law - Shanghai socialite apprehended for DVD-trade

Randolph Hobson Guthrie III was one of six people arrested at July 1 for trading in illegal DVD's, Shanghai police announced on Friday, the China Daily writes. Also a second US citizens, Cody Abram Thrush, has been held.
Guthrie, described by the New York Times as the member of a famous New York family, was a famous socialite in Shanghai. Mr. Guthrie never kept the nature of his business secret and was often found gladly boasting about his success.
The arrest was a combined action of both Chinese and US law enforcement agencies, the first time they together cracked down on the DVD-trade. All suspects are expected to stand trial in China. On his website he wrote he was earning US$ 25,000 per months and employed ten employees, writes the New York Times.
Police demolished three warehouses holding over 210,000, DVD's the China Daily said.

Competition – Beijing might walk away with Universal Studio’s

 

Beijing is trying to catch the Universal Studio project after Shanghai was forced to halt construction, because the central government did not give the needed permission, The Standard from Hong Kong reports today. They have noted the story again in the Economic Observer weekly, but could not get independent confirmation of the new twist in the ongoing drama. “Quoting senior management of Beijing Holdings, the newspaper said the central government's decision was influenced in part by Beijing's hosting of China's first-ever Olympic Games in 2008. Efforts to reach Beijing Holdings and Universal Studios were unsuccessfull,” writes The Standard. “’Currently, there is some change in the situation'’ on the project, Chen Yongping of Jinjiang's strategic planning office was quoted by the newspaper as saying on Thursday. Chen did not elaborate. He said the Shanghai municipal government will give an update in the next two weeks.”

 

Permission to cause cancer - the WTO column

(today at Chinabiz)

On popular demand I will address today the position British American Tobacco has maneuvered itself in. At the very busy and pleasant mixer of the American Chamber of Commerce on Wednesday I could investigate among the Chinabiz readers what news had amused them most in the past week and BAT’s dealing with the permission they got, did not got and then got again to build the first foreign-invested cigarette factory in China won with a high margin.

The official line of the central government is that it wants to bring back the red tape. This culture, marked by the red chops, has stopped many at least potentially profitable activities in their tracks. Getting permission was a major thing in the past and still is, at the builders of major infrastructure projects in Shanghai found out the hard way. It is the main reason the Chinese bureaucracy exists.
My first encounter with the Chinese attitude towards the red chops was at the university where I stayed and where I wanted to interview some people. “We need permission to do that,” said my temporary assistant, a diligent student who is by now a Fudan professor. Who should give us permission, I wondered. “As long as we have permission, it does not matter whom gives permission,” was the answer.

I was at the time of course confused about this permission thing, as confused as the chairman of British American Tobacco (BAT) who first told his investors last week the company had permission to open a factory producing annually 100 billion cigarettes in a country where tobacco was at least technically a monopoly. Of course the shares went up.
China is the only tobacco-friendly country in the world where it would at least allow tobacco adds on the F1-racing cars – not on the circuit, as a compromise between the Chinese anti-smoking lobby and the sections of the government that earn a lot of money in causing cancer among their compatriots. No wonder that BAT, on the retreat in most of the rest of the world, is eager to set up shop in China.
Then the China Tobacco, the official holder of the monopoly in China, said it had not given anybody permission. Then BAT chairman Jan du Plessis tried to limit the damage and said they had high-level permission. It is not going to help him.
“Who is the idiot who dunnit,” was the key question according to my audience at the Amcham mixer. BAT is very well connected in China. One of their managers even married the famous film actress Gong Li: now, how much better can you get connected in China? So why did they repeat the lessons everybody learned from the failure of the Singaporean park ten year ago in Suzhou?
Then president Jiang Zemin himself gave green light for an industrial park that should show China how the Singaporean model would work in their country. The conclusion is by now even shared by Singaporeans: it did not work. What was forgotten was to secure the support of the local authorities, who had much more interest in promoting their own industrial park in stead of the Singaporean one. China is not a top-down command society where the top has absolute control over the country, as the classic models of the communist way of organizing suggest.

BAT did not want to disclose who actually gave the permission, only that is was very high up in the hierarchy. It is not going to help them and the question is why well-versed managers, who exactly know how China works, could not tell their bosses back home they were making a stupid mistake.
BAT might now be sitting in the backseat, while competitors can make advantage of the mistakes BAT made. Some people never learn.

Fons Tuinstra

bloghosphere - Getting close to half a million bloggers 

China is getting close to almost half a million bloggers, says the counter at cnblogs.org: 456,000 and counting. Maybe time for a party, even if it is only a virtual one. Or do we wait till the first million?

