Agence France-Presse/Getty Images

Customers use computers at an internet cafe in Hami, northwest China’s Xinjiang region. China now has more than 500 million people on the Internet and nearly half use weibo, microblogs similar to Twitter.

Twitter sent its digital street cred tumbling on Thursday night when it announced that it would being selectively censoring content as a way to enter countries with “different ideas” about freedom of expression. Though Twitter has never made promises along the lines of Google’s “Don’t Be Evil,” the move nevertheless comes as a surprise for a company that took pride in helping grease the wheels of last year’s Arab Spring uprisings.

In China, where Twitter is blocked but still accessible to those with the technical know-how to skirt the country’s Web filters, the revelation seems to have hit particularly hard.

Among the first to comment on the announcement was Wen Yunchao, one of many Chinese dissidents who’ve embraced Twitter as an uncensored alternative to China’s own heavily managed microblogging services:

Oh no! @Twitter says going to start censoring tweets in certain countries. Pls RT!act.demandprogress.org/act/twitter_ce… 通过 @demandprogress

— 北风 (@wenyunchao) January 27, 2012

It didn’t take long for speculation to spread that Twitter had announced the change because it planned to make a play for the China market. A number of Chinese users promptly declared their intention boycott the service. Among those leveling the boycott threat was activist artist Ai Weiwei, who wrote in a characteristically pithy post, “If Twitter starts censoring, I’ll stop tweeting”:

推若审查，我即停推。 RT @wenyunchao: @aiww 商人在商言商，道这东东，能像谷歌那样最好，不能也不能强求。 — 艾未未Ai Weiwei (@aiww) January 27, 2012

But how likely is it that Twitter’s proposed changes are aimed at earning access to the world’s largest population of Internet users?

“Unlikely” says the answer from Beijing- based investor and Internet watcher Bill Bishop.

As Mr. Bishop notes, a large part of the speculation that Twitter might be getting ready to kow-tow to China’s censors stems from Twitter co-founder Jack Dorsey’s visit to Shanghai earlier this month, during which he complained about not being able to read his tweets. That trip came almost exactly a year after the founder of another social-media site banned in China, Facebook’s Mark Zuckerberg, visited Beijing amid talk of trying to tap the Chinese market.

But for all the salivating over China’s potential in board rooms across Silicon Valley, Mr. Bishop says Twitter would have to be “incredibly naive” to think they could wedge their way into the country.

“It would be stupidity,” he says. “One, I don’t think the government would go for it. And two, the market is already saturated.”

Twitter did not immediately respond to requests for comment.

The key issue, Mr. Bishop says, is whether or not the government would be able to trust Twitter. One sign that Twitter isn’t likely to do what it takes to earn that trust is its plan to partner with Chilling Effects, an Internet freedom advocacy website, to publish government take-down notices — a problematic strategy in a country where banned keywords are treated like state secrets.

Even if Twitter were somehow able to get in Beijing’s good graces, Mr. Bishop says, it would have almost no shot at competing with home-grown “weibo” microblogging products from Sina and Tencent that are already well-established and offer more features. “Sina Weibo and Tencent Weibo are better products,” he says. “Twitter’s only competitive advantage here is freedom of speech. Once you start censoring, what do you have left to offer?”

Indeed, Mr. Dorsey himself quashed the idea of Twitter being able to break into China in an interview in Hong Kong in October in which he said his company “just can’t compete” in China “and that’s not up to us to change.”

In developing the ability to censor tweets by region, Twitter more likely has different markets in mind. The only countries mentioned by name in the blog post announcing the new policy were France and Germany, both of which, the post notes, ban pro-Nazi content. How to handle that ban is a dilemma that Yahoo, Google and Facebook have all struggled with in Germany.

Mr. Dorsey visited Germany earlier this week to announce his desire to hire a team there.

Twitter’s announcement also acknowledges there are some countries with severe restrictions on speech where the company simply cannot exist.

That’s not to say Twitter’s latest move won’t have an impact on China. Implausible as it may be for the company to establish itself in the country, Mr. Bishop notes, its embrace of content filtering could aid Beijing in making the argument that the Internet is a space in need of censorship.

– Josh Chin. Follow him on Twitter @joshchin.

Agence France-Presse/Getty Images

Customers use computers at an internet cafe in Hami, northwest China’s Xinjiang region. China now has more than 500 million people on the Internet and nearly half use weibo, microblogs similar to Twitter.

Twitter sent its digital street cred tumbling on Thursday night when it announced that it would being selectively censoring content as a way to enter countries with “different ideas” about freedom of expression. Though Twitter has never made promises along the lines of Google’s “Don’t Be Evil,” the move nevertheless comes as a surprise for a company that took pride in helping grease the wheels of last year’s Arab Spring uprisings.

In China, where Twitter is blocked but still accessible to those with the technical know-how to skirt the country’s Web filters, the revelation seems to have hit particularly hard.

Among the first to comment on the announcement was Wen Yunchao, one of many Chinese dissidents who’ve embraced Twitter as an uncensored alternative to China’s own heavily managed microblogging services:

Oh no! @Twitter says going to start censoring tweets in certain countries. Pls RT!act.demandprogress.org/act/twitter_ce… 通过 @demandprogress

— 北风 (@wenyunchao) January 27, 2012

It didn’t take long for speculation to spread that Twitter had announced the change because it planned to make a play for the China market. A number of Chinese users promptly declared their intention boycott the service. Among those leveling the boycott threat was activist artist Ai Weiwei, who wrote in a characteristically pithy post, “If Twitter starts censoring, I’ll stop tweeting”:

推若审查，我即停推。 RT @wenyunchao: @aiww 商人在商言商，道这东东，能像谷歌那样最好，不能也不能强求。 — 艾未未Ai Weiwei (@aiww) January 27, 2012

But how likely is it that Twitter’s proposed changes are aimed at earning access to the world’s largest population of Internet users?

“Unlikely” says the answer from Beijing- based investor and Internet watcher Bill Bishop.

As Mr. Bishop notes, a large part of the speculation that Twitter might be getting ready to kow-tow to China’s censors stems from Twitter co-founder Jack Dorsey’s visit to Shanghai earlier this month, during which he complained about not being able to read his tweets. That trip came almost exactly a year after the founder of another social-media site banned in China, Facebook’s Mark Zuckerberg, visited Beijing amid talk of trying to tap the Chinese market.

But for all the salivating over China’s potential in board rooms across Silicon Valley, Mr. Bishop says Twitter would have to be “incredibly naive” to think they could wedge their way into the country.

“It would be stupidity,” he says. “One, I don’t think the government would go for it. And two, the market is already saturated.”

Twitter did not immediately respond to requests for comment.

