Monthly Archives: January 2009

Death Sentences Handed Down In Tainted Formula Scandal

The sentences in the melamine-tainted infant formula trials have been handed down, Xinhua reports. They are harsh, if not unexpectedly so.

The most prominent defendant Tian Wenhua, who was chairwoman of the Sanlu Group, the largest producer of baby milk powder, gets life imprisonment and a 20 million yuan ($2.9 million) fine. Now-bankrupt Sanlu was fined 50 million yuan.

Separately (the sentencing was spread across five courts in Shijiazhuang  in Hebei province), two of the middleman involved, cattle farmer Zhang Yujun and milk trader Geng Jinping, received death sentences. Zhang Yujun was accused of running an illegal workshop in Shandong province, producing 600 tonnes of the fake protein powder –the largest source of melamine in the country. Geng Jinping was convicted of producing and selling toxic products to dairy companies from his milk production base.

The courts also jailed two other people for life and six, including three former Sanlu executives, for between five and 15 years for their part in the scandal, Xinhua says.

Apart from the 21 defendants who have been sentenced or tried, a further 18 have been arrested but it is unclear if or when they might be tried.

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Obama Inauguration Speech Almost In Full

BBC reports that translations into Chinese of U.S. President Barack Obama’s inauguration speech were economical if not with the truth then at least with the words. While Xinhua posted the speech in full on its English language web site, the Chinese version omitted references to facing down communism and silencing dissent. One sentence the censors left out:  “To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history,”

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Top Chinese Cops Held In Gome Graft Probe

Couldn’t resist the tabloid headline, but the underlying story reveals more signs of why the anti-corruption drive is having such a hard time making headway.

Reports say two senior police officials in charge of the investigation in to Gome Electrical Appliances Holdings founder Huang Guangyu have been detained for allegedly taking bribes during the investigation. Huang, one of China’s richest businessmen, stands accused of alleged manipulation of the stock price of China’s largest consumer electronics retailing chain. (Background here.)

The two officials involved are Zheng Shaodong, assistant minister of public security and director of the ministry’s economic criminal investigation bureau, and Xiang Huaizhu, the bureau’s deputy director, have been detained, Xinhua reports, quoting ministry sources.

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China Catches 1,000 Cheats In Civil Service Exams

The anti-corruption drive against officials is making slow headway. One reason may be that that bureaucracy takes on officials who have a predisposition for breaking the rules. That is one conclusion that could be drawn from a China Daily report that 1,000 people taking civil service entrance exams have been caught cheating.

This Bystander acknowledges that he is stretching a point to make a point: the proportion of caught cheats is low, though how many others got away with it? This year saw a record number of applications — more than 750,000 for 13,500 places — civil service jobs seem more appealing with the downturn in private sector employment. But this does all seem redolent of a readiness to bend the rules when things become highly competitive that will be familiar to many who do business in China.

China Daily says 300 candidates were caught cheating while completing their papers. Another 700 were deemed to have done so on the basis of too-similar answers. Some of the cheaters used tiny earpiece receivers to pick up radio transmissions of the correct answers from accomplices outside the exam room. That high-tech approach has also shown up in the national college entrance exams taken by high schools and in which there is a 50% failure rate.

Last July, education authorities in eastern Zhejiang province uncovered a scheme in which a group of parents and relatives radioed in the correct answers to nine high school students sitting the tests by way of tiny earpiece receivers. The education ministry said that across the country, 2,645 people were found cheating in the college entrance exams, though that was 800 fewer than in 2007. Some 10 million students sit the tests.

Back to the civil service entrance exams: we were amused last month by another China Daily report of a candidate in Jiangxi province who was duped out of 12,000 yuan (1,760) by a con man who had provided him with a bogus cheat sheet for the exams. The candidate turned to the authorities for redress. Good luck.

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English Soccer Seeks To Get Back On Free-To-Air Chinese TV

English football is widely watched on TV (and often heavily gambled on) everywhere in Asia, except China. The reason for that is that the games have been on WinTV since 2007 when the subscription service outbid free to air broadcasters for China rights to the games. The size of the viewing audience has reportedly fallen from 30 million to about 20,000 following the switch.

Now Bloomberg reports that the English Premier League, worried that its big clubs are missing out on a potentially lucrative merchandising market and the game is at risk in its global marketing battle with basketball, is trying to get the matches back on free TV.

It is reportedly brokering a consortium of advertisers to buy the China rights when they next come up in 2010. The consortium would then give the games to CCTV for broadcast. No names of whom the advertisers might be, but they are  “world-wide brands in the sporting goods, soft drinks and alcoholic beverage industries”, Phil Lines, the Premier League’s head of international broadcasting and media operations, told Bloomberg.

Novel approach to sports media rights and a further sign of the potential importance of the domestic Chinese market to global businesses.

Update: The Offside, a football blog, has a more skeptical take on the EPL’s proposal.


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China’s Widening Income Inequality Challenges Party’s Leadership

The urban-rural inequality gap is now at its widest since Deng Xiaoping initiated economic reform three decades ago. Unpublished but widely reported agriculture ministry figures show urban wages are now 3.36 times those in rural areas, up from 3.33 times in 2007 and a post-1979 record.

President Hu Jintao and Prime Minister Wen Jiabao took power just over six years ago with a promise to redress the imbalances exacerbated by rapid economic growth. That they have failed to do so poses questions about the Party’s management of the economy and its political authority regardless of the fact that real living standards in the countryside have risen. Policy is increasingly having to be tailored to curtail further widening of the urban-rural divide, complicating the overall management of a slowing economy.

