Keep America Great

China Turns Predominantly Urban

2012-02-13T09:43:00.002-06:00

By JEREMY PAGE and BOB DAVIS in Beijing and JAMES T. AREDDY in Shanghai

BEIJING—China has announced that people living in its towns and cities now outnumber those in the countryside, making it a predominantly urban nation for the first time in Chinese civilization.

Xinhua/Zuma Press

Migrant workers and others line up for trains ahead of the Lunar New Year holiday in Chengdu on Tuesday.

The milestone spotlights a trend that China's government says will be a key driver of economic growth over the next two decades as hundreds of millions more people move into urban areas in search of higher-paying jobs.

But it also points to the challenges facing Chinese leaders as mass migration places an increasing strain on urban housing, transport and welfare, while fueling pollution, social unrest and demands for political reform.

Urban dwellers account for 51.27% of China's entire population of nearly 1.35 billion—or a total of 690.8 million people—the National Bureau of Statistics (NBS) announced at a news conference in Beijing on Tuesday.

Heard: Deconstructing China's Urban Legend

City dwellers represented just 10.6% of China's population in 1949, when the Communist Party took power, and just under 19% in 1979, when it launched the market reforms, according to official Chinese statistics.

That means that in the economic boom of the past three decades, China has roughly matched what economic historians say took about 200 years in Britain, 100 years in the U.S. and 50 years in Japan.

Many experts expect the trend to continue at a similar pace in China, with McKinsey, the consulting firm, forecasting last year that the country would have one billion urban residents by 2030—its urban population growing by more than that of the entire U.S. in just two decades.

The social cost of urbanization is becoming increasingly evident, however, with 253 million rural migrants now living in Chinese cities with little or no access to public services, which they can only access in the villages where they are registered under the "hukou" or household-registration system.

The demand for urban property has also led to rampant seizures of farmland near towns and cities by local officials, who typically pay farmers a nominal fee before selling at market rates to developers who often build luxury housing and shopping malls.

Wen Jiabao, the Chinese Premier who is entering his last year in power this year, called for greater efforts to tackle such illegal land seizures in an essay published this week in an official Communist Party magazine called Qiushi, or Seeking Truth.

China had "lowered the costs of industrialization and urbanization by sacrificing farmers' rights to land," he wrote. "No one is empowered to take away such rights."

Mr. Wen also criticized a widespread policy of moving villagers into apartment blocks so their land can be merged into larger blocs or used for property development.

Growing public anger at land grabs came into focus last month when residents of the fishing village of Wukan in the southern province of Guangdong staged an open revolt against local officials they accused of illegally selling their land to property developers.

Such land disputes account for 65% of "mass incidents"—the government's euphemism for large protests—in rural areas according to Yu Jianrong, a professor and expert on rural issues at the state-run Chinese Academy of Social Sciences.

China's Land Ministry has also warned that misappropriation of farmland has brought the country dangerously close to the so-called red line of 120 million hectares of arable land that the government believes it needs to feed China's people.

Mr. Wen said in his essay that China needed to modernize its agricultural technology in order to meet the demand for food from its expanding population despite the shortage of land and water resources.

However, the central government's efforts to curb land abuses have so far met fierce resistance from local authorities who rely on land sales to maintain growth, service debt and top up their budgets.

Reuters

Job seekers waited to enter a job fair in Yantai, Shandong province, in February 2011.

Finding a balance between GDP growth, urbanization, farmers' rights and food security is one of the main challenges facing a new generation of party leaders who are expected to take charge later this year in a once-a-decade leadership change.

Vice Premier Li Keqiang—the favorite to replace Mr. Wen as Premier—told a high-level party meeting on the economy last month that urbanization was key to stimulating domestic demand so China can move away from its export-driven growth model.

He also called for increased efforts to build and distribute fairly the 36 million units of affordable "social housing" that the government has pledged to construct over the next five years to help meet demand from migrants and ease property prices.

"The construction of affordable homes will help curb excessive price rises and fuel urbanization, which will in turn unleash consumption and investment potentials and push development of related industries," Mr. Li said.

Urban migration is also prompting some local governments to provide better services to newcomers, as well as extending city services into satellite towns.

In Shanghai, for instance, Mayor Han Zheng this week said that nonlocals would be permitted to rent subsidized units in certain public-housing projects in the city's outer reaches, whereas in the past eligibility hinged on their employment.

"Coverage is extended to all migrant workers in Shanghai," Mr. Han told a press briefing.

Speaking days earlier, Mr. Han also pledged to "encourage and guide the migrant population's involvement in community affairs, enrich their cultural life and show our genuine care to them."

Chinese officials and experts say the country will accelerate the urbanization process over the next two decades in order to avoid the "middle-income trap," a term coined by the World Bank to describe stagnation in a country when per capita GDP reaches $3,000.

The per capita income of China's urban residents was 21,810 yuan ($3,434) in 2011, while that of rural residents was 6,977 yuan, according to the NBS.

Still, many Chinese and Western economists and demographers say that urbanization can be a double-edged sword.

When rural residents move to urban areas, they tend to do more economically productive work, learn more skills, earn more money, and buy more goods. They also boost demand for urban infrastructure and housing, which can boost economic growth.

Comparing the growth of 18th century England with modern China, Standard Chartered economist Stephen Green recently concluded that "urbanization went hand in hand with economic growth."

But urbanization, by itself, is hardly enough. Latin America is filled with megacities teeming with shanty towns housing unemployed and underemployed workers from the countryside, whose move didn't stop those nations from stalling economically. According to Mr. Green, China would need to learn some of the lessons from a rapidly urbanizing and industrializing England, especially the creation of "power-restricting, adequate, market-friendly institutions."

That's not necessarily a given in China where the Party claims a monopoly on power and blocks the creations of independent institutions.

Moreover, urbanization is hardly the only demographic trend sweeping over China. At the same time as more workers are moving into the cities, the size of the Chinese work force—those aged 15 to 64—is peaking as the work force ages.

More than 30% of the population is expected to be older than 60 by 2050, producing an increasingly heavy economic burden on those in the work force.

The NBS said Tuesday that the number of people aged 15 to 64 stood at about 1 billion 2011—representing an increase of about 3% over 2010. But China's overall population grew faster—by about 4.8%—between 2010 and 2011.

China Sentences Another Prominent Activist to Prison

2012-02-08T10:10:00.002-06:00

BEIJING — For the third time in less than a month, a Chinese court has sentenced a prominent rights activist to a lengthy prison term on charges involving subversion of state power, a telling indicator of the government’s fixation on security as China enters a year of leadership changes.

The Wuhan Intermediate People’s Court ordered Li Tie, 52, a writer and human rights campaigner, to 10 years in prison for subversion of state power, a more serious charge than the original accusation of inciting to subvert. Wuhan is the capital of Hubei Province in central China.

The sentence, handed down on Wednesday but made public on Thursday, came more than 16 months after Mr. Li was detained in September 2010, and 9 months after his trial in April.

The evidence included membership in an alternative political group, the China Social Democracy Party, and a succession of essays that took issue with the government, led by an online criticism titled “Human Beings’ Heaven Is Human Dignity.”

The sentencing followed hearings in late December in which a Sichuan Province democracy activist, Chen Wei, was sentenced to nine years in jail for inciting subversion, and a Guizhou Province dissident, Chen Xi, received a 10-year term on the same charge.

This week, prosecutors in Hangzhou, the capital of Zhejiang Province, charged a fourth activist, Zhu Yufu, with subversion for writing a poem that urged Chinese citizens to gather together to call for freedom.

Those cases, with similar convictions and sentences meted out to other dissidents, reflect a steady trend of restrictions and harsher punishments for government critics since late 2008, some experts say.

“It’s now a consensus among many people that the legal environment in China is worsening; the authorities are setting up more and more obstacles,” Mo Shaoping, a Beijing lawyer who has defended well-known dissidents, said Thursday. “The difficulty for lawyers in these kinds of cases is getting greater and greater. And the sentences are getting heavier and heavier.”

No one can say with certainty why. But most analysts suggest that the crackdown began with vastly stepped-up security surrounding the 2008 Beijing Olympics, gained steam after activists released the online democracy manifesto Charter 08 in December 2008 and was ratcheted up again after Arab uprisings last spring started an online call for demonstrations in China.

China’s pending transition to a new Communist Party Politburo and government leadership, likely to get under way this fall, has yet again heightened the emphasis on stability, most analysts say.

In part, the latest flurry of convictions is “the long tail of the wave of arrests that took place after the Arab spring,” one of the most knowledgeable critics of Chinese rights policies, Nicholas Bequelin of Human Rights Watch, said Thursday.

The fact that the state’s targets are all veteran dissidents, many with ties to the 1989 Tiananmen Square demonstrations, suggests that security officials want to nip any effort to link Arab political uprisings with China’s last mass democratic movement, he said.

The government generally does not address questions about individual cases. On Wednesday, the Foreign Ministry spokesman Liu Weimin dismissed comments this week by the American ambassador, Gary Locke, that China’s recent human rights conduct reflects a fear of an Arab-style uprising. Mr. Liu suggested that objections to the crackdown are much ado about nothing.

“Some people always take viewpoints of the minority in China as the mainstream public opinion, and I think this is entirely wrong,” he said. “Should we take the views of those in the Occupy Wall Street movement as society’s mainstream public point of view?”

Mr. Li’s case differs somewhat from others recently charged or imprisoned. Although he also is a longtime democracy advocate, he is not prominent outside his home province. He is perhaps best known for promoting the memory of Lin Zhao, a student who was executed during Mao’s rule as a counterrevolutionary, apparently for supporting an army commander who had dared to criticize Mao’s disastrous Great Leap Forward in the 1950s. Ms. Lin’s case became emblematic to many of the struggle for free speech inside China.

It is unclear why Mr. Li was singled out for punishment, but it is possible that his writings and memorials for Ms. Lin angered local officials, said the research coordinator for Chinese Human Rights Defenders, Wang Songlian.

“This environment encourages local party officials to hand out very harsh sentences because they can get away with it,” Ms. Wang said. “The national green light has been give to the local authorities.”

Mr. Li’s case was handled by what Mr. Mo, the lawyer, called abnormal procedures that have become common in cases involving dissidents. The court barred a family hired lawyer from defending him, appointing a government lawyer instead. The family’s lawyer disappeared about 10 days before Mr. Li’s April trial, according to Chinese Human Rights Defenders, a network of rights advocates, and later resurfaced.

A relative of Mr. Li who refused to be named for fear of retribution said that only two family members were allowed in the courtroom on Wednesday for the reading of the sentence, and that they were not allowed to see papers related to the verdict. Mr. Li did manage, however, to slip one of them a note.

“I am not guilty,” the relative quoted the note as stating. “I am a good person, a useful person to society. Find me a lawyer.”

Li Bibo contributed research in Beijing.

Trade cheats beware: new U.S. team will come after you: Kirk

2012-02-07T20:02:00.000-06:00

DAVOS, Switzerland (Reuters) – A new team of U.S. trade enforcers will make countries think twice about putting up unfair barriers to American exports, President Barack Obama's top trade official said.

U.S. Trade Representative Ron Kirk told Reuters that the team, announced by Obama last week, will include intelligence officials as well as representatives of other agencies in order to beef up U.S. resources and crack open markets.

"We want to make sure we aren't resource-constrained. Other countries know our budget and our resources ... and so they'll game the system because they know that we're very discriminating on which cases we make," Kirk said in an interview.

"We don't want them to make ... that bet that we don't have the resources to come after them if they're intentionally and unfairly discriminating against American exporters," Kirk said, speaking on the sidelines of the World Economic Forum in Davos, Switzerland.

He did not identify countries that could attract the attention of the unit, but Obama is under pressure to show business and voters he is taking a tough stance against China.

Republican presidential candidates have slammed Obama's handling of Beijing ahead of November's elections.

The U.S. trade deficit with China is expected to have hit a record of about $300 billion in 2011. Obama has set a target of doubling total U.S. exports between 2010 and 2015.

Kirk's office negotiates and enforces trade deals. But it has only about 250 employees, which could tempt countries to think they can flout world trade rules, Kirk said.

"This (the new unit) will provide a much better tool basket and put more bodies in terms of being able to develop some of these cases and gather the intelligence that is necessary to take some of these complex matters before the World Trade Organization," he said.

"There will be additional people, some additional resources," Kirk said without providing details of any extra funding for the unit.

FOCUS ON COLLABORATION

Obama announced the team during his January 24 State of the Union speech in which he said the United States needs to do more to tackle unfair foreign trade practices and rebuild American manufacturing.

As well as officials with the Commerce Department, which Obama is proposing to close as part of a government streamlining, customs personnel will also work with the unit, Kirk said.

"Even some of the intelligence agencies will be working collaboratively together" on the project, Kirk said.

Obama said last week his administration was more forceful than that of his predecessor in the White House, George W. Bush, in challenging other countries at the World Trade Organization.

Washington has filed six WTO cases since Obama took office in January 2009, five of them against China. Bush brought seven cases against China in his two terms although for most of his first year in office, China was not yet a member of the WTO.

U.S. trade officials say their main complaints against China are barriers to its agricultural and services markets, discriminatory industrial policies and weak intellectual property rights protection.

Kirk told Reuters in the interview, which was conducted on Thursday, that his office would lead the team.

Trade is likely to be high on the agenda when Obama hosts China's likely next leader, Vice President Xi Jinping, at the White House on February 14.

China has complained about anti-dumping duties applied to its exports to the United States and about restrictions on Chinese companies seeking to invest in U.S. firms.

(Writing By Doug Palmer; Editing by Xavier Briand)

Zakaria: Does America need an industrial policy? – Global Public Square - CNN.com Blogs

2012-02-04T20:39:00.001-06:00

Zakaria: Does America need an industrial policy? – Global Public Square - CNN.com Blogs

China Continues Crackdown on Prominent Dissidents - NYTimes.com

2012-01-29T08:50:00.001-06:00

China Continues Crackdown on Prominent Dissidents - NYTimes.com

Why China Is Weak on Soft Power

2012-01-27T08:16:00.004-06:00

China’s president, Hu Jintao, greeted 2012 with an important essay warning that China was being battered by Western culture: “We must clearly see that international hostile forces are intensifying the strategic plot of Westernizing and dividing China, and ideological and cultural fields are the focal areas of their long-term infiltration,” he wrote, adding that “the international culture of the West is strong while we are weak.”

Essentially, Hu was saying that China was under assault by Western soft power — the ability to produce outcomes through persuasion and attraction rather than coercion or payment — and needed to fight back.

Over the past decade, China’s economic and military might has grown impressively, and this has frightened its neighbors into looking for allies to balance rising Chinese hard power. But if a country can also increase its soft power, its neighbors feel less need to seek balancing alliances. For example, Canada and Mexico do not seek alliances with China to balance American power the way Asian countries seek an American presence to balance China.

Already in 2007, Hu told the 17th Congress of the Chinese Communist Party that China needed to invest more in its soft power resources. Accordingly, China is spending billions of dollars on a charm offensive.

The Chinese style emphasizes high-profile gestures, such as rebuilding the Cambodian Parliament or Mozambique’s Foreign Affairs Ministry. The elaborately staged 2008 Beijing Olympics enhanced China’s reputation, and the 2010 Shanghai Expo attracted more than 70 million visitors. The Boao Forum for Asia on Hainan Island attracts nearly 2,000 Asian politicians and business leaders to what is billed as an “Asian Davos.” And Chinese aid programs to Africa and Latin America are not limited by the institutional or human rights concerns that constrain Western aid.

China has always had an attractive traditional culture, and now it has created several hundred Confucius Institutes around the world to teach its language and culture. The enrollment of foreign students in China has increased from 36,000 a decade ago to at least 240,000 in 2010, and while the Voice of America was cutting its Chinese broadcasts, China Radio International was increasing its broadcasts in English to 24 hours a day.

In 2009, Beijing announced plans to spend billions of dollars to develop global media giants to compete with Bloomberg, Time Warner and Viacom. China invested $8.9 billion in external publicity work, including a 24-hour Xinhua cable news channel designed to imitate Al Jazeera.

Beijing has also raised defenses. It limits foreign films to only 20 per year, subsidizes Chinese companies creating cultural products, and has restricted Chinese television shows that are imitations of Western entertainment programs.

But for all its efforts, China has had a limited return on its investment. A recent BBC poll shows that opinions of China’s influence are positive in much of Africa and Latin America, but predominantly negative in the United States and Europe, as well as in India, Japan and South Korea. A poll taken in Asia after the Beijing Olympics found that China’s charm offensive had been ineffective.

What China seems not to appreciate is that using culture and narrative to create soft power is not easy when they are inconsistent with domestic realities.

The 2008 Olympics were a success, but shortly afterwards, China’s domestic crackdown in Tibet and Xianjiang, and on human rights activists, undercut its soft power gains. The Shanghai Expo was also a great success, but was followed by the jailing of the Nobel peace laureate Liu Xiaobo and the artist Ai Weiwei. And for all the efforts to turn Xinhua and China Central Television into competitors for CNN and the BBC, there is little international audience for brittle propaganda.

Now, in the aftermath of the Middle East revolutions, China is clamping down on the Internet and jailing human rights lawyers, once again torpedoing its soft power campaign.

As Han Han, a novelist and popular blogger, argued in December, “the restriction on cultural activities makes it impossible for China to influence literature and cinema on a global basis or for us culturati to raise our heads up proud.”

The development of soft power need not be a zero sum game. All countries can gain from finding attraction in one anothers’ cultures. But for China to succeed, it will need to unleash the talents of its civil society. Unfortunately, that does not seem about to happen soon.

