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Monday, March 31, 2008

TIMES Article: China in Italy: Kick Start

Link: http://www.time.com/time/nation/article/0,8599,1651236,00.html

On a recent afternoon in this east-coast Italian city, you could hear the first snippets of dialogue from the next act of the global economy's evolving plotline. "Wo jiao Francesco," says a young Italian man, at the start of a Mandarin lesson in an office conference room. With a quick "Bravo," for Francesco, Alessandra Brezzi, a moonlighting professor of Chinese from the nearby University of Urbino, begins drilling her seven students on useful workplace vocabulary (ziliao/raw material; caiwuchu/accounting department) and proper Chinese etiquette (introduce yourself with a business card ready; never open a gift right away). Of course, these lessons are by now standard for anyone in the West looking to drum up business prospects in Beijing or Xiamen. But the group in Pesaro are not M.B.A. students or venture capitalists. They are clock-punching engineers, mechanics and secretaries — and they're learning Chinese because that's what the boss speaks.

For this Mandarin lesson is taking place at the headquarters of Benelli motorcycles. Once one of Europe's most revered bikemakers, it was also the first Italian firm to be bought outright by a Chinese company when, in October 2005, the Qianjiang Group, China's third-largest scootermaker, purchased Benelli for $24 million. At the time of the bid, Qianjiang's purchase of the storied brand from its last Italian owner was seen as another sign of the country's industrial decline, with local newspapers deriding the sale as a "disaster" and an "ugly story." Indeed Italy's manufacturing model — built largely on small and midsize companies that turn out easily replicable products from light fixtures and heavy tools to sofas and office chairs — has proved particularly vulnerable to Chinese competition, though Italians hope that their luxury consumer brands, valued for their European cachet and design, can attract China's burgeoning shopping class, and help stave off a looming trade-imbalance crisis.

But the fate of Benelli doesn't fit neatly into conventional accounts of Italy vs. China. For starters, the motomaker had already suffered the consequences of a very different era of Asian competition. In the 1970s, it took a hit from top-performing Japanese bikes. What was once a company of 1,000 employees largely responsible for Pesaro's post-1945 growth had halted new production twice in the past two decades. By 1995, it had laid off all but the shell of a staff; those who were left merely produced replacement parts for existing bikes. Mauro Righi, who has worked 33 years at his hometown company, has survived repeated rounds of layoffs. Currently responsible for emission systems, Righi is the only employee left who worked when the Benelli family (which sold out in the early 1970s) was still in charge, and he recalls the days when, "We were once considered the avant garde."

The company's most recent owner, Italian appliance giant Merloni, invested heavily but never managed to turn a profit, and announced in early 2005 that a buyer had to be found if the 94-year-old company was to survive. With no Italian bidders, offers came from Russia and Britain, though they were focused merely on acquiring the brand. Qianjiang, instead, which turns out 1.2 million scooters a year in China, saw value in buying — and relaunching — Benelli's design and production. That would give them a foothold in the European market, and the move had an industrial logic: unlike Japan three decades earlier, China still lags well behind the Western motor industry in know-how and design, which means the Chinese saw the small Italian firm as a vehicle for the improvement of Qianjiang's own products back in China. Dai Wei, Benelli's export manager, and one of just two Chinese employees on-site in Pesaro, spends time chaperoning colleagues from China. "Here they know how to make motorcycles better and faster," says Dai. "We consider this our European research and development center."

One of Qianjiang's first moves was to give Benelli's technical director, Pierluigi Marconi, the same title for the Chinese company, too. Though he confesses that he'd "never even eaten an egg roll" before meeting his new employers, Marconi is now in constant contact with his Chinese counterparts, and often visits headquarters in the southeast China city of Wenling. "They understand that we have the history in this sector," he says, "which is not something you can just buy or invent from scratch."

The main responsibility for Yan "Klara" Haimei, Qianjiang's chief in Pesaro, is to watch Benelli's balance sheet, leaving design and production in the hands of the Italians. Both the Chinese and Italian managers emphasize that the aim is to boost the Italian brand while improving the performance of the smaller and simpler Chinese scooters. It's a question of knowing your markets. The 500cc motorcycles popular with European and American riders are not even permitted on Chinese roads. Says Marconi: "In China they've produced the same scooter for the past 20 years." Marconi says the equation is not mysterious: Italy has the know-how and style and China has low labor costs — and, increasingly, ready capital. "This is the reality. If we don't produce with the Chinese, we'll eventually lose the technology too."

