Strong in furniture, very weak in outdoor gear – China news from May 10, 2017

Chinese brands are very strong in furniture, very weak in outdoor gear

May 10 is apparently the first “China Brand Day” (中国品牌日 zhōngguó pǐnpái rì). Ai Feng 艾丰, chairman of the Brand Alliance Expert Committee, says (in Chinese) that China is a manufacturing giant but a brand pygmy with only a few contenders in the list of the world’s top 100 brands, and that the purpose of China Brand Day is to change that. Xinhua headlined its Chinese website with a story (in Chinese) that mentions Chinese Brand Day as an introduction to a summary of recent Xi Jinping speeches about innovation, technology, and the “revitalization of the real economy.”

Sina has published an article (in Chinese) that looks at the origins of brands purchased on platforms owned by ecommerce giant Alibaba during the November 11 “Singles Day” shopping promotion. When it comes to the “high end market” (高端市场), Chinese brands supply 97 percent of demand for furniture, 75 percent for clothing, and 61 percent for household appliances, but only 36 percent for maternity and baby products, 15 percent for luggage, handbags, and shoes, and a mere 6 percent for outdoor sportswear and equipment.

The Belt and Road development model?

With 28 heads of state set to attend a “One Belt, One Road” (OBOR) summit in Beijing on May 14, Justin Yifu Lin 林毅夫, former chief economist at the World Bank and director of the Center for New Structural Economics at Peking University, and his colleague Wang Yan 王燕 ask: “What is China’s rationale for pursuing this grandiose vision – one that so many countries, especially in the developing world, have embraced?”

They have written a book in answer, and summarize their arguments in an article on China-U.S. Focus. Whether you agree with them or not, or object that they have merely found a sophisticated way of saying “win-win,” their ideas will probably become part of the rhetorical toolkit of those in favor of OBOR and the Chinese approach to development. In essence, Lin and Wang “make the case for going ‘beyond aid,’ toward a broader approach — like that taken by China – that includes trade and investment…By combining aid with trade and investment, donor and recipient countries alike can benefit.”

Oil and propaganda on the New Silk Road

In other OBOR news:

• The People’s Daily devoted its top story (in Chinese) on May 10 to an article titled “PetroChina: An oil road through the Silk Road really wins the hearts of the people.” It’s a paean to a state-owned oil company that is lubricating the trade and connectivity of OBOR, from Myanmar to Turkmenistan. This is the first time since the fall of former security czar and oilman Zhou Yongkang that a Chinese oil company has received such love from the People’s Daily.
• The China Daily reports that “nearly 50 journalists from 22 countries, including China, Turkey and Singapore” have arrived in Urumqi, the capital of western Xinjiang Province, for a media event themed “Approaching the Core Zone (Xinjiang) of the ‘Silk Road Economic Belt.’”
• On May 9, we noted the Bedtime Stories about OBOR propaganda video, aimed at foreigners and published by the China Daily. On May 10, Xinhua published a Chinese language OBOR propaganda video that features traditional graphic motifs, quotations from classical Chinese poetry as captions, and the “Fisherman’s Song” (渔舟唱晚 yúzhōu chàngwǎn) played on the traditional guzheng instrument. The video suggests that global harmony will be achieved through OBOR.
• Huchun is a Chinese city whose “position at the apex of Russia, North Korea and China is a blessing and a curse,” as “while Russia is gradually opening up to more trade, North Korea has stalled.” Reuters reports on how the city’s successful lobbying to be included in OBOR plans has yet to bear fruit.

—Jeremy Goldkorn, Editor-in-Chief

This issue of the The China Project newsletter was produced by Sky Canaves, Lucas Niewenhuis, Jia Guo, and Jiayun Feng. More China stories worth your time are curated below, with the most important ones at the top of each section.

The China Project’s conference in New York on May 18 will feature 20 women leaders in Chinese technology, business, and culture. Buy your tickets here.

BUSINESS AND TECHNOLOGY:

Alipay to reach 4 million merchants in the U.S.

Earlier this week, The China Project noted that both Alipay and WeChat, popular mobile apps that make payments extraordinarily easy in China, had partnered with Silicon Valley startup Citcon to bring their payment platforms to the U.S. Yet on May 8, Alipay made a far more important partnership with Atlanta-based payments processor First Data. This partnership will bring Alipay to 4 million merchants in the U.S., only half a million shy of Apple Pay, Quartz reports. With the numbers of Chinese visiting the U.S. every year skyrocketing, from 2.6 million in 2015 to an expected 6 million in 2021, Alipay’s rival app WeChat has some catching up to do.