The key issue, Mr. Bishop says, is whether or not the government would be able to trust Twitter. One sign that Twitter isn’t likely to do what it takes to earn that trust is its plan to partner with Chilling Effects, an Internet freedom advocacy website, to publish government take-down notices — a problematic strategy in a country where banned keywords are treated like state secrets.

Even if Twitter were somehow able to get in Beijing’s good graces, Mr. Bishop says, it would have almost no shot at competing with home-grown “weibo” microblogging products from Sina and Tencent that are already well-established and offer more features. “Sina Weibo and Tencent Weibo are better products,” he says. “Twitter’s only competitive advantage here is freedom of speech. Once you start censoring, what do you have left to offer?”

Indeed, Mr. Dorsey himself quashed the idea of Twitter being able to break into China in an interview in Hong Kong in October in which he said his company “just can’t compete” in China “and that’s not up to us to change.”

In developing the ability to censor tweets by region, Twitter more likely has different markets in mind. The only countries mentioned by name in the blog post announcing the new policy were France and Germany, both of which, the post notes, ban pro-Nazi content. How to handle that ban is a dilemma that Yahoo, Google and Facebook have all struggled with in Germany.

Mr. Dorsey visited Germany earlier this week to announce his desire to hire a team there.

Twitter’s announcement also acknowledges there are some countries with severe restrictions on speech where the company simply cannot exist.

That’s not to say Twitter’s latest move won’t have an impact on China. Implausible as it may be for the company to establish itself in the country, Mr. Bishop notes, its embrace of content filtering could aid Beijing in making the argument that the Internet is a space in need of censorship.

– Josh Chin. Follow him on Twitter @joshchin.

Reuters

Your daily roundup of the best of The Wall Street Journal’s China coverage:

China Sees Drop in Property Prices: Property prices in 70 Chinese cities fell in December from the previous month, marking the third straight decline after developers cut prices to boost sales amid Beijing’s campaign to cool the property market. (Free)

For Brokers in Hong Kong, This New Policy Is Out to Lunch: In the city that created the dim sum bond, where food and money are two overriding passions, the biggest battle in the financial community isn’t about job cuts or billion-dollar IPOs. It’s about lunch. (Free)

China Objects to U.S. ‘Notorious Markets’ Designation for Taobao: China’s Commerce Ministry expressed opposition to the U.S. Trade Representative’s recent inclusion of Alibaba Group Holding Ltd.’s Taobao e-commerce operation on a list of “notorious markets” for piracy. The ministry also called for the U.S. to be more objective in judging China’s record on intellectual-property rights. (Subscriber Content)

Bond Sales by Private Chinese Firms Rise: More Chinese private companies are tapping the nation’s domestic bond market, which has long been dominated by state issuers, as Beijing seeks to broaden its financial base as part of its effort to gradually open itself to foreign capital. (Subscriber Content)

Bloomberg News

Warren Buffett, chairman of Berkshire Hathaway Inc., pauses as he attends a news conference for Chinese automaker BYD in Changsha, Hunan province, on Sept. 30, 2010. Rumors that Mr. Buffett would sing a song in this year’s Spring Festival gala turn out to be false.

Those expecting a song from U.S. investor Warren Buffett this Chinese New Year are likely to be disappointed.

Mr. Buffett has recorded a greeting that will appear on the website of China’s annual Chinese New Year show later this month, according to organizers. But the greeting won’t include a song, said Wu Zheng, co-chairman of Sun Media Investment Holding Ltd., a Chinese media company, and the person who connected the U.S. billionaire with the show’s Chinese producers.

That’s at odds with what Wang Pingjiu, a production executive for the broadcast, told a press conference on Thursday. In his statement, which was repeated by the state-run Xinhua news agency, Mr. Wang said Mr. Buffett would sing a song and play guitar in the online version of this year’s Spring Festival gala. “We all know that Buffett is good at investment, but few knew he also did well in singing,” Mr. Wang said, according to Xinhua.

The statement was broadly picked up by foreign media. It also set off a strong reaction on China’s Sina Weibo microblogging service because Mr. Buffett is well-known in increasingly wealthy China, which prizes investment know-how.

The story appeared consistent with Mr. Buffett’s previous behavior. The billionaire has long been known to sing in public, including a cameo turn as ‘80s rocker Axl Rose in a 2010 video made by Geico Corp., the insurer owned by his Berkshire Hathaway Inc. investment vehicle. He’s also no stranger to the Chinese Internet, having once lauded a Chinese suit maker in a video posted on its website.

But Xinhua’s report raised a few questions among Buffett watchers. For one, Mr. Buffett is a ukulele enthusiast but doesn’t appear to play guitar. Mr. Wang also declined to offer specifics on Mr. Buffett’s appearance, including whether it would also appear on the Spring Festival television special, a four- to five-hour series of songs and skits produced by the state broadcaster that’s watched by 700 million people in China and might be the world’s most-viewed TV show.

Mr. Wang said on Friday that he worked with Sun Media’s Mr. Wu to reach Mr. Buffett. In an interview, Mr. Wu said he had indeed worked through Buffett family members to get hold of a video of Mr. Buffett wishing Chinese viewers a happy Chinese New Year. He also said he offered to the gala’s producers a video of Mr. Buffett’s son, Peter, who plays piano. (See an unrelated video of Peter accompanying his father.)

Mr. Wu then planned to mix in a video Mr. Buffett recorded a year earlier for a charity the Chinese executive is involved with, the Sun Culture Foundation (in Chinese). In that video, which was shown at a charity ball in Beijing in January 2011, Mr. Buffett reportedly sang and played the ukulele to “I’ve Been Working on the Railroad.” But Mr. Wu said Mr. Buffett objected when he found out the singing video would be featured in the New Year’s greeting. Mr. Wu said he acceded to Mr. Buffett’s request and pulled it.

Mr. Wu says he still expects the online version of the gala will play Mr. Buffett’s Chinese New Year greeting. “Mr. Buffett’s New Year’s greeting is great,” he said.

– Kersten Zhang and Carlos Tejada

AP

A derailed train car is removed from a bridge as workers clear up the wreckage after a train accident in Wenzhou in July.

Your daily roundup of the best of The Wall Street Journal’s coverage:

China Blames Equipment, Officials for Wenzhou Crash: Flawed equipment and procedures as well as corruption were the main culprits in a Chinese bullet-train collision this year, the government said, conceding that its rail-network expansion has gone too fast.

French Train China Nuclear Experts: In five years, about 100 Chinese nuclear engineers will graduate from the Franco-Chinese Institute for Nuclear Energy in southern China’s Guangdong province. Trained by top French professors, the graduates will leave the school fluent in French and with master’s degrees in nuclear engineering.

Expats in Hong Kong Feel School Squeeze: Over the past two years, the number of expatriates moving to Hong Kong has surged, lured by China’s booming economy. But the steady influx of newcomers has created a huge bottleneck in another area: the region’s international educational system.

