China: the next must-have, private jets | beyondbrics | News and views on emerging markets from the Financial Times – FT.com

It will come as no surprise that rich Chinese have developed a taste these days for private jets. It is a short step, in China, from Gucci to Gulfstream: according to a survey of China’s richest people, released by the Hurun report at the Asian Business Aviation Conference Asian Business Aviation Conference in Shanghai, 13 per cent of Chinese with personal assets over Rmb100m plan to buy a corporate jet.

China had only 32 business jets registered in 2008, but that number rose to 132 by last year, according to state-owned China Daily. Beijing’s latest five year plan calls for developing the industry, and Cessna, one of the world’s biggest makers of business jets, recently signed agreements with Chinese partners to build business jets in Chengdu. The aviation industry is salivating at the opportunities presented by the notion of rich Chinese looking for the convenience – not to mention that sheer bragging value – of owning one’s own personal airplane.

But VistaJet, the ultra-luxurious Swiss business aviation company, is confident that there will be plenty of rich Chinese who think owning a jet is just too much trouble. VistaJet promises on-demand access to the company’s 31 near-new Bombardier aircraft, under a subscription model which VistaJet says makes much better financial sense than owning a jet for anyone who flies less than 500 hours per year. VistaJet today announced a memorandum of understanding with Beijing Airlines (the private jet subsidiary of Air China) that will allow it to base some of those aircraft in China, and eventually fly between domestic Chinese destinations.

Thomas Flohr, VistaJet chairman and founder, knows that deciding to buy a jet, especially in China, is not always a purely rational decision. Reason not the need: ultra high net worth Chinese have given “need” an all new meaning. But he is sure there will still be plenty of value-conscious business people around – even in China – who want access to a jet without having to pay for pilots, mechanics and downtime.

Flohr said his company is already doing good business flying the Chinese to Africa and Africans to China – often to remote locations that could not conveniently be reached by commercial airlines. “As an entrepreneur, you cannot afford to spend up to three days flying commercially between Harbin and Khartoum,” he said, adding “nor are you going to want to fly on some of the airlines that will get you there”. And even if some Chinese entrepreneurs are tempted to buy a jet rather than a block of hours on VistaJet, there will still be plenty of wives and kids, grandmas and grandpas of entrepreneurs who need moving from place to place – and as Flohr put it, first class on Air China will no longer cut it once they have tasted private aviation.

Related reading:
Chinese airlines hit by dispute over hedging, FT
China creates turbulence over EU aviation levies, FT
Luxury brand makes links with China’s past, FT

Not surprised the Chinese have taken to private planes.


Wen Jiabao attacks party conservatives on the way out the door | via @FinancialTimes

(Source: FT.com)

Premier Wen Jiabao©Getty

Chinese premier Wen Jiabao fired a parting shot at conservative officials in the ruling Communist party, warning them that China could face another Cultural Revolution unless it undertakes urgent political reforms.


“Without successful political structural reform, it is impossible for us to fully institute economic structural reform and the gains we have made in this area may be lost,” Mr Wen said at his farewell briefing at the National People’s Congress, China’s rubber stamp parliament which meets for just 10 days every year.






“New problems that have cropped up in Chinese society will not be fundamentally resolved and such a historical tragedy as the Cultural Revolution may happen again,” the premier added, in remarks that were broadcast live on national television. “The mistake of the Cultural Revolution and impact of feudalism are yet to be fully eliminated.”


Mr Wen, who will step down from the party’s powerful politburo standing committee later this year, directed his aim at rivals including Bo Xilai.

Mr Bo is the ruling party official in Chongqing, a large city in southwest China, and a candidate for promotion to the top ranks of the party in the upcoming leadership transition. His propects, however, have been damaged by a recent scandal involving Chongqing’s former police chief.


Mr Wen’s references to the anarchy of the 1966-76 Cultural Revolution, during which millions of people were persecuted and perished, appeared to be a swipe at the “Cultural Revolution-style” campaigns organised by Mr Bo in Chongqing. The campaigns evoke revolutionary, or “red”, propaganda and ostensibly target organised crime.


