commentary • FRoM
CHINaECoNoMICREVIEw.CoM Best of the website
“Groupthink,” Pete Sweeney, April 12
It’s spring here in China, and perhaps we should blame warmer weather for the current silliness in the group- buying segment. On April 11, Beijing Lashou Network Technology, opera-
tor of the Groupon-clone
Lashou.cn, completed another round of fundraising from Western private equity investors that valued the company at US$1.1 billion. I feel like I’m missing something. Yes, group coupon sites
were once great ways to make money; unlike, say, social net- working sites, they generate revenue right off the bat, and they cost next to nothing to put up. But China illustrates the double- edged nature of this easy startup. Everyone and their knock- kneed stepbrother now has a group discount site. Tis low bar- rier is what necessitates all the fundraising and M&A. Were the model defensible, Lashou could simply rake in
money. It’s the most popular group buying site in China, af- ter all, and US-based
Groupon.com is only just getting started here. But Lashou is popular with merchants because it remains cheap. Te site is not charging enough to cover its marketing costs, which are high. Lashou spent US$10 million on advertis- ing last month alone, and it will probably suppress competitors only so long as this spending rate is sustained.
PUNDITRY Stumping for support
From “If Only as Simple as Minimum Wage” by Citi Investment Research and Analysis, April 15
Targets for the minimum wage in the 12th Five-Year Plan (FYP) may be coun- terproductive. Local gov- ernments are raising mini-
mum wages aggressively to heed targets for at least a 13% increase in the annual minimum wage, and for the minimum wage to reach at least 40% of the average wage. However, small increases won’t impact overall incomes, and higher minimum wages could stall job creation. Only about 3.5% of urban households are likely to be di-
rectly affected by the minimum wage hikes. Minimum wage levels are still attractive for rural households, but migrant workers are unlikely to be covered by the minimum wage. In addition, labor supply is still tight relative to demand after recent wage hikes. Overall, reforms and market forces are much more im-
portant than minimum wage hikes. It is laudable to target at least 7% real growth in average incomes in the 12th FYP. But this would rely on key reforms in education, social infra- structure, the service sector and on deeper urbanization. A higher minimum wage would not meaningfully contribute to this and may even deepen the imbalances. If reforms are undertaken, then market forces would automatically raise wages, including those for the lowest paid.
6 China Economic Review • May 2011
From “China’s 2011 Na- tional People’s Congress” by APCO Worldwide, March 2011
Te approval of China’s 12th FYP was the high- light of this year’s meet- ing of China’s parliament – the National People’s
Congress (NPC). Occurring against a backdrop of concerns about inflation, property prices, and uprisings in the Middle East, this year’s congressional session unsurprisingly focused on policies to improve the livelihood of Chinese citizens and control social dissent. Key initiatives in the 12th FYP include measures to tackle rapidly rising food and housing prices, and to increase spending on social welfare and internal security. In addition, this year’s congress saw a few officials tak-
ing turns in the media spotlight, underscoring the growing role of public relations in Chinese politics. Wen Jiabao and Wu Bangguo delivered what appeared to be opposing state- ments regarding political reform, but a closer look suggests the Party has no plans for political reform as defined by most foreign observers. Te upcoming shift in leadership should not significant-
ly change China’s business environment in the short term. New administrations in China are generally constrained in their ability to undertake any serious political reforms, and Xi Jinping has already indicated his intent to follow Hu Jin- tao and Wen Jiabao’s policies, as laid out in the 12th FYP.
“Dylan in China,” Ana Swanson, April 14
Bob Dylan’s concerts in Shanghai and Beijing were accompanied by a flurry of blogs and articles that described him as a protest artist (usually before the con- certs) or a sell-out (usually after).
Like all foreign artists in China, Dylan was required to have
his set list pre-approved by the Ministry of Culture, which prob- ably axed any protest pieces early on. Tat he was allowed to perform in the first place was somewhat of a surprise, what with inflation running high and the scent of jasmine wafting around the globe. In its attitude towards music, the MoC has a history of being, shall we say, prudish: Authorities asked Te Rolling Stones to refrain from playing Let’s Spend the Night Together in their 2006 China debut. But for those who were looking for the subversive notes in
his Friday concert, there were a few, like Ballad of a Tin Man. Not a protest song, but if the Chinese audience understood his growling, they would have recognized a clear jab at Te Man. While Dylan shouldn’t be described as a protest artist, his
work has the kind of wacky subtlety that Chinese bloggers ap- preciate. Working in a censored society, they’ve long learned to make political statements through allusion, allegory – even, like Ai Weiwei, dinners of river crab.
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