Alibaba Hires Lobbying Firm for Yahoo Bid: Alibaba Group Holding Ltd. recently hired the lobbying firm headed by former White House official Kenneth Duberstein as part of its exploration of a possible bid for all of Yahoo Inc., according to a person familiar with the matter.

Fushi Copperweld Considers Bid: The board of directors of Fushi Copperweld Inc. is considering a bid to take the wire company company private by its chairman and co-chief executive, Li Fu, in conjunction with Abax Global Capital and TPG Growth Asia.

Your daily roundup of the best of The Wall Street Journal’s coverage:

Wukans Win Deal: The leaders of a protest that represents the biggest instance of civil unrest this year say they have won unusual concessions from government officials that will likely be closely watched around the country.

North Korea Easing Up: Closed after Kim Jong Il’s death, the border between North Korea and China appears to be opening up somewhat.

Local Money in Stocks?: China may let local pension funds invest in domestic stocks, though many hurdles remain.

Yahoo May Cut Alibaba Stake: Yahoo is weighing a plan that would reduce its stake in Alibaba Group Holding.

Stocking Up on Crude: China, along with India, add to oil reserves in a move that could bolster prices.

Hacker Blowback: U.S. lawmakers urge probe into the alleged break-in by China-based hackers into the U.S. Chamber of Commerce.

Leading Indicator?: Australia could offer a hint over whether China is headed for a hard landing.

Hong Kong Bird Flu: Hong Kong culls 17,000 chickens after finding its first new avian flu case since 2008.

U.S. Soldiers Charged: Eight U.S. solders have been charged in connection with the death in Afghanistan of a 19-year-old private from New York’s Chinatown.

Bloomberg News

Baidu’s efforts to make nice with copyright owners may be starting to pay off.

The U.S. Trade Representative, or USTR, has removed Chinese search giant Baidu from its name-and-shame list of “notorious” markets for piracy, and praised the company for resolving its years-long battle with the music industry through an agreement to post links to licensed music tracks from major record labels.

Baidu’s removal from the list highlights how Chinese Internet companies are increasingly becoming the partners, rather than the enemies, of copyright owners seeking to distribute content in China.

Chinese online video websites including Youku and Tudou were also once accused of providing unauthorized streaming of television shows and movies, but now license much of this content and provide it legally and even carry on intellectual property battles among themselves. Baidu also has an online video venture called Qiyi, which allows users to watch high-definition licensed content.

In some cases, the websites have become the only channel for the content owners to distribute their content in China because of government restrictions on foreign content in theaters and on television.

This year’s list “highlights positive developments,” the office said in a statement. “USTR applauds Chinese site Baidu, one of the world’s most visited sites and previously identified as an example of a site linking to infringing content, for entering into a licensing agreement with U.S. and other rights holders in the recording industry.”

Remaining on the list from China are Alibaba Group Holding’s online shopping brand Taobao, which USTR said carries listings of “pirated and counterfeit goods” despite Taobao’s “significant efforts to address the problem.” Sohu.com’s search unit Sogou was listed for providing links to unlicensed music, while Beijing’s Silk Market and the China Small Commodities Market in Yiwu were listed as offline sources for infringing consumer goods.

Alibaba Group spokesman John Spelich said in a statement that the company’s consumer-to-consumer website Taobao Marketplace and business-to-consumer website Taobao Mall “stand firmly in favor of protecting customers and sellers, as well as the IPR rights of brand owners.” He noted that brands including Coach, Ray-Ban, Procter & Gamble and Uniqlo list their products on Taobao.

– Loretta Chao. Follow her on Twitter @lorettac

North Korea closed its border to all trade and visitors as the country prepares for the funeral of Kim Jong Il. The WSJ’s Deborah Kan speaks to Jeremy Page, who reports from the Chinese border town of Tumen.

Reuters

North Korean leader Kim Jong Il (L) and South Korean President Kim Dae-jung embrace as they bid farewell at Sunan airport, outside Pyongyang, in this June 15, 2000, file photo.

The friendship between North Korea and China is widely known. Perhaps less well-remembered is China’s role in helping nurture the government that would rule the Republic of Korea, as South Korea is known today.

It’s a dichotomy that in Shanghai occasionally has North and South Koreans bumping into each other. On Monday, a group of South Korean high school students was contemplating north Asia’s turbulent history shortly after learning of North Korean leader Kim Jong Il’s death.

One of the top draws for Korean tourists in Shanghai is an old house labeled in English as the Original Site of the Temporary Govt of Korea. Starting in 1919, it was the location of the provisional Korean government while the peninsula was a Japanese colony and before it was formally established as the Republic of Korea after World War II.

This was the stop for a group of South Korean students on Monday shortly after they learned Kim had died. The students, from the South Korean island of Geoje, were giddy and enjoying themselves, and said they were not giving much thought to the major geopolitical event of the day.

“This is part of South Korea’s independence and colonization by Japan,” explained 17-year-old Joshua Kim referring to the historic site.

The watched a brief video about the provisional government’s history in Shanghai and the wartime years with Japan. They donned plastic booties over their shoes and climbed stairs to see a mock up of the government offices, all of it set in a French Concession house located steps from where the Chinese Communist Party itself was founded.

No North Korean visitors were at the Temporary Govt Site on Monday, staff members said.

The students said they learned of the North Korean leader’s death aboard their tour bus.

“Sad and surprised” is how one 17-year old, Lee Jin-seo, described the reaction of her fellow students to widespread agreement.

The young woman, wearing a mustard-yellow cap, repeatedly said she was unhappy at the news. “I am very sorry to hear that. He is Korean too,” Ms. Lee said.

Some of the students had other opinions.

“He thinks it will bring peace to the whole world,” said Mr. Kim, translating to English comments from a friend wearing a purple sweater.

The students agreed that their parents would be split in their reaction to news of the North Korean leader’s death.

“Maybe we will feel a little more safe than when he was alive,” said Mr. Kim. “He was so closed-minded. He attacked South Korea many times.”

– James T. Areddy. Follow him on Twitter @jamestareddy

James T. Areddy/The Wall Street Journal

The entrance to Shanghai’s D.P.R Korean Restaurant

North Korean restaurants in China offer a rare and somewhat surreal opportunity for outsiders to interact with citizens of the hermit kingdom.

Flag pins usually give away the fact that a Korean restaurant serves cuisine of the north, instead of the south. The authentic northerners wear the blue-and-red pins on their chests, keep their opinions focused on the food and offer minimal personality during the requisite dinner-time performance that accompanies a barbeque meal.

News Monday of the death of Kim Jong Il appeared to leave some of China’s North Korean restaurateurs in shock, though it was exhibited in different ways.

