1. Reuters: China's Xi warns of grim fight against corruption
2. Bloomberg: Bitcoin banned by Alibaba’s Taobao after China tightens rules
3. Bloomberg: Tech upstarts paying 17 times interest upset China banks
4. WSJ: China orders military to buy only domestic cars
5. Bloomberg: Gates says China’s Xi has firmer grip on army than Hu did
6. WSJ - Andrew Browne: No quick fix for China's air quality

 

7. Xinhua: Armed forces ordered to buy Chinese brands of vehicles
8. SCMP: 'Cultural threats' among five focuses of new national security panel, colonel says
9. SD: Yuan lifts to 20-year high against dollar
10. SCMP: Foreign banks lured to Shanghai free-trade zone are left in limbo over regulation delay
11. SD: Chinese brands facing an uphill struggle to establish themselves in the US market

 

1. Reuters: China's Xi warns of grim fight against corruption 
Chinese President Xi Jinping said on Tuesday the fight against corruption was grim and complicated but nevertheless, it had to be solved quickly with "drastic medicine". Xi, in lengthy remarks to the ruling Communist Party's anti-graft watchdog, echoed comments he has made before and stressed the importance he has placed on tackling official abuse, which is a major source of public discontent. Xi has made fighting pervasive graft a central theme since becoming president last March and has warned, like others before him, that corruption threatens the party's survival. "Xi Jinping stressed that while we affirm our achievements, we must also see that the fertile ground for corruption still exists," state broadcaster CCTV said. "The anti-corruption situation remains grim and complicated, the unhealthy influence of the corruption problem is malignant and needs to be solved quickly," CCTV cited Xi as saying. Xi said the party must "continue to beat the tigers and flies together" - meaning both high-flying politicians and lowly bureaucrats - to tackle corruption and "take drastic medicine to cure its ills".
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2. Bloomberg: Bitcoin banned by Alibaba’s Taobao after China tightens rules 
Alibaba Group Holding Ltd., China’s largest e-commerce website, will ban the sale of Bitcoin and other virtual currencies after the country’s central bank tightened regulations in December. Taobao Marketplace, one of the main platforms that link buyers and sellers on Alibaba, will bar from Jan. 14 the sale of Bitcoin and related products, including mining software and hardware for the virtual currency, the company said on its website yesterday. China’s central bank stopped financial institutions from handling Bitcoin transactions after the virtual currency’s value jumped 89-fold. Alibaba’s move to ban the sale of virtual currencies and related products will help protect users, according to the company.
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3. Bloomberg: Tech upstarts paying 17 times interest upset China banks 
Rebecca Ning, along with 43 million other Chinese, has found a way to make about 6 percent annually, or 17 times her usual interest rate, by tapping her phone and using technology that’s disrupting China’s banking status quo. Employing Alibaba Group Holding Ltd.’s affiliate Alipay, an Internet payment system similar to PayPal, Ning pokes a silver icon with the first Chinese character for “pay” to transfer money from her bank account in Beijing to Alipay’s investing platform, Yu’E Bao. She earned 430 yuan ($71) in interest on 30,000 yuan in almost three months last year instead of 26 yuan had she left the money in her checking account. “I put any spare cash I have into Yu’E Bao,” said Ning, 24, a graduate student from southern Guangxi province who raves about the process. “I’m basically losing money if I leave it as a bank deposit, as it’s depreciating in value every day.”
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4. WSJ: China orders military to buy only domestic cars 
China is moving one step further to rein in signs of corruption, ordering its military to purchase only domestic-brand cars. The directive, issued Monday by China’s State Council, or cabinet, comes on top of new rules announced last year that tighten the use of military license plates on luxury vehicles, according to the official Xinhua news agency. The State Council’s directive also included a slew of new measures, including a call for a centralized system for military-car purchases, tamping down on the extravagance of military offices and housing, and limiting expenses on events, business trips and banquets and banning gifts. There’s nothing more visible on the country’s roads than the white license plates that identify cars as military vehicles. Cars with the plates are often seen violating traffic regulations without penalty and are exempt from charges at toll stations. Over the past year, the government has issued new rules to restrict the use of these plates—which are sometimes illegally auctioned off to civilians—on luxury vehicles. The State Council on Monday reiterated the “strict use” of military license plates. Last year, Xinhua reported that certain high-end luxury cars with engines of three liters or more and priced at more than 450,000 yuan (around $72,000) wouldn’t qualify for the military license plates. Several models by German brands such as Mercedes-Benz, BMV and Audi, both popular choices among party elites, fall into that category.
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5. Bloomberg: Gates says China’s Xi has firmer grip on army than Hu did 