Joseph S. Nye Jr. is a professor at Harvard and the author, most recently, of “The Future of Power.”

Why Apple's products are 'Designed in California' but 'Assembled in China'

2012-01-26T19:15:00.001-06:00

Look at the back of your iPhone, or your iPad, or on the bottom of your Mac. You'll see the following words embossed somewhere: "Designed by Apple in California. Assembled in China." Many Americans, all the way up to the President himself, have wondered why Apple has outsourced virtually all of its manufacturing overseas. At a dinner with several top US technology executives last year, President Obama asked Steve Jobs flat out what it would take to bring those jobs back to the US. According to Jobs, there's simply no way for it to happen.

Why not? Why can't iPhones, iPads, and all the rest of Apple's magic gadgets be built in the States? More generally, why can't more US-based consumer electronics and computer companies do their manufacturing work domestically, helping to create American jobs and boost the struggling economy?

The New York Times asked that question, and after an extremely well-researched report involving interviews with both former and current executives at Apple, the answer the Times found is both simple and chilling: iPhones aren't made in America because they just can't be. The infrastructure and labor force doesn't exist at the levels necessary to support Apple's operations -- it's not even close.

The Chinese factory where most iPhones reach final assembly employs 230,000 workers. I just asked Siri how many cities in the US have a population higher than that, and the answer was a mere 83 cities -- and that's total population, not workforce. With an average labor force of around 65 percent of the population, only 50 US cities are large enough to provide that kind of labor pool... and even in the biggest US city of them all, New York, 230,000 people still amounts to almost three percent of the city's entire population. Can you imagine three out of every hundred New Yorkers on an assembly line, cranking out iPhones every day?

Over the past couple of years, we have heard a great deal concerning working conditions at factories owned by Foxconn. The Chinese manufacturing company is responsible for assembling consumer electronics for most of the major vendors out there, including Apple. Around a fourth of those 230,000 people live in company-owned dorms or barracks right on factory property; that's almost 60,000 people living andworking at the factory. Many of the people at "Foxconn City" work six days a week, twelve hours a day, and they earn less than US$17 per day. It may sound inhumane by American standards, but these jobs are in high demand in China -- so much so that Jennifer Rigoni, former worldwide supply demand manager for Apple, told the New York Times that Foxconn "could hire 3,000 people overnight."

Those are just a couple examples of how the scale, speed, and efficiency of Chinese manufacturing outstrips anything the US is currently capable of. But the Times' report is full of more evidence, and it's damning. Even though the 200,000 assembly-line workers putting part A into slot B could potentially be classified as unskilled labor, the 8700 industrial engineers overseeing the process can't be -- and according to the Times, finding that many qualified engineers in the States would take nine months. Chinese manufacturers found them all in 15 days.

With the notable exception of the A5 processor, most of the components used to make the iPhone are also manufactured overseas, many of them within a relatively short distance of the final assembly plant. Shipping those components to any potential US-based factories would incur greater costs, and even worse from Apple's perspective, manufacturing delays.

Traditional defenses of outsourcing of manufacturing jobs have revolved around cost. "It costs more money to build in America," the reasoning goes; "You have to pay your workers more, you have to pay benefits, insurance, higher taxes. Everything costs more." Since companies want to make a profit, that added cost inevitably gets passed on to the consumer in inflated prices for goods.

To exaggerate the point, many have claimed that an American-manufactured iPhone would cost thousands of dollars. It turns out that's hyperbole; according to the New York Times, the increased cost of paying American wages to workers would add $65 to the cost of an iPhone. The other costs, added together, probably wouldn't drive the unsubsidized price of a 16 GB iPhone 4S over US$1000. But the dollar cost of manufacturing in America isn't the biggest issue that's driving Apple's decision to outsource manufacturing to China. Instead, it's about who can build the greatest number of iPhones within the shortest period of time, all while remaining flexible and instantaneously adaptable to Apple's needs. According to one current Apple executive, "The US has stopped producing people with the skills we need."

The Times provides a telling example from the early days of the iPhone, before it ever hit the market. It's hard to believe now, but originally the iPhone's screen was going to be made from the same scratch-prone plasticthat graced the fronts of its contemporaneous iPod models. In mid-2007, just over a month before the iPhone was scheduled to hit stores for the first time ever, Jobs realized the folly of using that plastic when the screen of the iPhone prototype he was carrying in his jeans pocket had accumulated dozens of scratches. "I won't sell a product that gets scratched. I want a glass screen, and I want it perfect in six weeks."

Anyone who knows how Jobs worked knows that he wasn't bluffing -- if the iPhone didn't meet his standards, it wouldn't go on sale, period. Six months of anticipation had driven demand for the first iPhone into a frenzy, so Apple knew it was going to have to crank them out as quickly as possible. But the last-second change to what was arguably one of the iPhone's most central components meant initiating the kind of mad scramble that simply wouldn't be possible in US manufacturing. Apple would have been an industry laughingstock for as long as it took to overcome the manufacturing delay. Instead, what might have taken months to transpire in the US took place in six short weeks; Apple sourced a virtually scratchproof glass from Corning, and Chinese factories rapidly managed to integrate it into the existing iPhone design.

As it's an American company reaping unprecedented financial rewards, many Americans have lamented the fact that the rewards coming back into America are so comparatively meager. Apple employs 43,000 people in the United States, less than a fifth the number of contractor employees assembling iPhones at one Chinese factory. One could argue that Apple's success has come at the expense of the American manufacturing workforce, but if the New York Times' report is anything to go by, it seems the workforce Apple would have needed in America never existed to begin with.

$1,600 'Red Pad' is China's Communist Party-approved iPad clone

2012-01-26T15:52:00.002-06:00

Not a day goes by without the Chinese coming up with some kind of bizarro iPad clone. According to the Wall Street Journal, an iPad clone called the "Red Pad" endorsing Mao Tse-Tung's "Little Red Book" of Communism briefly surfaced in China before getting removed.

The WSJ claims the Red Pad was created by China's People's Daily newspaper and the Ministry of Industry and Technology.

If there's one thing I know the Chinese love (being Chinese American myself) is that theylove anything that's red — and will pay a premium for the color. Or gold.

The Red Pad is virtually identical to the iPad , except for the fact it runs Android, has a "A9 processor" (current iPads only rock a dual-core A5 processor), has red accents and is $1,600, or nearly three times that of the base iPad.

As if the high price wasn't crazy enough, the Red Pad supposedly only displays material "specifically tailored to China's Communist platforms such as the website of the party's People's Daily mouthpiece."

Can you imagine paying that much for a tablet that can only display Communist propaganda? If the Red Pad's pre-loaded reading material doesn't get you ready to party rock the house, you can take it to another level of outrageousness by buying a "daily political reference" app that costs only about 3800 yuan or $600 dollars!

Who seriously thought this was a good idea, at that high of a price? Maybe you get a glowing Mao head on the back for all that dinero you're spending.

Can China Rescue Its Economy?

2012-01-26T09:42:00.004-06:00

http://www.forbes.com/sites/gordonchang/2011/11/27/can-china-rescue-its-economy/

China’s new ghost town: Wonderland in Beijing | CNNGo.com

2012-01-26T07:09:00.001-06:00

China’s new ghost town: Wonderland in Beijing | CNNGo.com

Chinese Entrepreneurs Are Leaving China

2012-01-25T11:04:00.004-06:00

http://www.forbes.com/sites/gordonchang/2011/06/05/chinese-entrepreneurs-are-leaving-china/

China Wants to Buy Facebook

2012-01-25T10:56:00.002-06:00

http://www.forbes.com/sites/gordonchang/2011/07/03/china-wants-to-buy-facebook/

The Chinese Town That Turns Your Old Christmas Tree Lights Into Slippers

2012-01-24T09:38:00.003-06:00

http://www.theatlantic.com/international/archive/2011/12/the-chinese-town-that-turns-your-old-christmas-tree-lights-into-slippers/250190/

China Is 175.6% Dependent on the U.S.

2012-01-24T09:21:00.001-06:00

The Chinese economy increased its dependence on the United States last year according to recently released trade figures from Beijing and Washington.

China’s overall trade surplus in 2011 was $155.1 billion, according to the Ministry of Commerce.

And how much of that surplus is related to America? Commerce Department figures show that, through the first 11 months of last year, China’s trade surplus against the United States was $272.3 billion. That’s up from $252.4 billion for the same period in 2010, a 7.9% increase.

The Commerce Department has not released the December trade number yet, and some are predicting that China’s surplus against us will top $300 billion when all the figures are in. Yet let’s assume, merely to be conservative, that China’s December surplus is zero. If December’s surplus is zero, then 175.6% of China’s overall trade surplus last year related to sales to the United States. That’s up from full-year figures for the three preceding years: 149.2% for 2010, 115.7% for 2009, and 90.1% for 2008.

Notice a trend? The Chinese economy is becoming even more hooked on selling things to the United States. Why the big jump last year? Because orders from the 27-nation European Union for Chinese goods collapsed. And if Europe falls apart this year—increasingly likely—China will become even more reliant on the American consumer.

President Obama, in his State of the Union message on Tuesday, is expected to announce the creation of a China trade task force that will combine officials from the Treasury, Commerce, and Energy Departments as well as the U.S. Trade Representative’s office.

Is the concept a good one? Ted Alden of the Council on Foreign Relations praised the idea in the January 12 Nelson Report when he said “this should be seen as an opportunity for creative thinking about trade enforcement.”

Perhaps it is, but we don’t need to get fancy on this issue. All we need is for President Obama to tell the Chinese that they need us more than we need them. And all he has to say is “175.6%.” The clever officials in Beijing will not need interpreters to figure out what that means.

CONTRIBUTOR - China’s power dilemma

2012-01-24T09:13:00.001-06:00

CONTRIBUTOR - China’s power dilemma

In China, 8 babies and a rash of protests | | The Bulletin

2012-01-23T14:51:00.001-06:00

In China, 8 babies and a rash of protests | | The Bulletin

Guest post: social housing won’t fix China’s economy

2012-01-23T10:13:00.003-06:00

By Ben Simpfendorfer of Silk Road Associates

The chairman of a large Chinese construction company recently commented about the increase in spending on public housing: “The government is satisfied. The people are happy. And the banks all benefit, as the company will not lose money”.

His comment could be a slogan for 2012’s outlook: and it’s both good and bad news.

The good news is that China has plenty of scope to increase its debt-financed spending should it have to support GDP growth in 2012, and that includes spending on public housing.

Sure, bad debts have increased in recent years. But government debt, estimated at around 58 per cent of GDP, is still tolerable relative to levels in the developed world. Household debt is also remarkably low at 28 per cent.

To be fair, non-financial corporate debt is higher at 91 per cent of GDP, even before accounting for loans made by the shadow banking system. But that figure compares to 76 per cent in the United States and 125 per cent in Europe.

The bad news is that any increase in debt-financed spending will be channelled through the same old vehicles: state-owned companies and local governments.

Ideally, consumers would step up and take out more auto-loans or use their credit cards more frequently. Yet, that isn’t going to happen soon, even if attitudes towards debt are changing among the younger generation.

It helps that last week’s Q4 GDP figure was firmer than expected.

But worse is to come with the property sector still under pressure and the export sector weakening. Odds are then that China may consider modest stimulus again in 2012.

Yet, any increase in public debt must be accompanied by economic reform, the latter having lagged over the past decade, but especially since the global crisis.

Economic reform is necessary to wean the economy off its reliance on the state-sector: further liberalisation of the service sector; improved credit availability for SMEs; better protection of IPR. These changes will all help revitalise the private-sector.

If not, more public spending will simply result in an increasingly state-dominated, low-margin, economy: a feature of growth in the past five years.

Take the housing market as an example. More public housing is indeed needed: it’s crucial to social stability. Yet, public home builders have profit margins of just 8 per cent to 10 per cent, as against margins nearer to 20 per cent for private home builders.

Neither is spending on public housing a productive investment, meaning the government must simultaneously encourage the private sector to increase its own investment spending, whether that’s buying a machine tool or computer network.

The latter type of spending is vastly more productive and so is crucial to maintaining China’s double-digit nominal GDP growth over the medium-term, and help the country to grow its way out of any legacy bad debt problems.

So, while fears of a hard landing in 2012 are overdone, the risks to 2013-15 continue to grow, especially if more stimulus is needed to counter weaker global growth and should economic reforms lag amid a political transition.

Ben Simpfendorfer is Managing Director of Silk Road Associates, a Hong Kong-based economic consultancy. He is also publisher of the monthly “China Insider” and author of “The New Silk Road”.

Why China Could Steal the Magic of Disney

2012-01-23T09:50:00.000-06:00

One of the world's most recognized brands is set to open up shop in China later this year. Walt Disney (NYS: DIS) plans to launch 25 to 40 Disney Stores in China by 2015. Rising wealth and a huge population make China a crucial market for Disney as it looks for fresh sources of revenue outside the United States and Europe. However, this growth strategy could cause major problems for the specialty retailer, because China is known for counterfeit goods.

American companies in China face a costly battle to protect their intellectual-property rights. It's estimated that Chinese knock-offs cost foreign businesses around $20 billion in profits each year. Deregulation in the country has helped it become one of the fastest-growing economies in the world. However, this explosive growth can costs companies like Disney in terms of missed sales and possible damage to their brand names.

If you don't make it, fake it

Companies such as Apple (NAS: AAPL) spend billions of dollars each year building their brand, only to see that value ripped away by counterfeits. Last year, a fake Apple store in Kunming, China, made headlines around the world for its striking resemblance to the real Apple store. The counterfeit location was so convincing, in fact, that actual employees working for the imitation retailer thought they were working for Apple. Also consider that Apple's iPhone and iPad are some of the most pirated devices in China and the potential brand destruction is huge.

Selling the experience

Similar to Apple, the Disney Store relates to customers in a way that fosters the Disney brand experience. In 2010, the company launched its new interactive store design, which created an engaging retail experience.

Part of buying Disney merchandise is visiting the store. Kids can create custom rides featuring their favorite characters from the movie Cars or step in front of a special princess-mirror that talks to them based on what merchandise is in their hand.

The magic of Disney will be available in 12 countries by the close of 2012. While the new Disney Store format is going to be difficult to mimic, it wouldn't be the first time we've seen Chinese counterfeiting replicate a seemingly irreplaceable brand experience.

Satisfying local demand

There's a lot at stake for Disney Stores as they enter the Asian market. On top of protecting their intellectual-property rights, businesses breaking into the Chinese marketplace face serious challenges involving cultural differences. Just look at what happened with American toymaker Mattel (NYS: MAT) .

Barbie closed her six-story flagship store in China last March, after lagging sales failed to gain speed. It's hard to imagine the world's biggest toymaker struggling to find customers in the heart of Shanghai. However, that's exactly what happened. Perhaps Disney learned something from Barbie's experience in the emerging market, as Disney's China stores plan to carry more localized products and fewer princess dolls.

At least for Disney, most people in China understand the brand and the merchandise behind it. Chinese demand is so strong, in fact, that a fake Magic Kingdom was created. Known as the Beijing Shijingshan Amusement Park, the illegitimate theme park even featured Disney's familiar characters. To counter, Disney's planning to open its famous Disneyland theme park in Shanghai -- bringing the authentic magic of Disney to the heart of China.

There's no doubt that China's a critical market for Disney to be in. However, the company's profits could be hurt if it's unable to stay a beat ahead of imitation retailers in the region. Luckily for investors, Disney isn't the only U.S.-based company trying to tap into emerging markets.

See full article from DailyFinance: http://srph.it/xotP8x

China to Again Close Tibet During Sensitive Period - ABC News

2012-01-23T09:33:00.001-06:00

China to Again Close Tibet During Sensitive Period - ABC News

India beats China in nurturing future leaders: survey - Hindustan Times

2012-01-23T08:07:00.001-06:00

India beats China in nurturing future leaders: survey - Hindustan Times

China's drive for 'green' cars in neutral

2012-01-23T08:05:00.001-06:00

China's drive for 'green' cars in neutral: Foreign and domestic car makers are struggling to sell environmentally friendly vehicles in China, the world's largest auto market, even as Beijing pumps billions into clean energy.

Apple, America and a Squeezed Middle Class - NYTimes.com

2012-01-23T08:01:00.001-06:00

Apple, America and a Squeezed Middle Class - NYTimes.com

Taiwan Vote Stirs Chinese Hopes for Democracy - NYTimes.com

2012-01-22T22:40:00.001-06:00

Taiwan Vote Stirs Chinese Hopes for Democracy - NYTimes.com

Top Ten Reasons NOT to be an Architect | Life of an Architect

2011-12-22T13:26:00.001-06:00

Top Ten Reasons NOT to be an Architect | Life of an Architect

China tops U.S, Japan to become top patent filer | FP Tech Desk | Financial Post

2011-12-21T22:35:00.001-06:00

China tops U.S, Japan to become top patent filer | FP Tech Desk | Financial Post

Washington quietly upgrades fighter fleets of key allies as China rises - The Hill's DEFCON Hill

2011-12-20T22:15:00.001-06:00

Washington quietly upgrades fighter fleets of key allies as China rises - The Hill's DEFCON Hill

Communist Chinese say no to religion by members

2011-12-20T20:45:00.001-06:00

Communist Chinese say no to religion by members

After Wukan

2011-12-20T07:39:00.003-06:00

The ongoing standoff between Chinese police and the defiant residents of Wukan, a 20,000-person village about 200 kilometers northeast of Hong Kong, is nothing short of extraordinary. Reports of the arrival of a "China Spring" are premature, but the comparison is closer than anyone would have predicted before last week. Long after authorities from Beijing re-establish control, Wukan's achievement will affect China's internal security policy, succession dynamics in the run-up to the 2012 leadership handover, and even China's foreign policy.

