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Chinese Group to Acquire AMC

Posted: 20 May 2012 11:51 PM PDT

The Wall Street Journal reports that China's Wanda Group has agreed to acquire U.S. cinema chain AMC Entertainment for around $2.6 billion in a deal rumored since early May:

The deal announced late Sunday would give China's Dalian Group Corp. access to AMC's 346 multiplex theaters with more than 5,000 screens, mostly in the U.S. and Canada. As part of the deal, plans to invest up to an additional $500 million in AMC, which the U.S. chain can use to update its cinemas' technological innovations and reduce debt.

In a statement, Wang Jianlin, chairman and president of Wanda, said the acquisition "will help make Wanda a truly global cinema owner, with theater and technology that enhance the movie-going experience for audiences in the world's two largest movie markets."

The deal is subject to regulatory approval from U.S. and Chinese authorities, the companies added.

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Cartoon: Chen Guangcheng’s Kiss of Freedom, by Hexie Farm (蟹农场)

Posted: 20 May 2012 10:00 PM PDT

Wang Lijun To Face Treason Charges

Posted: 20 May 2012 08:51 PM PDT

The South China Morning Post [$$] is reporting that , 's former police chief whose February visit to the U.S. consulate in Chengdu sparked China's biggest political in two decades, will stand trial for treason as early as next month:

The trial will take place in Sichuan province's capital, , home to the US consulate where Wang fled. It remains unknown whether the trial will be open to the press or the public, the sources said. Wang could face the death penalty.

If the trial goes ahead as reported, it will serve as a good indication that the outcome of two other connected cases, those of Bo and of his wife Gu Kailai, a murder suspect in the mysterious death of a British businessman, will also be known shortly.

…

Hong Kong-based China law expert Ong Yew-kim said yesterday that he believed Wang could hardly be sentenced to death "as he neither killed anyone, nor had been caught in possession of weaponry".

"But I wouldn't be surprised if he receives eight or 10 years of jail terms," Ong said.

Another source in Chongqing said earlier that Wang, despite his defection attempt, had been acknowledged to "have made a major contribution" to investigations into the Bo scandal.

As the investigations into Bo Xilai and his wife have snowballed, the web of people associated with the scandal has grown as well. The New York Times' Ed Wong and Jonathan Ansfield reported today that with the relationship between Bo Xilai and Wang Lijun hanging by a thread just days before Wang turned up at the U.S. consulate, three close and powerful allies of Bo rushed to Chongqing to broker a peace:

The most famous of the three, Xu Ming, 41, listed by Forbes as China's eighth-richest person in 2005, had flown in on his private jet. He and the others held separate meetings with Mr. Bo and Mr. Wang. The damage was irreparable. The former intelligence agent, Yu Junshi, rushed home and stuffed a bag with 1.2 million renminbi, or nearly $200,000, to take to a bank with Ma Biao, the other businessman, known for his girth. Then all three fled to Australia within days, fearful of the fallout from a possible investigation of Mr. Bo.

Those figures are now being detained as central suspects or witnesses in the Chinese government's broad investigation into Mr. Bo's use of power. His fall from the party's top echelons has opened a window on how some of his closest allies from his years as a rising official in northeast China became entwined in the social and economic fabric of Chongqing, a fast-growing western municipality of 31 million that Mr. Bo governed for four years. The accounts about those allies, which raise questions about Mr. Bo's relations with tycoons, are based primarily on interviews with six people associated with the circle, who spoke on the condition of anonymity for fear of facing official scrutiny, and a review of financial documents and company Web sites. Together, they reveal the workings of the shadowy court of one of China's leaders, and of the panic that set in when these ambitious figures realized their world was about to collapse.

"These are powerful men with their own style," said one person who has met with Mr. Yu. "It was all very strange, very abnormal, the way they acted at that time."

…

The three men who fled to Australia have been held for two months. They left after Mr. Wang's consulate visit, but returned to China in about 10 days on Mr. Xu's private jet, thinking that Mr. Bo had avoided serious trouble. They were picked up by the police around the time that Mr. Bo was removed as party chief of Chongqing on March 15, according to several people who knew the men or their friends and families. One with security contacts said almost 60 people had been detained.

