Off the beaten track in Puxi

A few weeks ago I went to Ocean World near Zhongshan Park in Changning district.  It was a fairly new aquarium, well-kept and apparently French-owned.  I recommend it for families, though it is a tad pricey (around ~160 rmb).

A couple nights ago I went to the House of Blues & Jazz near The Bund.  I do not recommend it for anyone.  The seating was completely cramped (sardine style), the management was quite pretentious and the food was ridiculously overpriced (112 rmb for a small cheese platter).  Worst of all, there is a 50 rmb cover charge per person and the band doesn’t start playing until after 10pm.  So if you don’t like their tunes you’re too far away to catch the last subway home and thus will spend even more on a taxi.

Another Brick in the Wall: Link Edition XXXV

While there is a plethora of bearish news there may be opportunities for real-estate agents in the US (and elsewhere) to sell homes to Chinese looking to invest or live abroad (two links below about that).  Figuring out the e-book market may have some opportunities still but that seem like a tough nut to crack (despite the big investments).  Also, if you have experience in M&A perhaps you can figure out how to get some of the low performing steel SOEs to merge…

Thanks to James and Sinocism for several links:

Another Brick in the Wall: Link Edition XXXIV

If you’re an experienced bond manager perhaps you may find new opportunities in Shandong and Jiangsu (see the last link).  And if you want to get involved in the TCM export business, look at the CER article as well.

Thanks to James and Sinocism for some of the links:

What happened with the “cash crunch” in China two weeks ago?

While there have been many explanations for why the People’s Bank of China (temporarily) allowed (easy) credit to dry up, I think Mark DeWeaver has a very plausible and well-reasoned explanation.  Mark wrote the foreword to my book and is the author of Animals Spirits with Chinese Characteristics.

Below is his op-ed published two days ago in The Wall Street Journal.  Be sure to check out his predictions for why this solution probably will not stick:

Beijing’s War on Shadow Banking

China’s central bank cracks down on credit that is not under the government’s control.

On June 20, China’s central bank precipitated a major credit crisis by withholding funds from the nation’s cash-starved banking system. The People’s Bank of China’s refusal to act as liquidity provider of last resort froze lending in the interbank market. Overnight rates, which had been as low as 2.1% in early May, exploded, closing at a record 13.4%.

As rumors swirled about the solvency of China’s state-owned banks, some commentators began talking about a Chinese “Lehman moment.” But the crisis passed and the overnight interbank lending rate quickly came back to earth. By July 4, it had fallen to 3.4%.

Trouble in the interbank market had been brewing since early June, when Beijing began a crackdown on illicit inflows of foreign exchange, previously a major source of growth in the local money supply. The demand for yuan also began rising, as Chinese banks prepared for their June 30 book closings and their customers for their first-half tax payments.

The result was a growing imbalance between the supply of and demand for credit. As rumored large-scale interventions by the People’s Bank of China repeatedly failed to materialize, commercial banks realized they would have to fend for themselves. Lenders hoarded cash to guard against potential counterparty defaults, and the normal flow of funds among financial institutions quickly dried up.

The central bank’s immediate objective seems to have been to rein in China’s “shadow banking” system, which has grown rapidly in recent years and now accounts for a significant share of total Chinese credit. Shadow banking in China involves lightly regulated products that allow savers to earn more than the official deposit rate while providing financing for “subprime” borrowers.

Generally the funding is relatively short-term, which makes the business highly sensitive to liquidity conditions. Shadow lenders require inflows of new money to pay off maturing obligations. These typically come either directly from the banks—for example, via their “wealth management products”—or from entities with access to bank financing such as state-owned enterprises.

There may be a larger political game going on. The People’s Bank of China is not an independent central bank, so the order to turn off the credit spigot must have come directly from the Politburo. The central bank’s surprise attack on bank credit must therefore be understood in the context of the leadership’s current focus on improving economic efficiency. This objective will be impossible to achieve unless the central government can overcome resistance from the powerful local interests that benefit from the status quo. The Politburo’s goal may have been to starve opponents of reform into submission.

