China's gunboat diplomacy, past and present - Howard French

Howard French

How do China's current global efforts to expand its power, link to its past as a world might? Journalist Howard French explores in his new book Everything Under the Heavens: How the Past Helps Shape China's Push for Global Power the historical roots of China's position as a world power. From ChinaFile.

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Repressing religion in China is not the big picture - Ian Johnson

Ian Johnson

The forceful removal of crosses at churches and the arrest of Christians have hit of Western media regularly. But that is not the big picture, says journalist Ian Johnson, author of the upcoming book The Souls of China: The Return of Religion After Mao, at CNN. Those government actions are mainly symbolic, he says.

CNN:

Hundreds of Christians have also been detained or arrested attempting to resist those demolitions, ChinaAid said. 

As the larger of the Christian denominations in China, Freedom House said Protestants had been “particularly affected by cross-removal and church-demolition campaigns, punishment of state-sanctioned leaders, and the arrest of human rights lawyers who take up Christians’ cases.” 

However, Ian Johnson, author of new book “The Souls of China: The Return of Religion After Mao,” said the focus on the cross removal misses the big picture. 

“I’d say that the most important point is that virtually none of these churches have been closed,” he said in a piece for CNN Opinion. 

“All continue to have worshipers and services just like before. In addition, the campaign never spread beyond the one province. Some pessimists see it as a precursor for a campaign that might spread nationally, but so far that hasn’t happened and there is no indication it will.”

More at CNN.

The full CNN opinion piece is here.

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Why we should not worry about Chinese nationalism - Kaiser Kuo

Kaiser Kuo

Sometime vehement explosions of nationalism have worried both the outside world, and the Chinese government. But today, nationalism is in decline, notes China-watcher Kaiser Kuo in SupChina. "I’m coming around to the view that we’ve exaggerated its proportions and the dangers it poses."

Kaiser Kuo:

But the appeal of nationalism in China appears to be dwindling. A recent paper by Alastair Iain Johnston of Harvard University, examining survey data measuring nationalist attitudes in the Beijing area over a period of 13 years from 2002 to 2015, suggests that at least in the vicinity of the capital, nationalism is indeed in decline. Johnston, aware that Beijing is not necessarily representative, notes that his findings nevertheless accord with nationwide surveys measuring those attitudes. 

The rising nationalisms of our times — and Trump’s “America First” approach in particular — may even have the ironic effect of diminishing nationalism’s appeal in China still further: Xi Jinping has, after all, stepped (even if opportunistically) into the role of standard bearer for globalization. His unapologetically globalist Davos speech played well at home. And if nationalism has an opposite number today, it is globalism... 

The specter of Chinese nationalism is invoked with some frequency by those who would douse the ardor for multiparty democracy. It’s invoked in this way, indeed, by many a liberal. It’s a twist of course on the familiar sùzhì 素质 argument — that the unwashed Chinese masses just aren’t ready for democracy. In this telling, the problem is that freed of its fetters, nationalism would run the table: “If we had free elections in China tomorrow,” said one liberal Chinese friend of mine, “we would elect Hitler next Tuesday and be at war with Japan by Friday.” The message is “Careful what you wish for.” In this view, some gratitude is perhaps due to an illiberal Party that serves as a bulwark against a nationalism that would be more illiberal still. 

The jury is out on what would actually happen were that bulwark to be dismantled, but I’m coming around to the view that we’ve exaggerated its proportions and the dangers it poses. While I’m not suggesting that Chinese nationalism is innocuous, and is not something we ought to continue to concern ourselves with, we really should keep in mind that nationalism is an ideology that feeds on perceived slights and tends, conversely, to diminish when it can’t claim to feel put upon. We should recognize it for what it mostly is — the unsurprising residue of China’s historical experience, utterly comprehensible by anyone with the least capacity for empathy, and remarkable mainly for its relative impotence.

More in SupChina.

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At last, Beijing might get serious about North Korea - Paul French

Paul French

China has been trying to ignore its unruly neighbor North Korea for as long as it was possible. And North Korea was more interested in talking to the US, and less to China. But Beijing might at last be changing its tune, says Paul French, author of North Korea: State of Paranoia (Asian Arguments) to the Washington Post.

Paul French:

Beijing’s current thinking may be that responding to North Korea’s recent bouts of belligerency with a coal ban punishes Pyongyang more directly (i.e., right in the wallet) than the Chinese have previously been willing to do while also letting Washington know it is not afraid to get a lot tougher with an old, but frustrating, ally. Though it’s worth considering that Beijing, with its horrendous pollution problems, is itself looking to diversify away from coal-fired power, so maybe there is no great sacrifice on the Chinese part here. 