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Taiwan President Pledges Close Ties with China

Posted: 20 May 2012 07:58 PM PDT

After Ma Ying-jeou's successful reelection and hopes for improved cross-strait relations, President Ma has pledged to build stronger relations with China in his inauguration address. The Voice of America reports:

The Taiwanese president, who was first elected in 2008 on pledges to ease tension with rising military power China, said he would stick to that course. President said he expected more deals like the 16 trade, transit and economic agreements that were signed between the two sides over the past four years.

But President Ma told a news conference he was in no hurry to sign a formal peace accord with Beijing without popular support. He was criticized after making the suggestion last year.

He says Taiwan will handle easy but pressing issues with China before tackling harder ones and consider economic issues ahead of political ones. In that spirit, he says, there is no urgency to discuss a peace accord now with China, and Taiwan's people must first express a high level of support, including a voter referendum.

President Ma said on Sunday he had heard the public's voice. But his government has said it expects to sign an investment protection guarantee with China this year, helping about a million of the island's business people. Officials on the island also expect to cut thousands of import tariffs and lower barriers for Chinese investors interested in Taiwanese companies, all before Ma leaves office in 2016.

While Ma addressed Taiwan's relationship with China, critics claim that his pledge lacks a clear blueprint. There have also been criticism that Ma's lack of improvement on domestic issues overshadows the improved relationship with China. The Wall Street Journal adds:

Starting Saturday, tens of thousands of protesters gathered outside the presidential office, with grievances including Mr. Ma's failure to deliver on two major campaign pledges in his first four-year term: to lower the jobless rate to 3% (the latest data, for March, show a rate of 4.17%) and to accelerate real wage growth (it's rising at a snail's pace). The wealth gap remains wide, with the annual disposable income of the top 20% earners now 6.19 times that of the bottom 20%.

Adding to those complaints are the government's withdrawal of its longtime subsidies on fuel and electricity last month and its plan to reimpose capital-gains tax on stock transactions, which spurred discontent from the middle class and business community.

In June 2010, Taipei and Beijing signed a landmark trade pact to gradually lift tariffs on goods and investment barriers between the two sides. During Mr. Ma's first time, 16 cross-straits agreements were reached, including one allowing visits from individual Chinese rather than just tour groups—a much-needed boost for Taiwan's tourism industry. Despite the lingering mistrust between the two sides—Beijing continues to to assert its right to annex Taiwan by force, according to the latest assessment—military tension has relaxed substantially, a much welcomed change to the U.S.

Cross-strait détente and increased bilateral trade helped Mr. Ma to secure a second term, but analysts said the president should not count on help from China, implicit or explicit, in reversing the plummet in his popularity.

Prior to Ma's inauguration speech, thousands of protesters had gathered due to the Taiwan president's stance on cross-strait relations.

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China Approves Google’s Acquisition of Motorola

Posted: 20 May 2012 07:55 PM PDT

Despite longstanding tensions between Google and China due to rules on internet access and censorship, China has recently approved of Google's acquisition of Motorola. The Associated Press reports:

Authorities in China have approved Inc.'s bid to buy phone maker Motorola Mobility, clearing the way for the $12.5 billion deal to close early next week.

The approval brings the Internet search giant closer to sealing its biggest acquisition ever. Buying Motorola allows Google to expand into manufacturing phones, tablet computers and other consumer devices for the first time. The deal also gives Google access to more than 17,000 Motorola patents.

The Chinese government approved the deal on Saturday, Google spokeswoman Niki Fenwick said. "We look forward to closing the deal," she said.

Although China has given Google the OK, they have also stipulated that Android, Google's mobile operating system, remains free and open for the next five years. CNET adds:

The stipulation would seem to be designed to keep Google from denying Motorola's handset competitors access to the mobile operating system, or from giving Motorola an advantage of some sort — such as integration between its handsets and Android that's tighter than connections between rival phones and the OS.