In another rare example of open criticism among senior Communist party officials, Mr Wen also addressed the scandal that brought down Mr Bo’s former police chief and political ally, Wang Lijun, who tried to defect to the US last month. Mr Wang is in custody and his case is under investigation.

“The current [Chongqing] party committee and government of Chongqing must seriously reflect on the Wang Lijun incident and learn lessons from this incident,” Mr Wen said.


As Mr Wen and President Hu Jintao prepare to make way for a new generation of leaders in a once-in-a-decade reshuffle, the country’s political elite are engaged in internecine strugglesthat will determine the national agenda for years to come. Mr Bo has been angling for a place on the nine-person Politburo standing committee, the Communist party’s most powerful body.


“There are obviously some conflicts [among China’s political elite], with the most important conflicts related to the distribution of power within the party,” said He Weifang, a law professor at Beijing University. “There are also different views over how to solve China’s social problems, including the wealth distribution problem, corruption and China’s relations with the outside world.”


During a three-hour press conference, Mr Wen outlined a liberal reform agenda, including gradual steps towards direct elections. While Mr Wen has commented about the need for such reform before, he has rarely done so in such forceful language.


Asked whether China would hold general elections to choose its leaders, Mr Wen said he believed lower-level village elections should be expanded to towns and counties: “The democratic system of China will continue to move forward in keeping with China’s national conditions and no force will be able to hold this process back.”


Referring to the wave of uprisings sweeping across the Middle East, Mr Wen was more emphatic in his support for free elections. “The demand for democracy by the Arab people must be respected and truly responded to,” he said. “I believe this trend towards democracy cannot be held back by any force.”


Mr Wen has often been criticised for failing to match his rhetoric with action. He alluded to this criticism on Wednesday, blaming “institutional and other factors” for his inability to push through some policies and reforms. He also referred to unspecified “slander” directed at him personally and said these attacks made him “worried about society”.


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A Political Shocker in China Has Implications for the Economy | via @bloomberg

[[posterous-content:pid___0]]In a terse announcement, China’s official Xinhua News Agency announced March 15 that the charismatic Chongqing party leader and princeling, Bo Xilai, has been replaced. It is the biggest setback for a senior Chinese Communist Party leader since at least the sacking of former Shanghai party secretary Chen Liangyu in a corruption scandal in 2006. “Bo will no longer serve as
secretary, standing committee member, or member of the CPC Chongqing municipal committee,” according to the Xinhua announcement.

While Bo is still listed on a government website as one of the 25 members of China’s ruling Politburo, it is unclear whether he will also have to step down from that body. Even if he doesn’t, Bo’s political future seems finished, and his once-likely appointment to the nine-member Standing Committee of the Politburo—with seven positions up for grabs this fall in a major leadership transition—is finished.

While some see the fall of Bo as a setback for princelings, or the children of early revolutionary leaders, others see his downfall stemming from a more generalized resistance in the ruling party to Bo’s swashbuckling, nontraditional campaign style—in essence, his use of populism and personality to try to win promotion to the top echelons of Chinese leadership. “Some leaders have been very nervous about Bo Xilai’s self-promotional campaign. They see it as a possible effort to establish a political kingdom to challenge Beijing,” says Cheng Li, a senior fellow at the Brookings Institution in Washington.

The 62-year-old party leader’s demise also suggests significant resistance to what some had started calling the Chongqing model. That’s usually seen as an approach to running the political economy that advocates conservative values, including the singing of “red songs” from China’s Maoist past, as well as an aggressive crackdown on crime. Bo’s assault on crime, a campaign called “dahei”—literally, “hit black”—put 2,000 people in jail in the southwestern municipality of 30 million people. These moves raised the ire of some Chinese intellectuals and party members, who saw them as a regressive step back to a less open, and more dogma-ruled China.

