Anxieties of development: emerging voices in Chinese social media


Development blogging becomes a new genre in Chinese social media. Image: Web banner of the 2017 “Made in China Day” celebration organized by the Communist Youth League featuring several development bloggers

In August 2018, an online post by “Shenzhen Ningnanshan” (深圳宁南山, hereafter “SN”) piqued the interest of Global Times chief editor Hu Xijin, who pointed his followers to the lengthy list of complaints about high property prices and education costs that, according to SN, threaten to sap the morale of an “urban middle class that has fundamental faith in China’s developmental trajectory”. Hu, who often presents himself as an interlocutor between the regime and the public, acknowledged the complaints’ “authenticity” and “sincerity”. In a published response, Hu reminded government officials to read SN’s article carefully, as it represents “the real worries of the People’s Republic’s hardworking constructors.” These people should be heard and shown the country’s future directions.

The exchange underscores the weight assigned to urban middle class voices by a political elite keen to monitor a constituency consequential to national progress and stability. But SN is no ordinary disgruntled working man. At the beginning of his post, he wrote that his articles were often read by “people up there”, meaning Party leaders and officials, and he hoped that this one reached them too. SN’s extraordinary influence in social media is part of a bigger story of development blogging’s ascend in Chinese cyberspace. It has become a genre, fueled by the economic slowdown and heightened trade tensions with the United States. Microbloggers such as SN dedicate their social media space to big questions like China’s place in the world and if it can overcome the middle-income trap. And they find a growing audience, including “people up there”, tuned in to listen to their diagnoses of China’s ills and prescriptions for cures.

The escalation of the US-China trade tension in early 2018 became a rallying cry for these online voices, who collectively shaped how the Chinese public perceived the clash between the two countries. SN’s Mar 24 post “Trade War: an interlude in China’s rise to surpass the US” was one widely read online analysis of what the trade war was really about. It distinguished itself from two kinds of “extreme voices”. On the left, Maoists were calling for China to go back to autarky, a state of non-trading economic self-sufficiency, while on the right, people were advocating for deep concessions that would surrender much of China’s industrial and technological agenda. SN’s views were essentially realistic nationalist, conceding that China was not ready to take on the US at this very moment but firmly believing in the inevitability of national rejuvenation through the conquering of technological commanding heights in multiple key industries.

The history of “online statecraft” by Chinese netizens dates to the dawn of China’s Internet age, as early users of chatrooms and BBS forums heatedly debated China’s geopolitical strategies and military posture. The perceived futility of such online discussions in a country with very limited political participation has been a subject of ridicule, as manifested in a popular online joke about a “basement-dwelling patriotic youth“, who preoccupies himself with questions of national security but can’t even guarantee his own personal safety against the intrusions of the state.

Different from the brand of juvenile statecraft that resembles an online projection of masculinity, the emerging development bloggers build their profiles to exude maturity and credibility. SN’s Zhihu page (Chinese equivalent of Quora) describes himself as a “middle class person moving bricks in Shenzhen” (“moving bricks” is a humorous online reference to making money). His Weibo account carries a tag line that says “re-recognizing our own country.” Although his true identity remains unknown, many believe that he works with supply chains in Shenzhen, giving him first-hand insights about the frontier of Chinese technological advancements. A Zhihu user tried to paint an imagined profile of him: “around 40 years old, grew up in a modest family, graduated from a top Chinese university, works at a major manufacturing company and earns 1 million RMB a year.” Some of SN’s peer bloggers are more upfront about their real-life identity. A group of Weibo accounts which frequently interact with and promote SN’s posts, self-identify as the Society of Wind and Cloud (风云学会), which is supposed to be associated with the University of Science and Technology of China (USTC). One of the key voices from the group, Chen Jing (陈经), is research director at Asia Vision, a company specialized in Optical Character Recognition (OCR). Beijing Saidong (北京塞冬, hereafter as Saidong), another popular development blogger who has friendly interactions with SN both online and offline, is a Peking University-educated computer scientist who works in the Internet sector.

Their technology/industry background gives them credibility when they write on issues related to China’s growing industrial might or its competition with other countries in developing next generation semi-conductors, even though their topic areas go way beyond their professional domains. Chen Jing, for example, writes extensively on microeconomics, trade, and… football. In 2016 he even published a book called “China’s government-organized economy” that claimed to have discovered the secret of China’s economic miracle: an economic model that is neither market nor planned, but run by multiple levels of the government using market-based approaches. The idea is not entirely new but it shows the appetite of typical development bloggers, who enjoy throwing out grand theories about China’s rise. They sometimes refer to themselves as the “industrial party”(工业党), people who firmly believe in a country’s industrial might as its passport to success.

The “industrial party” bloggers share a lexicon of terms such as “per capita GDP”, “demographics”, “supply chains” and “national fortune”, which reflects a tendency to think in aggregates and a competitive arena-shaped world view. Their interest in (obsession with) nations, their rise and fall, prosperity and poverty, fill their Weibo/WeChat pages with lengthy, data-heavy accounts of national competition and dominance. Popular posts written by SN in the past year include titles like “The competitiveness of China’s low-end industries“, “China’s development and the East Asian hell model“, and more bluntly, “Challenging white superiority: the competition a thousand miles away“. Collectively they depict a picture of a merciless ladder called “development” on which nations laboriously climb. At the top of the ladder sit countries with the highest per capita GDP, enjoying comfortable privileges, while other lower income countries fight to occupy favorable positions underneath. “Overall, the white world, Europe+North America+Australia/New Zealand+Israel, still makes up the top echelon of nations,” writes SN in a post responding to an IMF data release, “when per capita GDP goes above 40,000USD, only very few non-white nations can enter that area… Japan and a few ethnic Chinese economies, Hong Kong, Macau and Singapore managed to achieve that. We should have confidence in ourselves.”

Development bloggers fill their online posts with graphs like this.

The racial message is even more explicit in his wildly popular post on how China could break from the East Asian model. A sense of injustice oozes from the text when he observed how, in the past two decades, the 20 or so countries that surpassed Japan in per capita GDP were mainly European. “The life of Europeans is really laid back, while East Asians, whose intelligence and hardwork are universally recognized, have to endure intensive, hellish work hours.” He continued, “there must be a problem when a lazy people’s economic performance goes beyond a hardworking people’s.”

The problem, as SN saw it, was an “invisible hand that pinned East Asian economies on a few narrow and fiercely competitive industrial tracks”. Most of them lack vast agricultural lands or natural resources that support lucrative businesses such as agrochemicals or energy extraction, sectors dominated by Americans and Europeans. More importantly, he asserted that military shackles placed by the United States on East Asian states, particularly Japan and South Korea, suppressed their technological potential, as military-to-civilian transfer is a major pathway of technological innovation. He also maintained that Western capital had been extracting disproportionally high returns from investments in premium East Asian companies such as Samsung, exploiting their “capital superiority.” Those restrictions and suppressions limited East Asian states to a small number of industries such as semiconductors, forcing people in those countries to compete fiercely for a finite number of middle-class jobs generated by those sectors. China, free from the above constraints, could be the only East Asian nation with the potential to redefine an East Asian developed economy, he declared.

If this sounds alarmingly like a (milder) version of Japan’s complaint about a suffocating “Anglo-Saxon encirclement” prior to World War II, fellow bloggers only reinforce the impression by repeatedly invoking the imagery of shrinking “development space” for China. Only in this case, the “space” is not so much the physical territory that pre-war Japan was paranoid about, but rather the remaining seat at the table of developed economies in a game of musical chairs. The sheer size of China’s population makes some wonder how the current global order can accommodate another billion people to join the high-income club. “It took a world-class conglomerate like Samsung to pull 50 million of South Koreans into developed status. China has a population 28 times larger. How could the world absorb another 28 Samsungs?” wrote Weibo user Qingpuluo the day after Trump declared a trade war on China, using very rough mathematics. He believed that China would not reach developed status within the existing global framework by simply “trading with developed economies.” It needs new space.

This is also a theme that SN often explores, although his views are colored by a more ideological tinge. Again using back-of-the-envelope calculations, he asserted in one of his posts that 1.4 billion newcomers to the industrialized club would “completely change the face of “developed economies”, which currently cover just 800-900 million people. Racially speaking, Asians would replace Caucasians as the majority. Politically speaking, the West’s control over the world would be much diminished as China becomes the first developed Asian power that’s not subject to Western military control. Culturally speaking, the “cultural composition” of what it means to be “developed economies” would fundamentally change with China’s entry. He insisted that the white-majority developed world wouldn’t tolerate such tectonic shifts and would be prepared to stave off China’s rise.

In keeping with the industrial party’s manufacture-centric world view, some bloggers looked at the issue through a “global value chain” framework. Citing a recent report in Japanese media, Machinery & Engineering Strategy (机工战略), an industry voice represented on Chinese social media, observed how US companies took in as much as 40% of total global corporate profits (of 18,000 publicly listed companies from 100 countries).  Another blogger distilled the phenomenon into a globalization pyramid made up of 3 camps of countries: at the top are technology and capital providers, in the middle are labor providers and at the bottom are natural resource providers. China’s struggle to move from camp 2 to camp 1 and grab a bigger share from the highest tier of the value chain is considered a major uphill battle that the country has to fight. Saidong has found a real-life illustration of the battle in the global value chain of electronics, where China has evolved from an assembler to a major parts supplier and brand owner, chipping away, bit by bit, the economic cake from Apple, Samsung, and Japanese/Taiwanese manufacturers. “The extensive electronics value chain creates high-end R&D jobs, mid-level trade and logistics opportunities and low-end assembly line employments that can accommodate a huge and diverse workforce,” he argued, “it’s a godsent for any developing economy.”

The idea of “development space” shapes the thinking of development bloggers when they consider major strategic topics such as the Belt and Road Initiative (BRI). To be clear, unlike the way it is scrutinized and debated in the West and in recipient countries, the BRI is barely an issue on Chinese social media, likely due to its lack of connection with the day-to-day experience of ordinary Chinese netizens. One notable exception is the “industrial party”. Deeply concerned about China’s future position in the world, these bloggers quite often engage in intellectual exercises about China’s adventures overseas and what they mean for the country.