From the beginning, Google has taken an open approach with Android, making it free and available to any hardware manufacturer — a strategy that's helped to quickly make Android the No. 1 mobile OS globally.

"Many hardware partners have contributed to Android's success and we look forward to continuing our work with all of them on an equal basis to deliver outstanding user experiences," Google CEO Larry Page said during a conference call last August, at the time the intended acquisition was announced. "We built Android as an open-source platform and it will stay that way."

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Chen Guangcheng Speaks from New York

Posted: 20 May 2012 06:38 PM PDT

Chen Guangcheng, who arrived in New York on Saturday, greeted a cheering crowd outside New York University with a short speech. From NTDTV, via Shanghaiist:

From the Associated Press:

"I believe that no matter how difficult the environment nothing is impossible if you put your heart to it," he told a cheering crowd at NYU shortly after arriving at Newark Liberty International Airport on Saturday evening.

"We should link our arms to continue in the fight for the goodness in the world and to fight against injustice. So, I think that all people should apply themselves to this end to work for the common good worldwide …."

"For the past seven years, I have never had a day's rest," Chen said through a translator, "so I have come here for a bit of recuperation for body and in spirit."

Chen thanked the U.S. and Chinese governments, along with the embassies of Switzerland, Canada and France.

Some Americans welcomed Chen not with cheers but, in comments collected by Offbeat China, with complaints about the burden he would place on the US taxpayer. The combined hourly rate of the several US officials who negotiated on his behalf is likely quite high; however, an NYU spokesman told The Wall Street Journal that, while he could not discuss financial specifics, "I don't think it will come as a surprise to anyone that there have been significant offers of philanthropy regarding Mr. Chen."

With Chen and his family finally out of China, diplomats involved in the wrangling that secured their departure anonymously disclosed their account of the negotiations to The Washington Post.

Over the course of the negotiations, the Chinese never put any proposals on the table. Their role was strictly reactive. At the end of each meeting, Cui would leave to report the latest terms to Chinese leaders. At times, he would enter the next meeting having come directly from the compound reserved for China's highest leaders.

"We would put something forward, and were getting answers back almost immediately from the highest levels," one senior administration official said. "I have never seen the Chinese government working this rapidly and efficiently."

Meanwhile, the 12-hour time difference with Washington meant U.S. negotiators were getting little sleep, spending most of their night hours briefing the White House and State Department via secure lines at the embassy.

Negotiating with Chen could sometimes be as difficult as negotiating with Chinese officials. Conversations with him could be deeply moving. He often seemed fragile — a blind man with few possessions, sleeping in a small unadorned room in the barracks of the embassy. He talked of how much he missed his wife and worried about his children.

But he could pivot in an instant, displaying a steely shrewdness as he detailed the demands he wanted conveyed to Chinese officials.

One Chinese scholar quoted by the South China Morning Post drew a pessimistic conclusion from the episode:

"It was an acceptable solution among the three parties after a series of negotiations between Beijing and Washington," Professor Shi Yinhong , a Sino-US expert at Renmin University, said. "But I hope Chen's incident is just an isolated case, not a trend."

Shi said mainland scholars were more suspicions about US intentions towards China's internal issues after Chen's case. It came at a sensitive time, just before the Sino-US Strategic and Economic Dialogue.

"I think our leadership should remain vigilant … because the Chen case showed Washington doesn't watch us only on our human rights," Shi said.

"It also wants to affect our politics at the highest level."

But Orville Schell was among many who pointed to encouraging signs for the crucial US-China relationship in the two sides' conduct during the crisis.

… China showed either a new maturity, or a much keener sense of realism, perhaps recognizing that relations with the U.S. are even more important than the fate of a single dissident, even if his flight is represents a sublime loss of face ….

In many ways, it is tempting to look back at the whole transaction as something of a hopeful breakthrough. With a minimum of posturing, the two countries did manage to work their way through a very difficult problem. Evidently, each saw sufficient common interest to find a mutually agreeable solution. That is a very hopeful sign.