In the Shanghai district Hongqiao, the glass façade of the almost-clinically clean D.P.R Korean Restaurant displays intertwined Korean and Chinese flags, plus Santa Claus. But the mood Monday was far from jolly inside the suddenly and indefinitely closed establishment.

A lone woman in a black sweater – presumably the manager – sat sobbing at the table furthest from the door. With a vacant stare and warming her hands on a cup of tea, the woman’s eyes were puffy and red. The noise of would-be patrons brought four younger women out from a back room. All were wearing traditional choson-ot and likewise had moist eyes and sullen faces.

A question about Kim was met with a single word in Chinese from one of the young women: “Leave.”

At kilometer or so away at another Shanghai restaurant, Pyongyang KoRyo, it was all bustle. Staff wearing expressions as bright as their pink choson-ot smiled as they confirmed themselves to be North Korean while offering to seat guests.

But the elegant young woman in charge drew a firm line at questions, even as she bowed to her inquisitive new arrivals.

At the mention of Kim’s name, she reflexively dropped her gaze and lifted her finger to her lips with a motion – a demand – to hush.

“Shi jia-de,” she said in Mandarin: “It is fake.”

A gentle press for more explanation was met with a whispered but firm request to go. “This news has not been delivered to us. If you are going to ask about that please leave,” she said pointing to the winding stairway that leads to the street. The buzz of young waitresses – a half dozen of whom had earlier said they were from the north – suggested they indeed may not have been told.

Outside Pyongyang KoRyo after the lunch rush, two Korean men in track suits manned the entrance and declined to speak, shooing two young workers back inside when a reporter approached. Minutes later one of the men guided five or six of the waitresses, some wearing identical winter jackets, out of the restaurant and down the street, moments before arrival of a television crew.

Beijing-based users of the popular Twitter-like microblogging service Sina Weibo reported similar scenes at North Korean restaurants in the capital.

Weibo user He Jianye wrote that he was halfway through lunch at an unspecified North Korean restaurant in the city when the waitresses suddenly started to weep – “each crying up a storm” – and the restaurant was temporarily closed.

Another user, He Huafeng, said he went to Beijing’s Pyongyang Mudanfeng, where waitresses, some red-eyed and holding back tears, were wearing black aprons on top of their usual work outfits. “After we finished eating, we were told to go out the back door. The front door was shut with a sign saying ‘temporarily closed.”

– James T. Areddy. Follow him on Twitter @jamestareddy

Agence France-Presse/Getty Images

North Korean leader Kim Jong-Il shakes hands with Chinese President Hu Jintao (R) prior to a meeting at the Great Hall of the People in Beijing in 2004.

China and North Korea may officially be as close as “lips and teeth,” as Mao Zedong famously said, but that hasn’t kept Internet users in China from greeting news of the death of Kim Jong Il with mixed emotions.

Kim’s death was the top trending topic on Sina Weibo, China’s most active Twitter-like microblogging platform. It attracted more than a million posts by midday Monday according to statistics posted on a special topic page.

One indicator of how Chinese Internet users are taking Kim’s death: the use of emoticons. While a number of the service’s users have decorated their posts with candles and broken hearts to indicate mourning, at least as many have opted instead to festoon their feeds with thumbs up, victory symbols and animated faces in various states of laughter.

Among the laughing emoticons, many come attached to jokes referencing the film “2012,” in which China builds arks to save humankind’s elite from an impending cataclysm.

“Kim Jong Il has gotten on the boat,” quipped a Weibo user writing under the handle Chongqing Ocean. “I’m starting to believe 2012 is really going to happen,”

Others accompany tongue-in-cheek posts noting that Kim’s death comes closely on the heels of the death of Czech playwright and Velvet Revolution hero Vaclav Havel.

“Havel has made yet another contribution to mankind,” wrote user Caijun Zhinan. “He decided to take Kim Jong Il with him when he went.”

In a possible nod to Kim’s alleged fondness for drink, normally voluble political blogger Wu Jiaxiang opted to simply post an animation of glasses clinking in celebration.

Journalist Fan Wei, meanwhile, has used emoticons to produce this chart predicting how each country would feel about Kim’s demise (from left to right: North Korea, South Korea, Japan, the U.S., the UK, Russia, China, Others)

Among those posting candles, many worried about what Kim’s death would mean for China, which has long worried that a collapse of the regime in Pyongyang could bring South Korean and U.S. troops perilously close to its border.

Writing on his Weibo account, Hu Xijin, editor of the nationalistic tabloid Global Times, predicted a diplomatic struggle. “South Korea, Japan and the United States will do whatever they can to influence North Korea, even frighten her,” he wrote:

In this crucial moment, China can absolutely not back down. China has to strenuously protect the special Sino-North Korean relationship – this has bearing on China’s strategic interests in Northeast Asia. China has to help North Korea get on the right path toward prosperous development.

Commenting on reports of North Koreans mourning Kim on the streets, a number of Weibo users have noted similarities with the death of Mao in 1976. Among them was former Yahoo China President Xie Wen, who pointed out that Mao’s death was followed quickly by the arrest of the Gang of Four – an event that precipitated China’s embrace of economic reforms. “It’s similar to the mood on the streets on Sept. 9, 1976,” Mr. Xie wrote. “Who knew that four months later Mao’s wife would be arrested?”

– Josh Chin. Follow him on Twitter @joshchin

In this year of tight monetary policy, China’s commercial banks have been kept on a tight leash, right? Not exactly. For some Chinese banks, it’s been like 2009 all over again.

That was the year Beijing’s economic stimulus really swung into gear, and new lending by the banking sector roughly doubled from the previous year.

Who got the hall pass this time around? China’s three policy banks – China Development Bank, Agricultural Development Bank of China and the Export-Import Bank of China.

We don’t actually know how much the banks have lent so far this year. They aren’t listed and so don’t file quarterly earnings reports. But they do issue bonds. Unlike normal banks, the policy banks can’t accept deposits (in most circumstances) and instead raise most of their funds by selling bonds — and that bond issuance has ballooned.

China Development Bank Corp., the biggest of China’s policy banks, has raised 959.3 billion yuan ($151 billion) by selling bonds domestically this year, up 34% from 714.4 billion last year, according to data from Chinabond.com, an official Web site for bond users.

Its smaller cousins posted even bigger percentage increases. The Export-Import Bank of China more than doubled the amount it raised, selling 378.7 billion yuan worth of bonds, up from 182.5 billion last year. Agricultural Development Bank raised 447.3 billion yuan after issuing 280.0 billion yuan’s worth last year, up 60%.

The policy banks were set up in the mid-1990s to help the major commercial banks commercialize. The commercial banks – Industrial & Commercial Bank of China, Bank of China, China Construction Bank, and Agricultural Bank of China – had been used and abused by the central and local governments alike as off-balance-sheet piggy banks. In order to give the banks a fresh start, governments were told the banks would cease to make loans based on political decisions. The policy banks were set up to fill the gap where government directed lending was deemed necessary.