In a recent long post for the Society of Wind and Cloud, Saidong did an extensive analysis of Africa’s future demographic changes and their implications for China. With multiple graphs, he highlighted the pyramid-shaped population structure of today’s Africa and marveled at how it resembled that of India 40 years ago. Based on a few bold assumptions, he calculated in a quick-and-dirty fashion, that Africa’s total population would reach 2.5 billion in 30 years while its GDP per capita would enter the 3000-4000 USD terrain. “We will witness the emergence of an Africa that’s 2.5-4 times the economic size of today’s India”, he predicted. By then, the continent would have produced a group of mega-population countries. Nigeria, Ethiopia and Egypt would all boast populations over 200 million. As he saw it, in 2050, these countries would still be relatively poor and not fully industrialized. Yet their vast internal markets would make ideal destinations for Chinese industrial products, infrastructure construction capacities (and overcapacities), and Internet services. “Africa, with its size and potential, represents a new market that a late comer like China can more easily access,” Saidong argued, apparently alluding to the resistance China may face when it enters existing markets with established players. At the end of the article he reminded his readers that in the 21st century, China’s “national fortune” would be decided by how it approaches the “6 billion people in African and Asian developing countries.”

When they apply such a world view inward to scrutinize China’s domestic developments, the development bloggers constitute a formidable force on the Chinese Internet, challenging some of the Communist Party’s most important policy agendas. Just as they are sensitive to demographic changes in other developing countries, they are keenly aware of China’s rapidly aging population and are some of the most vocal online critics of family planning policies. The perception of growing populations as a source of national strength and growth potential shapes their attitude toward the one-child policy. In a widely circulated Weibo post, SN took on China’s population control and real estate market at once. “Years of propaganda in our country treat population purely as a burden,” he wrote, “but a large and growing population can actually bring lots of benefits.” These benefits, in his mind, include a great number of entrepreneurial opportunities and the job creation ensued, cheap labor and service that propel new business models, and higher returns from property booms kept afloat by the continued urbanization process. Because of the depth of China’s domestic market, it has the guts to confront the United States without the fear of “economic collapses experienced by Turkey or Iran”.

In the same vein, development bloggers are perpetually worried about China slipping into the same  demographic predicament of its neighbors, Japan and South Korea. The abject lives of Japanese retirees and the country’s looming pension crisis are constant reminders of what China’s own fate may look like down the road.  At the beginning of 2018, confronted by China’s newly released birth statistics of 2017, Saidong warned that in 5-10 years China’s demographic atrophy would be as severe as, if not direr than Japan’s, thanks to 30 years of arbitrary acceleration of a natural process of lowering birth rates and other driving forces of an aging society.

In addition to their intellectual propensities on the population question, their own status as members of an upper-middle class rooted in China’s booming high-tech sectors seems to have made them advocates for certain middle-class-centric policies, all of them centered around child-rearing. The underlying message appears to be that, since high-tech manufacturing is the pillar of China’s next industrial revolution, people employed by such sectors need to be well taken care of by the state for them to concentrate on their excellent work. For instance, reforms in China’s pre-school system and primary education in recent years that tilt heavily towards burden-shedding for kids meet with heavy criticism from this group. Letting children off school at 3pm instead of 5 or 6 creates extra work for parents who need to find ways to fill those hours for which schools no longer bear responsibility. It also creates a massive extra-curricular education market that exploits parents who fear that their kids are not being given sufficient tutoring to prepare them for fierce future higher education competitions. The group also considers rising property prices in Chinese cities a major sore point for this social class and a drag on demographic improvements. Not only is living space being squeezed due to ever higher real estate prices, making it difficult to raise more kids under one roof, but also marriage and child bearing ages are being pushed back as young people have to work longer before accumulating enough capital to form families, if they do so at all.

Complaints like these, and the resonance they generate, tend to produce response from the likes of Global Times’ Hu Xijin. But as Hu himself reminded SN in his piece, the distribution of wealth in today’s Chinese society had made readjustments around issues like property price particularly challenging. While a city’s new comers may look for cheaper paths to property ownership, the city’s propertied class may, in contrast, hope for even higher real estate values for themselves. Measures favoring one side of the equation may stir discontent in the other.

Hu’s response highlighted the social class signature of SN’s brand of development blogging on which its critics often focus. Some of the more visible detractors claimed that, constrained by the narrow interest of their social class, policy prescriptions offered by SN and his peers are biased and could harm the nation as a whole. Maqianzu, a blogger associated with the left-leaning, has argued that measures to lighten the burden on urban middle class, as SN advocates, would undermine overall social mobility. High property prices in big cities, as he sees it, are a way to continue funding infrastructure expansions in underdeveloped parts of the country and they will provide upward movement channels for the poor. He also has dismissed SN’s complaint about overburdened middle class parents, claiming that ultra-competitiveness in basic education is a result of more qualified students entering the system, another sign of positive, upward mobility in the society. “China has no hope if its middle class is allowed to have a laidback lifestyle,” he wrote provocatively. Instead, the country’s long-term prosperity depends on an over-worked mortgage-bearing middle class that’s constantly kept on their toes. For Maqianzu, the idea that the offspring of today’s middle-class are entitled to effortlessly inherit the social status of their parents is borderline reactionary.

More scathing criticism condemns SN’s writing as nothing more than a kind of “development porn”, using selective, misleading materials to depict an overly rosy picture of China’s economic prospects and industrial prowess, stirring up cheap nationalistic sentiments as its online predecessor, “military porn” often did.

Even if it is just another type of intellectual opium that the Chinese Internet routinely produces, if “people up there” are really paying attention to what the SNs are blogging about these days, they may find it reassuring that a not so small segment on social media is fully supportive of the leadership’s push to bring Chinese manufacturing to the next level against a strong trade headwind. They may be alerted by the intensity of frustration this group of people feel about the Party’s track record in managing the country’s population, education and property market. They may also be encouraged to find a reliable cyberspace ally more powerful in many ways than the official propaganda machinery in its ability to coalesce the hardworking middle class around an assertive agenda of Made in China 2025, Belt & Road Initiative and geopolitical adventures that reclaim China’s development space in the world.

Brave the enemy’s gunfire, rejuvenate!


Defining the win in a trade war is difficult, even for a “winner” like Donald Trump. In an Apr 2018 tweet, the US President declared the trade war “already lost” with China by his foolish and incompetent predecessors. What he had been doing, first initiating a Section 301 investigation and then asking for tariffs to be imposed on roughly 150 billion USD worth of Chinese goods, appeared more like a penalty long overdue than the a strategically planned assault with clear objectives.

On the other side of the Pacific, victory was equally elusive to the Chinese government. “There is no winner in a trade war” was the official line repeated by the Ministry of Foreign Affairs(MoFA), the Ministry of Commerce(MOFCOM) and the official mouthpiece outlets such as People’s Daily. In the early days of the standoff, the message from the Chinese authorities was essentially of “peace through war”: we don’t think the war will benefit anyone, but if fighting is the only way to bring some sense back to the offender, we will retaliate with matching forcefulness.

That rhetoric escalated dramatically on Apr 6 upon Trump’s latest round of threat. In a MOFCOM statement responding to the US President’s announcement of his intention to slap penalizing tariffs on 100 billion USD worth of Chinese imports on top of earlier measures, the words used was “to fight till the end” and “at all costs”, even though, curiously, China has so far refrained from announcing its counter measures against Trump’s 100 billion “bluff”. If the country opts to follow suit in a one-eye-for-one-eye manner, it would mean a near blanket 25% tariff on all US imports (In 2017, total imports from the US amounted to 130 billion USD).In this sense, being rhetorically strong but substantively vague is all but rational.

Where official intentions remain ambivalent underneath the confrontational posture, social media is itching to offer some clarity. The trade war creates a rare spectacle of a massive Internet debate on China’s industrial and trade policies, through which one gets a glimpse of the public opinion foundation for China’s own brand of economic nationalism that is growing into an integral component of the increasingly prominent “national rejuvenation” narrative. If Donald Trump’s trade war has any effects, one of them would be uniting the Chinese internet under the flag of industrial self-armament.

Rejuvenation under threat

While the cyberspace was pretty calm about the relatively targeted tariffs on Chinese steel and aluminum announced on Mar 8, the following proposal to slap tariffs on another 50 billions worth of Chinese goods, a sure sign of a possible full-blown trade war, ignited the Chinese social media with excitement. As soon as China’s MOFCOM released its list of potential US products targeted for retaliation, online opinion leaders took note of the stark differences in the industries covered by each country’s measures. The Chinese goods and services included in Trump’s proposed levies ranged from industrial robotics to new generation information technologies, whereas China’s matching list consisted almost entirely of agricultural products: pork, fruit and nuts.

There was an almost gleeful response to the comparison. “It’s a trade war between an agricultural economy with an industrial power,” as one commentator put it. This might be a mischaracterization of both the makeup of the US economy and the nature of the trade war. The 10 categories of Chinese products selected by the Trump Administration were there not because they made up majority of Chinese exports now. They represented sectors that could challenge US industrial advantages in the future.

The message was not lost in Chinese online discussions, which seemed to be seized by a mixed sense of pride and threat. The juxtaposition of the two countries’ tariff lists quickly developed into a theory about what the trade war was really about: it was seen as an attempt to undermine China’s rise as a developed industrial power, with industries capable of competing at the highest level. “The trade war is but one interlude in China’s rise as a great power,” one commentator wrote in a long Weibo post.

Fluxing China’s engineering muscles has increasingly become part of broader patriotic propaganda in China. In 2013, a CCTV documentary series, “The Pillars of a Great Power“, amplified the “engineering equals national strength” narrative in the public’s mind. In Mao’s era, when China faced severe economic blockade from the rest of the world, developing its industrial might was often associated with achieving self-sufficiency. Today, honing China’s manufacturing capabilities has attained new significance: asserting China’s global competitiveness. The documentary, co-produced with the Ministry of Industry and Information Technology(MIIT), the government body overseeing the implementation of “Made in China 2025” strategy, was a tour de force of Chinese equipment manufacturing companies already occupying advantageous positions in their respective value chains: heavy duty bulldozers, high efficiency power generators, industrial robots. In one episode, a Chinese corporate executive recollected how, years ago, he and his colleagues got belittled by German engineers at a trade fair. By 2013 his company, a producer of cranes, was competing head to head with that German company globally. Similar accounts of an underdog fighting its way up abound in the series.