Here is what seems to have happened: Since the 1990s, Wukan authorities have sold off the town's land to developers and enriched themselves with the proceeds. Villagers, who rely on fishing for their livelihood, tolerated the loss of property until the recent uptick in inflation made food more expensive and land more dear. In September, locals learned of the sale of another large plot, including a grave site, when developers began construction. (Popular estimates of the deal's value exceed $150 million; divided among residents, this would amount to a payout of about four times the average annual income.) Villagers rioted, and Wukan's Chinese Communist Party (CCP) Secretary, its leader for the last three decades, fled. The uprising was quelled when remaining local officials authorized the villagers to select 13 representatives for negotiations. Fast forward to last Friday. Unmarked (read: government) vans arrived in Wukan, and the men who jumped out arrested five of the 13 representatives, at least one of whom died in captivity. On Sunday, villagers moved fallen trees across a highway to block the entrance of an approaching 1,000-man riot squad. After unleashing tear gas and water cannons, the squad retreated, erecting a steel barrier around the town. Now all of the local party officials have fled, and with security forces outside Wukan preventing the flow of food and water into the town, the standoff continues.

Villagers' appeals to the central party have expanded from restitution and punishment of corrupt officials to compensation for police brutality. Lead protester Lin Zulian, an army veteran, is rumored to have ties in Beijing, and has been quoted as holding out hope that authorities there will intercede to resolve the situation. Reporters from Xinhua, the official Chinese news agency, have now entered the village. While Wukan residents with access to the Chinese microblogging website Weibo were able to communicate with the outside world through last Thursday, a complete blackout has been implemented in advance of Xinhua's coverage, paving the way for an authorized storyline to emerge. Watch for the central party to make gestures to appease the protesters, imprisoning the most egregiously corrupt local officials and providing some compensation for seized land. This will succeed in quieting down Wukan, but history is likely to remember the impact of what happened there on Chinese domestic security practices, jockeying for leadership positions, and even foreign affairs.

The consequences: Those responsible for maintaining social stability in China will now have to invest even more in local informants to stay abreast of nascent unrest. Already, estimates based on leaks from provincial security bureaus put the number of domestic spies in China at about 39 million, or three percent of the population. (By comparison, in East Germany under the Stasi, informants made up 2.5 percent of the population.) The Wukan precedent is also likely to inspire efforts to make sure that a town cannot survive for long without access to external supplies. Food, water, and medicine stocks in localities could now be regulated.

Even more troubling for the central government, the grievances of Wukan-ites are representative of a broader problem in China. CCP members readily confess that corruption is rampant. According to the former China bureau chief of the Financial Times, a local official who pays 300,000 yuan for a position can expect to pull in five million within a couple years of occupying his or her post. Most of this will be outside the salary attached to the position, make no mistake. Bribes, kickbacks, and the seizure of land for real estate development deals are part of a predatory system whose victims are ordinary Chinese people. It is the general population that suffers when shoddy materials are used in the construction of schools and roads, or even airports, in the case of the new terminal outside Beijing that recently collapsed. The general population is left homeless when they are evicted without compensation, or with payment insufficient to cover the cost of another residence.

These issues are at the forefront of internal party debates on future economic and social policy in the run-up to next year's leadership transition. A rivalry between spokesmen for different approaches has been much reported. The populist, Mao-invoking leader of Chongqing, Bo Xilai, who launched a very public anti-corruption campaign, is said to be vying with Wang Yang, the leader of Guangdong province where Wukan is located, for a seat on the Politburo standing committee.

Whether or not reports of lead protester Lin Zulian's ties in Beijing are accurate, the Wukan incident is likely to foment divisions among party elites, as factions argue over who was responsible and how the situation should have been handled. The fact that news of the uprising reached both domestic and foreign audiences despite the suppression efforts of China's propaganda authorities indicates the limits of the country's vast censorship apparatus. Dissension within its ranks may even have played a role.

Finally, amidst the climate of debate and recrimination in Beijing, some will highlight the coincidence of the Wukan uprising with the "Occupy" movement in the United States. Despite the fact that Wukan residents clearly acted on their own initiative, in response to local grievances, their achievement is likely to heighten the already acute sensitivity of China's political leaders to evidence of foreign efforts to sow instability in the country. Rather than scapegoat Washington, however, China's leaders would do well to remember that what happened in Wukan was their taste of the Arab Spring, not evidence of external meddling in China's affairs.

Jacqueline N. Deal is a senior fellow at the Foreign Policy Research Institute and president of the Long Term Strategy Group, a defense research firm.

Will China Break?

2011-12-19T23:02:00.002-06:00

Consider the following picture: Recent growth has relied on a huge construction boom fueled by surging real estate prices, and exhibiting all the classic signs of a bubble. There was rapid growth in credit — with much of that growth taking place not through traditional banking but rather through unregulated “shadow banking” neither subject to government supervision nor backed by government guarantees. Now the bubble is bursting — and there are real reasons to fear financial and economic crisis.

Am I describing Japan at the end of the 1980s? Or am I describing America in 2007? I could be. But right now I’m talking about China, which is emerging as another danger spot in a world economy that really, really doesn’t need this right now.

I’ve been reluctant to weigh in on the Chinese situation, in part because it’s so hard to know what’s really happening. All economic statistics are best seen as a peculiarly boring form of science fiction, but China’s numbers are more fictional than most. I’d turn to real China experts for guidance, but no two experts seem to be telling the same story.

Still, even the official data are troubling — and recent news is sufficiently dramatic to ring alarm bells.

The most striking thing about the Chinese economy over the past decade was the way household consumption, although rising, lagged behind overall growth. At this point consumer spending is only about 35 percent of G.D.P., about half the level in the United States.

So who’s buying the goods and services China produces? Part of the answer is, well, we are: as the consumer share of the economy declined, China increasingly relied on trade surpluses to keep manufacturing afloat. But the bigger story from China’s point of view is investment spending, which has soared to almost half of G.D.P.

The obvious question is, with consumer demand relatively weak, what motivated all that investment? And the answer, to an important extent, is that it depended on an ever-inflating real estate bubble. Real estate investment has roughly doubled as a share of G.D.P. since 2000, accounting directly for more than half of the overall rise in investment. And surely much of the rest of the increase was from firms expanding to sell to the burgeoning construction industry.

Do we actually know that real estate was a bubble? It exhibited all the signs: not just rising prices, but also the kind of speculative fever all too familiar from our own experiences just a few years back — think coastal Florida.

And there was another parallel with U.S. experience: as credit boomed, much of it came not from banks but from an unsupervised, unprotected shadow banking system. There were huge differences in detail: shadow banking American style tended to involve prestigious Wall Street firms and complex financial instruments, while the Chinese version tends to run through underground banks and even pawnshops. Yet the consequences were similar: in China as in America a few years ago, the financial system may be much more vulnerable than data on conventional banking reveal.

Now the bubble is visibly bursting. How much damage will it do to the Chinese economy — and the world?

Some commentators say not to worry, that China has strong, smart leaders who will do whatever is necessary to cope with a downturn. Implied though not often stated is the thought that China can do what it takes because it doesn’t have to worry about democratic niceties.

To me, however, these sound like famous last words. After all, I remember very well getting similar assurances about Japan in the 1980s, where the brilliant bureaucrats at the Ministry of Finance supposedly had everything under control. And later, there were assurances that America would never, ever, repeat the mistakes that led to Japan’s lost decade — when we are, in reality, doing even worse than Japan did.

For what it’s worth, statements about economic policy from Chinese officials don’t strike me as being especially clear-headed. In particular, the way China has been lashing out at foreigners — among other things, imposing a punitive tariff on imports of U.S.-made autos that will do nothing to help its economy but will help poison trade relations — does not sound like a mature government that knows what it’s doing.

And anecdotal evidence suggests that while China’s government may not be constrained by rule of law, it is constrained by pervasive corruption, which means that what actually happens at the local level may bear little resemblance to what is ordered in Beijing.

I hope that I’m being needlessly alarmist here. But it’s impossible not to be worried: China’s story just sounds too much like the crack-ups we’ve already seen elsewhere. And a world economy already suffering from the mess in Europe really, really doesn’t need a new epicenter of crisis.

China amongst the worst jailors of journalists - www.phayul.com

2011-12-19T11:23:00.001-06:00

China amongst the worst jailors of journalists - www.phayul.com

Why South Koreans Are Right To Be Furious At China Over The Coast Guard Incident

2011-12-18T21:05:00.001-06:00

Why South Koreans Are Right To Be Furious At China Over The Coast Guard Incident

China: Stop harassment against Buddhist leader Mr. Wu Zeheng

2011-12-18T20:52:00.003-06:00

Dear Prime Minister of China,
I am expressing my deepest concern about the impunity of acts of harassment against Mr. Wu Zeheng, a prominent Buddhist leader, also known as Buddhist Zen Master Shi Xingwu, known for his commitment towards greater respect of human rights and the rule of law principles and his fight against corruption.

According to the information received, on May 9, 2011, the eve of an important Buddhist holiday (the commemoration of Buddha Sakyamuni's birthday), in front of several witnesses, Mr. Wu Zeheng was beaten, threatened and forcibly arrested by officers belonging to the Zhu-hai police. At 9 pm, eight policemen forcefully entered Mr. Wu's residence and seized him, his young sister and two other students and searched all rooms, without presenting any search warrant or any other legal documentation authorising their action. Double-handcuffed, Mr. Wu was forcefully taken to the police for questioning, without allowing him to even put on his shoes. Several followers present in his house at the time were also taken in for questioning. Along the way, Mr. Luo Yu, Director of the Zhu-hai Qian-shan Police station (ID No. 082846), beat him on the head with a mobile phone and yelled offensive comments. During the interrogation, which went on until 10 am the following morning, the police told him “We can do anything we want. We can arrest you any time if we want and that is our right”. He was told that he would not be allowed to do anything and that only if he remains in his home town, he would not be bothered. He was also warned not to participate in Buddhist ceremonies nor to have his students visit him. He was held in detention for 24 hours. Mr. Wu and his followers were released without charge and without being provided any legal document explaining or justifying the police actions.

According to the police interrogators, Mr. Wu and his followers were detained on “suspicion of intending to organise an illegal assembly”. Despite complaints filed on May 16, 2011 with the Xiang-zhou Public Security Bureau (PSB) of Zhu-hai city, these acts of harassment remain today unpunished. According to a written notice in response to the complaints, bearing the seal of the Xiang-zhou PSB of Zhu-hai and dated July 4, 2011, the Bureau stated “no illegal enforcement of the law and assault of citizens” have occurred during the police actions on May 9.

Over the last four months, Mr. Wu Zeheng's home has been visited by the police at least on five occasions. Each time, the police come in, ask him about his activities, and make clear by their presence that he is being closely watched.

Since his release from prison on February 28, 2010, where he served a 11-year prison term on spurious accusations of “economic crimes” that followed a letter he sent in 1998 to the Central Committee of the Communist Party of China and State Council to denounce human rights violations and call for reform, Mr. Wu Zeheng has been subjected to close surveillance by the Chinese authorities as well as various forms of persecutions (stalking, beatings, insults, theft, travel restrictions, etc.).

I condemn the above-mentioned acts of harassment, which merely seem to aim at intimidating Mr. Wu Zeheng for his human rights activities, as well as the on-going impunity for these acts. It calls on your Excellencies to cease any action aimed at preventing Mr. Wu Zeheng from carrying out human rights activities and that an effective, thorough and impartial investigation into the above-mentioned events is immediately carried out, the result of which must be made public, in order to identify all those responsible, bring them before a civil, competent and impartial tribunal and apply to them the penal sanctions provided by the law.

I respectfully remind you that the United Nations Declaration on the Right and Responsibility of Individuals, Groups and Organs of Society to Promote and Protect Universally Recognized Human Rights and Fundamental Freedoms, adopted by consensus by the UN General Assembly on 9 December 1998, recognises the legitimacy of the activities of human rights defenders, their right to freedom of association and calls on States to ensure that they can carry out their activities without fear of reprisals.

I would particularly draw attention to Article 6: “Everyone has the right, individually and in association with others: (c) To study, discuss, form and hold opinions on the observance, both in law and in practice, of all human rights and fundamental freedoms and, through these and other appropriate means, to draw public attention to those matters”, and to Article 12: “(1) Everyone has the right, individually and in association with others, to participate in peaceful activities against violations of human rights and fundamental freedoms. (2) The State shall take all necessary measures to ensure the protection by the competent authorities of everyone, individually and in association with others, against any violence, threats, retaliation, de facto or de jure adverse discrimination, pressure or any other arbitrary action as a consequence of his or her legitimate exercise of the rights referred to in the present Declaration”.

I respectfully thank your Excellencies for your attention in this matter and express our sincere hope that your Excellencies will take these considerations into account.

Yours sincerely,
William Nicholas Gomes
William's Desk

China Economy May Drag World Down

2011-12-18T07:06:00.000-06:00

My column of June 24, 2011 ("China Yield Inversion May Portend Economic Slowdown") opened with the following sentence:

“The yield on Chinese bonds are inverting at an accelerating rate. This does not portend well for the Chinese economy, and this may have negative implications globally.”

China’s contribution to global economic growth this year is nearly 40%.

The reason: property construction in China boomed significantly during the previous decade.

The Chinese government controls all the allocation of land. Beginning in 1998, Chinese authorities permitted individuals to buy the “right” to use property for 70 years. Domestic capital controls, which limited investment outside China, increased demand for this asset.

As a result, property construction boomed. The increased supply resulted in high levels of employment, income, and demand for residential and commercial properties.

The problem: insufficient demand to absorb the excess investment in property development.

According to the National Bureau of Statistics in China, real estate development for 2011 will total nearly $1 trillion, a 32% increase over last year. This investment represents approximately 15% of GDP, as calculated by the World Bank.

According to Jonathan Anderson of UBS, this is “the single most important sector in the entire global economy, in terms of its impact on the rest of the world.”

The reason: significant, productive economic activity is dependent on this sector.

Forty percent of Chinese steel use is related to property construction. China produces more steel than the next 10 steel producing countries combined, deeming it the most important procurer of iron ore, a key input for steel manufacturing.

Other essential steel manufacturing inputs are copper, cement, coal, and power generation. These activities generate a significant amount of income that is used to purchase global products and services.

Today, the average home price in China equals 9 times average annual income. The price for luxury apartments in Versailles Residentiel de Luxe La Grand Maison, located in the city of Wenzhou, are 350 times average annual income.

The perspective: at the peak of the U.S. real estate bubble, this ratio was 5.1. It is currently near 3, the historic average.

Using the current income level in China, real estate prices would need to fall by two thirds to be sustainably priced. Should income rise 50% in the coming decade (4% per annum), prices could fall 50% to achieve a stable equilibrium.

In the past year, real estate transactions (sales) and prices have fallen dramatically. At the current rate, prices may drop 50% within over the coming decade.

This decline has been due to low income demand at the current price level and the tremendous supply of inventory (approximately 20 years based on current vacancies, pending projects, and future population projections).

Demand for property development is decreasing. Less construction translates into lower income, personal, corporate, and governmental (local government derives 40% of its income from property sales). Smaller incomes suggest lower demand for global products and services.

In addition, lower property values imply less collateral for future credit, thereby limiting growth prospects.

This portends poorly for the global economy.

China’s annual trade surplus has been halved since 2008 to roughly $150 billion. This reflects a decrease in export and import growth, with exports declining at a greater rate. This decline is partially a manifestation of decreased demand by the eurozone and China’s domestic market.

In recent years, China increased the required reserve ratio for bank deposits to limit monetary growth, reduce aggregate demand, and minimize inflationary pressures.

However, due to the impending global economic slowdown, China recently reduced the reserve requirement to foster economic growth.

Deleveraging of the massive global debt, which is 3 times global income, will reduce monetary velocity (transactions) and income over the next decade.

Increases in monetary aggregates, credit, and liquidity may provide meager assistance in the immediate term.
In fact, it will delay, and possibly exacerbate, the underlying economic dysfunction, thereby extending anemic global growth for years to come.

Moreover, the increased money supply, without much increase in value added product supply, will increase transaction demand for existing products, thereby placing upward price pressures.

Lower government revenues may require additional debt issuance at higher interest rates to attract scarce capital. Existing economies of scale may not be sufficient to offset a possible increase in borrowing costs. Upward pressure on retail prices may result, creating an inflationary spiral.

Global stagflation may be the new paradigm over the coming decade.

By Barry Elias

eliasbarry@aol.com, beb1b2b3@gmail.com

Death-by-Air in Beijing Exposes Pollution’s Untold Heart Risk - Bloomberg

2011-12-18T07:05:00.001-06:00

Death-by-Air in Beijing Exposes Pollution’s Untold Heart Risk - Bloomberg

How WTO membership made China the workshop of the world

2011-12-17T21:55:00.000-06:00

How WTO membership made China the workshop of the world

Actor Christian Bale assaulted in China as he tries to visit captive lawyer

2011-12-17T21:45:00.000-06:00

Actor Christian Bale assaulted in China as he tries to visit captive lawyer

China Cautious on Myanmar Reforms

2011-11-20T23:08:00.003-06:00

BEIJING—China on Friday sounded a note of caution about ongoing political reform in Myanmar, a longtime ally that has pushed back against Beijing in recent months amid tensions over aggressive Chinese resource investment within its underdeveloped neighbor.