Downstairs on the shop floor, where 18 motorcycles are produced a day, there is not a single visible sign that Benelli is Chinese-owned. With his handlebar moustache and thick sideburns, veteran worker Righi believes Qianjiang has brought a real change for the better. "We've seen more investment and new projects in the past 18 months than we'd seen in the past decade," he says. On the local level, this might be the most meaningful effect of the Benelli-Qianjiang model: the hundred or so Italian employees at the plant see the Chinese parent as the savior, not the usurper, of their jobs. "We would have closed down without them. They were the only ones with a serious plan," says Stefano Michelotti, a Benelli engineer. "We have to begin to think globally — Italian companies have had a tendency to fossilize."

Cash-rich Chinese enterprises have garnered attention for their mega-investments in Africa and other parts of the developing world. In Italy, Chinese investment has been most noteworthy in the textile business and in the purchase of bars and restaurants in northern Italian cities. Increasingly, Chinese investors are looking at all sectors of the European economy, including high-tech and heavy manufacturing. Thomas Rosenthal of the Italy-China Foundation says there are now 27 Chinese companies doing business in Italy, and that China has jumped from the 33rd largest foreign investor in Italy in 2004 to 10th in 2006.

The China-Italy storyline, though, is not just happy economics. Social integration, for example, has not always gone smoothly. In April, street violence erupted among Chinese immigrants in Milan complaining that they were singled out for parking tickets. The clashes left a dozen police officers and several Chinese residents injured. According to the latest figures from the National Statistics Institute, the number of Chinese residents in Italy jumped from 47,000 in 2001 to 112,000 in 2005. Claudio Morganti, who heads a local branch of the right-wing Northern League party, wrote on a blog: "The reality of Chinese immigration, with its apparently tranquil and quiet exterior and cover of legal business, hides a world of mafia, racketeering, prostitution and black markets."

Giuseppe Berta, a professor of economic history at Milan's Bocconi University, does not endorse such views. Nevertheless, he says that the clashes in Milan were a reminder that the growing economic role of an immigrant group almost inevitably brings disruptions. Even so, these disruptions have been relatively minor since Chinese investment in Italy has, so far at least, focused on small, decentralized industries. "The Chinese presence is growing, but it's a penetration from below," says Berta.

Not all international investment works immediately, of course, regardless of where it originates. Italian automaker Fiat, for example, failed in its initial attempts to build cars in India because of India's protectionist policies and its own ignorance of the market. Now, however, Fiat has a partnership with Tata Motors that will turn out cars geared to local Indian needs. "There are great opportunities in both directions," says Berta, "but the way in must be soft. Europeans can't be aggressive in Asia. And Asians can't be aggressive in Europe."

One thing is clear: learning your partner's language always helps. Qianjiang boss Yan can now get by in Italian and engineer Michelotti often throws a few Mandarin phrases into conversation with his colleagues in Wenling. He's also begun to pick up certain words they keep repeating. Chinese Professor Brezzi explains the difference between "we should" (yinggai) and "we must" (yao). "I always hear 'yao,'" says Michelotti. That's a reminder of who's in charge.

Picked out by: Shi Rong (07A102)

Labels: international relations, Shi Rong (07A102), Western-Sino Relations

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TIMES Article: Out of Order/Disorder in China's Courts

Link: http://www.time.com/time/magazine/article/0,9171,1626718,00.html

The police say her son was busy cutting a taxi driver's throat on the night of Aug. 16, 1994, but Yang Shuxia says she knows better. "He was right here lying down next to me with the tube running into his arm," she says, pointing to the kang, a traditional brick sleeping platform found in most farmers' homes in this part of northeastern China. Yang and other family members insist that then 21-year-old Zhu Yanqiang couldn't even get to the toilet without help, much less sneak out to join in the brutal robbery-murder that took place some 40 km from the family's two-room farmhouse in the windswept hills outside the town of Chengde. Zhu, who sold vegetables in a nearby market, had gotten into a fight the previous day with other vendors while jostling for a prime spot; he was beaten repeatedly with an iron bar. "He was badly injured and the doctor gave him medicines and told him to rest," Yang says. "We have the prescriptions to prove it all, but the judge refused to listen."

Zhu and three friends from his village of Zhuangtouying were convicted in 1995 of murdering a taxi driver—convictions obtained in large part on the basis of their confessions, which all four men later said they were tortured into fabricating. Citing numerous problems with the trial—one higher court found no fewer than 28 inconsistencies in the original court's conduct—the case was appealed all the way to the Supreme People's Court in Beijing, which recommended a retrial, as did several lower courts. In all, the case has been retried five times. Yet all four men remain in jail 13 years later. "Even for China, this is an unusual case," says law professor Xu Zhiyong, a legal adviser to the defendants' families, "because it is so clear that these men are innocent."
Like almost everything else in the country, China's legal system is in transition, buffeted by social changes sweeping the nation as it races toward economic modernity. There are many other areas of grave concern for Beijing: a ravaged environment, an inadequate health-care system, pervasive corruption and a widening chasm between the urban rich and rural poor, to name a few. But none is so visible a symbol of the dilemmas Beijing faces in coping with rapid change while at the same time preserving the country's tenuous social order—and the Communist Party's grasp on political power—as the judicial and legal system.