At The New Yorker, Evan Osnos saw similar grounds for cautious optimism in Chen's expression of gratitude to the Chinese government for their "restraint and calm":

… It might not have been the first thanks on everyone's lips. One could read that as a diplomatic comment, intended to protect those still in China, including his mother (whose house is reportedly being fenced off by local officials) and the fellow dissidents who helped him escape.

But it must also be read as the measure of a man with extraordinary presence of mind. He is, after all, correct: by the standards of official Chinese conduct in many other areas, its handling of Chen's departure was restrained and calm. And that is one of the modestly encouraging facts to emerge from the final accounting of this whole complicated business: presented with diplomatic dynamite, neither China nor the United States succumbed to its worst instincts. The American handling of the affair was far better than the fevered early indictments suggested, and the Chinese have, so far, kept their promises to Chen and the United States. Those involved should take confidence from that ….

And from Bloomberg:

… With Chen now in New York, the two sides can return to nurturing a relationship that has progressed to a point that a case like his can be handled without a serious rupture, said Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace in Washington.

"It reinforces the trend since late 2010 for the two leaderships to find a way to steer around sensitive subjects and promote pragmatic near-term relations," Paal said ….

"I think this brings the matter to a close," Bonnie Glaser, an analyst at the Center for Strategic and International Studies in Washington, said in an e-mail. "Both countries will focus on their domestic politics, upcoming elections in the U.S. and the 18th Party Congress in China later this year."

While many headlines hailed Chen's arrival in the US as an ending, Perry Link told NPR that although "the tangle is finished for this particular case, it seems … the problems of human rights in China are not problems of one or two people whose cases have to 'be resolved,' quote-unquote. It's a very deep, underlying long-term problem and we should view it that way." As others stressed, the news brings no resolution for family and supporters still in China. From at The Guardian:

Nicholas Bequelin of Human Rights Watch said Chen's departure was no cause for celebration as his family remained under pressure and there may be less incentive for the central government to investigate wrongdoing by the local authorities.

More importantly, Bequelin said, it raised questions about the wider environment for activists. "This is a reflection that there is no room for human rights defenders in China. We don't know if this will turn into a temporary stay or exile, but in either case it begs the questions why someone like Chen Guangcheng cannot freely operate in China. What is it that stops the authorities from tolerating or even embracing someone like Chen?"

Bequelin's comments were echoed, perhaps surprisingly, in a weibo post by editor-in-chief, Hu Xijin, quoted by Didi Kirsten Tatlow at The New York Times: "Today, Chen and his family have already taken an American airplane to New York. It makes people feel regret and sigh that in China today this is the only way to solve his problem." His wistfulness was not matched by an editorial in his paper, which took a dismissive tone: "The drama around Chen is a colorful bubble. Nothing is left when it bursts." Otherwise, as Tatlow wrote, Chinese media were largely silent about his departure, focusing instead on athletic victories, the , or the ongoing clean-up of 'foreign trash'. The famously independent Caixin did publish a report on Chen's arrival in New York, but William Farris noted on Google+ that this was quickly taken down.

While some expressed reservations or disappointment, there was broad approval of Chen's decision to leave from activists remaining in China. The Guardian's Jonathan Watts spoke to several:

He Peirong – who played a key role in the escape by driving Chen from Shandong to Beijing – said she sympathised, even though the reverberations of Chen's flight remain unclear. "I support any decision made by Chen, but it's too early to say whether his departure is a good thing for China's rights movement. Things are not settled. Problems are not solved. His family is still in China. The people who helped him escape are still in China."

He – who was detained for several days after Chen's escape and remains under surveillance – spoke of her admiration for Chen.

"He has done more than you could expect from any individual … Although he has experienced so much injustice and so many threats, he sticks to his beliefs. He is like a piece of jade: always smooth and warm."

Chen's lawyer Liu Weiguo said similarly that, despite his reservations about the outcome, "for the Chinese rights movement he has done more than enough. We can't ask him to do any more. Now he needs time to rest." Teng Biao, who precipitated the second phase of the diplomatic crisis by persuading Chen to abandon the idea of remaining in China, stood by his earlier position, telling Watts that "[Chen's] safety and freedom are the priority. Whether this is a good thing for the rights movement is secondary now."