Chinese President Xi Jinping has greater control of the military than his predecessor did, and that increases the need for a strong White House relationship with him, former U.S. defense secretary Robert Gates said. Gates, 70, said in an interview yesterday that former president President Hu Jintao “did not have strong control” of the People’s Liberation Army. The “best example,” Gates said, was China’s rollout of its stealthy J-20 fighter jet during a visit he made in January 2010. The event seemed to catch Hu unaware, Gates said, recounting a story in his memoir “Duty,” which is scheduled to go on sale today. China posed few crises for Gates during his four and a half years as defense secretary. Tensions have grown since the Obama administration announced plans to step up military and political engagement in the Pacific -- a strategy announced after Gates left office -- and China stepped up its territorial claims off its coast. President Xi’s stronger control is “both a good-news and a bad-news story,” Gates said. “Before, when the Chinese did something aggressive or risky, you could say ‘that’s the PLA acting on their own.’”
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6. WSJ - Andrew Browne: No quick fix for China's air quality 
To control the pollution that's choking Beijing, demolition squads recently swooped down on this industrial city located two hours away by car and crippled a batch of coal-burning steel works. TV cameras caught the officially sanctioned saboteurs dismantling massive pieces of equipment in outdated steel facilities that had long resisted government orders to close. Some reports say they used explosives to blow up boilers in what was dubbed "Operation Sunday." The message to local officials who are often complicit with owners of polluting factories, many of them big taxpayers: get serious about the urban cleanup. As China's air pollution indexes hit record highs, it's easy to conclude that the country's central government lacks resolve in dealing with the problem. But the military-style operation in Tangshan suggests the opposite is true. In fact, a team of scientists and engineers from Harvard University in the U.S. and several top Chinese institutions, including Tsinghua University, say that China's air quality is getting worse despite draconian efforts to eliminate sources of pollution.
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7. Xinhua: Armed forces ordered to buy Chinese brands of vehicles 
China’s armed forces have been told to choose domestic brands when procuring military vehicles, according to a circular published yesterday. The purchase of new military cars should be arranged within a centralized system and vehicles should be domestic brands, said the document issued by the four headquarters of the Chinese People’s Liberation Army — General Staff Headquarters, General Political Department, General Logistics Department and General Armament Department. The document, aimed at promoting frugality and cutting down on waste in military and armed police forces, was issued after the approval of the Central Military Commission and its chairman, President Xi Jinping. The document said money used by the army should be strictly regulated and budgeting processes improved.
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8. SCMP: 'Cultural threats' among five focuses of new national security panel, colonel says 
National security committee will plan response to extremists, online agitators and West's cultural influence, among others, colonel says.
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9. SD: Yuan lifts to 20-year high against dollar 
The yuan firmed to a 20-year high against the US dollar yesterday after the People’s Bank of China set the daily reference rate to a record low against the greenback due to surprisingly soft employment data. The PBOC set the central parity rate at 6.0950 yuan per dollar yesterday, 0.1 percent stronger than the previous day’s 6.1008. It’s the highest level since China’s foreign exchange reform in 2005, which unpegged the yuan to the greenback. US employers added 74,000 workers in December, the least since January 2011, which spurred the selling of dollars in the morning. China’s trade surplus with the US will continue to add pressure for the yuan to appreciate, Lian Ping, chief economist at the Bank of Communications, said. Ma Jun, chief economist for China at Deutsche Bank, predicted the yuan to  appreciate 2 percent against the dollar by year-end. The PBOC, or central bank, fixes the central parity rate every morning and allows the yuan to appreciate or weaken  within 1 percent from the reference rate each trading day.
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10. SCMP: Foreign banks lured to Shanghai free-trade zone are left in limbo over regulation delay 
Firms find themselves twiddling their thumbs under 'un-actionable' and vague rules, which hamper their quest for new clients.
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11. SD: Chinese brands facing an uphill struggle to establish themselves in the US market 
LG Electronics executive Frank Lee bounded onto a Las Vegas stage this week to show off a new phone for the US market, the G-Flex, which boasts a curved screen. Two hours later, at the same hotel, Huawei Technologies’ Richard Yu unveiled the razor-thin Ascend Mate II, boasting a battery life of nearly two days. There was one key difference between the two product launches at the Consumer Electronics Show: the South Korean G-Flex will be sold through three US carriers — T-Mobile US Inc, AT&T Inc and Sprint Corp. The Chinese Ascend Mate II? None, at least not yet. In two years, China’s three biggest handset makers — Huawei, ZTE and Lenovo — have vaulted into the top ranks of global smartphone charts, helped in part by their huge domestic market and spurring talk of a new force in the smartphone wars. Chinese companies took up more showspace at CES than ever before, eager to tout their products to the world’s largest electronics market. Still, analysts said it will likely take years for the Chinese to make headway in the United States, where arguably the only Asian brand to have succeeded is Samsung.