Landing – the sustainability of growth

Paul French has a go at an earlier column I wrote for Chinabiz on the overheating of China’s economy in a way almost only Paul can do that. Fortunately, we agree on the main point. China’s problems are surmountable on the short run, when there is a problem, it is on the long run. “In the WTO Column mentioned above (The Landing: In Your Safety Position - 20/7/2004) Professor Wu Jinglian wisely points out a major flaw in China's economy - that each dollar earned in China costs 8 times more energy than in the US. It is a fact that over the past decade China has on average invested nearly 40% of GDP and generated an average growth rate of 8% (20 cents of growth for each buck coughed up in investment). This is truly shocking, even India gets something like 25 cents to the dollar on a 25% investment rate,” writes Paul. “The answer is pretty simple though not as simple as just shouting market economy. Reduce waste, trim the fat, improve the operation, seriously deal with NPLs and lending, distance the state planners and China could easily achieve between 9 and 10% growth without any overheating. So understand the meaning of the term overheating, then throw it out, then hopefully you see that growth in China of around 9% per annum is indeed sustainable.”
There are still a few details to solve, before a 9 percent growth can be sustainable.

permissions - Also BAT struggles on
 
British American Tobacco first said they had permission for a factory for 100bn cigarrets in a desperate efforts to keep the growth of China's population in check by causing more lung cancer. Then the Chinese monopoly in charge of tobacco said they had given no permission, causing painful scenes between BAT and their investors. Now BAT says again it has permission.
It looks a bit like the scene I described yesterday, after I learned a Dutch business man said he had permission to build a US$2 bn sport complex in Shanghai.
The central government is trying to reduce all these systems that make control into an often not very useful habit, but having permission it still a good idea. Only, every time it is very important to see who gives those permissions.
Jan du Plessis, chairman of BAT, now actually says he has top-level permission. That might actually be bad news, since in some cases top-level permission means that you are going to get a hell of a lot of trouble on a lower level, in his case with the Tobacco Monopoly. They can rather effectively block many decisions. Similar to this famous Singaporean industrial park in Suzhou that kicked off ten years ago with top-level permission from President Jiang Zemin, but without support on a local level.
People wrongly think this is a communist country, with command style of organizing.

blogging - In a slow speed
 
Blogging has been down a bit, not because of the sweltering heat here in Shanghai: that would have been a perfect legitimate reason. We have been making fun of Shanghai who intends to fight the heat by causing artificial rain. If we could have some today: do no hesitate.
Working very hard on writing a business plan that should be done by the end of the week, more news about that in the coming months as new projects move on. News has been rather slow. Well, HSBC buying 20 percent of the Bank of Communications for two billion US dollar, but nothing really striking.
More will come later today: that happens all the time when I complain about the lack of interesting news. For those in Shanghai, do not forget today's Amcham mixer.

dreams – A Future Dome we have never heard from
 
Sometimes important news about Shanghai arrives through my friends in the Netherlands. Papers over there have published about the so-called “Future Dome”, a 2 billion US dollar sporting complex that is going to be build here in Shanghai. A Dutch entrepreneur Karel Aalberts, who used to be involved with the soccer club Vitesse and has been responsible for a rather disastrous megaproject in the Netherlands, is pushing the project.
Main problem: I had never, ever heard about what is called a pet-project of the Shanghai government. And nobody has. Articles in Dutch media say ‘the’ government has already given permission. What government? Shanghai or Beijing? I guess that it will be very hard to get any approval from the central government now it wants to cool down the economy. Looks like a nice China dream. Seems all very unlikely.

fake - The Tiananmen papers under attack

A fierce debate is emerging regarding the famous Tiananmen papers: like some many things in China, it might be a fake. Read here more about the debate that is going to keep us busy for some times. Whodunit? Why? What is different from the real story?

media - the Lu Yuegang letter
 
Some blame Chinese for not having a Western sense of humor. The Chinese sense can be equally devasting.

media - AFP revamps an old report
 
I just discovered that AFP - in a need to comply with the standards of sweatshops - revamped yesterday an old report, drawing very different conclusions. The first report dates from June and suggests that Chinese cities have actually become cheaper. In this week's report they suggest Chinese cities have become more expensive than ever.
Stupid me did not realize AFP was talking about the same report. Now foreign correspondence is hardly financially supported, you can hardly expect us to check our own stories, can you?

media - An editor speaks out...
 
I picked this FT piece up again from the China Digital News about editor Lu Yuegang of the China Youth Daily who speaks up against his superiors. Fascinating stuff, and important to see whether Lu gets away with it in the current political climate. The China Digital News has loads more, including full translations of the letter. We will hear more about this.