The Chongqing model also includes a focus on state-led control of the economy, a return to government-owned companies that dominate the business world, as well as policies aimed at combatting China’s growing inequality, including by building subsidized housing for the poor. On March 9, on the sidelines of the National People’s Congress, Bo said that China’s gini coefficient, an index of income inequality, had exceeded 0.46, well above the level that most economists say leads to social unrest. “As Chairman Mao said as he was building the nation, the goal of our building a socialist society is to make sure that everyone has a job to do and food to eat, that everybody is wealthy together,” Bo said. “If only a few people are rich, then we’ll slide into capitalism. We’ve failed. If a new capitalist class is created, then we’ll really have turned onto a wrong road.”

In pointed comments during a press conference the day before Bo’s dismissal, outgoing premier Wen Jiabao took aim at the soon-to-be deposed princeling and his policies (Wen very likely already knew of Bo’s fate; the decision to replace Bo would almost certainly require lengthy discussions by China’s Standing Committee in the days proceeding the move). “The current party committee and government in Chongqing must seriously reflect on the Wang Lijun incident,” he said, referring to Bo’s former chief of police, who, after taking temporary refuge in the American consulate in Chengdu, Sichuan, last month, is now under investigation and has been relieved of his previous positions.

“I want to say a few words at this point,” Wen continued, before launching into a spirited defense of the need for continued economic reform. “Our country’s modernization drive has made great achievements. Yet at the same  time, we’ve also taken detours and have learned hard lessons,” the 69-year-old Wen said. “In particular, we’ve taken the major decision of conducting reform and opening up in China, a decision that’s crucial for China’s future and destiny. What has happened shows that any practice that we take must be based on the experience and lessons we’ve gained from history, and it must serve the people’s interests.”

Wen also made an appeal for political reform, saying that without it, China could once again experience a “tragedy” like the Cultural Revolution. His reference to the decade-long era of Mao excesses seemed also to be criticism directed at Bo’s recent campaigns. “Reform can only go forward and must not stand still or go backward, because that offers no way out,” he said. “Without successful political reform, it’s impossible for China to fully institute economic reform, and the gains we have made in these areas may be lost.”

“It was a very, very powerful statement. It was the clearest, most comprehensive statement talking about the necessity of political reform in China,” says the Brookings Institution’s Li. To Bo’s Chongqing model, “there is a linkage absolutely. Chongqing’s approach is ultimately anti-democratic, and it is very dangerous. Wen was saying that political institutionalization or Chinese-style democracy, not red terror, should be the way forward for China,” says Li.

Bo was replaced as party secretary by 65-year-old Vice Premier Zhang Dejiang, a less well-known senior Politburo member. The native of China’s northeastern Liaoning province has a decidedly mixed background: He earned a degree in economics from North Korea’s Kim Il Sung University, hardly a place where one is likely to acquire a reformist bent. But Zhang also served from 1998 to 2007 as party secretary of Zhejiang and Guangdong, respectively, two of China’s most open provinces, albeit doing little there to distinguish his tenure. The Brookings Institution says this promotion increases Zhang’s chance of winning an eventual appointment to the Standing Committee.

More tantalizing is what the sacking might mean for the future of presumed Bo rival and, at 57, relatively youthful Guangdong party secretary Wang Yang. Bo’s dismissal could open up a slot for Wang in the top leadership body but also could hamper his prospects if the elite or princeling faction lashes out at Wang in retaliation, says Li.

In recent years, Wang has earned a reformist reputation running China’s export-oriented southern province. In particular, his handling of labor strikes that have swept the Pearl River Delta, including the spring 2010 Honda strike in which he personally intervened (he is believed to support reforms to China’s usually toothless official union, including allowing workers to elect their own representatives), as well as his dealing with the Wukan Village movement last year, has encouraged those hoping for a more politically open younger generation of leaders taking over in China.