An announcement that U.S. Secretary of State Hillary Clinton would visit the country next month signals a preliminary U.S. inroad into the poor, yet strategically important, country. That comes as Beijing appears increasingly isolated politically from many of its other neighbors as well.

Beijing is embroiled in territorial disputes with neighbors in the South China Sea. The U.S. has deepened cooperation with Vietnam, another of China's southern neighbors, which has emerged as one of the most vociferous opponents of Beijing's maritime push into Southeast Asia.

It also faces growing questions over its respect for the sovereignty of neighbors following an aggressive push to send armed security forces to patrol the Mekong River in areas outside China's borders.

At a daily press briefing on Friday, Foreign Ministry spokesman Liu Weimin called for stability amid political reform in Myanmar. "We would like to see China and other Western countries enhance contact with Myanmar and improve their relations," said Mr. Liu. "At the same time, we also hope the domestic and foreign policies of Myanmar are conducive to peace and stability in Myanmar."

A senior Obama administration official said China had been consulted about recent U.S. dealing with Myanmar, which is also known as Burma. "Engagement with Burmese leaders by the United States does not come at the expense of China or China's relationship with Burma," the official said, adding that the administration believes the new outreach comes because Myanmar's leaders "recognize that the cockpit of global prosperity is in the Asian-Pacific region, and they're not playing."

Analysts say China's ongoing struggle to win favor among its neighbors is in part caused by contradictions in China's foreign policy. Even as Beijing promotes a "peaceful rise" narrative, its aggressive moves to secure territory and resources is breeding mistrust among smaller neighbors.

Mrs. Clinton "truly got fed up with China's actions in the region," said Zhu Feng, a professor of international relations at Peking University in Beijing. At the same time, China has struggled to win respect from its neighbors even as it has emerged as a critical trade partner for most countries in the region, he said.

Mrs. Clinton's visit to the country next month will be the first by a U.S. secretary of state in more than 50 years. Myanmar last year held its first election in decades, and its military-backed government has pledged to deepen political reform.

Myanmar's location on the Bay of Bengal is of economic and geostrategic importance to China. The countries are building an oil and natural-gas pipeline from the bay through Myanmar and into southwestern China. The project is a key part of Beijing's efforts to diversify its sources of fuel and protect itself from possible shipping disruptions in the Malacca Strait, long a U.S. Navy choke point.

China's concerns over a U.S. military presence in the region have risen this week following Mr. Obama's pledge to bolster the U.S. military's strength across the Asia-Pacific.

Cracks have formed in recent months between Myanmar and China. In late September, Myanmar President Thein Sein ordered a suspension of construction of the $3.6 billion China-backed Myitsone dam project, which would have flooded an area roughly the size of Singapore. The move was widely seen as a snub to China and a conciliatory move by the country's new government toward political dissidents who had long opposed the project.

Recent questions have also emerged over how China will balance a need to protect commercial interests across the region with respect for its neighbors' sovereignty. After 13 Chinese sailors were murdered on two cargo ships traveling along the Mekong River in Thailand last month, China said it was considering sending armed patrols down the Mekong River outside its borders.

Chinese officials say they are negotiating joint security cooperation together with Laos, Myanmar and Thailand, but analysts say China's neighbors are leery of a sustained armed presence inside their territories.

China Confronts its Own Greece - IPS ipsnews.net

2011-11-20T19:05:00.003-06:00

China Confronts its Own Greece - IPS ipsnews.net

China sends long-missing lawyer Gao back to jail

2011-11-20T19:05:00.000-06:00

More than a year and a half after prominent civil rights lawyer Gao Zhisheng disappeared, China's government gave the first sign Friday that he is alive, saying he would be sent to prison for three years for violating his probation.A brief report by the state-run Xinhua News Agency did not answer key questions about Gao _ the condition of his health and his whereabouts now and in the 20 months since he disappeared, presumably at the hands of the authorities."Are they sending him to a proper prison? Which prison was he at before? Where were they hiding him?" said Gao's brother, Gao Zhiyi, who has been on a quest to find his sibling. Gao's wife said from the United States she was still uneasy because of the lack of information.Charismatic and pugnacious, Gao was a galvanizing figure for the rights movement, advocating constitutional reform and arguing landmark cases to defend property rights and political and religious dissenters. Convicted in 2006 of subversion and sentenced to three years, he was quickly released on probation before being taken away by security agents in 2009 in the first of his forced disappearances that set off an international outcry.The Xinhua report referred to his 2006 subversion conviction and said Beijing's No. 1 Intermediate People's Court found that Gao "had seriously violated probation rules for a number of times, which led to the court decision to withdraw the probation."The report did not explain what violations Gao had committed but said his five-year probation was due to expire next Thursday _ timing which legal experts said may have prompted the government to send Gao back to jail. "He would serve his term in prison in the next three years," the report said.Calls to the No. 1 court and the city's appeals court rang unanswered Friday.Gao has been held incommunicado in apparent disregard of laws and regulations for all but two months of the last three years. When he emerged from the first 14-month bout in April 2010, he told The Associated Press that he had been shunted between detention centers, farm houses and apartments across north China and repeatedly beaten and abused.He said he had been hooded several times. His captors made him sit motionless for up to 16 hours and threatened to kill him and dump his body in a river."'You must forget you're human. You're a beast,'" Gao said police told him in September 2009.At one point, six plainclothes officers bound him with belts and put a wet towel around his face for an hour, bringing on a feeling of slow suffocation."It's hard to fathom what they might be referring to when they say that he violated his parole given that he seems to have been under constant supervision," said Joshua Rosenzweig, a human rights researcher based in Hong Kong. "It's kind of cynical."Formalizing Gao's detention as a prison term, Rosenzweig said, gives Chinese leaders a ready response to queries from foreign governments and officials. Gao's case has repeatedly been raised by the U.S. and European governments, drawing cryptic responses if any from Chinese officials. U.S. Ambassador Gary Locke mentioned him in a public statement last weekend.Gao's wife, Geng He, fled China with their two children, escorted by human traffickers overland to Southeast Asia, around the time he first disappeared. They now live in the United States."When I heard what they said, all I could think was 'Oh, it means he's still alive,'" Geng said, crying, in a phone interview with The Associated Press.Now living in California, she said she learned about the Xinhua report when a friend called her as she was taking her daughter to school. "We've asked them (the Chinese authorities) so many times, and they would never tell us anything," Geng said.She said the family has yet to receive any notice from the police or courts about Gao's case and they still have no idea where he is.Adding to the confusion and uncertainty, Geng said local police called Gao's elder sister in Shandong province on Thursday, and asked if Gao was there with her."I am not at ease," Geng said. "I still don't know where he is or what kind of condition he's in."Activists in China seemed astounded and outraged by the news. Huang Qi, who runs a rights monitoring group in Sichuan province, strongly condemned what he said was the use of the judicial system to persecute dissidents and he offered his services to Gao's family."Gao Zhisheng has used his actions to write a glorious page in the history of the Chinese democracy movement," Huang said in a statement.Amnesty International called the move to send Gao to prison "a travesty.""This inhuman treatment must stop. Gao Zhisheng and his family have suffered enough and he must be freed," Catherine Baber, deputy director in Asia for the group, said in a statement.German Human Rights Commissioner Markus Loening called the report on Gao a cause of "great worry" and said he would urge China once more to shed light on his case."I will push for Gao Zhisheng being able to live a life in dignity and freedom," he said in a statement.Maran Turner, executive director of Freedom Now, a Washington D.C. rights group that has campaigned for Gao's release said that Gao's formal imprisonment was "blatant repression behind a thin facade of legality."Bob Fu, the founder of China Aid, a Texas rights group that focuses on Chinese issues, and a friend of Gao's said in an email that the court decision was "totally unacceptable and laughable."The top Beijing government leadership owes a clear explanation to the international community and Gao's family for this new hideous detention," Fu said.He added that "silence was not a diplomatic option" and urged the United States and global community to tell Beijing the Gao case would hinder its interest in the world.While Gao may be the most prominent government critic to be treated so harshly in years, the authorities have done so with other dissidents.Du Daobin, an outspoken critic also convicted of subversion and sentenced to three years in prison in 2004, did not immediately start his sentence, according to the Laogai Research Foundation, a Washington-based advocacy group that runs a website for which Du wrote. Instead, Du was released and lived under probation for four years before being sent to prison in 2008, apparently because he continued to criticize the government online.Gao's family and supporters meanwhile have continued to campaign for him, with little result. His brother, Zhiyi, has been on a constant search for information. When he asked Beijing police in September about his brother, one officer told him Gao Zhisheng was a "missing person and no one knows where he is."___Associated Press writers Alexa Olesen and Gillian Wong contributed to this report.

After a Horrific Crash, a Stark Depiction of Injustice in China

2011-11-19T09:52:00.000-06:00

BEIJING — Days after a nine-seat van crammed with 62 kindergartners slammed into a coal truck in northwest China this week, killing 21 children and two adults, the 21st Century Business Herald — a state-run, reliably nationalistic newspaper — did something extraordinary.

It published a chart.

In one column, the paper recounted recent school-bus accidents in which about 60 children had died. In an adjacent column, it listed the sums that selected Chinese government departments had lavished on new cars in 2010.

No Chinese citizen needed a pencil to connect the dots.

Since the accident on Wednesday in Gansu Province, China’s Twitter-like microblogs and other social media sites have been alight with heartbreak and outrage over the tragedy — and they have been subsequently red-carded by government censors for unpatriotic emotion.

But there are few more devastating statements about what gnaws at modern Chinese than the state-run newspaper’s two columns of numbers.

As China sped toward its new status as the world’s second largest economy, the already yawning gap between the rich and poor grew wider. By sociologists’ calculations, income inequality here is not that far from levels that have spurred social unrest in other nations.

But some things are not easily reduced to statistics. There is an argument, buttressed by the Gansu tragedy, that what truly eats at people here is not so much the rich-poor gap as the canyon that separates the powerful from the powerless.

“Most Chinese aren’t angry about rising inequality,” said Martin K. Whyte, a Harvard sociologist who specializes in research on Chinese social trends. “It’s not rich versus poor. It’s the system of power and procedural injustices that they’re upset about.”

And in fact, many episodes in the litany of scandal and misfortune that has consumed Chinese Web surfers in recent years had little to do with money.

After a young man fled last year from a hit-and-run accident by invoking his father’s rankas a deputy police chief, the phrase “My father is Li Gang” became a national catchphrase for using connections to escape responsibility.

After a much-publicized high-speed rail crash in the eastern city of Wenzhou killed 40 people in July, online critics and journalists contended that corruption had enriched powerful officials at the expense of safety or had encouraged cover-ups of officials’ misbehavior.

The Railway Ministry admitted to high-level corruption and fired several officials, although a government report is two months overdue, and scores of victims have yet to be compensated.

By many accounts, the awful van accident in Gansu Province only underscored the impotence that some Chinese feel in the face of authority.

For years, China’s roads have been among the world’s most dangerous. Statistics for 2009, the most recent available, show that 67,759 people died on the road in China, a 7.8 percent decline over the previous year. That capped a decade of steadily declining road fatalities.

But another study, by the World Health Organization, cast serious doubt on the official Chinese figures. Comparing policy data with hospital records, the study concluded that the real death rate from traffic accidents was roughly twice the official figure. That would make China’s roads the most dangerous among middle-income countries.

The dangers facing students in substandard school buses were known to government officials. In July 2010, the national government ordered that buses carrying primary school students meet strict safety standards that included emergency exits, seat belts and data recorders to track drivers’ behavior. Unregistered minibuses were outlawed.

Some were skeptical that the new standards would have much effect. “The biggest problem of China’s school bus industry is not the lack of a standard, but the rampant use of illegal vehicles,” a prescient vehicle-rental businessman from Beijing, Zhang Jie, told China Daily, a state-run English-language newspaper, at the time.

Without enforcement, he said, new standards would represent “just a piece of paper” and data recorders expensive decorations.

Five months later, 14 students died when a three-wheel farm truck being used as a school bus tumbled into a river in Hunan Province. And in September, police officers in Hebei Province stopped an eight-seat van in Qian’an with 64 preschoolers stuffed inside.

“The government should not wait for more fatal crashes to occur to take whatever steps are needed to ensure that the nation’s children are as safe as they can be,” China Daily stated then.

On Wednesday, just two months later, the van badly overloaded with the 62 children, along with a teacher and the driver, careened down a foggy street and crashed head-on with a coal truck. The van was demolished, killing 23 passengers, and injuring everyone else on board.

The government took swift action, as it often does in cases of public embarrassment. The Education Ministry ordered a national inspection of school buses, and four local officials were suspended pending an inquiry.

The news ignited indignant postings on China’s major social media platform, Sina Weibo. One of the country’s most influential bloggers, the social scientist Yu Jianrong, wrote that school buses were notoriously overcrowded, while government officials built themselves palatial offices and bought luxury cars.

Microbloggers posted photographs of an elaborate new government office building in Qingyang, the poor town where the accident occurred.

A post on the blog of Caixin, a business magazine known for its rule-bending investigations, reported that the building’s garage and ventilation systems alone cost more than $2.2 million.

By Thursday, the discussion in China’s blogosphere had turned sharply against the government. A microblog post by local officials in Gansu Province that hailed the swift official response to the disaster was hooted down by critics and was subsequently withdrawn.

Commentators asked why countries like the United States had enormous, high-riding school buses instead of shoddily built microvans.

The magazine News Weekly posted a rhetorical question on its blog: “Why doesn’t the flower of the nation have a proper flower pot?” and posted next to it a picture of a big yellow school bus.

Other bloggers were even more blunt.

“Qingyang is nothing but a representative of tens of thousands of places in China. It’s no more than the tip of an iceberg,” wrote one poster who called himself Kuaile de Jingling Laodie.

“No matter how poor we are, or how much hardship there is, we cannot let the leaders suffer.”

China's Ai Weiwei says under investigation over porn - Hindustan Times

2011-11-19T09:49:00.001-06:00

China's Ai Weiwei says under investigation over porn - Hindustan Times

Thousands strike at China factory: Rights group

2011-11-19T09:43:00.002-06:00

Thousands strike at China factory: Rights group

U.S., Australia send Beijing a message - UPI.com

2011-11-19T08:55:00.001-06:00

U.S., Australia send Beijing a message - UPI.com

The 10 Most Counterfeited Products Sold in America - DailyFinance

2011-11-19T07:52:00.001-06:00

The 10 Most Counterfeited Products Sold in America - DailyFinance

Obama Retreat on Taiwan Fighters Sacrifices Thousands of U.S. Jobs to China

2011-08-15T19:07:00.000-05:00

18:53 GMT, August 15, 2011 Defense News reports today that the Obama Administration will turn down Taiwan's request to purchase 66 new F-16 fighters, aircraft the island nation says it needs to counter a regional military buildup by the People's Republic of China. China has challenged the legitimacy of Taiwan's government ever since it was set up by nationalist forces fleeing the mainland following the revolution that put communists in power in Beijing. Washington ended formal diplomatic ties with Taiwan in 1979 when it recognized Beijing as the government of China, however under the Taiwan Relations Act signed into law that same year, the U.S. government is required to supply the island with weapons suitable for defending against an attack from the mainland. Taiwan began requesting new F-16s for that purpose in 2006.

According to reporter Wendell Minnick of Defense News, the Obama Administration bowed to Chinese pressure by deciding not to approve purchase of 66 new F-16 C/Ds, which Taiwan's air force would have used to replace the oldest fighters in its fleet. Instead, a U.S. government delegation visiting the capital of Taipei proposed upgrades to 146 existing F-16 A/B fighters in the Taiwanese inventory. A/B variants are the oldest versions of a fighter that first debuted in 1980. The U.S. delegation argued they could be kept operationally relevant through the introduction of new electronically scanned radars, defensive countermeasures and smart bombs. However, Minnick quotes an unnamed Taiwanese military official saying, "we are so disappointed in the United States" for declining to supply new F-16s.

The official has good reason to be disappointed, because even with improved on-board equipment, the earlier versions of the F-16 can't match the performance of new-build fighters in the more advanced C/D configuration. If the White House really has decided not to sell any new planes, Taiwan will be more susceptible to military pressure from Beijing -- which remains, for all its progressive flourishes, a communist dictatorship. Washington's stance will be interpreted in some quarters as evidence that China's rising economic and military power is forcing an American retreat in the Western Pacific. U.S. allies in the area are anxious for signs that Washington is still committed to balancing Beijing's regional ambitions, so any decision not to meet the defensive needs of a fellow democracy is likely to be viewed with alarm. Recent letters to the White House signed by 47 Senators and 181 members of the House of Representatives have warned of the security consequences if Taiwan's request for new F-16s is rebuffed.

But that is not the only drawback from failing to sell Taiwan new weapons with which to defend itself. According to reporter Minnick, the sale of 66 new F-16s would have been worth $8 billion and generated 16,000 jobs in the U.S. at a time when Chinese exports are gradually hollowing out much of the U.S. industrial base. It's no secret China's export-driven growth is made possible in part by mercantilist trade policies that violate the letter and the spirit of the agreement allowing that country to join the World Trade Organization. Those policies have enabled China to surpass the U.S. in the production of everything from steel to electronics, and according to the International Monetary Fund have now put the Chinese economy on a vector to surpass the size of America's in 2015 (China ran a trade surplus of $32 billion last month, while America's trade deficit -- largely with China -- was in excess of $50 billion).

So the willingness of the Obama Administration to pass up 16,000 jobs and billions of dollars in export earnings because of pressure from Beijing suggests that it is dreadfully out of touch not only with security trends in the Western Pacific, but also with what is needed to get America growing again.