None seemed to entertain any hope that the concessions granted to Chen and his family were signs of a wider easing. From Reuters:

"There won't be any big changes for us now that Chen Guangcheng has left. There are still many reasons to keep up control and stability preservation," , a Beijing human rights lawyer, said in a telephone interview, referring to the Communist Party's terms for controlling dissidents.

Jiang, a long-time campaigner for Chen's freedom, said he remained under house arrest, despite police officers' earlier promises that he would be released after Chen left.

"I still don't know when they're going to let up," Jiang said of the police restrictions. "This is no way forward, but especially with the 18th party congress, the high pressure will probably only grow, not decrease."

As in recent days, the most urgent concern was for Chen Kegui, Chen's nephew, who faces charges of intentional homicide for attacking intruders into his father's home when Chen Guangcheng's escape was first discovered. From The Wall Street Journal:

Lawyers who have taken up the case of Mr. Chen's nephew said it wasn't clear how Mr. Chen's departure would affect the outcome.

"It's hard to say, since China never plays its cards in the proper order," said Chen Wuquan, a Guangzhou-based lawyer whose license was revoked by local authorities just as he was preparing to travel to meet with Chen Kegui this month.

"I think [the authorities] will be more strict in dealing with Chen Kegui," said Liang Xiaojun, another of the lawyers involved in the case. "They won't care about the international viewpoint."

While a number of lawyers volunteered to defend Chen Kegui, his family's eventual choice of Ding Qikui and Si Weijiang was rejected by local officials, supposedly at his own request. Chen Guangcheng told The Financial Times that similar obstruction had occurred before his own sentencing to four years in prison in 2006. "That this naked, shameless abuse can still happen again six years later …," he said, adding that he suspected Chen Kegui had been tortured to make him accept a public defender in place of the lawyers appointed by his family.

The longer term fear arising from Chen Guangcheng's departure is that he may, like others before him, be barred from re-entering China and find himself trapped and increasingly powerless abroad. Wang Dan argued in a recent New York Times op-ed, and Human Rights Watch's Phelim Kine told The Wall Street Journal on Saturday, that the Internet had changed the nature of political exile. Nevertheless, worry about Beijing's enthusiasm for exporting dissent muted Orville Schell's optimism about the state of Sino-US relations. From Asia Society:

The tactic of facilitating the most prominent critics of the Party to go into exile was something like the outsourcing of the manufacture process of a very polluting and unwelcomed home-based industry. There might initially be some complaints from dispossessed workers, but ultimately all, or almost all, would be forgotten, and the ongoing problem, if there were one, would be someone else's.

With dissidents like Fang Lizhi and Wei Jingsheng, Chinese officials learned that interest in the opinions of such activists and concern for their well-being quickly waned once they were abroad. The political oblivion usually followed rather rapidly. Moreover, a short while after they left China, these once-celebrated voices seemed to lose the requisite standing necessary to being taken seriously as authorities on Chinese affairs. The process of being exiled effectively turned them into political eunuchs. Far better, so the Chinese leadership seemed to have concluded, to endure a few days of high intensity bad press as a prelude to watching a dissident parked harmlessly and unheard in Queens, sink out of site. The alternative was to have someone like Liu Xiaobo stuck in a Chinese jail writing damning essays and winning Nobel Prizes. (At least so far, neither Liu nor the Chinese Government has shown any inclination to engage in such export tactics in his case.)

In his interview with NPR, Perry Link also described the history of this trend:

The record of dissidents leaving China has changed pretty dramatically over the last 23 years, since the Massacre. At the time, the Chinese government was angry to see people like and Fang Lizhi and Fu Xiao Jun and many, many others who fled and congregated at the time at Princeton University, where I was teaching. There were about 25 of them. And the government didn't like that because they wanted them to come back. They were wanted and so on.

