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Last week, Patti Waldmeir and Jamil Anderlini of The Financial Times reported:
Pre-Olympic warnings to China’s fund managers
Fund managers in China have been warned to watch what they say about the country’s stock market, in the latest manifestation of a pre-Olympic Chinese government crackdown on everything from Beijing weather to suspected terrorists.
In a bluntly worded notice distributed to fund managers, including foreign-Chinese joint ventures, China’s securities watchdog warned fund employees not to say anything publicly that could harm the stability of the market.
The China Securities Regulatory Commission, which issued the notice, did not make overt reference to the Olympics, but the message was not lost on local fund managers, who linked the notice to a broader effort to avoid market turmoil in the pre-Olympic period...
...“Fund company executives, fund managers and other important staff should be very careful about their speeches and blog content, which may cause market fluctuations,” the notice says, adding that companies should be cautious about holding public forums “which may cause market fluctuations”.
While it's good to see that the stock exchange regulators think that blogs are important, it would be even better to the see the Olympic clampdown on irresponsible behavior in the markets extended beyond the end of August, and to include other types of irresponsible behavior such as insider trading, manipulation of stock prices, egregious conflicts of interest etc. etc.
For more on shady stock market dealings, see two recent articles by Gady Epstein at Forbes:
Market maker
Lin Rongshi isn’t up to his old tricks in Chinese stocks. But, as he describes, plenty of others still are. Fair warning to the bulls.
Shanghaied
How do you say "irrational exuberance" in Chinese?
Two years ago investors had no use for Jilin Aodong Medicine Industry Group or the Liaoning Cheng Da Co., two of the many clunker state-owned companies with publicly traded shares. The shares change hands on the Shenzhen and Shanghai exchanges, respectively.
Since then the stated core businesses of both companies have stagnated and China's securities regulator has implicated Jilin Aodong in an insider trading investigation. In a normal market that would scare buyers away.
China's markets are anything but normal. Both Jilin Aodong and Liaoning Cheng Da shares have risen 750% in the last year, and their stock charts look like copies of each other despite the fact that one is a drugmaker and the other is ostensibly in the fabrics trade.
This article is from Danwei.org
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The China Daily reports:
People who failed to get tickets for Olympic events at the Bird's Nest can look forward to getting inside the iconic venue after the Games, as it was announced it will become a sports and entertainment venue.
Beijing CITIC Consortium Stadium Operation Co Ltd, a co-venture among CITIC Group, Beijing Urban Construction Group and Golden State Holding Group Corp, recently won the rights to operate the stadium for 30 years after the Games.
It said the venue will be used for a range of sports and entertainment events and other commercial operations.
It was earlier announced that the stadium will be the future home of Beijing Guo'an Football Club and will open to tourists during the National Day holiday in October...
...Li Hang, chairman of the consortium, said he is confident the venue will be a good investment.
"The operating cost of the stadium is about 70 million yuan ($10.2 million) a year," he said...
...The consortium will also generate revenue from the sale of naming rights, he said.
"We will sell the naming rights at various levels, such as for the whole stadium, and for each entrance and stand," Li said.
The China Mobile Bird's Nest? Lenovo Bird's Nest? Hai'er Stadium?
Links and Sources
This article is from Danwei.org
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From Sexy Beijing: "It's important to get kids into McDonald's early"
Last month the bilingual environment website China Dialogue published an article by Paul French called Why is China different for Western brands?.
The article did not get much attention when it was published, partly because the Sichuan earthquake was still occupying the news agenda, but it's worth drawing attention to it again. French poses some uncomfortable questions for certain Western companies operating in China. Excerpt:
For western companies, the need for an environmental strategy in China is essential. Yet those companies working at the interface between Chinese consumers and western brands appear to be the most lax. This is perplexing to those of us working in the Chinese retail and consumer market, where doing the right thing ultimately means gaining consumer loyalty and a competitive advantage...
French provides some examples of how some multinationals treat the mainland China market differently:
• In Hong Kong, McDonald’s has two “no straw days” every month, but it does not have them on the Chinese mainland. The company does not substitute super-size options for a “Gofit” adult happy meal in China, as it does in the United States. McDonald’s Happy Meals targeted at children in the US come with “better-for-you” substitutes, such as milk and apple dippers, but not in China;
• Burger King, which has just announced a major expansion of outlets in China, in many countries offers chilled apple slices as an alternative to french fries, with no-fat apple sauce dips. They already offer milk as an alternative to cola in many markets, but they do not offer any of these items in China;
• Sandwich-chain Subway is expanding quickly in China. In the US, the chain has launched a “Fresh Fit for Kids” menu, with apples or raisins as a replacement for potato crisps; but not in China;
• Starbucks now offers low-calorie drinks and better food options for kids in the west; but, again, not in China;
• In Singapore, Minute Maid orange juice comes with a series of “Lifewise” tips from the National Healthcare Group, stressing the importance of exercise and vitamin intake. No such advice is dispensed on Minute Maid’s packaging in China.
