banks all seem to be like that. I remember one time when I wanted to withdraw the last 12 yuan remaining in a closed account at the Agriculture Bank. I waited in line all day, then obediently went to photocopy my ID at the copy-shop, then returned to pay the 5 yuan lost-card fee, and then waited several days until I could go to the Agriculture Bank that my account was opened at to withdraw 7 yuan. I couldn't do it - the bank I opened my account with was pretty far off, and the round trip bus fare was about 7 yuan.
We all know that China's banks are rich now. They're listing overseas, and foreigners have rushed to buy stock in them. Even so, if I'd like to give them 83 yuan, there's no way that'll happen.
So?
Suddenly I had an idea - I hereby declare, as a Chinese citizen and a smallest-of-the-small depositor, I voluntarily donate the 83 yuan left in my Minsheng account to Minsheng Bank!
 
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 Busted at the hair salon Sohu.com reports on a new study finding that urban residents in China enjoy 4.4 trillion renminbi in "gray" income. "Gray income" includes any income that is (a) illegal, (b) "the rational merit of which is called into question by generally accepted societal moral concepts," and (c) other income the source of which is unclear.
According to the study, called "The Condition of National Income Distribution and Gray Income," "gray" income goes hand-in-hand with wealth. The report identifies the following contributing factors to "gray" income: a lack of regulatory control over investment capital, poor transparency of investment capital flows, and "serious abuses and leaks." The report points out that, in recent years, investment in real estate projects with multiple layers of sub-contracts have created opportunities for "leakage." The problem, concludes Wang Xiaoyu, who headed the group that prepared the study, is not "marketization, but the institutions that foster corruption."
It's not surprising that the study found "gray" income to be a problem of China's affluent class, given its methodology. The study's authors surveyed more than 2,000 residents across China from different class backgrounds. The survey results were then compared to data collected by the National Bureau of Statistics (NBS). The difference between the per capita disposable income levels reported in the survey and those recorded by NBS was identified as "gray" income. But NBS admits that ferreting out the actual income of high-income residents is a "headache problem," and 70% of high-income residents who participated in the survey said they are unwilling to disclose their true income situation to NBS.
Maybe the income of rich Chinese includes a greater proportion of "gray" income than their poorer countrymen, or maybe the disparity is an accounting phantom that vanishes in daylight. What the light of day exposes in your correspondent's hutong is vigorous participation by the laobaixing in China's "gray" economy, from the hair salon-***-handjob shack down the street, to the "adult health" sex shop one alley over, to the gambling establishment across from the community center. And while reporting on corruption-related "gray" income may advance an important political agenda, denying the existence of the seedier "gray" economy — the one dominated by China's poorer folk — makes no sense. After all, the true size and robustness of China's economy can never be reflected in data that fails to count the handjobs.
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