Beijing’s recent policy of studiously ignoring Kim hasn’t worked. Chinese President Xi Jinping has visited locations as far flung as Fiji, Belarus and Zimbabwe but has never taken the one-hour shuttle from Beijing to Pyongyang. The coal ban then is the start of what may be a series of harsher measures that could include finally getting tough on North Korean bank accounts in China, putting limits on Chinese firms doing business in the country, restrictions on North Korean officials transiting through China, and a demand that Pyongyang rejoin the Six Party Talks or risk losing essential aid supplies. 

Trump, like President Obama before him, may be right that the way to contain North Korea is through Chinese pressure. But perhaps it is the events that Trump’s ascendancy appear to have unleashed from Pyongyang that will finally force Beijing to get seriously tough with their neighbor.

More in the Washington Post.

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Why most startups should avoid China - William Bao Bean

William Bao Bean

It sounds odd to hear from the managing director if the Chinaccelator in Shanghai, but William Bao Bean sees it as a success when startups decide to avoid the China market and explore other markets. "Interestingly enough, the greatest help that Chinaccelerator can give to start-ups considering China is convincing them otherwise," he tells Inc-ASEAN.

Inc-ASEAN:

“99% of international start-ups don't belong in China. Locals have a better market understanding and better ability to raise capital. China is the number two market in the world for VC investment—meaning no foreign company is ever going to be better funded, even UBER,” says (says William Bao Bean, the managing director of Chinaccelerator and MOX and general partner at SOSV.) Hence, it is important that the accelerator focus on international companies that have a competitive advantage in areas, such as adtech, education, fintech, and cross border commerce, and are difficult to clone... 

Bao Bean also feels that a data-driven approach is crucial when expanding, if only because relying on our own skills can lead us astray. 

“The biggest problem with international start-ups and even corporates is that what makes them a winner in their home market, their experience and domain knowledge, can be a liability when they go into new markets. Gut instinct and pattern recognition, developed over years of failing and succeeding, is suddenly more likely to send a founder in the wrong direction than the right,” he says, adding that their approach overcomes these biases and even leads entrepreneurs to make discoveries that hadn’t occurred to them previously. 

Chinaccelerator is itself expanding, in a manner of speaking. According to Bao Bean, they are partnering with venture capitalists and accelerators in Southeast Asia and even South Asia to help recruit start-ups with an interest in China. Interestingly enough, the greatest help that Chinaccelerator can give to start-ups considering China is convincing them otherwise. 

“Our biggest value can sometimes be to tell a company that it doesn't make sense for them to enter the Chinese market,” he says.

More in Inc-ASEAN.

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Labor: China's massive challenge - Ben Cavender

Ben Cavender

Rising wages have already put China in the same cost-league as Portugal and South-Africa, forcing manufacturers to low-wage countries. But that is only one challenge for a major shift in the labor market, says business analyst Ben Cavender to CNBC.

CNBC:

As China's economy expanded at breakneck speed, so has pay for employees. But the wage increase has translated to higher costs for companies with assembly lines in China. Some firms are now taking their business elsewhere, which also means China could start losing jobs to other developing countries like Sri Lanka, where hourly factory wages are $0.50. 

Apparel manufacturing has been hit "extremely hard," said Ben Cavender, a principal at Shanghai-based China Market Research. "The result has been that factory owners have gone on a massive investment spree outside of China."... 

With fewer jobs available — and perhaps more robots buzzing on factory floors — experts maintain unemployment will be an ongoing concern, especially as the government works to maneuver the world's second-largest economy away from manufacturing and toward services. 

"You're talking about a way to re-skill millions of workers, but it's not clear what jobs they're going to be placed into," Cavender said. "They're creating white collar, clerical jobs here as quickly as possible, but it's still not enough to go around."

More in CNBC.

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China's new top-planner did not perform well - Victor Shih

Victor Shin

Amid the reshuffle of China's top-officials, He Lifeng will take the helm at the powerful National Development and Reform Commission. But some senior analysts doubted his skills as a planner. Just look at his work in Tianjin, says political analist Victor Shih in AP.

AP

And yet, in the selection of He as top economic planner, some political observers saw a throwback to a retrograde model of wasteful spending and runaway borrowing that many policymakers in the party blame for dragging down China's economy. 