As the case of the Zhuangtouying four demonstrates, it is a system in near paralysis, where even cases that its own judges have acknowledged are profoundly flawed can go unresolved. China's legal institutions share many names and structures with those of Europe and the U.S.: four tiers of courts from the county level to the Supreme People's Court, a prosecution service (the People's Procuratorates), an appeals process, trials, judges and lawyers. But the institutions that make up China's legal system are all ultimately under the control of the Communist Party. The Party isn't solely to blame for China's woes: rogue local officials, badly paid, poorly trained judges and the courts' own institutional weakness all play a role. But the Party's near absolute power over the judiciary ensures a lack of accountability that is the root cause of many other ills.

It's not hard to find examples of questionable legal outcomes like the case of the Zhuangtouying four. The plight of blind legal activist Chen Guangcheng, who was given a four-year sentence on charges of inciting public disorder last year after he exposed the forced sterilization of women as part of a provincial family-planning campaign, is one example regularly cited by activists. New York-based Human Rights Watch and others say they have recorded numerous instances of individuals who protested court decisions being beaten, tortured, imprisoned and even killed as local officials sought to bury controversial or embarrassing cases.

Xu, the academic who is advising the prisoners' families, says that the treatment received by Zhu and his co-defendants was typical. "The same judges are not supposed to try the same case twice, but in this case they tried the case three times," he says. Xu says there were many other errors. According to documents lodged by the Chengde People's Procurate, the government alleged four men flagged down a taxi at the Chengde railway station on the night of the murder. After one asked the driver to stop so that he could relieve himself, all four attacked him with knives, stole about $50, a pager and some keys, and buried the body in a nearby field. With no witnesses to the crime, the prosecution's case relied on the confessions and two pieces of evidence: a knife found in one defendant's home that had blood of the same type as the driver and a cigarette butt found in the taxi with another's DNA. But the knife and the cigarette butt were never produced in court, says Xu. And as for the confessions, "We have witnesses who saw them being tortured. And because [the confessions] were made up, they didn't even agree with the facts of the case at the crime scene and had to be changed later." (Court and police officials involved with the case declined to comment for this story.)

Chinese have long had to accept that the courts offered little recourse from flawed decisions. But economic development is bringing pressure for change. The country's emerging urban élite now see protecting their individual rights as a No. 1 priority. "The rising middle class likes predictability and security, and that's what the law does," says Nicholas Bequelin of Human Rights Watch, adding that the Communist Party recognizes that its future hangs on being able to accommodate such demands. "The Party is highly adaptable so long as nothing threatens their basic control."

Like any bureaucracy, Chinese authorities have preferred to leave things the way they are as long as they could. But inaction is no longer an option. By Beijing's own accounting, the country is wracked by more than 70,000 "public-order incidents" each year. What defines an incident is kept vague, but activists and scholars agree that they constitute serious breaches of public order, and are often sparked by disputes over issues such as property rights or local government decisions that in other societies would be resolved through the legal system. Yet officials are also aware that any expansion of individual rights—a change for which activists and legal experts have clamored—will come at the expense of the Party's hegemony. Some progress is being made: lawyers have recently won credible victories on cases involving environmental protection, labor rights and antidiscrimination. The government has also attempted to professionalize the legal system by bringing in overseas lawyers and judges to help train their Chinese counterparts. But even those incremental gains are met with deep suspicion, resulting in what Bequelin calls the "fundamental inner contradiction" of the law's role in Chinese society. "On the one hand the Party insists China is subject to the rule of law," he says, "but at the same time they insist on the primacy of the Party in all areas, including the law."

There is an ancient ambivalence in China toward the very idea of the legal system as a protector of individual rights. As George Washington University legal scholar Donald Clarke points out, for millennia the main role of China's courts was to remind citizens of the power of the state. In an essay on China's legal system, he cites a passage written by the 17th century Qing Emperor Kangxi: "If people were not afraid of the tribunals, and if they felt confident of always finding in them ready and perfect justice, lawsuits would tend to increase to a frightful amount," the passage reads. "Those who have recourse to the tribunals should be treated without any pity, and in such a manner that they shall be disgusted with law, and tremble to appear before a magistrate."