Unemployment among migrant workers is a case in point; job losses have been concentrated in low-end export manufacturing, which was heavily dependent on migrant labor. Those lost jobs deprive rural families of remittances while local authorities shoulder an additional burden of supporting the influx of returning but unemployed workers.

Beijing is increasingly being pushed towards more radical measures to transfer wealth form city to countryside–which will bring questions about the Party’s leadership of their own.

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Parents Of First Baby To Die Of Tainted Infant Formula Accept Compensation

The parents of the first child to die from ingesting melamine-tainted infant formula has accepted compensation from Sanlu Group, the dairy company at the heart of the scandal, their lawyers say. They have taken the 200,000 yuan ($29,000) death payout under the standardized compensation scheme announced last month by China’s dairy association and the 22 dairy companies involved.

The couple give up their right to further legal action. Not so other parents who say the compensation levels are too low, even though lawyers quoted by Xinhua say that death compensation in Gansu, where the couple live, is typically 40,000 yuan. Parents in Guangdong province launched a lawsuit against Sanlu and the China Dairy Industry Association in October demanding 900,000 yuan, but the Guangzhou court wouldn’t hear the case.

Xinhua also says that more than 3,000 families in Shijiazhuang, capital of Hebei province, where Sanlu is based, have accepted the compensation package, quoting local government officials. The squeeze has been put on parents to take the money regardless of their reservations.

“Some parents were reluctant to accept the compensation package at the beginning, but they were persuaded and have since changed their minds,” a spokesman of the Shijiazhuang government said.

Six babies died and 296,000 children were sickened by the tainted milk. At the start of  December, 861 children were still in hospital suffering from kidney stones or urinary problems. The health ministry has not updated the numbers since.

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Four Chinese Construction Firms Banned From World Bank Bids

Another black eye for Chinese companies on the international stage. China State Construction, China Wu Yi Co. China Road and Bridge and China Geo-Engineering are among seven construction firms and one individual banned by the World Bank from bidding on future contracts for alleged attempts to fix the bidding on road building projects in the Philippines between 2000 and 2007.

The debarments follow an investigation carried out by the division responsible for investigating allegations of fraud and corruption in Bank-financed operations. It says it uncovered evidence of a cartel involving the companies in what it calls “one of our most important and far-reaching cases”. The Chinese companies are banned from bidding on World Bank-financed contracts for between five and eight years. Details here.

The suspicion must be that collusive habits acquired at home didn’t stay at home when the companies ventured abroad.

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China Tweaks Its Economy Past Germany’s

Having fiddled with its GDP figures once more, China became the world’s third largest economy in 2007, passing Germany and closing in on Japan, which is number 2 after the U.S.

The National Bureau of Statistics said growth in 2007 was 13%, not 11.9% as previously stated, itself a revision from an initial figure of 11.4%. The latest change tweaks an extra $114 billion into the economy, all of which will do little to end some lingering doubts among economists about the robustness of China’s economic statistics.

Using the conventional market exchange rates,  Germany’s GDP was $3,3 billion in 2007, China’s GDP was $3.4 billon on the new estimate,  Japan’s, $4.4 billion and the U.S.’s  $13.8 billion. Private economists reckon that China will catch up with Japan  within five years. How long until it surpasses the U.S.? Goldman Sachs has pencilled in the year 2040.

While there is no doubt that the economy has grown by leaps and bounds since Deng Xiaoping inititated economic reform three decades agao, there there are famously lies, damned lies and statistics. China remains relatively poor. If you look at GDP per capita in purchasing power parity terms, which adjusts for price differences between countries to reflect buying power of local incomes, as the World Bank does, rather than comparing GDP at market exchange rates, China ranks as the 122nd richest country.

That said, as the FT and others point out, the latest GDP data “will reinforce the case to give China and other large emerging economies a bigger role in global financial decision-making.” Another reason for that is what is likely to be an overlooked point in the China-Germany economic comparisons. China is about to overtake the European country as the world’s largest exporter.

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China’s World Service, An Al-Jazeera Of Its Own

Modeling a proposed 24-hour cable news channel on Al-Jazeera is bound to be taken the wrong way in the U.S. and set false expectations elsewhere. But that is the model that Beijing reportedly has at the heart of a 45 billion yuan ($6.6 billion) investment in its three main state media, Xinhua, CCTV and the People’s Daily, expanding their services to give China a global media voice commensurate with its emerging superpower status.

Beyond the 24-hour cable channel, CCTV will add Arabic and Russian language services to the Mandarin, English, French and Spanish ones it already has, and from May the People’s Daily will publish an English-language version of its tabloid Global Times.

The expansion comes when Western commercial media are scaling down their own international coverage so there is a vacuum to fill. Beijing’s plan calls for more reporters, more bureaux and more outlets, but not necessarily more freedom to report. China’s press has increasingly been feeling if only occasionally pressing the edges of the envelope within which it operates, but three organziations getting the money are still state-run media in a country where propaganda is a term, as Variety puts it, “used without negative connotations”.

The primary task, though, is to present China to the world, not the other way round. The melamine tainted milk and other recent food and product safety scandals have shown Beijing that it needs to do more in that regard, and is a further sign of the country’s confidence in stepping out into the world on its own terms.

And those terms must be true, because we’ll have seen them on TV.

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