----

Loren B. Thompson, Ph.D.

Early Warning Blog, Lexington Institute

Chinese currency quickening pace of appreciation

2011-08-15T18:50:00.000-05:00

The change may seem minuscule. But for those who follow China's currency, 0.8% is practically a bonanza.

That's how much the Chinese yuan has appreciated against the dollar in the last week, its fastest pace in almost a year.

Monday showed no signs of slowing down as China's central bank set its so-called parity exchange rate at 6.395 yuan for each dollar, giving the Chinese currency a value of 15.64 U.S. cents, a record high. (The bank sets the rate in the morning before every currency trading session and allows the yuan to strengthen or weaken 0.5%.)

The yuan has gained 3.1% against the greenback this year and 6.8% since June 2010, when China depegged its currency from the dollar. Many analysts had expected the yuan to climb just over 6% for the year, but the last few days may give them reason to revise on the upside.

The uptick in appreciation is welcome news to trading partners who have long argued that China unfairly undervalues its currency to boost its exports. Reinforcing that view, China last week reported its largest trade surplus in more than two years.

Diplomacy may be at play as well. The yuan's strengthening comes right before Vice President Joe Biden's arrival in China this week. The last time the so-called redback grew this fast was last September, when Washington was preparing a report on China's currency regime.

But more than anything, analysts say, the strengthening yuan has to do with China's growing battle with inflation, which hit a 37-month high in July, stoking fears of social instability the cost of food.

A mightier yuan would make imports cheaper and rein in the nation's over-abundant money supply.

The recent downgrade of U.S. government debt by Standard & Poor's has also raised doubts in Beijing about the merits of running large trade surpluses, which increase China's foreign-currency reserves. With few other viable ways to invest that money, China has accumulated about $1.2 trillion in U.S. Treasuries.

In a recent research note, Daniel Hui, a senior foreign exchange strategist at HSBC, said of the yuan's quickening appreciation:

[I]t is increasingly likely that this is going beyond just macro factors, and that domestic politics is becoming increasingly important.

We have long viewed [foreign exchange] policy as ultimately being the outcome of a domestic political process. Now, the U.S. sovereign downgrade by S&P as well as the seemingly increased potential for a third round of quantitative easing is stoking real debate [in China] as to the broader costs and benefits of China's choice of exchange rate policy. This, alongside recent domestic discontent, may have been enough to shift [foreign exchange] policy away from the previous stance, becoming more permissive and lessening the requirement for such large accumulation of dollars. If so, this new, accelerated pace of appreciation could last for some time.

The trend could also mean that China's central bank, which favors liberalizing the country's financial sector, is gaining ground against pro-export forces -- namely rich coastal provinces and their patron in the central government, the Ministry of Commerce.

The ministry has said that a sharp appreciation of the yuan would leave millions of factory workers out of jobs.

But Li Jie, head of the Reserves Research Institute at the Central University of Finance and Economics in Beijing, disagrees, telling The Times last week that a stronger yuan would help the country's manufacturers by reducing raw-material prices and wages.

"It would easily offset the pain of having more expensive exports," Li said.

-- David Pierson

The Hindu : News / International : Tibetan monk dies after self-immolation

2011-08-15T18:32:00.001-05:00

The Hindu : News / International : Tibetan monk dies after self-immolation

China's Energy Insecurity Worsens

2011-08-15T18:29:00.000-05:00

In the first five months of 2011, China consumed 10.3% more oil that it had during the same time period in 2010. Meanwhile, oil imports rose 11.3% in the first five months of this, pushing China’s dependence on imported oil to 55.2%, according to the Ministry of Industry and Information Technology (MIIT).

To put the magnitude of this increase in perspective, China’s oil dependence was 33% in 2009.

“China is witnessing growing need of crude oil during its development of urbanization and industrialization,” said Tong Xiaoguang, a researcher with Chinese Academy of Engineering.

Tong estimated that China’s dependence on imported oil would reach 60% by 2020 and 65% by 2030.

China’s oil consumption growth has already outpaced that of the overall economy, indicating that China’s economic development has largely relied on energy-intensive industries.

“The risk is that when the country’s economic development largely depends on oil consumption, it is easy to be buffeted by oil price fluctuations,” Lin Boqiang, an energy professor at Xiamen University.

Plant Protest Shows a China Under Pressure

2011-08-15T18:21:00.000-05:00

BEIJING — More than international prestige or even economic might, the top priority of China’s leadership is to maintain stability in this nation’s vast and varied population. President Hu Jintao explicitly reaffirmed that goal just last month, telling a Communist Party celebration that “without stability, nothing can be accomplished.”

In the aftermath of a large protest on Sunday in a major metropolis of northeast China, Dalian, that craving for rigid orderliness appears increasingly ephemeral. In the face of increasingly sophisticated efforts to control and guide them, significant protests — and visceral public expressions of unhappiness with government — appear to be an ever more regular feature of Chinese life.

By official estimates, 12,000 demonstrators marched through central Dalian — by other estimates, many more — to demand the removal of the multibillion-dollar Fujia chemical factory, whose Pacific coast sea wall had been breached a week earlier during a typhoon. The plant produces paraxylene, a toxic chemical used to make polyester products. It can cause illness and, if concentrated, even death.

The mostly peaceful protest was one of the largest reported in the country in nearly three years. It included the extraordinary scene of the city’s Communist Party secretary standing atop a car, promising to close the plant and pleading in vain with the demonstrators to go home. He said the two-year-old plant, worth more than $1.5 billion, would be relocated. Even that did not satisfy some hecklers: they demanded a date.

Experts widely believe that China’s embrace of wireless communications — first cellphone text messages, then Internet chat rooms and Twitter-like microblogs — has fueled such protests by allowing the disaffected to share grievances in a way never before possible. Dalian residents flooded microblogs with photos of their protest, reposting them as fast as censors could delete them.

“Once it was happening, I could follow everything through the pictures that were being posted,” said one person in Dalian, Ma Lei, who considered joining the demonstration but ran into police roadblocks.

The protest mirrored one in mid-2007, when thousands of demonstrators in Xiamen in southeast China across from Taiwan, forced local officials to ditch plans for a plant that would have made the same chemical.

But more broadly, scholars said, it suggests a revolution of rising expectations in which Chinese citizens, growing more educated and wealthier, think their government should better protect their health, safety and other interests.

“People are more aware of their rights, and they are demanding more rights and better protection of their interests,” Yiyi Lu, an Asia scholar in Beijing with the research institute Chatham House, said in an interview.

Although the government is becoming more responsive, she said, “it is not reacting fast enough.”

“That,” she said, “is why there is growing discontent.”

Others question whether China’s middle class is eager to assert itself. “The power of civil society is growing but it is still very weak,” said Hu Xingdou, a professor of economics at Beijing Institute of Technology. By official count, so-called mass incidents — a term that appears to cover group actions ranging from minor work stoppages to serious riots — numbered 74,000 in 2004, up from 10,000 in 1993. The government has not released figures since then.

But in a February article in Economic Observer, a Chinese weekly publication, Sun Liping, a sociologist at Tsinghua University, wrote that a government academy estimated that such cases had doubled between 2006 and 2010, reaching 180,000 last year. He also quoted an academic study that found that one major episode of social unrest occurred, on average, every five days.

In one of the biggest, about 30,000 people protested in Guizhou Province in 2008 over what the government said was a bevy of grievances with local officials. Thousands more staged ethnic riots in the Xinjiang region in 2009.

This year has brought a number of serious protests. At least 2,000 Yunnan Province residents demonstrated in March against their evictions to make way for a power station. In April, 2,000 Shanghai residents flipped a police car and set motorcycles afire after urban security guards beat a migrant worker and his wife.

In May, Mongolians in Xilinhot and Hohhot staged widespread protests after an ethnic Han driver killed an ethnic Mongol herder in a hit-and-run accident. In June, a crowd said to number in the thousands rioted in Guangdong Province after a peaceful protest over a wage dispute spun out of control.

Public reaction took time to build after the Fujia sea wall was breached. But the protest on Sunday showed clear signs of advance planning, as demonstrators displayed large anti-Fujia banners, T-shirts, professionally printed placards and even face masks.

Although the government said one group of demonstrators pelted police officers with plastic bottles of water and other objects, the protest appears to have been mostly peaceful. Some participants sang the national anthem.

If the commitment by local leaders to move the plant is carried out, the scale of the protesters’ victory would set a new benchmark in China. The plant, a joint venture between a state-owned chemical company and a local real estate giant, is said to contribute more than $300 million to the local government in taxes each year. Officials were so anxious to open it they did not wait for environmental approval, the Chinese media reported. The pattern of elevating economic development over health and safety increasingly worries many Chinese.

Dalian’s compromise also points to a paradox that Communist Party leaders face as they begin — under pressure from China’s top leaders — to pay more attention to local grievances.

“You can find many examples of the government trying to better meet people’s demands,” said Ms. Lu, of Chatham House. “But when you improve your service, that creates more demand.”

In particular, she said, the slow move toward more government transparency, in areas like official expenses, has encouraged citizen watchdogs to point out areas of waste and abuse that further undermine the already low trust in government.

Ma Jun , director of the Institute of Public and Environmental Affairs, a nonprofit Beijing group, said the Dalian case shows that officials should be open at the start. Better, he said, to get public input and genuine environmental assessments before approving major projects like the Fujia plant. “It is high time to open up the decision-making process.”

Professor Hu said officials at all levels of government should take heed lest public opposition force them into expensive revisions of bad decisions. “The problem is the top official just decides what to do and everyone does it,” he said.

By Monday, censors were wiping the topic off the Chinese versions of Twitter. They also canceled a news show last week about dangerous projects in Dalian, just before it was to be shown on CCTV, China’s government-controlled television network. When the show’s popular host, Bai Yansong, complained online, his microblog on Sina Weibo was frozen. He struck back using another account. “This is the public information sphere!” he wrote. “I really don’t know what you are afraid of.”

Adam Century, Edy Yin and Shi Da contributed research in Beijing

Ouch! U.S. booted from Triple-A debt club

2011-08-08T18:26:00.001-05:00

Ouch! U.S. booted from Triple-A debt club

The cars of summer: 10 winners and losers - Who's selling, who's not (1) - CNNMoney

2011-08-08T16:38:00.001-05:00

The cars of summer: 10 winners and losers - Who's selling, who's not (1) - CNNMoney

Arming the Chinese Dragon

2011-08-07T19:41:00.001-05:00

The Media Line

Bo paints the town red, invokes Mao and jails gangsters

2011-08-07T19:06:00.001-05:00

Bo paints the town red, invokes Mao and jails gangsters

Train crash shakes confidence in train travel|Society|chinadaily.com.cn

2011-08-07T09:28:00.001-05:00

Train crash shakes confidence in train travel|Society|chinadaily.com.cn

This Nebraska Village May Be Sitting On The World's Largest Untapped Deposit Of Rare Earth Minerals

2011-08-06T23:10:00.001-05:00

This Nebraska Village May Be Sitting On The World's Largest Untapped Deposit Of Rare Earth Minerals

Shanghai Workshop Caught Making Fake Condiments

2011-08-06T22:46:00.001-05:00

Shanghai Workshop Caught Making Fake Condiments

UPDATE 2-China calls for global cooperation on debt risks

2011-08-06T19:17:00.000-05:00

China Foreign Minister says U.S. debt risks are growing

* Urges global coordination to tackle economic problems

* Calls on U.S. to protect dollar investment

* Says supports Europe and the euro (Adds background)

BEIJING, Aug 5 (Reuters) - China's Foreign Minister called on Friday for more global cooperation to resolve U.S. and euro area debt problems as stock markets around the world tumbled on fears another financial storm may be developing.

The minister, Yang Jiechi, said U.S. debt risks were escalating and he called on Washington to protect dollar investments and adopt "responsible" monetary policies.

China has a major stake in the future of the dollar. Analysts estimate about 70 percent of its $3.2 trillion in foreign reserves is invested in dollar assets, making it the United States' biggest foreign creditor.

"Europe's debt problems are still developing, and the U.S. sovereign debt default risk is escalating," Yang told the media in Poland, where he is on an official visit.

"All countries must further increase communication and coordination, push ahead reforms in the global financial system, and improve governance of the global economy."

World stocks fell for the eighth straight session on Friday on fears that Europe's debt crisis could spin out of control and that the U.S. economy may slide into another recession.

Such a scenario could leave the weight of global economic growth on China, although Beijing's ability to provide fresh stimulus is limited by its need to fight inflation, which reached a three-year high in June.

As it stands, China could account for over a third of world economic growth this year, said Liu Ligang, an ANZ economist.

Despite the euro area's debt woes, China's foreign minister reiterated Beijing's confidence in Europe, its top trading partner, and the euro .

"We have bought many euro bonds in recent years and will continue to support Europe and the euro as always in future," he said.

He urged Washington to "ensure the safety" of foreign dollar investment.

"We hope the United States can enact responsible monetary policies to maintain a trend of global economic recovery," he said. "A stable U.S. dollar as a major global reserve currency is very significant to global economic and financial conditions."

CHINA'S DOLLAR RISKS

Underlining Beijing's growing unease with dollar risks, China Central Bank Governor Zhou Xiaochuan asked Washington this week to deal responsibly with its debt, saying a choppy Treasury market endangers the world.

Washington averted a debt default this week by agreeing to cut fiscal spending, a deal that opened the way for an increase in the government's borrowing limit. Still, Washington may need to do more to stabilise its finances longer term to stave off the risk of losing its top-notch AAA credit rating.

More Chinese are lobbying for Beijing to tackle its dollar woes by slowing down the pace of growth in its reserves and by investing its dollars in other asset classes, such as equity.

"We have recommended the Chinese government negotiate with the United States to convert part of its Treasury holdings into equity stakes in U.S. financial or energy firms," said Jing Xuecheng, a former deputy head of research at the central bank.

Jing, who now runs his own research institute, said U.S. equity markets are large and liquid enough to absorb any larger-sized sales that Beijing could make in future.

Others said China should address the heart of its dollar headache by freeing the tightly controlled yuan and let it rise.

A government economist with China's top economic planning agency, who declined to be identified, said Beijing should allow more Chinese investors and firms to invest abroad. That would reduce the need for the central bank to buy so many dollars flowing into the country and so slow growth in reserves.

Yu Yongding, a former academic member of the monetary policy committee at China's central bank, went further and called on Beijing to float the yuan.

"If there is any lesson China can draw from the U.S. debt ceiling crisis, it is that it must stop policies that result in further accumulation of foreign exchange reserves," he wrote in an article in the Financial Times.

CHINA TO THE RESCUE?

China's growth during the global financial crisis, helped by a massive stimulus programme, helped offset the dramatic slide in economies elsewhere.

With fears that global growth may falter once again, many investors are pinning their hopes on China to pick up some of the slack.

But some analysts say Beijing may not be in a position to launch another massive fiscal stimulus to aid growth, as it did in 2008, because it would almost certainly fuel already high inflation.

Beijing has pulled every lever at its disposal to try to brake economic growth, yet the price pressures persist.

China's inflation likely ran at 6.3 percent in July, just a whisker below three-year highs of 6.4 percent in June, a Reuters poll shows. That argues for Beijing to at least keep monetary policy tight.

And as far as purchasing sovereign debt is concerned, cash-rich Beijing may not be as keen a buyer as some nations hope.

Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank.

Tremonti's remarks come after a source told Reuters Italian Treasury chief, Vittorio Grilli, is in Asia as part of a regular visit to talk to investors about buying Italian bonds.

When asked if Beijing is keen to buy Italian debt, China's central bank declined to comment on Friday. (Reporting by Langi Chiang and Koh Gui Qing; Editing by Ken Wills and Neil Fullick)

SGGP English Edition- China rejects claims of Africa land buy-ups

2011-08-06T09:41:00.001-05:00

SGGP English Edition- China rejects claims of Africa land buy-ups

China's Rescue Ability Seen Limited

2011-08-06T09:37:00.000-05:00

As concerns grow that the global economy may be running into a ditch again, adding to the uncertainty is doubt that China will be able to lift it out this time around.

The plunge in global markets this week exposed anxiety about another bout of economic malaise and a "double-dip" recession in the U.S. at a time when the euro zone is struggling to contain its long-simmering sovereign-debt crisis.

Last time around, after the collapse of Lehman Brothers, China launched a massive 4 trillion yuan ($622 billion) spending plan that didn't just keep growth in its own economy on track, but helped steady the world economy at a crucial time.

The railways, bridges and buildings it built as part of its stimulus package fed demand for raw materials from resource-rich countries like Australia and Brazil. Chinese consumers kept buying things like cars and computers, helping to buoy the business of multinational corporations even as demand in developed markets fizzled. China's share of global GDP rose to 9.3% last year, from 5.5% in 2006.

But China, now the world's No. 2 economy, is struggling with the costs of that last massive rescue plan: inflation, a property bubble and growing debt. Those factors will constrain the government's ability to invigorate the economy again, economists say.

"They've already had to introduce a big stimulus package a couple years ago so it's going to make it harder to go back to the same playbook again," said Brian Jackson, economist at Royal Bank of Canada in Hong Kong.

Also hampering China's ability to help, its efforts to refocus its economy toward domestic consumption remain at a nascent level. Household spendingcontinues to grow and wages are increasing, but because of the stimulus spending, the share of investment in China's GDP has risen, not fallen, since 2008. If demand from the U.S. and Europe falls away, Beijing won't be able to turn to its own households to pick up the slack.