And it is not just the fast-food giants:
• Banking chain HSBC sends its mail in Hong Kong on recyclable paper, in envelopes that note the bank is committed to protecting the environment. None of this is mentioned on envelopes sent to Chinese mainland addresses;
• Luxury retailer LVMH’s new Catherine Deneuve-led advertising campaign features a tag line that supports the Climate Project. It appears everywhere from London to Hong Kong, but not on their ads in the Chinese mainland;
This article is from Danwei.org
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This article is by Pete Sweeney, a Fulbright Scholar researching business policy in Chengdu, China.
The surge of investment developing countries are pouring into more developed economies is a phenomenon that is receiving increasing attention. According to Kofi Annan's preface to the 2005 United Nations Committee for Trade and Development (UNCTAD) World Investment Report:
The conventional wisdom of developed countries as capital and technology exporters and developing countries as importers is gradually giving way to a more complex set of relationships. The geography of international investment flows is changing. Developing countries are emerging as outward investors, and their importance as recipients of foreign direct investment in more knowledge-intensive activities is increasing.
Outbound investment from the People's Republic of China is part of this trend. A recent article in the China Daily claimed that outbound investment from the BRIC countries (Brazil, Russia, India and China) and other developing nations is a "sign of a new world order." The claim sounds dramatic, but it is nevertheless indisputable. According to MOFCOM statistics compiled by Professor Lu Bo, Deputy Director of the Chinese Academy of International Trade and Economic Co-operation (CAITEC), China has established about 10 thousand companies in 172 countries and regions with a total investment of $90.63 billion. Thanks to its attraction of inbound investment and its accumulation of foreign currency reserves, China is now one of the world's largest sources of investment. This naturally includes investments in developing countries. "Nearly half of US capital inflows over the past year and a quarter came from China, Brazil, Mexico, and Russia," the Xinhua News article claimed.
Indeed, during the recent global economic downturn, driven by the subprime mortgage crisis in the United States, Chinese firms have emerged to inject cash into troubled firms like Morgan Stanley and Citigroup. Michael Heise, writing for the International Herald Tribune, called these firms "white knights from afar." "Is [this] something to fear?" asks Heise. "The answer is no, at least, not directly." If the Chinese Ministry of Commerce has its way, we are likely to see more of such Chinese knights in the near future. A recent article on the Chinese Council for the Promotion of International Trade (CCPIT) website quoted Fu Zi Ying, Vice Minister of the Ministry of Commerce (MOFCOM), who argued that the current economic crisis offered Chinese firms unprecedented M&A opportunities. "Several well-known enterprises and research organizations have fallen into difficult positions. This offers Chinese firms a great acquisition opportunity. These [Western] firms possess well-known brands, formidable international sales networks, and relatively strong research capabilities. If our firms can successfully acquire them, we can use these resources to greatly enhance Chinese firms' international competitiveness."
In the current political climate, however, Chinese firms still face obstacles investing in developed economies, particularly when it comes to taking control of US firms. The Committee on Foreign Investment in the United States (CFIUS) recently blocked an attempt by Huawei, a well-known Chinese telecommunications firm, from acquiring a $2.2bn stake in the US firm 3com, citing security concerns related to 3com's technology assets. Huawei is hardly the first Chinese firm to run into a wall when it comes to acquiring controlling stakes in US firms. The Chinese National Offshore Oil Corporation (CNOOC) attempted to acquire Unocal and was rebuffed due to security concerns. While not subject to a security review, Haier's attempt to acquire Maytag was politically unpopular in the US and was ultimately stymied.
Predictably, the Chinese are irritated and blame US protectionism and paranoia. Opinion in the US varies according to the speaker's assessment of Chinese intentions. In short, a lot of political sound and fury. What does it signify? First, much of the popular fear of Chinese investment in the US is hysterical, reminiscent of the widespread fear that swept through the US when Japanese firms began buying up US assets, or more recently the Dubai port acquisition controversy. This is largely due to a poor understanding of the purpose of international direct investment, which can vary from deal to deal, and how it can affect national interests. The most dangerous canard is that foreign firms are more likely to destroy jobs when they acquire American firms than American firms are.
Indeed, what is the national interest when it comes to foreign direct investment? For example, the logic supporting the acquisition of Unocal deal (and the blockage of same) rested on the premise that oil is not, in fact, a fungible market product for sale anywhere to anyone, but rather a strategic resource that should be physically controlled by the nation. Therefore if China acquires an American oil firm, it can turn off US oil at the tap. But since most of Chinese oil currently passes through the Straits of Malacca under the eyes of the US Pacific Fleet, China's control of Unocal would hardly allow it to dictate terms of oil supply to the US. In short, if either the US government or the Chinese trusted the oil market to function, there would be little point to the acquisition from a national strategic perspective.