By now, I think we should say that the Chinese government's policy has changed about 180 degrees. Now, they're quite happy to see what they view as troublemakers like Chen Guangcheng be exiled, because the record over the last two decades of people who've come out has been that their influence inside China dramatically declines, and they feel frustrated. And their followers back in China feel frustrated.

So this exit of Chen Guangcheng is in one sense a win-win situation, because he and his family are now safe. And back in China they weren't and didn't feel that they were safe. And the Chinese government wins because it gets rid of a thorn in its side.

Link continued to describe Chen's rural background, a potent contrast with that of the sterotypical Chinese urban-intellectual dissident. Sui-Lee Wee and Terril Yue Jones explore similar ground in a profile at Reuters:

"It was his own feelings of discrimination from the time he was a kid that really got him interested in law," said Jerome Cohen, a China law expert and professor at New York University's law school. Cohen has become a supporter and confidante of Chen.

"He felt the community leaders, instead of making blind people an object of sympathy, treated them as an unneeded burden on the community, people who didn't pull their weight, people who claimed they shouldn't pay tax like able-bodied farmers.

"That was what started him off …."

"My first impression was I could be talking to a Chinese equivalent of Gandhi," Cohen recalled. "This is a man with a quiet charisma, considerable intelligence, very articulate and a steely determination."

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China Approves Google-Motorola Deal With Conditions

Posted: 20 May 2012 12:59 PM PDT

The decision was issued on Saturday:

Authorities in China have approved Google Inc.'s bid to buy phone maker Motorola Mobility, clearing the way for the $12.5 billion deal to close early next week.

The approval brings the Internet search giant closer to sealing its biggest acquisition ever. Buying Motorola allows Google to expand into manufacturing phones, tablet computers and other consumer devices for the first time. The deal also gives Google access to more than 17,000 Motorola patents. (Associated Press)

The full text of the decision is not yet available in English, although I'm sure that will be remedied by someone quickly. It only runs perhaps three pages in English (my estimate). Here's the link to the Chinese version.

Two things about the decision that are interesting. First, this is yet again another conditional M&A approval by the Ministry of Commerce. So far, we've only had one rejection (Coca-Cola's failed acquisition of Huiyuan) under the Anti-monopoly Law since 2008. However, conditional approvals seem to be getting more frequent. I'm not yet sure what that means, although it certainly does point to a more active MOFCOM which, if nothing else, is reminding everyone around the world that China must be taken seriously when cross-border M&A deals go down.

Second, the analysis of the mobile market by MOFCOM should provide lots of fodder for IT consultants and industry experts. I don't count myself as one, so I will not attempt to either support or criticize MOFCOM's take on the effects of the Google acquisition to China's domestic market.

That being said, here are a few of the issues raised by MOFCOM in its decision and, most importantly, the conditions it attached to the approval:

1. MOFCOM found that with Android, Google occupies a dominant market position. This is not a violation of the Anti-monopoly Law, but it is a key component of an analysis into whether a company is in fact using that position (or could do so in the future) to harm consumers. In its decision, MOFCOM took into account Android's market share, the reliance that mobile device manufacturers have on the operating system, Google's strong position with respect to technology and its financial position, and the relatively high market barriers to entry.

2. With Google's Motorola purchase, it would be able to treat other mobile device manufacturers non-preferentially, putting those manufacturers at a competitive disadvantage and distorting the market.

3. With respect to Motorola's patent portfolio, Google will be able to use those IPRs to force unreasonable licensing conditions, which could reduce competition and ultimately harm consumers.

No huge surprises there to anyone, I suspect. And here are the conditions that MOFCOM attached to the approval (this is NOT a translation, just a quick summary of key points):

1. Google shall provide Android on a "free and open basis" (免费和开放的基础).

2. In doing so, Google shall treat all original equipment manufacturers on a non-discriminatory basis.

3. Google shall continue to comply with Motorola's current fair, reasonable and non-discriminatory patent obligations.

4. Google shall commission an independent trustee (独立的监督受托人) to monitor and supervise the fulfillment of these obligations.