As the No. 2 party official, He oversaw a building spree in the coastal city of Tianjin that was envisioned to be a new financial hub to rival Manhattan but now sits unoccupied, said Victor Shih, a political scientist at the University of California, San Diego. 

"He Lifeng presided over the largest ghost city in China and built even more empty office towers in it," Shih said. "His reform credentials are questionable to say the least."

More in AP.

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IPO-hungry tech firms might jump the queue in China - Paul Gillis

Paul Gillis

Financial authorities in Beijing are playing with the idea to give tech firms a faster-track IPO in China, says accounting professor Paul Gillis at his weblog. Taking away some of the cumbersome restrictions for IPO's in China might lead to the expected abolishment of variable interest entity or VIE's, a side-track allowing Chinese firms to list in the US, he suggests.

Paul Gillis:

Chinese tech companies often also faced restrictions against foreign ownership. That should have blocked foreign venture capital investments and foreign IPOs, but a workaround was developed. The workaround was the variable interest entity (VIE), which enabled the listing of companies controlled through contracts instead of ownership. VIEs have been a source of pain for many investors, since the contracts proved difficult to enforce and control through contracts proved to be vastly inferior to control through actual ownership. 

A few formerly US listed companies have succeeded in relisting in China. Before doing so they needed to restructure to get rid of the VIE structures and offshore structures (and control features) that had been put in place for the US listings. 

The Reuter’s article points to three companies that may be the initial beneficiaries of the queue-jumping initiative - Ant Financial, the world's most valuable financial technology company, Zhong An Online Property and Casualty Insurance, and security software maker Qihoo 360 Technology Co.  Ant and Zhong An would be doing IPOs, while Qihoo went private in 2016 and would be relisting in China. 

It is not known whether China plans to change its rules to facilitate control structures. Ant is owned by Jack Ma and his associates. Jack Ma insisted on a control structure for Alibaba. It would also appear that it will be difficult for foreign investors to participate in these transactions, since foreigners can only purchase shares on the Chinese exchanges through the Qualified Foreign Institutional Investor (QFII) programs or the Hong Kong Connects. 

I have been hearing rumors that China soon plans to announce that the VIE structure will no longer be tolerated for foreign investment, while at the same time grandfathering existing VIE structures. China had earlier proposed to change the foreign investment rules to exclude companies that were controlled by Chinese from restrictions, effectively encouraging the control structures, but these rules were not adopted when the foreign investment rules were modified last year. 

If VIEs are banned (and the rules are actually enforced), it would likely mean the end of new US listings of Chinese tech (and other restricted sectors such as education and finance) companies. The queue-jumping program might foreshadow that announcement.  The big losers would appear to be US venture capital firms and US investment banks.

More at Paul Gillis' weblog.
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Why and how should prostitution be decriminalized - Zhang Lijia

Zhang Lijia

In China most women enter the prostitution on their own free will. The government is criminalizing them, forcing them into a submissive position. What can be done? Author Zhang Lijia of Lotus: A Novel on prostitution researched the sex trade in China, and possible solutions and discusses government approaches.

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Is there room for paid internet platforms? - Andy Mok

Andy Mok

More Chinese internet users are looking for good answers and are willing to pay for it. Paid Q&A apps emerge in China and business consulent Andy Mok discusses at CGTN America their business models and their chances to succeed.

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The success of China's Communist Party - Ian Johnson interviews Sebastian Heilmann

Ian Johnson

Few scholars have looked into the inner workings of China's Communist Party like Sebastian Heilmann,  founding president of the Mercator Institute of Chinese Studies (Merics) in Berlin, a government professor at the University of Trier and author of China's Political System. Journalist Ian Johnson interviews him on the success of the party for the New York Times.

Ian Johnson:

A key question you pose is how much of China’s success can be ascribed to this political system. What’s the answer?

There are several important elements. One is the party successfully sets long-term political goals, such as the modernization of industry or technology, or infrastructure planning. As Deng Xiaoping made clear in the 1980s, it can concentrate resources in priority areas. I see this as a strength in the initial phase of development, from say the 1980s to the mid-2000s.

Another crucial element is experimentation. This is something we ignore in the West — how unexpectedly flexible China’s deeply bureaucratic system can be. This flexibility has been demonstrated in the ability to set up pilot projects in special economic zones, in local tests — such as for housing reform or bankruptcy in state enterprises. Very difficult measures were regularly tested in pilot projects for several years before national laws were enacted.

You show how this flexibility arose from the Communist Party’s revolutionary experience.