Huawei, on the other hand, is more complicated. For starters, Huawei's original foray into the US resulted in a large lawsuit. Cisco alleged that Huawei's router products were made from pirated Cisco technology. While a confidential settlement was reached between the firms, Cisco did not formally close the case, presumably to retain leverage. Huawei went on to establish US affiliates and research centers in the US, but its business performance in the US market has been less-than-spectacular. Even Lenovo's successful acquisition of IBM's laptop unit's performance in the US has been spotty; most of Lenovo's growth remains in Asia.
Nevertheless, many Chinese find these investment barriers insulting, unfair, and counterproductive. One article in the Guangzhou Daily argued that not only are such barriers unfair, but if the US wants to resolve the trade surplus, it should encourage Chinese firms to export capital to the US in the form of direct investment as a counterbalance. Other Chinese economists make arguments that such investment can help tame China's inflation problem caused by the renminbi glut. In order for such investment to make an impact on the enormous trade surplus, its scope would have to be amplified geometrically, but nevertheless.
However, it's unwise to mix conversations about trade with conversations about direct investment. Trade is the movement of goods, direct investment (as opposed to portfolio investment, which is the simple purchase of stocks and bonds) is the movement of management control. The latter is far more complex than the former and requires market similarity, not complementarity. This is why the bulk of direct investment flows are between the US and Europe, not the US and developing economies. The learning curve is much shorter for European managers, who operate in a similar legal and business environment as their American counterparts (not to mention language ability), than it is for Chinese managers.
If China wants to export capital for macroeconomic reason, it can do so simply by investing in bonds, as indeed it is already doing, or by letting the renminbi float, as is already underway. But direct investment should be a microeconomic firm-level decision, not a facet of macroeconomic strategy.
In the short run, Chinese direct investment's impact in the US should not be overestimated. It makes up a relatively low portion of China's GDP, even in comparison with other developing countries like India, and the average transaction amount is small, less than $5 million according to CCPIT. China, in short, invests less than it probably should, and despite aggressive moves like the Unocal bid, most Chinese investors are quite cautious about direct investment.
In the long term, however, Chinese direct investment in the western countries should be ultimately provide a net benefit to both parties, provided it creates value, local jobs, and avoids sensitive sectors. From the Chinese perspective, acquiring foreign experience (and training staff) is key to developing the competitive capacity they need to move up the value chain and pull the millions of impoverished Chinese trapped in dead-end manufacturing jobs along with them. As importantly, China needs to provide more jobs for its college graduates, among whom the unemployment rate (around 40%) is unsustainably high and is a long-term security problem for everyone.
From the foreign perspective, closer and healthier linkages with Chinese firms would not only facilitate business operations along the supply chain, it would provide greater legal leverage in conflicts of interest. As the recent controversy over quality control illustrate, it is quite difficult to gain recompense from Chinese firms that have no foreign assets to seize. As Chinese firms internationalize their operations, they become more accountable to international norms, as the Huawei-Cisco case illustrates.
However, reforms on both sides are necessary. Many American policies towards China are, in fact, discriminatory, particularly those directed towards protecting US agriculture and textile sectors, and many of the US security concerns regarding China are paranoid. At the same time, China's reliance on SOEs to drive direct investment is problematic as it is difficult to ascertain whether an SOE's acquisition strategy is driven by the profit motive or by political strategy. Therefore it is in everyone's interests that private Chinese firms, as opposed to state behemoths, be allowed to lead outbound direct investment overseas. This means giving them better access to capital from Chinese banks, and removing barriers in the US that stifle Chinese competition in sectors in which they enjoy the greatest comparative advantage. For example, part of the reason Chinese manufacturing is so cheap is they have near unlimited access to a Chinese peasantry that cannot survive on their farm incomes. Were the US and Europe to open their agriculture markets, the result would drive up the price of manufacturing labor in China as peasants return to an economically-viable agriculture sector.
China must also stop encouraging domestic firms to invest abroad for non-business reasons. Obviously national pride is a poor reason to invest, as is national security, neither of which are the responsibility of the business sector. There are also other policies that have perverse effects. For example, the Chinese tax structure currently gives preferential treatment to foreign-invested firms. This encourages a phenomenon called "round-trip" investment, in which a mainland firm creates a foreign affiliate abroad whose sole purpose is to return to China as a foreign firm. This means lowering domestic firms' tax treatment to the same rate as foreign firms, and at the same time equalizing the regulatory treatment of foreign firms (who already operate under an information and "guanxi" deficit) so that everyone plays on a level field. In short, increasing the depth and quality of investment flows in both directions can only serve to harmonize both nations' national interests. This article is from Danwei.org
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 Now spell...ABANDON Today's newspapers reported on the collapse of the Microsoft-Yahoo deal; The Beijing News illustrated its report with a CFP image of an AP wire report.
What's especially interesting about the image is that it's actually a screenshot of someone using Kingsoft's instant translation software, which gives tool-tip popup translations whenever you mouse over words.