More recently, another CCTV made documentary “Amazing China“(the title is more literally translated as “Awesome, My Country!”) hit cinemas right before trade war talks began to heat up. The movie featured Chinese feats in building roads, bridges, high-speed trains, ports and networks. It was a visual manifestation of “industrial nationalism” at full play.

The propaganda shaped the national psyche when confronted with Trump’s provocation. The fact that the 10 sectors targeted by the US government were taken directly out of China’s catalogue of industries supported under the “Made in China 2025” strategy only intensified those sentiments. Zhanhao, one of the most-read grassroots nationalist accounts on social media, penned an incendiary Weibo post declaring that the trade war was the US’s desperate effort to “keep China in the bondage of low-end industries to be eternally exploited by the US hegemony, technologically and financially.”

Less melodramatic voices, which would not go so far as to brand Trump’s move as a calculated “Cold War” strategy to suffocate China, nevertheless saw it as a real trap in the way of a great national ascent. Multiple commentators pointed to Japan as a cautionary tale of the kind of unforced mistakes a country could make under the pressure of a trade war. “China is approaching the same sensitive spot where Japan was 30 years ago, in terms of population trends and economic conditions”, one observer noted. Improper response could cost China dearly, even ushering in its own version of the “lost decade”. He listed the four “wrong responses” China should absolutely avoid: restart real estate bubbling to hedge the potential loss of trade surplus; halt de-leveraging efforts due to external pressure; encourage households to take on more debt to boost consumption; reduce government support on new strategic industries to appease the US.

National strength vs. free trade

The conversation marks a notable departure from how trade issues have been discussed on the Chinese Internet. For years, online opinion leaders tend to hold the view that China should open its door wider, which would benefit consumers with cheaper and better imported goods and services, and, more importantly, exert much needed external pressure on the inert state-owned sector.

A 2015 article on FT Chinese summarized those sentiments. Two generations of Chinese leaders, from Deng Xiaoping to Zhu Rongji, had relied on a determined charge toward opening to integrate the country with the global market and inject much-needed energy and a sense of urgency into the reform process. Deng unleashed the nation’s productivity by removing shackles of the planned economy. Zhu spurred the system further by negotiating China’s way into the World Trade Organization (WTO). “Reformers have since then used China’s agreed deadline to meet its WTO commitments to accelerate domestic reforms of the state-owned sector and the expansion of the private sector.”

Those sentiments erupted at a few key moments in recent years, including when the negotiation of the Trans-Pacific Partnership (TPP) neared fruition in 2015, and when China’s 15-year grace period under WTO expired in 2016. Those moments invariably triggered public scrutiny of China’s fulfillment of its pledge to open up its markets, which would make desirable imported item, from cars to Hollywood films, more accessible to domestic consumers. One recurring theme in those discussions was a complaint that China never actually met its promises to the WTO, effectively taking advantage of its trading partners by winning access to their markets while restricting entrance to its own. “When China entered WTO in 2001, probably no Chinese took the 15-year deadline seriously… Nobody believed China would pay any price for violating the contract, ” a 2016 Weibo post by Huang Zhangjin, a veteran journalist and editor noted.

The pro-opening stance reemerged in the current debate in the form of support for Trump’s actions against China. A few dovish commentators said things like “Donald Trump is a godsend gift to China” and that “Chinese consumers would benefit the most from the trade war,” given the expected lowering of tariffs for imported goods and freer flow of capital and services. Some pleaded “surrender” and “compromise”, arguing that China’s unreasonable industrial policies should have been scrapped a long time ago.

But with “national rejuvenation” talks in the ascent this time around, such “capitulation-ist” voices got challenged, their core premises explicitly picked apart. “That China did not fulfill its WTO promises was a myth fabricated by the TPP camp (a trade bloc of nations excluding China),” one Weibo post stated after a Vice Minister of MOFCOM claimed that China had allowed access to 120 WTO designated business sectors, way more than the 100 it had agreed to open in 2001. In a lengthy WeChat post, Prof. Cui Fan of the University of Foreign Commerce and Trade traced the “myth” to the Information Technology and Innovation Foundation, a US think tank that produced a “misleading” list of China’s WTO entrance commitments. To the astonishment and dismay of the author, the “fabricated” list was translated and widely circulated in the Chinese cyberspace as evidence of China’s dishonest behavior. He quoted former WTO Director General Lamy as confirming, in multiple occasions, that China had fully met its commitments upon its entry into the trade club, and it was the United States whose number of violations way surpassed that of China. The issue of whether those commitments, made almost 17 years ago when the Chinese economy was way weaker than it is now, are inadequate by today’s standard, should be treated separately and “through re-negotiation.”

A telling sign of the turning tide in Chinese public opinion is social media reactions to Elon Musk’s open complaint to Donald Trump about China’s “unfair” treatment of foreign car companies.   In early March, the founder of Tesla sent out a few tweets, addressed to Trump, protesting China’s high import car tariff (25%) and coercive joint venture rules. To be clear, these restrictions, as highlighted by the above WeChat post, do not violate WTO rules, which allow developing countries to put up protection measures for their nascent industries. And Musk, despite his otherwise popularity on Chinese social media as a cultural hero, got a fair amount of ridicule for his comments. People questioned why he bellyached about the situation when other foreign car companies formed profitable joint ventures in China. Instead of supporting Musk’s plea to lower the bar for entering the Chinese market, which would potentially lower the price of imported vehicles for Chinese consumers, many opinion leaders spontaneously ran to the defense of Chinese policies nurturing its own EV industry.

ZTE complication and the “developmental state”

On Apr 10, President Xi Jinping delivered a closely watched keynote speech at the Boao Forum, re-affirming China’s commitment to global cooperation and to market openness. “Opening brings progress, while a closed door means backwardness,” the Chinese leader told his audience before announcing a series of market opening measures, including lowering import car tariffs. The second day, a MOFCOM spokesperson had to fend off interpretations of the speech as a concession to Trump’s threat, claiming that it represented a long-standing Chinese position on trade issues.

Even though it’s hard to believe that the speech was not some form of response to the trade war, there was detailed analysis showing that the high-handedness was indeed in line with earlier decisions made by the leadership, way before Trump got elected. Later developments, however, would soon put that commitment to test. 6 days after Xi’s appearance at Boao, a decision by the US Department of Commerce would send shockwaves across China and force the Chinese society into an intense round of soul-searching about its industrial ambitions.

On Apr 16, US secretary of commerce Wilbur Ross Jr. activated a “denial order” against ZTE, a Chinese telecom conglomerate, which would essentially bar any US company from exporting components and services to the Chinese company for 7 years. ZTE was accused of lying repeatedly to the US government while the denial order was in suspension after it paid a billion dollar fine and reached a deal with US authorities in Mar 2017 for violating US embargo to Iran and North Korea (it exported products containing US technology to the two countries).

The severity of the punishment already became clear on Apr 15, when a slew of US microchip suppliers, including Qualcomm, Intel and IBM, informed ZTE that they would terminate contracts, sending the latter’s production lines to a grinding halt. “The US denial of export could knock us into a coma,” ZTE’s President Yin Yimin told reporters at an Apr 20 press conference. An industry insider told Caixin magazine that ZTE’s microchip inventory wouldn’t last for another month.

The company’s predicament exposed just how vulnerable China’s telecom industry was to upstream supply shocks like this. Notwithstanding their reputation as pioneers of the country’s manufacturing upgrade and global competitiveness, players like ZTE and Huawei, which are able to compete head-to-head with traditional industry giants such as Cisco and Ericsson, nevertheless have to source core components of its products almost entirely from outside China. A widely shared chart showed the pathetic rate of domestic availability for a host of semiconductor chips.

Even though legally speaking the ZTE episode was a separate matter from the on-going trade war (investigation of its behavior started in Obama years), it inevitably got intertwined with trade war debates in Chinese social media. Ironically, the news made some nationalists almost ecstatic. Zhou Xiaoping, a notoriously provocative figure, openly celebrated the US ban as an “enormously positive development” that would force China to cast aside illusions about global interdependence and concentrate on creating its own microchips, “the spring has come for home-made chips!” Others even cited Mao-era philosophy to justify a return to complete industrial self-reliance. For economic nationalists, the incident only affirmed their belief that it was an all-out attack on China’s grand industrial ascendance. “This is a US plot to stave off China’s momentum of attaining dominance in 5G telecom technologies. The Americans are scared and desperate,” Global Times’s editor in chief Hu Xijin asserted as he mobilized support for ZTE on Weibo.

China’s state media, People’s Daily in particular, quickly distanced themselves from this brand of economic isolationism. It openly criticized Zhou’s view for being “extreme”, as it presented domestic R&D and international cooperation as “mutually exclusive”. On the other hand, the propaganda outlet also raised the flag of economic security by declaring that China would develop its own chip industry “at all cost”, after the painful realization that China is still very much at the mercy of a supply chain controlled by technologically more advanced countries.

“Extreme views” aside, ZTE’s troubles seemed to have pushed official stance and public opinion to converge on one key point: that China needs to build its own competitive processor industry. One Weibo user claimed that building the processor industry had become the new “political correctness” on the Chinese Internet. Public support for state nurturing of the industry was at all-time high. The difference was only on the question of how. In a long blog post, Liang Ning, a researcher who was deeply involved in China’s botched effort to develop its own CPU and operation system around 2001, advocated for massive government investment to be run in the fashion of venture capitals. The lesson she generated from the unsuccessful bid to open a new path not blocked by the Windows/Intel hegemony 17 years ago was insufficient funding into the field and the need for a domestically cultivated hardware/software ecosystem, which could only be achieved through an enhanced “natural selection” process on a massive scale.