So does the U.S., in terms of mobile payments adoption, where it lags behind China. However, a Bloomberg columnist points out that the proportion of customers using mobile platforms to settle transactions is rising faster in the U.S. than in China, and both countries are expected to reach 23 percent adoption in 2018. Alipay’s newest partnership may help speed along U.S. adoption.

• Russian authorities should lift block on WeChat soon to minimize harmful effects / Global Times
  The shrill state-owned newspaper, a frequent defender of Chinese internet censorship, calls on Russia to restore access in Russia to WeChat, whose blocking has “triggered wide complaints from Chinese tourists, students and businessmen in Russia, who see WeChat as an essential channel for connecting with people.”
• As China’s growth cools, wealth management products boom / Caixin
  “Chinese publicly listed firms are increasingly trying to boost their incomes by buying so-called wealth management products (WMPs)…higher-yield, short-term investments typically sold by commercial banks.”
• Beijing property agent Lianjia shutters shops amid market cool-down / Caixin (paywall)
  “One of China’s largest real estate brokerage firms, Lianjia, has shuttered 87 out of its 1,400 offices in the capital since March, when the Beijing government introduced its latest round of regulatory curbs in a bid to rein in skyrocketing property prices.”
• Germany welcomes Chinese investment in financial firms / Reuters
  Germany’s top financial watchdog greenlighted the nearly 10 percent share in Deutsche Bank by China’s HNA Group.
• Opinion: Think China home prices can’t topple? Think again / Bloomberg
  “Property market curbs imposed by authorities are getting stricter, even in smaller, regional cities…down-payment rates are rising and the nation’s banking regulator has instructed trust companies to rein in funding,” Nisha Gopalan writes.
• China stocks adored abroad as local investors see losses mount / Bloomberg
  “Mainland markets have struggled under the government’s campaign to trim risk in the financial sector, making stocks the least linked to the offshore index since 2006.”
• China toughens auditing of overseas investment by state-owned companies / Xinhua
• China’s financial regulators appear determined to tighten rules further, boost oversight / SCMP

POLITICS AND CURRENT AFFAIRS:

The Chinese tycoon in New Zealand who forfeited $30 million for money laundering

“They went to the basement and Yan offered Lentino to take his pick — a Porsche, a Bentley or the Rolls-Royce.” That is how William Yan (闫永明 Yan Yongming), aka Bill Liu, a flashy multimillionaire residing in New Zealand despite Beijing’s long-standing accusation that he is an “economic fugitive,” liked to seal his business deals. But not all business has been that pleasant for Yan recently: In August last year, he agreed to pay US$30 million (NZ$43 million) to settle a money-laundering case in New Zealand and is now serving a five-month home detention sentence.

The New Zealand Herald reports on Yan’s decade-long story in New Zealand, ending with his conviction on money laundering and sentencing to home detention on May 10: Yan had previously been accused of falsifying his identity, a point that became especially salient after 2008, when the government controversially granted him New Zealand citizenship. In trials in 2012 for identity falsification and 2014 for money laundering, Yan was revealed to have obscured both his identity and the ownership of his assets through a web of third-party registrations and documents filled out on his behalf, making it difficult to tie any crimes back to Yan. When investigators did find more solid evidence of fraud in 2014, it sparked a drawn-out negotiation between New Zealand police, Yan, and the Chinese government.

The August 2016 settlement came with an agreement by Yan to return to China to face trial for fraud charges — Yan went in November 2016, came back in January 2017 with no publicized outcome, and stood trial this week, leading to his final sentencing. On May 10, Xinhua finally reported (in Chinese) an outcome of the trial: The majority of Yan’s $30 million, the equivalent of 130 million yuan ($18.8 million), will be remitted directly from his frozen assets in New Zealand to China.