Although they won't be able to make use of the text-to-speech functionality, readers can still learn what "abandon" means. This article is from Danwei.org
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 Ad campaign, perhaps not China ready At the end of last month, Shanghaiist reported that American Apparel are planning to open a store in China. The store has a cult following in the U.S. for a few reasons:
Firstly, all American Apparel clothing is manufactured in a downtown L.A. factory, which gives American consumers a nice karmic perk of knowing that their clothes are 'sweatshop free'. Although the company apparently pays good salaries, they do not allow their workers to unionize, but it seems the new left values of guilt avoidance politics ('sweatshop free') now trump the old left values symbolized by labor unions.
Another important part of American Apparel's image is the effect of their advertising campaigns which feature amateur models, often shot in grainy, home porno style.
Thirdly, the charismatic founder of the company, Dov Charney, has become a media figure in how own right because of his unconventional management style, the fact that he takes many of the photos used in American Apparel ads, and perhaps most notoriously because he repeatedly masturbated in front of a reporter for Jane magazine when she was interviewing him.
The clothes themselves are nothing remarkable: American Apparel is the clothing version of IKEA, a place where you can get a bunch of basic, fairly decent looking clothes. But there are no logos nor any flashy design features on the clothes.
American Apparel's China play will be interesting to watch. The announcement on their own web page says the following:
In the next few months American Apparel will be opening its first stores in China with locations already slated in Beijing and in Shanghai.
In a rare industry occurrence, we will be bringing Made in the USA clothing to China and we intend to pay employees there gross wages that exceed the US minimum.
Aside from the fact that the company intends to sell U.S. made clothes and pay above market rates for labor, there is a further obstacle to their success: it is not clear whether Chinese consumers will pay much for clothes that have no obvious brand and therefore no obvious status marker.
Finally, those adverts: not so easy to get them approved in China's censorious media and advertising environment.
Links and Sources
This article is from Danwei.org
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 SOHO's Zhang Xin on the cover This article is by Bruce Humes, a bilingual media consultant and Chinese-to-English literary translator who can be reached at xumushi@yahoo.com.
China’s Star Senior Managers:
25 Women to Watch
Business Watch Magazine (商务周刊) recently rolled out its list of "The 25 Most Powerful Women in Business" (March 20, 2008 issue). A quick look at the backgrounds of these corporate warriors can tell us a thing or two about how China’s media perceives the female manager.
The English-language contents page sets the tone. Headlines to the individual bios include "Charming Woman", "Party-girl to Businesswoman", "Dragon Girl" and "Steel Princess".
And just how did these 25 women qualify for recognition by Business Watch Magazine? The introductory piece rattles on about the relationship between the female sex, the right lobe of the brain and a woman’s aptitude for "tempering firmness with tenderness" (刚柔并济). Unfortunately the editors have neglected to tell us which, if any, concrete standards were used to assess the candidates.
Occupying a very senior position in a multinational like AMD (Greater China CEO Guo Kezun), or a heavyweight China firm like Hisense Group (COO Yu Shumin), is clearly a requirement. A senior role in the IT, telecoms, real estate or venture capital industries doesn’t hurt. A handful was born with silver spoons in their mouths, and it helps to have been previously ranked by an authoritative publication in the West like Forbes.
Significantly, most of these success-driven managers share certain experiences—ones that would once have brought charges of being "politically incorrect"—that now make them over-achievers in the business world. By my count, two-thirds of them were educated in the USA or the UK, grew up in Taiwan or Hong Kong, or at least cut their teeth on business in the former British colony.
As a long-time (but now former) consultant to the publishers of two of China’s leading management monthlies, Chief Executive China (世界经理人) and Manager (经理人), I’ve been privy to editors’ debates on topics to report and talking heads to feature (or not feature) on the cover. I was told in the late 1990s, for instance, that women didn’t make good cover shots because they were often not very, uh, photogenic.
Nor will I forget just a few years ago when I suggested investigating sexual harassment in the workplace for our readers. The answer: "That’s a problem in the West, not here in China."
Business Watch Magazine’s feature is, predictably, akin to hagiography. No pithy quotes about the glass ceiling here or dealing with male chauvinist types on the way up. That’s not to say that reporters didn’t pose any gender-related questions to these rising stars. But their reactions imply that such questions are somehow less than kosher.
"How do you view the similarities and differences between male and female, in terms of management?" asked reporter Yuan Ying.
"In my view,” replied Amy Yip, CEO at DBS Bank Hong Kong, "in and of itself, that sort of comparison has a 'politically incorrect' air to it."
The list of the top 25 businesswomen and a link to the Chinese language article are below.
25 Chinese business women to watch
1. Ma Xuezheng (马雪征): Managing director and partner of Texas Pacific Group (TPG), Non Executive Vice Chairman and Non executive director of Lenovo Group Ltd.