The policy banks have since aligned themselves very closely with the government agenda. The swelling bond issuance and ensuing lending would suggest a greater reliance in Beijing on their in-house financiers.

CDB in particular has played a major role in supporting local government infrastructure projects – accounting for about 17% of all loans made by banks to local government investment vehicles – and could play a useful role supporting low-income housing construction, a high-priority for the government but one struggling to attract funds. The Agricultural Development Bank, meanwhile, is at the forefront of trying to further stimulate development in rural areas and bridge the income divide between urban areas and the countryside.

But the rise in policy bank borrowing also suggests that the government just doesn’t trust the commercial banks to get credit to those corners of the economy that genuinely need it. The commercial banks are certainly not short on cash – Beijing just doesn’t let them lend it. The reserve requirement ratio – the amount of cash banks need to put aside as a share of loans – has hovered around 20% for much of the year, and new lending by banks this year is likely to be largely the same as last year.

But the commercial banks lend along commercial lines. Artificially depressed deposit and lending rates might distort their decisions and result in a less than an ideal allocation of capital throughout the economy, but the commercial banks are keeping to the script. Until the next wave of meaningful financial reform comes to China, the wholly state-owned and controlled banking sector might be making a comeback.

– Dinny McMahon and Wang Ming

Bloomberg News

Hong Kong — no longer China’s most expensive city?

A list of what The Wall Street Journal’s reporters in China are reading and watching online. (NOTE: WSJ has not verified items in the ‘News’ section and doesn’t vouch for their accuracy.)

News:

* Sources say Alibaba is seeking $4 billion to buy back Yahoo’s stake (Reuters)

* Entrepreneurs fight the state and the state wins (NYT)

* Beijing more expensive than Hong Kong? So says one survey (Global Times)

* A poll with scary implications for China’s banking system (Bloomberg)

* Scandalized philanthropists are giving less — a lot less — to China’s charities (Reuters)

Analysis and Commentary:

* A pair of Stanford researchers say North Korea is cozy enough with China, it doesn’t need the U.S. like it used to (L.A. Times)

Just Because:

* A school uses an official’s face on a statue of Athena, controversy ensues (China Daily)

European Pressphoto Agency

A view of a port facility in Shanghai, China on July 4, 2011.

Shanghai claimed this year to be the world’s busiest container handling port. One tradable it doesn’t want mixed into the throughput figures: nuclear and radioactive items.

In a joint U.S.-China non-proliferation initiative, officials next week are scheduled to commission and demonstrate a radiation detection system at Shanghai’s flagship Yangshan port, according to a brief statement distributed Friday by the U.S. Consulate in Shanghai.

“This U.S.-Chinese effort is the first project of its kind in China,” the statement said.

It noted the radiation detection equipment, to be operated by local officers, “provides a comprehensive screening capability for one of China’s largest ports.”

Installation of the port equipment is part of a global U.S. program called the Megaports Initiative, run by a Department of Energy division that aims to equip 100 of the world’s biggest ports with radiation detection scanning systems. A number are already in operation.

Container handling ports were quickly identified after the September 2001 terrorist attacks on New York and Washington as vulnerabilities in the global security fabric that were loosely monitored compared with airports but nevertheless handled an estimated 90% of world trade.

The idea behind Megaports is to scan half the world’s global maritime containerized cargo and 80% of the U.S.-bound container traffic for nuclear-related items sought or sent by terrorist organizations and rouge states (pdf). (A related program is targeted at former Soviet states.)

The initiative comes despite the fact that the U.S. and China have repeatedly locked horns over proliferation issues, grabbing headlines on the subject from North Korea and Pakistan to Iran.

Politicians in Washington say China hasn’t done enough, while Beijing says its commitments to nuclear non-proliferation are solid.

Garnering less notice are efforts like the Shanghai port project, the inauguration of which follows news in January that the U.S. and China had agreed to establish a first-of-its-kind-center to train Asian port monitors in radiation detection to be based in a Bohai port city near Beijing called Qinhuangdao.

In photos, the equipment supplied under Megaports appears to check containers as they arrive and leave on the backs of trucks. Suspicious boxes can be checked with hand-held monitors, in the container-handling version of a security pat-down.

Port screening in China has been long-sought by the U.S. A 2005 General Accountability Office report criticized the Dept. of Energy’s “limited progress” made in installing such equipment at the highest priority foreign seaports, in particular in China. It said the DOE cost estimate per port of $15 million as likely too low (pdf).

Thomas D’Agostino, head of the Energy Department’s National Nuclear Security Administration, will represent the U.S. at next week’s ceremony, according to the invitation. China’s group will be headed by Lu Pei, vice minister of the General Administration of Customs.

– James T. Areddy. Follow him on Twitter @jamestareddy

Everett Collection

Your daily round-up of the best of The Wall Street Journal’s China coverage:

Beijing Cracks Down on Trading Houses: China’s government said that exchanges set up without Beijing’s approval will be banned from trading derivatives and other financial products. (Subscriber Content)

Hollywood’s New Kick: From Russell Crowe to Steven Soderbergh, top actors and directors are leaping into the global market for martial arts movies. Why everybody is kung fu fighting. (Free)

Alibaba.com Net Rises, but Challenges Persist: Alibaba.com Ltd. posted a 12% rise in its third-quarter net profit Thursday, but the company’s expenses rose and its number of paying members fell. (Subscriber Content)

Reuters

A man talks on his mobile phone as he walks past an advertising billboard outside the Greentown residential construction site in Hangzhou, Zhejiang province September 23, 2011.

Property developer Greentown China Holdings has grabbed headlines in recent days, in a time when Chinese real-estate companies would probably rather keep a low profile.

First, Song Weiping, founder of Greentown, last week directly disputed rumors that the company is on the verge of bankruptcy amid the chorus of pessimism over the sector.

Then over the weekend, local media said Mr. Song was getting a boost from Jack Ma, chairman of Chinese e-commerce giant Alibaba Group Holding, which like Greentown is based in Hangzhou. According to those reports, Mr. Ma encouraged his employees to buy property from Greentown. The company disputes those reports as well.

The flurry of attention comes as the company, like others in the sector, grapples with Beijing’s efforts to tame the property market. On Monday, Greentown said it is considering disposing of some of its property projects to boost cash flow.

On the bankruptcy rumors, Mr. Song decided to address them head-on. In an essay on the company’s website last week (in Chinese), he disputed the rumors but also took the opportunity to imagine the scenario that might unfold should any of Greentown’s peers collapse.