On Friday, fears over the extent of problems in the U.S. and Europe roiled Asian markets, inflicting some of their worst losses since the global financial crisis hit. Hong Kong's Hang Seng Index dropped 4.3%, Japan's Nikkei Stock Average fell 3.7% to 9,299.88 and South Korea's Kospi sank 3.7%. Investors fret that fast-growing Asian markets won't be able to completely avoid taking a hit if demand for the region's exports from Europe and the U.S. takes a sharp turn for the worse.

"There are certain risks, as Asia is still heavily dependent on exports," said Tomo Kinoshita, an economist at Nomura in Hong Kong. He notes that South Korea, Taiwan, Singapore, Malaysia and Thailand are particularly exposed given that exports make up a large percentage of their GDP.

On Friday, policy makers across the region voiced concern about the darkening outlook and declared themselves ready to respond.

Japanese officials said Friday they stand ready to wade back into the currency markets if action is needed, a day after the Bank of Japan sold yen to counter buying from investors wary of holding dollars and euros. Foreign-exchange dealers said Bank Indonesia sold dollars Friday to support the country's currency after the sell-off in stocks helped push it sharply lower.

"We have the policy flexibility to deal with the uncertainty in the international economy should measures be required," Australia's Deputy Prime Minister and Treasurer Wayne Swan said, although he noted that growth in the Asia-Pacific region was strong.

South Korean authorities said Friday they would step up the monitoring of financial markets amid heightened volatility. Officials from the Bank of Korea, the Finance Ministry and financial regulatory agencies are scheduled to meet Sunday to discuss market conditions and necessary policy responses, taking into account the latest economic data.

Global risks could spur policy makers to hold off from further interest-rate increases and credit tightening until the outlook becomes clearer. Prakash Sakpal, an economist at ING Bank, predicted that central banks in China, India, South Korea, Taiwan and Thailand would move to the defensive side, a shift in policy from the anti-inflationary stance that has dominated the agenda all year.

The economies of China and other emerging economies in Asia and the rest of the world are likely better placed to weather the storm than big, developed economies like the U.S., the European Union and Japan. In many countries, government debt remains low as a percentage of GDP. Even in China, analysts estimate that China's total public debt, including local governments and various arms of the central government, remains low enough for Beijing to finance more fiscal stimulus if needed, though not at the level it did last time. And though exports remain a main driver of growth across the region, rising trade between emerging markets that's less susceptible to a drop-off in demand from the U.S. or Europe is helping reduce risk.

"We are lucky that we are not depending on the European and American economy, as our product is exported to China and India," said Geroad Jusuf, director and corporate secretary of PT Borneo Lumbung Energi & Metal, Indonesia's largest coking coal miner. He said despite current global economic concerns, growth will be sustainable. "We are not worried, " he said. Though he said his product will look more expensive in dollars and euros if those currencies fall in value, "that's fine. In the future, maybe we should start leaving the dollar or the euro."

Fu Wing Hoong, president of the Electrical and Electronics Association of Malaysia, said the immediate impact of a worsening outlook in the U.S. "is not bad for most of our members," as "our products, like light fittings, for example, are exported to the Middle East."

On Friday, Bank of Thailand Gov. Prasarn Trairatvorakul said economic problems in the U.S. were expected to have only a limited impact on Thailand's exports in the second half of this year, as exports to countries other than Europe, the U.S. and Japan—the so-called G-3—accounted for around 70% of total exports.

Ma seeks to act against China spies

2011-08-06T09:30:00.000-05:00

President Ma Ying-jeou (馬英九) said Taiwan should strengthen its defenses against Chinese espionage, following a string of spy scandals showing that Chinese intelligence-gathering continues despite thawing relations.

Taiwan needs to “actively prevent” any leak of secrets to China and must counter infiltration attempts by beefing up its counter-intelligence, Ma said in a statement issued by the National Security Bureau.

He made the comments on Thursday at an intelligence meeting discussing security issues related to expanding cross-strait exchanges, the statement said.

The Military High Court last month handed down life sentences to General Lo Hsien-che (羅賢哲), former head of communications and electronic information at army command headquarters, and Colonel Lo Chi-cheng (羅奇正), who used to work at the Ministry of National Defense’s Military Intelligence Bureau, for spying for China, in the nation’s biggest espionage scandals in recent years.

INFILTRATION

The general was allegedly “persuaded” by a Chinese female spy to gather information for Beijing, while the intelligence officer reportedly assisted China in unraveling several of Taiwan’s spy networks in China.

A retired Taiwanese agent recently warned that at least 10 Chinese moles were believed to have infiltrated the nation’s security units.

COMPUTER SECURITY

In other news, defense ministry officials said the military had taken steps to ensure the security of its computer networks.

The officials were responding to reports that US computer security company McAfee has discovered vast cyberattacks that have targeted more than 70 governments, nonprofit groups and corporations around the world to steal vast quantities of data.

According to the McAfee report, some organizations that have fallen victim to the attacks dating from mid-2006 are Taiwanese, and experts have pointed the finger at China as the source of the hacking.

INDEPENDENT SYSTEM

Ministry spokesman David Lo (羅紹和) said on Thursday that the military’s computer systems are monitored around the clock to ensure security.

Lo said the military has long adopted its own independent system separate from civilian networks out of concern for the security of defense-related information.

Wang Teh-pen (王德本), a ministry division chief in charge of information and communication security, said the ministry had adopted many strategies, including constant renewal of protective measures, to reinforce its cyber-securit

Experts doubt that Uighurs with Taliban ties are behind violence in China - Guantánamo - MiamiHerald.com

2011-08-05T17:07:00.002-05:00

Experts doubt that Uighurs with Taliban ties are behind violence in China - Guantánamo - MiamiHerald.com

China blamed for cyber attacks

2011-08-04T23:42:00.001-05:00

China blamed for cyber attacks

China can break free of the dollar trap - FT.com

2011-08-04T22:11:00.001-05:00

China can break free of the dollar trap - FT.com

China vs. U.S.: The cyber Cold War is raging

2011-07-29T10:29:00.001-05:00

China vs. U.S.: The cyber Cold War is raging

Infographic: How China's Clean Tech Industry Crushes The U.S. | Fast Company

2011-07-26T08:40:00.001-05:00

Infographic: How China's Clean Tech Industry Crushes The U.S. | Fast Company

China's growth 'unsustainable', say analysts | The Australian

2011-07-25T11:47:00.001-05:00

China's growth 'unsustainable', say analysts | The Australian

A gleam in China's cloudy auto outlook

2011-07-25T11:45:00.001-05:00

A gleam in China's cloudy auto outlook

UPDATE 2-China rail equipment shares plunge after train crash | Reuters

2011-07-25T03:45:00.001-05:00

UPDATE 2-China rail equipment shares plunge after train crash | Reuters

China's aging population slows economic growth - USATODAY.com

2011-07-25T03:44:00.001-05:00

China's aging population slows economic growth - USATODAY.com

Train Wreck in China Raises Questions of Safety - NYTimes.com

2011-07-24T23:17:00.001-05:00

Train Wreck in China Raises Questions of Safety - NYTimes.com

Power bubbles are Hu's big challenge

2011-07-24T09:08:00.001-05:00

Asia Times Online :: China News, China Business News, Taiwan and Hong Kong News and Business.

China's Yuan-Trading Program has Unintended Side Effects

2011-07-20T09:44:00.000-05:00

BEIJING—When China announced a flagship program to make its currency more international in the summer of 2009, it cited "the growing call" from Chinese trading partners to use the yuan in cross-border transactions. More than a year later, the People's Bank of China touted the program as a "breakthrough," citing a surge in the amount of trade in the currency.

Not everything went according to plan.

The move had important, unintended side effects, including giving companies and investors a way to profit from the difference in interest rates between China and other countries, and opening a path for "hot money" to flood the country.

It also has boosted, rather than reduced, the amount of foreign-exchange reserves piling up in China's coffers—the opposite of what Beijing intended when it opened the yuan for foreign trade.

This, in turn, could add to China's already difficult battle to tame an inflation rate running at more than 6%, as the central bank needs to print more yuan to buy up the dollars flowing into the country.

China's stumbles in trying to get its currency more widely accepted outside its borders underline a fundamental contradiction at the heart of Beijing's plans: The Chinese authorities want to keep a tight grip on the value of the yuan to keep exports booming, while at the same time encouraging more foreign companies and investors to use it.

China is trying to blunt the rise of the yuan by keeping its appreciation sharply controlled, but the internationalization program puts upward pressure on the currency.

There is a "tension in the short run between managing yuan appreciation and increasing the yuan's prominence in global trade and finance transactions," says Brookings Institution China scholar Eswar Prasad.

On Tuesday, the People's Bank of China said foreign-exchange reserves jumped by $153 billion in the second quarter to $3.2 trillion.

Of that increase, $48 billion, or about a third, was attributable to China's decision to allow the yuan to be used in foreign-trade transactions, estimates Zhu Chaoping, head of research at ChinaScope Financial, a market-research firm in Hong Kong.

In the prior two quarters, the trade program added a total of $83.5 billion to China's reserves, Mr. Zhu calculates.

China had hoped that allowing the yuan to be used more freely abroad would boost demand for the currency, also known as the renminbi or RMB, and reduce the amount of dollars entering the country.

For the long term, China wants to turn the yuan into a global reserve currency that is used for investment, trade and loans, as the dollar and euro are.

A widely accepted yuan could help Chinese companies alleviate foreign-exchange risks. Chinese exporters, in particular, fear the yuan's continued appreciation against the dollar—a rise China's leaders have tried to restrain—would expose them to losses if they can be paid only in greenbacks that have been steadily losing value.

The yuan is widely seen as undervalued, so only overseas sellers are interested in the trade.

Nearly 90% of cross-border trade settled in yuan in the first quarter—totaling 360.3 billion yuan, or 7% of China's total trade—involved China's imports, according to data provided by the People's Bank of China, a sign foreign demand for yuan hasn't picked up much.

Shanghai Flying Horse Imports & Exports Co., a state-owned company that exports clothing and textiles, is among the first batch of companies in the city authorized to use yuan to settle trade.

Still, nearly all of the company's exports are settled in dollars, according to Mao Xiaohua, a manager at Shanghai Flying Horse.

"Renminbi settlement certainly would be good for us because that would reduce our foreign-exchange risks," Ms. Mao said. "But our customers in Europe and the U.S. are all unwilling to pay in renminbi....It seems that they totally dismiss the idea of renminbi settlement."

The fact that importers are using yuan means that dollars build up at a more rapid clip in the Peoples Bank of China's vaults because importers don't need to tap them.

"Everyone thinks there is a one-way bet on which way the currency will move," so only those that get paid in yuan are interested in the business, says University of California at Berkeley economist Barry Eichengreen. "When you internationalize, you can't control all the uses to which money is put."

Chinese economist Yu Yongding, a former adviser to the People's Bank of China, recently told a Chinese newspaper that "to date, renminbi trade settlement hasn't helped Chinese companies reduce foreign-exchange risks, but has helped foreign companies cut risks."

Some companies also have used the trade-settlement program to profit from the difference between higher yuan interest rates in mainland China and lower U.S. dollar rates in Hong Kong, according to bankers and analysts.

Such transactions could be used by speculators betting on the yuan's rise and have the potential effect of adding to China's dollar reserves.

Asia Pulp & Paper Co., an Indonesian paper maker, recently directed its Hong Kong subsidiary to borrow U.S. dollars at low rates, using its yuan deposits as collateral, says a person familiar with its operations.

APP then took the dollars and paid for goods produced by its mainland subsidiaries, effectively using low-rate U.S.-dollar loans instead of higher-rate yuan loans.

At the end of a complex series of transactions, APP was able to repay the dollar loans with yuan obtained from the internationalization program.

APP benefitted in two ways: It borrowed in dollars at low rates and paid off the loan with yuan that had appreciated in value since the beginning of its dealings.

APP declined to comment.

Li Bo, director of the Chinese central bank's currency policy division, said in an April speech that the goal of the cross-border yuan program was to help Chinese companies reduce foreign-exchange risks and to ease cross-border trade and investment.

PBOC officials declined to comment for this article.

Harvard economist Jeffrey Frankel said China is unusual in pressing to give its currency a bigger international role. Japan and Germany, after World War II, and the U.S. after World War I resisted such efforts because they worried their currencies would strengthen and make their exporters less competitive.

For now, China's central bank is struggling to keep up with companies looking to use the internationalization program as a channel for so-called hot money, which can contribute to dangerous bubbles in China's real-estate market and stock exchanges, as investors look to park their money in sectors seen as paying a high return.

The State Administration of Foreign Exchange, the central bank's currency watchdog, has put in place a "special campaign" to crack down on speculative money flows.

This week, the regulator fined Guangzhou Teng Hang Metal Materials Co., of Guangzhou, China, which buys steel scrap from overseas for recycling, for manipulating its import payments.

The company inappropriately deferred payments of $1.3 million, SAFE alleged.

Delaying payments for imports is a long-used tactic by Chinese companies to benefit from yuan appreciation.

Experts on China's foreign-exchange regulations say the availability of yuan settlement has the potential to make this form of arbitrage even more profitable, because companies now have access to even more favorable yuan exchange rates overseas.

The yuan is valued slightly more against the U.S. dollar in Hong Kong than it is on the mainland.

A manager at Guangzhou Teng Hang declined to comment on SAFE's finding and the fine levied by the agency.

"I'm not aware of that," he said.

The SAFE program may be having some impact.

According to UBS AG economist Wang Tao, speculative inflows—or capital seeking short-term returns—slowed to $24 billion in the second quarter, from an estimated $90 billion in each of the previous two quarters.

Write to Lingling Wei at lingling.wei@wsj.com and Bob Davis at bob.davis@wsj.com

Asia Times Online :: Undemocratic China can't rule the world

2011-07-20T09:21:00.001-05:00

Asia Times Online :: Undemocratic China can't rule the world

Nation & World | Living unusually large in a tiny Chinese collective | Seattle Times Newspaper

2011-07-19T09:01:00.001-05:00

Nation & World | Living unusually large in a tiny Chinese collective | Seattle Times Newspaper

China’s love affair with imported cars revs up a few more notches

2011-07-16T19:51:00.001-05:00

When Zheng Huizhong was growing up in the Henan countryside, he was proud his father owned a three-wheeled farm tractor. Back in the 1970s, that was as automated — and fast — as most people could get in rural China.

Today, however, he is out shopping on Beijing’s swanky Jinbao (Treasure) Street for an addition to his Bentley and cannot quite decide which 300kph sports car to splash out on.

“I like Aston Martins because I used to watch James Bond films. But I think I prefer Ferrari, even though they are more expensive,” muses the former farm boy, who has made a fortune as a yacht salesman.

Each of these cars cost more than 4 million yuan (US$620,000), but price is not Zheng’s main concern.

“Turning heads with a luxury car is not as easy as it used to be. They are common now. Many people can afford them,” he says. “So I focus on comfort.”

It is an increasingly familiar story as ranks of wealthy Chinese move from bike to Bentley and moped to Merc in a generation. This has not only transformed the streets of Beijing, it is reshaping the business strategies of the world’s biggest carmakers.

China’s emergence as a car industry superconsumer is evident in Jinbao Street. This leafy promenade between the Forbidden City and the central business district opened in 2002 on the site of demolished hutong (alleyway) neighborhoods. It aims to be Ginza — Tokyo’s shopping and entertainment district — plus Mayfair and Park Avenue all rolled into one, with five-star hotels, plush restaurants and designer boutiques. However, its most striking feature is a clutch of car showrooms. One side of the street is home to Ferrari, Rolls-Royce, Maserati, Jaguar and BMW. On the other, Lamborghini, Aston Martin and Mercedes.

Most of these luxury brands have only moved in within the past few years, but the chief outlets on this street — and others like it in Shanghai, Tianjin and Guangzhou — have rapidly become the leading profit centers for the world’s prestige carmakers.

Sales of ultra-luxury vehicles in China have increased by 30 percent in the past six months, after even more spectacular growth last year. Thanks largely to this surge, Mercedes — one of the first foreign firms into the market — recently announced the highest monthly worldwide car sales in the company’s 110-year history. BMW has also just attributed its best ever six-monthly sales to high demand in China.

Audi — another early arrival — sold more than 200,000 cars in China last year, nearly overtaking Germany as its biggest market. Its vehicles are now the must-have status symbol for communist cadres and government officers. According to the finance ministry, the government spent 86 billion yuan last year on official cars. Audi have tried to cement their hold on this lucrative niche by customizing models with temperature-controlled holders for the tea-flasks carried around by officials.

Cars have become one of the most visible symbols of an increasingly divided society.

Between 2000 and last year, the number of cars in China increased 20-fold to an estimated 270 million cars and motorbikes. In the next twenty years, this is forecast to more than double again, which means there will be more cars in China in 2030 than there were in the entire world in 2000. But the pace of growth is as uneven as the society.

In the past six months, the rise of overall car sales has slowed to single digits from the spectacular 20 percent to 30 percent expansion of the past decade due to rising fuel prices, curbs on license registrations in Beijing and government efforts to promote public transport. However, the rich are not only getting richer, they are getting rich faster.

The Aston Martin Rapide — which Zheng is considering — has a six-liter engine, a top speed of 303kph and a price tag of 4 million yuan. This is almost twice as expensive as in the west due to high import tariffs. According to the Hurun Rich List, China has almost a million dollar-millionaires, each of whom owns an average of three cars.

Luxury car ownership has distinct Chinese characteristics. On average, Chinese owners are 10 years younger than their counterparts in the US and Europe. They are also more likely to be women. Fiat estimates the percentage of women buying its Maserati models in China is triple that of Europe, while the percentage buying its Ferraris is double the global average.