Others did not agree. Government-run “venture capitals” are doomed to fail, as bureaucrats would certainly abuse their “permission to fail”, one commentator predicted. Only a genuinely incentivized healthy capital market can rise to the occasion of picking the right winners. Wu Jinglian, one of the most well-respected liberal economists, openly warned about the “danger of a state-led campaign to develop the semiconductor industry at all cost.” The old man was worried that corruptive administrative power would use the excuse to plug itself deeper into the economy. The alarmed voice found some resonance on social media, which was full of accounts of wasteful government R&D spending and the 2003 Hanxin scandal, where a former Motorola executive cheated the entire Chinese science and technology establishment by claiming to have developed China’s first 180nm chip, which turned out to be purchased Motorola products.

Nevertheless, advocates insisted that the Chinese state had a very big role to play, if not directly handing out cash to the industry. They pointed to China’s East Asian neighbors, Japan, South Korea and Taiwan as examples of “enlightened” industrial policies that led to the taking off of their respective semiconductor industries, with Samsung and TSMC now dominating the field. One commentator even came up with a full roadmap for how China’s weak microchip industry could catch up with its South Korean and Taiwanese competitors through strategic financial support from the government. The key, according to such views, was for government to help its high-potential corporates withstand the industry’s cruel business cycles: subsidize them to lower cost when they need to fight uphill price wars to snatch market shares from dominant players, reap benefits during high-demand booming years and patiently wait for an era-changing moment to complete a leapfrog. These once-in-a-generation moments came when email substituted fax and smartphones replaced PC. The next one, many believe, would be when custom AI chips become more widely used than generic processors.

No matter what route China takes with its chip industry, many commentators seem to share one presumption: it has to happen within the context of a global value chain, a functional capital market and strategic government intervention. In a 2016 article by Fudan University scholar Tang Shiping, he summarized the key factors contributing to a successful “developmental state”, a concept first advanced by Chalmers Johnson in the 1980s in his groundbreaking book about the “Japan Miracle”. Tang emphasized that an effective developmental state should play by the rules of a market economy, set industrial policies that take into account international division of labor, and most importantly, serve as a “helping hand” for a vigorous private sector, not a control-all planning machine.

This is the kind of thinking that Maoist isolationists don’t get, and neo-classic liberal economists, suspicious of all forms of state intervention, too readily dismiss. But increasingly, this is the message that the likes of People’s Daily send, and around which a social media consensus is growing: China needs strong state-guided industries that embrace the market and globalization.


On May 3, a high-level US delegation landed in Beijing. Chinese media described the visit as the “touching down of hawks”, as the team consisted of the most ardent China-bashers of the Trump administration: Robert Lighthizer, the US trade representative, White House trade and manufacturing adviser Peter Navarro, and Secretary of Commerce Wilbur Ross Jr. In a leaked “draft framework” brought to the table by the American side, the hawks demanded China to reduce its trade surplus with the United States by “at least 200 billion dollars by the end of 2020,” and “immediately cease providing market-distorting subsidies and other types of government support” to industries under the Made in China 2025 industrial plan.

The proposal was met with laughter and dismissal by Chinese netizens. “Those Americans came here just to poke fun at us,” as one financial observer quipped, “do not harbor any illusion about the intention of those American rightists.” Another Weibo user noted the short stay of the delegation, only for an afternoon, “this is not a negotiation. It’s declaration of a war using the trade dispute as harbinger.”

Trump’s negotiators might have misunderstood China’s state-directed economy. In a recent event, Lou Jiwei, a former Finance Minister said of the arbitrary surplus reduction target as “planned economy style” when China itself had all but given up on rigid GDP targets. They might have also underestimated the public support for the government’s industrial upgrade strategy, in part mobilized by US provocation. “If Made in China 2025 is negotiable, this Chinese administration might as well dress-up in Qing Dynasty costumes,” joked a Weibo commentator.

In response to the US proposal, the Chinese side, led by vice premier Liu He, suggested a list of counter-measures, which included cancelation of Trump’s proposed penalizing tariffs, adjustment of the ZTE denial order and a commitment to not initiate any future Section 301 investigation against China. The two sides held “constructive” discussions,  and agreed to disagree. No deal was reached, no victory declared by either side. The hawks left Beijing, leaving behind a nation more alerted and vigilant than ever about staying its course toward regained glory.

Xiongan: the making of a great non-megacity


In a surprise move that caught most of the country off guard, the Party’s Central Committee, jointly with the State Council, issued a Resolution in the late afternoon of April 1, when people were wrapping up a week’s work ahead of the Tomb Sweeping Festival. The decision, announced through Xinhua, the official news agency, unveils the planned Xiongan New Area, which encompasses three existing counties in Beijing’s adjacent Hebei province. Development of the New Area will be phased: in the short term, a 100 square kilometer start-up area will be built, which will expand to 200 square kilometers in the mid-term and 2000 square kilometers (roughly the size of Tokyo) in the long run.

Though impressive, size was not the decisive factor in the awe that permeated the Chinese Internet. When introducing the resolution, Xinhua made it clear that this was not just another new special zone among an array of similar projects. “Xiongan is a New Area that follows the path of Shenzhen and Shanghai’s Pudong New District. It is an initiative for the next millennium, a major event of national significance.” By elevating Xiongan to the level of Shenzhen and Pudong, Xinhua fanned anticipation to historic proportions. In 1980, the opening of Shenzhen, at that time just a small village bordering Hong Kong, was the decisive moment of China’s Reform and Opening after the country broke away from the grip of Maoist ideology. In 1990, the decision to develop Pudong as China’s new window facing the world symbolized one of Deng Xiaoping’s last major efforts to give momentum to the reform that suffered major setbacks in the late 1980s. Joining the ranks of Shenzhen and Pudong meant that Xiongan would bypass its “older brother” in North China, the Binhai New Area in Tianjin, set up in 2005, as the heir apparent of the Reform. Xinhua’s application of a “millennial” dimension only increased the astonished curiosity surrounding the announcement.

Ever since the kick-off of Reform and Opening under Deng, Chinese society has come to cherish the “invisible hand” of the free market. The memory of shortages still lingers in the minds of those born before the 1980s, when the supply of basic goods such as food had to be rationed. The economic reform has unleashed the creativity and can-do spirit of the Chinese people. It has also reshaped their perception of the state’s role in the economy. Government interventions have since then become a kind of necessary evil to be tolerated, not embraced. Until very recently, catch-phrases such as “Guojin Mintui” (the advance of the state and the retreat of the civilian) represent the nation’s uneasiness with the state’s corrosive touch on the economy. Progress towards an open economy friendly to the participation of a vigorous private sector is seen as the ultimate barometer of the reform’s success.

The reaction to the Xiongan New Area reveals a shifting national psyche. The pageant-like online discussion shows that for a considerable segment of Chinese society, the visible hand is no longer frowned upon. Rather, it is seen as a magic wand that can turn a backwater town into a booming center of innovation and productivity.


At least no more tomb sweeping for now. For those with a heightened sense for money-making opportunities, the Resolution let out the assuring fragrance of Renminbi. In no time, the Chinese media were filled with stories about jammed streets and fully booked hotels in Xiongan. Almost overnight, once obscure towns that nobody had ever heard of were transformed into bustling centers of real estate transactions. Urban legends abounded of nouveaux riches from Beijing and Shanxi buying up entire residential compounds with piles of cash.

The scene marked the first public test of confidence in the newborn area. And it was excessively bullish. The cash-wielding house buyers saw the announcement as a clear signal of imminent pouring-in of investment, people and possibly preferential policies from the government, all pointing to a rising real estate market. Bet long on Xiongan, their guts told them. Quite literally, this mood was reflected in the stock market. Stock prices of cement and steel companies from Hebei province soared following the news, to the extent that a few of them had to publicly downplay expectations.

The reaction seemed not what the designers of Xiongan had wanted. Measures were swiftly put in place to quench the fever of apartment hoarding and deter speculators flocking to the place. A freeze on any real-estate trade in the region was announced, which quickly escalated into the arrest and lock up of rogue traders, and resulted in bizarre scenes on the streets of Xiongan, with police officers chasing after real estate agents.

Xiongan’s planners are faced with a tricky task of managing not just expectation but also imagination. And there is visible frustration over the public’s small-minded, reductionist reading of the New Area as a repeat of the real-estate-driven routine of city construction. Wild speculation is “debasing” to the leadership’s vision for the New Area, a People’s Daily article declares. The grand plan, it argues, is an ambitious strategy to explore a new way to overcome “megacity disease”, to achieve a more balanced regional development and to nurture innovative engines of growth. In other words, the speculators are guided by a misplaced enthusiasm, which, according to the article, is a kind of short-sighted “petty wisdom”. They fail to appreciate the designers’ real intention.

The article introduces a few novel terms to the lexicon of urban development. Besides “megacity disease”, it also highlights the primary role of Xiongan as the receiving base for “non-capital functions” to be moved out of Beijing. In case this is not clear, it specifies that such functions include anything that’s inconsistent with Beijing’s self-image as China’s capital, i.e. the political, cultural, international exchange and technological innovation center of the country. Corporate headquarters and financial institutions therefore do not belong to the capital and should be relocated.

The framing provides a powerful conceptual framework to understand Xiongan: it stands against everything that’s wrong with Beijing, the largest megacity in North China today. In addition to its notorious pollution, congested traffic and overheated real estate market (megacity disease), commentators also blame Beijing for its unconstructive role in the region: instead of acting like a sun that radiates warmth to its neighboring towns and cities, it acts like a black hole that sucks resources from them. The relatively healthy symbiotic relationship among Yangtze River delta cities, wherein Shanghai and Shenzhen shine like stars, do not exist around Beijing.