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12. WSJ: Foxconn ships over 1 million iPhone 5Ss to China Mobile 
Apple's major iPhone assembler Foxconn has shipped about 1.4 million iPhone 5Ss to China Mobile last week, according to a person familiar with the matter, ahead of the mobile giant’s launch this Friday. While the initial shipment volume doesn’t represent the total sales at China Mobile for January, the figure helps to gauge early demand for iPhones from China Mobile, the world’s biggest carrier by subscribers with more than 760 million customers.  China Mobile began taking preorders for iPhones since Dec. 25. “Shipping one million or more iPhones to a single carrier per month is substantial. But we have limited visibility beyond this month as Apple hasn’t informed Foxconn of  the volume for the next shipment to China Mobile,” said the person.
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13. Bloomberg: Away from their children, China's migrant workers suffer guilt and anxiety 
A-ying is a 33-year-old mother of two. While she works in the city with her husband, though, her children, who are six and 10, live with her in-laws in her rural hometown in Hunan. The family is together for only a month in the summer and 10 days around the Chinese New Year. Not surprisingly, that has created problems, particularly with her eldest son. “The reason he dislikes us is because he blames us for not taking care of him, because he did not get proper care. Living together would have helped make our relationship more affectionate,” she says, adding that she is plagued with feelings of guilt. “Raising a child is a parent’s responsibility, after all, and parental care plays an essential role in the child’s growth.” For China’s 262 million migrant workers who toil long hours, often in unsafe conditions in factories and on construction sites, add another source of hardship: anxiety and frictions due to living away from their children.
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14. WSJ: Hedge funds' bets on China pay off 
China-focused hedge funds are beating out the country's lackluster stock indexes and attracting inflows, illustrating how alternative investors are profiting as Beijing pushes through sweeping reforms weighing on growth. Hedge funds that bet on China rose 17% last year according to data provider eVestment, the group's best performing year since 2009 and almost double the 9.2% return the industry averaged globally last year. The strong year for China funds contrasts starkly with the performance of the broader market as the Hang Seng China Enterprises CSHEF 0.00%  Index fell 5.4% and the Shanghai Composite tumbled 6.8%, the worst-performing stock market in Asia last year. One reason for the strong performance is hedge funds stayed away from stock benchmarks loaded with shares of debt-laden state-owned enterprises, a sector that is struggling as the country enacts reforms aimed at increasing competition, said Richard Johnston, Asia head for alternative investment advisory firm Albourne Partners. "Hedge funds have been more flexible than the long-only community in exploiting the relatively narrow leaders of the market," such as Macau casino operators and China technology firms, said Mr. Johnston.
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15. Bloomberg: Chinese stocks to trail world for fifth year 
Chinese stocks may trail global peers for a fifth straight year as higher borrowing costs hurt earnings and a flood of initial public offerings divert funds from existing shares, according to Bank Julius Baer & Co. The CHART OF THE DAY shows the Shanghai Composite Index’s lowest price-earnings ratio on record versus the MSCI All-Country World Index has failed to lure investors. The Chinese benchmark gauge has underperformed the global measure every year since the start of 2010, the lower panel shows, while the number of new accounts opened to trade shares in the most-populous nation has dropped 94 percent from the 2007 peak.

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16. AEI - Derek Scissors: China invests (somewhat) more in the world 
Many headlines around the world proclaim the impending Chinese financial invasion. China is investing more outside its borders, but growth is solid, not dramatic. According to the American Enterprise Institute–Heritage Foundation China Global Investment Tracker (CGIT), China’s overseas investment accelerated in 2013 to around $85 billion. The leading target for Chinese investors last year was the United States, at better than $14 billion. The US is now slightly ahead of Australia as the top recipient since 2005. By sector, it is no surprise that China invests most heavily in energy and metals. In addition, real estate became more prominent in 2013. There are governance problems in certain countries, but Chinese investment is typically a voluntary transaction on both sides and beneficial to both. A complicating factor is the role of heavily subsidized Chinese state-owned enterprises (SOEs). While SOEs remain dominant, the Chinese private sector is becoming more active in outward investment. This may allow host country policymakers, such as those in the US, to focus on reciprocity when evaluating Chinese investment.

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