The four families of Zhuangtouying have spent 13 years dealing with the modern-day descendants of Kangxi and his mandarins. Like millions of Chinese for whom the legal system has provided little satisfaction, they have sought redress through petitions in Beijing, exercising an ancient right to bypass the courts and appeal directly to the central government. Official statistics are unreliable, but legal scholars say that out of the nearly 12 million petitions filed in 2006, only a few thousand will succeed. Out of those, petitioners able to translate Beijing's decrees into corrective action by local officials likely number in the hundreds.

Still, several times a month, women like Yang and Wang Xiuqin, whose son Chen Guoqing is also imprisoned for the taxi murder, visit the main petition office in a run-down neighborhood near the Beijing South train station. Yang says she has no choice. "Of course we still come. Our children are innocent. How could we not come?" In December 2005, fed up with the lack of response, four relatives bypassed the petition office and marched straight to the red gates of Zhongnanhai, the Communist Party headquarters. Fu Yuru, mother of He Guoqiang, who is serving a suspended death sentence for the crime, held aloft a banner calling for her son's freedom. The gesture cost the then 56-year-old 14 days in detention before she, like the others, was shipped back to Zhuangtouying with a warning to stick to established procedures in the future. "We had been to the Supreme Court and were not treated with patience," explains Fu. "They said, 'Go home and wait patiently because this is a complicated case.' But we talked and agreed that we had to do something. We wasted 13 years. Did we want to waste another 13?"
For Yang Wanying, whose son Yang Shiliang is also serving a suspended death sentence, the injustice is a crisis of faith. A lifelong Communist Party member who still dresses in a baggy Mao suit and cap, he passionately denies his son is guilty. On the night of the murder, his son was "sitting right there," Yang says, pointing to a window in the family home. "We played mah-jongg from seven o'clock until two in the morning." He pauses for a moment, overcome by emotion, then continues. "Every time I visit him in the jail he asks me the same thing," Yang says, without looking up. "'When can I come home, father? When can I come home?' I don't believe there is justice in China anymore."

Article Picked by: Shi Rong (07A102)

Labels: Justice System, Shi Rong (07A102), Social

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TIMES Hong Kong 1997-2007 Special Article: The China Connection

Link: http://www.time.com/time/specials/2007/article/0,28804,1630244_1630240_1630204,00.html

Thirteen years before Chinese leader Deng Xiaoping made his famous Southern Tour, Jeffrey Lam made one of his own. Just five years out of college, Lam traveled to the city of Dongguan in Guangdong province to set up a small factory to produce parts for his family's Hong Kong toy company. The year was 1979, and China had just begun to open up its economy. Unlike Deng's 1992 trip, which revitalized a wavering reform program, Lam's voyage won't make it into the history books. But his efforts, and those of thousands of other Hong Kong businessmen like him, helped turn neighboring Guangdong—and hence China itself—into an economic giant. "If it hadn't been for Hong Kong," says Guan Zhisheng, an economist at Sun Yat-sen University in Guangzhou, "then there wouldn't have been any reform and opening up in Guangdong."

As Hong Kong marks the 10th anniversary of the end of British rule, there has been no shortage of debate over the question of China's influence over its reclaimed territory. What about the opposite? When Deng put the mainland on the path that led to the end of its self-imposed isolation, Hong Kong became the example China followed as it groped for a way forward in the transition from communism to capitalism. And Hong Kong quickly established itself as a conduit for foreign technology, culture, business know-how and investment. Now, as the mainland grows richer, what's striking is the degree to which the flow of ideas, influence and investment has started to reverse. "China has learned from Hong Kong," says Michael DeGolyer, a political-science professor at Hong Kong Baptist University. "China has learned how to compete. Now it's competing with Hong Kong and forcing Hong Kong to improve."

Three decades ago, it was Guangdong province that needed a jump-start. Although it was a backward region in a backward country, Guangdong did have several advantages. Its people were eager to work hard. Its politics were removed from the power centers of Beijing and Shanghai, so Deng considered it a safe place to begin reforms. In 1980 three of China's first four special economic zones (SEZs) were set up in the Guangdong cities of Shenzhen, Zhuhai and Shantou. These experiments in capitalism attracted foreign capital through liberalized regulations and tax exemptions.

As the SEZs' market-oriented policies spread across Guangdong, the possibilities became obvious to Hong Kong businessmen. After years of remarkable growth, the city's economy in the late 1970s was in danger of stalling. Land and labor prices were climbing, making light manufacturing increasingly unaffordable. Guangdong, meanwhile, had millions of able-bodied citizens who shared language, culture and often family ties. Hong Kong entrepreneurs "just thought about bringing factories here because the production costs were lower and they could be more competitive," says economist Guan. "They didn't know they would influence Guangdong. They didn't know they would influence China."