Conditions 1 & 2 are valid for five years, although Google can apply for modification or rescission if market conditions change. The trustee's report must be submitted to MOFCOM every six months. After the five-year period has expired, MOFCOM may still monitor the situation and make such decisions that are necessary given market conditions.

Someday I'd love to see what one of these trustee reports looks like.

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The Daily Twit (@chinahearsay Twitter feed) – 2012-05-20

Posted: 19 May 2012 08:59 PM PDT

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Facebook, China and Innovation

Posted: 20 May 2012 06:50 AM PDT

As made its stock market debut on Friday morning, and with observers wondering if and when the company will attempt to enter the China market, The New Yorker's stepped back from the flurry of Chinese state and commentary and asked whether "the political system that has nurtured China's rise may also be limiting its next step":

Beyond the snark and the state media, a more earnest discussion has gathered force. Despite years of investment and official injunctions to advance Chinese technology, China has yet to produce a brand or original tech product with a fraction of the global influence of Facebook or Apple. Chen Yongdong, a Shanghai-based technology writer, adapted the title of a famous Chinese poem for an essay he called "Raising My Head to Look Up to Facebook; Lowering My Head to Think About Its Chinese Counterparts." He wrote: "If you don't have , are you not going to be laughed at by the industry, and by the world?"

In all likelihood, China is approaching the end of its run as the world's low-skilled workshop. There are fewer workers, and they are pursuing more income and skills; Vietnam and other neighbors are cheaper. The larger problem is existential: The nation that so often reminds the world that it invented printing, paper, gunpowder, and the compass is exceedingly uncomfortable about how far back it has to reach to name its world-beating inventions. China has excelled in several pockets of innovation (genomics and nanotechnology, for example) but those are the exception; Chinese technology is now best known for "process innovation"—reducing the cost of producing, say, low-end mobile phones for Huawei—and for the distinctly Chinese term, "re-innovation," which involves making something simpler or cheaper than the original.

Even successful Chinese Internet companies, such as Tencent and Alibaba, are respected for their business achievements, not for their original insights. The obstacles are not a mystery: The government has failed to protect intellectual property or promote small- and medium-sized businesses with good ideas, to name a couple of factors.

Imagine, for a moment, the Chinese version of the Facebook story: A no-name undergrad in the Tsinghua University computer-science department gains notoriety for a high-profile prank that makes the university concerned about its digital security; instead of getting expelled, he starts a company, drops out, attracts prominent investors despite ignoring powerful players in the field, is invited to meet the President of the country, continues expanding, goes public, and makes billions. Impossible—for all kinds of reasons (a Chinese student who toys with a university network might not be enrolled by the end of the day), but the most vexing question may be, as an editorial in Nature once put it, "whether a truly vibrant scientific culture is possible without a more widespread societal commitment to free expression."

The Wall Street Journal's China Real Time Report, however, claims that China can still teach Facebook a thing or two:

With traffic quickly migrating from personal computers to mobile devices, all of the big Chinese Internet companies are pushing hard into mobile, but some with more success than others. Though Mark Zuckerberg is well aware of the mobile challenge, he might think about following in Tencent's footsteps, and instead of working on a more streamlined Facebook app or some grander mobile operating system, make a new mobile product from scratch.

China's largest internet conglomerate, Tencent, launched a new mobile chat service last year called Weixin.

On top of its mobile chat function, Weixin has integrated audio and photo sharing and other quirky features, one of which allows users to shake their phone and start up a conversation with strangers shaking their phone in the area. According to the Chinese media it's also testing a new circles feature, that has the uncanny power to automatically categorize friends and contacts based on how a person knows them, and even throws in a few similar strangers for good measure.

…

As Kaifu Lee, former head of China for points out, what has set Weixin apart is it has left completely behind the "baggage" of being a PC product.

"Facebook's client was not inventive from the get go for the mobile experience, [it was] just aiming for functional compatibility with desktop version. That may on the positive side it will be more friendly to the desktop client, but the downside is it's not optimized for mobile," he said.

See also speculation in Forbes on what impact Facebook's IPO will have on China's top social network, .