2. Zhou Kaixuan (周凯旋): Director of Li Ka-shing Foundation
3. Sun Yafang (孙亚芳): Chairwoman of the board of Huawei Technologies
4. Yang Mianmian (杨绵绵): President of Haier Group
5. Yu Shumin (于淑珉): President and chief executive officer of Hisense Group
6. Guo Kezun (郭可尊): Senior vice-chairman of AMD global and president of AMD China
7. Wang Xuehong (王雪红): Chairwoman of the board in VIA Technologies, Inc
8. Zhang Yin (张茵): Chairwoman of Jiu Long Paper
9. Sun Wei (孙玮): CEO of Morgan Stanley China
10. Ren Keying (任克英 or Margaret Ren): Chairwoman of Merrill Lynch & Co. Investment Banking China
11. Deng Mingzhu (董明珠): Chairwoman Zhuhai Gree Electrical Appliance Inc.
12. He Chaoqiong (何超琼 or Pansy Ho): Managing director Shun Tak Holdings
13. Chen Ningning (陈宁宁): Chairwoman of Pioneer Metals Group
14. Zhang Xin (张欣): Co-CEO of SOHO China
15. Yang Lan (杨澜): Co-founder and chairperson of Sun Media Investment Holdings
16. Ye Yuede: (叶约德 or Amy Yip) Chief Executive Officer of DBS Asset Management
17. Li Qianling: (李倩玲 or Bessie Lee) Chief Executive GroupM China
18. Ru Linqi: (汝林琪 or Tina Ju) Managing partner of KPCB China
19. Chen Xiuwen (陈秀玟): General manager of IBM China
20. Li Lizhen (黎丽珍): Senior vice president and president greater China of ACP-MGE
21. Li Yifei (李亦非): Chief representative of Viacom China
22. Pan Peicong (潘佩聪): President of China Tingyu Group
23. Zhang Tian'ai: (张天爱 or Flora Zeta) Fashion designer, founder and president of The House of Tian Art
24. Tan Xuejing (谈雪晶): President of Folli Follie China
25. Yang Minde (杨敏德): Chairwoman of Esquel Group
This article is from Danwei.org
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 Mao Shijian and Zhou Difan What does it take to get a private company licensed in China? This week's Oriental Outlook answers that question in an interesting fashion, by reproducing diary entries made over the course of eight months by two entrepreneurs in Hunan.
Between February and September, 2005, using a well-placed relative as an intermediary, Mao Shijian and Zhou Difan curried favor with local goverment officials as they sought permits for their start-up fireworks business. Each time they sent out gifts or treated officials to dinner, they made a note in their diary. The 105 entries tell a tale of banquets and late-night entertainment, hefty red envelopes, back-door job placements, dried tofu, and a veritable truckload of cigarettes and alcohol.
Here's the Oriental Outlook article with a representative selection of diary entries.
The gift diary of a small, private company
by Huang Zhijie / OO
At the end of 2004, Mao Shijian and Zhou Difan, farmers from the town of Hetang in Lianyuan, Hunan Province, scoped out the regional fireworks market and decided to go into the fireworks business together as wholesalers.
Fireworks sales belongs to a special sector that requires permission from the Work Safety Bureau. Going over ways to clear all of the steps, they eventually decided to have Liang Wenkuan, one of Zhou Difan's relatives and a staffer at a government agency in Lianyuan, facilitate their relationship with the government.
Looking back on things, that decision was the start of the "nightmare" for the two men. They spent upwards of 300,000 yuan on entertainment and gifts just to pave the way for getting their operating licence; practically every day they had to present a gift or take someone to dinner. In the journal recording these gifts that they provided to Oriental Outlook, March had just four days without a record of gifts or entertainment.
This magazine is publishing the journal to reveal the difficult conditions that private businessmen have in pursuing their livelihood rather than out of a desire to finger any agency in particular. For this reason, this report omits the names of work units mentioned in the journal.  The storefront to the main Xianglian Fireworks warehouse. The company has retail outlets throughout the city. Lianyuan is a county-level city under Loudi City. It has a population of 1.09 million and is located in the geographic center of Hunan Province, an economically strategic area between east and west Hunan. It is know for its abundant resources: it is one of 100 major coal-producing counties in the country. Loudi recently attracted national media attention for the strong measures its municipal party committee made against collusion between government officials and mining companies. During the ensuing storm, a number of officials, including the director, vice-director, and head of enforcement at the Geology and Mineral Resources Bureau, and a vice-director at the Coal Bureau, all lost their jobs.
The following is taken from the notes made by the two men at the start of their licensing efforts, detailing the gifts they gave and the times they entertained. The time frame is between February and September, 2005.
1. 1 February, 2005: Liang Wenkuan requested 15,000 yuan in five red envelopes: one for 5,000, one for 4,000, and three for 2,000. At the Blue Sky Restaurant, the 5,000 yuan envelope was given to Director W of a Lianyuan government bureau, and the 4,000 yuan envelope was given to Xia Song, a cadre with that bureau. I don't which leaders the three 2,000 yuan envelopes were given to. Zhou Difan and I were present.
2. 2 February: Liang Wenkuan requested three cartons of Baisha Special cigarettes. Zhou Difan and I were present.