The implied dissatisfaction with the capital’s current situation found resonance in the popular reaction to the announcement. Many people, upon hearing the news, paid homage in their social networks to Liang Sicheng, the defiant architecture scholar who, in the 1950s, insisted that the old imperial Beijing be kept intact, while a new city should be built in its vicinity to accommodate the new capital’s expanding industries, commerce and governmental entities. His vision of Beijing was diametrically opposite to that of Mao, who famously told colleagues that he would like to see chimneys all over the city from the towers of Tiannanmen. His Soviet advisors, at that time, were busy planning a public square in the city center in the fashion of the Red Square. No wonder Liang’s advice was not heeded. Worse, he was fiercely persecuted in later political movements for those very views.

If setting up Xiongan is to some extent a correction to Mao’s extreme vision of the capital as the symbol of China’s industrial might, it is by no means a return to Jane Jacobs’ organically grown city. The effort is as deliberate as the meticulously ranked dancers at the opening ceremony of the Beijing Olympics. And attitudes toward the arbitrariness divide the country into bears and bulls.


The pessimistic sentiment is best represented by a Weibo post that inspired thousands of reposts: “Is the government able to make some place prosperous simply by wishing it? What you guys have in mind is not Gov, it’s God.” The author uses the examples of China’s Northeastern rust belt provinces to illustrate the point that the heavy involvement of the state does not necessarily bring desired economic results. Those provinces have enjoyed decades of central government largesse in the form of state-owned industries and the associated public resources. Yet the region’s deepening economic woes since the 1990s, especially in comparison to the vibrant economies of coastal provinces dominated by private businesses, accentuates the limitations of state planning.

A more serious critique is offered by Chen Gong, a senior researcher at the Anbound think tank. He bluntly calls Xiongan New Area “overrated”, and predicts that it won’t imitate the success of Shenzhen. “Both Shenzhen and Pudong saw great influx of investment and talent because China was in the process of integrating into the global economy. There was huge momentum at the time of their opening. All the government needed to do was to lift the restrictions and set free those market forces. ” Xiongan will be different. “Forever gone is the era when government draws a circle, enacts a few policies, and capital automatically flows in to prop up thriving industries.”

The economic new normal means a lack of untapped reservoirs of capital and resources that will replenish a pool as soon as the gate of the dam is open. The arbitrary allocation of “non-capital functions” to the New Area is therefore seen as a zero-sum game. “Enterprises moving out of Beijing will bring down the city’s economic output, reduce its tax revenue, cut consumption and sap part of its service sector,” Chen predicts, “it can become a major depletion of Beijing’s economy and its impact is likely underestimated.”

Drawing on the experience of the Silicon Valley, another commentator is more explicit with his disdain for state-driven efforts in building so-called technopolises. The success of the Silicon Valley, the argument goes, is in stark contrast to the relative obscurity of Massachusetts’s Route 128 today, whose lackluster performance is attributed to its reliance on government contracts, big conglomerates and a top-down approach to innovation.uch deep-rooted skepticism probably won’t disperse until a more definitive assessment of Xiongan’s economic performance can be made.

But this time the pessimists are confronted with an articulated optimism that rivals, if not trumps, the doubt. An FT Chinese piece by long time urban development observer Li Yan is representative of such confidence: “North China hasn’t had such strong and clear anticipation of growth for a long time. The psychological need for such anticipation overrides any rational calculation of real interests.” In other words, simply manufacturing that anticipation is already a brilliant move by the government. Li directs people to look beyond the relocation of “non-capital functions” and pay attention to the other stated objective of Xiongan to become “a showcase of innovative development”. This means the New Area will likely concentrate high-end, rising industries (as opposed to low-end manufacturing), powered by the inflow of new migrants. It will kick-off a “chemical reaction” that reactivates other economic elements in the North China eco-system. Unlike Shenzhen in the 1980s, this time Xiongan will enjoy the backing of a central government with “unprecedented finance prowess and administrative resources.” And it will become the “ultimate test” of a developmental model that puts government mobilization and direction of resources at the center.

The optimism online also comes from agreement with the general strategic direction of redistributing resources between Beijing and Hebei, and confidence in China’s bureaucratic apparatus in delivering such schemes with top level blessing. As Weibo user Li Ziyang, someone known for his bullish views about China, puts it, “China has an army of officials and bureaucrats who know the country well, are proactive in their job and can execute competently. It is one of the secrets of China’s economic miracle.” Both Li Yan and Li Ziyang suggest that the New Area can be China’s chance to articulate and crystallize its homegrown approach to economic success, wherein the state, with its efficient bureaucratic apparatus, are central to its recipe.

For those optimists, details of the Xiongan plan are not as important as its strategic boldness. Or, as Li Yan puts it, people are simply enthralled by the grandeur of setting up a new city from scratch (大手笔). The society’s appetite for boldness is also reflected in the relative marginalized voices that question the procedural integrity of the decision. The fact that a decision of millennial proportion did not go through any public consultation or approval by the National People’s Congress, and was kept under an iron lid up to the moment of its announcement, seems not to have bothered the general public. And people take the drastic crackdown on real estate trade in stride. After all, neither Shenzhen nor Pudong is the product of democratic deliberation.


Against the backdrop of public anticipation and confusion, the Party’s official outlets continue to dole out information about how the plan came into being. Through this tiny window, people have a glimpse of how the idea evolved out of the perpetual frustration over the imbalanced and uncoordinated development of the Beijing-Tianjin-Hebei region and how, in as early as Feb 2015, the proposal for a “new city” had already emerged. The concept was further hashed out in a series of follow-up meetings led by President Xi himself, from the March 2016 notion of a “second wing” of Beijing to the May 2016 official designation of the New Area. The vision for the city also became progressively clearer. A Xinhua piece puts Xiongan’s long term population projection at 2.5 million, which is only a fraction of Beijing’s current population of over 20 million, further confirming the point that it’s not going to be “mega”. It also names Japan’s Tsukuba and Israel’s Haifa as role models for the new city. Both are centers of science and technology brainpower for their respective countries, while Tsukuba is also very much a “planned city”. The designers of Xiongan seem determined to act differently from what China’s playbook for economic growth would prescribe. Their determination and the dizzying swiftness of its materialization leaves the country in a state of thrills and disbelief.


(Picture by: 安小庆)

Over the years, people have come up with various barometers for the Chinese economy, which, due to the opaqueness of official statistics, proves to be a tough nut to crack. The price of pork, the output of coal, the number of windows that light up at urban neighborhoods at night have all been used to take the pulse of the massively complex country. One of the more famous examples of such makeshift indictors is the now legendary “Keqiang Index”, named after Premier Li Keqiang, who, while serving as the governor of Liaoning province during the early 2000s, used railway cargo volume, electricity consumption and the amount of bank loans as surrogates of the official GDP figures which he, as a Communist Party provincial chief, deemed unreliable.

Jokes are to official statements what the Keqiang Index is to GDP numbers. Nowadays, The best online jokes are about the overheated housing market that since late 2015 have preoccupied the nation. “Today’s HR gauges a candidate’s hireablility by asking if he or she owns real estate. A person without an apartment is often pessimistic and cynical about the society. Those having to pay mortgage tend to be loyal, not itching for job change.” Another version has a more real-life feel to it: “Engineers who own more than one apartments in Beijing are unmanageable in the office, always ready to fire their boss, sell an apartment and go travel the world with the money; engineers who own one apartment are completely demotivated, as they are basically set. The raise they earn through harder work would be rendered pointless by the rising house price. Those without an apartment are anxious to go into the finance sector or do an MBA and won’t spend a single minute on perfecting their engineering skills. The housing market is shaking the Republic’s foundation!”

Ever since the 2009 post-financial-crisis government stimulus of 4 trillion RMB, which kick-started a massive housing market boom, anxiety about skyrocketing housing prices has filled the pages of the country’s newspapers and cadres’ speeches. Premier Wen Jiabao’s numerous promises to keep housing price “reasonable” during his last few years in office still resounds. But the jokes today capture something new in that anxiety. The rallying market is reshaping people’s psyche as much as their pockets.

One of the most cited expressions of concern in the Chinese media today is Longview Economics CEO Chris Watling’s comparison of the current housing price hike to the Dutch “Tulip Fever” that happened almost 400 years ago. The London-based consultancy lists Shenzhen, the Chinese city that borders Hong Kong, as the world’s second most expensive housing market, next only to San Jose in California. According to the firm, Shenzhen’s housing price has risen a whopping 76 percent in a single year, surpassing longtime real estate strongholds, its sister city Hong Kong, and even inner London.

It is debatable if China’s housing boom today is as economically shaky as the Tulip Fever or even the housing boom in the United States before the financial crisis, fueled by subprime mortgage. As recent as in Jun this year, bullish advocates for the Chinese property market, such as star developer Ren Zhiqiang, a Weibo celebrity, were still arguing that the rise in housing prices is driven by the unabated pace of urbanization and population inflow into cities. The large amount of down payments, backed by actual saving of the Chinese consumers, not credit, makes the boom qualitatively different from the subprime mortgage driven US housing market before the crisis.

But concerns with the sustainability of the current boom is only part of what people have been fretting about. Yes, the prospect of a spectacular crash in the fashion of the stock market last year is scary. However, to many people, the alternative, a market that continues to rally in the foreseeable future, looks as troubling if not more fearsome. The engineer joke is an embodiment of such concern: an ever booming housing market is going to eat into the very foundation of a robust, creativity-based economy that China is so eager to become.

A much more articulated version of this fear appeared on the Financial Times Chinese website on Aug 29. The author enumerates a few dire consequences of an ever enlarging housing bubble, including financial risks and depleted capitals for the “material economy” such as manufacturing. More piercingly, he observes that with the housing price spike, the “landlord mentality” that historically haunts China has been rekindled among the Chinese nouveau riche. “Many rich investors have accumulated a large amount of real estate in their hands to collect rent or simply the additional value generated from more rise in price. One the other side, more urban proletarians, those workers who can never afford housing, are created in the process.” For a regime that, more than 60 years ago, gained support by wiping out the landowning class through collectivization, the current situation seems ironic.