At its crudest, this influence took the form of cash, bucketloads of it. Since 1978, Hong Kong has contributed more than $273 billion in foreign direct investment to China, nearly as much as the total from all countries combined; southern China got the lion's share. The Pearl River Delta, the part of Guangdong province closest to Hong Kong, is now home to 57,500 factories established by or producing for Hong Kong enterprises. But investment did not just mean building factories. When Lam first visited Dongguan, the trip required two ferry rides and took up to four hours. Today his factory is a two-hour drive from Hong Kong. Travel time has been vastly reduced in part because of the infrastructure investments of Hong Kong companies. Hong Kong tycoon Sir Gordon Wu's Hopewell Group built the mainland's first expressway, the 120-km Guangzhou-Shenzhen Superhighway, and more than 160 km of other key roads in Guangdong. Hong Kong companies like Hutchison Port Holdings and Swire Pacific helped develop critical Guangdong ports.

Projects like these turned the region into a manufacturing force on a global scale. From 1980 to 2002 the Pearl River Delta was, according to the book Regional Powerhouse, "the fastest-growing portion of the fastest-growing province in the fastest-growing large economy in the world." Hong Kong didn't just bankroll this party. It also supplied management expertise and knowledge of foreign markets. In the mainland's planned economy, meeting customer expectations wasn't a priority. For Hong Kong's entrepreneurs it was a matter of survival. "These small businesses were exporters of course," says Joseph Cheng, a professor at City University of Hong Kong. "They all knew that Christmas delivery was a matter of life and death. They had to deliver for a particular ship, 14 weeks before Christmas. If they couldn't make it, it was bankruptcy." At Lam's first operation in Dongguan—25 sewing machines and some paint sprayers set up in a converted municipal building—lessons were sometimes as painful for the teachers as they were for the students. Once, when the shop ran short of black paint needed to complete a run of pieces for a toy mirror set, local employees bought an extra can at a market and finished the job. The only problem was the paint was toxic, and unsuitable for use in a toy. The unsafe parts had been mixed in with the safe, so Lam had to scrap thousands of pieces. "They had no clue in making anything," Lam says of his Dongguan employees.

But they learned. Just ask F.C. Lo, once known as China's "king of cans." The Hong Kong entrepreneur shipped the first aluminum cans to the mainland in the early 1980s from a plant in Hong Kong's New Territories. In 1985 he built his first factory on the mainland in Guangzhou, an $18 million investment. With the help of foreign stakeholders, his company expanded to 20 plants, and at one time controlled about 60% of China's can market. (Lo split the company's assets with its American investors in 2001 and now runs four plants on the mainland.) In the beginning, working with mainlanders was "one-way traffic," Lo says. "We would tell them what to do because we were so strong and they didn't know anything." Today Lo competes with homegrown manufacturers. "The local guys are so good," he says. Lam, the toy manufacturer, agrees: "They are teaching us. That's the way it should go. We should not be jealous of somebody who worked for us for $34 a month who is now making $34 million a year. If they are good, they deserve it."

Guangdong has become the workshop for the world, but that doesn't mean all it does is work. As commercial contacts with Hong Kong grew, the province also looked to its neighbor for hints on how to have fun. Nowhere is that more evident than in Shenzhen, the mainland city next to Hong Kong. The border crossing at Lowu is the world's busiest, with 252,000 trips daily. Hong Kongers cross to shop, sing karaoke in a nightclub or partake in other diversions that have become favorite pastimes for mainlanders, too. Shenzhen is home to Mission Hills, the world's largest golf complex, with a dozen 18-hole courses. When Hong Kong paper-and-packaging tycoon David Chu founded the club in 1994, 90% of its members were from Hong Kong. Today 60% of the members are from the mainland.

The SAR's cultural sway has extended far beyond Shenzhen and the fairways of Mission Hills. Hong Kong's music, movies and fashion dominated pop culture in Guangdong when China first opened up. "In the '80s and '90s, I definitely only listened to Hong Kong artists like Alan Tam, Jacky Cheung and Anita Mui," says Kent Li, 37, who hosts a pop-music show for state-owned Guangzhou Radio. Hong Kong also set the pace for fashion. Before a look is big in Guangzhou, Guangdong's capital, it is vetted in Hong Kong, says He Ying, a 28-year-old video editor and former owner of a clothing shop. "Hong Kong is like a filter," says He. "If people there don't embrace certain trends, then Guangzhou will never embrace them."