3. 4 February: Liang Wenkuan requested 4,440 in cash to buy tea oil to give to leaders. A 25kg jug for Director W, and a 25kg jug for Xia Song. These were delivered personally by Liang and me. Zhou Difan was present. I do not know where Liang delivered the other tea oil.
4. 5 February: Liang Wenkuan requested two fireworks from Mao Shijian.
5. 13 February: Liang Wenkuan requested eight cartons of Furongwang Special cigarettes, 3,000 pieces of Futianqiao dried tofu, and six cases of fruit. 3,140 yuan in total. Liang Wenkuan said he would take me and Zhou to pay our New Year's respects to the leaders. Zhou Difan and I were present.
6. 25 February: Liang Wenkuan requested 3,700 yuan in cash from me. Liang took Bureau Director W, Xia Song, and goverment staffers to Hetang to see Zhou Difan's warehouse and to have dinner in Hetang. Liang Wenkuan stuffed four red envelopes—three for 400 yuan and one for 300 yuan—and said they were transportation fees. He took one carton of Furongwang Special and two bottles of Five Star Jinliufu. He also spent some money that evening on bathing and girls at "Legend of Beauty." Zhou Difan and I were present.
7. 26 February: Liang Wenkuan requested 2,640 yuan in cash from me. Xia Song took Liang to buy two cartons of Furongwang Special and two bottles of Wuliangye to bring to the home of a Bureau director in Lianyuan. Today neither Zhou Difan nor I accompanied them to the director's house. I do not know what was done with the remainder of the money.
8. 28 February: Liang Wenkuan requested 3,800 yuan in cash from me. He gave gifts to a Bureau leader in Lianyuan . He spent 600 yuan on dining. Zhou Difan and I were present.
[9-26 omitted]
25. 18 March: Liang Wenkuan requested 20,000 yuan in cash from me to take care of paperwork at a Lianyuan Bureau. He stuffed three red evelopes of 800 each for Department leaders, and left a 2,000-yuan deposit there. The remainder of the money was used later. Zhou Difan and I were present.
26. 19 March: Liang Wenkuan requested 5,000 yuan in cash from me and 11 packs of Furongwang Special. He also handed over 10,000 yuan as a deposit to a Lianyuan Bureau. He purchased 2,600 pieces of dried tofu and 75kg of tea oil for the Loudi Bureau director and two Department directors, which he took to their homes.
27. 21 March: Liang Wenkuan requested 1,600 pieces of dried tofu, two cartons of Baisha Special, fifty eggs, thirty packets of spicy vegetables, and two cartons of Furongwang Special from Mao Shijian. The two cartons of Baisha were given to a department director; the tofu and Furongwang were distributed to Bureau leaders in Loudi.
28. 22 March: Liang Wenkuan requested 5,000 yuan in cash from me, seven packs of Furongwang Special, and five packs of Baisha. Liang sent his wife Chen Lufen with the Furongwang and 2,000 yuan to obtain a Bureau stamp and a certificate. (addendum: the remainder of the money was used on 23 March.)
29. 23 March: Liang Wenkuan requested 4,000 yuan in cash, 1,100 pieces of dried tofu. To obtain a certificate at a bureau branch in Yangshi, eight envelopes of 800 yuan were distributed, totalling 6,400 yuan. Zhou Difan and I were present.
30. 24 March: Liang Wenkuan requested 15,200 yuan in cash from me. Liang invited Liu Bing of the People's Hospital and five leaders from a city agency to Lianyuan Yinzuo. Eight envelopes of 800 yuan were distributed. Later we split into two groups for entertainment. Zhou Difan and I each went with one group.
31. 25 March: Liang Wenkuan requested 5,000 yuan in cash from me, 45 yuan worth of black bean sauce, and fifteen packs of Furongwang Special. He invited the leaders of a Loudi bureau to go fishing in Shanjiaxiang. Two cars were rented.
32. 27 March: Liang Wenkuan requested 5,000 yuan in cash from me, and one carton of Furongwang. Liang stuffed three red envelopes: two for 1,200 yuan and one for 2,000 yuan. I do not know who he gave them to.
[33-57 omitted]
58. 27 May: Liang Wenkuan requested 5,400 yuan in cash from me and four cartons of Baisha cigarettes. He paid the storehouse auction registration fee.
59. 29 May: Liang Wenkuan requested 5,000 yuan in cash from me, for unknown purposes.
60. 31 May: Liang Wenkuan requested 25,000 yuan in cash from me. Liang and Mr. Cai went to a company Changsha to find someone to find a job for the daughter of a Bureau director in Lianyuan. Zhou Difan and I went along to Changsha. Liang Wenkuan took 8,000 yuan to take a leader to dinner. I am not clear who the leader was; I only heard he was "Department Director Yang."
 The diary. 61. 5 June: Liang Wenkuan asked for one carton of Baisha Special and one carton of Baisha.