To illustrate their increasing uneasiness about where real estate is leading the country, commentators need to borrow an entire vocabulary from a place where the dominance of property developers have agonized a society, Hong Kong. An article that warns about the mainland cities slipping toward “Hong Kong-ization” characterizes the autonomous metropolis as having three distinctive features: sky high property price and living costs, huge income inequality, and increasing conflicts between the natives and newcomers. The author attributes the problems to the Hong Kong government’s laissez-faire approach to real estate profiteering, whose unbridled growth squeezes the space for small and medium businesses (through expensive rent) and exacerbates social inequality (property owners vs. those who can never afford).

Nothing highlights the mainland’s resemblance to the Hong Kong case better than the 6-square-meter apartment in Shenzhen that causes a stir in the public conscious. On Sept 24, news had it that a developer was selling a set of ultra-mini flats in Shenzhen with a jaw-dropping per-square-meter price of 150,000 RMB (roughly 22,000 USD). As a reference, monthly average salary in Shenzhen is about 5000 RMB (746 USD). The mean salary is lower. Reporters visiting the place as potential buyers were shocked to find a packed scene: people were rushing there to get hold of the deal. A woman reportedly wept after her apartment slipped away to another buyer just because of a minute of hesitation.

Commentators were quick to refer to those mini-apartments as “pigeon cages“, a term once used to describe the horrible hellholes immigrant laborers and poor residents inhabit in Hong Kong. (To be fair to the developer, those Shenzhen apartments are actually much more spacious than their registered 6 square meters.) They become the symbol of the property frenzy, 880,000 RMB for literally a jail cell in the middle of a city.

There are people who see it differently. Again, Hong Kong provides the inspiration. They call such small apartments “Get-on-the-bus-property“, meaning that the relatively low total cost (because of the tiny space) allows cash strapped consumers to embark on the “bus” of property ownership. The housing boom makes it perfectly clear to many that property has become the watershed of one’s fortune. Ownership means a quick accumulation of personal asset, a defense against inflation and access to cheap credit. Without it, you are doomed with the dwindling value of cash in the bank or under your bed. To buy or not to buy, it’s not a question. That’s why when Hong Kong developer Cheung Kong Property released a 16 square meter mini-condo for RMB 1.32 million back in 2014, the Hong Kong media dubbed it “mercy to the poor“. Mainland observers bring up this anecdote with sarcasm and resignation.

The exacerbation of already severe income inequality through this recent episode of housing price spike, which spread to second and third tier cities, is the most disturbing aspect of this property market rally. As one commentator puts it, “without denying their hard-working, the property owning upper middle class should attribute most of the build-up of their fortune to property price increase. Today’s housing boom is not primarily hurting the anxious middle class, but the desperate lower classes that won’t share a penny of this market. Observers who do not acknowledge this sad fact, or even watch with amused indifference, should go into the hall of shame.”

Not just the cold-blooded spectators are to be shamed. The above-mentioned Financial Times commentary also points the finger directly at central ministries and local governments, which, as the author claims, willingly hijack a top leadership policy of clearing housing inventory and turn it into a call for re-stimulus. The result is rapidly increasing leverage of households and the simple shift of debt from the balance sheets of property developers to those of individuals. Local governments benefit tremendously from land sales and taxation on transactions while families bearing the financial risks. They are becoming “super landlords”.

As the country’s top propaganda organ, the People’s Daily weighed in on Sep 26 with an opinion piece, reflecting the graveness of the current situation. Titled “Losing the hard-working spirit, we will still be homeless with all the properties”, the article devotes much of its content to an uneasiness about the ascent of a opportunist, speculation mentality, in the same vein as the engineer joke, but with a notable twist at the end: it calls on individuals to cling to their faith in self-improvement and to not get lost in the housing pageant. The commentary was met with disbelief and ridicule. In no time, another joke starts to spread on the Internet. It applies a light touch to the original title of the People’s Daily article: “Losing all the properties, we will still be homeless with all the hard-working.”

Crime and Punishment of a Search Engine


Does a search engine have the ability to kill a person? After being bombarded by the news about the death of a 21-year-old college student called Wei Zexi, many Chinese have come to the conclusion that it does.

Like numerous online debates about scandals of late, the incident devolves into an exercise of guilt rationing on a massive scale. With the absence of an impartial arbitrator, public opinion takes up the role of fact-finding and responsibility allocation, with implications hard to pin down at this very moment. The story puts Baidu, China’s largest search engine company, at the epicenter of the controversy, bearing the brunt of online criticism, which is guided as much by a complex set of moral convictions as by a vision of technology’s role in the society.

According to Wei’s own account posted on two months before his death (as an answer to the question “what is the greatest evil in human nature?”) , he was diagnosed of a rare tumor, synovial sarcoma. Major hospitals he visited all threw up their hands and told him no effective therapy was available. Desperate, he resorted to Baidu, and initial searches quickly rendered amazing results: a bio-research center based in one of Beijing’s well-regarded hospitals (affiliated with the People’s Armed Police) claimed that they had an advanced therapy (DC-CIK) that could help. The doctor there told him it was “Stanford technology” and promised to extend Wei’s life by “another 20 years at least”. The family invested almost its entire fortune into this last ditch effort, only to find that cancer quickly spread to his lung. Later, well-intentioned individuals on the internet helped Wei find out that DC-CIK was a shelved technology in most parts of the developed world due to limited effect in clinical application. Yet precious time and money was wasted. Wei, the only son of a Xi’an family, died on Apr 12th.

The personal tragedy of Wei Zexi puts a key business component of Baidu under a scorching national spotlight. It is called P4P (pay for performance), whereby customers bid for premium advertisement placement alongside “natural” search results of selected keywords. Although other factors such as quality of content also affect positioning of promoted links, bidding price carries significant weight in the formula, giving high-paying customers good chance of occupying prime locations on Baidu’s search page. The search engine does put a “promotion” mark under sponsored search results, but in a way that is probably not as visually distinguishable as critics and regulators want. The subtlety of the mark can get lost on eyes less experienced with Internet surfing, or those who are eager to find something.

With this background, it may be understandable that the first wave of criticism came for Baidu, even though in both Wei’s original account and the initial investigative piece that directed public attention to the case, the blame fell squarely on the Internet company and on the bio-research center, as well as the invisible yet mightily present state that loomed over the two.

In an era when books like Nudge populate bookstore shelves and people believe in step-counting mobile phone apps to keep themselves fit, the idea that search engine results determine the fate of individual users is only the natural offspring of a faith in the efficacy of technological interventions. It is further enhanced by the towering image of the do-no-evil Google, whose upholding of “enlightened” technology becomes a shining exemplar that shapes the Chinese public’s view of Baidu.

So the conversation swings back and forth between Baidu and Google. Some goes so far as to suggest that Baidu is the “fundamental culprit in dragging down the informational infrastructure of the Chinese society”, by abusing its virtual monopoly in the search market to set up roadblocks on the information highway, profiting from a slowed traffic and a misguided crowd. Google’s Adsense, its core advertising instrument, is upheld as being non-intrusive and responsible. Tales of Google’s efforts to ensure the quality of medical-related search results attracts the attention (and imagination) of Chinese netizens. Very specific ideas proposed by prominent opinion leaders, such as listing ads in a separate column on the screen, are clearly influenced by widely held perceptions of Google’s practices. But it is worth stressing that nowadays Google also puts some ads in the same column as natural search results (with clear marking as “Ads”). More sophisticated industry observers have also pointed out that the growth of Google’s business in China, back when it was still allowed to operate inside the country, was also partially driven by traffic generated by the same kind of search result tricks that Baidu deploys.

Pressed for a response, the Internet firm released a statement through one of its Weibo accounts on Apr 28: it had double-checked the paperwork submitted by the hospital and found it completely legit. This may be true, if your scrutiny stays at hospital level. Move one level below, to the department level, disturbing signs start to emerge. When investigative journalists dug deeper into the bio-research center, they came up with a shadowy web of private entities that had basically “taken over” lucrative departments in military-affiliated Chinese hospitals and ran them like joint-ventures. The public would learn of a so-called “Putian clan”, a group of businessmen who shared the same origin in Putian, a town in southern China’s Fujian province. Lurid, unverifiable stories about the ascent of this group of medical entrepreneurs spread widely on the Internet. As the story goes, they got hold of their first bucket of money in the early days of China’s economic reform. In those years, guerilla clinics prospered in street-side budget hotels, ripping off patients of venereal and skin diseases who were too ashamed to go to proper hospitals. With initial capital in hand, those “bare-foot doctors” began to eye more systematic, legitimate ways of money making. Cash-hungry public hospitals became their natural partners and a new model of “contracted departments” spread like wild fire. In order to bring in more patients, the Putian businessmen took up online marketing, taking advantage of the stellar reputation of hospitals that were hosting them. Baidu’s emergence as a dominant search engine and its offering of P4P handed them a perfect platform to reach out to an anxious, sometimes desperate, clientele. In the process, many patients like Wei Zexi fell victim to sub-par treatments.

The entering of the Putian businessmen into the scene makes the ethical water of the Wei Zexi case much muddier. How much blame should a search engine share if much larger malign interests are motivated to take advantage of its playbook and win access to premium ad slots? As Baidu has always claimed, it only collects and sorts information, not generating it. It acts like a mirror: the reflection is only as good as the Chinese society can be.

An event in 2015 seems to indicate that relationship between Baidu and the Putian clan is less than amiable. At that time, an industry group representing Putian medical interests called for a boycott of Baidu P4P services, claiming that the latter had used its dominance in the market to rip off Putian-controlled hospitals by unilaterally raising prices for promotion. Baidu search results have become a major channel through which such hospitals bring in patients. According to the industry association, P4P expenditures occupy an increasing chunk of those hospitals’ profits, in some cases as high as 60-80%. One the other side of the equation, medical advertisement makes up to 25% of the search engine’s ad revenue, making the relationship of the two parties a love-hate symbiosis. Baidu’s account for the unpleasant stand-off was completely different. It claimed that the industry group was threatening boycott because its crackdown on deceptive medical advertisement was hurting Putian interests. “The threat will not soften our resolute to keep false medical information out of our search results.”