The trends are transmitted to the mainland through Hong Kong media, which is widely available in Guangdong despite the fact that most newspapers and TV channels are restricted. Hong Kong-style teahouses, found throughout southern China, always have copies of day-old Hong Kong newspapers; some are distributed legally while others are smuggled across the border. Likewise, hotels and residence compounds for foreigners have access to two dozen overseas satellite channels and eight from the SAR. A huge gray market in illegal satellite dishes means Hong Kong programs are widely available. Indeed, Hong Kong's media spurred the development of Guangdong's own press, which is known for testing the limits of mainland censors. Fledgling mainland journalists looked next door for instruction on everything from story development to production, says Chang Ping, deputy editor of the Guangzhou-based Southern Metropolis Weekly. "Hong Kong media helped establish the foundation for Guangdong's media," he says. but familiarity sometimes breeds discontent. Mainland Chinese nowadays no longer take all their cues from their cousins—and the spread of the Internet in China means they no longer have to, because the whole world is in reach. "Now, there's more of a global culture in Guangzhou," says Alex So of the youth-lifestyle magazine Coldtea. Relaxed travel restrictions mean mainlanders can easily visit the SAR. "Before, when it was harder to go to Hong Kong, I thought it was such a cool, mysterious place," says He. "It's not the same anymore."

Guangdong's industries, too, are more independent of Hong Kong than they once were. "In the 1980s, the shop was in front and the factory was in back," Yvonne Choi, Hong Kong's Secretary for Commerce, Industry and Technology, told a business forum in April. "This has changed and Hong Kong is no longer playing the leading role." Instead, the SAR is increasingly dependent upon China for its economic vitality. Last year, Hong Kong's stock market launched initial public offerings worth more than any other market except London—a bravura performance that was largely due to the $25 billion raised through the IPOs of Bank of China and the Industrial and Commercial Bank of China. In 2001, mainland China became Hong Kong's largest investor, and by the end of 2005, it had poured $162 billion into the territory. The capital influx is expected to expand since Beijing announced in May that it would begin to allow mainland institutions to invest in foreign stock markets, beginning with Hong Kong.

The hope is that the mainland's investors will provide the same economic boost that its tourists have. Beginning in 2003, when Hong Kong was suffering a severe economic slump due to the SARS outbreak, the central government began allowing greater numbers of mainlanders to visit the territory. They played a key role in reviving the economy, says Allan Zeman, a Hong Kong developer who operates Ocean Park, a marine-and-amusement park, and owns property, restaurants and bars in Lan Kwai Fong, a popular night spot. "China was the match that started the fire burning and got the economy going again," Zeman says. Of Hong Kong's 25 million visitors last year, 13.6 million came from the mainland, more than four times the 3.1 million who visited in 1999. Zeman says he has changed his businesses to meet the needs of mainland tourists. Fluent Mandarin speakers have been hired, menus have been altered and renminbi, the mainland currency, is now accepted. "Over the last several years there's been a tremendous impact on all business," he says. "I think everyone in Hong Kong is starting to cater ... to the mainland market."

That has created some unexpected opportunities for entrepreneurs like Apichar Sirichantakul, a Thai businessman who calls himself the "father of the ladyboys." The transvestite stage shows he runs in Bangkok are so popular among Chinese tour groups that he decided to bring them to Hong Kong. As many as 3,000 customers a day, most of them mainlanders, pay $20 each to see three dozen Thai transsexuals and transvestites give a 45-minute dance-and-lip-synch performance in an old movie theater on Hong Kong island. "Chinese travelers come here, go shopping in the day and see some sights, but at night there's nothing to do," Apichar says. "We give them something to see."

From lowbrow entertainment to high finance, it's certain Hong Kong will increasingly be catering to China in coming years. Lam, for one, reckons the partnership between the SAR and the rest of China is just as dynamic as it was when he ventured to Guangdong to set up a toy factory 28 years ago. "Hong Kong will continue to impact the mainland," he says. Just not as much as the mainland impacts Hong Kong.

Article picked by: Shi Rong (07A102)

Labels: Shi Rong (07A102), Social, Transnational Relations

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Sunday, March 30, 2008

International Herald Tribune Report: China's Latest Crackdown: The Liquid Lunch

Link: http://www.iht.com/articles/2008/03/08/asia/08china.php

Li Bin, a barrel-chested retiree on special assignment for this city's Communist Party boss, strode down an empty hallway of the Xinyang Middle Court in search of bureaucrats. He rattled locked doorknobs and barged into offices without knocking. A court officer retreated in red-faced terror.

The booze squad had arrived.

"Blow," ordered one of Li's young subordinates a few minutes later as he pressed an alcohol monitor to the lips of a nervous Communist Party functionary.