Local governments appear to be the central bank’s real targets, because they rely heavily on shadow financing to subvert Beijing’s reform initiatives. Shadow funds flow directly into local government projects that the central government views as wasteful, and the funds benefit localities indirectly by pushing up land prices. As long as this money keeps flowing, over-investment in infrastructure, heavy industry and real estate will continue unchecked and Beijing’s vision of a new economy driven mainly by consumer demand and productivity growth will be impossible to realize.

The credit crunch occurred a few days after the launch of the Communist Party’s new “mass line” campaign, which seeks to make the party more sensitive to the needs of the people by circumventing official government and party hierarchies. This idea goes back to Mao Zedong, for whom the goal was to realize “democratic centralism” and bypass bureaucratic factions that threatened his agenda. Going directly to the “masses” was a way to attack the opposition from the outside—to “bombard the headquarters” in a famous slogan of the Cultural Revolution era.

In Mao’s time, bombarding the headquarters meant unleashing a reign of terror. Today the leadership has turned to less violent means. The central bank’s strike against shadow banking will undermine today’s vested interests in a way that Mao could scarcely have imagined—simply by cutting off their financing.

There are two problems with this approach. First, the central bank’s policy will result in considerable collateral damage. Small- and medium-size private firms will be particularly hard hit. They tend to be ineligible for bank loans and often depend on shadow financing to make ends meet.

Second, attacking anti-reform factions will not be enough to generate real reform. Without radical changes in the economic role of local governments, they will quickly return to business as usual once the fallout has cleared.

The People’s Bank of China may have won a battle, but the Politburo is far from winning the war.

Another Brick in the Wall: Link Edition XXXIII

A bit of bearish news in the media this week, lots of challenges for sure.  Thanks to Michael and Sinocism for several links:

Another Brick in the Wall: Link Edition XXXII

A few notes of interest: if you have a bit of experience in the telecom industry firms like Huawei and ZTE may be interested in hiring you for new perspectives (and of course to help assuage security concerns).  Chinese students are still flocking to Western universities, especially the US — perhaps you can help recruit them.  And you probably may want to avoid making taxi apps for the big metros in China, yet another story about how independent developers are getting squashed by SOEs.

Thanks to Will and Sinocism for a couple links:

Another Brick in the Wall: Link Edition XXXI

It would be interesting to see if Google penalized the last link edition for the Roman numerals that just so happened (coincidentally) to be the euphemism for a very adult-themed video genre.  Big story like usual is the upcoming Alibaba IPO, get some if you can (disclosure: I do not hold shares in Alibaba or any of its subsidiaries).  Check out Chapter 12 for more detailed info about ecommerce.  Thanks to James and Sinocism for a couple links.

Google Reader: An end of an era?

Midway in pursuing my grad studies years ago, a friend of mine, Michael Ewens, convinced me to switch from Bloglines to Google Reader.

What are those?  They are news aggregators that use syndication feeds based on a couple of popular formats: RSS and Atom.  Back in 2003 I wrote a lengthy series of posts regarding the various strains of RSS for a website that no longer exists (and its url is currently being squatted upon by a Eastern European malware owner so I won’t link to it right now).  While Netscape created the first version of RSS, it was further enhanced by Dave Winer over at Radio UserLand and then yet another fork was created in part by the late Aaron Swartz called Atom.  All are based on XML and each has the potential to tap into the ontological web.