“On Nov. 1, a reporter called to ask me if Greentown is applying for bankruptcy… this is a cold joke,” wrote Mr. Song, whose firm develops high-end property. “Currently everything is within our control and we have confidence to pass this winter together with our peers. Greentown still has a long way to go before it declares bankruptcy.”

Concerns over the company’s fiscal health have mounted since September, when China’s banking regulator asked trust companies, key players in the nation’s shadow banking system, to submit details on how much they had lent to the Hong Kong-listed property developer.

The property market is showing signs of distress as Beijing’s nearly two-year-long property tightening campaign continue to bite. Sales are slowing and property prices are falling in some cities, intensifying pressure on property developers. Many luxury property developers such as Greentown have been hit.

With declining sales and tightened credit, some firms might collapse in the next couple of months, he wrote. “When that time comes, some developers will close down, some developers may run away, or perhaps, something even more tragic could happen,” said Mr. Song, adding that one should also consider what would happen to “our brothers in the downstream industry chain, from building material firms, construction worker and migrant workers waiting to bring money home for the lunar new year.”

He stopped short of criticizing the government’s stance on property tightening, and said that he is confident that the government will be able to “grasp the overall situation.”

On the Alibaba situation, both the e-commerce company and the property developer disputed the idea that Mr. Ma was trying to help Mr. Song.

An Alibaba spokesman said it sent a generic human-resource email to selected employees offering discounts of about 8% on Greentown apartments as a benefit for employees. He added that there was no language in it about saving Greentown, it didn’t come from Mr. Ma and it didn’t encourage employees to accept.

Greentown Chief Financial Officer Simon Fung said that the company is offering the discount to Alibaba employees but declined to reveal the minimum transaction volume.

“We have offered similar discounts on bulk purchases to other industrial associations as well,” Mr. Fung said, noting that one discounted project is priced at 18,000 yuan ($2,834) a square meter.

– Esther Fung

Getty Images

Alibaba Group chairman and CEO Ma Yun speaks during a press conference on October 17, 2011 in Hangzhou, Zhejiang Provinceo of China. The value of transactions on Alibaba’s Taobao retail platforms doubled last year to hit $63 billion.

Alibaba Group’s Taobao websites are virtually synonymous with online shopping in China, but one venture capitalist with experience navigating the Chinese Internet says that may not always be the case.

In China e-commerce is all about discount shopping, said Hurst Lin, general partner at venture capital firm DCM and former COO of Chinese web portal and microblog operator Sina, but that won’t last. Mr. Lin believes that in several years, Chinese consumers will have more discerning taste and that online retailers with the best design and branding will challenge the dominance of Alibaba Group’s Taobao websites.

DCM has investments in several e-commerce companies focused on China, including online lingerie retailer La Miu and health and beauty seller Lumi. “Today, what you’re looking at is discount,” Mr. Lin said. “That’s what Taobao is all about—the cheapest stuff, comparison shopping.” What Taobao websites offer is similar to what eBay offered to online shoppers in the 90s, he said. “When I was in the U.S. in the 90s, I would go on eBay and check on the price first.”

Taobao Marketplace, a website for consumers to sell to other consumers, and Taobao Mall, where larger retailers can open online storefronts to sell their products to consumers, are currently the largest online shopping sites in China. But growing competition has recently begun to erode Taobao’s market share. Its share of online purchases in China slipped to 71% by value in the second quarter from 75% a year earlier, according to Analysys International.

But Mr. Lin said that “eBay is declining” in the U.S. and though Taobao is still on an upswing, its dominance will eventually decline as well. He and other venture capitalists are now looking for trends that will pick up two or three years down the line. Taobao “will have their heyday for another four to five years, then eventually consumers” will go to online retailers that specialize in specific product categories, Mr. Lin said, adding: “Taobao better go public.”

Alibaba chairman Jack Ma has said the company doesn’t have plans for an initial public offering of Taobao, but that he wouldn’t rule out an IPO for Alibaba Group. The value of transactions on Taobao had doubled last year to hit 400 billion yuan ($63 billion). Taobao sites didn’t disclose transaction numbers this year, but Mr. Ma said he expects the number to reach a trillion yuan in 2012.

Mr. Lin believes e-commerce companies, rather than simply competing on price, will eventually have to differentiate themselves by offering better design, more entertainment value and services that increase margins. For examples, he cited flash sales websites that add a sense of urgency by setting time limits for people to keep purchases in their virtual shopping carts or a website that offers buyers the ability to do swaps with other buyers if they have a last-minute change of heart after placing an order.

Mr. Lin said 360buy.com, also known as Jingdong Mall, another Taobao challenger, has done well to attract consumers with low prices and fast delivery service. “It’s fantastic,” he said, but it’s still unclear how the company will make money given its low profit margins. He said he believes 360buy “needs to go one step further,” adding “it’s not all about discounting. It’s about information, it’s about entertainment, it’s about social” and “when those things come you can charge incremental value.”

An Alibaba Group spokesman said the company is addressing the changing tastes of Chinese consumers with Taobao Mall, which “is focusing on service quality” and with its shopping search engine eTao which “provides info other than pricing,” including “product guarantees, user reviews, shipping options etc.”

– Loretta Chao. Follow her on Twitter @lorettac

Google’s John Lagerling, Director of Global Partnerships, Android at Google, wouldn’t give any insight as to when the company’s application store, Android Market might be launched in China (currently, Android phones shipped officially here have application stores from handset makers or third parties pre-installed instead). When asked at Disrupt whether Google is making an effort to launch Android Market in China, he would only say the company is always working with its partners, without elaborating.

Wang Hua, founder and managing partner of Innovation Works, said he believes the right move for Google would be to launch a standard for third-party application stores instead of launching its own store.

Ultimately, speakers on the panel agreed that there aren’t many people making money on Android in the world’s largest mobile market by number of subscribers, but that things may change as advertisements in applications are rolled out, and cheaper tablets (1,000 yuan or less) begin to sell in China in 2012.

Meanwhile, the former head of Google’s China operations, Kai-Fu Lee, spoke about whether Chinese companies would be able to compete in the U.S., an old question given new relevance as some speculate that China’s Alibaba Group is a candidate to participate in a takeover of Yahoo. “The U.S. is a tough market for Chinese companies to go to,” he said. “The two markets are extremely different.” But some larger companies can do well in other developing markets, he said, such as in Southeast Asia, then “gradually Russia, Eastern Europe, South America and Africa”–something Google competitor Baidu has been trying with recent launches of products in Arabic, Thai and Vietnamese.

The issue for Chinese companies, Mr. Lee said, is that the local market is “so large, it’s so easy and natural to focus energy on China.” When asked about U.S. companies trying their luck in China, he said big companies are “so successful in the U.S., Europe and sometime Japan it’s hard to imagine why China should be different.” But he said he hopes past failures will show that China is “large enough” to do things differently and that companies should find someone to trust to run their businesses here and power a local team because “it’s a really scrappy marketplace.”