• U.S. patrols challenging Beijing in South China Sea will continue, says U.S. Navy commander / SCMP
  U.S. Navy Commander Gary Ross: “We are continuing with regular FONOPs [freedom of navigation operation], as we have routinely done in the past and will continue to do in the future.” A week ago, it had been reported that FONOP requests were being denied by the Trump administration.
• U.S. ‘strongly supports’ Taiwan’s participation in WHA: official / Focus Taiwan
  Taiwan plans to send a delegation to the World Health Assembly on May 22-31, despite China’s objections.
• China reaches out to new South Korean leader amid tensions with North Korea and the U.S. / SCMP
  “President Xi Jinping congratulates South Korea’s new president and calls for mutual understanding and trust.”
• China lawyer’s wife seeks U.S. asylum after brazen escape / AFP
  The wife of human rights lawyer Xie Yang 谢阳, who is set to stand trial in China this week for subversion, is in Texas and seeking U.S. asylum.
• China’s missile tests in Bohai ‘aimed at THAAD in South Korea’ / SCMP
• Xi’s new Silk Road forum sets Chinese tone for globalization 2.0 / Bloomberg
• China’s ‘outstanding’ former top diplomat Qian Qichen dies, aged 90 / SCMP
  “Qian…was described by some as the principal architect of China’s emergence from diplomatic isolation in the wake of the bloody 1989 Tiananmen crackdown on the student movement.”
• ‘Emaciated, unrecognizable’: China releases human rights lawyer from custody / The Guardian
  “Li Heping was held in secret for two years and deprived of all contact with his family but is now back home.” More information on Li Heping available here.
• Opinion: Beijing is weakening China’s rule of law. How far will it go? / ChinaFile
• China complains to U.S. over lawmakers visit to Dalai Lama / Reuters

SOCIETY AND CULTURE:

Allegations of graft at bike-sharing darling Ofo

On May 3, a former employee of Ofo, one of China’s biggest bike-sharing startups, wrote up an exposé of alleged internal corruption (in Chinese) on the social networking app Momo 陌陌. According to the whistleblower, there are two major areas of unscrupulous behavior:

• Regional managers falsely report the number of staff in their areas: By adding five or six nonexistent bike repairmen in their reports, managers can earn an extra 20,000 to 30,000 yuan ($2,900–$4,345) every month.
• Kickbacks from bike-manufacturing companies: Some staff in procurement have purchased old tires that were produced 10 years ago from suppliers who are their friends.

In February, Ofo closed a $450 million funding round, which elevated its total valuation to more than a billion dollars. Two months later, Ofo announced that Ant Financial, an Alibaba affiliate, had become an investor and would work with the bike-sharing startup on credit card payments and international expansion strategy. Another big investor in Ofo is Didi Chuxing, China’s dominant ride-hailing service, which added Ofo to its main app in April.

On the social media platform Weibo, many commenters hold negative views about Ofo’s future, especially when comparing the startup with its major rival Mobike. One commenter complained (in Chinese), “Eight out of 10 Ofo bikes are broken. I’m turning to Mobike now.” Others accused Ofo of being too busy with attracting investment, rather than “improving internal management and listening to users’ feedback.”

• Debate rages over China’s captive tigers / Caixin
  A CPPCC member and “artist who built his career painting and sculpting tigers” has “argued that tiger parks obstruct tiger conservation efforts and damage China’s international image.” He hopes to use his influence to improve the treatment of captive big cats.
• Translation: I Am Fan Yusu (我是范雨素) / What’s on Weibo
  “In late April of 2017, Fan Yusu became an overnight literary sensation in China when her essay ‘I Am Fan Yusu’ was published on online platform Noonstory.com and soon went viral.”
• American universities are welcoming China’s Trojan Horse / Foreign Policy
  An argument against Confucius Institutes on U.S. campuses.
• China’s prosperity eludes a generation of aging workers / WSJ (paywall)
  “Laborers who helped build modern China face toiling into twilight years; ‘No one will feed me if I don’t work.’”
• China is building a Disney World for wine / Bloomberg
  At Chateau Changyu Reina, “honey-colored brick towers enclose wide cobbled courtyards, and vast, wood-beamed halls look as if they are prepared to host an imminent medieval banquet.” The construction is “but one part of an ambitious 600 million yuan ($86.9 million) complex completed four years ago just outside the city of Xi’an.”
• Baby Louie, the dinosaur orphan, finds its species at last / NYT (paywall)
  Baby Louie is a “90-million-year-old fossilized dinosaur embryo” that “was found among a clutch of eggs in Henan Province,” yet the remains of the parents of Baby Louie and the eggs were never found. “But now, after nearly 25 years, Dr. Zelenitsky and her colleagues have linked the orphaned dinosaurs with their prehistoric lineage…a group of large, birdlike dinosaurs known as giant oviraptorosaurs.”