China Emerging_ 1978-2008 - Xiao-bo , Wu [61]
However, the victory of this defensive war for cigarette-lighters did not slow down an ongoing wave of anti-dumping cases. On September 16, 2004, a demonstration against Wenzhou shoes erupted in Elche, Spain. Several hundred Spanish shoemakers gathered at the docks where Chinese goods were being offloaded, and destroyed sixteen containers full of Wenzhou shoes worth an estimated US$1 million. A week later, another demonstration erupted in Elche, where a sizeable percentage of the town’s population of two hundred thousand marched through the streets. The same emotions were stirring in Italy. According to the statistics obtained from the Italian Shoe Manufacturing Industry Federation, more than 250 million pairs of Chinese shoes had been imported into Italy in the past two years, a figure that for the first time exceeded the number of shoes exported. This was humiliating to a country that prided itself on its shoe manufacturing industry. After this incident, the European Union designed a special label, “Not Made in China,” in order to appease the local manufacturers.
Chinese officials and experts tried to explain this uncomfortable situation from China’s standpoint and to ameliorate the friction. In May 2005, Bo Xi-lai, China’s minister of commerce, attended the Sino-French Small and Medium-sized Industry Cooperation Forum in Paris. When asked about his opinion regarding Chinese textile dumping, the seasoned negotiator replied, “Perhaps you have not done the calculations, but China must sell 800 million shirts before it can import one Airbus 380.” A key fact relevant to Bo Xi-lai’s statement is that in the past two years, China had purchased thirty passenger planes, five of which were the expensive French Airbus 380.
On June 6, 2005, the Shanghai Stock Exchange index fell to 998.22 and stayed at that level—the first time it dropped below 1,000 in eight years. A great deal was made of this “thousand-point benchmark” and people who had said that the market could not fall below that mark seemed totally exasperated, as they saw the numbers move south. Paradoxically, since the markets had fallen to a point from where they could fall no further, it was an excellent time to start implementing new reforms. Low share prices were what finally enabled a resolution of ownership issues in a number of stateowned enterprises. The reform was known as the “split share structure.”
As mentioned above, for a long time, China had maintained two classes of shares—those that could be traded and those that could not. However, the legal rights of shareholders holding the traded shares were trampled upon by the system since they were in the minority. Small and medium shareholders were particularly vulnerable. The system was custommade to incubate all the evils of market manipulation. For ten years, this phenomenon had been recognized and vigorously denounced by experts. Despite this, because the benefits of the dual-share system were substantial to certain interest groups, all proposals to change the system were blocked. However, when the detrimental effect of the system began to influence the entire stock market, negatively impacting the special interest groups as well, negotiating a solution became feasible. All recognized that the split share structure had to be addressed.
The reform started in 2005 with a listed company in Hunan, which was controlled by private capital. On April 29, 2005, the Board of Directors determined that out of a total of 240 million shares, each shareholder of
The 2008 Olympics filled the Chinese people with hope and confidence.
10 traded shares would receive 3 shares and RMB 8 in cash. Shareholders of non-tradable shares could now make their shares tradable on the stock market. This was an icebreaker. Since the deal was clinched at a low point in the markets, the reform