The target of Li's midafternoon sting last week was not just tipsy cadres but a ritual that many Communist Party officials have long considered a part of their job description: the hours-long, alcohol-soaked midday banquet (usually paid for with public money). For the past year, Li and other investigators have swooped into government offices in this grimy city of seven million people to catch civil servants partaking of the liquid lunch. One violator was fired on the spot.
With Beijing trying to rein in official corruption, the campaign in Xinyang, in Henan Province, might seem like comic relief. But public disgust with official privilege is so palpable that the campaign has attracted national attention, spawned imitators in other cities and offered a tantalizing hint at how much China's liquor industry profits from the thirst of Communist Party officials.

Wang Tie, the Xinyang Communist Party chief and architect of the crackdown, estimated that the policy saved his government almost $6 million in six months. Local restaurants have reported sharp drops in profits. Last month, the Henan Alcoholic Drink Industry Association, a trade group alarmed at losing its best customers, challenged the policy as a violation of the legal rights of civil servants.

"The country's Civil Servant Law doesn't require civil servants to refrain from drinking during their lunchtime," argued Kang Yinzhong, a lawyer for the trade group, according to state media. "Drink or not, it is the civil servant's right. Public power has no legal ground to interfere in a civil servant's life if he or she doesn't mess up their afternoon work."

Wang, the party chief, said the policy could withstand any challenges, and he proudly provided a positive editorial from People's Daily, the Communist Party's authoritative newspaper.

"Everyone knows there is a problem in China with cadres eating and drinking on public funds," Wang said. "It's a big problem, and to deal with corruption you've got to start with issues like this."

Wang, who is getting fan mail, added, "We wanted the cadres to have energy for work." Indeed, service is not always a priority for government workers after a few hours of slugging down shots.
"Sometimes you'll go to the civil affairs bureau after lunch and they are sleeping or playing cards," said one Xinyang taxi driver. "Sometimes you can't even find anyone."

Drinking on the job is hardly unique to China, but ritualized drinking is deeply ingrained in China's business culture. Restaurants usually offer private banquet rooms, some with lounge areas, flat-screen televisions and private bathrooms. Tables are often set with specific glasses for beer, wine or baijiu, the fiery Chinese liquor that lubricates nearly every banqueting experience.
A banquet is considered a mandatory exercise for welcoming guests on official business. Hosts will lose face if a guest is perceived to be uncomfortable or having less than a jolly time. By this same logic, one way to ensure good feelings and build rapport is for everyone to drink. And, often, drink very heavily.

"It's like a form of communication between people," offered Zhu Xiaojun, general manager of Jigongshan Baijiu, a distillery in Xinyang. "It would be disrespectful to not drink with a guest."
Many of the growing number of foreign business executives in China would probably welcome some disrespect. Baijiu is distilled from sorghum and other grains, has the clarity of vodka or gin but contains far higher alcohol levels than most spirits. It is served in shots and its taste has been compared with rubbing alcohol or diesel fuel. Toasting is customary and can sometimes take on the bonhomie of hazing.

"When there are six people and you see three bottles of baijiu waiting on the buffet table, start eating and start eating fast," said one American businessmen in describing his survival strategy. He said he once faced baijiu at consecutive banquets for lunch, dinner and breakfast.

Banquet war stories are legion. Tim Clissold, author of "Mr. China," a memoir about doing business in China, described an evening banquet with a Chinese mayor that featured course after course of exotic food: cow's lung soaked in chili sauce, goose stomachs, fish lips with celery, goat's feet tendons in wheat noodles, ox forehead, turtle casserole and, finally, deer's penis. Round after round of baijiu toasts followed until the banquet ended and Clissold staggered from the table.

"I've never met anybody, even at the heights of alcoholic derangement, prepared to admit that they actually liked the taste," Clissold wrote of baijiu. "After drinking it, most people screw up their faces in an involuntary expression of pain and some even yell out."

Baijiu does usually enliven conversation. In 1974, Henry Kissinger played host in New York to Deng Xiaoping and commented on the powers of Maotai, the most famous brand of baijiu.

"I think if we drink enough Maotai we can solve anything," Kissinger said.

"Then when I go back to China, I must increase production of it," Deng responded.

Today, baijiu remains a major player in China's alcohol market, but nationwide production has steadily declined as rising prosperity has brought more alcoholic choices, like wines, beers and other spirits. A younger generation of business executives in cities like Beijing and Shanghai is more likely to eschew baijiu. Many prefer the golf course to the banquet table as a setting for doing business.

At the Jigongshan Baijiu distillery in Xinyang, Zhu said baijiu was a tough business with more and more brands competing for a slowly declining number of customers. He estimated that the Xinyang crackdown had cost him about 20 percent of his sales. Zhu described officials as an important segment of his customer base but remained hopeful.