With more information surfacing about the Putian clan, a push back against Baidu-bashing quickly collects momentum. People begin to question the society’s proclivity to blame the safer, easier and more exposed. For them, the focused attack on a publicly listed Internet company is a sign of the collective laziness of Chinese Internet. “The Putian businessmen are happily off the hook now,” as some would proclaim. The despicable deal between public hospitals and the nouveau riche, and negligence of their supervisors, can easily escape public scrutiny under the cover of an outcry directed entirely at Baidu. As a veteran Caijing journalist puts it, what the public should really chase is the regulators who turned a blind eye to the rampant, irresponsible monetization of public hospital reputations. Not only is Baidu a minor consideration in this whole scheme that condemns Chinese patients, so is the Putian clan, whose fortune is determined by the whims of powerful regulators. He predicts that a campaign-style crackdown on private interests in the medical sector would ensue to placate the public, without touching the fundamentals that have allowed the situation to spread in the first place. “It is a way for power to routinely discipline private interest groups, preventing them from growing too big, while reminding them to be more active in paying their rent.”

More methodical minds try to lead people out of this ethical swamp by actually ranking the relative moral responsibility of the parties involved: the biggest share of blame goes to the military-affiliated hospital that knowingly sold its reputation and standing for profit, while being in the best position to judge the medical merit of the technology that its “contracted” bio-research center is promoting. Second comes the center and regulators. Baidu ranks at the bottom of this ethical ladder, for “it is also in relative disadvantage when it comes to medical expertise”. Its only problem is choosing to pursue profits in this category in spite of its own blind spot.

But there are people who resist this way of assigning responsibility. They see it as a distraction or even an intentional tactic to deflect pressure from Baidu, at a point when intensive public questioning is just about to make a dent on one of China’s largest internet firms. The sentiment roots in a deep frustration over a string of Baidu-related controversies (including the one in January this year where it attempted to sell off management authority of an online patient support group to commercial interests), which the Internet giant have all weathered with impunity. “We don’t have the ability to change the root cause of the problem, but at least we can change Baidu with a concentrated effort.” This line of argument contains, at once, a deep sense of powerlessness and a great faith in public opinion: criticizing the power behind the whole corrupt situation won’t bring you much change. It’s a dissipation of precious energy. But the search engine will ultimately bow to such public pressure.

The powerlessness manifests itself in a different reading of Wei’s death. What killed him seems to be a carefully weaved web of sub-lethal elements: acting individually, no element, whether it’s the search engine or the hospital, is potent enough to bring death to a person. Yet collectively, their grip turns out inescapable for an ordinary Chinese like Wei. In the end, each individual element can deny accountability for the collective consequence.

On May 10, China’s Internet authority handed down its verdict on Baidu: it has to change its algorithm for search result presentation, give more weight to credibility, less to bidding prices. Plus, no more than 30% of a page should be given to promotional results. It is a rare occasion where the country’s web regulator publicly dictates change, albeit a noble one this time, to an Internet company’s core business, its algorithm. Earlier, commentators already made a careful-what-you-wish type warning about a more empowered Internet police coming out of this case. But for most part of the cyberspace, vindication is the predominant mood.

The complexity of Baidu’s response to the whole saga is best captured by an article published on the company’s intranet days before the final result. While pledging to collaborate with regulators, it also questioned why the bio-research center could obtain all the certificates and official documents. “As a great enterprise, we sometimes have to shoulder responsibilities that once belong to the state and the medical industry, because with more power comes more responsibility.”

Das Evil Kapital


(China Vanke Chairman Wang Shi)

Speaking of the pot calling the kettle black, nothing sounds weirder than a Chinese real estate developer accusing a private insurer of bringing in sinful capital, which incidentally pushed up the former’s stock price to a historic high.

In what has become one of China’s most spectacular melodramas of the year, the attempted hostile takeover of China’s largest home builder, China Vanke, by a little known insurance conglomerate, Baoneng, creates a sense of intrigue so intense that it almost redefines how a corporate deal could be received by the Chinese society. In the process, it reveals the multi-layered, fantastic imagination that the society attaches to capital and those who wields it.

The substance of the event is pretty simple on the surface. In the time span of less than half a year, the Baoneng conglomerate has acquired tens of billions RMB worth of Vanke’s share through the stock market. Quietly, the insurer had become Vanke’s largest shareholder with 22.45% of its total shares by Dec 17, a dramatic increase from only 5% four months earlier.

Nothing in the public domain suggests that Baoneng’s operation violates any written rules. This is reflected in the authority’s largely ambivalent attitude toward the deal up to this point. China’s securities watchdog has openly expressed its willingness to “leave the matter to the market”, while its supervisory body for banking is “looking into” potential exposure of local banks to risks involved in the deal. But what Baoneng essentially does is disrupting Vanke’s carefully maintained shareholder structure that has been in place for two decades. The essence of that structure is highly dispersed shareholding that allows senior management a freehand in steering the company. Until Baoneng emerged on the horizon, China Resources, a state-owned conglomerate friendly to the Vanke management, had been Vanke’s largest shareholder owning about 15% of its shares. Other major shareholders held less than 6% combined.

This explains why those most unsettled by Baoneng’s move are Vanke’s senior managers, specifically its chairman, the 60-year-old Wang Shi.

In an internal speech made public on Dec 18, Wang makes it clear that he does not welcome Baoneng as Vanke’s no.1 shareholder. He sneers at the new comer’s business as risky and irresponsible, which will tarnish Vanke’s stellar reputation as China’s most credit-worthy home builder.

According to details revealed by the Chinese media, Baoneng financed its 40-billion-RMB stock market advancement on Vanke largely through margin financing, layers of collateralized loans leveraged by money from its sales of Universal Life Insurance that is often marketed as short-term investment products. In his speech, Wang blasts the financing model as excessively risk-taking. He is not without his points. Equity investment as a long-term investment strategy would put pressure on Baoneng’s short-term based money line. In an event of large-scale redemption of the ULI product or unexpected regulatory intervention, the insurer will face serious liquidity problems.

But Wang’s criticism of his fervent bidder goes beyond finance. His account of his first face-to-face encounter with Yao Zhenhua, the man behind Baoneng, betrays a hint of contempt: “He appeared not able to control his mouth… Nobody has heard of such persons before. They came out of nowhere and suddenly got very rich using leveraged money.

Unlike his “nobody” adversary, Wang has been the torch bearer of Chinese entrepreneurship for as long as “entrepreneurship” is valued in China. Being the founder of Vanke, Wang has led the legendary company for 31 straight years. Vanke was the second earliest stock ever listed on China’s Shenzhen Stock Exchange, with its trading code 000002 as a badge of honor.  Over the years, Wang has cultivated a larger-than-life public image that sets him apart from the typical “Chinese businessman”. He is adventurous, spending his leisure time climbing Mount Everest, kayaking in the torrents of western China and flying gliders over the sky. He radiates wisdom, taking three years off his corporate chairmanship to ruminate about Japanese history at Harvard; He advocates for a business culture that sounds refreshing for a Chinese audience: He claims that Vanke never bribes anyone to get business deals in China; He promotes high-quality, sustainable architecture and neighborhood; He serves as WWF US’s board member and delivers inspiring speeches at the world’s most prestigious green events.

The stark contrast between the public images of Wang and Yao creates an interesting tension that defines initial reaction to the Vanke-Baoneng conflict. Specters were somehow led to believe that there are two kinds of businesses, those that are benign and decent, and those that are hostile and crooked. Wang’s internal speech certainly helps create this impression by invoking the “barbarians at the gate” image, which spreads across newspaper headlines in the following days. The narrative was also enhanced by Wang’s influential admirers, the most excessive of which declares that “Vanke can lose Wang Shi. But China can’t lose him.” As a former chief editor of one of China’s most popular business newspapers puts it, Wang’s Vanke represents the “truthfulness, goodness and beauty” in the Chinese business community for its uphold of basic business ethics and rationality. The editor “shed tears” after learning about Wang’s current difficulties.

Whereas 30 years of relatively robust business does speak to the strength of Vanke’s business model and Wang’s leadership, whether it is a sign of its moral superiority is debatable. Actually many people were put off by Wang’s overtly ethical criticism of Baoneng, seeing it rather as a kind of biased arrogance. For Wang Shi, introducing the ethical argument into a corporate deal cuts both ways. While he can once again brand Vanke’s cleaner-than-thou business culture, some questions Wang’s fundamental business ethics of openly rejecting a perfectly legitimate major shareholder who may actually improve Vanke’s performance in the stock market. Interestingly, Baoneng issued a public statement on Dec 18 confronting Wang on the ethical question head on: “Where is the conflict between the pursuit of optimal, efficient capital deployment and an open, transparent social order?” In his speech, Wang speaks highly of Vanke’s regard for its hundreds of thousands of small shareholders. However, people also point out the contradiction that the management never did anything to boost the company’s stock performance, even when they had the chance to do so through a stock buyback in 2014. It turns out to be a fateful decision not to do so, as it hands Baoneng an opening (80% of Vanke’s shares were outstanding in the stock market at that time).

As financial observers are debating the wisdom of Vanke’s business decisions, and more importantly, the disturbing trend of insurance money flooding the securities market shopping for real estate equities, wider discussions about the deal are turning decisively “Olympian”. The dramatic clash between business titans teases out a deep-seated suspicion that big capitals are but proxies of more powerful interests behind them, and therefore their conflict must represent power struggles on a much higher level. In other words, this is modern China’s financial Trojan War, where the Greeks and Trojans are fighting on behalf of their rivaling Gods.

The theory goes that both Wang Shi and Yao Zhenhua are front-men of their respective political patrons, who belong to adversarial cliques of the Party. Wang’s unspecified patron controls the China Resources conglomerate (Vanke’s biggest shareholder before Baoneng’s bid), which has recently been disciplined under the anti-corruption campaign (its chairman was arrested last year). Baoneng’s attempt to seize control of Vanke is another assault on the big boss behind Wang Shi from its political rivals. The intriguing participation of Anbang Insurance in this financial drama further fuels this line of speculation. As Baoneng was making strides in the stock market, Anbang, a company widely associated with prominent “princelings,” quietly increased its stake in Vanke to over 6%, making itself the “swing vote” between the two fighting camps. If Anbang represents the will of another God which may decide the fate of Troy, is it Athena or Apollo?