This is very important. Because we have to ask ourselves, how did a socialist bureaucratic system get this kind of adaptability that you didn’t see in Eastern Europe? It’s due to the specific historical experiences of this party [in the 1930s and 1940s before coming to power]. It controlled very spread-out and not contiguous districts. So when it tried something like land reform it was done experimentally and in a decentralized fashion. This was fundamentally different from the Soviet Union....

Toward the end of the book you offer several scenarios for how China might develop, and poll Merics staffers for their views. Most support the first scenario, which is a “centralized and disciplined party and security state (the Xi Jinping system).” You are less sure, arguing that the risks are greater than people realize.

I’m not sure that the party can achieve everything it’s set out to do. It’s tried to keep a lid on all changes in society, but I doubt this can work over time. There are different lifestyles and forces in society. I’m not sure they can be unified. I’m very skeptical.

Also, we shouldn’t forget that hierarchical systems are susceptible to shocks. If Xi Jinping became seriously ill, what would happen to the political system? The system has been tailored to him. Or, if there are military skirmishes, how will the nationalistic forces in society react?

This system is built for expansion, especially economic expansion, and setbacks are very hard to justify. It’s easier in Western systems because you can change the government. But in China you can’t. So the potential for disruption is greater than people imagine.

More at the New York Times.


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Ian Johnson will publish his much anticipated book The Souls of China: The Return of Religion After Mao in April.
 

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A business model can help a successful app Meitu - Jeffrey Towson

Jeffrey Towson

Meitu, with 450 million users a leader in China's selfie apps and a growing following overseas, helps to beautify those selfies. But having a good idea is not enough, says Peking business professor Jeffrey Towson to AFP. Having a business model helps even more.

AFP:

Chinese Internet giants like Tencent and Alibaba have struggled to replicate their domestic dominance overseas. 

But Meitu said it had 430 million overseas users as of October last year, compared to around 500 million claimed by Instagram. 

Yet profits remain elusive. Meitu lost CNY 2.2 billion ($320 million) in the first half of last year. 

"Meitu's big problem has always been that it came up with this killer app - and the usage is unbelievable. It's crazy. But they never had a clear business model underneath it," said Jeffrey Towson, professor of investment at Peking University. 

Meitu did not respond to requests for comment.

More at AFP.

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Ant Financial's strategy to go global - Ben Cavender

Ben Cavender

Alibaba's Ant Financial investment of US$200 million into the Korean mobile payment service Kakao Pay illustrates how the leading Chinese payment platform want to gain global dominance, says business analyst Ben Cavender to Reuters. Buying into strong local players is smarter than competing with them.

Reuters:

Ant is currently looking to raise as much as $3 billion in debt to fund acquisitions and further foreign investments, a person with direct knowledge of the matter told Reuters earlier this month. 

"Ant's ultimate goal is to become a global payments monster - the biggest, broadest option for consumers," said Ben Cavender, Shanghai-based principle for China Market Research. 

"The challenge is facing strong local players around the world, so it's cheaper to buy into these companies rather than burning money to steal market share from them." 

Kakao, best known for its online messaging platform Kakao Talk, has in total over 48 million users. Its Kakao Pay unit is a financial services platform which offers services such as bill payment and remittance.

More at Reuters.

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Mixing online and offline retail does not work yet - Ben Cavender

Ben Cavender

Alibaba teamed up with brick-and-mortar retailer Bailian, in the latest effort to combine the best of two worlds. But while the idea seems to make sense, the results up to now have been meager, tells retail analyst Ben Cavender to Reuters.

Reuters:

The deal, which does not include any financial investment in Bailian, is the latest in Alibaba's still nascent efforts to capture a bigger share of the retail market as online sales growth slows. 

It has also spent $4.6 billion on a minority stake in appliances retailer Suning Commerce Group Co Ltd, is leading a $2.6 billion bid to take department store and shopping mall operator Intime Retail Group Co Ltd private and has bought a stake in grocery chain Sanjiang Shopping Club Co Ltd. 

News of the agreement sent shares in Bailian Group firms surging but analysts cautioned it may take several years before returns from using big data can make a significant difference to earnings. 

"There is a big push right now across brands to try and figure out how to mix physical and online shopping but gains so far have been limited," said Shanghai-based retail analyst Ben Cavender at China Market Research Group.

The two firms will initially cooperate on supply chain technology using Alibaba's big data capabilities and will integrate Alipay payments with Bailian Group's existing membership program.

More at Reuters.

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