62. 9-10 June: Liang Wenkuan asked for 30,000 yuan in cash from me. 24,000 yuan was payment for a year of Liang's "legal consultation"; 4,000 yuan for his mobile phone charges, 2,000 yuan for his wife Chen Lufen's mobile phone charges. In addition, Liang Wenkuan asked Mao Shijian for two packs of Baisha Special and one pack of Furongwang Special.
63. 13 June: Liang Wenkuan asked for 12,000 yuan in cash from me. He said that it was compensation for a warehouse auction for someone with a certain agency in the city.
[64-72 omitted]
73. 20 July: Liang Wenkuan requested four packs of Baisha Special from me.
74. 21 July: Liang Wenkuan requested seventeen packs of Baisha Special and two lighters from me.
75. 22 July: Liang Wenkuan requested four packs of Baisha Special, one box of honey, and two bottles of two-star Liuyanghe from me.
76. 23 July: Liang Wenkuan requested four packs of Baisha Special and six bottles of Jinjiu from me.
77. 24 July: Liang Wenkuan requested one carton of Baisha Special and five bottles of Jinjiu from me.
78. 25 July: Liang Wenkuan requested three packs of Baisha Special.
79. 27 July: Liang Wenkuan requested fourteen packs of Baisha Special.
80. 28 July: Liang Wenkuan requested three packs of Baisha Special.
81. 30 July: Liang Wenkuan requested two packs of Baisha Special.
82. 1 August: Liang Wenkuan requested one carton of Baisha Special.
[83-98 omitted]
99. 7 September: Liang Wenkuan requested five bottles of Jinjiu, one bottle of milk, and seven packs of Baisha Special from me.
100. 8 September: Liang Wenkuan requested 300 yuan from me for fuel fees.
101. 9 September: Liang Wenkuan requested 1,700 yuan in cash from me.
102. 11 September: Liang Wenkuan requested one carton of Furongwang Special, once carton of Baisha Special, and 240 yuan in cash from me.
103. 12 September: Liang Wenkuan requested 2,000 yuan in payment from me for cement fees.
104. 14 September: Liang Wenkuan requested 300 yuan in cash from me.
105. 25 September: Liang Wenkuan requested 1,300 yuan in cash and two cartons of Baisha Special from me.
On 22 November this year, a reporter for this magazine contacted Liang Wenkuan and his wife a number of times, but the two persisted in refusing to confirm Mao Zhijian and Zhou Difan's record.
Mao and Zhou provided Oriental Outlook with two documents. According to a Business Operating License issued by the Lianyuan Bureau of Industry and Commerce, the Lianyuan Xianglian Fireworks Sales Company (hereafter, Xianglian) was established on 28 April, 2005. However, the Fireworks Sales Permit issued to Xianglian by the Loudi Work Safety Bureau clearly shows that it was issued on 16 March, indicating that even before the company was established, it had already obtained a permit to sell fireworks from the Work Safety Bureau.
Four other investors in Xianglian, Li Fuxi, Zhou Jianming, Qiu Fumei, and Liao Ziqiu, told this magazine that as far as they knew, Mao Shijian and Zhou Difan held 380,000 yuan and 180,000 yuan worth of the company, respectively, as original shareholders. The majority of this money was used in the company's early stages to entertain and to give gifts—that is, what is recorded in Mao's journal.
Mao Shijian made a daily record of the gifts because he was the company's manager and treasurer in its early stages; the ledger was passed on to Zhou and others for review and inclusion as the costs of running the company.
Now that the individuals involved have made a complaint to the Hunan Provincial Party Committee, Mao Shijian's journal has become the focus of attention among the provincial discipline and inspection leadership, and party, political, and judicial agencies are conducting serious investigations into this case. Is this diary genuine? How will the parties responsible be dealt with? Oriental Outlook will continue to watch the situation.
Note: The names of individuals other than Mao Shijian and Zhou Difan have been changed.
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This article is from Danwei.org
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 Just the thing for an energy magnate. The Top Essence luxury goods show was held in Beijing over three days at the end of September. Borrison, the organizer of this and similar luxury expos in Shanghai and Guangzhou, invited guests from Beijing and surrounding areas.
According to a report in the Mirror, many of the guests were not what you'd expect:
Wiesmann sales manager Mr. Zhu was surprised: over three days he received a number clients who had Tangshan accents and who were interested in purchasing a 2.98 million RMB (US$400,000) Weismann automobile. They all seemed to be rich and powerful. In the minds of many people, Tangshan is at most a third-tier city. "How could Tangshan have so many rich people?"
[Borrison representative] Sheng Lei explained that eighty percent of the target consumer group for these luxury items came from Beijing; twenty percent came from four cities around Beijing: Shenyang, Dalian, Taiyuan, and Tangshan.
"I invited the guests from Tangshan. They're primarily in the energy industry," Sheng Lei said....He explained that he had expressly invited guests from Taiyuan and Tangzhan because those two areas have many private "magnates" in energy sectors (such as coal), and they have considerable purchasing power. Moreover, they live close to Beijing and like to come to Beijing to shop. On the eve of the expo, the sponsors chose Tangshan and Taiyuan for special media promotions in the hopes of attracting their target consumer group.