A cautious mind would notice that this political reading of the Vanke-Baoneng deal shows signs of stretching reality to fit an imagination about the politics of Chinese elites. It assumes that the supposed political enmity among powerful party figures extends naturally from the political arena to the corporate realm through “proxies”, and that large Chinese corporations, no matter how complicated their financing is, can be neatly assigned to particular political figures who are involved in a zero-sum power game.

But this kind of alternative narrative does broaden the base of the story’s audience, as it proves to be something more “entertaining” than cold financial details. The abundance of conjectures and the shortage of ascertainable facts also make the story much more social-media-friendly, leaving most serious media outlets high and dry. One observer senses the irony in the popularity of the story: as something fundamentally non-relatable to most Chinese watchers, it manages to create an almost magnetic theatrical effect.

The vulgarization of the story does not stop at political gossips. Both Wang and Yao’s personal lives were added into the recipe to make it more flavory. In particular, Wang’s once high profile love affair with a young actress was held against him as indication of his sluggishness in recent years, which supposedly led to his unpreparedness in response to Baoneng’s ambush. It fits well into a misogynist tradition of Chinese classic stories, where the fall of a male hero is often blamed upon a seductive female partner. “All of a sudden many people jump out to teach Wang Shi, and everybody, a lesson: how women cost ambitious men their world.”

On Dec 21, Vanke applied for the suspension of trading in its stocks for as long as three months, citing “significant asset restructuring” as a reason. The move was widely read as a way to strike back at Baoneng, which faces liquidity pressure on its leveraged debts. A recent Caixin report reveals that Wang has been busy approaching potential equity investors to improve Vanke’s shareholding structure. But given the fact that very few shares outstanding remain on the market, it will not be an easy job.

Two days later, the mysterious Anbang Insurance issued a statement publicly supporting “the stability of Vanke’s senior management”, essentially busting the conspiracy theory that Anbang, and the political forces behind it, are set to overthrow Wang Shi’s real estate empire. With Anbang’s more than 6% share on Wang’s side, the situation improves almost overnight for Wang’s team. But Anbang’s real intention with Vanke remains unclear.

The general public probably will never know what actually happened behind the scene during these hectic days and nights of December 2015. No one is there to write the Chinese version of “The Barbarians at the Gate”, which is a lamentable fact for long-time observers of the country’s finance reporting scene. (Only Caixin’s detailed investigative report on the case is probably an exception.) No matter who emerges in the end as the winner of this bid for the control of China’s largest home developer, the loser is already visible: it’s the idea of “philosopher-king capitalists” as the progressive force to change China. The Vanke drama has revealed the fragility of the public image that Wang Shi and an entire class of so-called progressive Chinese capitalists have built for themselves. To the Chinese public, not only are their moral positions dubious, their independent agency is also under question. The widespread public perception that they are just puppets of much more powerful masters provides a real valuation of their moral capital in this country and how shaky their moral high ground really is. Expecting entrepreneurs like Wang Shi to provide the kind of moral leadership that can lift the society out of its value vacuum is almost like betting on Hector to win the Trojan War.

Li Ka-shing’s Indignation


What on earth can agitate the steely Superman? It turns out all it takes is an article written by some dubious “researcher” from a Chinese institute.

On Sept 29, the 87-year-old Hong Kong billionaire Li Ka-shing, nicknamed “Superman Li”, broke his cool by releasing to the Chinese media a statement in response to a controversy that had been raising eyebrows all over the country in the past two weeks. It started with an article titled “Don’t Let Li Ka-shing Run Away” that appeared on the WeChat platform of a major think tank run by the state-owned news agency Xinhua. In that article, author Luo Tianhao accused Li of being ungrateful and opportunistic by cashing out his real estate properties in mainland China and moving investments to Europe. It then moved on to instruct Li to do three things, with a tone at once condescending and menacing: invest in lower profit industries in mainland China; hold on to “symbolic” properties in the mainland and Hong Kong as a token of his loyalty and confidence; do more philanthropy. The author also spent a good portion of the article belittling Hong Kong’s business tycoons and highlighting their relative “dispensability” compared to the early days of China’s reform and opening.

As many Chinese observers have pointed out, the significance of that particular article is probably overblown by its somewhat unfortunate pick-up by the Xinhua-affiliated think tank. Likely what happened was that some inexperienced editor in charge of its WeChat account innocently carried it without realizing the potential explosiveness of its content. Commentators also dug out the bogus nature of the author’s numerous self-claimed titles, revealing that he was nothing but an aggressive self-promoter.

In a society where the ruling elites are accustomed to communicate in codes and hide political intentions behind cryptography, the probability of the signal-hungry public to misread or over-interpret things runs high. But even if this is a classic example of overreaction to an essentially trivial piece of opinion, the waves it stirred up and the fact that people so naturally associated it with some sort of high-level intention speaks to a deep-rooted concern that had been fermenting over this past summer.

Economists were among the first to cry foul of the mentality embodied in the article. They dubbed it “anti-market” and maintained that Li Ka-shing’ accumulation of wealth in the mainland was essentially a market phenomenon and should be encouraged. Applying moral judgments on market transactions (including cashing out) is going to affect the business community’s confidence in the system itself. The same sentiment also defines the reaction to the government’s botched effort to rescue a sliding stock market in the summer. Instead of “letting the market play a decisive role”, the authority displayed an assortment of administrative weaponry: suspension of IPOs, banning short selling and arresting a journalist whose exclusive report about the possible wrapping-up of governmental rescue efforts sent the market downward again. In both the Li Ka-shing and the stock market cases, observers sense the ominous encroachment of the logic of power into the sanctity of the marketplace, the former features demagogy, mass mobilization and coercion, while the latter run under the principles of contractual spirit, mutual consent and free will.  People satirically refer to the authority’s stop-running-away mindset as “the foundation of this strong nation” and a “panacea” to every conceivable problem the country faces.

But as business writer Wu Xiaobo writes, in the case of Li Ka-shing, as in many Hong Kong tycoons of his generation, the line between politics and market is never that clear-cut. He even considers Li the symbol of a business philosophy that treasures and embraces the partnership with an ascending power. By supplying the power with much needed capital and support, Li got handsome returns from his investment and therefore became the “biggest winner of China’s transition.”

That ambivalent relationship with power becomes an original sin that Li’s critics exploit. The author of the original article argues that since real estate development in China is almost impossible without some forms of governmental “benevolence”, Li’s cashing out is no less than an equivalence of betrayal. His status as the richest Chinese man on earth (only recently taken over by Wanda Group’s Wang Jianlin) also means that every move he takes carries a symbolic meaning beyond the transaction itself. As early as 2013, when Li’s initial shift of his portfolio to outside mainland China and Hong Kong drew public attention, Wang Shi, president of one of China’s largest real estate developers, sent out a Weibo post reminding everyone: “The very shrewd Mr. Li Ka-shing is selling properties in Beijing and Shanghai. This is a signal. Be careful!” And when China’s economic troubles make business transactions, be it stocks or real estate properties, an issue of allegiance, Li finds himself caught in a spot utterly uncomfortable.

It is particularly unfortunate that Li, a man who builds his life time of business career on optimally timed transactions on a global scale and an extreme prudence in cash flow management, would have to respond to morally charged allegations of ingratitude and disloyalty. Li’s Chinese biographer, Xu Zhiyuan, once compared Li with the likes of John D. Rockefeller, Henry Ford, Bill Gates and Akio Morita, all of whom were short-listed for the London Times’s 1999 award of the “Entrepreneur of the Millennium.” Unlike his great peers who had either enjoyed large home markets or generous government support, Li launched his business from a tiny free port city. From the very beginning he had to face the global market or perish, and up until this point his global portfolio still stands out among Chinese businesses.

His relationship with mainland China has also been complicated. Originally coming from Guangdong province, he spent a good part of his adolescent years sending back money to his mother and siblings who remained in the mainland while he struggled to make ends meet in Hong Kong, where his father died abruptly of tuberculosis and he himself almost died of the same disease. It was this attachment to his hometown that brought him back in the 1980s to set up the first university in the region of Chaoshan, so that kids from the same modest roots as his could receive first-class education. A 2013 profile of Li in a Chinese magazine also took note of his interactions with then Chinese leader Deng Xiaoping. Even though Deng individually received Li twice in 1986 and 1990, an absolute privilege, it was until after Deng’s 1992 speech in Guangdong that finally inject confidence in Li of China’s future. As a perfect example of his signature prudence, Li only started large scale investment in the mainland after that point, which sets him apart from Hong Kong’s other pro-Beijing tycoons who got into the game much earlier.

Xu, his biographer, noticed a sort of “unsophisticated patriotism” in Li. “His generation has experienced violent turbulence (in modern Chinese history). They have a special craving for a wealthy and strong China, and a deep affection for its traditional culture. For them, China is not only just a market. It’s an identity and a place where they can help change.”

This probably explains the tone of Li’s response to the article which sounds hurt and indignant. It is already quite unusual for the old man, who largely stays out of the spotlight, to make such a statement to begin with. The brief press release to the Chinese media contains a distinct personal touch of Li Ka-shing. In response to allegations of him being “unpatriotic”, he listed contributions to the mainland through his multi-billion dollar foundation, in particular the Shantou University endeavor which he dedicated more than a quarter of a century of his time. He quoted Su Shi, the poet from a thousand years ago, to describe his own sense of belonging: “Where my heart finds its inner peace, I call it my homeland.”

He strikes back at the article as “chilling” and representing a “cultural revolution mindset.” Yet while he defends his business decisions as based on a sound and common-sensical logic detached from political considerations, he also makes a gesture that shows his acute sense of his place: “We should not let this meaningless fight over words to become the focus and a distraction from the important message that President Xi tries to send through his state visit to the United States.” The old man, the second richest Chinese on this planet and a self-described “compassionate lion”, is following the thousand-year-old tradition of the Chinese merchant class: showing his subordination to his King.