Still, the sentiments driving much of what has been identified with the Chongqing model are unlikely to go away with Bo’s departure, says Patrick Chovanec, a business professor at Tsinghua University in Beijing. “Bo was hopping onto some broader trends that exist in the Chinese economy and society, especially in the wake of the global financial crisis. Those include greater skepticism about the market, embracing the role of the state in the economy, and concerns about income inequality,” he says. “The things that made [the Chongqing model] so attractive to so many people are still very real for many in China today.”

By on March 15, 2012

(Source: Bloomberg BusinessWeek)

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China set to become top smartphone market in 2012, critical for Apple & Others | via @TechCrunch

(Source: TechCrunch)

China is already a significant market for companies like Apple, with CEO Tim Cook describing “staggering” and “off the charts” sales of the iPhone in China last quarter. But according to IDC the opportunity is just beginning for Apple and others working in the smartphone world: China is set to become the world’s largest smartphone market this year, overtaking the U.S., which has led in years past.

IDC says this is part of a larger trend of emerging countries getting up to speed with developed nations: by 2016, China will be joined by Brazil and India in the top-five countries in terms of smartphone shipments. Countries like the U.S., U.K. and Japan will continue to see growth, but not at the rate of these other, more populated countries.

The growth of China is something that IDC had already started to track in 2011: China had already overtaken the U.S. in terms of shipments in the last two quarters of that year, it said today.

The shift raises questions about pricing and what we might expect in these devices as they roll out to bigger markets.

IDC notes that so far, in China, it has been the rush of sub-$200 Android devices that have benefited most from the surge in smartphone demand. But it believes that the trend will be for smartphones to cost less than $50.

The big names so far have been domestic handset makers like Huawei, ZTE, and Lenovo, but Samsung and Nokia (which had once led the smartphone market in China before the Android onslaught) are also playing a part with the launch of cheap devices. Nokia’s first Windows Phone handset China — one of its less expensive Lumia devices — is expected to launch by the end of this month.

That drive for domestic handset makers is not only being played out in China. In India, names like Micromax, Spice, Karbonn and Lava — also developing low-cost devices — are trying to set the agenda for what consumers demand and expect out of their smartphones. However, up to now more global brands like HTC and Samsung have been leading the pack.

Brazil, meanwhile, seems to be facing a still-high cost for devices, and it is only this year that average prices have come down to below $300 for a smartphone. Whether Apple chooses to try to create devices to better target users in markets like this one, rather than continue to aim for the high-end consumer, still remains to be seen.

IDC notes that it will not just be about cheap devices, however: it says that carriers will have to step up with innovative data plans, and probable handset subsidies, to get people using smartphones to their full effect.

Some good headway seems to already have been made in that area in some emerging markets:

Some statistics out yesterday from OnDevice Research found that in China, some 38 percent of consumers are only accessing the Internet from their mobile devices. In comparison, countries like the UK registered at 25 percent; while countries with less fixed infrastructure registered with even higher percentages: Nigeria’s figure was 56 percent, and Kenya’s was 51 percent. In effect, that means the opportunity is there not just for device makers, but for carriers and the many companies developing content as well.

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China’s holy grail: a leading indicator | beyondbrics FT.com

For anyone foolhardy enough to make Chinese economic forecasts, a constant problem is the lack of crystal balls at hand.

The usual arsenal of predictive tools in other countries – yield curves, stock prices, purchasing manager surveys, Conference Board and OECD indices – all exist in China. But all are market-based measures, making them deeply flawed in an economy which is so heavily managed by the government. So what to believe?

Three leading analysts who cover China have in recent weeks revealed their frustrations at the paucity of leading indicators, but also made a few novel suggestions.

Stephen Green and colleagues at Standard Chartered looked at a series of unconventional data points: wheel-loader and excavator sales, steel and cement production, and projects under construction. Their conclusion was that cement output and construction were indeed useful, but didn’t function as leading indicators. That is, they closely track investment activity in real time, but “there is very limited leading information here”.

Jonathan Anderson, who left UBS this month, used one of his last research notes at the bank to savage the idea that purchasing manger indices (PMIs) are even remotely useful in China. Not only did PMI numbers fail to predict the country’s downturn in late 2008 and recovery in early 2009, they were actually late in detecting the economic changes and thus misleading as coincident indicators.