"They are enthusiastic buyers of luxury items, and they're potential purchasers of fine cars, high-end watches, jewelry, and real estate. Every year, at least thirty percent of Beijing's high-end luxury items are carried off to those four areas," said Sheng Lei. He explained that this was an estimate according to sales feedback.
On 21 September, an individual with an exclusive club in Changping, Beijing, said that even when faced with a US$200,000 entry fee, many Shanxi coal bosses still had a strong interest in joining. "I rejected them all. Money isn't enough! Members here have station and position."
Perhaps it's not so surprising in light of a report a few years ago that coal mine privatization in Shanxi was giving owners astronomical returns on small, government-assisted initial investments.
The expo itself was criticized for encouraging conspicuous consumption and for violating Hu Jintao's 8th Shame: wallowing in luxury.  Xia Yaozhou's planned community. Far off in Tangtang, Yunnan, another rich mining boss has been in the news recently. Rather than spending his millions on luxury imports, Xia Yaozhou is trying to enrich the people of his village by providing them with jobs and homes.
Xia got his start working a carpenter while trying to get his mining business off the ground; he is now worth around 100 million yuan. He's invested 30 million so far in development projects for the village, including a pig farm in which all villagers are shareholders.
His goodwill is not universally accepted, however. According to reporters from Yunnan's Metropolitan Times, many people suspect that he has ulterior motives for building houses for the villagers and providing them with 10,000 yuan each in annual income. His business associates think there must be a profit motive somewhere; Xia protests that he just wants to bring wealth to his village:
When speaking of others' confusion over his decision, Xia Yaozhou says with a twinge of self-mockery, "They say I'm stupid, they say I'm an idiot! But I still think that I'm just a bit smarter than them!" When he says that last sentence, he is full of self-confidence.
"How can everyone can be well-off in developed countries, while in China, in Tangtang, we cannot achieve that? No matter what people think, I want the people in my hometown to make lots of money and live happy lives!" Such stirring words brought forth objections from a bystander: "This is completely at odds with the instincts of a businessman. Businessmen should take care of business. They don't even bother getting up if there's no profit in it!"
Indulgence in luxury is criticized as overly ostentatious, but generosity is distrusted. What's a coal boss to do?
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This article is from Danwei.org
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From a report on Candian TV's website:
Mattel says sorry to China about toy recalls
In a surprising move, U.S. toy manufacturer Mattel apologized to China on Friday, taking responsibility for recent toy recalls and admitting they were due to "design flaws."
The Chinese manufacturers of the toys were not to blame for the massive recalls, a senior Mattel executive said during talks in Beijing.
"The vast majority of those products that were recalled were the result of a design flaw in Mattel's design, not through a manufacturing flaw in China's manufacturers," Debrowski said at a meeting in the office of Li Changjiang, chief of China's product quality assurance agency.
However, the apology from Mattel's CEO Bob Eckert to American parents on Mattel's website makes no mention of any such design flaws. This article is from Danwei.org
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 No money spent on food or logo design From yesterday's Financial Times:
Air China on Wednesday said profits soared in the first half due to the strengthening Chinese currency, investment gains and a booming travel market.
The carrier said its net profit increased more than 2000 per cent to at least RMB 900m ($119m) for the first six months, up from the RMB 45m it reported under Chinese accounting standards in the first half of 2006...
...Air China’s Hong Kong-listed shares shot up 17.6 per cent on Wednesday to HK$7.20 at the news...
...“The most significant reason for our profitability from an operational point of view is the huge demand for domestic and international air travel in China,” said Rao Xinyu, Air China’s general manager of investor relations...
Perhaps another significant reason is that Air China does not spend any money on edible food, enjoyable inflight entertainment, or computer systems that make their planes depart on time.
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Playboy magazine has seen it sales decimated on one end by by crass lads mags like FHM, and on the other end by easily available Internet pornography.
However, the magazine's name and it bunny logo remain widely recognized from Australia to Zambia. The group, under the leadership of Hugh Hefner's daughter Christy, is therefore putting money into its other lines of business: namely it chain of clubs, and its clothing line.
Christy Hefner recently announced plans to build a Playboy club in Macao. Variety magazine said that Playboy Enterprises and Macao Studio City had joined forces to open up a "Playboy Mansion ... described variously as a 'club' and a 'multi-faceted entertainment destination'".
It will be interesting to see if it works: in a city full of brothels, will the prospect of being served cocktails by girls dressed as bunnies have any appeal for the punters?
In unrelated news, a Danwei source close to the Wynn casino in Macao has reported the the new American-owned gambling houses are currently getting the jitters: the Mainland authorities have slowed down the processing of travel permits to Macao, which has drastically reduced the house takings of the clutch of new casinos in the city.
If you want to see what some of the new casinos look like, below is a Danwei video shot about a year ago in Macao.
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