While reading social media feeds from Twitter, Facebook, LinkedIn and their Chinese equivalents is very popular for both power users and the average Joe (or Zhou) alike, RSS/Atom is still a widely used syndication/aggregation method for millions of readers, including myself.  In fact, I prefer not to scan through the thousands of Weibo posts or Facebook smack downs to find links of information.  Opinions, sure, but actual data and original content that is longer than 140 character sound bites — traditional websites is where that information is still at, not behind subscription-only or friend-only silos.  While I personally am a proponent of the Open Access/Open content (hence the reason all of my writings are CC licensed), in practice it appears that the trend away from information silos that began in the ’90s with the original hobbyist intertubes has done a U-turn back into a new form of walled gardens (social media sites).  And while some disdain this trend, it would be fallacious to say whether this phenomenon is either good or bad because it is based solely on user subjective preferences (if you do not like AOL in 1994 for its “walled garden” in terms of accessing sites outside of the AOL ecosystem, no one is forcing you to subscribe to their service just like no one is forcing you to use FB today).

With that said, July 1, 2013 marks the end of a great service that Google provided in the form of Google Reader.  While its users were all freeloaders (there was no monetization or monthly subscription costs to it), when Google announced it was ending the service several months back, among the weeping and gnashing of teeth, one of the claims that I saw posted several times on social media sites is: RSS is dead.  Why was RSS dead?  Because it purportedly has no roadmap or development.

While there are many reasons to end the Google Reader service (such as the capital costs of maintaining it, for free to end users and how it is apparently hard to integrate it into Google+ due to licensing/copyright issues), this particular argument put forth above seems like a non sequitur.  RSS/Atom are not programming languages, they are not operating systems, they are not SDKs or APIs.

Among others, one objective of RSS/Atom was to help make it easier for machine-based solutions to grab the content from your site and allow other machine-based technologies (aggregators) to translate the code into something readable and organized to humans (and eventually AI itself).  It does that and it does that efficiently.  Whether or not it is effective is debatable as the duplication issues are related to an aggregation itself, not the XML code defining parameters in RSS/Atom.  This type of service can and will still be done so as long as sites still create and support the feeds, which I suspect will continue for many more moons — unless it is replaced by something technically superior.  Like what?  Perhaps information providers such as Reuters or Bloomberg (which most associate with news broadcasting but have huge budgets and teams working towards information processing) may develop a syndication method that satiates and unmet need.  Or maybe RSS and Atom are good enough for content producers and consumers for decades to come.

What solutions are there for news junkies to continue their habit?  Bloglines is still around, but slow (at least for me).  Digg released theirs, but it is inaccessible here in China without a VPN (it times out over and over).  Feedly doesn’t automatically insert the url of the articles when you email them.  The Old Reader has similar issues.  And AOL surprisingly has a reader now, one that I’m now using, that looks and feels snappy — but when you want to email the story to someone it opens up Outlook by default (I put in a request to have that changed to other email addresses and received a response from their dev team that a future feature is in the works to change this).

So basically, nothing matches the current form of Google’s own solution.  It is their service, so of course they have every right to close it down.  However, it will probably not push the millions of users towards Google+ which was managements original (desired) intention.  Until social media sites allow for integration of RSS/Atom, then power users will continue to find solutions to their information needs.

As an aside, to give readers an idea of how often I used Google Reader, below is a snapshot from the statistics page today.  On average, about 225-250 stories are aggregated through all of the feeds each weekday (weekends oddly enough have relatively little published), perhaps 15% of the stories are duplicates (especially the science/tech sites).  I dislike posting stories on FB or Twitter unless they are very important (but obviously I’m in a small minority) and consequently enjoy emailing them to friends, family and colleagues (hence the 300+ emails this past month).  Note: “clicked” means a user clicked the url in the headline of the article, usually that specific url is a Feed Burner link (called “feedproxy”).  Unfortunately, here in China, those url’s are blocked by the GFW and clicking it kills the link (one last tangent, it is because of Google Reader that many blocked stories are able to get past the GFW here sans a VPN).  Fortunately most sites like io9 or Slashdot have a “Read more here” link which is what I click (I am unaware of statistics that say which specific link is more prevalent to be clicked).

Long live, RSS and long live Google Reader!

Update: be sure to read Lockdown for more details and analysis

google reader stats