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China Web Users Push Out Official

BEIJING—A Chinese official in the southern city of Guangzhou was fired from his post and detained after investigators confirmed he and his family owned 22 homes, according to state media. He is the latest local official to fall at the hands of Internet activists incensed over local corruption.

Cai Bin, who formerly ran the city's urban management bureau in the district of Panyu, served as its political commissar and was its deputy chief of police, is suspected of bribe-taking, the state-run Xinhua news agency quoted Mei Heqing, a local discipline official, as saying.

Mr. Cai and local officials couldn't be reached for comment.

Earlier this month, online activists and local media reported Mr. Cai's family owned more than 20 homes. The value of those homes wasn't immediately clear, though Xinhua has quoted estimates saying the homes possibly were worth as much as 40 million yuan ($6.4 million). Mr. Cai earned about 10,000 yuan monthly in his official work, Xinhua said.

Mr. Cai is suspected of concealing most of his family's real estate, Xinhua reported, previously disclosing only two family homes. State media reported Monday that he had been placed under shuanggui, a form of investigative detention for cadres.

Anger over corruption throughout the Communist Party is one of the most pressing issues facing leaders as they prepare for a once-a-decade leadership change that begins Nov. 8, according to political analysts. Deepening concerns over corruption in business and government parallel a rise in Internet users engaged in a constant and raucous conversation over China's future.

Mr. Cai is at least the second official to fall at the hands of online users in two months. In September, Yang Dacai, former head of northwest Shaanxi province's Work Safety Administration, was removed from his post after online activists exposed a trove of photos of him sporting several luxury watches. Mr. Yang later publicly said he owned the watches—including one costing about $5,500 from luxury watchmaker Montblanc—but said they had all been purchased with legally earned income.

The rise of social media, in particular microblogging services such as Sina Corp.'s Weibo, present challenges for the party. Relative freedom to gripe about local problems releases social tensions, according to analysts. But at the same time, the pace at which online information travels means local concerns can quickly gain national sympathy. Across the Internet, Mr. Yang soon became known as Watch-Wearing Brother, while Mr. Cai is now referred to as Uncle House.

In addition, the ouster of once-rising political star Bo Xilai has compounded concerns over corruption. Mr. Bo, once a candidate for promotion to the all-powerful Politburo Standing Committee, was expelled from the party last month on accusations that include widespread bribe-taking during the course of a 30-year career, in addition to otherwise abusing his power.

Mr. Bo once ran a high-profile anticorruption campaign in the southwest city of Chongqing, where he served as party chief until March. Accusations against him appear to have further undermined the party's credibility in the eyes of ordinary Chinese already grappling with a slowing economy, local corruption, environmental degradation and other issues.

Mr. Cai, as head of the district's urban management agency, would have wielded significant power. The bureau's precise jurisdictions are at times vague, though its officials, known in China as chengguan, are active in nearly all aspects of urban development and planning. As a result, they are commonly a target of local petitioners' claims of abuse, ranging from land seizures to extortion.


Chinas Internet service provider showing strong growth prospects

China’s social networking giant Tencent, responsible for 88% of the Naspers group’s core headline earnings, reported a 54.3% increase in revenue for the first half of 2012.

Not rated yet.

Tencent, which was founded in November 1998, made its name in the market a year later with QQ – an easy to use instant-messaging platform that has almost 800 million active monthly users in a market that is still showing growth prospects.

Residents in China’s lower tier cities (which are not necessarily low income) are increasingly choosing their computer over other forms of media. This is according to the Yangtze Study, a market research report of mass consumers in 510 locations across 27 provinces in China. 

According to the study’s Jeffrey Tan, one thing that was noticeable in the home visits was there, “was always a computer in the room”.

The study shows that an average of three hours a day is spent on instant messaging sites, browsing, online gaming and other online activities. This is from Tier 1 to Tier 5 cities in China.

Tan added that the notion that residents of “lower tier cities are not digitally savvy couldn’t be more wrong”.

This far surpasses two hours per day spent watching television and one hour listening to the radio. Tan adds that the television is just background media.

Tencent’s simple strategy has proven lucrative.

It provides free online services such as QQ, Qzone (a blog linked to your QQ account), QQ games, QQ mail, 3gQQ and QQ show, and then generates revenue by locking its consumers into memberships which gives the user access to more features such as costumes for avatars or weapons and accessories in games.

However, for the largest integrated Internet service provider in China to retain its steady growth it needs to continue dedicating half its staff to research and development and buy or crush any competition.

The aphorism among Internet entrepreneurs at this year’s Global Media Internet Conference in Beijing was “Life, death or Tencent”. In other words join them, die or grow really quickly so you can compete.

The last option seems highly unlikely.

When Xiamoi CEO, Jun Lei, announced the rollout of its instant messaging service Miliao he expected that it would take at least six months for Tencent to launch a competing service. He pointed out - at an event where Pony Ma Tencent’s chief executive was sitting in the front row – that it only took them two months to launch Weixin, which now has an estimated 60 million users.

Tencent doesn’t just need to out compete in the market place; it also needs to fight fiercely in court.

In 2008 Tencent reported that it had formally sued 15 employees who were suspected of “violating non-competing obligations” in their employment contracts.

In September last year free anti- virus software provider Qihoo, launched an attack on QQ saying that it was leaking users private data, the battle which culminated in a stand off between the two companies resulted in Qihoo being ordered to pay 400 000 yuan in indemnity to Tencent.

In November last year, mobile software vendor UCWeb announced that it would sue Tencent for unfair competition after it had announced that “Tencent mobile has eclipsed its competitors to become No 1”. UCWeb CEO Yongfu Yu was quoted saying that “Tencent milked its monopoly position to menace partners and distort report”.

Prior to that QQ argued that Coral QQ, software that made some of QQ’s paid services free and blocked some of the advertising, violated copyright and claimed that its profit was illegal. Coral QQ’s founder Chen Shoufa was ordered to pay the money he had made and was sentenced to a three-year jail sentence.

But while Tencent is fighting to retain its market position, some speculate that its dominance in the industry is what may lead to its demise.

According to a recent interview with chief executive David Wolf from Wolf Group Asia, “There is a Chinese anti-monopoly law, and if this goes on long enough and they break the dreams of people and especially the wrong people, Tencent may find itself facing some challenges.”


Edward Lehman 雷曼法学博士
Managing Director 董事长

LEHMAN, LEE & XU China Lawyers

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