"Most people can adjust their drinking to drink more at night," he suggested. "Maybe two bottles instead of one. Or they can drink more on the weekends."

Wang believes that his crackdown will not just save money and improve work performance but also liberate government officials from unwanted cultural expectations. He said many bureaucrats considered lunchtime drinking an onerous obligation. "A lot of people agree with the decision," said one city official, Shi, who refused to provide his full name. "They felt obligated to drink at these lunches. If they didn't, they would be accused of not treating their guests warmly.

"But," he added, "it was tiring."

Meanwhile, the inebriation inspections have become news media sensations. Three special alcohol SWAT teams make random checks on the city's 120,000 officials and civil servants. Offenders are usually reprimanded or shamed by accounts in local newspapers and television reports. In January, a reporter from China's state television network, CCTV, followed Li's team and filmed him catching an inebriated ranking official. Li fired him.

Last week, Li, 60, took a reporter from The New York Times on a surprise visit to the Middle Court and the city's construction commission. He said violators were quick with excuses: a good friend in town; a special family occasion; even a shot or two on doctor's orders.

"I say, 'We don't care,' " Li said.

At the construction commission, a startled secretary said, "Who are you?" when Li's team burst into one office. At the Middle Court, several offices were locked and empty, leaving open the possibility that their inhabitants were off drinking and not planning to return.

At the end of the day, Li's team tested about 20 cadres and nary a one tested positive. He made only one exception when a roomful of older men shooed him away.

"We're old bosses," one of them said, explaining why they were not subjected to the test. "We're retired."

Article picked by: Shi Rong (07A102)

Labels: corruption, guanxi, Shi Rong (07A102), Social

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Straits Times Report: Laptop sent for repair loaded with bootleg XP

Link: http://www.straitstimes.com/Singapore/Story/STIStory_220534.html

A BRITON who has lived here for 11 years got a rude shock when he turned on his Hewlett-Packard (HP) laptop, only to be flashed a message saying that its copy of Windows XP was a bootleg one.

Mr Anthony Jeff, 56, had just picked up the machine from an HP-authorised service centre in Guangzhou, China, where he was on a business trip.
His bought-in-Singapore laptop kept crashing during the trip, so the globe-trotting businessman sent it to an HP-authorised service centre there, since the machine had a limited international warranty.

The service centre told him that it did not have any more stock of the English version of Windows XP software, and that the default version used in China was the one in Chinese, but Mr Jeff insisted on having an English version installed.
An HP spokesman said: 'The engineer was under pressure and downloaded an English version from the Web without obtaining a licence from Microsoft.'
Mr Jeff, who was not told this, discovered it only when he turned on the machine.

'Fortunately for me, I did not turn on the laptop in front of my clients that day. It would have been utterly embarrassing for me,' he said.
He runs day2daytrading, a maker of decorative furniture and licensed toys like Buck Rogers, and is married to a Singaporean.

Mr Jeff returned to confront the service centre staff the next day, only to be taken aback by their nonchalance. He was told it was 'normal' in China because 'everyone uses copies'.
HP has since clarified that it gives strict guidelines to its authorised service centres against installing illegal copies of operating systems.

Its spokesman added that the company took the matter seriously, and that it would discipline the engineer and 'reiterate the importance of our service policy to all our partners'.
China has been in the spotlight for its rampant software piracy over the years, but industry observers say the incident was not about piracy but a failure in HP's support service.
Mr Tarun Sawney, anti-piracy director for the software piracy watchdog Business Software Alliance Asia, said: 'Using an unlicensed product key to download software is definitely illegal, but this is the first time I've heard of a service centre doing something like this.'
Technology lawyer Bryan Tan said: 'The attitude of the service centre reflects the general lackadaisical attitude in China towards using genuine software.'

Meanwhile, HP Singapore has settled the matter with Mr Jeff: It has paid for his return air ticket to China on business class, repaired his old laptop, given him a new one and also an HP iPaq smartphone.

Mr Jeff is happy with the way the company has resolved his problem. He remains an HP fan - and not because of its compensatory moves. When he had to buy a new laptop in China after the one with the illegal Windows XP could not work, he chose an HP.

Article selected by: Shi Rong (07A102)

Shi Rong's Analysis (Or Whatever you call it)
Anyway, I am showing you all this article as it shows how serious the piracy problem is, since even non-perpetuators can be affected by it. This article can also show the large scope of this issue in China considering the comment made in the article and that it affects large corporations like HP in this case. This certainly gives piracy hunters another thing to do in their checklists: Ensuring that pirated software is not transmitted to customers.

Labels: Economy, Piracy, Shi Rong (07A102)

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