He writes: “Did this show up in the PMI? Hardly. In fact, if you were watching the index you essentially had no idea that any of this was going on.”

What, then, can we rely on if we want to get a feel for where the economy is headed?

Green reaches for an old stand-by: “After following one tantalising clue after another, we are still left with credit growth as the only leading indicator of investment.”

The beauty of looking at credit growth in China is two-fold. The financial system is dominated by bank lending, making credit issuance far and away the most important factor in liquidity conditions and hence also the best predictor of investment activity. What’s more, credit growth is closely managed by the government through a loan quota system, so it does a good job of reflecting Beijing’s policy preferences, not just market sentiment.

Du Jinsong, a property analyst with Credit Suisse, makes a more unusual proposal for a leading indicator: the production of bricks and pre-stressed concrete piling. To be clear, he is only thinking of these as predictors for property construction – they seem to lead new housing starts by about eight months.

But property is the dominant component of Chinese investment activity and the broader economy is led by investment, so getting the real estate market right would be a very good start.

There is only one problem. The leading indicators proposed by Green and Du point in slightly different directions.

Looking at credit growth, Green forecasts a moderate pick-up in investment growth in the second quarter. Looking at brick and piling production, Du says property construction will probably remain flat for the next six months.

Now, it is of course possible that both are right. Investment growth may accelerate, just not in property. But given China’s frustrating track record for would-be oracles, it is also possible that at least one of the two may be more of a red herring than a leading indicator.

Very interesting post about the tools available to economists for predicting economic growth in China.


Meet The Chinese Guy Who Ripped Off Conan O'Brien

Meet The Chinese Guy Who Ripped Off Conan O'Brien

This is Da Peng. He is a Chinese variety show host, and he recently made his American television debut—for ripping off Conan O'Brien.

On a recent episode, Conan O'Brien showed how Da Peng's program, Da Pang Debade, totally copied Conan's opening animation. O'Brien then copied some of the silly antics of the Chinese show in revenge.

Da Peng's program, however, isn't televised. It's an online talk show, which isn't exactly a household name in China. However, it does have its loyal fans, and it does appear on a major Chinese web network. After Conan took the webshow to task, that could change—being called out by a famous American celebrity does mean Da Peng suddenly has more name recognition as this story makes its way through Chinese cyberspace via microblogs and webforums.

In the most recent show, Da Peng removed the intro animation—the one that ripped off Conan. Then he apologized. "At this point I want to the time to say sorry to Mr. Conan on behalf of myself, my show, and our staff," said Da Peng, who then started doing a "sorry dance". He even refers to his own show as "shanzai" or a Chinese imitation.

He's apparently a comedian, so he's trying to be funny. "I hope English majors, translators and American show lovers will help me translate this," Da Peng added. "We will immediately stop using the opening sequence—and will officially apologize again. We'll have to apologize again after apologizing."

Da Peng then went off on tangent (again, he's trying to be funny), saying that the show's name is too hard to pronounce as well as mentioning Jeremy Lin and the U.S. debt.

Online in China, many seem embarrassed by the show's opening and how it copied Conan. "China invented the four great Inventions (gunpowder, paper, paper Printing and the compass)," wrote one individual online. "But that is in the past, and now all we're doing is plagiarizing and copying... Such a tragedy."

Chinese people might feel embarrassed. Though, if anyone "won" in this brouhaha, it's webshow Da Peng. "The guy downstairs selling fruit even recognizes me," he said about his newfound celebrity. "I guess everyone knows about this now.

"My ex-girlfriend sent me a text saying how she regrets dumping me and how she saw me on American television. Now, I'm international." That you are, Da Peng, that you are.

View Da Peng's apology in the link below.

Da Peng Debade [TV Sohu]

Its always interesting to see what elements of western culture go viral in the Middle Kingdom, just usually with their own Chinese flavor.