Regardless of the jams, China’s nouveaux riches increasingly flaunt their wealth on the roads, much to the envy of others. Among the most widely circulated photographs on the Internet in recent years are those of the ostentatious wedding parades for the daughters of Shanxi coal barons. One reportedly featured four Rolls-Royce Phantoms, four Ferraris, six Mercedes Benz, six Bentleys, 20 Audi Quattros, six Jeeps, a Hummer, plus several BMWs, Porsches and Range Rovers.

Foreign companies are cashing in on the growing obsession with status. Last year, Lamborghini sales tripled in China to 247 cars, Rolls-Royce’s rose 146 percent to 678 cars — overtaking the UK and on course to soon surpass the US.

“It will only be a matter of time before the market becomes the largest market in the world for the company,” Jenny Zheng (鄭津蘭), general manager of Rolls-Royce’s regional office, told China Daily.

Bentley’s sales almost doubled to nearly 1,000 cars, making it the firm’s third-biggest market. Porsche — which has been in China for 10 years — sold 13,800 cars, up 60 percent from 2009. In recognition of where growth is coming from, Volkswagen, which encompasses the Audi, Bentley and Bugatti marques, plans to invest an extra $15 billion in a joint venture by 2015.

Rising concern about the impact on traffic, the environment and fuel prices has prompted the government to promote energy-efficient vehicles and public transport. Beijing has sharply restricted issuance of new vehicle registrations, handed out rebates to millions of buyers of fuel-efficient cars and is doubling the length of its subway system with a 330 billion yuan investment. High-speed rail networks are being rolled out nationwide, most recently from the capital to Shanghai.

Analysts see little indication that the passion for big, fast engines will dampen any time soon.

“The appeal of the car is rising because in China, it has become the symbol of fortune and social class,” Beijing Institute of Technology economics professor Hu Xingdou (胡星斗) said.

However, China’s traffic looks likely to slow of its own accord. Despite the surge in sales of 300kph cars, the rush-hour speed in Beijing is rarely above 25kph. Nor can the comfort of plush interiors fully compensate for the inconvenience of nightmarish congestion. According to a survey by IBM last year, seven out of 10 drivers in Beijing have at least once given up on getting to their destination and turned back because the jams were so bad. In a “commuter pain index” of 20 global cities, the world’s most painful commute is into the Chinese capital.

China oil spill six times size of Singapore: govt

2011-07-16T19:32:00.003-05:00

BEIJING — A huge oil spill off the Chinese coast has now contaminated an area around six times the size of Singapore, state media reported Friday, as the government said it may seek compensation for the leak.

The spill from the oil field, which the United States' ConocoPhillips operates with China's state-run oil giant CNOOC, has polluted a total area of almost 4,250 square kilometres (1,650 square miles), government figures showed.

The figures, which were announced on the State Oceanic Administration website earlier this week but only reported on Friday, were almost five times the size of the 840-square-kilometre area previously reported.

The administration says that area remains worst affected by the spill, but that another 3,400 square kilometres have also been contaminated to a lesser degree by the oil.

The spill was kept secret by the authorities for several weeks before being made public this month, sparking suspicions of an official cover-up, and the disaster has triggered a furious public response in China.

State media said the government was considering seeking compensation from ConocoPhillips over the spill.

"We have made an initial plan to claim compensation from ConocoPhillips China," the business daily 21st Century Business Herald quoted an unnamed official from the State Oceanic Administration as saying.

"But whether and how it will be implemented still depends on the status of plugging the leak."

CNOOC said last week the spill was "basically under control" while ConocoPhillips told reporters the leaks had been plugged.

But on Wednesday the oceanic administration said oil was still leaking into the ocean and ordered ConocoPhillips to stop operations at several rigs in the polluted area until the source of the spill was fully plugged.

"There has been oil seeping continuously into the sea for days from platforms B and C in the Penglai 19-3 oilfield and there is still a slick in the surrounding marine areas," it said in a statement.

"Another spill could happen at any time, which has posed a huge threat to the oceanic ecological environment."

CNOOC has been slammed by state media and green groups over the spill, and it emerged on Tuesday that the firm was cleaning up another slick after a breakdown at a rig off the northeast coast.

ConocoPhillips said Thursday the spill was the equivalent of 1,500 barrels of oil.

Big Pharma Launches a Talent Raid in China

2011-07-15T12:58:00.000-05:00

In most parts of the world, being a physician brings both prestige and affluence. However, Mao Mengjia gave up a career as a doctor in China for a simple reason: He could make more money selling medicine than prescribing it. Mao, 26, tripled his income after quitting his job at a hospital in northeastern China to work as a medical sales representative in 2009. As many as 14,000 physicians will join foreign pharmaceutical makers, ranging from New York-based Pfizer (PFE) to Paris-based Sanofi (SNY), in China in the next five years, predicts Aon’s (AON) Shanghai-based human resources advisory firm.

Pharmaceutical sales grew an average of 24 percent a year in China from 2006 to 2010 and will expand at a 19 percent to 22 percent annual clip over the next five years, according to researcher IMS Institute for Healthcare Informatics. IMS projects annual drug sales in China could reach $115 billion by 2015. “The pay for new doctors is low, which makes it hard to survive,” says Mao, who was one of 30 to graduate in 2005 from a medical college in Dalian, 286 miles east of Beijing. Nine of his classmates have since taken jobs in pharmaceutical sales, he says.

Simple arithmetic explains the attraction. A newly qualified doctor makes about 2,000 to 3,000 yuan ($309 to $464) a month, while a one-bedroom apartment in Dalian, a city of 6 million people, goes for 2,000 to 2,500 yuan. Typically three or four newly qualified doctors will rent a flat together to defray their costs, Mao says.

Shi Yingkang, dean of the West China Medical School at Sichuan University in Chengdu and vice-president of the Chinese Medical Doctor Assn., says half his students spurn local hospitals for better-paying jobs overseas or in drug sales. “To them, the pay does not match the effort put in,” explains Shi, who says pharmaceutical reps can earn two to three times more.

China has launched a three-year initiative to invest 850 billion yuan ($131 billion) to expand access to medical care and provide more than 90 percent of China’s people with basic health insurance. The plan is also spurring demand for medicines—and people trained to sell them. Sanofi runs classes for its medical representatives from a center in the 20-story BenBen tower in downtown Shanghai, which it calls the Sanofi-Aventis University. “We brand it as a university, and it does work when we go to campuses and do mass recruitments,” says Freddie Chow, Sanofi’s vice-president for human resources in China. “Chinese people love to be trained. The hunger for knowledge acquisition is very high.”

Foreign drugmakers like Sanofi and their local affiliates will hire at least 35,000 sales staff by the end of 2014, Aon Hewitt China estimates. The same employers had 33,000 on staff at the end of 2010. About 30 percent to 40 percent of people recruited for sales jobs will have a medical degree, says Jarroad Zhang, a consulting director with Aon Hewitt in Shanghai. “In most other countries it’s extremely rare to get fully trained doctors as medical representatives,” says Chris Lee, managing director of Bayer HealthCare China, a Beijing-based unit of Bayer, Germany’s largest drugmaker. Doctors—followed by pharmacists and nurses—are sought after by drugmakers in China for their medical knowledge, he says.

Lee has already met his 2011 target for hiring 1,000 sales representatives and says he may recruit a similar number next year. China will overtake the U.S. as Bayer’s largest pharmaceuticals market in the next seven to eight years, he says. “There’s an understanding within the company that we will need to hire to meet that goal,” says Lee, who began his own career in drug sales with Merck (MRK) in New Jersey.

The bottom line: China needs rural doctors. But low pay of $300 to $450 a month has enabled Western companies to lure provincial MDs to sell drugs.

Loo is a reporter for Bloomberg News.

THE DAILY STAR :: Opinion :: Commentary :: Will China lead once it is number one?

2011-07-15T12:33:00.001-05:00

THE DAILY STAR :: Opinion :: Commentary :: Will China lead once it is number one?

TV report of China leader's death fuels political rumor mill

2011-07-15T11:45:00.002-05:00

(Reuters) - Chinese state media denied rum ours on Thursday that former president Jiang Zemin had died after a Hong Kong television station said he had, sparking a wave of speculation about a leadership transition due next year.

"Recent reports of some overseas media organizations about Jiang Zemin's death from illness are pure rumor," the official Xinhua news agency quoted "authoritative sources" as saying.

Jiang, 84, is in poor health. Three sources with ties to China's leadership told Reuters that he is in intensive care in Beijing at the No. 301 military hospital after suffering a heart attack.

In the opaque world of Chinese politics, the health of a leader is fodder for rumors about how the balance of power is shifting at the highest levels of the government.

Current President Hu Jintao retires from office from late next year in a sweeping leadership overhaul, and the rumors about Jiang's health underscore the uncertainties around this.

Hong Kong's Asia Television interrupted its main newscast on Wednesday evening to announce solemnly that Jiang had died, and followed with a brief profile. It kept up the news for several hours on a ticker and then said it would air a special report on Jiang's life late in the evening.

It later canceled the report, and withdrew the ticker after failing to get official confirmation.

On Thursday afternoon, the television station issued a statement to apologize to its audience and Jiang's family.

"Asia Television has taken note of this afternoon's report from Xinhua and has withdrawn last night's report about Mr. Jiang Zemin's death and would like to apologize to our audience and Mr. Jiang Zemin's family," the statement said.

Meanwhile, the Shandong News website (www.sdnews.com.cn) in northeast China posted a black banner with white characters, saying "Our Respectable Comrade Jiang Zemin Is Immortal." The site was no longer accessible on Thursday.

China's foreign ministry spokesman Hong Lei deflected numerous questions about Jiang at a regular news briefing, saying Xinhua had already made a full explanation and that he had nothing further to add.

Searches on a popular Chinese micro-blogging site with terms ranging from "Jiang Zemin" to the Yangtze River (Jiang's surname means "river"), are blocked, a sign that China's censors are concerned about public debate about his health.

Premature reports about the demise of Chinese leaders are hardly new. In the 1990s, Hong Kong and Japanese media reported several times that paramount leader Deng Xiaoping had died.

UNCERTAINTY FOR JIANG ALLIES

Jiang Zemin's passing -- on the surface at least -- would likely have limited impact on the direction of China's politics and economic development.

He retired long ago, handing over the Communist Party's top job to Hu in 2002 and his other posts over the next two years. Hu and Premier Wen Jiabao have since led the country on a decade-long charge that saw it grow from an economy the size of Britain to one that has surpassed Japan.

But the prospect of Jiang's passing would add a breeze of uncertainty to a transition that is widely thought to hand power from Hu to a new generation led by Xi Jinping, currently vice president. That would take place at the 18th Communist Party Congress expected sometime in the autumn of 2012.

Xi, anointed as Hu's heir apparent at the congress in 2007, was considered acceptable to both the Hu and Jiang camps.

But in China, the death of a senior leader can be cause for worry, and even spell disaster, for proteges and allies who are no longer protected.

Hu would no longer have Jiang acting as a counterweight to his influence over the future make up of the next leadership.

"New leaders are selected by old leaders," Zheng Yongnian, professor of Chinese politics at the National University of Singapore. "He's one of the important selectorate. After he passes away, other current leaders will become more influential."

He could also settle scores or take down other rivals with links to Jiang, if necessary.

Past leaders can have considerable clout in China. Deng wielded power as paramount leader despite having given up all his posts except the honorary chairman of the Chinese bridge association.

Jiang consolidated his own grip on power after Deng died in 1997. By the time Jiang retired his last post -- as head of the military commission -- in 2004, he had already stacked the Politburo with his people.

"Front and back, left and right, up and down. No matter where Hu looks, there is a Jiang man," said one source at the time the leadership line-up was announced back in 2002.

In Jiang's case, there are quite a few allies still in place in the leadership who might now have cause for concern, should Hu assert himself.

"If he dies, the situation becomes very delicate," said one source with ties to leadership circles who requested anonymity given the sensitivity of the subject.

Among the Jiang allies still in senior posts are: Wu Bangguo, parliament chief and the second ranking person in the nine-member Politburo Standing Committee; Jia Qinglin, who heads a parliamentary advisory body and is ranked fourth; and Li Changchun, who oversees propaganda and ideology and is ranked fifth.

How exactly it will play it out, is unclear. With the Party Congress only about 15 months away, Hu's window to further consolidate his grip on power is considerably shorter than Jiang had as he prepared to step down.

(Writing by Brian Rhoads; Additional reporting by Alison Leung in HONG KONG and Ben Blanchard in BEIJING,; Editing by Don Durfee and John Chalmers)

China accused of rushing world's longest sea bridge Jiaozhou Bay Bridge opening

2011-07-10T21:26:00.002-05:00

BEIJING: Chinese officials have been accused of rushing construction of the world's longest sea bridge to open for the Communist Party's 90th anniversary, with nuts left unfastened, state media said on Thursday.

In the haste to finish the bridge before the July 1 celebrations, nuts on guard rails were in place but not fastened on a roughly 15-metre section of the 36.5-kilometre (22.7-mile) Jiaozhou Bay Bridge, the Global Times said.

The lighting system also had not been installed before it opened on June 30 and it would take at least two months to finish all the bridge's features, state-run China Central Television reported earlier this week.

"Time was running out," a construction worker told state television as he tightened nuts on the guard rails.

The Global Times newspaper quoted Han Bin, a bridge expert at Beijing Jiaotong University, saying: "In order to present a gift for July 1, some works were unable to be finished before the bridge rushed to open to traffic."

"If accidents occur and hit the guard rails, problems might rise."

The dates for openings of major infrastructure projects in China often coincide with the anniversary of the ruling Communist Party on July 1 or the October 1 National Day to showcase the government's achievements.

Despite the rush, the chief engineer for the Jiaozhou Bay Bridge insisted the structure was safe and ready for traffic, the official Xinhua news agency said Wednesday.

"The status of secondary features does not affect the main project or the opening of the bridge," Shao Xinpeng was quoted saying, adding the lighting system was only aesthetic.

Internet users were not convinced, accusing engineers and local authorities of putting propaganda ahead of safety as they posted video and photos of the yet to be completed bridge online.

"Infrastructure projects opened earlier than scheduled for window-dressing could lead to chaos and even horrible disasters, which are not rare," one web user said in a post on Weibo, a popular twitter-like microblogging service.

Google+ Made Unavailable In China: REPORT

2011-07-02T17:57:00.001-05:00

Google+ Made Unavailable In China: REPORT

Elizabeth Lynch: Ai Weiwei: Artist, Dissident and ... Tax Evader?

2011-07-02T17:46:00.001-05:00

Elizabeth Lynch: Ai Weiwei: Artist, Dissident and ... Tax Evader?

Illegal cooking oil produced on huge scale

2011-07-02T00:27:00.002-05:00

BEIJING - Some supposedly edible cooking oil on store shelves in Beijing, Tianjin and Hebei province is being produced from so-called gutter oil and swill-cooked oil, Chinese media have reported.

Swill-cooked oil is waste animal oil and oil that has been used several times - usually by restaurants - for frying.

According to Beijing Times, some producers of the illegal cooking oil that is made from the gutter oil and swill-cooked oil are processing nearly 100 tons of their substandard and possibly dangerous oil each day. Their advanced refining equipment and production techniques make it difficult for buyers to tell which oil is produced properly and which is really processed garbage.

The newspaper said the oil produced out of swill-cooked oil flows to food processing businesses and into wholesale markets through illegal channels and even onto supermarket shelves.

An insider told the paper that the raw materials for the illegal oil include swill, oil that has been repeatedly fried, leftover pieces of pork from slaughterhouses and poultry fat. The oil is then blended and bleached.

Statistics from the capital's management agency in charge of the city's appearance said some 1,750 tons of food waste is produced in the city every day and kitchens produce 60 tons of waste oil daily. The agency said the city can only properly process 600 tons of food waste each day.

The person in charge of an illegal cooking oil plant in Tianjin said his factory processes more than 30 tons daily and he said several other local factories have similar capacities.

Industry insiders said the main equipment needed is large cans and boilers, which are connected with pipes. The oil becomes clear when refined and filtered and is then packaged as cooking oil.

According to the paper, reporters saw cylindrical cans that were 10 meters tall and 3 meters wide in illegal cooking oil plants in Tianjin and Xingtai city, Hebei, producing oil that was brighter than tea after impurities were removed with calcium bicarbonate and acidity neutralized with alkali.

Reporters from the newspaper sent samples of the "recycled" oil from several illegal plants in Tianjin and Hebei to the China National Food Safety Supervision and Inspection Center, and two bottles of the samples unexpectedly met the standards of the general indicators of edible vegetable oil and animal oil.

Wang Ruiyuan, vice-chairman of the oil branch of the Chinese Association of Cereals and Oils, said no effective way to detect illegal cooking oil has been found to date.

UN Criticizes China's Failure to Arrest Sudan's Bashir

2011-07-01T11:36:00.001-05:00

UN Criticizes China's Failure to Arrest Sudan's Bashir

China feeling like No. 1 with a bullet train

2011-07-01T10:43:00.001-05:00

China feeling like No. 1 with a bullet train

World Affairs Journal - The New Imperialism: China in Angola

2011-06-29T20:41:00.001-05:00

World Affairs Journal - The New Imperialism: China in Angola

China's debt bomb - The Term Sheet: Fortune's deals blog Term Sheet

2011-06-28T23:35:00.001-05:00

China's debt bomb - The Term Sheet: Fortune's deals blog Term Sheet

How China sees the world - Boston.com

2011-06-28T17:57:00.001-05:00

How China sees the world - Boston.com

Chinese Entrepreneurs Are Leaving China - Gordon G. Chang - New Asia - Forbes

2011-06-28T09:19:00.002-05:00

Chinese Entrepreneurs Are Leaving China - Gordon G. Chang - New Asia - Forbes

Who Turned Out the Lights in China? - Gordon G. Chang - New Asia - Forbes

2011-06-28T09:18:00.001-05:00

Who Turned Out the Lights in China? - Gordon G. Chang - New Asia - Forbes

Did China Just Change Its Growth Model?