On the sidelines of the conference, Pony Ma, CEO of Chinese Internet giant Tencent, said his company is developing new ways to oversee content on its Tencent Weibo microblog service as it faces demands from China’s government and from society to prevent the spread of rumors online. He added that the oversight will be “beneficial” in the long term. “This isn’t just a government demand, I think society also has this demand,” he said.

The campaign to squash rumors online has been watched closely by investors and analysts, many of whom worry that the government’s regulation efforts could strangle fast-growing microblogging services from Tencent and rival Sina.

– Loretta Chao and Owen Fletcher

Asa Mathat

Jack Ma may be no Bill Gates, but he says his views on philanthropy and the social responsibility of companies have been vastly misunderstood.

“I probably spend a lot of money and efforts,” Mr. Ma told interviewer Peter Kafka in Hong Kong on Thursday at AsiaD — a conference organized by AllThingsDigital, an online publishing partner of The Wall Street Journal. “I keep it private and do not tell the public.”

Last month, the self-styled “Yangtze Crocodile” and founder of China’s Alibaba Group — whose net worth is somewhere around $1.6 billion, according to the latest Forbes Billionares list, which ranks him at No. 782 — drew some fire for not funneling the bulk of his personal wealth to philanthropic causes, à la Warren Buffett.

In comments reported by the China Daily, Mr. Ma noted the Sage of Omaha made his very-public giveaway decision when he was 75, while Chinese executives around his age, 47, are still busy creating wealth, not necessarily thinking about how to donate it to charity.

But Mr. Ma’s pronouncement wasn’t a Gekko-esque “greed is good” screed. The China Daily also quoted him as saying those C-suite execs who accumulated  100 million yuan (about $16 million) had a “duty to manage it wisely, as it has become a common property…and I believe there is  no other person who can manage it better than me.”

Combined with his comments at AsiaD on Thursday, the Alibaba chairman and CEO is building an interesting case study of where rising Chinese companies place social responsibility on their list of priorities. Surprisingly, it ranks right up there with profitability — at least according to Mr. Ma.

“Your business model, it should create value and be good to society,” he said, noting that Alibaba contributes 0.3% of its revenue to environmental protection, though he didn’t specify where or how.

And if there’s a conflict between between what’s good for the environment and what’s in an Alibaba customer’s interest? The plain-talking Mr. Ma was unequivocal.

“I think the choice is very clear. If it hurts the environment, it’s not good for society, so just don’t do it,” he said.

With such a big and diverse economy and scandals galore at rapidly growing Chinese companies, it’s hard to form a clear picture of what a model 21^st-century Chinese CEO stands for. It’s also not clear how much of an anomaly the former tour guide and English teacher is. Either way, getting inside Jack Ma’s head is an interesting exercise.

Unlike some of his counterparts, he dresses down and speaks colloquial English. Mr. Ma also eats from his own shop, and showed off a nifty pair of black buxie (cloth shoes) made by a Chinese woman in the countryside that he bought through his Taobao online shopping site.

“They’re very comfortable,” Mr. Ma said.

Mr. Ma seemed to be at ease while deftly dodging questions about what Alibaba’s intent is vis-à-vis Yahoo. The American Internet company has fallen on hard times, is shopping itself around and has had rocky relations with Alibaba. Mr. Ma again expressed interest in a bid for Yahoo, but was otherwise coy, saying what happens next is largely in the hands of the U.S. company’s management.

In a written submission to The Wall Street Journal’s CEO Council, due to be held in November in Washington,  D.C., Mr. Ma also hammered home major themes in his business strategy.

Key is to “help small businesses and care more about them than you care for yourself, focus first on customer satisfaction and second on teamwork. Shareholders’ interests come third because they are outcomes, not inputs.”

And his list of priorities, beyond social responsibility, include businesses focusing “on their beliefs and hopes — the reasons they got into business and the way they satisfy their customers – rather than focusing on profits and margins, etc.”

Critics of Mr. Ma have on occasion questioned how deep his concern for small businesses and customer satisfaction runs, including after Alibaba announced last week that it would require retailers to pay up to 10 times the 6,000 yuan ($940) the company currently levies to participate in its Taobao Mall online store. The move prompted a revolt among smaller retailers, some of whom pledged to sabotage the service. Alibaba responded by offering a grace period on the higher fees for those with already existing accounts.

Perhaps with that episode in mind, Mr. Ma emphasized that a top priority should be to “get back to why the business started in the first place. And look for opportunities to partner with others for growth, rather than focusing on automatically engaging in competition by going it alone.”

At AsiaD Thursday, Mr. Ma described competition as a fun sport, but not something he automatically sought out.

– Adam Najberg. Follow him on Twitter @najberg1

Asa Mathat

Jack Ma may be no Bill Gates, but he says his views on philanthropy and the social responsibility of companies have been vastly misunderstood.

“I probably spend a lot of money and efforts,” Mr. Ma told interviewer Peter Kafka in Hong Kong on Thursday at AsiaD — a conference organized by AllThingsDigital, an online publishing partner of The Wall Street Journal. “I keep it private and do not tell the public.”

Last month, the self-styled “Yangtze Crocodile” and founder of China’s Alibaba Group — whose net worth is somewhere around $1.6 billion, according to the latest Forbes Billionares list, which ranks him at No. 782 — drew some fire for not funneling the bulk of his personal wealth to philanthropic causes, à la Warren Buffett.

In comments reported by the China Daily, Mr. Ma noted the Sage of Omaha made his very-public giveaway decision when he was 75, while Chinese executives around his age, 47, are still busy creating wealth, not necessarily thinking about how to donate it to charity.

But Mr. Ma’s pronouncement wasn’t a Gekko-esque “greed is good” screed. The China Daily also quoted him as saying those C-suite execs who accumulated  100 million yuan (about $16 million) had a “duty to manage it wisely, as it has become a common property…and I believe there is  no other person who can manage it better than me.”

Combined with his comments at AsiaD on Thursday, the Alibaba chairman and CEO is building an interesting case study of where rising Chinese companies place social responsibility on their list of priorities. Surprisingly, it ranks right up there with profitability — at least according to Mr. Ma.

“Your business model, it should create value and be good to society,” he said, noting that Alibaba contributes 0.3% of its revenue to environmental protection, though he didn’t specify where or how.

And if there’s a conflict between between what’s good for the environment and what’s in an Alibaba customer’s interest? The plain-talking Mr. Ma was unequivocal.

“I think the choice is very clear. If it hurts the environment, it’s not good for society, so just don’t do it,” he said.

With such a big and diverse economy and scandals galore at rapidly growing Chinese companies, it’s hard to form a clear picture of what a model 21^st-century Chinese CEO stands for. It’s also not clear how much of an anomaly the former tour guide and English teacher is. Either way, getting inside Jack Ma’s head is an interesting exercise.