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NYT: Inside the Princeling “Spoils System”

Posted: 20 May 2012 02:25 AM PDT

The New York Times dives into the upper echelons of China's political elite, where relatives of party officials have enriched themselves within an "ecosystem of crony capitalism" that "poses a fundamental challenge to the legitimacy of the Communist Party":

As the over continues to reverberate, the authorities here are eager to paint Mr. Bo, a fallen leader who was one of 25 members of China's ruling Politburo, as a rogue operator who abused his power, even as his family members accumulated a substantial fortune.

But evidence is mounting that the relatives of other current and former senior officials have also amassed vast wealth, often playing central roles in businesses closely entwined with the state, including those involved in finance, energy, domestic security, telecommunications and entertainment. Many of these so-called also serve as middlemen to a host of global companies and wealthy tycoons eager to do business in China.

"Whenever there is something profitable that emerges in the economy, they'll be at the front of the queue," said Minxin Pei, an expert on China's leadership and professor of government at Claremont McKenna College in California. "They've gotten into private equity, state-owned enterprises, natural resources — you name it."

For example, Wen Yunsong, the son of Prime Minister , heads a state-owned company that boasts that it will soon be Asia's largest satellite communications operator. President 's son, Hu Haifeng, once managed a state-controlled firm that held a monopoly on security scanners used in China's airports, shipping ports and subway stations. And in 2006, Feng Shaodong, the son-in-law of , the party's second-ranking official, helped Merrill Lynch win a deal to arrange the $22 billion public listing of the giant state-run bank I.C.B.C., in what became the world's largest initial public stock offering.

The foreign press has been reporting on China's princelings and the challenge they pose to the CCP since well before the Bo Xilai scandal erupted, with a number of China's incoming generation of top leaders (including president-in-waiting Xi Jinping) descending from Communist Party elite. Still, the Bo scandal turned the princeling issue into a "U.S. media phenomenon," especially in light of already existing reports of son 's lavish and conspicuous lifestyle, writes Jay Newton-Small for TIME's Global Spin blog:

China has changed in the years since the revolution when everyone was expected to live simply. Bo Guagua and his contemporaries are everything the Communist Party stalwarts have sought not to be: frivolous, glittering, pampered, privileged. And while Bo Guagua has dropped off the map, abandoning his $3,000-a-month Boston luxury apartment for something in an undisclosed location, there is no shortage of princelings to focus on. There are hundreds if not thousands of them in the U.S. alone. "The reality is [there is] a very large number of Chinese officials, not only of highest levels but throughout the system, who send their children abroad whenever they can," says Lieberthal.

The American media aren't the only ones to find the princelings fascinating. Indeed, it is a much more crucial development that Chinese blogs were onto Bo Guagua even before the scandal enveloped his parents. They were the first to track his glitzy existence, for example, writing about Bo Guagua allegedly using his red Ferrari to pick up the daughter of former U.S. ambassador to China Jon Huntsman for an event. The same blogs follow former People's Liberation Army marshal Ye Jianying's granddaughter Ye Mingzi's latest fashion design or former Vice Premier Wang Li's granddaughter Wan Baobao's jewelry designs. They also traffic in unsubstantiated speculation (like whether the daughter of a prominent Chinese leader, attending Harvard under an assumed name, dated basketball phenom Jeremy Lin).

Singling out Bo Guagua may be the regime's shot across the bow to other young princelings: keep a low profile or you could end up like him. But surely Bo Guagua is only the first installment in what promises to be a long and dramatic soap opera. It's hard to imagine that none of the princelings want to be the Paris Hilton of China. As the story unfolds, the test will be how the Communist Party handles it. The trouble is that money and what it can flaunt is central to Chinese society nowadays. "China itself is very much focused on making money as a core goal of people throughout that system," says Lieberthal. "In fact, there are complaints in China all the time that people are worried that the focus is so strong that it isn't properly balanced by ethical considerations. The ethic is making money. And if that ethic isn't tempered, you may have a rapidly growing economy but you've got real problems."

© Scott Greene for China Digital Times (CDT), 2012.

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