2011-06-27T22:11:00.000-05:00

“We will actively boost consumer demand,” said Chinese Premier Wen Jiabao on Saturday when he gave his Work Report—often described as China’s State of the Union address—at the National People’s Congress annual meeting in Beijing. “We will continue to increase government spending used to help expand consumption, and increase subsidies to low-income urban residents and farmers.”

And to drive home the point, Zhang Ping on Sunday said the central government “will focus on the establishment of a long-term mechanism to boost domestic demand.” The head of the National Development and Reform Commission, the Chinese cabinet’s planning agency, also said the 12^th Five-Year Plan, which took effect this year, would shift the government’s efforts from creating growth to “improving people’s livelihoods.” That message was certainly in line with the thrust of the premier’s remarks yesterday.

And that’s exactly what everyone—Chinese consumers, Washington’s trade officials, and American marketers—wanted to hear. Unfortunately, we have heard this from Premier Wen and other Beijing officials before.

Many times, in fact. As Chinese officials continue to talk about increasing domestic consumer spending, consumption’s role in their economy has been declining from its historical average of about 60% to about 36% today. Beijing’s plan to ride out the global downturn, adopted in phases in July and November 2008, undermined spending in the shops. The government’s plan emphasized the building of infrastructure and industrial capacity and was by definition anti-consumption. Moreover, the steps the central government has been taking to stimulate exports—like holding down the value of the renminbi—inevitably discourage consumer spending.

The overriding reality is that consumption cannot become significant until Beijing, in fact and not just in words, abandons its investment-led strategy. Did Premier Wen do so yesterday?

To his credit, Mr. Wen took on some important issues. For instance, he said the government “will push forward the market-based reform of interest rates.” As a practical matter, China cannot increase consumption’s role until banks can compete for deposits by offering market interest rates, so as to put more money in the hands of consumers. To date, however, the banking system has shortchanged depositors so that it can provide inexpensive credit to state-owned enterprises. Wen, not surprisingly, did not specify the interest-rate reforms he would implement or when they would be put in place. State enterprises, considered the core of the economy, would bitterly fight any substantial increase in their cost of capital.

The truth is Mr. Wen was not specific yesterday because such reforms will not be made in the remaining two years of his term as premier. If he made such a change, he would be essentially abandoning the foundation of China’s growth model, now more than three decades old. Model-changing is, obviously, risky.

Why? Among other reasons, it takes years for individuals to adjust their spending patterns in response to new government incentives to do so, and it doesn’t take a Nostradamus to figure out what model-changing will do to growth before consumption increases. The investment-led, export-heavy economy could tank if the transition is not handled well.

Low consumption, as Premier Wen knows, is the inevitable result of China’s current growth model, not merely a remediable feature of it. That’s why he was long on generalities and short on specifics in his two-hour Work Report. Increasing consumption’s contribution to economic output is exceedingly difficult, and senior leaders have yet to make more than a rhetorical commitment to do so.

“It looks great on the surface but it isn’t clear whether they have the political capital or will to push through those changes,” said Alistair Thornton of IHS Global Insight, referring to Beijing’s leaders.

Actually, it’s clear they do not. Reform during the Hu Jintao-Wen Jiabao years has shifted into reverse as the duo has gone back to policies that betray more than just a trace of Maoism. Hu and Wen have, for instance, taken steps to renationalize the economy, to increase state ownership of partially privatized enterprises, and to build up “national champions.” In short, they are abandoning Deng Xiaoping’s policy of “reform and opening up.”

Premier Wen could afford to sponsor regressive policies because, despite doing so, gross domestic product soared in recent years. Although his investment-led growth is increasingly inefficient—it now takes seven yuan of debt-fueled government spending to create one yuan of economic output—the government has enough resources to continue old policies.

If the NDRC’s Zhang Ping is right that the country’s leadership has opted for slower growth—in other words, Beijing has adopted a new economic model—then Wen’s Work Report will be considered a real turning point.

Yet there is not much evidence that Beijing is trying to execute a “U-turn,” as foreign analysts assure us it is. It would take someone strong-willed and bold to make fundamental changes, and the affable Mr. Wen is neither. At the moment, it looks as if he is just trying to buy time until he leaves office in early 2013—and then hand intractable problems to someone else.

China’s “Conflict Handbags”

2011-06-27T21:56:00.002-05:00

On Thursday, more than six workers were beaten and taken away by local security guards as management sought to end a strike at a South Korean-owned factory in Panyu, a satellite city of Guangzhou, the capital of southern Guangdong province. Workers in blue uniforms confronted police, deployed in large numbers.

One of the detained employees, a 20-year-old migrant from Chongqing, was grabbed by the neck and dragged away. “They are thugs, photographing us, beating us anyway they please,” said a female co-worker to Hong Kong’s South China Morning Post. “My friend is a very frail girl, how can she take that brutality by so many men?”

Starting Monday, more than 4,000 employees had taken to the streets to protest low pay and harsh working conditions at the factory that produces handbags for upscale brands Michael Kors, DKNY, Burberry, Kate Spade, and Coach. Workers complained they were forced to stand during 12-hour shifts with only two toilet breaks, forbidden to drink water while on the job.

They also charged that the factory, operated by Simone Ltd., was feeding them blackened rice and other substandard food, for which deductions were made from their wages. “The Korean management treats us less than human beings,” said one worker. “The male managers walk into female toilets any time they please; we can’t contain our anger any more.”

Worker anger is evident across Guangdong, which has been hit this month by a wave of strikes. Hundreds of migrant workers fought police in Chaozhou in the eastern part of the province. In the middle of the month, in the industrial center of Dongguan, 2,000 employees struck a plant owned by Japan’s Citizen Watch to protest long working hours and low pay.

And in Zengcheng, the “Blue Jeans Capital of the World,” thousands of migrant workers rioted after government-hired thugs knocked down a pregnant 20-year-old itinerant vendor. For three days, migrants overturned official vehicles and set fire to government buildings.

The worker unrest in Guangdong is occurring at a time of protests across Chinese cities and a series of bombings directed against government offices. There has been a noticeable increase in social discontent, which seems to have been aggravated by the hardline policies of Hu Jintao, the country’s current leader.

According to one report, there were 280,000 protests in China last year. And although it is not possible to verify the number of “mass incidents,” today there are clearly many more of them than in the middle of last decade, when analysts believe there were only 80,000 to 90,000 demonstrations a year.

There are many causes for the increased restiveness. In general, modernizing societies are almost always unstable, especially after periods of sustained prosperity. As Alexis de Tocqueville noted, the French Revolution followed an unprecedented economic advance and discontent was most evident in those parts of France that had seen the most improvement. Unfortunately for China’s Communist Party, these trends from Europe’s 18^thcentury also played out in Asia’s 20th, particularly in the Confucian society of South Korea two decades ago and in Chinese-dominated Taiwan a little later.

To make matter worse for themselves, China’s recent leaders have replicated all the conditions under which protests flourish. They have, without this being their intention, adopted policies that have widened the wealth gap, denied the appearance of justice, and promoted runaway corruption. At the same time, Hu and his predecessor, Jiang Zemin, tried to make their rule appear benign, thereby lessening fear in society. So workers in today’s China, more angry and less afraid, are now assertive and defiant.

Long-term social trends and the problems of authoritarian rule explain much of the restiveness, but there is another principal reason. Employees these days have much more bargaining power. Back at the Simone factory in Panyu, management said it would fire those who did not return to work. That threat used to be effective, but not now.

Why not? For several years, Guangdong has been short of help. Some residents have become relatively well-off and no longer need mind-dulling employment in factories, something evident in Shenzhen, the booming city bordering even-more-prosperous Hong Kong.

Moreover, China’s workforce is starting to level off. Sometime between 2013 and 2016—and probably at the earlier end of the range—the number of the country’s workers will peak and then begin to decline. That will leave employers in Guangdong scrambling for migrants, who now prefer jobs closer to their homes in interior China. That’s one reason why Foxconn, operating the world’s biggest factory in Shenzhen, is locating facilities in inland provinces.

Last spring, there was labor unrest in Guangdong, triggered by a series of more than a dozen ghastly suicides at Foxconn’s mammoth factories, which make products for Apple, Dell, Nokia, and Hewlett-Packard, among others. The difference this year is that the province’s migrant workers are now violent, rioting and rampaging.

Across both the province and China as a whole, the disaffected are lashing out. “There is a growing sense of a country in danger of pulling itself apart at the seams,” as Hong Kong journalist Will Clem put ityesterday. Poor migrants in Guangdong have yet to start a full-scale insurrection and it’s too early to speak of “blood laptops” and “conflict handbags,” but these days they are in the mood to fight.

Stymied at home, Chinese hunt for property abroad

2011-06-27T21:01:00.000-05:00

(Reuters) - Amanda Sun bought three houses in Australia's coastal city of Gold Coast after visiting the town just once as a tourist.

The 33-year-old owner of a small trading firm is one of thousands of Chinese who are beginning to export China's house price inflation abroad by piling into property markets overseas.

Stifled by a clampdown on property speculation at home, cash-rich Chinese are buying up homes in Australia, the United States, Britain and Canada instead, countries popular with Chinese students studying abroad.

"Australia allows higher leverage and its legal system is better," said Sun, who plans on migrating to Australia to live in one of her newly-bought homes and rent out the other two.

Property developers are courting the international rise of the wealthy Chinese home buyer with ardor, marketing their projects in Shanghai and Beijing.

CB Richard Ellis (CBG.N) has set up a special arm to help Asian buyers purchase homes abroad. China's biggest real estate website, Soufun Holdings (SFUN.N), has been bringing Chinese investors to tour Western cities in the past two years.

"The Chinese are my most important clients now," said Cindy Chan, chairman of AGC Property Center Pty Ltd, Sun's property agent in Australia. "The number is growing very fast."

Business is so good that Chan visits China every other month to showcase homes on sale in Australia. She plans to start an office in Shanghai in May.

But while Chinese buyers, or any buyers for that matter, may be welcome in severely depressed property markets such as those in the United States, the UK or parts of Europe, the inflows of Chinese money are causing headaches for economies elsewhere which are growing at a much faster clip.

Singapore and Hong Kong, for example, have found it tough to keep a lid on surging home prices amid strong demand from Chinese nationals, despite government efforts to cool the market and stave off destabilizing asset bubbles.

Australia clamped down on foreign buying of homes in the country last year in a bid to calm buoyant prices.

CAPITAL CONTROLS

Yet, Chan and other property agents could be a lot busier if not for China's strict capital controls.

Chinese citizens are barred from buying more than $50,000 worth of foreign currencies a year, restricting them to smaller property purchases when they venture abroad.

There is talk that the cap may be raised to $200,000, but that is just unconfirmed chatter so far.

"The government worries about whether Chinese investors have a good understanding about foreign real estate markets," said Li Wei, an economist at Standard Chartered in Shanghai.

To beat the rules, Sun, like many other Chinese, turned to her relatives for help. They pooled their annual quotas together to give her enough foreign currency to put a downpayment on the three houses, which were worth a total A$3 million ($3.1 million).

Others sneak their money out of China by disguising the funds as import bills.

Such cracks in China's capital controls will help feed demand for houses elsewhere.

"We think that in a relatively short period of time and in a way that is measurable, Chinese buyers are going to account for something on the order of 10-20 percent of the London market," said Gerald Allison, a director at global real estate agency DTZ (DTZ.L) in London.

So far, there is no official nor private estimate on the total amount of Chinese outbound real estate investment.

Some developers hope China will relax its capital controls over time, albeit in its characteristic "gently gently" manner.

After all, China needs to slow the rapid build-up of its foreign exchange reserves, which at $2.85 trillion is the world's largest and a headache for the country. Freeing up Chinese investment overseas can do just that.

COMPANIES PRUDENT

In contrast to individual Chinese investors, Chinese firms are more cautious about moving abroad.

Although some developers including SOHO CHINA (0410.HK) have eyed foreign markets over the last two years, they have yet to announce any deals.

"It takes time for Chinese companies to understand the rules of the game abroad," said David Chen, a Shanghai-based executive director of CB Richard Ellis for China residential sector.

He said Chinese developers would most likely start from small deals and team up with foreign firms.

China insurers such as China Life (2628.HK) and Ping An Insurance (2318.HK) are waiting in the wings as well.

Beijing allows insurers to invest 10 percent of their total assets -- 5.2 trillion yuan at the end of February -- in commercial real estate markets, at home and abroad.

On the whole, however, insurers can only park 15 percent of their total assets outside China.

(Additional reporting by Xiaoyi Shao in Beijing, Karen Foster in London and Eriko Amaha in Sydney; Editing by Ken Wills)

China’s Message to U.S. Businesses : The World :: American Express OPEN Forum

2011-06-26T03:56:00.001-05:00

China’s Message to U.S. Businesses : The World :: American Express OPEN Forum

Chinese dam on Brahmaputra India outraged. But the government reacts meekly

2011-06-24T21:31:00.000-05:00

A vast and densely populated region of North-east India that depends on water from Brahmaputra and its tributaries is feeling agitated over China’s ambitious efforts to redraw its water map. China’s reported plan to divert the Brahmaputra from its upper reaches is being seen as a direct affront to India and a violation of International norms of sharing river waters. Once the construction of dam is complete, the control on the water of Brahmaputra will be in the hands of China. As the Brahmaputra is the lifeline of North East India, the life and environment in the region will be adversely affected by this development. The term Brahmaputra means “son of brahma” and in the early days of Indus valley civilizations Brahmaputra River is the subject of faith and legends of Bharat.

The Brahmaputra flows for about 1,625- km inside the Tibet Autonomous Region of China and for a further 918-km inside India. This is not the first time that tension is building up between India and China over Brahmaputra projects, which could affect the flow of water into India.

The BJP was quick to react to these reports and demanded that if there is fresh evidence of China’s intentions then India should immediately take up this matter with the Chinese authority. “These reports are of real concern to India. Since the last two years, there are reports that China wants to divert Brahmaputra waters from the Himalayas. If it is diverted, we will have real problems which will affect the economy of the whole region,” BJP spokesperson Prakash Javadekar said.The BJP MP had raised the issue in the Rajya Sabha last year.

Besides India, which raised the construction of a 510 MW dam on the Brahmaputra in talks with the Chinese leadership for many times. Thailand, Laos, Vietnam and Cambodia had expressed similar concerns over eight dams being built on the Mekong river. The blame game, voiced in vulnerable river towns and Asian capitals from Pakistan to Vietnam, is rooted in fear that China’s accelerating programme of damming every major river flowing from the Tibetan plateau will trigger environmental imbalance, natural disasters, degrade fragile ecologies, divert vital water supplies.

A few analysts and environmental advocates even speak of water as a future trigger for war or diplomatic strong-arming, though others strongly doubt it will come to that. Still, the remapping of the water flow in the world’s most heavily populated and thirstiest region is happening on a gigantic scale, with potentially strategic implications. On the eight great Tibetan rivers alone, almost 20 dams have been built or are under construction while some 40 more are planned or proposed.

China is not alone in disrupting the region’s water flows. Others are doing it with even worse consequences. But China’s vast thirst for power and water, its control over the sources of the rivers and its ever-growing political clout make it a singular target of criticism and suspicion. “Whether China intends to use water as a political weapon or not, it is acquiring the capability to turn off the tap if it wants to — a leverage it can use to keep any riparian neighbours on good behaviour,” says Brahma Chellaney, an analyst at New Delhi’s Center for Policy Research and author of the forthcoming book Water: Asia’s New Battlefield.

Tibet’s spiritual leader, Dalai Lama, has also warned of looming dangers stemming from the Tibetan plateau. “It’s something very, very essential. So, since millions of Indians use water coming from the Himalayan glaciers... I think you (India) should express more serious concern. This is nothing to do with politics, just everybody’s interests, including Chinese people,” he said about the talking of Chinese intentions over the redrawing water map.

Although China is saying that it is constructing the dam to produce power but actually some hidden agendas are also associated with it.

The water resources of Brahmaputra will be a strong point to blackmail India. If China blocks the water in Brahmaputra, it will lead to famine in the whole NE region. India needs to take this issue seriously. The attention of international community needs to be attracted. But the problem here is that China does not care for anyone. It is trying an act of international bully. India needs a totally different tactic to tackle China. But can it handle.

Thus, the important concern is that whether the Indian policy makers will wake up before it’s too late. India lose its dignity in past because of sleeping diplomacy of Jawaharlal Nehru. When China started to build the Sinkiang to Ali highway in 1951 than our diplomats showed their concerned about the highway in written on October 18, 1958. In his conversation with Henry Kissinger , the than Chinese premier Zhou Enlai quoted “ even three years after the road was built, Nehru didn’t know about it. In my discussion with Nehru on the Sino–Indian boundary in 1956, he suddenly raised the issue of the road. I said, ‘you didn’t even know we were building a road for the last three years, and now you suddenly say that is your territory, I remarked upon how strange this was” (The National Security Archive). Although if it did not happen in the case of Brahmputra, in the case of highway projects and railway projects, we all know the GoI failed the nation. Indian government always wake up after the happening of policy disaster.