Unlike some of his counterparts, he dresses down and speaks colloquial English. Mr. Ma also eats from his own shop, and showed off a nifty pair of black buxie (cloth shoes) made by a Chinese woman in the countryside that he bought through his Taobao online shopping site.

“They’re very comfortable,” Mr. Ma said.

Mr. Ma seemed to be at ease while deftly dodging questions about what Alibaba’s intent is vis-à-vis Yahoo. The American Internet company has fallen on hard times, is shopping itself around and has had rocky relations with Alibaba. Mr. Ma again expressed interest in a bid for Yahoo, but was otherwise coy, saying what happens next is largely in the hands of the U.S. company’s management.

In a written submission to The Wall Street Journal’s CEO Council, due to be held in November in Washington,  D.C., Mr. Ma also hammered home major themes in his business strategy.

Key is to “help small businesses and care more about them than you care for yourself, focus first on customer satisfaction and second on teamwork. Shareholders’ interests come third because they are outcomes, not inputs.”

And his list of priorities, beyond social responsibility, include businesses focusing “on their beliefs and hopes — the reasons they got into business and the way they satisfy their customers – rather than focusing on profits and margins, etc.”

Critics of Mr. Ma have on occasion questioned how deep his concern for small businesses and customer satisfaction runs, including after Alibaba announced last week that it would require retailers to pay up to 10 times the 6,000 yuan ($940) the company currently levies to participate in its Taobao Mall online store. The move prompted a revolt among smaller retailers, some of whom pledged to sabotage the service. Alibaba responded by offering a grace period on the higher fees for those with already existing accounts.

Perhaps with that episode in mind, Mr. Ma emphasized that a top priority should be to “get back to why the business started in the first place. And look for opportunities to partner with others for growth, rather than focusing on automatically engaging in competition by going it alone.”

At AsiaD Thursday, Mr. Ma described competition as a fun sport, but not something he automatically sought out.

– Adam Najberg. Follow him on Twitter @najberg1

Zuma Press

People look at a suspension notice in front of a Wal-Mart store on October 10, 2011 in Chongqing, China.

The good news for emerging economies: They’re consistently improving their conditions for entrepreneurs to start businesses and work through basic regulations. The not-so-good news: They’re a long, long way from the top in the World Bank Group’s latest global rankings on the overall ease of doing business.

China — the world’s second-largest economy — has been the world’s 11th fastest improver over the past six years. But it still ranks No. 91 out of 183 countries in ease of doing business.

And despite persistent complaints about regulations from American businesses and lawmakers, the United States — the world’s largest economy — ranked No. 4 on the overall list, just below Singapore, Hong Kong and New Zealand.

The World Bank started the Doing Business project nine years ago to assess how well countries handle key concerns for small- and medium-sized firms such as securing construction permits, getting electricity accounts, paying taxes and enforcing contracts. The rankings are designed to provide transparency about shortcomings and have influenced a number of countries looking to move up the list.

The 2012 report, released Wednesday night, shows that the most consistent improvers tend to be in emerging markets, where an action as straightforward as putting property records on computers can yield huge benefits.

Read more on Real Time Economics

Bloomberg

Alibaba Group Chairman Jack Ma

Alibaba Group Holding Ltd.’s effort to raise fees at its Taobao Mall online store stirred opposition this week from some small vendors who pledged to disrupt its operations.

The protests–which the company now says have been contained–prompted a pained response online from Alibaba Chairman Jack Ma, who cited his anguish over the issue and described the protesters as “people playing the Nazi anthem, hurting the innocent by shouting ‘Eliminate all, destroy all.’”

Taobao Mall connects consumers in China with retailers ranging from small mom-and-pop operators to retail giants like Gap Inc. of the U.S. and the Uniqlo arm of Japan’s Fast Retailing Co.

Taobao said on Monday it will require retailers to pay up to five to 10 times the 6,000 yuan ($940) it currently levies to participate in the service, beginning at the end of the year, depending on the size of the retail operation. The payment, which the company says is refundable if the retailers achieve a certain sales volumes or high positive-feedback levels from customers, is meant to get them to pay more attention to customer service.

The move irked a number of small vendors who argue that it disproportionally hurts them. They began this week a campaign to disrupt the operations at Taobao Mall, also known as Tmall. Under plans they outlined in online forums, the vendors pledged to make purchases at the online stores of larger Taobao Mall members, then complain or ask for refunds. Such an effort would lower the consumer ratings of the stores, which could lead to suspension of operations under Taobao Mall rules.

Alibaba spokeswoman Florence Shih said Friday that some retailers, such as Uniqlo, took down listings earlier this week to avoid attacks, but all are back up and operations have returned to normal. “We’re working with them to make sure any negative effects have been negated,” she said.

She said the company reported the incidents to local police in the city of Hangzhou, where Alibaba is based, and said the company believes a number of the attackers are outsiders who have pestered the company in the past. “We welcome legitimate customers to get in touch with us with their concerns,” she said.

In a series of online posts, Mr. Ma this week criticized the protesters even as he described the tough environment Taobao Mall has faced. “Last night [I] heard those people playing the Nazi anthem, hurting the innocent by shouting ‘Eliminate all, destroy all,’” he wrote on Tuesday on his verified account on Sina Weibo, China’s popular Twitter-like microblogging service. He added, “Looking at the tears of my family members and listening to the tired and distressed voices of my colleagues, my heart is broken.”

“We help small businesses wholeheartedly because we understand that kind of pain,” he wrote on Wednesday. “But not everybody who does business will make money. Business is a serious discipline of learning.”

He added, “It’s normal that a company wants to make money. It’s not normal that a company doesn’t want to make money. Taobao has had nine years of not-normal time. For nine years, we have never examined Taobao’s income, never asked Taobao to make one cent of profit. Still not today!”

Ms. Shih said the comments speak for themselves. Alibaba Group and Taobao Mall are closely held companies and don’t publicly report earnings results.

Taobao Mall is China’s top business-to-consumer online retail site by market share, according to research firm Analysys International, contributing to Alibaba’s overall strong position in China’s online commerce area. Taobao Mall said it aims for the value of transactions on its site to reach 100 billion yuan this year and 200 billion yuan next year.

But Taobao Mall faces rising competition, including from Beijing Jingdong Century Trading Co., which operates No. 2 consumer retailer 360buy.com. Jingdong hopes to raise as much as $4 billion to $5 billion from an initial public offering in the first half of 2012, people familiar with the situation said last month.

Last month, Taobao Mall said it would team up with more than three dozen other online retailers, broadening its offerings to consumers.

–Carlos Tejada

Note: A previous version of this article misstated the fee structure.